Annual Report
2020
CORPORATE DIRECTORY
DIRECTORS
Gary Johnson (Non-Executive Chair)
Julian (Joe) Walsh (Managing Director)
Mark Rodda (Non-Executive Director)
Cynthia Thomas (Non-Executive Director)
JOINT COMPANY SECRETARIES
Alex Neuling
Shontel Norgate
REGISTERED OFFICE
23 Belmont Avenue
Belmont, WA, Australia, 6104
Telephone: (08) 9363 7800
Facsimile: (08) 9363 7801
Email:
info@lepidico.com
PRINCIPAL PLACE OF BUSINESS
23 Belmont Avenue
Belmont, WA, Australia, 6104
PO Box 330 Belmont WA 6984
Website: www.lepidico.com
COUNTRY OF INCORPORATION
Australia
AUDITORS
Moore Australia Audit (WA)
Level 15, Exchange Tower
2 The Esplanade
PERTH WA 6000
Telephone: (08) 9225 5355
(08) 9225 6181
Facsimile:
SHARE REGISTRY
Automic Pty Ltd
Level 2, 267 St Georges Terrace
PERTH WA 6000
GPO Box 5193 Sydney NSW 2001
Telephone:
Email:
1300 288 664
hello@automicgroup.com.au
HOME EXCHANGE
Australian Securities Exchange Limited
Central Park
152 - 158 St Georges Terrace
PERTH WA 6000
ASX CODE: LPD, LPDOB, LPDOC
CONTENTS
HIGHLIGHTS
CHAIR’S AND MANAGING DIRECTOR’S LETTER
LITHIUM INDUSTRY AND MARKET
PROJECT DEVELOPMENT
TECHNOLOGY DEVELOPMENT
STRATEGIC RESOURCE DEVELOPMENT
BOARD OF DIRECTORS & MANAGEMENT
SUSTAINABILITY
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
SUPPLEMENTARY (ASX) INFORMATION
2
4
6
8
10
14
18
19
26
37
96
2020 LEPIDICO ANNUAL REPORT
1
HIGHLIGHTS
Y
T
I
L
I
B
A
N
A
T
S
U
S
I
• 2020 was incident free: Lepidico has a zero-harm
health, safety and environment track-record since
records began in September 2016.
• P1P exhibits excellent sustainability criteria within
the lithium industry including low CO2 intensity,
modest water usage and a small operational
footprint amongst other attributes.
• ESIA for Namibian P1P operations identifies
significant socio-economic benefits as well
as advantages in the form of environmental
reclamation of the existing mine sites.
• Karibib mine and concentrator redevelopments
designated as a Category B Project in terms of the
Equator Principles and IFC Performance Standards
on Social and Environmental Sustainability.
• Inaugural Ore Reserve of 6.7 million tonnes
grading 0.46% Li2O, 0.23% rubidium and
320ppm caesium is believed to be the world’s
only Code compliant estimate for the strategic
alkali metals caesium and rubidium.
• Project supported by a Mineral Resource
inventory of 11.2 million tonnes grading 0.43%
Li2O which includes 8.9 million tonnes in
Measured and Indicated categories grading
0.43% Li2O, 0.23% Rb, 302ppm Cs and 2.08% K.
• Mineral Resource estimates being undertaken in
fiscal 2021 for lepidolite rich surface stockpiles
at Rubicon and Helikon 1.
• Near mine and regional exploration targets
being generated for lithium, caesium and gold,
which the large property package is highly
prospective for.
T
N
E
M
P
O
L
E
V
E
D
I
C
G
E
T
A
R
T
S
E
C
R
U
O
S
E
R
2
2020 LEPIDICO ANNUAL REPORT
T
N
E
M
P
O
L
E
V
E
D
T
C
E
J
O
R
P
T
N
E
M
P
O
L
E
V
E
D
Y
G
O
L
O
N
H
C
E
T
• Definitive Feasibility Study for the vertically
integrated Phase 1 Project completed within just 10
months of acquiring the Karibib assets in Namibia.
• DFS reveals attractive Project economics and
fundamentals: 31% Internal Rate of Return; NPV8%
US$221 million (A$340 million) ungeared, based
on a 14 year production life.
• P1P average output of 4,900tpa lithium hydroxide
at a competitive C1 Cost of US$1,656/t LCE and
an AISC of US$3,221/t after credits from other
products.
• Payback after just over 3 years of operation on
pre-production capital of US$139 million (includes
13.6% contingency), giving a competitive capital
intensity of US$17,400/t LCE on by-product basis,
equivalent to US$27,900/t LCE before credits from
other products.
• Propietary LOH-Max® process batch trials
successfully produced nominal battery grade
lithium hydroxide monohydrate grading
>56.5% LiOH.
• LOH-Max® offers strategic benefits over
conventional conversion of spodumene in that
it does not result in the production of sodium
sulphate and can materially reduce process
complexity and thereby capital cost.
• Patent protection received for the L-Max®
technology in Australia, Europe, Japan and the
United States. Provisional patent applications
advancing for LOH-Max® and production of
caesium and rubidium chemicals.
• Proprietary process for production of caesium
and rubidium chemicals from lithium mica
minerals provides technological advantages
for the production of these strategic metals.
3
2020 LEPIDICO ANNUAL REPORT
CHAIR’S AND
MANAGING DIRECTOR’S LETTER
Completion of the Definitive Feasibility Study for the
vertically integrated Phase 1 Project in May 2020 – the
culmination of six years of research, development and study
work – represents a significant deliverable in Lepidico’s
strategy to become a globally significant lithium chemical
producer. Importantly, this milestone was reached with
the Company maintaining its zero-harm health, safety and
environmental track-record. Phase 1 is differentiated from
most other lithium development projects by providing
attractive economics at relatively modest scale, thereby
reducing scale-up and funding risk, and allowing a focus on
product quality rather than volume.
The backdrop to these achievements was clouded by
continued weak market conditions for both lithium chemical
prices and lithium equities throughout most of fiscal 2020.
However, by fiscal year end chemical prices appeared to
have stabilised, albeit at what appears to be around cycle
low levels. This already challenging environment was
further complicated by COVID-19 related lockdowns and
their associated global affects. Most importantly all our
employees have stayed safe and healthy during this time.
Furthermore, our sincere thanks go to all our staff and
contractors whose dedication, determination and ingenuity
allowed the business to continue to deliver on its objectives,
despite being faced with such considerable headwinds.
Sustainability practices and performance, specifically
pertaining to environment, social and governance – ESG
– have gained far greater prominence for all industries
in the past few years and the momentum for further
improvements increased again in 2020. It is clear that
greenhouse gas emissions, water usage and land use
intensity pose significant challenges for much of the
lithium industry, and in these areas. Lepidico is fortunate.
Our Phase 1 Project demonstrates, on balance, excellent
sustainability credentials, and not just with regards to
these three key tenants but also in the social benefits
associated with job creation, land remediation and much
needed economic stimulus within a developing region.
Furthermore, opportunities to improve on already enviable
sustainability criteria have been identified and imbedded
into the strategic planning process to ensure continual
improvement across all aspects of the business as it evolves.
Positive feedback from some of the world’s most discerning
lenders to projects in developing countries is testament to
Phase 1’s environmental and social attributes. The Project
is estimated to create over 800 direct and indirect jobs in
Namibia alone. The integrated Project exhibits competitive
CO2 intensity, more normally associated with lithium
brine projects, along with the modest water intensity of
integrated hard rock lithium producers and a relatively
small land use footprint. The Environment & Social Impact
Assessment – ESIA – for the Namibian developments
actually identified the Project as having beneficial
environmental impacts, associated with the ultimate
remediation of these brownfield sites which were never
rehabilitated when previously closed. As such the Project
is expected to leave positive environmental and social
legacies at the end of its life.
Development and operation of the planned chemical
conversion plant in Abu Dhabi is expected to be
environmentally benign from a land use perspective, being
located within a designated industrial park and provide
social benefits associated with the creation of some 119
direct jobs. CO₂ emissions are largely associated with the
chemical process but can be partially offset by credits from
by-products. Of note, the amorphous silica is planned to
be sold as a partial supplement for cement in concrete and
as such helps reduce carbon emissions. Opportunities to
reduce the integrated Project’s already moderate carbon
intensity further have been identified and will be evaluated
in fiscal 2021.
Looking ahead, activities are now focussed on transitioning
the business to development by securing the requisite
permits in Abu Dhabi, as well as binding offtake agreements
for the major products and a full funding package.
Importantly, the Namibian developments are fully permitted.
A prescribed process exists for permitting at the Khalifa
4
2020 LEPIDICO ANNUAL REPORT
We remain 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.
Industrial Zone of Abu Dhabi, with Phase 1 identified as
requiring a less onerous level of compliance. However,
a full ESIA has been committed to, completed to
International Finance Corporation Standards to support
debt funding plans.
Development Finance Institution (DFI) funding coupled
with export credit and commercial lending are being
pursued to ensure the most competitive debt funding terms
for the Project. This is possible because part of the Project
is located within a developing economy and the entire
integrated Project has such solid ESG credentials.
Sustainable business practices are also vital to securing
long term offtake arrangements from downstream chemical
customers. Most of the global supply chain for specialty
chemicals is becoming more focussed on reducing its
carbon footprint, while minimising water and land use
intensity. This is particularly so for European chemical
consumers, where auto manufacturers are influencing
their suppliers in the face of onerous penalties for non-
compliance to stringent emissions standards, imposed to
accelerate the transition to electric vehicles from internal
combustion engine models.
We continue to work towards offtake for lithium hydroxide
under our letter of intent with BASF SE. The Company
is also advancing offtake discussions with several other
consumers for supply of caesium and rubidium chemicals.
Here, it is noteworthy that Lepidico’s process technologies
provide a unique method for economically and sustainably
extracting salts of these two high-value metals that are of
strategic significance and in critically short supply.
Until recently pollucite was the chosen mineral source
for caesium. However, global primary supply has fallen
dramatically with the depletion of major historical
producing mines and no meaningful new discoveries.
Lepidolite offers an alternative to pollucite, as it tends to
have the highest aggregate concentrations of the alkali
metals caesium, rubidium, lithium and potassium, making it
a viable mineral substitute. All four of these metals are on
the U.S. Government list of 35 critical minerals and the U.S.
is entirely reliant on imports of caesium and rubidium.
Lepidico’s strategic objective remains to fast track the
business to free cash flow generation by developing a
sustainable lithium business that leverages its proprietary
technology, L-Max®. More recent development of new
process technologies that include the manufacture of
caesium and rubidium chemicals from lithium mica minerals
has allowed this strategy to be extended to include the
expanded alkali metals product suite, along with production
of lithium hydroxide using LOH-Max®. As such Lepidico is
uniquely positioned to become a first mover in developing
new sources of a range of specialty chemicals that are
either in short supply or in the case of lithium projected to
be within a few years.
As stated in prior years, we remain 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.
We again thank shareholders for another year of
tremendous support on our quest to build a new vertically
integrated alkali metals chemical company differentiated by
non-traditional mineral sources.
Yours Faithfully
Gary Johnson, Chair and
Joe Walsh Managing Director
5
2020 LEPIDICO ANNUAL REPORT LITHIUM INDUSTRY AND MARKET
Review
Lithium chemical prices appeared to stabilise in mid
calendar 2020 following more than two years of decline
from their cycle highs, albeit with prices back at early 2016
levels. Contract prices, which represent the majority of
market volume, have held up far better than spot prices,
which tend to be influenced by short term Chinese supply-
demand. Battery grade lithium hydroxide monohydrate
prices as stated by Benchmark Mineral Intelligence1 have
remained at or above US$10,000/t and at a material
premium of around US$2,000/t to lithium carbonate.
Against this backdrop, lithium equity prices have also
suffered and Lepidico’s share price has not been immune.
Looking forward, incumbent lithium chemical producers
have exercised significant supply discipline, evidenced by
the deferral of many expansion plans, which should see
the market transition back towards deficit as demand
for electric vehicles (EVs) in particular is predicted by
many industry commentators to be resurgent in the post
COVID-19 lockdown environment.
Technology
Two EV battery technology advancements have
gained traction over the past year: 1) a further move
towards high-nickel cathodes that use less cobalt but
similar amounts of lithium; and 2) solid state batteries
coming closer to commercialisation. While a number
of different formats are in development it is envisaged
that solid state batteries may consume more lithium
and have significantly better performance in the form of
charge density and better safety characteristics. Most
importantly, these developments rely on the continued
use of lithium for its unique electrochemical properties,
thereby supporting its extensive use in batteries for the
foreseeable future. Furthermore, higher charge densities
should accelerate EV adoption as range anxiety becomes
a lesser issue. In short, lithium is set to remain a key metal
for the global energy transition thematic.
Prices (September 2016 - June 2020)
e
c
i
r
P
e
r
a
h
S
o
c
d
p
e
L
i
i
$25,000
$20,000
e
n
n
o
T
/
D
S
U
$15,000
$10,000
$5,000
$0
$0.08
$0.07
$0.06
$0.05
$0.04
$0.03
$0.02
$0.01
$0.00
6
1
‘
t
p
e
S
6
1
‘
v
o
N
7
1
‘
n
a
J
7
1
‘
h
c
r
a
M
7
1
‘
y
a
M
7
1
‘
l
u
J
7
1
‘
p
e
S
7
1
‘
v
o
N
8
1
‘
n
a
J
8
1
‘
r
a
M
8
1
‘
y
a
M
8
1
‘
l
u
J
8
1
‘
p
e
S
8
1
‘
v
o
N
9
1
‘
n
a
J
9
1
‘
r
a
M
9
1
‘
y
a
M
9
1
‘
l
u
J
9
1
‘
p
e
S
9
1
‘
v
o
N
‘
0
2
n
a
J
0
2
‘
r
a
M
‘
0
2
y
a
M
Lithium Hydroxide (Min 55.0%)
Lithium Carbonate (Min 99.0%)
LPD Share Price
Source: BMI, ASX
1 BMI is a world leading information and price provider for the lithium ion battery and electric vehicle supply chain.
6
2020 LEPIDICO ANNUAL REPORT
Demand
Annual lithium chemical demand faltered in 2019 rising
just 5% compared with 15% the previous year, as the lifting
of certain Chinese EV subsidies caused EV sales growth
in the country to fall, according to BMI data. EV battery
manufacturing was subsequently impacted in 2020
by the Covid-19 pandemic, causing inventory build-up
throughout the supply chain. BMI is predicting that annual
lithium demand will grow by just 7% in calendar 2020 to
300,000t, prior to jumping by 30% year-on-year in 2021 in
large part driven by a forecast surge in European EV sales
as a raft of new models role off the production lines at
more affordable price points.
Additionally, governments around the world are
introducing a range of new measures to support EV
adoption in an attempt to decarbonise while also
stimulating their respective economies, particularly
in Europe. The French government announced an €8
billion stimulus package to support the country’s ailing
automotive industry, alongside an increase in subsidies
for EV buyers, which includes a production target
of 1 Million ‘clean’ vehicles a year by 2025. Similarly,
the German government plans to double its current
subsidies to €6,000 on EVs that cost up to €40,000.
These incentives are part of a €130 billion package
approved by the German government designed to
support domestic industry.
Many commentators continue to forecast lithium chemical
demand, driven predominantly by EV sales to exceed
1 million tonnes per year by around 2026. This begs the
question, where will all the raw materials come from?
Supply
Lithium supply growth lagged demand for the middle
part of the last decade, causing the market to be
in fundamental deficit and chemical prices to rise
dramatically. Then, in 2018 annual supply rose by 34%
transitioning the market into surplus, with supply in 2019
of 321,000t exceeding demand by around 14%. Leading
producers outside of China began to constrain output and
reign in their expansion plans. Further supply discipline
emerged amid the global pandemic uncertainties from the
first quarter of 2020.
BMI has opined that there is almost no new supply
coming from financed projects in 2020, and only marginal
volumes are expected in 2021. As a result, an expected
upturn in lithium chemical orders, particularly in the
second half of 2021 will be dependent on expansions
from existing operations. Looking further ahead into
2022 and beyond, it is evident that new supply from
greenfield developments will be required to try and meet
accelerating demand. The timelines to evaluate, permit,
finance and build new primary lithium capacity far exceed
those to develop battery, cathode and EV manufacturing
capacity, which is expected to lead to the industry
struggling to supply all the high specification lithium that
is expected to be required for use in EV batteries.
Outlook
Supply cutbacks in 2019 and 2020 will limit the market
imbalance in the short-term but increase the risk of future
market volatility according to BMI, which is forecasting
a sharp upward correction in battery demand growth
from 2021 onwards, thereby transitioning the market
back into deficit. BMI also advise, the timeframes
required for production expansions let alone new
project developments to come to fruition and reach a
high proportion of battery-quality output means that a
structural deficit in the market will likely be more intense
than previously expected from 2022 onwards.
Lepidico is positioning its Phase 1 Project to be an early
mover for this next lithium demand cycle that is expected
to lead to the return of a healthy incentive price for
quality lithium chemicals, to allow new production
capacity to be funded and committed to.
Lepidico is positioning its
Phase 1 Project to be an early
mover for this next lithium
demand cycle that is expected
to lead to the return of a
healthy incentive price for
quality lithium chemicals
7
2020 LEPIDICO ANNUAL REPORT PROJECT DEVELOPMENT
Definitive Feasibility Study
Completion of the DFS for the vertically integrated
P1P (Phase 1 Project) in May 2020 represented a major
milestone for the Company, following more than six years
of development work. The Study contemplates production
and shipment of a lepidolite concentrate from Namibia
to the chemical conversion plant to be built at the Kalifa
Industrial Zone Abu Dhabi (KIZAD) in the United Arab
Emirates that employs Lepidico’s proprietary process
technologies, L-Max® and LOH-Max®. The chemical
conversion plant has a concentrate throughput capacity of
6.9tph (tonnes per hour), capable of producing 5,600tpa
(tonnes per annum). Average annual P1P production is
estimated at 4,900tpa of nominal battery grade lithium
hydroxide monohydrate, along with a suite of both high-
value and bulk by-products. Accounting for these other
products as lithium carbonate equivalent (LCE) gives
implied total production of over 7,000tpa LCE. The
relatively modest size of Phase 1 for a lithium chemical
project is viewed as an important factor for the effective
management of scale up, development and operating risks.
Attractive investment fundamentals for the P1P include
an NPV8% of US$221 million (A$340 million) and an
Internal Rate of Return of 31% ungeared. Operating costs
for the Integrated Project after credits from by-products
are competitive with an average C1 cost of US$1,656/t
LCE and an AISC of US$3,221/t. Development capital of
US$139 million includes a 13.6% contingency and is split
approximately 30/70 between the mine and concentrator
in Namibia, and the chemical conversion plant in Abu Dhabi.
Capital intensity is industry competitive at US$27,900/t LCE
for an integrated hard rock project and just US$17,400/t
LCE net of by-products.
Lithium hydroxide monohydrate represents 62% of the
Project revenue under the assumptions used. The lithium
hydroxide monohydrate price forecast has been provided
by BMI, which averages $13,669/t over the Project life and
reverts to a long-term price of $12,910/t.
The Capital cost estimates meet the Association of
the Advancement of Cost Engineering (AACE) Class 3
requirements for a Feasibility Study. The nominal accuracy
is +/- 15%. The estimates for the processing plants were
prepared by Lycopodium Minerals P/L (LMPL). Underlying
engineering is informed by some six years of process
development testwork including continuous pilot plant
trials conducted in 2019.
Being a purely hydrometallurgical process, L-Max® is much
less power intensive than conventional chemical conversion
of spodumene, allowing the integrated Project to have a
relatively modest carbon intensity versus the industry, in the
range of 5-7t CO2/t lithium hydroxide monohydrate after
credits from amorphous silica and gypsum. Furthermore,
water intensity for the Project is estimated to be modest
by industry standards at approximately 50L/kg during the
first five years of production, rising to 60L/kg thereafter
following the mill expansion in Namibia. The aggregate
project footprint is also relatively modest and largely on
designated industrial land.
It is assumed that all permits, offtake agreements and a
full funding package are secured in the June 2021 quarter,
allowing Project implementation to commence. Allowance
is made for COVID-19 delays in this timeline. Lepidico
has engaged London based Lions Head Global Partners
(LHGP), which has offices in New York, Nairobi and Lagos,
and a new office being established in Dubai as Project
finance advisor. LHGP is seeking to leverage the Projects
excellent ESG credentials to maximise the quantum of
competitive DFI debt funding.
Mines & Concentrator, Namibia
Mining operations will use conventional open pit methods
for the deposits at Rubicon and Helikon 1 with particular
emphasis on selective mining of high grade ore zones. The
footprint is designed to maximise the use of land disturbed
by previous mining activities.
A small fleet of one 50-tonne excavator and 35 tonne
trucks can adequately support the mining schedule for
the majority of the mine life. Ore will be blended before
the concentrator to optimise concentrate production
and quality.
The Helikon 1 deposit will be mined as a satellite pit located
approximately 7km from the concentrator. The haul road
from Helikon 1 to Rubicon is already developed and road
trucks will be used for haulage.
Mine waste from the Helikon 1 pit will be placed into the
Helikon 1 Waste Management Area (WMA), constructed
immediately to the south of the open pit and up dip of the
pegmatite structures to avoid sterilisation of any deposit
extensions.
Rubicon mine waste will be placed in a separate WMA
immediately to the east of the open pit. There it will be co-
disposed with filtered tailings from the mineral concentrator
and used to construct the walls and to cap the facility at
closure. This approach minimises the land disturbance,
water use and project closure costs leaving a stable
structure that can be returned to agricultural land use.
The mineral concentrator will use conventional crushing,
grinding, desliming and froth flotation processes followed
by dewatering of concentrate and tailings streams.
8
2020 LEPIDICO ANNUAL REPORT Key Phase 1 Project DFS results:
• NPV8% : US$221 million (A$340 million)
• IRR: 31% ungeared
• AISC (LCE): US$3,221/t
• Capital Intensity (LCE): US$17,400/t
• LiOH H2O Production: 4,900tpa
• By-products: Caesium, Rubidium, SOP,
Amorphous Silica
• LCE eq Production: 7,000tpa
• Project life: 14 years
The lithium principally occurs in lepidolite, amblygonite and
lithian muscovite although zinnwaldite is also recovered
through the froth flotation process. The overall recovery
of lithium to the lithium concentrate is 80-90%, at a
concentrate grade of 2.9%-4.2% Li2O. These values vary
according to the mineralogy.
The concentrator will go through progressive minor
upgrades to cater for a declining head grade.
