FY 2020 ANNUAL REPORT For personal use only LINDIAN RESOURCES LTD ANNUAL REPORT For the year ended 30 June 2020 Contents Corporate Directory Chairman’s Report Directors’ Report Remuneration Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Financial Statements Directors’ Declaration Auditors’ Independence Declaration Auditors’ Report Additional ASX Information 2 3 4 6 18 19 20 21 22 49 50 51 55 1 For personal use only LINDIAN RESOURCES LTD ANNUAL REPORT For the year ended 30 June 2020 Corporate Directory Directors Mr. Asimwe Kabunga (Chairman) Mr. Matthew Bull (Non-Executive Director) Mr. Giacomo Fazio (Non-Executive Director) Mr Yves Occcello (Non-Executive Director) Company Secretary Ms Susan Hunter Registered Office Level 24 108 St Georges Terrace Perth WA 6000 Telephone: + 61 8 6557 8838 Website: www.lindianresources.com.au ABN 53 090 772 222 Share Registry Automic Registry Services Level 2 267 St Georges Terrace Perth WA 6000 Telephone: + 61 8 9324 2099 Facsimile: + 61 8 9321 2337 Auditors HLB Mann Judd Level 4 130 Stirling Street Perth WA 6000 Securities Exchange Australian Securities Exchange (Home Exchange: Perth, Western Australia) ASX Code: LIN, LINO 2 For personal use only LINDIAN RESOURCES LTD CHAIRMAN’S REPORT For the year ended 30 June 2020 Chairman’s Report It was a very busy year for Lindian with the focus being the identification and development of the Company’s conglomerate bauxite asset on the Bouba Plateaux in Gaoual, Guinea. Just 65km from the world renowned mine owned by Companie de Bauxite de Guinee (“CBG”) which was originally exploited as a conglomerate bauxite deposit, the Bouba Project was identified as having the potential to be a significant addition to the Guinea resource landscape. The Bouba plateau sits close to major operating bauxite mining companies with significant infrastructure including railways linked to a number of export locations. This makes it possible to develop a quick pathway to market for the ore. This potential is enhanced by the desire of the Guinean Government for mutualization of infrastructure to reduce the cost of development and time to market. Following the completion of a successful due diligence program, Lindian entered into an agreement to acquire the Gaoual asset and began the exploration program to establish a high grade JORC resource for the deposit. Post year end, the Company was able to declare a successful maiden resource of over 100Mt at the Bouba Plateaux confirming the high-quality nature of the deposit with the high alumina grades being particularly exciting. During the year, Lindian maintained its Tanzanian bauxite and gold assets in good standing as it considers the most appropriate way to develop these assets for its stakeholders. While, in my view, Guinea remains the prime location globally for bauxite due to the extent and quality of its resources, I believe that Tanzania could become an important bauxite jurisdiction due to its existing infrastructure and proximity to potential end markets in China and India. The recent increase in the gold price has resulted in increased attention on the Tanzanian gold projects and the technical team are looking at preliminary exploration work that can help to define the potential of these assets. Post year end, the Company significantly increased the strength of our management team and board with the addition of renowned bauxite asset developer Danny Keating as Chief Executive Officer and refinery and alumina expert Yves Occello as Non-Executive Director. Consequently, I expect the 2021 Financial Year to be a significant one for the Company as we look to deliver on our strategy of unlocking the value within our current diverse, exciting portfolio of assets. In closing, the Board and I would like to take this opportunity to thank all shareholders for their ongoing support and we look forward to what is shaping up to be a transformational year ahead. Yours sincerely, Asimwe Kabunga | Chairman 3 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 Directors’ Report The Directors present their report for Lindian Resources Limited (“Lindian” or “the Company”) and its subsidiaries (“the Group”) for the year ended 30 June 2020. DIRECTORS Mr. Asimwe Kabunga Non-Executive Chairman Mr Kabunga is a Tanzanian born Australian entrepreneur who holds a Bachelor of Science, Mathematics and Physics and has extensive technical and commercial experience in Tanzania, Australia, and the United States. Mr Kabunga has been instrumental in establishing the Tanzania Community of Western Australia Inc, and served as its first President. Mr Kabunga was also a founding member of Rafiki Surgical Missions and Safina Foundation, both Non- Governmental Organisations dedicated to helping children in Tanzania. Mr Kabunga’s professional qualifications include a Bachelor of Science Mathematics and Physics. Mr Kabunga has been non-executive chairman of Volt Resources Limited since 4 August 2017 (ASX: VRC) and was non-executive director of Strandline Resources Limited from 18 June 2015 to 8 October 2018 (ASX: STA). He has not held any other listed directorships in the past three years. Mr. Matthew Bull Non-Executive Exploration Director Mr Bull is an exploration geologist who has worked on a wide range of commodities including graphite, gold and iron ore. He has considerable experience in greenfield exploration and resource development programs. Mr Bull’s professional qualifications include Bachelor of Science Geology (hons). Mr Bull was non-executive director of Volt Resources Limited from 1 June 2015 to 9 July 2018 (ASX: VRC) and is currently a non-executive director of Paterson Resources Limited (ASX:PSL) and non-executive director of Armadale Capital Plc. (AIM: ACP). He has not held any other listed directorships in the past three years. Mr. Giacomo Fazio Non-Executive Director (appointed 26 June 2020) Mr Fazio is a highly experienced project, construction and contract/commercial management professional having held senior project management roles with Primero Group Limited, Laing O’Rourke and Forge Group Ltd and is currently a Non-executive Director of ASX listed Volt Resources Limited. His experience ranges from feasibility studies through to engineering, procurement, construction, and commissioning of diverse mining resources, infrastructure, oil & gas and energy projects. Mr Fazio’s professional qualifications include a Graduate Certificate in Project, an Associate Diploma in Civil Engineering and a Diploma in Quantity Surveying. Mr Fazio has been non-executive director of Volt Resources Limited since 1 July 2019 (ASX: VRC). He has not held any other listed directorships in the past three years. Mr. Yves Occello Non-Executive Director (appointed 29 July 2020) Mr Occello is a 45-year veteran of the bauxite and alumina industry having been COO of Pechiney’s Bauxite and Alumina Division and Director of Technical Projects at Alcan and Rio Tinto Alcan. He has held board positions at a number of significant companies, including Compagnie de Bauxite de Guinee, (“CBG”), a conglomerate 4 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 bauxite project and Guinea’s largest bauxite producer for the past 30 years, Alufer Mining, the first junior miner to construct and commence bauxite operations in Guinea, and Aluminium of Greece, one of Europe’s largest alumina refinery and aluminium smelting complexes. Further, Mr. Occello’s knowledge and expertise is well recognised within China’s bauxite and alumina industry and he is an Honorary Director of the Chinese Academy of Sciences in Beijing. Mr Occello’s is a Chemical Engineer with many years of practical, hands-on experience across the aluminium value chain from understanding bauxite resources and their specific chemical and mineralogical composition, through to the intricate technical requirements of alumina refining. He has not held any other listed directorships in the past three years. Mr. Shannon Green Managing Director (appointed 14 June 2019, resigned 30 June 2020) Mr Green has over 20 years resource development and mining operations experience, having managed several world-class resource project developments and mines including, several of Australia’s largest iron ore mining operations. Mr Green also has extensive experience working in Guinea, having held the role of General Manager Project Delivery with Alliance Mining Commodities (2012-2015). Most recently, Mr Green held the position of General Manager Project Implementation for ASX-listed bauxite developer Canyon Resources (ASX: CAY). Mr Green’s professional qualifications include Qld SSE Mine Managers Certificate, Graduate Diploma Mining Engineering, Diploma of Mining (Surface & underground) and a Diploma of (Finance) and is currently completing an MBA. He has not held any other listed directorships in the past three years. Company Secretary Ms Susan Hunter (appointed 17 March 2020) Ms Hunter has 24 years’ experience in the corporate finance industry and extensive experience in Company Secretarial and Non-Executive Director roles with ASX, AIM and TSX listed companies. Ms Hunter holds a Bachelor of Commerce, is a Member of the Australian Institute of Chartered Accountants, a Fellow of the Financial Services Institute of Australasia, a Graduate Member of the Australian Institute of Company Directors and a Graduate Member of the Governance Institute of Australia and is currently Company Secretary of several ASX listed companies. DIRECTORS’ MEETINGS During the financial year, in addition to regular Board discussions, the number of meetings of Directors held during the year and the number of meetings attended by each Director, including circular resolutions, were as follows: Directors Number of Meetings Eligible to Attend Number of Meetings Attended Mr. Asimwe Kabunga Mr. Shannon Green Mr. Matthew Bull Mr. Giacomo Fazio 3 3 3 - 3 3 3 - 5 For personal use only LINDIAN RESOURCES LTD REMUNERATION REPORT (AUDITED) For the year ended 30 June 2020 Remuneration Report (Audited) This report outlines the remuneration arrangements in place for Directors and executives of Lindian Resources Limited in accordance with the requirements of the Corporation Act 2001 and its Regulations. For the purpose of this report, Key Management Personnel (KMP) of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Group. The remuneration report is set out under the following main headings: • • • • • Principles used to determine the nature and amount of remuneration Details of remuneration Service agreements Share-based compensation Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The Board is responsible for determining and reviewing compensation arrangements for the Directors. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. The Group does not link the nature and amount of the emoluments of such officers to the Group’s financial or operational performance. The expected outcome of this remuneration structure is to retain and motivate Directors. As part of its Corporate Governance Policies and Procedures, the Board has adopted a formal Remuneration Committee Charter. Due to the current size of the Group and number of directors, the Board has elected not to create a separate Remuneration Committee but has instead decided to undertake the function of the Committee as a full Board under the guidance of the formal charter. The rewards for Directors have no set or pre-determined performance conditions or key performance indicators as part of their remuneration due to the current nature of the business operations. The Board determines appropriate levels of performance rewards as and when they consider rewards are warranted. Details of remuneration Details of Key Management Personnel Key Management Personnel Position Mr. Asimwe Kabunga Mr. Shannon Green Mr. Matthew Bull Chairman Managing Director Non-Executive Director Details of the nature and amount of each element of the emolument of each Director and executive of the Group for the financial year are as follows: 2020 Short term Options Post- employment Base salary & annual leave Director fees $ $ Consulting fees $ Share based payments $ Super- annuation $ Performance related % Total $ Directors Mr. Asimwe Kabunga Mr. Shannon Green1 Mr. Matthew Bull - 248,145 - 248,145 60,000 - 60,000 120,000 46,335 - - 46,335 - 231,402 - 231,402 - 21,850 - 21,850 106,335 501,397 60,000 667,372 1. Shannon Green appointed Managing Director on 14 June 2019, resigned 30 June 2020. - 46% - 35% 6 For personal use only LINDIAN RESOURCES LTD REMUNERATION REPORT (AUDITED) For the year ended 30 June 2020 2019 Short term Options Post- employment Directors Mr. Asimwe Kabunga Mr. Shannon Green1 Mr. Matthew Bull Mr. Steve Formica2 Base salary & annual leave Director fees $ $ Consulting fees $ Share based payments $ Super- annuation $ Performance related % Total $ - 11,290 - - 11,290 60,000 - 60,000 57,132 177,132 30,000 - 60,000 17,868 107,868 - - - 28,299 3 28,299 - 1,001 - - 1,001 90,000 12,291 120,000 103,299 325,590 - - - - - 1. 2. 