ABN 38 119 992 175
A N N U A L R E P O R T
for th e year en d ed 30 J u n e 2 0 2 0
C O R P O R A T E D I R E C T O R Y
Directors
Mr John Sibley
Mr Eduard Smirnov
Mr Grant Davey
Mr Stuart McKenzie
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Company Secretary
Mr Stuart McKenzie
Ms Amanda Burgess
Principal Place of Business and
Registered Office
Emerald House, 1202 Hay Street
West Perth, Western Australia, 6005
Telephone: +61 8 9278 2441
Website Address
www.lotusresources.com.au
Auditor
Solicitor
Share Registry
Securities Exchange
RSM Australia Partners
Level 32, Exchange Tower,
2 The Esplanade,
Perth WA 6000
Thompson Geer
Level 27, Exchange Tower
2 The Esplanade
Perth, Western Australia, 6000
Computershare Investor Services Pty Ltd
Level 2, Reserve Bank Building
45 St George's Terrace
Perth, Western Australia, 6000
Telephone: + 61 8 9323 2000
Facsimile: + 61 8 9323 2033
ASX Limited
Level 40
Central Park, 152-159
St Georges Terrace
Perth, Western Australia, 6000
ASX Code: LOT
2
C O N T E N T S
Managing Director’s Review
Directors' Report
-
-
-
-
Directors’ profiles and meetings schedule
Operating and financial review
Health, safety and sustainable development
Annual statement of ore reserves and mineral resources
Auditor’s Independence Declaration
Audited Remuneration Report
Corporate Governance Statement
Financial Statements
Directors' Declaration
Independent Auditor’s Report
ASX Additional Information
3
PAGE
4
5
5
10
12
17
20
22
29
36
67
68
71
M A N A G I N G D I R E C T O R ’ S R E V I E W
Dear Shareholder,
I am pleased to provide this Annual Report on your Company’s
performance in FY2020.
During the past year, we have emerged as a new player in the
uranium market and laid the foundation to grow value and
advance towards the restart of the Kayelekera Uranium Project.
Early in the year, the uranium price marked a recovery from 14-
year cycle lows of US$20-25 lbs of U3O8. Positive momentum
Lotus’s
year,
continued
outperformance versus the broader market.
contributing
through
the
to
Our FY2020 results were strong, reflecting the closing of the
Kayelekera acquisition on improved terms with on-target project
advancements and cost savings. The A$14.9M closing
consideration was satisfied with an A$0.2M cash payment, an
A$3.1M share issue, an A$3M shares to be issued on the 3rd
anniversary of completion and US$6.0M in deferred payments.
We used the improved consideration to settle 40% of the
Project’s US$10.0M legacy rehabilitation bond, with the balance
payable over a 3-year period post-closing.
During the year, as planned, we worked to both increase the
mineral resource at Kayelekera and advance our restart study
program. We applied
the Project’s historic production
performance and technical studies and developed a restart study
approach focussed on a rapid and cost-optimal production
restart. Our JORC compliant resource estimate now stands at
37.5M lbs U3O8, with an exploration potential target range of an
additional 7-14M lbs U3O8.
In addition, we implemented significant cost-saving measures.
Our guidance for care and maintenance costs has been reduced
by 50%, or US$0.9M, from the 2020 June-end quarter on a
quarterly basis and by 75%, or US$3.6M, from the original 2019
budget estimate on an annual basis.
Site safety has remained the highest priority at our operations in
Malawi. In that regard, I am pleased to note that we had no
reportable safety, health or environmental incidents and no
Covid-19 related cases at site during the year.
During the next financial year, Kayelekera will remain on care
and maintenance. We will not be standing still, however. We will
be focussed on re-establishing the Project as a proven producer,
offering security of supply to utilities worldwide as the next cycle
of long-term contracting develops. To that end, we are moving
forward now with offtake and contracting outreach to
prospective utility customers.
In addition, we will remain committed to significant pre-
feasibility level technical studies as well as further exploration
and drilling programs, in order to grow value and continue
progress towards restart readiness.
We owe our strong performance in 2020 to the hard work and
passion of the people of Lotus. Our first financial year has taught
us many things, but especially this – the world needs people who
think creatively, act decisively and bring the best of themselves
to what they do. The Lotus team has made great progress in the
last twelve months.
In closing, I would like to express my deep appreciation to our
employees, shareholders, Malawian communities, suppliers and
other stakeholders for their continuing support. I also extend my
thanks to the Board of Lotus, which has been a source of strength
and leadership for the Company and for me personally since my
appointment three months ago.