The general approach to engineering has been to utilise
pre-engineered modular plant for the major sections of the
plant including crushing, grinding, flotation, dewatering and
services. This approach minimises the amount of project
specific engineering. The equipment can be supplied pre-
assembled and skid mounted or containerised, thereby
reducing construction effort and commissioning time.
Logistics
Concentrate from the Karibib flotation plant will be
bagged and containerised to prevent contamination
during its journey to Abu Dhabi for chemical conversion.
Five truck movements per day will be required to
transport the concentrate containers 220km to the port
of Walvis Bay. From here it will be shipped to Khalifa Port,
the main container terminal for Abu Dhabi. KIZAD, where
the L-Max plant will be built is a purpose built industrial
free zone adjacent to the port. Abu Dhabi City is located
approximately 70km to the southwest and is serviced by a
well developed road network and in the future rail.
9
2020 LEPIDICO ANNUAL REPORT TECHNOLOGY DEVELOPMENT
The impure lithium-rich liquor is treated through a series
of pH controlled precipitation stages, with limestone and
lime, to sequentially remove the remaining impurities,
namely iron, aluminium, manganese, and magnesium. The
resulting lithium sulphate solution is of sufficient quality to
allow the recovery of a high specification lithium product.
LOH-Max® is a proprietary process for the production of
lithium hydroxide without the co-production of sodium
sulphate. The unique chemistry of this process has been
able to directly produce high purity lithium hydroxide
monohydrate in a cost effective manner. The process takes
the lithium sulphate liquor produced from the L-Max®
process as feed and involves hydrometallurgical reactions
to produce lithium hydroxide and a gypsum containing
residue. Provisional patent applications advanced in
fiscal 2020 for LOH-Max® and the separate process for
production of caesium and rubidium chemicals.
Lepidico’s proprietary
process technologies provide
a competitive advantage in
the production of critical and
strategic metals from lithium
mica minerals
Chemical Conversion Plant, Abu Dhabi
The L-Max® process technology employed in the
downstream chemical plant has been developed over
a six year timeframe through an extensive program of
laboratory, mini-plant and pilot plant programs. Coupled
with extensive flowsheet modelling and vendor testwork,
a robust process has evolved that produces lithium
chemical, high value by-product chemicals of caesium and
rubidium (extracted by a separate proprietary process)
and a range of bulk by-products, in an efficient low energy
approach. Patent protection was received in fiscal 2020
for the L-Max® technology in Australia, Europe, Japan and
the United States.
The Phase 1 chemical plant is designed to process
56,700tpa (dry basis) of lithium mica/amblygonite
concentrate at a feed grade of up to 4.0% Li2O for
production capacity of 5,600tpa of lithium hydroxide.
The overall lithium recovery from concentrate to lithium
hydroxide is estimated at 90%.
A key aspect of the L-Max® process is the direct leaching of
the lithium bearing mineral from the feed without the need
for an energy intensive thermal treatment step preceding
the leach, which is employed by many other hard rock
lithium conversion processes. The leach conditions are such
that very little energy is required to keep the process at
temperature. Optimising the leaching conditions has been
an important part of the development process.
Handling of the leached slurry is a unique part of the
L-Max® process and the embedded intellectual property.
The slurry is filtered at moderate temperature to yield a
solution containing the valuable alkali metals and a silica-
rich filter cake. Effective washing of this cake is required
to achieve high lithium recovery to the liquor moving
downstream.
The filtered leach liquor, which is rich in aluminium, is
cooled resulting in the crystallisation of an alum solid. This
alum crystallisation step achieves the separation of lithium
from the other monovalent cations. The monovalents,
potassium, rubidium and caesium all form alums, whereas
lithium does not. Filtering the alum slurry results in the
potassium, rubidium and caesium, and most of the
aluminium reporting to the solids, and a liquor containing
the lithium and small amounts of other impurities. The
alum solids are further treated to yield potassium, caesium
and rubidium products.
10
2020 LEPIDICO ANNUAL REPORT L-Max® and LOH-Max® technologies:
•
•
•
•
•
•
Six years of development including mini plant
and pilot plant manufacture of products
Demonstrated chemistry through piloting and
product development
Multiple products maximise revenue potential
and result in minimal waste streams
Low temperature and atmospheric pressure
leach with no roasting stage required,
allowing for relatively low energy intensity
and greenhouse gas emissions
Conventional processing equipment and non-
exotic materials of construction
Relatively short equipment and construction
lead time
11
2020 LEPIDICO ANNUAL REPORT TECHNOLOGY DEVELOPMENT
BUSINESS DEVELOPMENT
Transitioning to Development
& Operations
Four workstreams are being progressed in parallel that will
allow a Final Investment Decision to be considered, the
gating event into the implementation phase.
ESIAs
An ESIA and associated Environmental and Social
Management Plan were completed in July 2020 for
the planned Namibian developments, operations and
closure. These workstreams have been completed
to be aligned with the Equator Principles and IFC
Performance Standards.
The P1P chemical plant development has been registered
with the Environmental Authority of Abu Dhabi, which
advised that a Preliminary Environmental Review (PER) is
required for permitting rather than a more comprehensive
EIA. The PER is scheduled to be completed in the
December 2020 quarter. However, an associated ESIA
is also planned to be aligned with the Equator Principles
and IFC Performance Standards, and in turn support the
project financing.
Offtake
In December 2019 Lepidico and BASF SE (BASF)
extended the duration of their Letter of Intent to end
December 2020, whereby BASF would be able to
purchase lithium hydroxide sourced from Lepidico’s
integrated Phased 1 Lithium Chemical Project. By fiscal
year end Strategic Metallurgy had modified the back end
of the pilot plant in Perth to allow production of larger
quantities of nominal battery grade lithium hydroxide with
a reference purity of 56.5% LiOH for prospective customer
testing. Samples are planned to be produced for testing
by prospective customers throughout the balance of the
2020 calendar year.
Lepidico has non-disclosure agreements with three
prospective customers of caesium and rubidium
chemicals. Evaluations are being undertaken with two of
these to determine the viability of producing alternative
chemical products to better meet their respective
requirements. It is expected that any change in chemical
produced will simplify the Phase 1 Plant design and
possibly result in a minor reduction in the P1P capital cost.
12
2020 LEPIDICO ANNUAL REPORT Finance
Lepidico has been working with finance advisor LHGP
since December 2019. LHGP has specialist capabilities
in the key areas for the Phase 1 Project, being Africa, the
UAE, Europe and the United States. Soft soundings of
prospective debt providers were completed during the
year, which led to a target debt range of 60% to 70% of
the total funding requirement for the integrated Project.
Engagement with commercial banks, DFIs and export
credit agencies (ECAs) is ongoing in fiscal 2021 for
the Project debt. Particular interest is being shown by
organisations that lend to developing countries. Strategic
investors are favoured for the equity finance component.
The Integrated Project will have operations across two
jurisdictions: Namibia and Abu Dhabi; and potential
offtake partners across further jurisdictions resulting in
various regulatory and fiscal regimes. The structure of
the Integrated Project therefore requires separate legal
entities to be established in each operating jurisdiction,
which in turn has led to a split finance structure being
contemplated.
Engineering & Design
A considerable proportion of front end engineering and
design works for both the concentrator and chemical
conversion plant were completed as part of the DFS,
providing excellent Project definition given the stage of
development. A pre-qualification process of select mid-
tier engineering firms will be completed ahead of a formal
tender process for an EPCM contractor. The successful
contractor will preferably be capable of executing both
process plants. Lepidico will develop a small owners
team to self-perform construction management of minor
infrastructure works particularly at Karibib. The same team
will manage the EPCM and specialist consultants.
Implementation Milestones
• Procurement of long lead packages by April 2021
• Implementation commences – May 2021
• Karibib site works commence – September 2021
• Karibib mining commences – August 2022
• Karibib process plant ore commissioning starts –
November 2022
• Chemical Plant site works commences –
December 2021
• Chemical Plant wet commissioning starts –
February 2023
• Project fully operational – June 2023
13
2020 LEPIDICO ANNUAL REPORT STRATEGIC RESOURCE
DEVELOPMENT
Karibib Project
The Karibib Project comprises four granted tenements
encompassing 1,034km² 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. 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).
Mineral Resources
Mineralogy and internal zonation characteristics at
Rubicon and Helikon 1 are similar, aiding the development
of a simplified geological code that was used in the most
recent (2019) phase of drilling to identify lepidolite and
other lithium mineralisation amenable to processing by
L-Max®. For consistency, all of the previous drilling since
2017 was re-logged according to these revised codes.
Snowden Mining Industry Consultants Pty Ltd (Snowden)
produced an updated Mineral Resource estimate (MRE)
for Rubicon and Helikon 1 in January 2020, reported in
accordance with the JORC Code (2102). This estimate
is based on 5,164m of additional diamond drilling
undertaken in 2019, with 51 holes completed at Rubicon
and 35 holes completed at Helikon 1. Measured and
Indicated Resources at Rubicon and Helikon 1 total 8.87Mt
@ 0.43% Li2O (as reported to the ASX in January 2020).
Significantly, the updated MRE also includes estimates
for the accessory metals caesium (Cs), rubidium (Rb)
and potassium (K). The revised MRE for Rubicon and
Helikon 1 supersedes the inaugural MRE for these deposits,
prepared by The MSA Group, as initially reported to ASX
by Lepidico in July 2019. MREs (by The MSA Group) for
Helikon 2-5, remain unchanged but do not include assay
data for caesium, rubidium or potassium at this time.
Pit optimisations undertaken by Australian Mine Design
and Development Pty Ltd (AMDAD) for Rubicon and
Helikon 1 demonstrate these Mineral Resources to be
potentially economic at a cut-off grade of 0.15% Li₂O.
Project geology and occurrence of LCT-type pegmatites (red stars) within the Karibib Pegmatite Belt.
14
2020 LEPIDICO ANNUAL REPORT Ore Reserves
The dip, geometry and near surface location of the
mineralised zones at the Karibib Project are suitable for
conventional open pit truck and shovel operations with
drilling and blasting required to fragment both mineralised
rock and waste rock. An industry standard approach to
mine planning has been undertaken.
Whittle 4X™ pit optimisation was used by AMDAD to
define the location and shape of the open pits for the
mine plan. The software uses stable pit wall slopes,
mining, processing and administration operating costs,
process recoveries and product prices to determine the
highest value pit shell. It accounts for the interactions of
these inputs with the deposit geometry, the depth, width
and orientation of the mineralised zones and the grade
distribution of the target product within those zones.
The highest value, or optimised, pit shell is then used to
guide design of a practical working pit including wall slope
designs and access roads.
Pit wall slopes are based on a geotechnical assessment
by Pells Sullivan and Meynink engineers. The geotechnical
assessment was based on dedicated geotechnical
drilling in final pit walls, mapping of fault structures,
core assessment and physical rock testing and failure
modelling. Inter ramp angles are 55° based on 15m high
benches with 8m berms.
The Rubicon pit design has been completed in four stages
and Helikon 1 in two stages. The stages have been selected
based on value, grade, and strip ratio criteria. The Ore
Reserves Statement has been prepared by AMDAD in
accordance with the guidelines of the 2012 Edition of the
“JORC Code”, as reported to ASX in May 2020.
The Karibib Project Ore Reserve is understood to be
unique, being the only code compliant estimate globally
for both caesium and rubidium, and which also includes
other valuable alkali earth metals lithium and potassium.
This is a function of the metal endowment of the mineral
lepidolite – K(Li,Al,Rb,Cs)₂(Al,Si)₄O10(F,OH)₂ – the
dominant lithium mineral at Karibib.
Karibib Ore Reserves are
understood to be the only
publicly quoted code
compliant estimates globally
of strategic metals caesium
and rubidium
Other Exploration
Lepidico is pursuing a strategy of maximising the value
of its exploration properties by implementing programs
targeted at a range of metals for which the Karibib region
is prospective, including lithium, caesium, tantalum, gold,
copper, tungsten and uranium. Exploration during the
latter part of fiscal 2020 was hampered by movement
restrictions imposed by the Namibian authorities in
response to the COVID-19 pandemic.
A regional exploration program started in early 2020
to evaluate the lithium pegmatite and gold potential
within the Karibib exclusive prospecting licence areas.
A separate Resource development program also
commenced to further evaluate extensions to the known
lepidolite deposits and the lepidolite rich broken surface
stockpiles at the historical Rubicon and Helikon pegmatite
workings.
15
2020 LEPIDICO ANNUAL REPORT STRATEGIC RESOURCE
DEVELOPMENT
Karibib Mineral Resource estimate
Deposit
Rubicon*
+
Resource
Category
Measured
Indicated
Helikon 1*
Inferred
Helikon2#
Helikon3#
Helikon4#
Helikon5#
Global
Total
Inferred
Inferred
Inferred
Inferred
Measured
Indicated
Inferred
Total
Tonnes
(M)
2.20
6.66
0.17
9.04
0.216
0.295
1.510
0.179
2.20
6.66
2.37
11.24
Li₂O
(%)
0.57
0.38
0.70
0.43
0.56
0.48
0.38
0.31
0.57
0.38
0.43
0.43
Rb
(%)
0.27
0.22
0.29
0.23
Cs
(ppm)
389
274
1100
318
Ta
(ppm)
51
42
150
46
K
(%)
2.14
2.06
2.18
2.08
0.27
0.22
389
274
51
42
2.14
2.06
Source: *Snowden estimate cut-off 0.15% Li₂O; #MSA Group estimate cut-off 0.20% Li₂O
Karibib Ore Reserve estimate
Li₂O
%
0.55
0.38
0.43
0.69
0.51
0.58
0.59
0.41
0.46
Rb
%
Rubicon Pit
0.28
0.20
0.22
Helikon 1 Pit
0.26
0.22
0.24
Total Project
0.28
0.21
0.23
Cs
ppm
350
230
260
560
550
550
410
290
320
Ta
ppm
50
40
40
60
80
70
50
40
50
K
%
2.17
2.03
2.06
1.93
1.79
1.85
2.10
1.99
2.02
Mt
1.38
3.94
5.32
22.84
4.30
0.55
0.85
1.40
2.51
1.80
1.93
4.79
6.72
25.35
3.80
Pit
Proved
Probable
Pit Total
Waste
Waste: Ore Ratio
Proved
Probable
Pit Total
Waste
Waste: Ore Ratio
Proved
Probable
Total Ore
Waste
Waste: Ore Ratio
Source: AMDAD
16
2020 LEPIDICO ANNUAL REPORT
Competent Persons' Statements
The information in this report that relates to the Rubicon and Helikon
1 Mineral Resource estimates is based on information compiled
by Vanessa O’Toole who is a member of the Australasian Institute
of Mining and Metallurgy, and has sufficient experience which is
relevant to the style of mineralisation and type of deposit under
consideration and to the activity to which she 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.” Vanessa O’Toole was at the time an
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.
The information in this report that relates to the Helikon 2 - Helikon
5 Mineral Resource estimates is based on information compiled
by Mr Jeremy Witley, who is a fellow of The Geological Society of
South Africa (GSSA) and is a 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). Mr 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 Helikon 1 and
Rubicon Ore Reserve estimates is based on information compiled
by John Wyche who is a Fellow of the Australasian Institute
of Mining and Metallurgy and has sufficient experience which
is relevant to the type of deposit and mining method under
consideration and to the activity 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.” Mr Wyche is an employee
of Australian Mine Design and Development Pty Ltd which is an
independent consulting company. He consents to the inclusion
in the report of the information compiled by him in the form and
context in which it appears.
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.
17
2020 LEPIDICO ANNUAL REPORT BOARD OF DIRECTORS
AND MANAGEMENT
MR GARY JOHNSON
BOARD OF DIRECTORS
MR ALEX NEULING
Mr Gary Johnson
Chair (Non-executive)
Qualifications - MAusIMM, MTMS, MAICD
Mr Julian “Joe” Walsh
Managing Director (Executive)
Qualifications - BEng, MSc
Ms Cynthia Thomas
Non-Executive Director
Qualifications - B.Com, MBA
Mr Mark Rodda
Non-Executive Director
Qualifications - BA, LLB
MANAGEMENT TEAM
JOINT COMPANY SECRETARY
Mr Alex Neuling
Qualifications: BSc, FCA (ICAEW), FCIS
CHIEF FINANCIAL OFFICER &
JOINT COMPANY SECRETARY
Ms Shontel Norgate
Qualifications: CA, AGIA ACIS
GENERAL MANAGER – GEOLOGY
Mr Tom Dukovcic
Qualifications: BSc (Hons), MAIG, MAICD
GENERAL MANAGER –
BUSINESS DEVELOPMENT
Mr Peter Walker
Qualifications: ScENG, CENG, ARSM
MS SHONTEL NORGATE
MR TOM DUKOVCIC
MR PETER WALKER
MR JOE WALSH
MS CYNTHIA THOMAS
MR MARK RODDA
18
2020 LEPIDICO ANNUAL REPORT
SUSTAINABILITY
The aim of this third sustainability report is to discuss
management’s approach to environmental and social
responsibility initiatives and how these continue to be
integrated into our sustainable business strategy. As with
prior years, 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 producer.
the completion of the DFS and will continue to do so 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 our systems will
evolve to collect the necessary data.
Lepidico is committed to developing a sustainable
lithium business providing high quality products whilst
minimising environmental and social impacts, with a
particular focus on climate and biosphere stewardship.
Building sustainability into our systems, values,
management practices, behaviours and governance
arrangements within a rapidly changing and challenging
global environment is embedded within our approach to
strategic planning.
This report provides commentary on our Corporate
Social Responsibility (CSR) systems development,
commensurate with our risks and opportunities. We look
forward to sharing our experiences to date here, 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 project sites, and we welcome their input and
feedback on our CSR reporting.
As a modern company that is quickly moving forward
to the development phase of the P1P, 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. This is evidenced by ESIAs being aligned with
the Equator Principles and IFC Performance Standards,
when prevailing local regulatory requirements are far
less onerous.
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 P1P, currently scheduled to start
in late calendar 2022. Our understanding of the material
issues for each business unit have become clearer with
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 2020, the newly established Diversity Committee
met and developed the Charter under which it would
operate. The Committee reviewed its progress against the
FY2020 measurable objectives and set new objectives
for FY2021. We continued to benchmark and track
gender diversity against our peers and remain committed
to providing 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 are gender neutral and inclusive.
The proportion of women employed by Lepidico as at
30 June 2020 is listed below:
Level
Non-Executive Directors
Senior Executive Positions (including Executive Director)1
Management
Non-Management
All Employees2
2020
%
33%
25%
0%
50%
33%
1. “Senior Executive” for the purpose of gender representation is defined to mean the Managing Director and his direct reports.
2. Includes full-time, part-time and regular casual employees.
2020 LEPIDICO ANNUAL REPORT
19
Our Board composition brings together a balanced
team of experienced financial, technical and operations
professionals. The board works closely with the Lepidico
management team to guide the company and has
oversight of Lepidico’s CSR strategy
The Company has adopted a continuous improvement
philosophy and is an early adopter of the 4th edition of
the ASX Principles of Good Corporate Governance and
Best Practice Recommendations (refer to the Corporate
Governance Statement for further detail). Governance
principles adopted at the head company level are
cascaded, as appropriate, to the Company’s operations in
the UAE and Namibia.
Sustainability Policy and Risk
The Company takes a “top-down” approach to risk
management with a developed corporate risk register
including 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.
Sustainable Development
Phase 1 demonstrates strong sustainability credentials
across all facets of the Project. The DFS demonstrated
that Phase 1 is positively differentiated from other
conventional lithium process technologies in the
fields of sustainability, technical robustness, strategic
development and economic outcomes.
Karibib Project, Namibia
• Existing disturbed brownfield sites with
closure plans developed that employ industry
best practice and will rectify mining and
processing legacy issues, designed to return
the site to agricultural land use
• Symbiotic co-existence with local farmers and
communities
• Enhancement of local community
infrastructure through roads and water supply
• Community support programs developed
and focussed on critical resources, health and
education, diversity and sustainable micro
business development
• Social benefits include the creation of 115
direct jobs to benefit local communities and
the economy with an estimated eight fold
employment multiplier effect within the region
• Renewable energy supply is favoured with the
local electrical utility objective to have 80%
of power generated from renewable sources
within 5 years
• No tailings storage facility is required as co-
disposal of benign dry stacked flotation plant
tails with mine waste will be employed, which
also increases water recycling significantly
• Fossil fuel consumption will be low due to
the requirement for only a small scale mining
fleet, with electric options to be reviewed as
and when right-sized equipment becomes
available
• The Karibib Project is fully permitted with
an existing Environmental Compliance
Certification and Mining Licence both in place
20 2020 LEPIDICO ANNUAL REPORT
2020 LEPIDICO ANNUAL REPORT
21
SUSTAINABILITY
ESIA Karibib Operations
Karibib is fully permitted for the re-development of
two low strip ratio open pit mines, feeding lithium mica
ore to a central mineral concentrator that employs
conventional flotation technology. The associated
modest footprint maximises the use of disturbed ground
from historical operations.
Mining Licence (ML) 204 has a granted Environmental
Clearance Certificate (ECC) issued by the Environmental
Commissioner in the Ministry of Environment and
Tourism for a period of three years, valid to September
2020. The renewal process commenced in March 2020.
A new ESIA and Environmental & Social Management
Plan (ESMP) for the planned Namibian operations were
completed in early July 2020 and submitted along with
the ECC renewal application.
The ESIA and ESMP were completed by Risk-Based
Solutions CC, a leading Namibian environmental
consultancy and authored by Dr Sindila Mwiya, who
has undertaken more than 200 environmental projects
for Namibian, Continental African and International
based clients. The ESIA and ESMP are in compliance to
the provisions of Namibian mining and environmental
legislation and according to Equator Principles and IFC
Performance Standards on Social and Environmental
Sustainability.
Of note, Risk-Based Solutions designated the Project as
Category B² : “Business activities with potential limited
adverse environmental or social risks and/or impacts that
are few in number, generally site-specific, largely reversible,
and readily addressed through mitigation measures.”
Furthermore, the ESIA found that, “the proposed
Karibib Project development in the ML 204 poses
localised negative impacts to the receiving environment
with greater offset/trade-offs/benefits in the form
of socioeconomic and environmental reclamation of
the currently abandoned mine sites. The extent of the
proposed mining and minerals processing and ongoing
exploration operations are limited in area extent with
respect to the ore body, the Rubicon and Helikon 1 pits
and supporting infrastructures areas.”
² Category B projects are considered medium risk. For these reasons, the scope of environmental and social assessment for Category B
projects is narrower than that required for Category A projects. Examples of Category B projects may include small to medium scale
housing developments in urban areas, restaurants, and light manufacturing: Environmental and Social Policy and Procedures, January
2020, U.S. International Development Finance Corp.