3. Shannon Green appointed Managing Director on 14 June 2019, resigned 30 June 2020. Steve Formica resigned as Non-Executive Director on 13 June 2019. In accordance with the Deed of Termination and Release between the Company and Steve Formica, the parties agreed to a deferred payment in recognition of additional services completed consisting of: a. b. The Company will seek shareholder approval for the issue of 10,000,000 options with an exercise price of $0.03 each to expire on 31 December 2020; or Issue of 10,000,000 options with an exercise price of $0.03 each to expire on 31 December 2020 to former director, Steve Formica. Options were issued in recognition of additional services performed whilst a director. There were no other executive officers of the Group during the financial years ended 30 June 2020 and 30 June 2019. During the 2020 financial year Mr Green was issued 20,000,000 options linked to performance milestones. These options accounted for 46% of Mr Green’s remunerations for the year. The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2020. The Group has liabilities of $30,343 for unpaid Key Management Personnel remuneration at 30 June 2020 (2019: $120,000). Executive Directors Shannon Green was appointed as Managing Director on 14 June 2019 and resigned on 30 June 2020. Service Agreements Mr Green and the Company have agreed to key terms to enter into an executive service agreement with the Company. He was engaged to provide services in the capacity of Managing Director for an indefinite term. Mr Green was entitled to a minimum notice period of three months from the Company and the Company was entitled to a minimum notice period of three months from Mr Green. In the event that the Company gave notice the Company would be required to make a payment equal to 3 months’ salary at the end of the notice period. In the event of a change in control event including a redundancy due to a successful takeover or merger of the Company, Mr Green would have been entitled to a payment equal to 6 months’ salary plus superannuation. As part of Mr Green’s commencement package, the Company issued to Mr Green 20,000,000 unlisted options exercisable in accordance with the milestones below at $0.02 on or before 30 June 2021 (“Executive Options”): Milestones: (a) 10,000,000 Executive Options exercisable upon the Company receiving shareholder approval at the shareholder meeting for the purpose of proceeding with the Gaoual Bauxite Project in Guinea on similar terms to those set out in the Company’s ASX announcement dated 10 April 2019; and (b) 10,000,000 Executive Options exercisable upon close of trade the date the Company achieves a 10 day VWAP share price of $0.03 or above. In June 2019, Mr Green’s salary was set at $230,000 per annum plus minimum statutory superannuation contribution. As at the date of this report, the executive service agreement has not been signed and Mr Green has resigned, the Executive Options were issued on 21 November 2019 and vested on completion of the above milestones. 7 For personal use only LINDIAN RESOURCES LTD REMUNERATION REPORT (AUDITED) For the year ended 30 June 2020 Non-Executive Directors Each non-executive director has a written agreement with the Company that covers all aspects of their appointment including term, time commitment required, remuneration, disclosure of interests that may affect independence, guidance on complying with the Company’s corporate governance policies and the right to seek independent advice, indemnity and insurance arrangements, rights of access to the Company’s information and ongoing confidentiality obligations as well as roles on the Company’s committees. The aggregate remuneration that can be paid to Non-Executive Directors excluding share-based payments or other employee benefits, has been set at an amount not to exceed $240,000 per annum. This amount may only be increased with the approval of Shareholders at a general meeting. Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2020 (2019: nil). Options Except for the options issued to Mr Green, there were no unlisted options granted over ordinary shares during the current year affecting remuneration of directors and other key management personnel. Additional disclosures relating to key management personnel Key Management Personnel Options The numbers of options over ordinary shares in the company held during the financial year by each key management personnel of Lindian Resources Limited, including their personally related parties, are set out below: 2020 Vested option Directors Mr. Asimwe Kabunga Mr. Shannon Green1 Mr. Matthew Bull Balance at the start of the year/ appointment 10,000,000 - 4,000,000 14,000,000 Options purchased Options granted Options expired Balance at the end of the year/ resignation - - - - 12,500,000 20,000,000 - 32,500,000 - - - - 22,500,000 20,000,000 4,000,000 46,500,000 1. Shannon Green appointed Managing Director on 14 June 2019, resigned 30 June 2020. Exercisable 22,500,000 20,000,000 4,000,000 46,500,000 Non- exercisable - - - - 2019 Vested option Directors Mr. Asimwe Kabunga Mr. Shannon Green1 Mr. Matthew Bull Mr. Steve Formica2 Balance at the start of the year/ appointment 21,000,000 - 16,500,000 13,133,334 50,633,334 Options purchased Options granted Options expired Balance at the end of the year/ resignation - - - - - - - - - - (11,000,000) - (12,500,000) (5,633,334) (29,133,334) 10,000,000 - 4,000,000 7,500,000 21,500,000 1. 2. Shannon Green appointed Managing Director on 14 June 2019, resigned 30 June 2020. Steve Formica resigned as Non-Executive Director on 13 June 2019. Exercisable 10,000,000 - 4,000,000 7,500,000 21,500,000 Non- exercisable - - - - - 8 For personal use only LINDIAN RESOURCES LTD REMUNERATION REPORT (AUDITED) For the year ended 30 June 2020 Key Management Personnel Share holdings (including Performance Shares) The number of shares in the Company held during the financial year by each key management personnel of Lindian Resources Limited, including their personally related parties, is set out below. There were no shares granted during the reporting period as compensation. 2020 Directors Mr. Asimwe Kabunga2 Mr. Shannon Green1 Mr. Matthew Bull3 Balance at the start of the year/ appointment 64,775,000 - 28,500,000 93,275,000 Shares purchased Shares disposed / transferred Performance shares granted / (expired) Balance at the end of the year/ resignation 16,750,000 - - 16,750,000 - - - - 25,500,000 - - 25,500,000 107,025,000 - 28,500,000 135,525,000 1. 2. 3. Shannon Green appointed Managing Director on 14 June 2019, resigned 30 June 2020. Shares held by Asimwe Kabunga includes 70,275,000 ordinary shares and 36,750,000 Performance shares. During the year the company issued 10,625,000 Stage 1 Performance rights and 14,875,000 Stage 2 Performance right in respect of the Gaoual Bauxite Project (Refer to Note 15f). Shares held by Matthew Bull includes 24,250,000 ordinary shares and 4,250,000 Class B Performance shares. 2019 Directors Mr. Asimwe Kabunga1 Mr. Shannon Green2 Mr. Matthew Bull3 Mr. Steve Formica4 Balance at the start of the year/ appointment 76,025,000 - 32,750,000 14,687,689 123,426,689 Shares purchased Shares disposed / transferred Performance shares granted / (expired) Balance at the end of the year/ resignation - - - - - - - - (14,687,689) (14,687,689) (11,250,000) - (4,250,000) - (15,500,000) 64,775,000 - 28,500,000 - 93,275,000 1. 2. 3. 4. Shares held by Asimwe Kabunga includes 53,525,000 ordinary shares and 11,250,000 Class B Performance shares. Shannon Green appointed Managing Director on 14 June 2019. Shares held by Matthew Bull includes 24,250,000 ordinary shares and 4,250,000 Class B Performance shares. Steve Formica resigned as Non-Executive Director on 13 June 2019. Other transactions with key management personnel There were no other transactions with key management personnel during the year. Group performance and its consequences on shareholder wealth It is not possible at this time to evaluate the Group’s financial performance using generally accepted measures such as profitability and total shareholder return as the Group is focussed on exploration activities with no significant revenue stream. This assessment will be developed as and when the Groups moves from explorer to producer. The table below shows the gross revenue, losses and loss per share for the last five years for the Group: 2020 2019 2018 2017 2016 Revenue and other income Net loss Loss per share Share price at year end $ $ Cents Cents 58,703 (1,862,151) (0.35) 0.011 719 (765,688) (0.21) 0.011 4,810 1,541 2,247 (2,621,576) (872,075) (462,003) (0.98) 0.015 (0.43) 0.018 (0.05) 0.010 End of remuneration report 9 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 INTERESTS IN THE SECURITIES OF THE COMPANY As at the date of this report, the interests of the Directors in the securities of Lindian Resources Limited are: Director Ordinary Shares Class B Performance shares Unlisted Options over Ordinary Shares exercisable at 2 cents each Mr. Asimwe Kabunga Mr. Shannon Green Mr. Matthew Bull Mr. Giacomo Fazio Mr. Yves Occello 70,275,000 - 24,250,000 - - 11,250,000 - 4,250,000 - - 22,500,000 20,000,000 4,000,000 - - RESULTS OF OPERATIONS The Group’s net loss after taxation attributable to the members for the year to 30 June 2020 was $1,796,601 (2019: $737,085) and the net assets of the Group at 30 June 2020 were $2,514,450 (2019: $737,368). DIVIDENDS No dividend was paid or declared by the Company during the year and up to the date of this report. CORPORATE STRUCTURE Lindian Resources Limited is a company limited by shares, which is incorporated and domiciled in Australia. NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES During the financial year, the principal activity was mineral exploration. REVIEW OF OPERATIONS Operations Report June 2020 Gaoual Bauxite Project - Guinea The Gaoual Bauxite Project is located in the north west of Guinea, West Africa. The project area is located within a known bauxite mining province, is relatively close to the coastal port of Kamsar, the mining centre of Sangaredi, and is a day’s drive from the capital of Guinea, Conakry. The Project is Permit No. 22584 as labelled within the Ministry of Mines Geology database and is owned by KB Bauxite Guinee SARLU,a registered Guinean company. The Permit was applied for on 12 March 2019 and the application was approved by the Ministry of Mines in August 2019. Lindian Resources has held an exclusive option agreement with KB Bauxite Guinee SARLU since 10 April 2019. The Project is close to essential infrastructure, a key requirement for all direct shipping ore projects. The Gaoual Bauxite Project is very well strategically placed to take advantage of this infrastructure given its location in an existing high-quality significant bauxite mining province. 10 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 Figure 5: Proximity to Large scale Bauxite mining operations connected to railway operations Mapping and reconnaissance sampling undertaken during 2019 identified two mineralised zones, the Bouba conglomeratic bauxite deposit and the Mamaya bauxite deposit. During the first half of 2020, an extensive drill program was undertaken on both deposits; the Bouba deposit on a 300m drill spacing and the Mamaya deposit on a 600m drill spacing suitable for mineral resource estimation. The drilling program included 131 shallow HQ auger drill holes over the Bouba deposit and these intersected very high grade material and continuous mineralisation. Drilling of the Mamaya deposit also showed continuous intersections and mineralised bauxite results from most of the 34 holes completed. Figure 1 – Drill rig in action at the Gaoual project All samples were logged, weighed, and sub-sampled by Lindian Resources contractors with a chain of ownership from the drill rig through to the sample analysis facilities. Sample preparation and sample analysis was completed by the Bureau Veritas (Bamako) and Bureau Veritas (Perth) laboratories respectively. Duplicate 11 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 samples, blanks and certified bauxite standards were inserted into the sample sequence to test and validate sampling methodologies and laboratory sample preparation and analysis methods and practices. Post-Year End The field work conducted during the financial year culminated in the reporting of a significant and high grade maiden JORC mineral resource on the Bouba Conglomerate Bauxite deposit in July 2020, post the end of the financial year. All 1,374 samples were analysed through XRF and a smaller population of 126 samples was selected for low and high temperature micro digest test work. At every level of the testing of the repeatability of the analysis, there was a very high level of confirmation, from the sample preparation duplicates through to the standards. Deposit Drill spacing No of drill holes Bouba Mamaya 300m 600m Table 1 – Drill hole and sample overview 131 34 Total metres drilled (m) 871 295 No of samples analysed: XRF 1027 (153 QAQC) 347 (52 QAQC) Bomb digest 106 (6 QAQC) 20 (2 QAQC) Figure 2 – Location of drill holes at the Gaoual Project Micro digest testwork was performed to give insight into the suitability of the ore for low and high temperature digestion. Results from the testwork performed on the 106 samples taken from the Bouba plateau indicated that gibbsite was the dominant alumina hydrate containing mineral. Al2O3 SiO2 Fe2O3 LOI Total Available Alumina Reactive Silica Bouba Main Bouba North Bouba South % 56.1 51.8 56.2 % 6.2 11.0 10.0 % 7.9 9.9 7.4 % Low Temp High Temp Low Temp High Temp 26.3 24.1 21.7 80% 76% 63% 92% 82% 85% 49% 54% 38% 95% 92% 89% Table 2 – Digestion Testwork Results 12 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 Cube Consulting (Cube) was engaged by the Company to produce a mineral resource estimate (MRE) for the Gaoual Bauxite Project. The estimate was undertaken for the Bouba Conglomerate Bauxite deposit. The resource has been estimated using ordinary kriging, and a total resource using a 40% Al2O3 cut-off grade and a higher- grade component at 45% Al2O3 cut-off grade was determined. The process and procedures that were used for the MRE included geological interpretation of the base of bauxite, data selection, exploratory data analysis and variography, estimation by ordinary kriging (OK) for Al2O3, Fe2O3, LOI, SiO2 and TiO2, and model validation. The outputs for this estimate by Cube was two Datamine block