We look ahead with confidence, noting supportive uranium
market
fundamentals, synchronized post Covid-19 global
economic growth and the re-emerging importance of nuclear
electricity as a source of clean and safe baseload energy. We
believe our proven producer positioning in uranium will continue
to create compelling value for our shareholders in the years
ahead.
Thank you for your continued support of Lotus.
Eduard Smirnov
Managing Director
4
D I R E C T O R S ’ R E P O R T
The Directors present their report, including the remuneration report, together with the Corporate Governance Statement and
financial report of Lotus Resources Limited (the Company or Lotus Resources) and its subsidiaries (the Consolidated Entity or
Group) for the year ended 30 June 2020 and the auditor’s report thereon.
DIRECTORS
The Directors of the Company at any time during or since the end of the financial year are:
Mr John Sibley
Non-Executive Chairman – Appointed 24 June 2020
Experience and expertise
John Sibley has extensive board, special committee and executive experience with a
particular focus on mining, financing, regulatory compliance and corporate governance in
Canada and internationally.
John was formerly the Executive Vice President, General Counsel and Corporate Secretary
of Uranium One Inc. based in Toronto, Canada. During his 10-year career with the
company he gained extensive experience in working with governments and state-owned
enterprises in Asia Pacific, Africa, Europe, North America and the countries of the
Commonwealth of Independent States. John played a central role in the company’s
development into a global uranium producer, with a market valuation of $3 billion on its
2013 public going private transaction.
Prior to 2018, John served as Chairman of Qtrade Canada, a leading Canadian financial
services and wealth management business. Prior to joining Uranium One in 2006, John
practiced securities and mining law as a partner in Bull, Housser & Tupper (now Norton
Rose Fulbright Canada LLP) and Davis & Company (now DLA Piper Canada LLP).
Aldebaran Resources Inc. (Non-executive Director)
Stillwater Canada Limited (Non-executive Director)
Qtrade Canada Inc.
Chairman
Ordinary shares
Unlisted Options
Nil
Nil
Eduard Smirnov has significant international executive experience in the mining and
metals industry with a focus on operations, corporate development and strategy
developed through his over 15-year career in the resources and financial industries.
Prior to becoming MD, Eduard was responsible for uranium production, development and
exploration in eight countries around the world, including Kazakhstan, the U.S. and
Tanzania, and for the growth and management of the global nuclear utility order book at
Uranium One Inc. based in Toronto, Canada. He helped drive the financial transformation
of the business, refinancing over $500 million of debt with listings in Toronto, Luxembourg
and Moscow exchanges, delivering more than $100 million in annual cost savings and
maintaining cost-optimal production.
Eduard served as Uranium One’s Chief Executive Officer from 2016 to 2019 and Manager
of its Corporate Development and Corporate Projects Divisions from 2013 to 2016. Prior
to that, he held various senior positions at Royal Bank of Canada’s Strategy and
Transformations Group and at KPMG’s Corporate Finance Group.
Nil
Uranium One Inc.
Managing Director
Ordinary shares
Unlisted Options
5
Nil
Nil
Other current directorships
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
Mr Eduard Smirnov
Managing Director – Appointed 29 June 2020
Experience and expertise
Other current directorships
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Mr Grant Davey
Non-Executive Director -Appointed 22 June 2020
Experience and expertise
Mr Davey is an entrepreneur with 30 years of senior management and operational
experience in the development, construction and operation of precious metals, base
metals, uranium and bulk commodities throughout the world. More recently, he has been
involved in venture capital investments in several exploration and mining projects and has
been instrumental in the acquisition and development of the Panda Hill niobium project
in Tanzania, the Cape Ray gold project in Newfoundland and recently the acquisition of
the Kaylekera Uranium mine in Malawi from Paladin. He is s currently a Company Director
for Cradle Resources Limited (ASX:CXX), Superior Lake Resources (ASX:SUP), and is a
member of the Australian Institute of Company Directors (AICD)
Cradle Resources Limited (Executive Director)
Superior Lake Resources Limited (Non-Executive Director)
Lotus Resources Limited (Non-executive Director)
Boss Resources Limited (Non-Executive Director)
Matador Mining Limited (Non-Executive Director)
Managing Director
Ordinary shares
Unlisted Options
26,099,084
13,049,542
Other current directorships
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
Mr Stuart McKenzie
Non-Executive Director -Appointed 22 June 2020
Experience and expertise
Mr McKenzie has over 30 years of experience in senior commercial roles. He was
previously Company Secretary with Anvil Mining Limited for six years, prior to which he
held senior positions with Ok Tedi Mining Limited, Ernst and Young and HSBC. Mr
McKenzie is the current company secretary of Matador Mining Limited, Lotus Resources
Limited, Superior Lake Resources Limited and Tanga Resources Limited.