22
2020 LEPIDICO ANNUAL REPORT
Lepidolite Chemical Conversion
Plant, Abu Dhabi
• Chemical plant development is within an
established purpose built industrial zone that
minimises overall project impacts including
land disturbance, traffic, and emissions being
close to port facilities
• Low energy consumption: gas fired electrical
grid power to be supplemented by solar as and
when planned new supply comes on-stream
• Design incorporating heat recovery equipment
to reduce gas consumption
• Low emissions with net carbon intensity and
solid waste recycling into the building industry
in Abu Dhabi
• LOH-Max® eliminates the energy intensive
production of potentially problematic sodium
sulphate, which can’t be easily disposed of due
to its high solubility
• Social benefits – creation of 119 jobs
• Through the UAE and Abu Dhabi Vision 2030,
there is Government support for new projects
and technologies in the economic diversity
initiative that reduces reliance on the oil and
gas industries and general commodity imports
• Project permitting is underway for completion
in the December 2020 quarter
ESIA Abu Dhabi Operations
The P1P chemical plant development has been
registered with the Environmental Authority of Abu
Dhabi, which advised that a Preliminary Environmental
Review (PER) is required for permitting rather than a
more comprehensive EIA. The PER is scheduled to be
completed in the December 2020 quarter. However,
an associated ESIA is also planned to be aligned with
the Equator Principles and IFC Performance Standards,
and in turn support the project financing. Lepidico has
appointed environmental consultant GHD to manage the
permitting process in Abu Dhabi.
Residue Re-use Opportunities
Lepidico continues to pursue the opportunity for the
Phase 1 chemical plant to be a zero-waste facility. The
plant will produce two residue streams after impurity
treatment, referred to as the Impurity Removal and
Aluminium Removal streams. The total tonnage is
approximately 120,000tpa (dry basis) produced as a
filter cake with a free moisture of 25-30%. These streams
contain approximately 60% gypsum: the remaining
being alunite and other stable metal hydroxides.
Characterisation work completed during the DFS indicates
the material is benign and is suitable for remediation of
land fill sites and other affected land forms such as tailings
dams and as a building material.
A residue usage assessment specific to the UAE was
undertaken for the Phase 1 DFS. This work identified that
the gypsum residue could be used in the manufacture
of cement as a retarding agent. Typically, 5% gypsum is
added to cement clinker, sourced from synthetic gypsum
(from flue gas desulphurisation) or natural rock gypsum
in the case of the UAE. The majority of the gypsum used
in the UAE for this application is natural rock gypsum
imported from southern Oman.
The remaining residue will be disposed of through the
Abu Dhabi Waste Management Centre (Tadweer) which
will manage the recycling of the material through its
construction products recycling stream and/or its fertiliser
factory stream.
23
2020 LEPIDICO ANNUAL REPORT SUSTAINABILITY
Carbon Emissions: Current & Future
At its pre-development stage of evolution Lepidico’s
carbon emissions are largely associated with air travel
and exploration activities, predominantly drilling. The
international business footprints necessitates air travel,
however, efforts are made to minimise this by employing
audio-visual conferencing where possible. In fiscal 2020
Lepidico generated an estimated 501 tonnes of CO2
compared with 285 tonnes and 234 tonnes in the previous
two years respectively.
Being a purely hydrometallurgical process, L-Max® is
much less power intensive than conventional chemical
conversion of spodumene, allowing the integrated P1P
to have a relatively modest carbon intensity versus the
industry. A Scope 1 and 2 estimate3 indicated Phase 1
with a carbon intensity in the range of 5-7t CO₂/t lithium
hydroxide monohydrate after credits from amorphous
silica and gypsum. No allocation or allowance was made
for other by-products, which would have the effect of
reducing the intensity. A Scope 3 Project emissions
assessment is planned once upstream supply and
downstream offtake are finalised and associated emissions
are understood.
Water Intensity
Water intensity for the integrated Project is estimated to
be modest by industry standards at approximately
50L/kg during the first five years of production, rising to
60L/kg thereafter following a mill expansion in Namibia.
A permit for the annual abstraction of up to approximately
210,000m³ of groundwater from four boreholes within
the Company’s licence area was granted in 2017. Water
intensity for the Namibian operation during the first
five years of production is estimated to be 15L/kg of
lithium hydroxide, rising to 25L/kg following the planned
concentrator expansion. Water consumption intensity for
the Abu Dhabi chemical plant is expected to average
35L/kg of lithium hydroxide over the project life.
Land Use Intensity
The aggregate project footprint in Namibia and Abu Dhabi
combined is relatively modest and largely on designated
industrial land. The brownfield development in Namibia
has a footprint of approximately 800 hectares that
maximises the use of non-remediated ground disturbed
by the historical operations. The formal mine closure plan
will address rehabilitation of historically impacted areas.
The chemical plant in Abu Dhabi will be located on a 5.7
hectare plot within the KIZAD industrial park.
Ore Concentrator Waste Minimisation
The Karibib Project concentrator tailings will be a benign
mix of predominantly feldspar and quartz with some
residual mica, which will be filtered to recycle water and
co-disposed with mine waste rock, thereby eliminating the
requirement for a dedicated tailings storage facility.
Social, Community & Stakeholder
Consultation
Lepidico conducted a Socio-Economic Baseline Study
in March 2020, focused on the relevant communities in
the broader Karibib region. This revealed three broad
categories to prioritise support for the local communities:
1. Projects/investments with high employment creation
potential – to be aligned to the relatively abundant and
diverse local labour force.
2. Well-equipped vocational centres for tailor-made
training/skills enhancement, targeting unemployed
youth and women.
3. Diversification and value addition initiatives for food
security enhancement and poverty alleviation, targeting
vulnerable groups and farmers.
Based on several stakeholders’ meetings and the socio-
economic baseline assessments in the area, Lepidico has
identified five key objectives where it can add the greatest
value in its support of local communities.
1. Taking a systemic and strategic approach towards
sustainability to do no harm and stop making
tomorrow’s legacies today.
2. Improved local governance to effectively deliver basic
services and development.
3. Infrastructure Development.
4. Local Economic Development for Business and Job
Creation.
5. Education Development.
3 Greenhouse Gas Protocol, Corporate Accounting and Reporting Standard, 2004
24
2020 LEPIDICO ANNUAL REPORT 2020 LEPIDICO ANNUAL REPORT
25
These objectives will be achieved through both shorter-
term components of work, which are planned to start in
2021 (COVID-19 dependent) and longer-term components
that involve greater stakeholder participation and
consultation in their scoping and implementation.
In 2020, 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 below.
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.
Intellectual Property
Lepidico currently holds International Patent Application
PCT/AU2015/000608 and a granted Australian Innovation
Patent (2016101526) in relation to the L-Max® Process.
During the 2020 year the Company received notification
of the grant of the Australian, Japanese and US patents,
and confirmation of the decision to grant the European
patent in relation to the Company’s 100% owned L-Max®
process technology.
National and regional phase patent applications are well
advanced in other key jurisdictions. Patent application
processes also continue to advance for Lepidico’s other
proprietary processes including the production of
caesium, rubidium and potassium brines and LOH-Max®,
for the production of lithium hydroxide monohydrate from
a lithium sulphate intermediate, without the generation of
by-product sodium sulphate.
Goal
Governance
Outcome
Comments
Compliance
In compliance with all exploration licence conditions in
Namibia.
Occupational Health & Safety
Zero Fatalities
Zero Lost Time Incidents
Zero Medical Aid Incidents
Yes
Yes
Yes
No Fatalities.
No LTIs.
No MAIs.
OHS Management System
Established
OHS Policy and OHS Management Plan.
Environment
Zero Major Incidents
Yes
No major spills or incidents at managed sites.
Environmental Management System Yes
Sustainable Development Policy in place.
Environmental Baseline Studies
Ongoing
Phase 1 Plant studies continued in Namibia and Abu Dhabi.
ESIA completed for Karibib mine and concentrator to IFC
Environmental & Social Standards. ESIA to be completed
on the Chemical Plant to IFC standards despite only
requiring a Preliminary Environmental Review due to low
environmental impact.
Metallurgical Studies
Metallurgical Studies (waste
minimisation)
Social & Community
Communities
Ongoing
Implementation of filtered dry stacked tailings co-disposal
with mine waste thereby eliminating the requirement for a
dedicated wet tailings storage.
Ongoing
Consultation with KIZAD officials in Abu Dhabi.
Namibian Ministry of Lands and Reformation engaged to
work together with Lepidico to develop a formal land use
agreement.
Community meetings to negotiate Cohabitation
Agreement with the involvement of traditional owners and
local farmers from the area.
26
2020 LEPIDICO ANNUAL REPORT CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Lepidico Ltd (the “Company”) is responsible for the corporate governance of the Company.
The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they
are elected and to whom they are accountable.
This statement sets out the main corporate governance practices in place throughout the financial year in accordance
with the 4th edition of the ASX Principles of Good Corporate Governance and Best Practice Recommendations.
This Statement was approved by the Board of Directors and is current as at 2nd October 2020.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
ASX Recommendation 1.1: A listed entity should have and disclose a board charter setting out:
(a) the respective roles and responsibilities of its board and management; and
(b) those matters expressly reserved to the board and those delegated to management..
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.
ASX Recommendation 1.2: A listed entity should
(a) undertake appropriate checks before appointing a director or senior executive or putting someone forward for
election as a director; and
(b) provide security holders with all material information in its possession relevant to a decision on whether or not
to elect or re-elect a director.
The Company has complied with this recommendation.
Information in relation to Directors seeking election and/or re-election is set out in the Directors report and Notice of
Annual General Meeting.
ASX Recommendation 1.3: A listed entity should have a written agreement with each director and senior executive
setting out the terms of their appointment.
The Company has complied with this recommendation.
The Company has in place written agreements with each Director and Senior Executive.
ASX Recommendation 1.4: The company secretary of a listed company should be accountable directly to the Board,
through the chair, on all matters to do with the proper functioning of the Board.
The Company has complied with this recommendation.
The Board Charter provides for the Company Secretary to be accountable directly to the Board through the Chair.
ASX Recommendation 1.5: A listed entity should:
(a) have and disclose a diversity policy;
(b) through its board or a committee of the board set measurable objectives for achieving gender diversity in the
composition of its board, senior executives and workforce generally; and
(c) disclose in relation to each reporting period:
(1) the measurable objectives set for that period to achieve gender diversity;
(2) the entity’s progress towards achieving those objectives; and
(3) either:
(A) the respective proportions of men and women on the board, in senior executive positions and across
the whole workforce (including how the entity has defined “senior executive” for these purposes); or
(B) if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent
“Gender Equality Indicators”, as defined in and published under that Act.
27
2020 LEPIDICO ANNUAL REPORT If the entity was in the S&P / ASX 300 Index at the commencement of the reporting period, the measurable objective
for achieving gender diversity in the composition of its board should be to have not less than 30% of its directors of
each gender within a specified period.
The Company has complied with this recommendation.
The Company has adopted a Diversity Policy which is available in the Corporate Governance section of the Company’s
website at www.lepidico.com.
The table below sets out the measurable objectives for the 2020 financial year and provides details on the progress of
the Company toward achieving them:
Objective
Results
Gain baseline data understanding of representation of
women in all operating jurisdictions.
Ensuring that recruitment is made from a diverse pool of
qualified candidates. Where appropriate, a professional
recruitment firm shall be engaged to select a diverse
range of suitably qualified candidates.
Baseline data for representation of women in the
workforce in Australia and Canada established.
Relevant national data for Namibia and UAE will be
sought as part of the Environment and Social Impact
Assessments for the Phase 1 Project.
No new staff members were recruited during the
2020 financial year. This protocol will be adhered to
for all future recruitment.
To ensure that in the interview process for each Director
and/or senior executive position there is at least an
equal number of females on the interview panel.
No new staff members were recruited during the
2020 financial year. This protocol will be adhered to
for all future recruitment.
Support community led programmes empowering
women and ending discrimination.
Preparations for community programmes in the
Karibib area, Namibia started during the year but
were suspended due to COVID-19 and austerity
measures.
Capital for Representation
The proportion of women employed by the Company as at 30 June 2020 is listed below:
Level
Non-Executive Directors
Senior Executive Positions (including Executive Director)1
Management
Non-Management
All Employees2
2020
33%
25%
0%
50%
33%
(1) “Senior Executive” for the purpose of gender representation is defined to mean the Managing Director and his direct reports.
(2) Includes full-time, part-time and regular casual employees.
ASX Recommendation 1.6: A listed entity should:
(a) have and disclose a process for periodically evaluating the performance of the board, its committees and
individual directors; and
(b) disclose for each reporting period whether a performance evaluation has been undertaken in accordance with
that process during or in respect of that period.
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.
In accordance with this process, Board evaluation questionnaires were provided to each member of the Board in order
to assess the performance of the individual Director, the Board as a whole, Committees of the Board and the Managing
Director.
The completed questionnaires are provided to the Chair of the Nomination and Remuneration Committee and are used
by the Board to 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.
A performance review was undertaken for the reporting period.
28
2020 LEPIDICO ANNUAL REPORT ASX Recommendation 1.7: A listed entity should:
(a) have and disclose a process for evaluating the performance of its senior executives at least once every reporting
period; and
(b) disclose for each reporting period whether a performance evaluation has been undertaken in accordance with that
process during or in respect of that 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.
PRINCIPLE 2: STRUCTURE THE BOARD TO BE EFFECTIVE AND ADD VALUE
ASX Recommendation 2.1: The board of a listed entity should:
(a) have a nomination committee which:
(1) has at least three members, a majority of whom are independent directors; and
(2) chaired by an independent director;
and disclose:
(3) the charter of the committee;
(5) the members of the committee; and
as at the end of each reporting period, the number of times the committee met throughout the period and the individual
attendances of the members at those meetings; or
(b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board
succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience,
independence and diversity to enable it to discharge its duties and responsibilities effectively.
The Company has complied with this recommendation.
The members of the Committee, the number of meetings held during the financial period and the individual attendance of
the members at those meetings are set out in the Directors’ Report included in the Lepidico Annual Report.
A copy of the Committee’s Charter is available in the Corporate Governance section of the Company’s website
at www.lepidico.com.
29
2020 LEPIDICO ANNUAL REPORT ASX Recommendation 2.2: A listed entity should have and disclose a Board skills matrix setting out the mix of skills that
the Board currently has or is looking to achieve in its membership.
The Company has complied with this recommendation.
The Board has established a skill matrix. On a collective basis the Board has the following skills:
Area
Strategic expertise
Specific industry knowledge
International experience
Accounting and finance
Legal and governance
Risk management
Sustainability
Board Skill and Experience
Ability to identify and critically assess strategic opportunities and threats and
develop strategies.
Experience as a Director, CEO, CFO or other officeholder or similar in medium
sized entities.
Senior executive, advisory or board experience in the resources sector
including exploration, mineral resource project development, mining and
mineral processing, and mineral/chemical process development.
Relevant tertiary degree or professional qualification.
An understanding of the complexities of operating in foreign jurisdictions.
Experience in and exposure to multiple cultural, regulatory and business
environments.
Senior executive experience in financial accounting and reporting, or business
development or board remuneration and nomination committee experience.
Relevant tertiary degree or professional qualification.
Board audit committee experience.
Ability to read and comprehend the Company’s accounts, financial
material presented to the Board, financial reporting requirements and an
understanding of corporate finance.
Relevant tertiary degree or professional qualification.
Listed entity board and/or committee experience.
Experience in organisations with a strong focus on and adherence to
governance standards.
Experience in general corporate, mining, fiscal and labour laws and/or
the ability to consider the legal requirements of the Company’s business
operations and transactions contemplated by the Company, across the
multiple jurisdictions in which it operates.
Ability to identify and monitor risks to which the Company is, or has the
potential to be, exposed.
Experience and knowledge of working on sustainability activities directly and/
or as part of operational responsibility.
Experience in tailoring environmental and social practices to local
requirements found in foreign jurisdictions and also adhere to recognised
industry best practices.
Experience with capital markets
Experience in corporate finance and the equity/debt or capital markets.
Investor relations
Experience in identifying and establishing relationships with shareholders,
potential investors, institutions and equity analysts.
ASX Recommendation 2.3: A listed entity should disclose:
30
2020 LEPIDICO ANNUAL REPORT (a) the names of the directors considered by the board to be independent directors;
(b) if a director has an interest, position or affiliation or relationship described in 2.3 but the board is of the opinion
that it does not compromise the independence of the director, the nature of the interest, position or relationship in
question and an explanation of why the board is of that opinion; and
(c) provide details in relation to the length of service of each Director.
The Company has complied with this recommendation.
In determining a Director's independence, the Board considers those relationships which may affect independence as
contained in the 4th edition of the ASX Corporate Governance Principles and Recommendations.
In each case, the materiality of the interest, position, association or relationship is assessed to determine whether it might
interfere, or might reasonably be seen to interfere, with the Director’s capacity to bring an independent judgment to bear on
issues before the Board and to act in the best interests of the Company and its security holders generally.
The Company Secretary maintains a register for the purposes of identifying the existence of any transactions between
the Director’s related parties and the Company and the impact (if any) such transactions (or other factors) may have on a
Director’s independence which is tabled at each Board Meeting.
The independence and length of service of each Director is as follows:
Director
Independent
Date of Appointment
Length of Service1
Mr Gary Johnson
Mr Julian (Joe) Walsh
Mr Mark Rodda
Ms Cynthia Thomas
No
No
Yes
Yes
9 June 2016
22 September 2016
22 August 2016
10 January 2018
4.1 years
3.7 years
3.8 years
2.5 years
1 Length of service is calculated to 30 June 2020
ASX Recommendation 2.4: The majority of the Board of a listed entity should be independent Directors.
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.
ASX Recommendation 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.
ASX Recommendation 2.6: A listed entity should have a program for inducting new Directors and for periodically
reviewing whether there is a need for existing directors to undertake professional development to maintain the skills and
knowledge needed to perform their role as directors effectively.
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.
PRINCIPLE 3: INSTIL A CULTURE OF ACTING LAWFULLY, ETHICALLY AND RESPONSIBLY
31
2020 LEPIDICO ANNUAL REPORT ASX Recommendation 3.1: A listed entity should articulate and disclose its values.
The Company has complied with this recommendation.
The Company’s strategy, vision and values is reviewed annually and available in the Corporate Governance section of the
Company’s website at www.lepidico.com.
ASX Recommendation 3.2: A listed entity should:
(a) have and disclose a code of conduct for its directors, senior executives and employees; and
(b) ensure that the board or a committee of the board is informed of any material breaches of that code.
The Company has complied with this recommendation.
The Company has 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, senior executives 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.
There were no material breaches of the code during the reporting period.
ASX Recommendation 3.3: A listed entity should:
(a) have and disclose a Whistleblower Policy; and
(b) ensure that the board or a committee of the board is informed of any material incidents reported under that policy.
The Company has complied with this recommendation.
The Company has a Whistleblower Policy and a copy is available in the corporate governance section of the Company’s
website at www.lepidico.com.
There were no material incidents reported under the Whistleblower Policy during the reporting period.
ASX Recommendation 3.4: A listed entity should:
(a) have and disclose an anti-bribery and corruption policy; and
(b) ensure that the board or a committee of the board is informed of any material incidents reported under that policy.
The Company has complied with this recommendation.
The Company has an Anti-bribery and Corruption Policy and a copy is available in the Corporate Governance section of the
Company’s website at www.lepidico.com.
There were no material incidents reported under the Anti-bribery and Corruption Policy during the reporting period.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
ASX Recommendation 4.1: The Board of a listed entity should:
(a) have an audit committee which:
(1) has at least three members, all of whom are non-executive directors and a majority of which are independent
directors; and
(2) is chaired by an independent director, who is not the chair of the board;
and disclose:
(3) the charter of the committee,
(4) the relevant qualifications and experience of the members of the committee; and
(5) In relation to each reporting period, the number of times the committee met throughout the period and the
individual attendances of the members at those meetings; or
(b) If it does not have an audit committee, disclose that fact and the processes it employs that independently verify and
safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the
external auditor and the rotation of the audit engagement partner.
The Company has complied with this recommendation.
32
2020 LEPIDICO ANNUAL REPORT A copy of the Audit and Risk Committee Charter is available in the Corporate Governance section of the Company's website
at www.lepidico.com.
The relevant qualifications and experience of the members of the Audit and Risk Committee, the number of times the
Committee met during the financial period and the individual attendances of the members at those meetings are set out in
the Directors’ Report included in the Lepidico Annual Report.
ASX Recommendation 4.2: The Board of a listed entity should, before it approves the entity’s financial statements for a
financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have
been properly maintained and that the financial statements comply with the appropriate accounting standards and give
a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the
basis of a sound system of risk management and internal control which is operating effectively.
The Company has complied with this recommendation.
ASX Recommendation 4.3: A listed entity should disclose its process to verify the integrity of any periodic corporate
report it releases to the market that is not audited or reviewed by the external auditor.
The Company has complied with this recommendation.
Where a periodic corporate report is not required to be audited or reviewed by an external auditor, Lepidico conducts
an internal verification process to confirm the integrity of the report, to ensure that the content of the report is materially
accurate, and provides investors with appropriate information to make informed investment decisions.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
ASX Recommendation 5.1: A listed entity should have and disclose a written policy for complying with its continuous
disclosure obligations under listing rule 3.1.
The Company has complied with this recommendation.
A copy of the Continuous Disclosure Policy is available in the Corporate Governance section of the Company's website at
www.lepidico.com.
ASX Recommendation 5.2: A listed entity should ensure that its board receives copies of all material market
announcements promptly after they have been made.
The Company has complied with this recommendation.
ASX Recommendation 5.3: A listed entity that gives a new and substantive investor or analyst presentation should
release a copy of the presentation materials on the ASX Market Announcements Platform ahead of that presentation.
The Company has complied with this recommendation.
PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS
ASX Recommendation 6.1: A listed entity should provide information about itself and its governance to investors via its
website.
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.
33
2020 LEPIDICO ANNUAL REPORT ASX Recommendation 6.2: A listed entity should design and implement an investor relations program to facilitate
effective two-way communication with investors.
The Company has complied with this recommendation.
The Company’s Managing Director and General Manager - 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.
ASX Recommendation 6.3: A listed entity should disclose how it facilitates and encourages 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. At each Annual General Meeting the Chair allows a reasonable
opportunity for shareholders to ask questions of the Board and the external auditors.
The full text of all notices of meetings and explanatory material are posted on the Company’s website at www.lepidico.com
as soon as they have been released by the ASX.
ASX Recommendation 6.4: A listed entity should ensure that all substantive resolutions at a meeting of security holders
are decided by a poll rather than by a show of hands.
The Company has complied with this recommendation.