models. Cut off Total Resource (40% Al2O3) High Grade Resource (45% Al2O3) Resource Classification Resource (Mt) Al2O3 Fe2O3 SiO2 TiO2 LOI Indicated 101.5 49.8% 12.3% 11.5% 3.0% 23.0% Indicated 83.8 51.2% 11.0% 11.0% 3.0% 23.5% Table 3 -Resource at different cut-off grades Resource estimation work completed upon the Bouba deposit shows all of the bauxite is near surface and contains no lower grade bauxite as overburden or intraburden material. Tanzania - Lushoto and Pare Bauxite Projects & Uyowa Gold Project The Gaoual bauxite asset in Guinea was defined as the Company’s primary focus and so the decision was made for the Company to focus all of its resources and efforts on this asset. Consequently, there were no activities on the bauxite or the gold projects in Tanzania during the Financial Year. As a result, the Company has fully impaired the expenditure on these projects. Kangankunde Rare Earth Project – Malawi Lindian has previously announced the commencement of legal action in Malawi in respect of an exclusive option agreement entered into with Michael Saner and Rift Valley Resource Developments Limited regarding the Kangankunde Rare Earths Project in Malawi. The Company obtained an injunction from the High Court of Malawi in November 2018 to prevent Michael Saner and Rift Valley dealing with the Kangankunde Rare Earths Project and or the shares in Rift Valley, as well as commenced legal proceedings seeking specific performance/damages. As part of the formal court process, a mediation hearing was conducted on 16 April 2019 with no resolution agreed to by the parties. On 4 November 2019 and 5 November 2019, the High Court of Malawi hearing was held and the Company filed its closing submissions in accordance with the required 21 day timeframe. On 7 May 2020, the Company announced that the High Court of Malawi had not ruled in favour of its legal action in respect of the exclusive option agreement. The Company had six weeks from the date of the judgment to file an appeal. Subsequent to the year end On July 8, 2020 the Company announced that it had filed a notice of appeal. The opinion of the Company’s legal counsel is that the Company has a strong case and are still awaiting a date for a hearing from the Supreme Court of Appeals. On 23 July 2020, the Company received further correspondence from legal counsel representing Saner and RVR which detailed an out-of-court offer to settle. The Company is currently reviewing this information and will continue its legal appeals process. Lindian remains committed to seeking to enforce specific performance of the agreement or financial damages which will include actual and consequential losses. 13 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 Competent Person’s Statement – Guinea The information in this report that relates to exploration results for the Gaoual Bauxite Project is based on information compiled or reviewed by Mr Mark Gifford, an independent Geological expert consulting to Lindian Resources Limited. Mr Mark Gifford is a Fellow of the Australian 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 which he is undertaking to qualify as a Competent Person as defined in the December 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). Mr Gifford consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears. Competent Person’s Statement – Tanzania The information in this report that relates to exploration results for the Lushoto, Pare and Uyowa Projects is based on information compiled or reviewed by Mr Matt Bull, who is a director of Lindian Resources Limited. Mr Bull is a member of the Australian Institute of Geoscientists and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). Mr Bull consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears. Tenement Listing Project Country Licence Number Status Licence Type Area Gaoual Project* Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Pare Project** Pare Project** Pare Project** Pare Project** Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Guinea Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania 22584 PL 11176/2018 PL 11177/2018 PL 11178/2018 PL 11262/2019 PL 12194/2017 PL 12195/2017 PL 12227/2017 PL 11263/2019 PL 14098/2019 PL 14099/2019 PL 14100/2019 PL 10918/2016 PML002241CWZ PML002237GWZ PML002240CWZ PML002238CWZ PML002242CWZ PML002243CWZ PML002239CWZ Granted Granted Granted Granted Granted Application Application Application Granted Application Application Application Granted Granted Granted Granted Granted Granted Granted Granted Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Primary Mining Primary Mining Primary Mining Primary Mining Primary Mining Primary Mining Primary Mining 332.32 km2 0.26 km2 49.3 km2 3.64 km2 23.02 km2 90.25 km2 44.94 km2 24.87 km2 73.84 km2 1.52 km2 1.47 km2 1.36 km2 27.08 km2 0.08 km2 0.08 km2 0.03 km2 0.06 km2 0.07 km2 0.08 km2 0.08 km2 * Lindian Resources interest in this license is subject to completion occurring under an option agreement. Refer to the ASX announcement dated 10 April 2019 for full details of the consideration payable under the option agreement. ** Lindian Resources interest in these licenses is via a 51% stake in East Africa Bauxite Limited. 14 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 Corporate In August 2019, the Company completed a $1.3M Placement raising circa $1.1M through the issue of 70,937,500 shares at $0.016 per share. Each share under the Placement received a 1:1 free option exercisable at $0.02 per share expiring three years from date of issue. In November 2019, the Company completed a $500k Placement through the issue of 31.25 million shares at $0.016 per share. Each share under the Placement received a 1:2 free option (15,625,000 unlisted options) exercisable at $0.02 per share expiring three years from date of issue. At the Company’s Annual General Meeting on 15 November 2019 the following share and option issues were approved and have been subsequently allotted: • • • • • • • 10,000,000 shares issued as part of the Lushoto Bauxite Project consideration of which 7 million shares are subject to voluntary 6 month escrow; 5,000,000 shares issued as part consideration for the Gaoul Bauxite Project in Guinea subject to voluntary 3 month escrow; Issue of 68,750,000 unlisted options with an exercise price of $0.02 with a tenor of three years from the date of issue as part of the $1.3M Placement announced to the market on 24 July 2019; Issue of 5,000,000 unlisted broker options with an exercise price of $0.02 and a tenor of three years from the date of issue; Issue of 20,000,000 unlisted Managing Director incentive options which vested on completion of the two milestones: o 10,000,000: When the Company received shareholder approval for the purpose of proceeding with the Gaoual Bauxite Project in Guinea on similar terms to those set out in the Company’s ASX announcement dated 10 April 2019; o 10,000,000: The Company achieved a 10 day VWAP share price of $0.03 or above. (both milestones have an expiry date of 30 June 2021) Issue of 10,000,000 unlisted options with an exercise price of $0.03 and an expiry date of 31 Dec 2021 issued to a former Director. Issue of 12,500,000 Stage 1 Performance Rights and 17,500,000 Stage 2 Performance Rights that convert on the satisfaction of the following milestones. Each Performance Right converts into 1 share for nil consideration. o o Stage 1 Milestone: The Company identifying and establishing an initial JORC Code compliant resource containing a minimum of 65m tonnes with an average grade greater than 45% AI203 with less than 5% SI02 reactive silica being defined in relation to the Gaoual Bauxite Project and announced on ASX; Stage 2 Milestone: The Company completing a Preliminary Feasibility Study in relation to the Gaoual Bauxite Project. • • (Both Milestones expire 24 months after Completion of the Guinea Bauxite Agreement). Issue of 2,000,000 unlisted incentive options to the Company’s long term consulting project geologist. Issue of 76,637,500 shares on the valid exercise of unlisted options at $0.02 per share to raise $1,532,750. On 17 March 2020, Mr Nick Day resigned as Company Secretary and CFO, Ms Susan Hunter was appointed Company Secretary. On 26 May 2020, the Company announced the resignation of Managing Director, Mr Shannon Green and appointment of Non-Executive Director Mr Giacomo Fazio. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no other significant changes in the state of affairs of the Group during the financial year. SIGNIFICANT EVENTS AFTER THE BALANCE DATE On 8 July 2020, the Company announced that a notice of appeal had been filed in respect of the exclusive option agreement for the Kangankunde Rare Earths Project in Malawi. After receiving the record, the Supreme Court 15 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 of Appeal will set a date for hearing the arguments of both parties and will then make its judgement. A further update to market will be made at that time. On 15 July 2020, the Company announced a maiden resource for the Bouba Plateaux at the Company’s Gaoual Project in Guinea. A total JORC compliant Indicated Resource of 102M at 49.8% Al2O3 has been defined using a cut-off of 40% Al2O3. The Resource includes high grade areas with 84Mt at 51.2% Al2O3 using a higher cut-off of 45% Al2O3. On 24 July 2020, the Company announced receipt of an offer to settle out of court in respect of the exclusive option agreement for the Kangankunde Rare Earths Project in Malawi. The Company is reviewing the offer and will discuss with legal counsel before taking action. On 29 July 2020, the Company announced the appointment of Yves Occello as Non-Executive Director. On 10 August 2020, the Company announced the appointment of Danny Keating to the role of Chief Executive Officer. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Directors have excluded from this report any further information on the likely developments in the operations of the Company and the expected results of those operations in future financial years, as the Directors believe that it would be speculative and prejudicial to the interests of the Company. ENVIRONMENTAL REGULATIONS AND PERFORMANCE The Group is not aware of any breaches in relation to environmental matters. SHARE OPTIONS As at the date of this report, there were 222,237,501 unissued ordinary shares under options. The details of the options at the date of this report are as follows: Number Exercise Price $ Expiry Date 112,025,001 10,000,000 20,000,000 80,212,500 0.02 0.03 0.02 0.02 31 December 2020 31 December 2020 30 June 2021 20 November 2022 No option holder has any right under the options to participate in any other share issue of the company or any other entity. A total of 133,875,000 (2019:125,000,001) options were issued during the year, 76,637,500 options were exercised (2019: nil) during the year and no options expired (2019: 60,284,027) during the year. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has made an agreement indemnifying all the Directors and officers of the Company against all losses or liabilities incurred by each Director or officer in their capacity as Directors or officers of the Company to the extent permitted by the Corporations Act 2001. The indemnification specifically excludes wilful acts of negligence. The Company paid insurance premiums in respect of Directors’ and Officers’ Liability Insurance contracts for current officers of the Company, including officers of the Company’s controlled entities. The liabilities insured are damages and legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group. The total amount of insurance premiums paid has not been disclosed due to confidentiality reasons. 16 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ REPORT For the year ended 30 June 2020 PROCEEDINGS ON BEHALF OF COMPANY No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. INDEMNITY AND INSURANCE OF AUDITOR The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. CORPORATE GOVERNANCE A copy of Lindian’s 2020 Corporate Governance Statement, which provides detailed information about governance, and a copy of Lindian’s Appendix 4G which sets out the Company’s compliance with the in the fourth edition of the ASX Corporate Governance Council’s Principles and recommendations is available on the corporate governance section of the Company’s website at Recommendations https://www.lindianresources.com.au/corporate. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES Section 307C of the Corporations Act 2001 requires the Company’s auditors to provide the Directors of Lindian Resources Limited with an Independence Declaration in relation to the audit of the full year financial report. A copy of that declaration forms part of this report. There were no non-audit services provided by the Company’s auditor. Signed on behalf of the Board in accordance with a resolution of the Directors. Asimwe Kabunga | Executive Chairman 11 September 2020 17 For personal use only LINDIAN RESOURCES LTD FINANCIAL STATEMENTS For the year ended 30 June 2020 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2020 Revenue Interest income Other income Expenses Depreciation / immediate asset write-off Consulting and directors’ fees Share based payments Impairment of exploration and evaluation assets Exploration and evaluation expenses Finance costs Other expenses Loss before income tax Income tax (expense)/benefit Loss after income tax Other comprehensive income, net of income tax Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations Other comprehensive loss for the year, net of income tax Total comprehensive loss for the year Loss attributable to: Owners of Lindian Resources Limited Non-controlling interests Total comprehensive loss attributable to: Owners of Lindian Resources Limited Non-controlling interests Note 4 5 2020 $ 378 58,325 (10,704) (137,585) (336,464) (511,876) (75,853) (1,954) (846,418) (1,862,151) - (1,862,151) 2019 $ 719 - (9,693) (195,000) (28,299) - (46,412) (26,314) (460,689) (765,688) - (765,688) 4,310 (2,323) 4,310 (1,857,841) (2,323) (768,011) (1,796,601) (65,550) (1,862,151) (1,794,146) (63,695) (1,857,841) (737,085) (28,603) (765,688) (738,270) (29,741) (768,011) Loss per share attributable to owners of Lindian Resources Limited Basic and diluted loss per share (cents per share) 21 (0.35) (0.21) The accompanying notes form part of these financial statements. 