Other current directorships
Nil
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
Nil
Nil
Ordinary shares
Unlisted Options
300,000
175,000
Mr James Eggins
Non-Executive Chairman – Appointed 15 May 2020 - Resigned 23 June 2020
Experience and expertise
Mr Eggins has been involved in the uranium market since 1981. During his career Mr Eggins
held senior management roles at Queensland Mines Limited, CRA Limited, WMC Limited
and Paladin Energy Limited. He has an intimate knowledge of the uranium market having
been involved with mine to market logistics and full product lifecycle issues. His career has
included extensive involvement in uranium regulatory compliance at a national and
international level. He has been a Director and Chair of the Uranium Information Centre
and been on the Board of the World Nuclear Association.
At Paladin Mr Eggins held the position of General Manager – Sales and Contract
Administration. Mr Eggins managed sales contract development and product logistics for
Langer Heinrich Uranium (Namibia) and Kayelekera Uranium (Malawi) as well as working
on corporate marketing strategy,
investor relations, project finance, regulatory
compliance (uranium issues), government and trade organisation activities.
Nil
Nil
Nil
Ordinary shares
Unlisted Options
6
Nil
Nil
Other current directorships
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Mr Andrew Mirco
Non-Executive Director – Appointed 15 May 2020 - Resigned 23 June 2020
Experience and expertise
Other current directorships
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
Mr Simon Andrew
Managing Director –Resigned as Managing Director 19 May 2020 and terminated as CEO 26 June 2020
Experience and expertise
Mr Mirco has held senior executive positions at Woodside Petroleum Limited, Paladin
Energy Limited and currently Argosy Minerals Limited. Mr Mirco is an experienced
corporate finance and business development executive with a strong background in
financing, commercial negotiations, deal structuring, risk management and stakeholder
engagement.
At Paladin Mr Mirco held the position of General Manager Corporate Development &
Investor Relations. In this capacity he was responsible for planning, analysis and execution
of merger and acquisition opportunities, investor relations, enterprise risk management
and treasury
Nil
Nil
Nil
Ordinary shares
Unlisted Options
Nil
Nil
Mr Andrews has over 20 years’ experience in financial markets in Asia and Australia.
Previously he has held senior management positions at various global investment banks.
These roles included leading the equity sales desk for BNP Paribas for the ASEAN region
and heading the Refining and Petrochemicals sector research team at Deutsche Bank in
Asia. Mr Andrew was a founding director of Emmerson Resources (ASX:ERM). He was
responsible for securing the financing for the purchase of the Tennant Creek assets for
Emmerson and arranging the IPO in 2007. He is currently a director of Rivers Gold Limited
(ASX:RGL).
Riversgold Limited (Non-Executive Chairman)
Nil
Nil
Ordinary shares
Unlisted Options
Nil
Nil
Mr Milazzo is a Mining Engineer with over 30 years’ experience in the development and
management of mines and mineral processing plants across a range of commodities in
Australia and overseas. This includes both underground and surface operations, and
covers a wide range of mining applications, from small scale selective to mechanised bulk
extraction methods. He has been involved in a number of new mine development and
mine expansion projects. He has previously served on a number of ASX listed company
boards. Mr Milazzo is a Fellow of the Australasian Institute of Mining and Metallurgy and
a Member of the Australian Institute of Company Directors.
Nil
Nil
Nil
Ordinary shares
Unlisted Options
7
Nil
Nil
Other current directorships
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
Mr Mark Milazzo
Non-Executive Director – Resigned 23 June 2020
Experience and expertise
Other current directorships
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Mr Tim Kestell
Non-Executive Director - Resigned 31 May 2020
Experience and expertise
Mr. Kestell has over 20 years’ experience in capital markets including working for
Australian stockbrokers Euroz Securities and Patersons. In the past 14 years he has played
a key role in floating and re-capitalising publicly listed companies. He is currently a director
of Neon Capital Ltd and Blue Capital Ltd.