The proxy numbers received in advance of a meeting of shareholders are made available for shareholders attending the
meeting in person. Where a show of hands is not aligned with the proxy numbers the Chair will call for a poll.
Given the potential health risks and government restrictions in response to the coronavirus pandemic, Lepidico will
implement various measures to facilitate shareholder participation at the 2020 AGM, which will include a live webcast. All
resolutions will effectively be decided by a poll, allowing all shareholders to vote based on the number of securities held by
them. Voting on a poll also allows shareholders to register their vote regardless of whether they attend the meeting or not.
Further details about how shareholders can participate at the 2020 AGM will be provided in the 2020 Notice of Meeting.
ASX Recommendation 6.5: A listed entity should give security holders the option to receive communications from, and
send communications to, the entity and its security registry electronically.
The Company has complied with this recommendation.
Lepidico has a dedicated email address to handle shareholder communications.
Lepidico’s securities registrar, Automic Group, facilitates the provision of communications between Lepidico and its
shareholders electronically. Shareholders can make a choice about how they wish to receive information from Lepidico
and can elect to receive Lepidico documents including notices of meetings, annual reports and other correspondence
electronically. Shareholders can also lodge their proxies electronically.
34
2020 LEPIDICO ANNUAL REPORT PRINCIPLE 7: RECOGNISE AND MANAGE RISK
ASX Recommendation 7.1: The Board of a listed entity should:
(a) have a committee or committees to oversee risk, each of which:
(1) has at least three members, a majority of whom are independent directors; and
(2) is chaired by an independent director;
and disclose:
(3) the charter of the committee,
(4) the members of the committee and
(5) as at each reporting period, the number of times the committee met throughout the period and the individual
attendances of the members at those meetings; or
(b) If it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it
employs for overseeing the entity’s risk management framework.
The Company has complied with this recommendation.
A copy of the Audit and Risk Committee Charter is available in the Corporate Governance section of the Company's website
at www.lepidico.com.
The members of the Committee, the number of meetings held during the financial period and the individual attendance of
the members at those meetings are set out in the Directors’ Report included in the Lepidico Annual Report.
ASX Recommendation 7.2: The Board or a committee of the Board should:
(a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound and
that the entity is operating with due regard to the risk appetite set by the board; and
(b) disclose, in relation to each reporting period, whether such a review was undertaken.
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 in relation to the reporting period.
ASX Recommendation 7.3: A listed entity should disclose:
(a) if it has an internal audit function, how the function is structured and what role it performs; or
(b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually
improving the effectiveness of governance, risk management and internal control processes.
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.
ASX Recommendation 7.4: A listed entity should disclose whether it has any material exposure to economic,
environmental and social sustainability risks and if it does how it manages or intends to manage those risks.
The Company has complied with this recommendation.
The Company has exposure to economic risks, including general economy wide economic risks and risks associated with
the economic cycle which impact on the price and demand for minerals which affects the sentiment for investment in
exploration companies.
There will be a requirement in the future for the Company to raise additional funding to pursue its business objectives.
The Company’s ability to raise capital may be affected 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.
35
2020 LEPIDICO ANNUAL REPORT It is the Company’s intention to conduct its activities to the highest standard of environmental obligation, including
compliance with all environmental laws.
The Board currently considers that the Company does not have any material exposure to social sustainability risk.
The Company’s Corporate Code of Conduct outlines the Company’s commitment to integrity and fair dealing in its business
affairs and to a duty of care to all employees, clients and stakeholders. The code sets out the principles covering appropriate
conduct in a variety of contexts and outlines the minimum standard of behaviour expected from employees when dealing
with stakeholders.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
ASX Recommendation 8.1: The Board of a listed entity should:
(a) have a remuneration committee which:
(1) has at least three members, a majority of whom are independent directors; and
(2) is chaired by an independent director;
and disclose:
(3) the charter of the committee,
(4) the members of the committee and
(5) as at each reporting period, the number of times the committee met throughout the period and the individual
attendances of the members at those meetings; or
(b) If it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level
and composition of remuneration for directors and senior executives and ensuring that such remuneration is
appropriate and not excessive.
The Company has complied with this recommendation.
A copy of the Remuneration and Nomination Committee Charter is available in the Corporate Governance section of the
Company's website at www.lepidico.com
The members of the Committee, the number of meetings held during 2020 and the individual attendance of the members at
those meetings are set out in the Directors’ Report included in the Lepidico Annual Report.
ASX Recommendation 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.
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.
ASX Recommendation 8.3: A listed entity which has an equity-based remuneration scheme should:
(a) have a policy on whether participants are permitted to enter into transactions (whether through the use of
derivatives or otherwise) which limit the economic risk of participating in the scheme; and
(b) disclose the policy or a summary of that policy.
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.
36 2020 LEPIDICO ANNUAL REPORT
FINANCIAL REPORT
TABLE OF CONTENTS
DIRECTORS’ REPORT
AUDITORS INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOW
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
SUPPLEMENTARY (ASX) INFORMATION
38
54
55
56
57
58
59
90
91
96
2020 LEPIDICO ANNUAL REPORT
37
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 2020 (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:
Mr Gary Johnson
Mr Joe Walsh
Mr Tom Dukovcic
Mr Mark Rodda
Ms Cynthia Thomas
Mr Brian Talbot
Non-executive Chair
Managing Director
Geology Director (ceased to be a Director 21 November 2019)
Non-executive Director
Non-executive Director
Non-executive Director (resigned 9 April 2020)
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
CURRENT DIRECTORS
Mr Gary Johnson - Chair (Non-executive)
Qualifications - MAusIMM, MTMS, MAICD
Mr 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:
None
Mr Julian “Joe” Walsh - Managing Director (Executive)
Qualifications - BEng, MSc
Mr 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 Committee
Other Current Directorships of listed public companies:
None
Former Directorships of listed public companies in the last 3 years:
None
38
2020 LEPIDICO ANNUAL REPORT
Mr Mark Rodda - Non-Executive Director
Qualifications - BA, LLB
Mr Rodda is a lawyer and consultant with over 20 years’ private practice, in-house legal, company secretarial and corporate
experience. Mr Rodda has considerable practical experience in the management of local and international mergers and
acquisitions, divestments, exploration and project joint ventures, strategic alliances, corporate and project financing
transactions and corporate restructuring initiatives. Mark currently manages Napier Capital Pty Ltd, a business established
in 2008 to provide clients with specialist corporate services and assistance with transactional or strategic projects. Prior
to its 2007 takeover by Norilsk Nickel for in excess of $6 billion, Mark held the position of General Counsel and Corporate
Secretary for LionOre Mining International Ltd, a company with operations in Australia and Africa and listings on the TSX,
LSE and ASX.
Special responsibilities:
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:
Director of Antipa Minerals Ltd
Former Directorships of listed public companies in the last 3 years:
None
Ms Cynthia Thomas – Non-Executive Director
Qualifications – B.Com, MBA
Ms Thomas has over 30 years’ of banking and mine finance experience, and is currently the Principal of Conseil Advisory
Services Inc. (Conseil), an independent financial advisory firm specialising in the natural resource industry which she founded
in 2000. Prior to founding Conseil, Cynthia worked with Bank of Montreal, Scotiabank and ScotiaMcLeod in the corporate
and investment banking divisions. Cynthia holds a Bachelor of Commerce degree from the University of Toronto and a
Masters in Business Administration from the University of Western Ontario.
Special responsibilities:
Chair of Audit and Risk Committee
Chair of the Diversity Committee
Member of the Remuneration and Nomination Committee
Other 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:
None
COMPANY SECRETARIES
Mr Alex Neuling
Qualifications: BSc, FCA (ICAEW), FCIS
Mr Neuling has extensive corporate and financial experience including as director, chief financial officer and/or company
secretary of various ASX-listed companies in the mineral exploration, mining, oil and gas and other sectors. Alex is principal
of Erasmus Consulting, which provides company secretarial and financial management consultancy services to ASX-listed
companies. In addition to his professional qualifications, Alex also holds a degree in Chemistry from the University of Leeds
in the United Kingdom.
Ms Shontel Norgate
Qualifications: CA, AGIA ACIS
Ms Norgate is a Chartered Accountant with over 20 years’ experience in the resources industry including debt and equity
finance, financial reporting, project management, corporate governance, commercial negotiations and business analysis
experience in finance and administration. Prior to joining Lepidico Shontel was CFO for ten years with TSX-listed resources
company, Nautilus Minerals Inc. Prior to her appointment at Nautilus Minerals, Ms Norgate was Financial Controller with
Macarthur Coal Ltd and Southern Pacific Petroleum NL, both listed on the ASX and commenced her career as an auditor
with Price Waterhouse (now PricewaterhouseCoopers)
2020 LEPIDICO ANNUAL REPORT
39
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2020,
and the number of meetings attended by each director.
Full Board
Meetings
Audit & Risk
Committee
Meetings
Nomination &
Remuneration
Committee
Meetings
Diversity
Committee
Meetings
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
No.
eligible
to attend
No.
attended
Mr Gary Johnson
Mr Joe Walsh
Mr Tom Dukovcic
Mr Mark Rodda
Mr Brian Talbot
Ms Cynthia Thomas
5
5
2
5
4
5
5
5
2
5
4
5
2
0
0
2
0
2
2
0
0
2
0
2
2
0
0
2
0
2
2
0
0
2
0
2
0
2
0
2
0
2
0
2
0
2
0
2
INFORMATION ON DIRECTORS’ INTERESTS IN SECURITIES OF LEPIDICO
As at the date of this report, the notifiable interests held directly and through related bodies corporate or associates of the
Directors in shares and options of Lepidico are:
Mr Gary Johnson
Mr Joe Walsh
Mr Mark Rodda
Ms Cynthia Thomas
PRINCIPAL ACTIVITIES
Number of fully
paid ordinary shares
367,762,575
31,220,000
-
-
Number of options
31,352,379
45,735,000
22,500,000
15,000,000
398,982,575
114,587,379
The principal activity of the Consolidated Entity during the financial year was mineral exploration and development, and
development of proprietry technologies, including: L-Max®, S-Max® and LOH-Max®.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact included in this report including, without limitation, statements
regarding future plans and objectives of Lepidico, are forward-looking statements. Forward-looking statements can be
identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “future”, “intend”, “may”, “opportunity”,
“plan”, “potential”, “project”, “seek”, “will” and other similar words that involve risks and uncertainties. These statements
are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding
future events and actions that are expected to take place. Such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which
are beyond the control of the Company, its directors and management of Lepidico that could cause Lepidico’s actual results
to differ materially from the results expressed or anticipated in these statements.
The Company cannot and does not give any assurance that the results, performance or achievements expressed or implied
by the forward-looking statements contained in this release will actually occur and investors are cautioned not to place any
reliance on these forward-looking statements. Lepidico does not undertake to update or revise forward-looking statements,
or to publish prospective financial information in the future, regardless of whether new information, future events or any
other factors affect the information contained in this release, except where required by applicable law and stock exchange
listing requirements.
40
2020 LEPIDICO ANNUAL REPORT DIVIDENDS PAID OR RECOMMENDED
The Directors recommend that no dividend be paid for the year ended 30 June 2020, 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 2020 the Group recorded a net loss after tax of $10,118,237 (2019: $5,105,014) and a net
cash outflow from operations of $4,676,482 (2019: $3,503,582).
The net assets of the Group increased to $59,189,215 at 30 June 2020 (2019: $38,589,652).
DEVELOPMENT
Integrated Phase 1 Project Feasibility Study
In May 2020, the Company released the results of its vertically integrated Phase 1 Project Definitive Feasibility Study. The
Study is based on a commercial scale L-Max® plant processing a lithium-mica concentrate feed at a rate of 6.9 tonnes per
hour (tph) to produce approximately 4,900tpa of nominal battery grade lithium hydroxide monohydrate and a suite of high
value and bulk by-products, over 14 years. Converting other products to lithium carbonate equivalent gives implied total
production of over 7,000tpa LCE. The relatively modest size of Phase 1 for a lithium chemical project is important as project
development and operating risks tend to increase exponentially with scale.
The Feasibility Study is based on an integrated mine, concentrator and chemical conversion plant development that
collectively has compelling investment fundamentals, including an NPV8% of US$221 million (A$340 million) and an Internal
Rate of Return of 31% ungeared.
Ore Reserves at Karibib, Namibia total 6.7 million tonnes grading 0.46% Li2O, 0.23% rubidium and 320ppm caesium, a 60%
conversion from Mineral Resources of 11.24 million tonnes, which highlights the potential for further Ore Reserve expansion.
Karibib is understood to be the only JORC Code (2012) (or NI43-101) compliant Ore Reserve estimate for both rubidium
and caesium globally and therefore represents a unique opportunity for the production of these strategic metals, of which,
the United States is totally reliant on imports. Furthermore, lithium, caesium, rubidium and potash, the main Phase 1 Project
products, are all on the U.S. Government list of 35 Critical Minerals, making the Project strategically significant.
Karibib is fully permitted for the re-development of two open pit mines feeding lithium mica ore to a central mineral
concentrator that employs conventional flotation technology. The waste to ore ratio at Karibib is just 0.5 to 1 for the first two
years and 3.8 to 1 life of mine. This brownfield development has a modest footprint that maximises the use of ground used
by the historical operations. An Environment and Social Impact Assessment (ESIA) has been undertaken to IFC Standards
and was completed in July 2020.
Concentrate is shipped to a chemical conversion plant to be built in the Khalifa Industrial Zone of Abu Dhabi (KIZAD) that
employs Lepidico’s proprietary process technologies. Main products of lithium hydroxide monohydrate (lithium hydroxide or
LiOH), caesium formate and rubidium sulphate are augmented by bulk by-products of SOP fertiliser and amorphous silica,
with the latter used as a partial supplement for cement, which may attract a significant carbon credit. Industry competitive
operating costs after credits from by-products include an average C1 Cost of US$1,656/t (LCE) and an All in Sustaining Cost
(AISC) of US$3,221/t for the integrated Project.
Abu Dhabi is the world’s largest producer of sulphur, used in the manufacture of sulphuric acid, which is a key reagent in the
proprietary L-Max® process. It is planned that acid will be purchased for the first three years of operation prior to a dedicated
acid plant being built, which will also generate power from waste heat. L-Max® is a hydrometallurgical process that is much
less power intensive than conventional chemical conversion of spodumene, allowing the Phase 1 Project to have a modest
carbon intensity versus the industry. An ESIA is planned for the chemical conversion plant to commence in July 2020, also
undertaken to IFC Standards, which will run in parallel with project permitting.
Development capital of US$139 million includes a 13.6% contingency and is split 30/70 between the mine and concentrator
in Namibia, and the chemical conversion plant in Abu Dhabi. Capital intensity is industry competitive at US$27,900/t LCE for
an integrated hard rock project and just US$17,400/t LCE on a net of by-products basis.
The Capital cost estimates meet the Association of the Advancement of Cost Engineering (AACE) Class 3 requirements for
a Feasibility Study, which forms the initial control estimate against which all actual costs and resources will be monitored.
The nominal accuracy is +/-15%. The estimates for the processing plants were prepared by Lycopodium Minerals P/L (LMPL).
Underlying engineering is informed by some six years of process development testwork including continuous pilot plant
trials conducted in 2019.
41
2020 LEPIDICO ANNUAL REPORT In light of the COVID-19 pandemic the project timeline has been adjusted to take into account possible extended periods
for product evaluation to secure binding offtake agreements and longer than normal permitting timeframes in Abu Dhabi.
It is assumed that all permits, offtake agreements and a full funding package are secured in the June 2021 quarter, allowing
Project implementation to commence. Lepidico has engaged London based Lion’s Head Global Partners (LHGP), which has
offices in New York, Nairobi and Lagos, and in the process of being established in Dubai as Project finance advisor. LHGP is
seeking to leverage the Phase 1 Project's excellent Environmental Social and Governance (ESG) credentials to maximise the
quantum of competitive Development Finance Institution debt funding.
Alvarrões Lepidolite Mine (Gonçalo), Portugal1, Feasibility Study
Since its acquisition in 2019, the Karibib Project represents the primary mineral source for the Phase 1 Project DFS. The
term sheet for Alvarrões ore off-take with Mota Ceramic Solutions (MCS) lapsed on 9 March 2020 and is not planned to be
renewed, with both companies preferring an alternative structure.
Phase 2 L-Max® Plant Scoping Study
Under the P1P DFS a scoping study capital estimate was developed for a nominal 20,000tpa LCE Phase 2 Project. The
associated capital intensity was estimated to be US$16,900/t LCE and just US$10,500/t LCE on a net of by-products basis.
Plant design work is planned to recommence once the Phase 1 Plant detailed engineering is complete, with the objective
of developing scoping study level operating cost figures and key physical data for a hybrid LOH-Max®/L-Max® plant, with
configurations ranging from 10,000tpa to 20,000tpa lithium hydroxide. Various locations continue to be evaluated for a
Phase 2 Plant, including Walvis Bay in Namibia, which will benefit from lower logistics costs so long as a reliable, competitive
cost competitive energy source can be identified, and local markets can be identified for all the SOP, gypsum and
amorphous silica by-products.
RESEARCH & DEVELOPMENT
Pilot Plant Product Development, Perth, Western Australia
Continuous operation of the L-Max® Pilot Plant commenced on 8 July 2019. The leach and impurity removal circuits
operated continuously for approximately 200 hours and 250 hours respectively. During this period approximately 3.0
tonnes of concentrate was processed to produce 2.2 tonnes of high silica residue, over 5,000 litres of lithium sulphate
intermediate liquor and 2.5 tonnes of gypsum rich residue. The bulk of the lithium sulphate liquor was stockpiled as feed for
the planned LOH-Max™ lithium hydroxide circuit. The remaining lithium sulphate was treated to produce lithium carbonate
via the conventional circuit installed at the Pilot Plant at that time. The potassium sulphate (SOP fertiliser) recovery circuit
operated continuously for more than 100 hours. 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 SOP, along with a
rubidium and caesium brine.
Average lithium extraction from concentrate feed to lithium sulphate was 94% for Campaign 1. Insoluble lithium losses
associated with impurity removal stages averaged just 3% for the entire campaign and were consistently below 2% for
extended periods.
Most importantly Pilot Plant Campaign 1 confirmed L-Max® viability as a chemical process, as well as the general design
parameters for the Phase 1 Plant. In addition, product development work was undertaken during the period on samples
generated from Pilot Plant Campaign 1.
Lithium carbonate with a purity of 99.95% was produced from the Pilot Plant. This compares with a nominal battery grade
reference purity of 99.5% for many existing producers. Importantly, impurity levels of most deleterious elements for battery
grade specifications were below detection limits.
Lithium hydroxide Monohydrate (LiOH.H2O) with a purity of >99.0% (56.5% LiOH) was produced from a batch pilot
trial in early January 2020. This is consistent with a nominal battery grade reference purity for many existing producers.
Importantly, impurity levels of most deleterious elements for battery grade specifications were below detection limits. These
results confirm the viability of LOH-Max® at pilot plant scale as a new process for the production of high purity lithium
hydroxide from a lithium sulphate intermediate, importantly without the production of potentially problematic sodium
sulphate as a by-product.
The refining of a larger sample of high purity lithium hydroxide monohydrate subsequently commenced, which is being
prepared for dispatch to two prospective customers to start the product qualification process subsequent to year end.
On 20 December 2019, Lepidico confirmed that the Letter of Intent with BASF SE (BASF), whereby BASF would be able to
purchase lithium hydroxide sourced from Lepidico’s integrated Phase 1 Lithium Chemical Project was formally novated to
Lepidico and extended to 31 December 2020.
1 Lepidico announced on 9 March 2017 that it had signed a term sheet for ore off-take from the Alvarrões Lepidolite Mine with Mota Ceramic Solutions, the
66.6% owner and operator of Alvarrões.
42
2020 LEPIDICO ANNUAL REPORT
The novation and extension agreement followed a visit by BASF to Lepidico’s Pilot Plant in Perth and provides BASF and
Lepidico sufficient time to work towards completion of a definitive qualification and offtake agreement.
BASF has confirmed that it continues to have the capability to assess chemical products despite implementation of
COVID-19 related measures.
Sulphate of potash (SOP) of more than 96% purity was produced from the pilot plant trial, equivalent to 52.2% K2O, a high
purity product. Importantly this result also confirms the design parameters for the SOP recovery circuit in the Phase 1 Plant.
A specification sheet for product marketing was produced and prospective customers for this product were identified.
Engagement with prospective customers also identified the crystallinity and solubility specifications required for a premium
product. Marketing started in February 2020 but was subsequently interrupted by COVID-19 travel restrictions.
Amorphous silica further testwork was undertaken on the leach residue from Pilot Plant Campaign 1 to identify potential
application of this product stream as a supplementary cementitious material. This work involved grinding the leach residue
to target particle sizes of P80 25µm, P80 10µm and P80 5µm. Sub-samples of the milled products were tested for compressive
strength and specific surface area determination with encouraging results.
Multiple consumers have indicated interest in this product globally. Samples were generated in February, with some
dispatched to consumers. Further samples are planned to be distributed for analysis once COVID-19 related restrictions are
revoked. In country marketing activities in the UAE have been suspended with engagement undertaken from Australia until
Lepidico implemented travel restrictions are lifted.
Caesium & Rubidium (Cs & Rb) The process technology for producing rubidium and caesium compounds is owned by
Lepidico and subject to a stand-alone international patent application filed in February 2017.
Approximately 100 litres of rubidium-caesium brine was collected during Pilot Plant Campaign 1. This brine was concentrated
using a Lepidico proprietary process technology to produce intermediate crystallisation products and a brine containing
rubidium and caesium sulphates, which was subsequently converted to two discrete formates.
Non-disclosure agreements have been entered into with three prospective customers and the Company has engagement
with several other consumers. One consumer that tested material from the pilot plant indicated that it could consume all
Cs and Rb chemical production from the planned Phase 1 Plant. Further samples are being prepared for dispatch to other
consumers.
Caesium Rich Formate
A high specification sample of caesium-rubidium formate brine with a specific gravity (SG) of 2.3 was produced from Pilot
Plant potassium circuit liquor². The specification of this caesium-rubidium formate appears to meet key criteria for oil and
gas industry application. Chlorine and sulphate assays for product manufacturer are pending.
Rubidium Rich Formate
A high specification sample of rubidium rich formate brine with a specific gravity (SG) of 2.1 was produced from the Pilot
Plant potassium circuit liquor2. A rubidium-rich sulphate was also produced, containing 95% rubidium sulphate, 4% caesium
sulphate and 0.7% potassium sulphate.