18 For personal use only LINDIAN RESOURCES LTD FINANCIAL STATEMENTS For the year ended 30 June 2020 Consolidated Statement of Financial Position As at 30 June 2020 Current Assets Cash and cash equivalents Trade and other receivables Prepayments Total current assets Non-current Assets Deferred exploration and evaluation expenditure Property, plant and equipment Total non-current assets Total assets Current Liabilities Trade and other payables Unearned income Provisions Borrowings Total current liabilities Net assets Equity Share capital Reserves Accumulated losses Non-controlling interests Total equity Note 6 7 8 9 10 11 12 13 14 15 16 17 2020 $ 614,098 40,042 18,507 672,647 1,938,156 30,741 1,968,897 2,641,544 104,639 11,665 - 10,790 127,094 2,514,450 2019 $ 37,019 6,163 45,636 88,818 1,031,706 41,445 1,073,151 1,161,969 258,853 - 748 165,000 424,601 737,368 32,424,788 9,717,466 (39,534,368) 2,607,886 (93,436) 2,514,450 29,126,329 9,378,547 (37,737,767) 767,109 (29,741) 737,368 The accompanying notes form part of these financial statements. 19 For personal use only LINDIAN RESOURCES LTD FINANCIAL STATEMENTS For the year ended 30 June 2020 Consolidated Statement of Cash Flows For the year ended 30 June 2020 Cashflows from Operating Activities Government incentive received Payments to suppliers and employees Interest received Finance costs Net cash used in operating activities Cashflows from Investing Activities Payments for exploration expenditure Payments for plant and equipment Net cash used in investing activities Cashflows from Financing Activities Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Share issue costs Net cash from financing activities Net increase/(decrease) in cash held Cash and cash equivalents at beginning of period Cash and cash equivalents as at year end Note 2020 $ 2019 $ 19,950 (1,167,218) 378 (1,954) (1,148,844) (1,298,326) - (1,298,326) 3,152,750 35,966 (25,176) (139,291) 3,024,249 577,079 37,019 614,098 6 14 14 6 - (597,680) 719 (45,914) (642,875) (551,911) (3,040) (554,951) 1,500,000 174,139 (349,139) (94,584) 1,230,416 32,590 4,429 37,019 The accompanying notes form part of these financial statements. 20 For personal use only LINDIAN RESOURCES LTD FINANCIAL STATEMENTS For the year ended 30 June 2020 Consolidated Statement of Changes in Equity For the year ended 30 June 2020 Accumulated Share capital $ losses Option reserve $ $ Share-based payment reserve $ Foreign currency translation reserve $ Attributable to the owners of Lindian Resources $ Non-controlling interests $ At 1 July 2018 Loss for the year Other comprehensive loss Total comprehensive loss Transactions with owners in their capacity as owners Shares issued Cost of share issue Share based payments Options issued At 30 June 2019 At 1 July 2019 Loss for the year Other comprehensive loss Total comprehensive loss Transactions with owners in their capacity as owners Shares issued Cost of share issue Share based payments At 30 June 2020 27,492,524 - - - (37,000,682) (737,085) - (737,085) 1,890,000 (256,195) - - 29,126,329 29,126,329 - - - - - - - (37,737,767) (37,737,767) (1,796,601) - (1,796,601) 3,437,750 (139,291) - 32,424,788 - - - (39,534,368) The accompanying notes form part of these financial statements. 4,106,626 - - - - - - - 4,106,626 4,106,626 - - - - - - 4,106,626 4,861,778 - - - - - 28,299 383,029 5,273,106 5,273,106 - - - - - 336,464 5,609,570 - - (1,185) (1,185) - - - - (1,185) (1,185) - 2,455 2,455 - - - 1,270 (539,754) (737,085) (1,185) (738,270) 1,890,000 (256,195) 28,299 383,029 767,109 767,109 (1,796,601) 2,455 (1,794,146) 3,437,750 (139,291) 336,464 2,607,886 - (28,603) (1,138) (29,741) - - - - (29,741) (29,741) (65,550) 1,855 (63,695) - - - (93,436) Total equity $ (539,754) (765,688) (2,323) (768,011) 1,890,000 (256,195) 28,299 383,029 737,368 737,368 (1,862,151) 4,310 (1,857,841) 3,437,750 (139,291) 336,464 2,514,450 21 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Corporate Information Notes to the Financial Statements 1. The financial report of Lindian Resources Limited (“Lindian Resources” or “the Company”) and its controlled entities (“the Group”) for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors 11 September 2020. Lindian Resources Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. Summary of Significant Accounting Policies Basis of preparation 2. (a) The financial report is a general-purpose financial report, which has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. The financial report has been prepared on an accrual basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Material accounting policies adopted in preparation of this financial report are presented below and have been consistently applied unless otherwise stated. The presentation currency is Australian dollars. Going Concern This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business. The Group incurred a net loss after tax for the year ended 30 June 2020 of $1,862,151 and experienced net cash outflows from operating activities of $1,148,844. At 30 June 2020, the cash and cash equivalents balance was $614,098. The ability of the Group to continue as a going concern is principally dependent upon the ability of the Company raising capital from equity and debt markets as completed during the year and subsequent to the year ended 30 June 2020 and managing cashflow in line with available funds. The Directors have prepared a cash flow forecast, which indicates that the Group will have sufficient cash flows to meet all currently forecasted commitments and working capital requirements for the 12 month period from the date of signing this financial report. During the year the Company raised $3,152,750 from equity markets and the exercise of options (before costs) The Company may need to raise further capital in order to fund future exploration programs. Based on the cash flow forecasts, and other factors referred to above, the directors are satisfied that the going concern basis of preparation is appropriate. In particular, given the Company’s history of raising capital to date, the Directors are confident of the Company’s ability to raise additional funds as and when they are required, should the need arise. However, if the Group is not successful in securing sufficient funds through capital raising or exercise of options, there is a material uncertainty that may cast significant doubt on whether the Group is able to continue as a going concern and as to whether the Group will be able to realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of liabilities that might result should the Group be unable to continue as a going concern and meet its debts as and when they fall due. 22 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Parent entity information (b) In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 28. Compliance statement (c) Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Adoption of new and revised standards (d) Standards and Interpretations applicable to 30 June 2020 In the year ended 30 June 2020, the Directors have reviewed all new and revised Standards and Interpretations issued by the AASB that are relevant to the Group and effective for the current annual reporting period. Those which are relevant to the Group are set out below. AASB 16 Leases supersedes AASB 117 Leases. The Group has adopted AASB 16 from 1 July 2019 which has resulted in changes in the classification, measurement and recognition of leases. The changes result in almost all leases where the Group is the lessee being recognised in the Statement of Financial Position and removes the former distinction between `operating' and `finance' leases. The new standard requires recognition of a right-of-use asset (the leased item) and a financial liability (to pay rentals). The exceptions are short-term leases and leases of low value assets. The Group has adopted AASB 16 using the modified retrospective approach under which the reclassifications and the adjustments arising from the new leasing rules are recognised in the opening Condensed Statement of Financial Position on 1 July 2019. Under this approach, there is no initial impact on accumulated losses, and comparatives have not been restated. Impact on adoption of AASB 16 All Group leases have a term of less than 12 months or relate to low value assets and the Group has applied the optional exemptions to not capitalise these leases and instead account for the lease expense on a straight-line basis over the lease term. The Company has no such lease arrangements that require recognition under AASB 16 and therefore, the adoption of AASB 16 resulted in the recognition of right-of-use assets of $nil and lease liabilities of $nil in respect of all operating leases. The net impact on accumulated losses on 1 July 2019 was $nil. Basis of consolidation (e) The consolidated financial statements comprise the financial statements of Lindian Resources Limited and its subsidiaries as at 30 June each year (‘the Company’). Subsidiaries are all those entities (including special purpose entities) over which the Company has control. The Company controls an entity when the company 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 to direct the activities of the entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-company transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and cease to be consolidated from the date on which control is transferred out of the Company. 23 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired, and the liabilities assumed are measured at their acquisition date fair values. The difference between the above items and the fair value of the consideration (including the fair value of any pre-existing investment in the acquiree) is goodwill or a discount on acquisition. A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction. Foreign currency translation (f) Functional and presentation currency Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The functional and presentation currency of Lindian Resources Limited is Australian Dollars. The functional currency of the Tanzanian subsidiary is Tanzanian shilling and the functional currency of the Cameroonian subsidiary is Central African Franc. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Group entities The results and financial position of all the Company entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • • • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of any net investment in foreign entities are taken to foreign currency translation reserve. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in profit or loss, as part of the gain or loss on sale where applicable. Impairment of non-financial assets (g) The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets of the Group and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. 24 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in the statement of comprehensive income. An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Deferred exploration and evaluation expenditure (h) Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure but does not include general overheads or administrative expenditure not having a specific nexus with a particular area of interest. Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a mining operation. Exploration and evaluation expenditure for each area of interest is carried forward as an asset provided that one of the following conditions is met: • • such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or exploration and evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing. Expenditure which fails to meet the conditions outlined above is written off. Furthermore, the Directors regularly review the carrying value of exploration and evaluation expenditure and make write downs if the values are not expected to be recoverable. Identifiable exploration assets acquired are recognised as assets at their cost of acquisition, as determined by the requirements of AASB 6 Exploration for and Evaluation of Mineral Resources. Exploration assets acquired are reassessed on a regular basis and these costs are carried forward provided that at least one of the conditions referred to in AASB 6 is met. Exploration and evaluation expenditure incurred subsequent to acquisition in respect of an exploration asset acquired, is accounted for in accordance with the policy outlined above for exploration expenditure incurred by or on behalf of the entity. Acquired exploration assets are not written down below acquisition cost until such time as the acquisition cost is not expected to be recovered. When an area of interest is abandoned, any expenditure carried forward in respect of that area is written off. Expenditure is not carried forward in respect of any area of interest/mineral resource unless the Group’s rights of tenure to that area of interest are current. 