Other current directorships
Nil
Former directorships in the last 3 years
Special responsibilities
Interests in shares and options
Nil
Nil
Ordinary shares
Unlisted Options
Nil
Nil
COMPANY SECRETARY
Mr Stuart McKenzie
Appointed 22 June 2020
See Page 6
Ms Amanda Burgess
Appointed 2 January 2019
Ms Burgess is a finance professional with over 25 years’ experience in accounting and company administration. Ms Burgess
holds a Bachelor of Economics from the University of Western Australia and is a CPA with the Australian Society of Certified
Practicing Accountants. Ms Burgess currently holds CFO and Company Secretary positions with other Australian companies.
8
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
DIRECTORS’ MEETINGS
The number of directors’ meetings (including meetings of committees of directors) and the number of meetings attended by
each of the directors of the Company during the financial year are:
Board Meetings
Nomination and
Remuneration Committee
Meetings
Director
Held
Attended
Held
Attended
Mr John Sibley(i)
Mr Eduard Smirnov(ii)
Mr Grant Davey(iii)
Mr Stuart McKenzie(iii)
Mr Simon Andrew(iv)
Mr Andrew Mirco(vii)
Mr James Eggins(vii)
Mr Tim Kestell(vi)
Mr Mark Milazzo(V)
-
-
1
1
5
6
6
8
11
-
-
1(viii)
1
5
6
6
8
11
-
-
-
-
-
-
-
2
2
-
-
-
-
-
-
-
2
2
(i)Appointed 24 June 2020
(ii)Appointed 29 June 2020
(iii)Appointed 22 June 2020
(iv)Resigned 19 May 2020
(v)Resigned 23 June 2020
(vi)Resigned 31 May 2020
(vii)Appointed 15 May 2020 - Resigned 23 June 2020
(viii) This meeting was attended by Mr Davey’s alternate Director
Committee membership
As at the date of this report, there is no audit and risk committee or remuneration committee. The Board has determined that
given the size and composition of the Board and the scale of the Company’s activities, the functions of those committees ought
to be performed by the Board. For further information, please see the Company’s Corporate Governance Statement.
PRINCIPAL ACTIVITY
The principal activity of the Group during the year was the development of interests in exploration and development projects
in the resource industry in Australia and Malawi.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the financial year the Company changed strategic direction by moving away from its exploration focus on its Australian
exploration tenements and acquiring the Kayelekera Uranium Project, in Malawi. The Company’s focus moving forward will be
the improvement in processes and costs to position the Kayelekera project for a restart.
9
RESULTS
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
The Group incurred a loss after income tax of $16,569,943 for the financial year after income tax (2019: loss $821,364).
Cash Flows
The group had cash and cash equivalents at 30 June 2020 of $16,496,834. Cash and cash equivalents at 30 June 2020 consisted
of unrestricted cash of $1,935,494 and restricted cash of $14,561,340. An analysis of the cash flows for the year is set out
below.
Cash and cash equivalents increased by $16.4m during the year comprising of the following cash flows:
o
o
o
o
o
o
Proceeds from issue of shares - during the year the Company raised $8.0m (before costs) via the issue of 400,035,033
ordinary shares at $0.02 per share. In addition, the Company received a further $2.3m from the exercise of options
and $0.5m from the conversion of convertible notes.
Cash acquired on acquisition of subsidiary - the Company acquired a $14.6m (USD $10m) cash-backed environmental
performance bond as part of the acquisition of the Kayelekera Uranium Project. This is restricted cash that cannot be
used to fund operations whilst the environmental performance bond is in place. The Company is currently working
with its bank and insurance company to put insurance in place that would allow the Company to access the funds
currently restricted by the bond.
Kayelekera Uranium Project acquisition costs - as part of the acquisition of the Kayelekera Uranium Project the
company paid a cash payment of $0.2m (AUD) and a $4.0m (USD) repayment of an environmental bond offset by
$2.0m (USD) receipt from Paladin (Africa) Limited for water treatment costs. Total cash outflow in AUD was $3.4m.
Share issue transaction costs - costs associated with raising capital were $0.5m.
Kayelekera care and maintenance costs – cash care and maintenance costs on the Kayelekera Uranium Project of
$2.3m were paid during the period.
Corporate and administrative costs – cash payments to suppliers and employees for the year were $1.7m. This
consisted of legal, administration, salaries and wages and general overhead costs.