2 The Pilot Plant Campaign 1 feed was sourced from Alvarrões, Portugal. Note: lepidolites have similar major metal components (Li, K, Rb, Cs) albeit in varying
concentrations between deposits.
43
2020 LEPIDICO ANNUAL REPORT Background3
Caesium and rubidium compounds have a variety of applications albeit in relatively small quantities. Consumption, import,
export and price data for caesium and rubidium are not available as they are not traded in commercial quantities.
Caesium formate is a slightly alkaline salt of caesium hydroxide and formic acid (HCOO-Cs+), which is extremely soluble
in water and has a density of 2.4g/cm³ (82% weight). It has applications in the oil and gas industry as a completion fluid4.
Caesium formate is a high value compound that can be mixed with less expensive potassium formate to make clear brine
mixtures with a density range from 1.8 to 2.4g/cm³. Caesium compounds have a variety of applications albeit it relatively
small quantities. Consumption, import, export and price data for caesium and rubidium compounds are not available as they
are not traded in commercial quantities.
In May 2018, the U.S. Department of the Interior published a list of 35 critical minerals (83 FR 23295) which included caesium,
rubidium and lithium minerals. The list was developed to serve as an initial focus for “A Federal Strategy to Ensure Secure
and Reliable Supplies of Critical Minerals”. Lepidolite is the only known mineral that contains all three of these metals in
potentially economic concentrations.
EXPLORATION
Karibib Project (80%)
Snowden Mining Industry Consultants Pty Ltd (Snowden) produced an updated JORC code (2012)-compliant Mineral
Resource estimate (MRE) for Rubicon and Helikon 1 in January 2020. This estimate is based on 5,254m of additional
diamond drilling undertaken in 2019, with 55 holes completed at Rubicon and 35 holes completed at Helikon 1. Measured
and Indicated Resources at Rubicon and Helikon 1 total 8.87Mt @ 0.43% Li2O. Significantly, the updated MRE also includes
estimates for the accessory metals caesium (Cs), rubidium (Rb) and potassium (K). The revised MRE for Rubicon and
Helikon 1 supersedes the inaugural MRE for these deposits, prepared by The MSA Group, as initially reported to ASX by
Lepidico on 16 July 2019. MREs (by The MSA Group) for Helikon 2-5, remain unchanged but do not include assay data for
caesium, rubidium or potassium at this time.
Pit optimisations undertaken by Australian Mine Design and Development Pty Ltd (AMDAD) for Rubicon and Helikon 1
demonstrate these Mineral Resources to be potentially economic at a cut-off grade of 0.15% Li2O.
The Karibib Ore Reserves Statement, released in May 2020, totalling total 6.7 million tonnes grading 0.46% Li2O, 0.23%
rubidium and 320ppm caesium was prepared by AMDAD in accordance with the guidelines of the Australasian Code for the
Reporting of Resources and Reserves 2012 Edition (the JORC Code 2012).
The Karibib Project Ore Reserve is understood to be unique, being the only Code compliant estimate globally for both
caesium and rubidium, and which also includes other valuable alkali earth metals lithium and potassium. This is a function of
the metal endowment being predominantly associated with the mineral lepidolite, K(Li,Al,Rb,Cs)2(Al,Si)4O10(F,OH)2.
3 Source: U.S. Geological Survey.
4 A completion fluid is a solids-free liquid used to "complete" an oil or gas well. This fluid is placed in the well to facilitate final operations prior to initiation
of production. The fluid is meant to control a well should downhole hardware fail, without damaging the producing formation or completion components.
Completion fluids are typically high density brines (chlorides, bromides and formates), but in theory could be any fluid of proper density and flow
characteristics. The fluid should be chemically compatible with the reservoir formation and fluids, and is typically filtered to a high degree to avoid introducing
solids to the near-wellbore area. Seldom is a regular drilling fluid suitable for completion operations due to its solids content, pH and ionic composition.
CORPORATE
As at 30 June 2020, Lepidico had cash and cash equivalents of $4.8 million.
Desert Lion Energy Business Combination
The previously announced acquisition of all of the outstanding common shares of Desert Lion Energy Inc (Desert Lion)
successfully closed on 11 July 2019 with 5.4 Lepidico ordinary shares issued for every 1 Desert Lion share (the Transaction).
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).
The outstanding convertible notes of Desert Lion were also adjusted to allow for the acquisition of Lepidico Shares upon
their exercise (reflecting the Exchange Ratio). The Company may therefore issue up to 108,000,000 new Lepidico 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.
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).
44
2020 LEPIDICO ANNUAL REPORT
Controlled Placement Facility of $7.5 million Secured
On 23 December 2019, the Company entered into a Controlled Placement Agreement (CPA) with Acuity Capital to
provide Lepidico with up to $7.5 million of standby equity capital over the following 26 month period which may be used
by the Company to fund future product research and development work, new process technology development and
working capital.
Under the CPA Lepidico retains full control of all aspects of the placement process: having sole discretion as to whether or
not to utilise the CPA, the quantum of issued shares, the minimum issue price of shares and the timing of each placement
tranche (if any). There are no requirements on Lepidico to utilise the CPA and Lepidico may terminate the CPA at any time,
without cost or penalty.
If Lepidico utilises the CPA, it is able to set a floor price (at its sole discretion) and the final issue price will be calculated
as the greater of that floor price set by Lepidico and a 10% discount to a Volume Weighted Average Price (VWAP) over a
period of Lepidico’s choosing.
As collateral for the CPA, Lepidico issued 230,000,000 ordinary shares, at nil consideration to Acuity Capital (Collateral
Shares) but may, at any time, cancel the CPA and buy back the Collateral Shares for no consideration (subject to shareholder
approval).
The CPA remained undrawn as at 30 June 2020.
Capital Raising
In May 2020 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 nine (9) existing shares held with a 1 for 2 free attaching
option (New Options). New Options have an exercise price of 2.0 cents, a term of two years and are listed under the ASX
code LPDOC.
The Offer raised $3.6 million (before costs) and issued 514,852,045 New Shares and 257,426,023 New Options. High
demand from new investors resulted in the Company agreeing to place a further 37,215,428 fully paid ordinary shares at
$0.007 with 18,607,714 attaching LPDOC options to raise an additional $260,508 (Placement).
Patents
L-Max®
Lepidico submitted an international patent application (PCT/AU2015/000608) for the L-Max® Process under the Patent
Cooperation Treaty administered by the World Intellectual Property Organisation in October 2015. On 8 February 2017, the
L-Max® process was granted a Certification Report of Innovation Patent (number 2016101526) in Australia.
In April 2017, the Company proceeded with the national and region phase of L-Max® patent applications in several
jurisdictions in which L-Max® may operate in the future.
On 22 October 2019, the US patent was issued for the Company’s L-Max® process technology which was followed in March
2020 by the Australian Patent Office issuing a Deed of Letters Patent, in April 2020 the Japanese Patent Office confirming
the registration of the L-Max® patent and in June 2020 the grant of patent protection in Europe. National and regional phase
patent applications are well advanced in the remaining other key jurisdictions and these processes are expected to continue
into calendar year 2020.
A regional exclusivity clause with a third party licensee of Lepidico’s L-Max® technology expired on 30 June 2020.
LOH-Max®
In 2020, an International Patent Application, PCT/AU2020/050090 in relation to the LOH-Max™ Process was filed.
It is expected to the national and regional phase of patent application in the main jurisdictions in which LOH-Max® may
operate is likely to commence is 2021. This regional phase of the patent process is expected to continue into 2022.
Brines and other formates
In 2019 the Company filed International Patent Application, PCT/AU2019/051024 in relation to the production of caesium,
rubidium and potassium brines and other formates.
It is expected to the national and regional phase of patent application in the main jurisdictions in brines and other formates
may be produced operate is likely to commence in 2021. This regional phase of the patent process is expected to continue
into 2022.
45
2020 LEPIDICO ANNUAL REPORT S-Max®
In 2019, the Company filed International Patent Applications, PCT/AU2019/050317 and PCT/AU2019/050318 in relation to
the S-Max® Process, a hydrometallurgical process, which produces an amorphous silica from concentrates sourced from
a range of mica minerals, including lithium micas. The purified amorphous silica may be sold directly or used as a feed to
produce a variety of other marketable silica products.
S-Max® employs three stages; grinding, sulphuric acid leach regimes at atmospheric pressure, followed by differential
classification and flotation streams. Importantly, S-Max® can be integrated with Lepidico’s L-Max® process.
When lithium bearing mica concentrates are treated, the S-Max® leach liquor can feed directly into the first impurity removal
stage of the L-Max® process. Furthermore, the leach liquor from non-lithium bearing micas including muscovite and biotite
may be treated to produce valuable by-products including sulphate of potash (SOP) fertiliser.
The Company is expected to proceed with the national and regional phase of patent application in the main jurisdictions in
which S-Max® may operate in the future. This regional phase of the patent process is expected to continue into 2021.
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 14 September 2020, the Company announced it had established an incorporated subsidiary, Lepidico Chemicals
Manufacturing Ltd, in Abu Dhabi and a pre-operations Industrial Licence was awarded for the Phase 1 Project Chemical
Plant site within the Khalifa Industrial Zone Abu Dhabi (KIZAD). This license is a precursor to a Musataha Agreement, which
entitles its holder to construct a building or to invest in, mortgage, lease, sell, or purchase a plot of land belonging to a third
party for a period of up to 50 years.
Other than the matters discussed above there are no other matters or circumstances which have arisen since 30 June 2020
that have significantly affected or may significantly affect:
(a)
(b)
(c)
the Consolidated Entity’s operations in future years, or
the results of those operations in future financial years, or
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 technologies including L-Max®, S-Max® and LOH-Max® 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.
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.
46
2020 LEPIDICO ANNUAL REPORT OPTIONS
At the date of this report, the Company has the following options on issue:
Exercise Price
Grant
Expiry
$0.045
$0.091
$0.040
$0.026
$0.100
$0.020
$0.050
$0.100
$0.026
$0.350
$0.020
30 September 2018
30 September 2020
24 November 2017
23 November 2020
11 July 2019
25 October 2021
23 November 2018
22 November 2021
11 July 2019
18 May 2020
5 June 2019
11 July 2019
31 March 2022
18 May 2022
5 June 2022
21 June 2022
21 November 2019
21 November 2022
11 July 2019
11 July 2019
26 February 2023
14 January 2024
Number
220,518,031
50,000,000
9,450,000
65,000,000
945,000
276,033,605
190,764,921
3,921,982
73,000,000
5,967,000
18,900,000
914,500,539
WARRANTS
At 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:
Number
77,171,784
26,611,896
103,783,680
Exercise Price
Expiry
$0.04
$0.04
7 December 2020
13 December 2020
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001(Cth) for the year
ended 30 June 2020 is included in this the Directors’ Report.
The Auditor did not provide any non-audit services for the year ended 30 June 2020 (2019: $Nil)
47
2020 LEPIDICO ANNUAL REPORT REMUNERATION REPORT (AUDITED)
This remuneration report is set out under the following main headings:
A. Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Service Agreements
D. Share Based Compensation
This remuneration report outlines the Director and Executive remuneration arrangements for the Company and Group in
accordance with the requirements of the Corporations Act 2001 (Cth) and its Regulations. For this report, key management
personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and
controlling the major activities of the Company and Group, directly or indirectly, including any director (whether executive or
otherwise) of the Parent Company, and includes the highest paid executives of the Company and Group.
The information provided in this remuneration report has been audited as required by section 308(3c) of the Corporations
Act 2001.
A.
Principles Used To Determine The Nature And Amount Of Remuneration
The Company’s remuneration policy is designed to align director and executive objectives with shareholder and business
objectives by providing a fixed remuneration component and offering incentives based on the Group’s financial results. A
Remuneration Committee has been established which makes recommendations to the Board which aims to attract and
retain appropriate executives and directors to run and manage the Group, as well as create goal congruence between
directors, executives and shareholders.
The Remuneration Committee considers remuneration of Directors and the Executive and makes recommendations to the
Board. Remuneration is considered annually or otherwise as required.
The nature and amount of remuneration for an executive and non-executive director depends on the nature of the role and
market rates for the position, which are determined with the assistance of external advisors (where necessary), surveys and
reports, taking into account the experience and qualifications of each individual. The Board ensures that the remuneration
paid to KMP is competitive and reasonable.
During the financial year, the Remuneration Committee reviewed the elements of KMP remuneration for the year
commencing 1 July 2020 including comparative information relating to the KMP remuneration for the Company’s peers.
The Remuneration Committee recommended no reumuneration increases for the financial year; the recommendation from
the Remuneration Committee was 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
Non-executive Chair
Mr Gary Johnson
Non-executive Director
Mr Mark Rodda
Ms Cynthia Thomas Non-executive Director
Mr Brian Talbot
Non-executive Director (resigned 9 April 2020)
Executive Director
Mr Joe Walsh
Managing Director
Executives
Ms Shontel Norgate Chief Financial Officer and Joint Company Secretary
Mr Tom Dukovcic
Mr Peter Walker¹
Mr Alex Neuling²
General Manager - Geology (ceased to be a Director 21 November 2019)
General Manager – Projects
Joint Company Secretary
1 Mr Walker joined the Company as an employee on 1 July 2019, he previously provided services as a Project Manager through a services
agreement with Minmet Services Pty Ltd
2 Mr Neuling provides services as a the Joint Company Secretary through a services agreement with Erasmus Consulting (Erasmus).
In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration
is separate and distinct.
48
2020 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 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.
Non-Executive Director fees approved by the Board from 1 December 2018 are:
Base fees (annual) Non-Executive Chair
Other Non-Executive Directors
Chair of Committee
Member of Committee
87,600
54,750
10,000
10,000
Effective from 1 April 2020 the Board approved the deferment of payment of Directors Fees until COVID-19 austerity
measures are lifted.
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 expenses 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:
reward executives for Company and individual performance against pre-determined targets/benchmarks;
link rewards with the strategic goals and performance of the Company;
• attract, retain, motivate and reward executives;
•
•
• 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.
Effective from 1 April 2020 the senior Executives agreed to a 20% payment deferral of Fixed remuneration until COVID-19
austerity measures are lifted.
49
2020 LEPIDICO ANNUAL REPORT
Short-term incentives (STIs)
STIs comprise cash bonuses. The STIs are structured to provide remuneration for the achievement of individual and
Company performance targets linked to the Company’s strategic objectives across four areas of focus: Development,
Exploration, Financing/Shareholder Value and Governance. At the beginning of each year, performance targets are set by
the Board. Where possible, the performance targets are specific and measurable. At the end of each year the Company’s
performance against the KPIs are assessed by the CEO and presented to the N&R Committee and approved by the Board.
STIs may be adjusted up or down in line with under or over achievement relative to target performance levels at the
discretion of the Remuneration Committee.
During the year the Company achieved the significant milestone of completing the Definitive Feasibility Study for the
integrated Phase 1 Project incorporating the Ore Reserve from the Karibib Project in Namiba following the business
combination with Desert Lion Energy Inc. The Company successfully completed the integration of the Desert Lion
group of companies into the Lepidico group. The Company advanced discussions with BASF and extended the MOU for
LiOH offtake to 31 December 2020. The Company ensured the health and safety of its employees, particularly during the
COVID-19 pandemic and successfully raised over $3.8 million in an Entitlement Offer to able the Company to continue its
product development work following completion of the Feasibility Study.
Despite the significant milestones achieved during the year, in light of the uncertainty surrounding the economic impacts
of COVID-19 the KMP of the Company have forgone any STIs for the year ended 30 June 2020. Therefore no STIs were
payable to KMP of the Company or Group as at 30 June 2020 (2019: $322,373)
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, given the pre-development stage of the business 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 be a direct
correlation between the statutory key performance measures and the variable remuneration awarded.
2016
$
2017
$
2018
$
2019
$
2020
$
Net Profit/(Loss)
(2,263,225)
(5,357,243)
(7,219,713)
(5,105,014)
(10,118,237)
EPS
Share price at 30 June
(0.005)
0.017
(0.003)
0.013
(0.003)
0.037
(0.002)
0.026
(0.002)
0.007
50
2020 LEPIDICO ANNUAL REPORT
B.
Details Of Remuneration
Amounts of remuneration
Details of the remuneration paid or payable to the directors and Key Management Personnel of the Group are set out in the
following tables. Cash Salary and Fees for KMP in 2020 include paid and deferred remuneration which remained unpaid at
30 June 2020:
Short-term Benefits
Post-employment benefits
Share-
based
payments
Equity
Options
Total
Cash
Salary and
Fees (Paid)
Cash
Salary
and Fees
(Deferred)
$
$
Other
(STI)
$
Retirement
Benefits
(Paid)
Retirement
Benefits
(Deferred)
Vested
$
$
$
$
Non-Executive Directors
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Mr Gary Johnson
Mr Mark Rodda
Mr Brian Talbot 1
Ms Cynthia Thomas
Executive Directors
Mr Joe Walsh 2
Executives
Mr Tom Dukovcic 3
Ms Shontel Norgate 4
Mr Peter Walker 5
Mr Alex Neuling 6
Total Directors’ and
KMP remuneration
75,000
25,000
91,667
-
60,000
20,000
71,667
37,500
60,965
65,700
85,901
-
-
-
21,900
-
380,500
20,026
-
-
-
-
-
-
-
-
-
369,648
-
182,520
178,721
227,397
266,351
258,754
316,982
-
39,150
55,356
9,406
-
-
60,000
14,018
-
-
79,853
18,414
-
-
-
-
-
-
-
-
7,125
8,708
5,700
6,808
3,562
5,792
-
-
-
-
16,979
21,603
-
-
-
-
-
-
2,375
52,500
162,000
-
1,900
-
-
-
-
-
-
-
60,000
52,500
60,000
52,500
60,000
160,375
140,100
138,475
93,562
126,757
52,500
140,100
60,000
145,901
105,000
505,526
120,000
672,168
894
70,000
276,000
-
-
-
-
-
-
80,000
389,000
70,000
350,369
80,000
418,607
-
-
28,000
-
335,396
-
67,150
55,356
33,366
5,169
483,000 2,070,203
2020
1,419,904
128,764
2019
1,221,355
-
322,373
42,911
-
520,000 2,106,639
1 Mr Talbot resigned as Non-Executive Director on 9 April 2020
2 Mr Walsh is remunerated in Canadian dollars and his total salary paid was C$342,475, with C$18,025 deferred (2019: C$350,000). The Company uses the
average annual rate to translate remuneration into the reporting currency and has been translated at the rate of C$1.00 for every A$1.111031 (2019: C$1.00 for
every A$1.056137).
3 Mr Dukovcic ceased to be an Executive Director on 21 November 2019
4 Ms Norgate is remunerated in Canadian dollars and her total salary paid was C$239,733, with C$12,617 deferred (2019: C$245,000). The Company uses the
average annual rate to translate remuneration into the reporting currency and has been translated at the rate of C$1.00 for every A$1.111031 (2019: C$1.00 for
every A$1.056137).
5 Mr Walker joined the Company as an employee on 1 July 2019, he previously provided services as a Project Manager through a services agreement with
Minmet Services Pty Ltd. Mr Walker is remunerated in British pounds and his total salary paid was GBP£168,700, with GBP£9,800 deferred. The Company
uses the average annual rate to translate remuneration into the reporting currency and has been translated at the rate of GBP£1.00 for every A$1.878967
6 Mr Neuling provides services as the Joint Company Secretary through a services agreement with Erasmus Consulting Pty Ltd (Erasmus). During the year
Erasmus was paid or is payable fees of $39,150 (2019: $55,356) for the provision of company secretarial services to the Group.
51
2020 LEPIDICO ANNUAL REPORT Loans to Key Management Personnel
There were no loans made to Directors or other KMP of the Group (or their personally related entities) during the current
financial period.
Other Transactions with Key Management Personnel
Payments to director-related entities 1
2020
$
2019
$
1,229,403
4,003,387
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 in 2019 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 2020
invoices totalling $2,860 (2019: $15,730) were payable.
C.
Service Agreements
The remuneration and other terms of agreement for the Company’s Managing Director and other KMP are formalised in
employment contracts, as set out below.
Mr Joe Walsh, Managing Director (MD) has an employment agreement with the Group. The agreement specifies duties and
obligations to be fulfilled as MD and provides for an annual review of base remuneration taking into account performance.
As previously disclosed, Mr Walsh’s remuneration effective from 1 July 2019 includes a salary of C$360,500 per annum.
Mr Walsh did not receive any further increase to base salary during the reporting period. Effective 1 April 2020, Mr Walsh
deferred payment of 20% of his base salary until COVID-19 austerity measures are lifted. No bonus has been awarded for
the financial year ended 30 June 2020.
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, GM - Geology (GMG) has an employment agreement with the Group. The agreement specifies duties and
obligations to be fulfilled as GMG and provides for an annual review of base remuneration taking into account performance.
As previously disclosed, Mr Dukovcic’s remuneration effective from 1 July 2019 includes a salary of $206,000 per annum
inclusive of superannuation. Mr Dukovcic did not receive any further increase to base salary during the reporting period.
Effective 1 April 2020, Mr Dukovcic deferred payment of 20% of his base salary until COVID-19 austerity measures are lifted.
No bonus has been awarded for the financial year ended 30 June 2020.
Termination of the employment agreement requires 6 months written notice. Upon termination, the GMG 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 GMG 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 2019 includes a salary of C$252,350
per annum. Ms Norgate did not receive any further increase to base salary during the reporting period. Effective 1 April
2020, Ms Norgate deferred payment of 20% of her base salary until COVID-19 austerity measures are lifted. No bonus has
been awarded for the financial year ended 30 June 2020.
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).
Mr Peter Walker, General Manager – Project Development (GMP) has an employment agreement with the Group. The
agreement specifies duties and obligations to be fulfilled as GMP and provides for an annual review of base remuneration
taking into account performance. Mr Walker joined the Company as an employee on 1 July 2019, he previously provided
services as a Project Manager through a services agreement with Minmet Services Pty Ltd. Mr Walker is employed on a
casual basis based on the number of days worked and earned a salary of GBP178,500 for the financial year. Mr Walker did
not receive any increase to base salary during the reporting period. Effective 1 April 2020, Mr Walker deferred payment of
20% of his base salary until COVID-19 austerity measures are lifted. No bonus has been awarded for the financial year ended
30 June 2020.
Termination of the employment agreement requires 1 months written notice. Upon termination, the GMP is entitled to receive
from the Company all payments owed to him under the employment agreement up to and including the date of termination.