25 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Trade and other receivables (i) Trade receivables, which generally have 30 – 90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. The Group measures the loss allowance for trade and other receivables at an amount equal to lifetime expected credit loss. The expected credit losses on trade and other receivables are estimated with reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtor, general economic conditions of the industry in which the debtor operates and an assessment of both the current and the forecast direction of conditions at the reporting date. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery; for example, when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. Bad debts are written off when identified. Cash and cash equivalents (j) Cash and cash equivalent in the statement of financial position include cash on hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown as current liabilities in the statement of financial position. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as described above and bank overdrafts. Property, plant & equipment (k) Each asset of property, plant and equipment is carried at cost, less where applicable, any accumulated depreciation and impairment losses. Plant and equipment are measured on the cost basis less depreciation and impairment losses. Plant and equipment Plant and Equipment is shown at cost less subsequent depreciation for plant and equipment. Depreciation Items of plant and equipment are depreciated using the diminishing value method over their estimated useful lives to the consolidated entity. The depreciation rates used for this class of asset for the current period is as follows: • Plant and Equipment 20% Assets are depreciated from the date the asset is ready for use. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting 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. The recoverable amount is assessed on the basis of expected net cash flows that will be received from the assets continual use or subsequent disposal. The expected cash flows have been discounted to their present value in determining the recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the consolidated statement of profit or loss and other comprehensive income. When re-valued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. Provisions (l) Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The 26 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money, and where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Trade and other payables (m) Liabilities for trade creditors and other amounts are measured at amortised cost, which is the fair value of the consideration to be paid in the future for goods and services received that are unpaid, whether or not billed to the Group. Income tax (n) Deferred income tax is provided for on all temporary differences at balance date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. No deferred income tax will be recognised from the initial recognition of goodwill or of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. No deferred income tax will be recognised in respect of temporary differences associated with investments in subsidiaries if the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the near future. 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 charged or credited in the statement of comprehensive income except where it relates to items that may be charged or credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses 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 tax rates (and tax laws) that have been enacted or substantially enacted at the balance date and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. The carrying amount of deferred tax assets is reviewed at each balance date and only recognised to the extent that sufficient future assessable income is expected to be obtained. Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of comprehensive income. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Issued capital (o) Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 27 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Revenue (p) Revenue is recognised to the extent that control of the goods or services has passed and it is probable that the economic benefits will flow to the Group and the revenue is capable of being reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest income Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. Segment information (q) Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Lindian Resources Limited. Earnings per share (r) Basic earnings/loss per share Basic earnings/loss per share is calculated by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing equity other than dividends, by the weighted average number of ordinary shares, adjusted for any bonus elements. Diluted earnings/loss per share Diluted earnings/loss per share is calculated as net profit or loss attributable to members of the Company, adjusted for: • • • the costs of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus elements. Goods and services tax (“GST”) (s) 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. The net amount of GST recoverable from, or payable to, the Australian Tax Office is included as part of receivables or payables in the statement of financial position. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. Share based payment transactions (t) The Group provides benefits to individuals acting as, and providing services similar to employees (including Directors) of the Group in the form of share based payment transactions, whereby individuals render services in exchange for shares or rights over shares (“Equity Settled Transactions”). There is currently an Employee Share Option Plan (ESOP) in place, which provides benefits to Directors and individuals providing services similar to those provided by an employee. 28 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 The cost of these equity settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using the Black Scholes formula, taking into account the terms and conditions upon which the instruments were granted. In valuing equity settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Lindian Resources Limited (“Market Conditions”). The cost of the equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“Vesting date”). The cumulative expense recognised for equity settled transactions at each reporting date until Vesting Date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of the market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of the period. No expense is recognised for awards that do not vest, except for awards where vesting is conditional upon a market condition. Where the terms of an equity settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of the modification. Where an equity settled award is cancelled, it is treated as if it had vested on the date of the cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The cost of equity-settled transactions with non-employees is measured by reference to the fair value of goods and services received unless this cannot be measured reliably, in which case the cost is measured by reference to the fair value of the equity instruments granted. Comparative figures (u) When required by Accounting Standards, comparatives have been adjusted to conform to changes in presentation for the current financial year. Fair value measurement (v) When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principle market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. 29 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Critical accounting estimates and judgements (w) Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors which could impact the future recoverability include the level of proved, probable and inferred mineral resources, future technological changes which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, this will reduce profits and net assets in the period in which this determination is made. In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent that it is determined in the future that this capitalised expenditure should be written off, this will reduce profits and net assets in the period in which this determination is made. Share based payment transactions The Group measures the cost of equity settled transactions with employees or external parties subject to certain criteria, by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black Scholes formula, taking into account the terms and conditions upon which the instruments were granted. Borrowings (x) Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date. Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Segment Information 3. AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker in order to allocate resources to the segment and to assess its performance. For management purposes, the Group is organised into one main operating segment, being exploration of mineral projects and in four geographical areas, being Tanzania (gold and bauxite), Guinea (bauxite), Malawi (rare earths elements) and Australia (corporate office). 30 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 30 June 2020 Revenue Interest income Other income Total segment revenue Expenditure Depreciation expense Impairment of exploration and evaluation assets Exploration and evaluation expenses Finance costs Other expenses Total segment expenditure Loss before income tax SEGMENT ASSETS Segment operating assets Total segment assets SEGMENT LIABILITIES Segment operating liabilities Total segment liabilities Movement in non-current assets 30 June 2019 Revenue Corporate interest revenue Total segment revenue Expenditure Depreciation expense Impairment of exploration and evaluation assets Exploration and evaluation expenses Finance costs Other expenses Total segment expenditure Loss before income tax SEGMENT ASSETS Segment operating assets Total segment assets Tanzania $ Guinea $ Malawi $ Australia $ Total $ - - - 7,712 511,876 - - 39,621 559,209 (559,209) - - - - - 75,853 - - 75,853 (75,853) - - - - - - - - - - 378 58,325 58,703 378 58,325 58,703 2,992 10,704 - - 1,954 1,280,846 1,285,792 (1,227,089) 511,876 75,853 1,954 1,320,467 1,920,854 (1,862,151) 57,243 57,243 1,292,104 1,292,104 646,045 646,045 646,152 646,152 2,641,544 2,641,544 6,292 6,292 (453,756) - - 1,292,104 - - 60,389 120,802 120,802 (2,991) 127,094 127,094 895,746 Tanzania $ Guinea $ Malawi $ Australia $ Total $ 719 719 719 719 47 9,693 - - 26,314 683,988 710,349 (709,630) - 46,412 26,314 683,988 766,407 (765,688) - - 9,646 - - - - 9,646 (9,646) - - - - 46,412 - - 46,412 (46,412) - - - - - - - - - 484,503 484,503 - - 585,656 585,656 91,810 91,810 1,161,969 1,161,969 31 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 30 June 2019 SEGMENT LIABILITIES Segment operating liabilities Total segment liabilities Movement in non-current assets 4. Other Expenses Accounting, audit and tax fees Insurance Legal fees Listing and share registry costs Travel Marketing and corporate advisor fees Salary and superannuation Other Total other expenses Income Tax 5. Income tax expense Tanzania $ Guinea $ Malawi $ Australia $ Total $ 68,192 68,192 446,050 5,040 5,040 - - - 585,656 351,369 351,369 3,039 424,601 424,601 1,034,745 2020 $ 118,496 33,152 10,821 38,644 37,120 210,649 270,283 127,253 846,418 2020 $ - - - 2019 $ 109,215 22,916 46,402 41,416 - 218,302 12,291 10,147 460,689 2019 $ - - - Major component of tax expense/(benefit) for the year: Current tax Deferred tax Numerical reconciliation between aggregate tax expense recognised in the statement of comprehensive income and tax expense calculated per the statutory income tax rate. 2020 $ 2019 $ A reconciliation between tax expense and the product of accounting loss before income tax multiplied by the Group’s applicable tax rate is as follows: Total loss before income tax expense (1,862,151) (765,688) 32 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Tax at the group rate of 30% (2019: 30%) Non-deductible expenses Non-assessable income Movement in unrecognised temporary differences Debt equity raising costs Adjustment in respect of prior years Income tax benefit not brought to account Income tax benefit Unrecognised deferred tax balances: The following deferred tax assets and liabilities have not been brought to account: Deferred tax assets Losses available for offset against future taxable income - revenue Other deferred tax balances 2020 $ (558,646) 116,776 (17,498) 117,157 (18,703) 402 360,512 - 2019 $ (229,706) 67,423 - (2,209) (6,437) - 170,929 - 4,425,116 662,265 5,087,381 4,064,604 614,597 4,679,201 The benefit for tax losses will only be obtained if: (i) the Group derives future assessable income in Australia of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised; (ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation in Australia; and (iii) no changes in tax legislation in Australia, adversely affect the Group in realising the benefit from the deductions for the losses 6. Cash and Cash Equivalents 2020 $ 2019 $ Reconciliation of operating loss after tax to the net cash flows from operations: Loss after tax (1,862,151) (765,688) Non-cash items Depreciation and impairment charges Foreign currency (gain)/loss Share based payments Impairment of exploration and evaluation assets Change in assets and liabilities Trade and other receivables Trade and other payables Provisions Net cash outflow from operating activities 10,704 4,311 336,464 511,876 (5,750) (143,549) (749) (1,148,844) 9,693 1,073 158,837 - (42,559) (4,979) 748 (642,875) 33 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Reconciliation of cash: Cash at bank 2020 $ 614,098 614,098 Cash at bank earns interest at floating rates based on daily bank deposit rates. 