10
Cash Flows (Cont’d)
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
o Australian tenement exploration costs - during the period the Company incurred $1.1m of exploration expenditure
on its Australian tenements. Subsequently, on 13 March 2020 the Company completed the acquisition of the
Kayelekera which resulted in a change in strategic direction for the Company. The amount of $12.7m held on the
balance sheet related to the Company’s exploration tenements in Australia including its cobalt tenements in New
South Wales. Given that the Company is not expected to allocate its resources to these tenements in the near future
and their decrease in value due to a decline in the cobalt price, the Company has impaired the entire amount
previously capitalised for these tenements.
o Repayment of loans and lease liabilities – the Company spent $0.2m on repayment of loans and lease liabilities
during the year.
o Other receipts – the Company receipted $0.2m of other income during the period.
REVIEW OF ACTIVITIES
Acquisition of Kayelekera Uranium Project
On 24 June 2019, the Group entered into an agreement with ASX listed Paladin Energy Limited (ASX: PDN) to acquire an indirect
65% interest in the Kayelekera Uranium Project.
Subsequently, in April 2020, the Group completed the acquisition of Kayelekera, by way of Lily Resources Pty Ltd (Lily) acquiring
85% of the shares in Paladin’s subsidiary Paladin (Africa) Limited (PAL). Lotus holds 76.5% of the shares in Lily and Kayelekera
Resources Pty Ltd holds 23.5% of the shares in Lily, giving Kayelekera Resources Pty Ltd an indirect 20% interest in the
Kayelekera project, with the remaining 15% of PAL shares retained by the Malawi Government.
Kayelekera is located in northern Malawi, southern Africa, 52km west (by road) of the town of Karonga (Figure 2). In addition
to the Kayelekera Mining Lease, PAL also holds five Exclusive Prospecting Licences that are coincident with Karoo sediment
basins and are similar to those that host the Kayelekera deposit. The mine produced over 10.9MIb of uranium between 2009
and 2014 with a significant high-grade Resource estimate (refer to Table 2 below for further details).
The acquisition of Kayelekera was funded by:
o
o
o
completion of a placement in September 2019 of 124,965,202 Shares to sophisticated and professional investors at
an issue price of $0.02 per Share, together with one free attaching option exercisable at $0.04 each for every two
Shares issued;
an underwritten non-renounceable rights issue at an issue price of $0.02 per Share to raise $1 million (before costs),
together with one free attaching Option for every two Shares issued; and
a further placement of 225,000,000 Shares to sophisticated and professional investors at an issue price of $0.02 per
Share with one free attaching Option for every two Shares issue
Kayelekera Mineral Resource
Shortly after completing the acquisition of Kayelekera, the Group reported an updated mineral resource estimate of 37.5Mlb
U3O8 (27.1Mt @ 630 ppm U3O8 – refer to Table 2. Kayelekera Mineral Resource March 2020), which represented a 31%
increase in the global metal content to the previous Mineral Resource of 28.7 Mlb U3O8 (18.9Mt @ 700ppm U3O8) reported
by Lotus on 24 June 2019.
The Updated Mineral Resource is summarised in Table 2 below with 11% (by metal content) classified as Measured, 72%
classified as Indicated and 17% classified as Inferred. Metal content is based on contained metal in the ground and takes no
account of mining or metallurgical recoveries, mining dilution or other economic parameters.The primary driver for the
resource increase was the identification and inclusion of a previously unmodelled high-grade basal arkose unit beneath the pit,
and the inclusion of existing Run of Mine and low-grade stockpiles created while Kayelekera was in production from 2009 to
2014. The stockpiles have already been mined and sit near the processing plant.
The updated Mineral Resource utilised the same modelling techniques as the previous estimate and will form the basis for
mining studies at Kayelekera, which will focus on delivering improvements in costs associated with mining and processing,
including the potential use of beneficiation and sorting techniques.
11
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Care and maintenance costs
The Company has undertaken a comprehensive review of all activities and associated costs at the Project site to ensure we
optimise the site care and maintenance programs and costs. The review has ensured that the primary focus for the ongoing
activities are the core requirements of:
1) Maintaining a high level of security and safety at site;
2) Ensuring compliance with all regulatory requirements; and
3) On-going maintenance of critical equipment.
The revised care and maintenance operating cost guidance will now be approximately US$1.2M for the year ending 30 June
2021. Additional costs associated with in-country General and Administration costs include insurance premiums, tenements
fees and are approximately US$0.14M for the year ended 30 June 2021. A significant part of the guidance depends on a capital
investment required to finance installation of an improved water treatment system. The guidance is net of in-country senior
management remuneration which is incurred at the Parent level and is being recharged to the Company’s subsidiary in Malawi
operating the Project. The Company has also identified a number of other areas that could see further cost reductions
implemented. These initiatives are currently being further investigated.