52
2020 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:
Balance at
start of year
Purchased
Exercised
Options
Sold
Other Net
Change
Balance at
end of year
2020
Non-Executive Directors
Mr Gary Johnson
Mr Mark Rodda
Mr Brian Talbot1
Ms Cynthia Thomas
Executive Directors
Mr Joe Walsh
Executives
Mr Tom Dukovcic2
Ms Shontel Norgate
Mr Peter Walker
Mr Alex Neuling
365,413,438
-
-
-
2,349,137
-
-
-
30,500,000
720,000
10,146,269
5,564,022
-
3,553,946
456,689
-
-
-
Total
415,177,675
3,525,826
1 Mr Brian Talbot resigned 9 April 2020
2 Mr Tom Dukovcic ceased being a director 21 November 2019
Option Holdings
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,000,000)
-
-
-
(4,000,000)
-
-
-
-
-
-
-
-
-
-
367,762,575
-
-
-
31,220,000
6,602,958
5,564,022
-
3,553,946
414,703,501
2020
Non-Executive Directors
Mr Gary Johnson
Mr Mark Rodda
Mr Brian Talbot1
Ms Cynthia Thomas
Executive Directors
Mr Joe Walsh
Executives
Mr Tom Dukovcic2
Ms Shontel Norgate
Mr Peter Walker
Mr Alex Neuling
Balance at
start of year
35,177,810
20,000,000
7,500,000
7,500,000
Granted
during the
year as
remuneration
Purchased
during
year
Exercised/
Expired during
year
Balance at
end of year
* Vested and
exercisable at
end of year
7,500,000
7,500,000
7,500,000
7,500,000
1,174,569
-
-
-
(12,500,000)
(5,000,000)
-
-
31,352,379
22,500,000
15,000,000
15,000,000
31,352,379
22,500,000
15,000,000
15,000,000
42,875,000
15,000,000
360,000
(12,500,000)
45,735,000
45,735,000
32,710,495
32,778,202
-
-
10,000,000
10,000,000
-
4,000,000
228,345
-
-
-
(12,500,000)
(12,500,000)
-
-
30,438,840
30,278,202
-
4,000,000
30,438,840
30,278,202
-
4,000,000
Total
178,541,507
69,000,000
1,762,914
(55,000,000)
194,304,421
190,304,421
1 Mr Brian Talbot resigned 9 April 2020
2 Mr Tom Dukovcic ceased being a director 21 November 2019
Details of the share options granted during the year as remuneration are disclosed in Note 18(d) as approved by shareholders
at the Company’s Annual General Meeting in November 2019.
This report is made in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act 2001.
Joe Walsh
Managing Director
Dated this 28th day of September 2020
2020 LEPIDICO ANNUAL REPORT
53
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 2020 there has been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
Neil Pace
Partner
MOORE AUSTRALIA AUDIT (WA)
Chartered Accountants
Signed at Perth this 28th day of September 2020.
Moore Australia Audit (WA) – ABN 16 874 357 907.
An independent member of Moore Global Network Limited - members in principal cities throughout the world.
Liability limited by a scheme approved under Professional Standards Legislation.
54
2020 LEPIDICO ANNUAL REPORT CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME
as at 30 June 2020
Continuing Operations
Other income
Business development expenses
Administrative expenses
Employment benefits
Depreciation
Share based payments
Accretion expense
Impairment of property, plant and equipment
Exploration and evaluation expenditure expensed
Realised foreign exchange gain/(loss)
Note
4
5
2020
$
2019
$
63,558
59,110
(432,830)
(589,148)
(2,821,926)
(1,827,998)
(1,655,873)
(1,472,185)
(306,111)
(8,287)
(511,000)
(520,000)
(901,639)
(2,026,267)
-
-
(2,229,049)
(630,241)
6,697
(116,265)
Loss before income tax
(10,814,440)
(5,105,014)
Income tax benefit/(expense)
6
696,203
-
Loss from continuing operations after tax
(10,118,237)
(5,105,014)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
301,570
93,059
Total comprehensive loss for the year
(9,816,667)
(5,011,955)
Comprehensive loss for the year attributable to:
Owners of the parent
Non-controlling interest
(9,373,811)
(5,011,955)
(442,856)
-
(9,816,667)
(5,011,955)
Loss per share for the year attributable to the members of Lepidico Ltd
Basic and diluted loss per share
8
(0.002)
(0.002)
The accompanying notes form part of these financial statements.
55
2020 LEPIDICO ANNUAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2020
Note
2020
$
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
Liability component of convertible note
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred Revenue
Deferred Tax Liability
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Equity component of convertible note
Accumulated losses
Equity attributable to owners of the Parent
Non-controlling interests
TOTAL SHAREHOLDERS EQUITY
The accompanying notes form part of these financial statements.
56 2020 LEPIDICO ANNUAL REPORT
9
10
10
11
12
13
14
15
16
17
6
18
19
4,792,713
1,766,863
13,660,308
1,148,086
6,559,576
14,808,394
72,829
1,903,630
42,725,634
23,870,434
71,729
19,685
1,928,203
22,925,130
68,572,527
24,944,747
75,132,103
39,753,141
564,671
107,652
5,215,104
1,077,812
85,677
-
5,887,427
1,163,489
6,629,144
3,426,317
10,055,461
-
-
-
15,942,888
1,163,489
59,189,215
38,589,652
80,081,594
59,430,846
5,707,720
990,000
3,858,668
-
(34,375,243)
(24,699,862)
52,404,071
38,589,652
6,785,144
-
59,189,215
38,589,652
$
l
a
t
o
T
y
t
i
u
q
E
,
3
7
5
9
9
4
4
2
,
,
)
4
1
0
5
0
1
,
5
(
-
9
5
0
3
9
,
0
0
0
5
6
5
,
0
0
0
3
6
3
,
,
4
3
0
4
7
1
,
8
1
,
2
5
6
9
8
5
8
3
,
,
6
2
5
8
0
5
5
2
,
$
-
-
-
-
-
-
-
-
,
0
0
0
8
2
2
7,
-
0
7
5
,
1
0
3
0
0
0
,
1
1
5
0
0
0
5
7
,
4
0
7
,
1
2
3
4
,
-
-
-
-
-
,
)
7
3
2
8
1
1
,
0
1
(
,
)
6
5
8
2
4
4
(
,
5
1
2
9
8
1
,
9
5
4
4
1
,
5
8
7
6
,
n
o
N
g
n
i
l
l
o
r
t
n
o
C
t
s
e
r
e
t
n
I
l
a
t
o
T
$
$
s
e
s
s
o
L
$
e
t
o
n
l
d
e
t
a
u
m
u
c
c
A
l
e
b
i
t
r
e
v
n
o
c
$
i
n
g
e
r
o
F
y
c
n
e
r
r
u
C
f
o
y
t
i
u
q
E
t
n
e
n
o
p
m
o
c
s
e
v
r
e
s
e
R
y
n
a
p
m
o
C
e
h
t
f
o
s
r
e
n
w
o
e
h
t
o
t
e
b
a
t
u
b
i
r
t
t
A
l
d
e
u
s
s
I
l
a
t
i
p
a
C
,
3
7
5
9
9
4
4
2
,
,
)
8
4
8
4
9
5
9
1
(
,
-
9
5
0
3
9
,
0
0
0
5
6
5
,
0
0
0
3
6
3
,
,
4
3
0
4
7
1
,
8
1
-
-
-
-
-
,
)
4
1
0
5
0
1
,
5
(
,
)
4
1
0
5
0
1
,
5
(
,
2
5
6
9
8
5
8
3
,
,
)
2
6
8
9
9
6
4
2
(
,
-
-
-
-
-
-
-
-
-
0
7
5
,
1
0
3
0
0
0
,
1
1
5
0
0
0
5
7
,
4
0
7
,
1
2
3
4
,
-
-
-
-
-
,
)
1
8
3
5
7
6
9
(
,
,
)
1
8
3
5
7
6
9
(
,
-
-
-
-
-
-
,
6
2
5
0
8
2
8
1
,
-
0
0
0
0
9
9
,
-
-
-
-
)
1
4
1
7,
1
(
-
9
5
0
3
9
,
8
1
9
5
7
,
-
-
0
7
5
,
1
0
3
-
-
-
-
s
t
n
a
r
r
a
W
s
n
o
i
t
p
O
$
-
-
-
-
-
-
-
-
$
$
0
5
7
7,
7
3
3
,
-
-
0
0
0
5
6
5
,
-
-
-
,
2
1
8
3
3
7
0
4
,
-
0
0
0
3
6
3
,
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
r
a
e
y
e
h
t
r
o
f
s
s
o
L
d
e
s
i
c
r
e
x
e
s
n
o
i
t
p
O
d
e
u
s
s
i
s
n
o
i
t
p
O
8
1
0
2
y
u
J
1
l
t
a
e
c
n
a
a
B
l
)
0
0
0
0
6
1
(
,
0
0
0
0
6
1
,
d
e
s
i
c
r
e
x
e
s
n
o
i
t
p
o
f
o
e
u
a
v
r
i
a
F
l
-
,
4
3
0
4
7
1
,
8
1
d
e
u
s
s
i
s
e
r
a
h
S
,
0
5
7
2
8
7
3
,
,
6
4
8
0
3
4
9
5
,
9
1
0
2
e
n
u
J
0
3
t
a
e
c
n
a
l
a
B
5
3
1
,
5
1
4
7
4
3
6
1
7
,
,
4
4
0
9
5
1
,
6
1
i
n
o
i
t
a
n
b
m
o
c
s
s
e
n
i
s
u
B
-
-
-
-
-
-
-
-
-
-
0
0
0
,
1
1
5
)
0
0
0
5
9
(
,
-
-
-
0
0
0
5
7
,
0
0
0
5
9
,
4
0
7
,
1
2
3
4
,
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
r
a
e
y
e
h
t
r
o
f
s
s
o
L
d
e
s
i
c
r
e
x
e
s
n
o
i
t
p
O
d
e
u
s
s
i
s
n
o
i
t
p
O
d
e
s
i
c
r
e
x
e
s
n
o
i
t
p
o
f
o
e
u
a
v
r
i
a
F
l
d
e
u
s
s
i
s
e
r
a
h
S
,
1
7
0
4
0
4
2
5
,
,
)
3
4
2
5
7
3
4
3
(
,
0
0
0
0
9
9
,
8
8
4
7
7
3
,
5
3
1
,
5
1
4
,
7
9
0
5
1
9
4
,
4
9
5
,
1
8
0
0
8
,
0
2
0
2
e
n
u
J
0
3
t
a
e
c
n
a
l
a
B
.
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
fi
e
s
e
h
t
f
o
t
r
a
p
m
r
o
f
s
e
t
o
n
g
n
y
n
a
p
m
o
c
c
a
e
h
T
i
57
Y
T
I
U
Q
E
N
I
S
E
G
N
A
H
C
F
O
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
0
2
0
2
e
n
u
J
0
3
d
e
d
n
e
r
a
e
Y
e
h
t
r
o
f
2020 LEPIDICO ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOW
For the Year ended 30 June 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from government assistance programs
Payments to suppliers and employees
Interest received
Note
2020
$
2019
$
46,964
-
(4,740,040)
(3,560,720)
16,594
57,138
Net cash used in operating activities
23
(4,676,482)
(3,503,582)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation activities
Payments for research and development activities
Proceeds from research and development tax credit
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Cash acquired on acquisition of Desert Lion Energy Inc
Acquisition costs of Desert Lion Energy Inc
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/(decrease) in cash held
Cash at beginning of financial year
Effect of foreign exchange rate changes
(4,923,732)
(1,568,920)
(2,351,349)
(5,167,505)
1,010,808
484,796
(2,589)
-
416,113
(1,185,134)
(1,586)
2,050
-
-
(7,035,883)
(6,251,165)
3,447,716
18,099,034
75,000
363,000
3,522,716
18,462,034
(8,189,649)
8,707,287
13,660,308
4,859,962
(677,946)
93,059
Cash at end of financial year
9
4,792,713
13,660,308
58
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting
Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001.
The financial report covers Lepidico Ltd and its controlled entities (the Group or Consolidated Entity or Economic Entity).
Lepidico Ltd is a listed public company, incorporated and domiciled in Australia. The financial report of the Group complies
with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety.
The following is a summary of the material accounting policies adopted by the Consolidated Entity in the preparation of the
financial report. The accounting policies have been consistently applied, unless otherwise stated.
Basis of Preparation
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation
of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has
been applied.
The financial statements were authorised for issue on 24 September 2020 by the Directors of the Company. The Directors
have the power to amend and re-issue the financial report. The Group is a for-profit entity for financial reporting purposes
under Australian Accounting Standards.
Accounting Policies
(a)
Going Concern
The financial statements have been prepared on the going concern basis, which contemplates the continuity
of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of
business. The ability of the Group to continue as a going concern is dependent on the Company being able to
continue to raise additional funds as required to meet ongoing exploration and development programs, working
capital and being able to either refinance the Convertible Note (Note 16) or raise additional capital in order to repay
the Noteholder.
For the year ended 30 June 2020, the Group incurred a net loss after tax of $10,118,237 and had a net cash outflow
from operations of $4,676,482. As at 30 June 2020, the Company had net current assets of $672,149. Further,
the consequences of the COVID-19 pandemic have negatively impacted the global economy and created volatile
maket dynamics. As a result, the Group has implemented a business austerity plan including curtailment of all non-
essential activities, the deferral of all Directors’ fees and the deferral of 20% of senior executives’ remuneration.
Notwithstanding this, the financial report has been prepared on a going concern basis which the Directors consider
to be appropriate as they believe that the Group will be able to raise additional capital as required based on the
successful outcome of previous Entitlement Offers including the most recent Entitlement Offer, where the Company
raised $3.8 million (before costs) during the ongoing COVID-19 pandemic. There remains ongoing interest in the
Company and the long term outlook for the lithium industry remains robust.
While the Company has been successful in securing financing in the past, there can be no assurance that it will
be able to do so in the future. The Company’s opinion concerning its ability to secure future financing options
is based on currently available information. To the extent that this information proves to be inaccurate, or the
COVID-19 pandemic continues for a prolonged period of time and/or impacts capital markets further the future
availability of financing may be adversely affected.
59
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
(b)
Principles of Consolidation
The consolidated financial statements incorporate all the assets, liabilities and results of the parent (Lepidico Ltd)
and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent
controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 2.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from
the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date
that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group
entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments
made where necessary to ensure uniformity of the accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling
interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries
and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the
non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-
controlling interests are attributed their share of profit or loss and each component of other comprehensive income.
Non-controlling interests are shown separately within the equity section of the statement of financial position and
statement of comprehensive income.
(c)
Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving
entities or businesses under common control. The business combination will be accounted for from the date that
control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent
liabilities) assumed is recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a
contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent
consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any
change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a
financial instrument, are recognised as expenses in profit or loss when incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
(d)
Goodwill
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the
sum of:
the consideration transferred;
any non-controlling interest (determined under either the full goodwill or proportionate interest method); and
i)
ii)
iii) the acquisition date fair value of any previously held equity interest;
over the acquisition date fair value of net identifiable assets acquired
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition
date fair value of any previously held equity interest shall form the cost of the investment in the separate
financial statements.
Fair value re-measurements in any pre-existing equity holdings are recognised in profit or loss in the period in
which they arise. Where changes in the value of such equity holdings had previously been recognised in other
comprehensive income, such amounts are recycled to profit or loss. The amount of goodwill recognised on
acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method
adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the
non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest’s
proportionate share of the subsidiary’s identifiable net assets (proportionate interest method).
In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the
respective notes to these financial statements disclosing the business combination. Under the full goodwill method,
the fair value of the non-controlling interests is determined using valuation techniques which make the maximum
use of market information where available. Under this method, goodwill attributable to the non-controlling interests
is recognised in the consolidated financial statements.
60
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
(d)
Goodwill (continued)
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.
(e)
Income Tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or
disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance
sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination,
where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or
liability is settled. Deferred tax is credited in the statement of comprehensive income except where it relates to
items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available
against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that
no adverse change will occur in income taxation legislation and the anticipation that the Consolidated Entity will
derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of
deductibility imposed by the law.
(f)
Property, Plant and Equipment
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash
flows which will be received from the assets’ employment and subsequent disposal. The expected net cash flows
have been discounted to their present values in determining recoverable amounts.
The cost of fixed assets constructed within the Consolidated Entity includes the cost of materials, direct labour,
borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive
income during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including capitalised lease assets is depreciated on a straight-line
basis over their useful lives to the Consolidated Entity commencing from the time the asset is held ready for
use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the
estimated useful lives of the improvements.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or
losses are included in the statement of comprehensive income. When re-valued assets are sold, amounts included in
the revaluation reserve relating to that asset are transferred to retained earnings.
61
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
(g)
Exploration and Development Expenditure
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area
of interest. These costs are only carried forward to the extent that they are expected to be recouped through
the successful development of the area or where activities in the area have not yet reached a stage that permits
reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the
decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the life of
the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from when exploration commences and are included
in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and
building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits.
Such costs have been determined using estimates of future costs, current legal requirements and technology on an
undiscounted basis.
Any changes in the estimates for the costs of site restoration are accounted on a prospective basis. In determining
the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to
community expectations and future legislation. Accordingly, the costs have been determined on the basis that the
restoration will be completed within one year of abandoning the site.
(h)
Fair Value of Assets and Liabilities
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis,
depending on the requirements of the applicable Accounting Standard.
Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an
orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the
measurement date.
To the extent possible, market information is extracted from either the principal market for the asset or liability
(i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a
market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market
that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after
taking into account transaction costs and transport costs).
For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the
asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and
best use.
The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment
arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial
instrument, by reference to observable market information where such instruments are held as assets. Where
this information is not available, other valuation techniques are adopted and, where significant, are detailed in the
respective note to the financial statements.
62
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
(i)
Financial Instruments
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.
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.
63
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
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; and
• 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;
and
• 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.
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).
64
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
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;
• lease receivables;
• 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.
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.
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.
65
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to
the assets carrying value. Any excess of the assets carrying value over its recoverable amount is expensed to the
consolidated statement of comprehensive income.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not
possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of
the cash-generating unit to which the asset
Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the group’s entities is measured using the currency of the primary economic
environment in which that Entity operates. The consolidated financial statements are presented in Australian dollars
which is the Parent Entity’s functional and presentation currency.
Transaction and Balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date
of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary
items measured at historical cost continue to be carried at the exchange rate at the date of the transaction.
Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were
determined.
Exchange differences arising on the translation of monetary items are recognised in the statement of
comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the
extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the
statement of comprehensive income.
Group companies
The financial results and position of foreign operations whose functional currency is different from the group’s
presentation currency are translated as follows:
(i)
(ii)
(iii)
assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
income and expenses are translated at average exchange rates for the period; and
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.
Employee Benefits
Provision is made for the Company’s liability for employee benefits arising from services rendered by employees
to balance date. Employee benefits that are expected to be settled within one year have been measured at the
amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later
than one year have been measured at the present value of the estimated future cash outflows to be made for
those benefits.
Provisions
Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which
it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the statement of financial position.
(j)
(k)
(l)
(m)
(n)
66
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
(o)
Revenue
Revenue from the sale of goods is recognised upon delivery of goods to customers.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the
financial assets.
Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from
associates are accounted for in accordance with the equity method of accounting.
Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.
All revenue is stated net of the amount of goods and services tax (GST).
(p)
(q)
.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial
position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing
and financing activities, which are disclosed as operating cash flows.
Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the financial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future events and
are based on current trends and economic data, obtained both externally and within the group.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both current and future periods.
Key Sources of Estimation Uncertainty
The following key assumptions concerning the future, and other key sources of estimation uncertainty at the
reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year:
(i) Recoverability of Exploration and Evaluation Expenditure
The recoverability of the exploration and evaluation expenditure recognised as a non-current asset is
dependent upon the successful development, or alternatively sale, of the respective tenements which comprise
the assets.
(ii) Recoverability of Intangible Asset (Development Expenditure)
The recoverability of capitalised development expenditure recognised as a non-current asset is dependent
upon the successful development, or alternatively sale, of the respective intellectual property which comprise
the assets. Refer to Note 13 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).
67
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
(r)
Intangibles Assets – Intellectual Property Development Expenditure
Such assets are recognised at cost of acquisition. Expenditure during the research phase of a project is
recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies
identify that the project is expected to deliver future economic benefits and these benefits can be measured
reliably. Development costs have a finite life and are amortised on a systematic basis based on the future economic
benefits over the useful life of the project.
An intangible asset arising from development (or from the development phase of an internal project) is recognised
if, and only if, all the following are demonstrated:
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
•
•
the availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
the ability to measure reliably the expenditure attributed to the intangible asset during its development.
Capitalised development costs will be amortised over their expected useful life of the intangible asset once full
commercialisation or production commences.
(s)
New and Amended Accounting Policies Adopted by the Group
The Group has considered the implications of new or amended Accounting Standards which have become
applicable for the current financial reporting period. As a result the Group has made some changes to its accounting
policies as a result of adopting AASB 16: Leases.
AASB 16: Leases
AASB 16: Leases introduces a single lessee accounting model by eliminating the current requirement to distinguish
leases as either operating leases or finance leases depending on the transfer of risks and rewards of ownership. The
key requirements of AASB 16 are summarised as follows:
• recognition of a right-of-use asset and liability for all leases (excluding short-term leases with less than 12 months
of tenure and leases relating to low-value assets);
• depreciation of right-of-use assets in line with AASB 116: Property Plant and Equipment in profit or loss and
unwinding of the liability in principal and interest components;
• inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease
liability using the index or rate at the commencement date;
• application of a practical expedient to permit a lessee to elect not to separate non-lease components, instead
accounting for all components as a lease;
• inclusion of additional disclosure requirements; and
• accounting for lessors will not significantly change.
AASB 16 will affect primarily the accounting for the Group’s operating leases. As at 1 July 2019, the Group did not
not have any leases in excess of 12 months of tenure and therefore the Group did not recognise a Right of Use Asset
and Lease Liability as at 1 July 2019.
New Accounting Standards for Application in Future Periods
None noted.
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation in the current financial year.
(t)
(u)
68
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 2: Controlled Entities
The legal corporate structure of the Consolidated Entity is set out below:
Country of
Incorporation
Interest as at
30 June
(%)
2020
2019
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
Lepidico Holdings (Canada) Inc
Lepidico (Canada) Inc
(formerly Desert Lion Energy Inc)
Lepidico (Mauritius) Ltd
(formerly Desert Lion Energy
(Mauritius) Ltd
Lepidico Chemicals Namibia (Pty)
Ltd (formerly Desert Lion Energy
(Pty) Ltd)
Canada
Canada
Canada
Mauritius
0
0
0
0
0
100
100
100
100
100
100
100
100
100
100
Namibia
80
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
Deregistered
Deregistered
Deregistered
Deregistered
Deregistered
Lithium Exploration and Investment
Holder of L-Max® Technology
Holder of S-Max® Technology
Lithium Exploration
International Holding Company
Global Marketing Company
Dormant
Holding Company
Management Company
Holding Company
Exploration and Development Company
69
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 3: Business Combination
(a)
Summary of acquisition
On 11 July 2019 the Company announced the completion of the 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 7 May, 2019, was approved by the Desert Lion’s shareholders
at an annual general and special meeting held on 27 June, 2019. The acquisition provided the Company with with
a direct controlling interest in its first quality lepidolite deposits under an awarded mining license, providing a
clear path to development.