7. Trade and Other Receivables - Current GST receivable Other receivable 2020 $ 14,355 25,687 40,042 2019 $ 37,019 37,019 2019 $ 6,163 - 6,163 Goods and services tax is non-interest bearing and generally receivable on 30 day terms. They are neither past due nor impaired. The amount is fully collectible. Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. 8. Prepayments Prepaid expenditure 9. Deferred Exploration and Evaluation Expenditure Exploration and evaluation phase – at cost At beginning of the year Exploration expenditure during the year settled by cash Exploration expenditure during the year settled by issue of shares and options (refer to Note 27) Proposed issue of shares for acquisition of Batan Australia Pty Ltd (refer to Note 15) Impairment expense1 Total exploration and evaluation 2020 $ 18,507 18,507 2019 $ 45,636 45,636 2020 $ 2019 $ 1,031,706 1,298,326 - 550,827 120,000 280,879 - (511,876) 1,938,156 200,000 - 1,031,706 The deferred exploration and evaluation expenditure consists of expenditure on the Group’s Kangankunde Rare Earths Project in Malawi and the Gaoual Bauxite Project in Guinea. The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of respective areas. The ongoing legal issues with Michael Saner and Rift Valley Resources outlined in Note 31 gives rise to a material uncertainty on the recoverability of the Kangankunde Rare Earths Project in Malawi. 34 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 1. The impairment expense in the year ended 30 June 2020 of $511,876 relates to the expenditure on the Groups Lushoto Bauxite Project in Tanzania. 10. Plant and Equipment Plant and equipment – at cost Accumulated depreciation Net book amount Balance at the beginning of the year Acquisitions Immediate write-off Depreciation expense Balance at the end of the year 11. Trade and Other Payables Trade payables and accruals 2020 $ 55,000 (24,259) 30,741 41,445 - (3,039) (7,665) 30,741 2020 $ 104,639 104,639 2019 $ 58,039 (16,594) 41,445 48,099 3,039 - (9,693) 41,445 2019 $ 258,853 258,853 Trade creditors, other creditors and goods and services tax are non-interest bearing and generally payable on 30-day terms. Due to the short-term nature of these payable, their carrying value is assumed to approximate their fair value. 12. Unearned Income Cashflow boost 2020 $ 11,665 11,665 2019 $ - - Unearned income consists of the July component of the cashflow boost included on the June 2020 Business Activity Statement. The cashflow boost is a temporary injection of capital from the Australian Government to support small land medium businesses during the economic downturn associated with COVID-19. 13. Provisions Employee entitlements 2020 $ - - 2019 $ 748 748 35 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 14. Borrowings Short term debt Balance at the beginning of the year Drawdown of loan facility Finance charges Drawdown on Insurance Premium Funding Interest Insurance Premium Funding Repayment of borrowings Repayment of finance charges Balance at the end of the year Reconciliation of changes in liabilities from financing activities Balance at the beginning of the year Non-cash repayment of debt Changes in liabilities from operating activities Finance costs Changes in liabilities from financing activities Proceeds from borrowings Repayment of borrowings Balance at the end of the year 2020 $ 2019 $ 165,000 - - 38,757 (2,791) (175,176) (15,000) 10,790 2020 $ 165,000 (165,000) 357,500 174,139 17,414 - - (349,139) (34,914) 165,000 2019 $ 357,500 (17,500) - (17,500) 35,966 (25,176) 10,790 174,139 (349,139) 165,000 On 1 April 2019 the Company announced that it had entered into an unsecured $1M loan facility with Rose Lawn Limited for a 12-month term. The lender is entitled to a 6% fee payable upon receipt of each draw down and 110% of the loan amount is repayable on maturity. During the year ended 30 June 2019 $150,000 was drawn under this facility and on 2 August 2019 was repaid by way of a share issue. On 3 December 2019 the Company entered into an Insurance Premium Funding Agreement with IQumulate Premium Funding for a principal balance of $35,966, interest is charged at a flat rate of 7.7607% on the funded amount and payments are made in equal instalments over a 10 month period. 15. Share Capital a) Share capital Ordinary shares fully paid 2020 $ 2019 $ 32,424,788 32,424,788 29,126,329 29,126,329 36 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 b) Movement in shares on issue Balance at the beginning of the year Shares issued – placement August 2019 Shares issued – placement November 2019 Shares issued – part consideration for introduction of the Kangankunde Rare Earths Project (refer note 27) Shares issued – corporate advisor (refer note 27) Issue of shares for acquisition of Batan Australia Pty Ltd (i) Issue of share in settlement of short-term debt Issue of shares as part consideration for the Guinea Bauxite Acquisition Exercise of options Less fundraising costs Balance at the end of the year 2020 number 2020 $ 2019 number 2019 $ 377,812,124 70,937,500 31,250,000 29,126,329 267,812,123 1,135,000 100,000,000 - 500,000 27,492,524 1,500,000 - - - - - 6,666,667 113,333 3,333,334 76,667 10,000,000 10,312,500 - 165,000 - - 200,000 - 5,000,000 76,637,500 - 581,949,624 105,000 1,532,750 (139,291) - - - 32,424,788 377,812,124 - - (256,195) 29,126,329 (i) Shareholder approval was granted to issue of 10,000,000 shares to the vendors of the Lushoto Bauxite Project for the completion of the 51% Stage 1 acquisition of Batan Australia Pty Ltd which in turn owns 100% of East Africa Bauxite Limited, holder of the Lushoto and Pare Bauxite Projects (refer to ASX announcements dated 3 August 2017, 11 January 2018, 8 October 2018 and 20 March 2019 for further detail). The shares to be issued for the Stage 1 acquisition were previously approved by shareholders in November 2018. This approval had expired and accordingly shareholder “re-approval” was sought at the shareholder meeting and the shares were issued on 22 November 2019. c) Ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from 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 proxy, at a meeting of the Company. d) Capital risk management The Group’s capital comprises share capital, reserves less accumulated losses amounting to a surplus of $2,514,450 at 30 June 2020 (2019: surplus of $737,368). The Group manages its capital to ensure its ability to continue as a going concern and to optimise returns to its shareholders. The Group was geared to the extent indicated in Note 14 at the financial year end and not subject to any externally imposed capital requirements. e) Share options At 30 June 2020, there were 222,237,501 unissued ordinary shares under option (2019: 165,000,001 options). The details of the options are as follows: Number Exercise $ Expiry 112,025,001 10,000,000 20,000,000 80,212,500 0.02 0.03 0.02 0.02 31 December 2020 31 December 2020 30 June 2021 20 November 2022 37 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 The movement in options is set out below. At beginning of period Options expired Options issued – free attaching options for placement Options issued – capital raising fee Options issued – part consideration for introduction of the Kangankunde Rare Earths Project Options issued – MD for Gaoual Bauxite Options issued – corporate advisor services Options issued – consideration for consultancy fee Options issued – previous director Options exercised during the period At end of period f) Performance shares 2020 number 2019 number 165,000,001 - 81,250,000 15,625,000 - 20,000,000 2,000,000 5,000,000 10,000,000 (76,637,500) 222,237,501 100,284,027 (60,284,027) 100,000,000 10,000,000 6,666,667 - 3,333,334 5,000,000 - - 165,000,001 At 30 June 2020, there were 55,000,000 performance shares on issue (2019: 25,000,000 performance shares). The details of the performance shares are as follows: Number Expiry Vesting conditions 25,000,000 class B 12,500,000 6 December 2020 24 months after Completion as defined in the 2019 Notice of Annual General Meeting 17,500,000 24 months after Completion as defined in the 2019 Notice of Annual General Meeting Conditional on conversion of the Class A Performance Shares and an independent third party expert producing a positive Pre-Feasibility Study for the development of the Tanzanian Gold Projects, expiring on 6 December 2020. Conditional on the Company identifying and establishing an initial JORC Code compliant resource containing a minimum of 65million tonnes with an average grade greater than 45% AI203 with less than 5% SI02 reactive silica being defined in relation to the Gaoual Bauxite Project and announced on ASX. Conditional on the Company completing a Preliminary Feasibility Study in relation to the Gaoual Bauxite Project. Each Performance Right converts into 1 share for nil consideration. The movement in performance shares is set out below. No performance shares vested during the period. 2019 $ 2020 $ At beginning of period – Class A At beginning of period – Class B Performance shares expired – Class A (expired 6 December 2018) Performance shares issued At end of period - 25,000,000 - 30,000,000 55,000,000 25,000,000 25,000,000 (25,000,000) - 25,000,000 As part of the consideration for the acquisition of Tangold Pty Ltd, the Group had previously issued contingent consideration to the Tangold vendors in the form of performance shares. 38 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 No value has been assigned to the performance shares as achievement of the vesting conditions has not been deemed probable, at the date of this report. During the year 12,500,000 Stage 1 Performance Rights and 17,500,000 Stage 2 Performance Rights were issued and will convert on the satisfaction of the following milestones. Each Performance Right converts into 1 share for nil consideration. • • Stage 1 Milestone: The Company identifying and establishing an initial JORC Code compliant resource containing a minimum of 65m tonnes with an average grade greater than 45% AI203 with less than 5% SI02 reactive silica being defined in relation to the Gaoual Bauxite Project and announced on ASX; Stage 2 Milestone: The Company completing a Preliminary Feasibility Study in relation to the Gaoual Bauxite Project. (Both Milestones expire 24 months after Completion of the Guinea Bauxite Agreement). 16. Reserves Share based payments reserve Option reserve Foreign currency translation reserve Movement in reserves Share based payments reserve Balance at the beginning of the year Recognition of share-based payments for options issued for / to Capital raising fee Introduction of the Kangankunde Rare Earths Project Corporate advisor fees Consultancy fees Upon resignation of director1 Managing Director Exploration Geologist Balance at the end of the year 2020 $ 5,609,570 4,106,626 1,270 9,717,466 2019 $ 5,273,106 4,106,626 (1,185) 9,378,547 2020 $ 2019 $ 5,273,106 4,861,778 - - - 72,702 - 231,402 32,360 5,609,570 161,612 107,742 53,871 59,804 28,299 - 5,273,106 The share-based payment reserve is used to record the fair value of options issued. 1. Issue of 10,000,000 options with an exercise price of $0.03 each to expire on 31 December 2020 to former director, Steve Formica. Options were issued in recognition of additional services performed whilst a director. Option reserve 2020 $ Balance at the beginning of the year Balance at the end of the year 4,106,626 4,106,626 The option reserve is used to record the premium paid on the issue of listed options. 2019 $ 4,106,626 4,106,626 39 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Foreign currency translation reserve Balance at the beginning of the year Exchange difference on translation of foreign operation attributable to owners of Lindian Resources Limited Balance at the end of the year 2020 $ (1,185) 2,455 1,270 2019 $ - (1,185) (1,185) The foreign currency translation reserve is used to record exchange differences arising on translation of foreign controlled entities. The reserve is recognised in profit and loss when the net investment is disposed of. 17. Accumulated Losses At beginning of the year Loss for the year attributable to owners of Lindian Resources Limited Balance at the end of the year 2020 $ 2019 $ 37,737,767 37,000,682 1,796,601 39,534,368 737,085 37,737,767 Asset Acquisition 18. During the year ended 30 June 2019 the Group acquired a 51% interest in Batan Australia Pty Ltd (“Batan”) pursuant to a Farm-in and Joint Venture Agreement (“the Joint Venture Agreement”) dated 20 March 2019. Batan owns 100% of East Africa Bauxite Limited, holder of the tenements for the Lushoto and Pare Bauxite Projects in Tanzania. The Group met the requirement to spend $400,000 on the project tenements to acquire the 51% stage 1 interest. Pursuant to the Agreement and following shareholder approval, the Group issued 10,000,000 shares to the vendors of Batan in consideration for the completion of the 51% stage 1 acquisition of the Lushoto and Pare Bauxite Projects. Details of the fair value of the assets acquired on 20 March 2019 are as follows: Purchase Consideration Shares consideration and exploration spend Total Net Assets Acquired Deferred exploration and evaluation expenditure Total 20 March 2019 $ 400,000 400,000 400,000 400,000 The Group is required to spend a further $1,400,000 on the project tenements which includes completion of a bankable Feasibility Study and issue 10 million shares at a deemed issue price of $0.02 each to earn a further 24% interest in Batan (Stage 2 Interest). During the year the Company announced its decision not to pursue the 75% Stage 2 interest and as per the agreement the interest would revert to 49%. Subsequent to this the new management team requested an extension of the notice period by 12 months, to enable a full and considered review of the project prior to any decisions being made. Under the variation Lindian is required to give notice to Batan on or before 31 December 2020 to elect to continue to sole fund the project to acquire the Stage 2 40 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Interest. If the Group does not elect to proceed to acquire the Stage 2 Interest, Lindian’s Stage 1 interest will revert to 49%. 