Recordable Incident Rate
No reportable incidents and no Covid-19 related cases at the Kayelekera Uranium Project site were observed during the 12-
month period ending 30 June 2020. The total recordable injury rate for the period is recorded at zero.
Mining License and Mine Development Agreement
On 2 April 2007, the Ministry of Energy, Mines and Natural Resources of Malawi issued a 15-year Mining License to the
Company’s subsidiary in Malawi – Paladin Africa Limited for the Kayelekera Uranium Project in accordance with the Malawi
Mines and Minerals Act of 1981. The Mine Development Agreement providing for a fiscal, stability, royalty and equity regime
among other terms for the Project development was executed between the Malawi Ministry of Energy, Mines and Natural
Resources and Ministry of Finance and Paladin Africa Limited and a former owner of the Project - Paladin Energy Minerals
(Australia) on 22 February 2007. On 7 February 2014, Paladin Africa informed Ministry of Finance, Ministry of Mining and
Ministry of Labour and other regulators of production suspension and transition to a care and maintenance state for the Project,
citing continued adverse uranium market conditions as the primary reason. The Company will apply for the extension of the
Mining License in advance of its expiration date of 2 April 2022 and will concurrently review the Mine Development Agreement
terms with the Ministry of Finance and Ministry of Mining. The submission for the extension of the Mining License and the
review of the Mine Development Agreementcomply with the Mines and Minerals Act of 2019 and other relevant regulations.
Payments to Government
For the 12-month period ending 30 June 2020, payments to Government of Malawi amounted to US$0.6 million comprising
statutory payroll tax, withholding tax and fees paid by the Company’s subsidiary in Malawi operating the Kayelekera Uranium
Project – Paladin Africa Limited.
Corporate and Social Responsibility Payments
For the 12-month period ending 30 June 2020, corporate and social development-related contributions directly supporting
local communities in Malawi amounted to US$28,000. The contributions are related to educational and community
development projects in the vicinity of the Project site area and were made by the Company’s subsidiary in Malawi operating
the Kayelekera Uranium Project – Paladin Africa Limited.
Restart Scoping Study
The Company is well advanced with a restart scoping study (Study), which is expected to be available in the December quarter.
The Study will be underpinned by a mining study that is based on the Updated Mineral Resource and supported by historical
costs during the period of operations at Kayelekera. The restart of the Kayelekera operation is subject to a recovery in the
uranium price to a level providing for sustainable and profitable production.
Kayelekera Minority Ownership
Lily Resources Pty Ltd, a direct subsidiary of the Company, is an owner of Paladin Africa holding title to Kayelekera Uranium
Project. The Company has indirect 65% interest in the Project and 15% is owned by the Government of Malawi. The remaining
20% of the Project is owned by a third party, Kayelekera Resources Pty Ltd. (the Minority).
12
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
One of the owners of the Minority is Grant Davey, a Non-Executive Director and shareholder of Lotus and Managing Director
of Matador Capital. Lotus and the Minority (the Parties) entered into a shareholders’ agreement in June 2019 (the Agreement)
that governs the rights and responsibilities of both shareholders.
The key terms of the Agreement are publicly disclosed in the Section 1.5 of the Notice of Meeting dated 25 July 2019. The
following (as previously disclosed) is a summary of the key terms.
o Buy-Out Right: Lotus has the right to buy-out the Minority in its entirety by giving notice of such an election for the
buy-out consideration.
o Buy-Out Consideration: Consideration to be agreed between the Parties. To be purchased in Lotus shares at the 20-
day VWAP at the Fair Market Value, being the price that may reasonably be expected for the shares in an arm’s length
transaction between a willing buyer and a willing seller. Fair Market Value is to be determined by a third-party valuer
from one of the big four accounting companies.
o
o
o
Transfer Notice: A selling shareholder must notify the continuing shareholder if it wishes to sell shares and the
continuing shareholder will have the first right of refusal.
Sale to a Third Party: If Lotus is selling its ownership in the Project to a third party, then the Minority shareholder has
the right to tag along on the same terms as the Lotus third party sale.