(b)
Purchase Consideration
Details of the purchase consideration are as follows:
Ordinary shares issued to existing Desert Lion shareholders
Options issued to existing Desert Lion option holders
Warrants issued to existing Desert Lion warrant holders
Fair value of liability component of convertible note
Fair value of equity component of convertible note
Change of control payments to Desert Lion senior executives
Total Purchase Consideration
$
14,850,084
716,347
415,135
5,404,960
990,000
555,714
22,932,240
The fair value of the 571,157,062 shares issued as part of the consideration paid for Desert Lion ($14.850m) was based on the
published share price on 11 July 2019 of $0.026 per share.
(c)
Net assets acquired
The assets and liabilities recognised as a result of the acquisition are as follows:
$
416,113
377,238
4,543,380
40,521,647
(4,367,774)
(6,447,728)
(4,882,636)
30,160,240
(7,228,000)
22,932,240
Cash
Trade and other receivables
Property, plant and equipment
Exploration assets
Trade and other payables
Deferred revenue
Deferred tax liability
Net identifiable assets acquired
Less: non controlling interest
Net assets acquired
70
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 3: Business Combination (continued)
(d)
Non-controlling Interest
As part of the transaction the Group acquired an 80% interest in Desert Lion Energy (Pty) Ltd which holds mining
and exploration rights for the Karibib Project in Namibia. The Group recognises non controlling interests in an
acquired entity either at fair value or at the non controlling interest’s proportionate share of the acquired entity’s net
identifiable assets. This decision is made on an acquisition-by-acquisition basis. For the non-controlling interests in
Desert Lion Energy Inc, the group elected to recognise the non-controlling interests at fair value. See Note 1(c) of
the Group’s consolidated financial statements for the year ended 30 June 2020 for its Accounting Policy regarding
Business Comibinations.
(e)
Acquisition related expenses
Acquisition related expenses of $1,134,545 that were not directly attributable to the issue of shares are included in
administrative expenses in the statement of profit or loss and in investing cash flows in the statement of cash flows.
Note 4: Revenue
Interest
Profit on sale of property, plant and equipment
Government assistance programs
Other Income
Total Revenue
Note 5: Administrative Expenses
Office & general
Professional services
Compliance related
Travel
2020
$
16,594
-
46,964
63,558
63,558
2020
$
292,643
657,918
487,945
248,175
1,686,681
2019
$
57,060
2,050
-
59,110
59,110
2019
$
339,690
250,100
369,636
460,550
1,419,976
Other Significant Administrative Expenses
The following significant expenses were incurred during the period
and impacted the financial performance:
Desert Lion Energy acquisition costs
1,135,245
408,022
Total Administrative Expenses
2,821,926
1,827,998
71
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 6: Income Tax Expense
2020
$
2019
$
(a)
The components of tax expense comprise:
Current tax
Deferred tax
Losses recouped not previously recognised
-
(696,203)
-
Income tax expense/(benefit) reported in statement of comprehensive income
(696,203)
-
-
-
-
(b)
The prima facie tax benefit on loss from ordinary activities before income tax is
reconciled to the income tax as follows:
Prima facie tax benefit on loss from ordinary activities before income tax at 30%
(2019:27.5%)
(3,110,847)
(1,403,879)
Income tax expense/(benefit) reported in statement of comprehensive income
(696,203)
Add tax effect of:
- Share based payments
- Foreign expenditure
- Deferred tax balances not recognised
- Intercompany loans written off
- Effect of change in tax rate
- Foreign tax rate differential
- Exploration expenditure written off
- Ajustments to income tax of previous years
- Other non-allowable items
Less tax effect of:
- Deferred tax balances not recognised
- Losses recouped not previously recognised
(c)
Deferred tax recognised:
Deferred Tax Liabilities:
Karibib assets
Exploration expenditure
L-Max® Technology
L-Max® Pilot Plant
Other
Deferred Tax Assets:
Carry forward revenue losses
Net deferred tax
72
153,300
283,840
143,000
178,867
3,014,827
1,032,902
(1,309,956)
(609,565)
(52,215)
668,086
297,970
(31,643)
-
-
(3,426,317)
(4,245)
(248,698)
(723,772)
(4,396)
-
-
-
49,731
-
(621)
-
-
-
-
(1,141)
(227,973)
(272,694)
-
981,111
501,808
(3,426,317)
-
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 6: Income Tax Expense (continued)
(d)
Unrecognised deferred tax assets:
Carry forward revenue losses
Carry forward capital losses
Capital raising and other costs
L-Max Licence
Provision and accruals
2020
$
2019
$
9,257,874
6,190,047
293,087
382,736
21,826
32,745
268,663
506,301
20,007
8,686
9,988,267
6,993,703
(e)
Tax consolidation:
Lepidico Ltd and its wholly owned Australian resident subsidiaries formed a tax consolidated group with effect
from 1 July 2014. Lepidico Ltd is the head entity of the tax consolidated group.
The tax benefits of the above Deferred Tax Assets will only be obtained if:
a)
the Company derives future assessable income of a nature and of an amount sufficient to enable the benefits
to be utilised;
the Company continues to comply with the conditions for deductibility imposed by law; and
b)
c) no changes in income tax legislation adversely affect the company in utilising the benefits.
Note 7: Auditor’s Remuneration
Audit services
2020
$
64,469
2019
$
39,116
Note 8: 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.
Loss attributable to the ordinary equity holders of the Company
2020
$
0.002
2019
$
0.002
$
$
Loss from continuing operations
10,118,237
5,105,014
Weighted average number of ordinary shares
4,567,787,554
3,272,423,591
No.
No.
Note 9: Cash and Cash Equivalents
Cash at bank and in hand
2020
$
2019
$
4,792,713
13,660,308
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 25
73
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 10: Trade and Other Receivables
Current
Prepaid expenses
R&D tax rebate receivable
Goods and services tax receivable
2020
$
354,073
1,194,000
218,790
2019
$
35,397
950,000
162,689
Total Current Trade and Other Receivables
1,766,863
1,148,086
Non-Current
Cash backed guarantees
Total Non-Current Trade and Other Receivables
72,829
72,829
71,729
71,729
Total Trade and Other Receivables
1,839,692
1,219,815
Note 11: Property, Plant and Equipment
Cost
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June 2019
Buildings &
Infrastructure
$
-
-
-
-
Furniture,
Fittings &
Equipment
$
105,601
1,587
(37,173)
70,015
Motor
Vehicles
Assets under
Construction
$
-
-
-
-
$
-
-
-
-
Total
$
105,601
1,587
(37,173)
70,015
Acquired on business combination
1,741,511
193,703
215,359
2,392,807
4,543,380
Additions
Disposals
-
-
2,590
(241)
-
-
-
-
2,590
(241)
Balance at 30 June 2020
1,741,511
266,067
215,359
2,392,807
4,615,744
Accumulated Depreciation
Balance at 1 July 2018
Depreciation
Disposals
Balance at 30 June 2019
Depreciation
Disposals
Impairment
Impact of foreign exchange
Balance as at 30 June 2020
Net Book Value
At 30 June 2019
-
-
-
-
148,841
-
-
(18,331)
130,510
78,552
8,287
(36,509)
50,330
84,333
(241)
-
(9,579)
124,843
-
-
-
-
72,937
-
-
-
-
-
-
-
-
78,552
8,287
(36,509)
50,330
306,111
(241)
2,026,267
2,026,267
(8,983)
63,954
366,540
2,392,807
329,647
2,712,114
-
19,685
-
-
-
19,685
1,903,630
At 30 June 2020
1,611,001
141,224
151,405
74
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 12: Exploration and Evaluation Expenditure
Exploration expenditure
42,725,634
1,928,203
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.
2020
$
2019
$
Reconciliation of movements during the year:
Balance at the beginning of year
Exploration and evaluation assets acquired
Exploration and evaluation costs capitalised
Exploration and evaluation costs written off
2020
$
2019
$
1,928,203
40,521,647
2,504,833
(2,229,049)
729,697
-
1,838,747
(640,241)
Balance at the end of the year
42,725,634
1,928,203
Note 13: Intangible assets
L-Max® Technology
S-Max® Technology
LOH-Max® Technology
Intangible assets
2020
$
2019
$
23,354,178
22,692,203
146,109
370,147
136,543
96,384
23,870,434
22,925,130
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 assets 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
2020
$
2019
$
22,925,130
2,200,112
(1,254,808)
19,026,700
4,848,430
(950,000)
Balance at the end of the year
23,870,434
22,925,130
75
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 14: Trade and Other Payables
Current
Trade payables
Sundry payables and accrued expenses
2020
$
262,347
302,324
2019
$
648,449
429,363
Total Current Trade and Other Payables
564,671
1,077,812
Note 15: Provisions
Current
Employee Provisions
Reconciliation of movements during the year:
Balance at the beginning of year
Provisions acquired
Additional provisions
Provisions used/paid out
Impact of foreign exchange
2020
$
2019
$
107,652
85,677
2020
$
2019
$
85,677
36,300
102,044
(112,520)
(3,849)
51,030
-
89,184
(54,537)
-
Balance at the end of the year
107,652
85,677
Note 16: Convertible Note
The Company inherited a C$5,000,000 Convertible Note (Note), which matures on 7 December 2020, as part of its
acquisition of Desert Lion Energy Inc. Under the terms of Note, C$1,000,000 must be repaid on the maturity date. The
remaining C$4,000,000 may be converted into 108,000,000 Shares at a deemed issue price of C$0.037 per Share at the
discretion of the noteholder, AIP Global Macro Fund L.P. (AIP), on or before 7 December 2020. The Note is secured over the
assets acquired by the Company from Desert Lion Energy Inc.
At the date of acquisition Lepidico issued 54,539,996 shares to AIP at a deemed value of A$1,308,960 being the
prepayment of all interest and fees associated with the Note until maturity.
The fair value of the Note on acquisition was split between the financial liability element and an equity component
representing the residual attributable to the option to convert the financial liability into equity of the Company as follows:
Fair value of liability component
Fair value of prepaid interest and fees
Fair value of equity component
Total fair value of Convertible Note on acquisition
The equity component of $990,000 has been credited to equity.
$
4,096,000
1,308,960
990,000
6,394,960
The liability component is measured at amortised cost. The accretion expense for the year is calculated by applying an
effective interest rate of 16.8% to the liability component for the period since acquisition. Prepaid interest and fees are
amortised against the liability component.
76
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 16: Convertible Note (continued)
Carrying amount of the liability component on acquisition
Accretion expense for the financial year
Amortisation of interest and fees
Impact of foreign exchange
Carrying amount of the liability component
Note 17: Deferred Revenue
$
5,404,960
901,639
(780,692)
(310,803)
5,215,104
Deferred revenue of $6,629,144 represents a payment of US$4.5 million (the Deposit) received by Desert Lion Energy from
Jiangxi Jinhui Lithium Co Ltd (Jinhui), a private Chinese corporation under an offtake agreement dated 6 November 2017
and subsequently amended on 13 February 2018 (the Jinhui Lithium Offtake Agreement).
The Jinhui Lithium Offtake Agreement provides for the sale of material located in the stockpile at the Karibib project in
Namibia.
Following the completion of the first shipment by Desert Lion on 24 April 2018, the Deposit is no longer refundable and does
not accrue interest. The remaining balance shall continue to amortise against any future shipments of the stockpile material.
The term of the Jinhui Lithium Offtake Agreement began on 16 November 2017 and ends on the earlier of:-
(i)
(ii)
60 months following such date; and
the date that is 15 business days after all concentrate produced from the stockpiled material has been loaded on to
the vessel nominated by Jinhui; and has been paid for by Jinhui.
The offtake payment liability of $6,629,144 (US$4,558,272) is classified as unearned revenue as the Deposit is no longer
refundable.
Note 18: Contributed Equity
a)
Share capital
Fully paid ordinary shares
Share Issue Costs
2020
2019
Number
$
Number
$
5,185,735,038
84,926,182
3,737,703,973
63,858,677
(4,844,588)
80,081,594
(4,427,831)
59,430,846
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.
77
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 18: Contributed Equity (continued)
Share capital (continued)
a)
Movements in ordinary share capital
Description
Opening Balance
Date
Number of
shares
Issue Price
$
30 June 2019
3,737,703,973
59,430,846
Acquisition of Desert Lion Energy Inc
Issue of shares to certain Desert Lion creditors
Issue of shares to Bacchus Capital Advisers
11 July 2019
11 July 2019
31 July 2019
571,157,062
571,157,062
0.026
0.026
14,850,084
Exercise of options
6 November 2019
14,850,084
0.015
Fair value of options exercised
6 November 2019
-
Shares issued as collateral under CPA
23 December 2019
230,000,000
-
-
18 May 2020
552,066,631
0.007
1,824,498
358,452
75,000
95,000
-
3,864,471
(416,757)
Entitlement Offer
Less: Share issue costs
Closing Balance
5,185,735,038
80,081,594
b)
As at reporting date, Lepidico has the following options on issue:
Share options
Number
220,518,031
50,000,000
9,450,000
65,000,000
945,000
276,033,605
190,764,921
3,921,982
73,000,000
5,967,000
18,900,000
914,500,539
Exercise Price
Grant
Expiry
$0.045
$0.091
$0.040
$0.026
$0.100
$0.020
$0.050
$0.100
$0.025
$0.350
$0.020
30 September 2018
30 September 2020
24 November 2017
23 November 2020
11 July 2019
25 October 2021
23 November 2018
22 November 2021
11 July 2019
18 May 2020
5 June 2019
11 July 2019
31 March 2022
18 May 2022
5 June 2022
20 June 2022
21 November 2019
21 November 2022
11 July 2019
11 July 2019
26 February 2023
14 January 2024
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.
78
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 18: Contributed Equity (continued)
b)
Share options (continued)
Movements in Options
Balance at 30 June 2018
Granted
Exercised
Expired
Balance at 30 June 2019
Granted
Exercised
Expired
Balance at 30 June 2020
Weighted
Average Exercise
Price
$
0.049
0.044
0.019
-
0.046
0.028
0.015
0.025
0.040
Number
130,000,000
476,282,952
(20,000,000)
-
586,282,952
388,217,587
(5,000,000)
(55,000,000)
914,500,539
c)
Warrants
As at reporting date, 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:
Number
77,171,754
26,611,896
103,783,680
Movements in Warrants
Balance at 30 June 2019
Recognised on acquisition
Exercised
Expired
Balance at 30 June 2020
Exercise Price
$0.04
$0.04
Recognised
11 July 2019
11 July 2019
Expiry
7 December 2020
13 December 2020
Number
Weighted Average
Exercise Price
139,797,500
-
(36,013,820)
103,783,680
0.141
-
0.432
0.040
79
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 18: Contributed Equity (continued)
d)
Share Based Payments
During the year the Company made the following share based payments:
(i)
Under the terms of the Arrangement with Desert Lion, the Company issued:
Desert Lion Business Combination
i)
ii)
iii)
571,157,062 new fully paid ordinary shares (LPD Shares) to existing Desert Lion shareholders at a
deemed share price of $0.026 per share;
39,183,982 new options at exercise prices ranging from $0.02 - $0.35; and
139,797,500 warrants at exercise prices ranging from $0.04 to $0.44.
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 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.
The Company 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. The deemed share price of $0.024 per
share was based on the weighted average share price agreed under settlement of the debt arrangements by Desert
Lion adjusted for the Exchange Ratio.
Bacchus Capital Advisors
(ii)
On 31 July, the Company issued 13,786,605 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).
Related Party Options
(iii)
On 21 November 2019, the Company issued a total of 73,000,000 options to directors, employees and consultants
under the Company’s Share Option Plan and were valued using Black Scholes with the following assumptions:
Number of options in series
73,000,000
Unlisted Options
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest Rate
$0.016
$0.025
88%
3 years
0.00%
2.00%
Controlled Placement Agreement
(iv)
On 23 December 2019, the Company entered into a Controlled Placement Agreement (CPA) with Acuity Capital
to provide Lepidico with up to $7.5 million of standby equity capital over a 26 month period to fund future product
research and development work, new process technology development and working capital.
As collateral for the CPA, Lepidico issued 230,000,000 ordinary shares at nil consideration to Acuity Capital
(Collateral Shares) but may, at any time, cancel the CPA and buy back the Collateral Shares for no consideration
(subject to shareholder approval).
80
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 19: Reserves
Option Reserve
Warrant Reserve
Foreign Currency Translation Reserve
Total Reserves
2020
$
2019
$
4,915,097
3,782,750
415,135
377,488
-
75,918
5,707,720
3,858,668
a)
The options reserve is used to recognise the fair value of all options on issue but not yet exercised.
Option Reserve
Opening Balance
Options issued on acquisition
Option expense for the year
Transfer of value on exercise of options
Closing Balance
2020
$
2019
$
3,782,750
3,377,750
716,347
511,000
(95,000)
4,915,097
-
565,000
(160,000)
3,782,750
b)
The warrants reserve is used to recognise the fair value of all warrants contractually recognised but not yet exercised.
Warrant Reserve
Opening Balance
Fair value of warrants recognised on acquisition
Transfer of value on exercise of warrants
Closing Balance
2020
$
-
415,135
-
415,135
2019
$
-
-
-
-
c)
The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries.
Foreign Currency Translation Reserve
Opening Balance
Movement during the year
Closing Balance
Note 20: Contingent Liabilities and Contingent Assets
There are no contingent liabilities as at 30 June 2020.
2020
$
75,918
301,570
377,488
2019
$
(17,141)
93,059
75,918
81
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 21: Segment reporting
Reportable Segments
The Group operates two reportable segments, being mineral exploration and development of its technologies including
L-Max®, LOH-Max® and S-Max®, which reflects the structure used by the Group’s management to assess the performance of
the Group.
(i) Segment performance
Year ended 30 June 2020
Revenue
Loss before tax
Year ended 30 June 2019
Revenue
Loss before tax
(ii) Segment assets
As at 30 June 2020
As at 30 June 2019
Geographical Information
Mineral
Exploration
Technology
Corporate &
Unallocated items
$
Total
$
$
-
4,267,014
-
630,241
$
-
-
-
-
63,558
63,558
6,547,426
10,814,440
59,110
59,110
4,474,773
5,105,014
44,498,939
25,064,434
5,568,730
75,132,103
1,928,203
22,925,130
14,899,807
39,753,140
Australia
Canada
$
$
Africa
$
UAE
$
Europe
$
Total
$
(i) Segment
performance for
the year ended:
30 June 2020
Revenue
Loss before tax
30 June 2019
Revenue
62,573
985
-
-
-
63,558
2,285,650
3,656,251
2,501,415
17,914
2,353,210
10,814,440
Loss before tax
3,989,287
984,790
59,110
-
-
-
29,519,849
37,625,789
866,269
44,745,985
208,110
19,480
ii) Segment assets
30 June 2019
As at 30 June 2020
As at 30 June 2019
82
-
-
-
-
-
59,110
130,927
5,105,014
-
75,132,103
1,899,761
39,753,140
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 22: Commitments
Operating lease commitments
Not later than one year
2020
$
-
-
2019
$
45,630
45,630
As at 1 July 2019, the Group did not have any leases in excess of 12 months of tenure and therefore the Group did not
recognise a Right of Use asset and Lease liability as at 1 July 2019.
Exploration lease commitments
The Group has committed to the following tenement expenditures to maintain them in good standing until they are farmed
out, sold, reduced, relinquished, exemptions from expenditure are applied or are otherwise disposed of.
These commitments, net of farm outs, are not provided for in the financial statements and are:
Not later than one year
After one year but less than five years
Note 23: Cash Flow Information
Reconciliation of Cash Flow from Operations
with Loss after Income Tax
Loss after income tax
Adjustments items not impacting cash flow used in operations:
Depreciation and amortisation
Exploration expenditure written-off
Fair value of options issued
Share based payments
Desert Lion acquisition costs
Accretion expense
Impairment of assets under construction
(Profit)/Loss on sale of property, plant & equipment
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Increase/(decrease) in deferred tax liability
30 June
2020
$
3,002,903
1,828,297
4,831,200
2020
$
30 June
2019
$
-
-
-
2019
$
(10,118,237)
(5,105,014)
306,111
2,229,049
511,000
515,538
1,135,245
901,639
2,026,267
8,287
630,241
520,000
-
-
-
-
-
(1,387)
(446,492)
(1,062,374)
21,975
(696,203)
(90,362)
500,006
34,647
-
Cash flow used in operations
(4,676,482)
(3,503,582)
83
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 24: Related Party Transactions
Key Management Personnel Remuneration
Cash salaries, fees and other short-term benefits
Post employment benefits
Share based payments
2020
$
2019
$
1,548,668
1,543,728
38,535
483,000
42,911
520,000
2,070,203
2,106,639
Detailed remuneration disclosures are provided in the remuneration report contained in the Directors' Report.
Payments to director-related parties
Payments to director-related entities(1)
2020
$
2019
$
1,229,403
4,003,387
(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 in 2019 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
2020 invoices totalling $2,860 are payable (2019: $15,730).
Note 25: 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.
84
2020 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 25: Financial Risk Management (continued)
(a)
Credit Risk
Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial
loss to the consolidated entity. The consolidated entity has adopted the policy of only dealing with creditworthy
counter-parties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating
the risk of financial loss from defaults. The consolidated entity measures credit risk on a fair value basis. The
consolidated entity does not have any significant credit risk exposure to any single counter-party.
The Group’s cash and cash equivalents are held with HSBC Bank and First National Bank Namibia, 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
Total financial assets
Note
9
10
2020
$
2019
$
4,792,713
1,839,692
13,660,308
1,148,086
6,632,405
14,808,394
(b)
Liquidity Risk
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. Typically, the Group ensures it has sufficient cash on
demand to meet expected expenditures, including servicing financial obligations; this excludes the potential impact
of extreme circumstances that cannot be reasonably predicted, such as the COVID-19 pandemic.
The Company will need to raise additional capital to fund the development of the integrated 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.
The following table analyses the Group’s financial liabilities into relevant maturity periods based on the remaining
period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows and hence will not necessarily reconcile with the amounts disclosed in the
statement of financial position.