19. Non-controlling Interests As set out in Note 18, there is a 49% non-controlling interest in Batan Australia Pty Ltd. Opening balance Loss allocated to non-controlling interest Other comprehensive loss allocated to non-controlling interest Closing balance The summarised financial information is as follows: Non-current assets Total Assets Current liabilities Total Liabilities Net Assets/(Liabilities) 2020 $ (29,741) (65,550) 1,855 (93,436) 2020 $ - - 500,113 500,113 (500,113) 2019 $ - (28,603) (1,138) (29,741) 2019 $ 66,340 66,340 127,036 127,036 (60,696) Investments in Subsidiaries 20. The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries: West African Exploration Pty Ltd West African Exploration Cameroon Pty Ltd Tangold Pty Ltd Hapa Gold Limited Batan Australia Pty Ltd East Africa Bauxite Limited Country of Incorporation Australia Cameroon Australia Tanzania Australia Tanzania 2020 % 100% 100% 100% 100% 51% 51% 2019 % 100% 100% 100% 100% 51%1 51%1 1 Refer to note 18 for details of the acquisition of the subsidiaries. 21. Loss per Share Loss attributable to owners of Lindian Resources Limited used in calculating basic and dilutive EPS (1,796,601) (737,085) 2020 $ 2019 $ 41 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 2020 number 2019 number Weighted average number of ordinary shares used in calculating basic and diluted earnings / (loss) per share (*): 518,611,524 358,076,964 * There is no impact from the 222,237,501 options outstanding at 30 June 2020 (2019: 165,000,001 options) on the loss per share calculation because they are antidilutive. These options could potentially dilute basic EPS in the future. There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements. Expenditure Commitments 22. Exploration commitments contracted for at reporting date but not recognised as liabilities are as follows: Within one year After one year but not longer than 5 years 2020 $ 378,497 1,400,000 1,778,497 2019 $ 466,667 933,333 1,400,000 See Note 18 for detail on expenditure commitments relating to Batan Australia Pty Ltd and the Tanzania bauxite assets. Auditor’s Remuneration 23. The auditor of Lindian Resources Limited is HLB Mann Judd (2019: HLB Mann Judd). Amounts received or due and receivable by the auditor for : an audit or review of the financial report of the entity and any other entity in the Group 2020 $ 2019 $ 31,948 31,948 24,180 24,180 Key Management Personnel Disclosures 24. The aggregate compensation made to Directors and other Key Management Personnel of the Group is set out below: Short term employee benefits Share based payments Post-employment benefits (superannuation) Total remuneration 2020 $ 414,480 231,402 21,850 667,732 2019 $ 296,290 28,299 1,001 325,590 The Group has liabilities of $30,343 for unpaid Key Management Personnel remuneration at 30 June 2020 (2019: $120,000). 42 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Related Party Disclosures 25. The ultimate parent entity is Lindian Resources Limited. Refer to note 20 for list of all subsidiaries within the Group. There were no other related party transactions to report on for the period. As part of Mr Green’s commencement package, the Company issued to Mr Green (or nominee), 20,000,000 unlisted options exercisable in accordance with the milestones below at $0.02 on or before 30 June 2021 (“Executive Options”): Milestones: a) 10,000,000 Executive Options exercisable upon the Company receiving shareholder approval at the shareholder meeting for the purpose of proceeding with the Gaoual Bauxite Project in Guinea on similar terms to those set out in the Company’s ASX announcement dated 10 April 2019; and b) 10,000,000 Executive Options exercisable upon close of trade the date the Company achieves a 10 day VWAP share price of $0.03 or above. As disclosed in Note 27, 10,000,000 options with an exercise price of $0.03 each to expire on 31 December 2020 were issued to former director, Steve Formica. The options were issued in recognition of additional services performed whilst a director. Shareholder approval was granted at the Annual General Meeting held on 15 November 2019. Lindian announced on 10 April 2019 that it had signed an exclusive option agreement with KB Bauxite Guinea SARLU (“KB”) and its sole shareholder Guinea Bauxite Pty Ltd (“GB”) to acquire the Gaoual Bauxite Project (approximately 332km2 in Guinea) (“Project”) which is wholly owned by KB. KB and GB are related parties of Lindian Chairman, Mr Asimwe Kabunga, and as such, the Company will need to comply with the relevant provisions of both the Corporations Act and the ASX Listing Rules and accordingly shareholder approval will be sought to proceed with the option to earn up to 75% of the Project. On 6 August 2019 the company issued 937,500 shares at $0.016 for a total of $15,000 to Leticia Kabunga for services provided in respect of the Tanzanian bauxite project. Financial Risk Management 26. Exposure to interest rate, liquidity, and credit risk arises in the normal course of the Group’s business. The Group does not hold or use derivative financial instruments. The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Unearned income Short term debt 2020 $ 614,098 40,042 104,639 11,665 10,790 2019 $ 37,019 6,163 258,853 - 165,000 The fair value of financial assets and liabilities at balance date approximate their carrying values. 43 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Financial Risk Management Policies The board’s overall risk management strategy seeks to assist the consolidated group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of future cash flow requirements. Specific Financial Risk Exposure and Management The main risks arising from the Group’s financial instruments are interest rate risk, credit risk and liquidity risk. a) Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group manages liquidity risk by maintaining sufficient cash facilities to meet the operating requirements of the business and investing excess funds in highly liquid short term investments. The responsibility for liquidity risk management rests with the Board of Directors. Alternatives for sourcing the Group’s future capital needs include the cash position and the issue of equity instruments. These alternatives are evaluated to determine the optimal mix of capital resources for our capital needs. We expect that, absent a material adverse change in a combination of our sources of liquidity, present levels of liquidity along with future capital raisings will be adequate to meet our expected capital needs. Maturity analysis for financial liabilities Financial liabilities of the Group comprise trade and other payables and borrowings. At 30 June 2020, all trade and other payables and borrowings are expected to contractually mature within 30 days. b) Interest Rate Risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial instruments. The Group’s exposure to market risk for changes to interest rate risk relates primarily to its earnings on cash and term deposits. The Group manages the risk by investing in short term deposits. 2020 $ 2019 $ Cash and cash equivalents 614,098 37,019 At balance date the Group’s exposure to interest rate risk is not material. c) Credit Risk Exposures Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the Group to incur a financial loss. The Group’s maximum credit exposure is the carrying amounts on the statement of financial position. The Group holds financial instruments with credit worthy third parties. At 30 June 2020, the Group held cash at bank. These were held with a financial institution with a rating from Standard & Poors of AA or above (long term). The Group has no past due or impaired debtors as at 30 June 2020. d) Foreign Currency Risk Exposures The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. 44 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The foreign currency risk is not material. 27. Share Based Payments a) Recognised share based payment transactions Share based payment transactions recognised either as operating expenses in the statement of comprehensive income, capital raising expenses in equity or exploration expenditure on the statement of financial position as follows: Operating expenses Share based payment1,8,12 Other Expenses – corporate advisor services2,3,9 Exploration expenditure Part consideration for introduction of the Kangankunde Rare Earths Project4,5 Part consideration for the Gaoual Bauxite Project Guinea10 Consideration for consultancy fee6,13 Borrowings Repayment of short term borrowings11 Equity Issued capital3,4,10,11 Share issue expenses7 Share-based payments reserve1,2,5,6,7,8,9 2020 $ 263,762 72,702 336,464 2019 $ 28,299 130,538 158,837 - 221,075 105,000 15,000 120,000 165,000 165,000 621,464 285,000 - 336,464 621,464 - 59,804 280,879 - - 439,176 190,000 (161,612) 411,328 439,716 1. The issue of 10,000,000 options with an exercise price of $0.03 each to expire on 31 December 2020 to former director, Steve Formica. Options were issued in recognition of additional services performed whilst a director. 2. On 5 October 2018, the Group issued 3,333,334 unlisted options exercisable at $0.02 on or before 31 December 2020 pursuant to a corporate advisor mandate. 3. On 5 October 2018, the Group issued 3,333,334 fully paid ordinary shares pursuant to a corporate advisor mandate. The shares were valued using the closing share price on the last trading day prior to the issue date of $0.023 per share. 4. On 14 August 2018, the Group issued 6,666,667 fully paid ordinary shares as part consideration for the introduction of the Kangankunde Rare Earths Project. The shares were valued using the closing share price on the issue date of $0.017 per share. 5. On 5 October 2018, the Group issued 6,666,667 unlisted options exercisable at $0.02 on or before 31 December 2020 as part consideration for the introduction of the Kangankunde Rare Earths Project. 6. On 23 October 2018, the Group issued 5,000,000 unlisted options exercisable at $0.02 on or before 31 December 2020 pursuant to a consultancy agreement. 2,500,000 options are subject to a vesting condition that the 5 day volume weighted average price of shares as traded on ASX after the date of issue of the Options is not less than $0.04. 7. On 5 October 2018, the Group issued 10,000,000 unlisted options exercisable at $0.02 on or before 31 December 2020 pursuant 8. to a capital raising mandate. As part of the terms of Mr Green’s commencement package, the Company issued to Mr Green 20,000,000 unlisted options Executive Options (refer to Note 25) (a). 9. On 21 November 2019, the Group issued 5,000,000 fully unlisted options exercisable at $0.02 on or before 20 November 2022 to Baker Young as announced in the Notice to Annual General Meeting for 2019 (c). 45 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 10. On 21 November 2019 the Company issued of 5 million shares as part consideration of the acquisition of the Guinea Bauxite Project. 4.25 million shares to Kabunga Holdings Pty Ltd and 750 thousand shares to Mr. Kaba. 11. On 2 August 2019, 10,312,500 shares at $0.16 per share were issued to settle $150,000 in respect of the Rose Lawn facility including interest of $15,000 due to the terms of the facility which required 110% of the amount drawn to be repaid. Refer to Note 14. 12. On 21 November 2019, the Group issued 2,000,000 unlisted options exercisable at $0.02 on or before 20 November 2022 to the Company’s geological consultant in Africa (b). 