Free-Carry Period: Lotus is responsible for all group expenditure until the later of:
a) Group expenditure funded by Lotus reaches A$10 million or more; and
b) The third anniversary of the date of the agreement June 2022, with the Minority being free carried during this
period.
o Dilution: After the free carry period, shareholders will be called to contribute in accordance with their shareholding
or dilute. Diluting shareholders’ interest equals its contributions in cash or kind divided by contributions in cash or
kind by all shareholders.
o Roll-Up Right: The Minority has the right to roll up all its shareholding by making an election at the earlier of a change
of control or the end of the free carry period. If the Minority makes an election, then Lotus must purchase all the
Minority shareholding or transfer all shares held by it to the Minority for no consideration
Exploration opportunity
An Exploration Target of between 6 and 21 Mt at a grade of between 300 and 600ppm U3O8, which was derived from the near-
mine and brownfields exploration regions, has been identified at the Group’s Malawi tenements (see Table 1). This indicates a
potential metal endowment of between 7 and 14Mlb of U3O8.
The Exploration Target is summarised by prospect in Table 1. Note that the Exploration Target is conceptual in nature as there
has been insufficient exploration to estimate a Mineral Resource and it is uncertain that further exploration will result in the
estimation of a Mineral Resource.
Table 1. Exploration Target
Tonnage Range
Grade Range
Contained Metal
Tenement
Project
Min
Max
Max Min
Mt
Mt
ppm
U3O8 Kt
ML 152
EPL417
EPL418
Kayelekera
Mpata
Livingstonia North
Total
1
2
3
6
5
9
8
21
1,200
400
450
600
1.2
0.8
1.4
3
Max
U3O8
Kt
2.0
1.8
2.4
6
Min
U3O8
MLb
2.6
1.8
3.0
7
Max
U3O8
MLb
4.4
4.0
5.3
14
The location of the tenements in Table 2 and their proximity to Kayelekera is shown in Figure 1.
13
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Figure 1. Kayelekera Location Map and Exploration Targets
Rare earths and rutile exploration opportunity
Early-stage field work on licences in close proximity to the Kayelekera Project identified high-grade Rare Earth Elements (REE)
and rutile-bearing granitoids at the Milenje Hills Prospect, approximately 2km north of the Kayelekera resource area (see Figure
2).
The Milenje Hills prospect was discovered through ground surveys and mapping in 2014 during exploration for uranium
mineralisation adjacent to the Kayelekera uranium resource. Preliminary (and never released) surface and trench grab samples
have returned significant REE and TiO2 (predominantly from rutile) results from granitoid gneiss float material and sub crop.
Significant hand samples returned grades up to 38% total rare earth oxides (ASX announcement 8 April 2020).
The mineralisation is interpreted to be associated with allanite-rich pegmatite dykes and associated fluid alteration within
associated granitoids, which have been emplaced into the host Ubendian gneisses and granites. Both the pegmatite material
and granitoids exhibit high REE and TiO2 grades (up to 38% total Rare-Earth Oxides).
Importantly, the rare-earth assemblage identified includes significant portions of the high-value critical rare earth oxides of
Neodymium (Nd), Europium (Eu), Terbium (Tb), Dysprosium (Dy), Yttrium (Y), and Praseodymium (Pr): averaging 2.9% across
all samples and up to 8.5%. Of this, Neodymium oxide makes up on average 73% of the endowment: averaging 2.1% across the
samples, and up to 6.3%.
14
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Figure 2: Kayelekera Tenements and Milenje Project
Lotus believes the Milenje Hills prospect contains potential for significant REE mineralisation and aims to test the prospect
through systematic exploration including soil sampling, surface mapping and trenching in the upcoming dry season.
DIVIDENDS
No dividend has been declared or paid by the Group to the date of this report.
ENVIRONMENTAL REGULATION
Lotus Resources exploration and mining activities are governed by a range of environmental legislation and regulations.
As the Group is still in the development phase of its interests in exploration projects, Lotus Resources is not yet subject to the
public reporting requirements of environmental legislation and regulations. To the best of the directors’ knowledge, the Group
has adequate systems in place to ensure compliance with the requirements of the applicable environmental legislation and is
not aware of any breach of those requirements during the financial year and up to the date of the Directors’ Report.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
In the opinion of the Directors, there is nothing material further to report, except as outlined in the Directors’ Report, which
relates to likely developments in the operations of the Group and the expected results of those operations in financial years
subsequent to 30 June 2020.
15
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Subsequent to the end of the financial year:
o
o
65,934,365 unlisted options were exercised at $0.04 per options for gross proceeds before costs of $2,637,375.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has had no significant impact on the
Consolidated Entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative,
after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the
Australian and Malawi Governments, such as maintaining social distancing requirements, quarantine, travel
restrictions and any economic stimulus that may be provided.