30 June 2020
Trade & other payables
Convertible Note(1)
Deferred Revenue
Total
Note
14
16
17
Carrying
amount
Contractual
cash
outflows
Within 1
year
$
$
$
564,671
564,671
564,671
5,215,104
5,328,465
5,328,465
6,629,144
-
-
12,408,919
5,893,136
5,893,136
1-2 years
2-5 years
$
-
-
-
-
$
-
-
-
-
(1) The Group holds a C$5,000,000 Note, which matures on 7 December 2020. Under the terms of Note, C$1,000,000 must be repaid
on the maturity date. The remaining C$4,000,000 may be converted into 108,000,000 shares at a deemed issue price of C$0.037
(A$0.039) per Share at the discretion of the noteholder, AIP Global Macro Fund L.P., on or before the maturity date. As at reporting
date the Company’s share price was $0.007 (C$0.007). In the event the noteholder does not elect to convert its Note into shares in the
Company, the Company will need to refinance or raise additional capital to repay the Note in full.
85
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 25: Financial Risk Management (continued)
(b)
Liquidity Risk (continued)
30 June 2019
Trade & other payables
Total
Note
14
Carrying
amount
$
1,077,812
1,077,812
Contractual
cash
outflows
$
1,077,812
1,077,812
Within 1 year
$
1,077,812
1,077,812
Assets pledged as security
The Convertible Note is secured over the assets acquired by the Company from Desert Lion Energy Inc.
Market Risk
(c)
Market risk is 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:
%
2020
$
%
2019
$
Financial assets
Cash assets
Floating rate
0.23%
4,792,713
0.70%
13,858,394
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.
2020
$
56,159
(16,979)
2019
$
82,313
(57,060)
56,180
(16,979)
82,313
(57,060)
Change in Loss
Increase by 1%
Decrease by 1%
Change in Equity
Increase by 1%
Decrease by 1%
86
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 25: Financial Risk Management (continued)
(c)
Currency Risk
Market Risk (continued)
(ii)
The Group operates internationally and is exposed to foreign exchange risk on its financial assets and liabilities.
Fluctuations in exchange rates may have a significant affect on the cash flows of the Company. Future changes in
exchange rates could materially affect the Company’s results in either a positive or negative direction. The Group’s
currency risk arises primarily with respect to the Namibian dollar (NAD) and South African Rand (ZAR), which are
equivalent, Canadian dollars (CAD) and United States dollars (USD). In addition, the Company has transactions in
British pounds (GBP) and Euro (EUR). The Group has not entered into any derivative financial instruments to hedge
such transactions. The Group reivews its foreign currency exposure, including commitments on an ongoing basis.
The Group’s exposure to currency risk arising on financial assets and financial liabilities demoninated in various
currencies was :
30 June 2020
Cash and cash equivalents
Trade and other receivables
NAD
$
732,529
660,719
Trade and other payables
(2,350,531)
Liability component – Convertible
Note
Deferred Revenue
-
-
CAD
$
362,245
386,147
(57,404)
(4,893,627)
USD
$
9,645
-
-
-
-
(4,558,272)
GBP
£
50,360
-
(11,074)
-
-
Net currency exposure
(957,283)
(4,202,639)
(4,548,627)
39,286
30 June 2019
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Liability component – Convertible
Note
Deferred Revenue
Net currency exposure
NAD
$
-
-
-
-
-
-
CAD
$
142,673
60,620
(593,995)
-
-
USD
$
9,963
-
-
-
-
(390,703)
9,963
GBP
£
-
-
-
-
-
-
EUR
€
-
-
-
-
-
-
EUR
€
-
7,792
-
-
-
7,792
87
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 25: Financial Risk Management (continued)
(c)
Market Risk (continued)
ii)
Currency Risk (continued)
The following significant exchange rates applied during the year:
1 USD:AUD
1 NAD:AUD
1 CAD:AUD
Average rate
Reporting date spot rate
2020
1.491693
0.095624
1.111031
2019
1.398216
0.098477
1.056137
2020
1.453973
0.083848
1.056137
2019
1.422736
0.100755
1.086430
Sensitivity Analysis
The following table details the Group’s sensitivity arising in respect of translation of its financial assets and financial liabilities
to a 10% movement (2019: 10%) in the Australian dollar against the currencies where it has significant currency risk at the
reporting date, with all other variables held constant.
NAD
If the NAD had strengthened against the AUD
If the NAD had weakened against the AUD
CAD
If the CAD had strengthened against the AUD
If the CAD had weakened against the AUD
USD
If the USD had strengthened against the AUD
If the USD had weakened against the AUD
(iii)
Commodity Price Risk
2020
$
11,682
(11,682)
2019
$
-
-
(447,872)
447,872
(42,447)
42,447
(661,358)
661,358
1,417
(1,417)
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.
88
2020 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2020
Note 26: Parent Entity Financial Information
Assets
Current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Shareholders’ Equity
Issued capital
Reserves
Accumulated Losses
Total Shareholders’ Equity
Result of the parent entity
Loss for the year
Other comprehensive loss
2020
$
2019
$
4,391,351
14,618,365
60,057,622
50,364,845
325,310
507,622
325,310
507,622
112,523,626
94,964,846
5,452,792
4,171,241
(58,244,106)
(49,278,865)
59,732,312
49,857,223
(8,228,712)
(3,030,828)
(611,572)
178,808
Total comprehensive loss for the year
(8,840,284)
(2,852,020)
(b)
Contractual commitments for the acquisition of property, plant and equipment
As at 30 June 2020 the parent entity has no contractual commitments for the acquisition of property, plant or
equipment.
(c)
Guarantees and contingent liabilities
As at 30 June 2020 the parent entity has no guarantees or contingent liabilities other than as disclosed in Note 20.
Note 27: Events Subsequent to Reporting Date
Industrial License Awarded for Abu Dhabi Free Zone
On 14 September 2020, the Company announced it had established an incorporated subsidiary, Lepidico Chemicals
Manufacturing Ltd, in Abu Dhabi and a pre-operations Industrial Licence was awarded for the Phase 1 Project Chemical
Plant site within the Khalifa Industrial Zone Abu Dhabi (KIZAD). This license is a precursor to a Musataha Agreement, which
entitles its holder to construct a building or to invest in, mortgage, lease, sell, or purchase a plot of land belonging to a third
party for a period of up to 50 years.
89
2020 LEPIDICO ANNUAL REPORT
DIRECTORS’ DECLARATION
In the opinion of the Directors of Lepidico Ltd (the Company):
1.
The financial statements and notes and the remuneration disclosures that are contained in the Directors’ Report, are
in accordance with the Corporations Act 2001, including:
a.
b.
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its
performance for the year ended on that date.
2.
3.
4.
There are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
chief executive officer and chief financial officer for the financial year ended 30 June 2020.
Note 1 confirms that the financial statements also comply with the International Financial Reporting Standards as
issued by the International Accounting Standards Board.
This declaration is made in accordance with a resolution of the Board of Directors.
Joe Walsh
Managing Director
Dated this 28th day of September 2020
90
2020 LEPIDICO ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF LEPIDICO LTD
REPORT ON THE AUDIT
OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Lepidico Limited (the Company) and its subsidiaries (the “Group”), which comprises
the consolidated statement of financial position as at 30 June 2020, 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, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
• giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the
year then ended; and
• 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.
Material Uncertainty Related to Going Concern
In forming our opinion on the Group financial statements, which is not modified, we have considered the adequacy of the
disclosure made in Note 1(a) to the financial statements concerning the Group’s ability to continue as a going concern. The
Group’s ability to continue as a going concern for at least the next 12 months is dependent on the Company being able to
continue to raise additional funds as required to meet ongoing exploration programs, working capital and being able to
either refinance the Convertible Note (Note 16) or raise additional capital in order to repay the Noteholder. These conditions,
as explained in Note 1(a) to the financial statements, indicate the existence of a material uncertainty which may cast
significant doubt about the Group’s ability to continue as a going concern. The Group financial statements do not include
any adjustments that would result if the Group were unable to continue as a going concern.
Independence
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.
Moore Australia Audit (WA) – ABN 16 874 357 907.
An independent member of Moore Global Network Limited - members in principal cities throughout the world.
Liability limited by a scheme approved under Professional Standards Legislation.
91
2020 LEPIDICO ANNUAL REPORT Key Audit Matters
In addition to the matter described in the Material Uncertainty Related to Going Concern section, 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 year. These matters were addressed in the context of our audit of the financial report as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Carrying value of Exploration & Evaluation Expenditure and Intangible Assets
Refer to Notes 1(g), and (r), Notes 12 Exploration & Evaluation Expenditure & 13 Intangible Assets
As at 30 June 2020 the Group had capitalised exploration
and evaluation expenditure of $42,725,634 and intangible
assets with a carrying value of $23,870,434.
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 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, in part, based on a
“fair value less costs to sell” analysis. Note that given the
early stages of development of the technology, there are
inherent risks in relying on forecast cash flows as a reliable
estimate of value-in-use. Notwithstanding this, they have
also considered the results of the vertically integrated
Phase 1 Project Definitive Feasibility Study incorporating
the Karibib assets, which was completed in May 2020, in
their impairment review of the exploration and evaluation
and intangible assets.
The carrying values of the capitalised exploration and
evaluation and technology 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 recoverable amounts of the exploration and
evaluation and technology assets, including challenging
the methodologies used, testing the integrity of the
information provided, and assessing the appropriateness
of the key assumptions adopted based on our knowledge
of the technology and industry.
• Reviewing minutes of Board meetings, ASX
announcements, the latest professional technological and
other reports for evidence of any impairment indicators
or material adverse changes in relation to the technology
asset 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 and other additions to the technology
and exploration-evaluation assets during the year on a
sample basis against supporting documentation such as
supplier invoices and cost agreements and ensuring such
expenditures and additions 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.
• Review of an updated JORC code (2012) compliant
mineral resource estimate, completed in January 2020 by
Snowden Mining industry Consultants Pty Ltd, in respect of
ore reserves at Karibib, Namibia.
• Review of the vertically integrated Phase 1 Project
Definitive Feasibility Study completed in May 2020, which
is based on a commercial scale L-Max Plant, comprising
an integrated mine, concentrator and chemical conversion
plant development
• Compared the Group’s market capitalisation as at 30 June
2020 ($47.2 million) to its net asset position ($57.7 million),
noting that the market capitalisation at balance date was
lower than net assets, which is an indicator of possible
impairment, for further consideration.
• Assessing the appropriateness of the relevant disclosures
in the financial statements.
92
2020 LEPIDICO ANNUAL REPORT Key Audit Matters (continued)
Acquisition of Desert Lion Energy Inc
Refer to Note 3 – Business Combination
On 11 July 2019 the Group completed the acquisition of a
100% controlling interest in Desert Lion Energy Inc, which
included an 80% interest in the Karibib Project in Namibia,
for total consideration of $22.9 million.
Accounting for this transaction is complex, requiring
management to exercise judgement to determine the fair
value of consideration given, the fair value of acquired
assets and liabilities, including determining the allocation
of purchase consideration to separately identifiable
intangible and other assets.
This is a key audit matter due to the significance of the
acquisition and the extent of judgement involved in
accounting for the transaction.
Our procedures included, amongst others the following:
• We read the acquisition agreement dated 6 May 2019 and
related correspondence, so as to understand key terms
and conditions.
• We assessed whether this acquisition should be accounted
for under AASB 3/IFRS 3 Business Combinations or AASB
116 Property, Plant and Equipment – the Group accounted
for it as an acquisition of a business under AASB3/IFRS3.
• Evaluated the fair value model developed by management
to determine the fair value of consideration given and the
fair value of acquired assets and liabilities. This included
review and evaluation of a Purchase Price Allocation report
prepared by an independent, appropriately qualified
consultant.
• Assessed the cut-off period (acquisition date) for
consolidating the post-acquisition financial performance of
the acquired business.
• Assessed the appropriateness of the relevant disclosures in
the financial statements.
Related Party Transactions & Share Based Payments to Key Management Personnel
Refer to Remuneration Report, Note 18 d) Share Based Payments, Note 24 Related Party Transactions
During the year ended 30 June 2020, the Group
transacted with Key Management Personnel and their
related entities including:
• Awarded share-based payments amounting to $511,000
in the form of share options, to Key Management
Personnel
• Paid $1,229,403 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 the following:
• 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.
93
2020 LEPIDICO ANNUAL REPORT Key Audit Matters (continued)
Group’s ability to continue as a Going Concern
Refer to Note 1(a)
The financial statements are prepared on a going
concern basis in accordance with AASB 101 Presentation
of Financial Statements. The Group continues to incur
significant operating losses in its ongoing efforts to
advance the commercialisation and development of its
L-MAX®, LOH-Max® and S-Max® technologies, and the
exploration of newly acquired Karibib Project. As the
directors’ assessment of the Group’s ability to continue
as a going concern is subject to significant judgement,
we identified going concern as a significant risk requiring
special audit consideration.
Our audit procedures included, amongst others, the
following:
• An evaluation of the directors’ assessment of the Group’s
ability to continue as a going concern. In particular, we
reviewed budgets and cashflow forecasts for at least
the enxt 12 months and reviewed and challenged the
directors’ assumptions.
• Reviewed plans by the directors to defer certain
payments and secure additional funding through either
the issue of further shares and/or debt funding or a
combination thereof.
• An evaluation of the directors plans for future operations
and actions in relation to its going concern assessment,
taking into account any relevant events subsequent to
the year end, through discussion with the directors.
• Review of disclosure in the financial statements to ensure
appropriate.
Based on our work, we agree with the directors’
assessment that the going concern basis of preparation
is appropriate. However, we also concur that there is a
material uncertainty which may cast significant doubt
on the Group’s ability to continue as a going concern
because of the uncertainty over securing future funding.
The disclosures in the financial statements appropriately
identify this risk.
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 2020 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.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located on the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. This description forms part
of our auditor’s report.
94
2020 LEPIDICO ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF LEPIDICO LIMITED (CONTINUED)
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 2020.
In our opinion, the Remuneration Report of Lepidico Limited, for the year ended 30 June 2020 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 AUSTRALIA AUDIT (WA)
CHARTERED ACCOUNTANTS
Signed at Perth this 28th day of September 2020.
95
2020 LEPIDICO ANNUAL REPORT SUPPLEMENTARY (ASX) INFORMATION
The Information set out below was applicable as at 2 October 2020.
FULLY PAID ORDINARY SHARES (ASX:LPD)
Top 20 Holders of Fully Paid Ordinary Shares
Shareholder
Galaxy Resources Limited
Strategic Metallurgy Holdings Pty Ltd
J P Morgan Nominees Australia Pty Limited
Acuity Capital Investment Management Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd
Computershare Investor Services Inc
Perth Capital Pty Ltd
BNP Paribas Nominees Pty Ltd
Mr Johannes Hendrik Thorburn
Bacchus Capital Advisers Limited
Strategic Metallurgy Pty Ltd
HSBC Custody Nominees (Australia) Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15 Mr Gavin Sidney Becker & Mrs Wendy Mary Becker
16 Mr Ivars Vadzis
17
18
19
Isaiah Sixty Pty Ltd
Netwealth Investments Limited
Avalon Retirement Investments Pty Ltd
20 Mr Bill Georgaklis & Mrs Georgia Georgaklis
Number
314,390,228
294,271,201
244,329,271
229,856,002
121,608,333
120,906,136
84,147,888
67,493,456
60,000,000
57,074,517
56,788,306
51,900,073
50,000,134
47,426,129
38,888,889
36,586,319
35,643,750
35,616,314
30,107,472
27,018,389
%
6.06%
5.67%
4.71%
4.43%
2.35%
2.33%
1.62%
1.30%
1.16%
1.10%
1.10%
1.00%
0.96%
0.91%
0.75%
0.71%
0.69%
0.69%
0.58%
0.52%
Total
2,004,052,807
38.66%
Substantial Shareholders
The following shareholders held a substantial interest, being 5.0% or greater, in the issued capital of the Company:
Shareholder
Number of Shares
Galaxy Resources Ltd
Strategic Metallurgy Holding Pty Ltd and Gary Donald Johnson
314,390,228
367,762,575
%
6.06%
7.09%
Distribution of Shares
The distribution of members and their shareholding was as follows:
Number Held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
Over 100,000
Total Number of Shareholders
Holders
919
284
392
3,056
3,317
7,968
96
2020 LEPIDICO ANNUAL REPORT LISTED OPTIONS EXPIRING 5 JUNE 2022 AT $0.05 (ASX : LPDOB)
Top 20 Holders of Listed Options
Shareholder
Galaxy Resources Limited
Isaiah Sixty Pty Ltd
Mr David Ariti
Mr David Joseph Parrella
Mr Alfred Krendl
J P Morgan Nominees Australia Pty Limited
Mr Antony Edward Anderson
Mr Thomas Michael Cocks
1
2
3
4
5
6
7
8
9 Wythenshawe Pty Ltd
10
Strategic Metallurgy Holdings Pty Ltd
11
Bacchus Capital Advisers Limited
12 Mr Danny Forwood
13 Mr Anthony Charles Kenworthy
14
Paul Thomson Furniture Pty Ltd
15
BNP Paribas Noms Pty Ltd
16 Mr Michael John Rae
17
Netwealth Investments Limited
18
Rookharp Capital Pty Limited
19 Mr Andrew Stephen Devlin & Mrs Maria Devlin
20 Mrs Veselinka Kostdinovic
Total
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
%
10.78%
3.67%
2.88%
2.62%
2.06%
2.05%
1.63%
1.56%
1.47%
1.19%
1.19%
1.12%
1.05%
1.05%
1.00%
0.98%
0.96%
0.90%
0.80%
0.79%
39.75%
Number
20,555,556
7,005,000
5,500,000
5,000,000
3,931,000
3,901,242
3,100,000
2,974,819
2,801,588
2,273,552
2,271,910
2,136,112
2,000,000
2,000,000
1,902,255
1,875,000
1,832,128
1,724,138
1,531,747
1,508,621
75,824,668
Holders
141
448
271
652
255
1,767
97
2020 LEPIDICO ANNUAL REPORT LISTED OPTIONS EXPIRING 18 MAY 2022 AT $0.02 (ASX : LPDOC)
Top 20 Holders of Listed Options
Shareholder
Gazump Resources Pty Ltd
Isaiah Sixty Pty Ltd
Mr Mark Trent
Annlew Investments Pty Ltd
Rookharp Capital Pty Limited
Mr Gavin Sidney Milroy Becker & Mrs Wendy Mary Becker
AHM NSW Pty Ltd
Dolphin Capital Partners Pty Ltd
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
Paul Thomson Furniture Pty Ltd
1
2
3
4
5
6
7
8
9
10
11
12 Mr Gavin Sidney Becker & Mrs Wendy Mary Becker
13 Mrs Yan Wang
14 Mr Anthony Charles Kenworthy
15 Mrs Zi Juan Qi
16 Mr Mitchell James Gill
17
IQ Global Asset Partners Pty Ltd
18 Mr Gregory Steven Jakab
19
Perth Capital Pty Ltd
20 HP Super Fund Pty Ltd
Total
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
21,340,119
20,500,000
15,000,000
10,000,000
7,142,858
7,000,000
6,823,355
6,500,000
6,407,207
5,377,479
4,200,000
4,000,000
4,000,000
4,000,000
4,000,000
3,620,827
3,164,285
2,799,999
2,500,000
2,500,000
140,876,129
Holders
59
185
97
338
306
985
%
7.73%
7.43%
5.43%
3.62%
2.59%
2.54%
2.47%
2.35%
2.32%
1.95%
1.52%
1.45%
1.45%
1.45%
1.45%
1.31%
1.15%
1.01%
0.91%
0.914%
51.04%
98
2020 LEPIDICO ANNUAL REPORT UNLISTED OPTIONS
Unlisted Option holdings as at 2 October 2020
The company has 227,183,982 unlisted options with varying expiry and exercise price on issue.
40,000,000 options expiring 23 November 2020 with an exercise price of 9.1c (“A’), which were issued to the Company’s
Directors.
10,000,000 options expiring 23 November 2020 with an exercise price of 9.1c (“B”), which were issued under the
Company Employee Share Plan.
9,450,000 options expiring 25 October 2021 with an exercise price of 4.0c (“C”), 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 (“D’), which were issued to the Company’s
Directors.
10,000,000 options expiring 22 November 2021 with an exercise price of 2.6c (“E”), which were issued under the
Company Employee Share Plan.
945,000 options expiring 31 March 2022 with an exercise price of 10.0c (“F”), 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 (“G”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
45,000,000 options expiring 21 November 2022 with an exercise price of 2.5c (“H’), which were issued to the Company’s
Directors.
28,000,000 options expiring 21 November 2022 with an exercise price of 2.5c (“I”), which were issued under the Company
Employee Share Plan.
5,967,000 options expiring 26 February 2023 with an exercise price of 35.0c (“J”), 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 (“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
-
-
-
-
4
4
B
-
-
-
-
1
1
C
-
-
-
-
3
3
D
-
-
-
-
6
6
E
-
-
-
-
1
1
F
-
-
-
-
2
2
G
-
-
-
-
5
5
H
-
-
-
-
5
5
I
-
-
-
-
4
4
J
-
-
-
2
6
8
K
-
-
-
-
10
10
99
2020 LEPIDICO ANNUAL REPORT UNLISTED WARRANTS
Unlisted Warrant holdings as at 2 October 2020
The Company has 103,783,680 unlisted warrants with varying expiry dates and an exercise price of 4c, which were issued in accordance
with the Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
77,171,784 warrants expiring 7 December 2020 with an exercise price of 4.0c (“A’).
26,611,896 warrants expiring 13 December 2020 with an exercise price of 4.0c (“B”).
Number Held
1-1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
101,000 and above
Total number of holders
A
-
-
-
-
11
11
B
-
-
-
1
18
19
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 $0.08 per share
Minimum Parcel Size
62,500
Holders
3,791
Shares
73,929,425
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.
NAMIBIAN OPERATIONS, Karibib Project
Karibib Project Tenement Schedule
Registered Holder
Lepidico Interest
Expiry Date
Lepidico Chemicals Namibia (Pty) Ltd
Lepidico Chemicals Namibia (Pty) Ltd
Lepidico Chemicals Namibia (Pty) Ltd
Lepidico Chemicals Namibia (Pty) Ltd
80%
80%
80%
80%
18/06/2028
27/10/2021
03/04/2021
Area
69 km²
225 km²
539 km²
07/05/2022
200 km²
Tenement ID
ML 204
EPL 5439
EPL 5555
EPL 5718
100
2020 LEPIDICO ANNUAL REPORT
2
0
2
0
L
E
P
I
D
I
C
O
A
N
N
U
A
L
R
E
P
O
R
T
www.lepidico.com