13. On 6 August 2019, the Company issued 937,500 shares at $0.016 for a total of $15,000 to Leticia Kabunga for services provided in respect of the Tanzanian bauxite project. Fair value of options issued or proposed to be issued during the period calculated using the Black-Scholes option pricing model applying the following inputs: Valuation date Valuation date fair value Valuation date share price Exercise price Expected volatility Option life Expiry date Risk-free interest rate (a) (b) (c) 15 Nov 19 $0.0116 $0.021 $0.020 115.1% 1.6 years 30 Jun 21 0.78% 20 Nov 19 $0.0162 $0.023 $0.020 114.4% 3 years 20 Nov 22 0.72% 21 Nov 19 $0.0145 $0.021 $0.020 115.1% 3 years 20 Nov 22 0.75% Details of the options on issue during the years ended 30 June 2020 and 30 June 2019 are set out below: Grant Date Expiry Date Fair Value at Valuation Date Exercise Price Number at 30 June 2019 Number vested / exercisable at 30 June 2019 Number at 30 June 2020 Number vested / exercisable at 30 June 2020 05 Oct 18 23 Oct 18 15 Nov 19 20 Nov 19 21 Nov 19 Total 31 Dec 20 31 Dec 20 30 Jun 21 20 Nov 22 20 Nov 22 $0.0162 $0.0120 $0.0116 $0.0162 $0.0145 $0.02 $0.02 $0.02 $0.02 $0.02 2,500,000 5,000,000 20,000,001 20,000,001 20,000,001 20,000,001 5,000,000 5,000,000 - 20,000,000 20,000,000 - 2,000,000 - - 5,000,000 - - 25,000,001 22,500,001 52,000,001 52,500,001 2,000,000 5,000,000 The movement in options on issue during the current and previous year is reconciled as follows: Options Weighted Average Exercise Price Weighted Average Fair Value number $ $ Weighted Average Contractual Life days Options outstanding at 30 June 2018 Issued during the year Exercised during the year Expired during the year Options outstanding at 30 June 2019 Issued during the year Exercised during the year Expired during the year Options outstanding at 30 June 2020 - 25,000,001 - - 25,000,001 27,000,000 - - 52,000,001 - $0.020 - - $0.020 $0.020 - - $0.020 - $0.0154 - - - $0.0125 - - - - - - - 550 - - - 346 46 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 Parent Entity Information 28. The following details relate to the parent entity, Lindian Resources Limited, as at 30 June 2020. The information presented here has been prepared using consistent accounting policies as presented in Note 2. Current assets Non-current assets Total assets Current liabilities Total liabilities Net assets/(liabilities) Issued capital Reserves Accumulated losses Total equity Loss for the year Other comprehensive income for the year Total comprehensive loss for the year 2020 $ 657,951 1,968,890 2,626,841 119,801 119,801 2,507,040 32,424,788 9,716,196 (39,633,944) 2,507,040 (1,925,948) - (1,925,948) 2019 $ 88,818 1,073,151 1,161,969 424,601 424,601 737,368 29,126,329 9,379,732 (37,768,693) 737,368 (768,011) - (768,011) Guarantees Lindian Resources Limited has not entered into any guarantees in relation to the debts of its subsidiary. Other Commitments and Contingencies Refer to Note 22 and Note 31 for details of the parent company’s commitments and contingent liabilities. Dividends 29. No dividend was paid or declared by the Group in the period since the end of the financial year and up to the date of this report. The Directors do not recommend that any amount be paid by way of dividend for the financial year ended 30 June 2020. The balance of the franking account is nil as at 30 June 2020 (2019: Nil). Events Subsequent to Balance Date 30. On 8 July 2020, the Company announced that a notice of appeal had been filed in respect of the exclusive option agreement for the Kangankunde Rare Earths Project in Malawi. After receiving the record, the Supreme Court of Appeal will set a date for hearing the arguments of both parties and will then make its judgement. A further update to market will be made at that time. On 15 July 2020, the Company announced a maiden resource for the Bouba Plateaux at the Company’s Gaoual Project in Guinea. A total JORC compliant Indicated Resource of 102M at 49.8% Al2O3 has been defined using a cut-off of 40% Al2O3. The Resource includes high grade areas with 84Mt at 51.2% Al2O3 using a higher cut-off of 45% Al2O3. On 24 July 2020, the Company announced receipt of an offer to settle out of court in respect of the exclusive option agreement for the Kangankunde Rare Earths Project in Malawi. The Company is reviewing the offer and will discuss with legal counsel before taking action. 47 For personal use only LINDIAN RESOURCES LTD NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2020 On 29 July 2020, the Company announced the appointment of Yves Occello as Non-Executive Director. On 10 August 2020, the Company announced the appointment of Danny Keating to the role of Chief Executive Officer. Contingent Consideration 31. Kangankunde Rare Earths Project Lindian has previously announced the commencement of legal action in Malawi in respect of an exclusive option agreement (the “Exclusive Option Agreement”) (“Agreement”) entered into with Michael Saner (“Saner”) and Rift Valley Resource Developments Limited (“RVR”) regarding the Kangankunde Rare Earths Project in Malawi (“Project”). The Company obtained an injunction from the High Court of Malawi in November 2018 to prevent Michael Saner and Rift Valley dealing with the Kangankunde Rare Earths Project and or the shares in Rift Valley, as well as commenced legal proceedings seeking specific performance/damages. During the year the High Court of Malawi hearing was held in accordance with the scheduled dates of 4-5 November 2019, the Company then filed the closing submissions in accordance with the 21-day maximum timeframe from 5th November 2019. The closing submission is an analysis of the evidence tendered in court considering the applicable law from 5th November 2019. On 7 May 2020, the Company announced that the High Court of Malawi had not ruled in favour of its legal action in respect of the Exclusive Option Agreement for the Kangankunde Rare Earths Project in Malawi. The Company had six weeks from the date of the judgment to file an appeal. On 8 July 2020, the Company announced that a notice of appeal had been filed in respect of the Exclusive Option Agreement for the Kangankunde Rare Earths Project in Malawi. The Supreme Court of Appeal will set a date for hearing the arguments of both parties and will then make its judgement. Subsequent to the lodgement of the appeal, the Company received an offer to settle out of court, the details of which were included in the announcement released on 24 July 2020. The Company maintains that it has a strong legal position and will pursue all legal avenues available to it. Legal costs to date have been kept to a minimum and pursuit of the claim will not be a significant drain on the Company’s ongoing cash requirements. 48 For personal use only LINDIAN RESOURCES LTD DIRECTORS’ DECLARATION For the year ended 30 June 2020 Directors’ Declaration In accordance with a resolution of the Directors of Lindian Resources Limited, I state that: 1). In the opinion of the Directors: (a) the financial statements and notes of the Group are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the financial position of the Group as at 30 June 2020 and of its performance, for the year ended on that date; and complying with Accounting Standards Interpretations) and the Corporations Regulations 2001. (including the Australian Accounting there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(c). (b) (c) 2). This declaration has been made after receiving the declarations required to be made by the director in accordance with sections 295A of the Corporations Act 2001 for the year ended 30 June 2020. On behalf of the board Asimwe Kabunga | Chairman 11 September 2020 49 For personal use only AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Lindian Resources Limited for the year ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 11 September 2020 N G Neill Partner 50 For personal use only INDEPENDENT AUDITOR’S REPORT To the members of Lindian Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Lindian Resources Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) 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 b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 2 in the financial report, which indicates that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Emphasis of matter - material uncertainty related to carrying value of exploration expenditure We also draw attention to Note 9 in the financial report, which indicates a material uncertainty in relation to the recoverability of the Group’s capitalised exploration expenditure in relation to the Kangankunde Rare Earths Project in Malawi. Our opinion is not modified in respect of this matter. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern we have determined the matters described below to be the key audit matters to be communicated in our report. 51 For personal use only Key Audit Matter How our audit addressed the key audit matter Deferred exploration and evaluation expenditure Note 9 In accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, the Group capitalises acquisition costs of rights to explore as well as subsequent exploration and evaluation expenditure and applies the cost model after recognition. Our audit focussed on the Group’s assessment of the carrying value of the capitalised exploration and evaluation expenditure. We considered this to be a key audit matter because this is one of the significant assets of the Group. There is a risk that the capitalised expenditure no longer meets the recognition criteria of the standard. In addition, we considered is necessary to assess whether facts and circumstances existed to suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. Additionally, the Group has commenced legal action in Malawi in respect of an exclusive option agreement entered into with Michael Saner (“Saner”) and Rift Valley Resources Developments Limited (“RVR”) to earn up to 75% interest in the Kangankunde Rare Earths Project in Malawi (“Project”). The carrying value of this project at balance date is $646,045. The Group obtained an injunction from the High Court of Malawi in November 2018 to prevent RVR or Saner from dealing with the Project and/or shares in RVR. In May 2020, the High Court had ruled in favour of Saner and RVR and the Group has lodged an appeal in July 2020. Our procedures included but were not limited to the following: • We obtained an understanding of the key processes associated with management’s the exploration and evaluation asset carrying values; review of • We substantiated a sample of • We exploration expenditures; the considered Director’ assessment of potential indicators of impairment; • We obtained evidence that the Group has current rights to tenures of its area of interest; • We enquired about the current status of the legal action in Malawi; • We examined the exploration budget and discussed with management the nature of planned ongoing activities; and • We examined the disclosures made in the financial report. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 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. 52 For personal use only 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 have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - - - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. - We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 53 For personal use only Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Lindian Resources 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. HLB Mann Judd Chartered Accountants Perth, Western Australia 11 September 2020 N G Neill Partner 54 For personal use only LINDIAN RESOURCES LTD ADDITIONAL ASX INFORMATION Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current at 4 September 2020. Number of Shareholders and Option Holders Shares As at 4 September 2020, there were 885 shareholders holding a total of 581,949,624 fully paid ordinary shares. Options As at 4 September 2020, there were 112,025,001 un-quoted Options exercisable at $0.02 on or before 31 December 2020, 10,000,000 un-quoted Options exercisable at $0.03 on or before 31 December 2020, 20,000,00 un-quoted Options exercisable at $0.02 on or before 30 June 2021 and 80,212,500 un-quoted Options exercisable at $0.02 on or before 20 November 2021. Distribution of Equity Securities Ordinary Shares Unlisted Options Number of Holders Number of Shares Number of Holders 1 - 1000 1001 - 5000 5001 - 10,000 10,001 - 100,000 100,001 and above Total There were 254 holders totalling 2,591,169 ordinary shares holding less than a marketable parcel. 25,082 96,638 100,315 17,126,796 564,600,793 581,949,624 101 33 13 344 394 885 - - - - 70 70 Number of Shares - - - - 222,237,501 222,237,501 Top Twenty Share Holders Shareholder name Kabunga Holdings Pty LtdVen Capital Pty Ltd Mr Rohan Patnaik Ms Leticia Kokutengeneza Kabunga Matthew Norman Bull Easy Connect Group Pty Ltd Leticia Kabunga Citicorp Nominees Pty Limited J P Morgan Nominees Australia Pty Limited Bnp Paribas Nominees Pty Ltd 1 2 3 4 5 6 7 8 9 10 11 Ms Lianaeli Kineneko Mtei Nampesya 12 13 Mrs Lin Sheung Sze 14 Mr Nigel Strong 15 16 Mr Victor Lorusso 17 Mr Henry Wiechecki 18 Mr Floyd Barry Aquino 18 19 20 Mr Robert Mario Franco & Mr Michael Robert Franco &Mrs Laura Prem Sanghani Pty Ltd Aymon Pacific Pty Ltd Gotha Street Capital Pty Ltd Futurity Private Pty Ltd Michele Franco Ordinary shares held number 70,275,000 28,849,692 20,000,000 17,298,660 16,750,000 14,000,000 13,500,000 12,630,139 11,673,119 8,879,010 8,622,352 8,400,000 8,025,000 7,796,056 7,191,300 7,000,000 7,000,000 6,437,023 6,250,000 5,500,000 5,100,000 % 12.08% 4.96% 3.44% 2.97% 2.88% 2.41% 2.32% 2.17% 2.01% 1.53% 1.48% 1.44% 1.38% 1.34% 1.24% 1.20% 1.20% 1.11% 1.07% 0.95% 0.88% 291,177,351 50.03% 55 For personal use only LINDIAN RESOURCES LTD ADDITIONAL ASX INFORMATION Substantial Share Holders The names of substantial shareholders pursuant to the Company’s share register are as follows: Shareholder name Kabunga Holdings Pty Ltd Ordinary shares held number 70,275,000 70,275,000 % 12.08% 12.08% Voting Rights All ordinary shares carry one vote per share without restriction. Tenement Listing Project Country Licence Number Status Licence Type Area Gaoual Project* Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Lushoto Project** Pare Project** Pare Project** Pare Project** Pare Project** Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Uyowa Project Guinea Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania Tanzania 22584 PL 11176/2018 PL 11177/2018 PL 11178/2018 PL 11262/2019 PL 12194/2017 PL 12195/2017 PL 12227/2017 PL 11263/2019 PL 14098/2019 PL 14099/2019 PL 14100/2019 PL 10918/2016 PML002241CWZ PML002237GWZ PML002240CWZ PML002238CWZ PML002242CWZ PML002243CWZ PML002239CWZ Granted Granted Granted Granted Granted Application Application Application Granted Application Application Application Granted Granted Granted Granted Granted Granted Granted Granted Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Prospecting Primary Mining Primary Mining Primary Mining Primary Mining Primary Mining Primary Mining Primary Mining 332.32 km2 0.26 km2 49.3 km2 3.64 km2 23.02 km2 90.25 km2 44.94 km2 24.87 km2 73.84 km2 1.52 km2 1.47 km2 1.36 km2 27.08 km2 0.08 km2 0.08 km2 0.03 km2 0.06 km2 0.07 km2 0.08 km2 0.08 km2 * Lindian Resources interest in this license is subject to completion occurring under an option agreement. Refer to the ASX announcement dated 10 April 2019 for full details of the consideration payable under the option agreement. ** Lindian Resources interest in these licenses is via a 51% stake in East Africa Bauxite Limited. 56 For personal use only