ANNUAL STATEMENT OF ORE RESERVES AND MINERAL RESOURCES
Table 2. Kayelekera Mineral Resource March 20201 (Reported above a 300ppm U3O8 lower cut-off for in situ material; and a
200ppm U3O8 lower cut-off for the low-grade stockpiles).
Measured
Measured - RoM Stockpile2
Indicated
Inferred
Total
Inferred - LG Stockpile3
Total All Material
Mt
0.7
1.6
18.7
3.7
24.6
2.4
27.1
Grade (U3O8 ppm)
1,010
760
660
590
660
290
630
U3O8 (M kg)
0.7
1.2
12.3
2.2
16.3
0.7
17.0
U3O8 (M Lb)
1.5
2.6
27.1
4.8
36.0
1.5
37.5
1 The information that relates to the Mineral Resource at Kayelekera was announced on 26 March 2020. Lotus confirms that it is not
aware of any new information or data that materially affects the information included in the announcement of 26 March 2020 and
that all material assumptions and technical parameters underpinning the Mineral Resource estimate in that announcement of
continue to apply and have not materially changed.
2 RoM stockpile has been mined and is located near mill facility.
3 Low-grade has been mined and placed on low-grade stockpile and are considered potentially feasible for blending or beneficiation,
with studies planned to further assess this option.
Figures have been rounded. Grade has been determined from a combination of XRF and downhole logging derived eU3O8 grades. In
situ Mineral Resources are depleted for mining to 31 December 2013, when mining ceased, with stockpiles depleted to the end of
processing in June 2014. Metal content is based on contained metal in the ground and takes no account of mining or metallurgical
recoveries, mining dilution or other economic parameters. An in-situ bulk density of 2.29g/cm3 was applied for Arkose material and
2.20g/cm3 for mudstone material to all blocks within the model.
Competent persons’ statement
The Mineral Resource estimates for the Kayelekera deposit were prepared by David Princep of Gill Lane Consulting. David
Princep has visited the Kayelekera Project on numerous occasions since 2003 with the most recent being in October 2013 just
before the project was placed on care and maintenance. Mr. Princep is a Fellow of the Australasian Institute of Mining and
Metallurgy and a Chartered Professional Geologist and has sufficient experience that is relevant to the style of mineralisation
and type of deposit under consideration to qualify as a Competent Person as defined in the 2012 edition of the Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2012). Mr. Princep approves of,
and consents to, the inclusion of the information in this annual report in the form and context in which it appears.
16
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Ore Reserves and Mineral Resources Governance
Lotus reviews its Mineral Resource and Ore Reserve (if applicable) estimates on an annual basis. The Annual Statement of
Mineral Resources and Ore Reserves is prepared in accordance with the JORC Code 2012 and the ASX Listing Rules.
Competent Persons named by the Company are members of the Australian Institute of Mining and Metallurgy and/or the
Australian Institute of Geoscientists and qualify as Competent Persons as defined under the JORC Code 2012.
The Company engages external consultants and Competent Persons to prepare and calculate estimates of its Mineral Resources
and Ore Reserves. These estimates and underlying assumptions are reviewed by the Directors and management for
reasonableness and accuracy. The results of the Mineral Resource and Ore Reserve estimates are then reported in accordance
with the JORC Code 2012 and the ASX Listing Rules. Where material changes occur to a project during the period, including the
project’s size, title, exploration results or other technical information, previous resource estimates and market disclosures are
reviewed for completeness. The Company reviews its Mineral Resources and Ore Reserves as at 30 June each year and where
a material change has occurred in the assumptions or data used in previously reported Mineral Resources and Ore Reserves, a
revised estimate will be prepared as part of the annual review process.
SHARES AND OPTIONS ON ISSUE
At the date of this report, the Company has 738,264,828 fully paid ordinary shares on issue.
The following options over ordinary shares in the Company were on issue at the date of this report:
Number
Unlisted Options
Issue Date
Exercise Price
Expiry Date
48,856,092
9,517,399
2,018,102
8,564,516
20,523,094
89,479,203
13 March 2020
22 October 2019
4 October 2019
25 September 2019
12 September 2019
$0.04
$0.04
$0.04
$0.04
$0.04
13 March 2023
22 October 2022
4 October 2022
25 September 2022
12 September 2022
OPTIONS GRANTED
The following unlisted options were issued during the reporting period:
Number
Issue Date
Exercise Price
Expiry Date
62,482,626
12 September 2019
18,391,853
25 September 2019
6,643,102
12,517,399
4 October 2019
22 October 2019
112,500,026
13 March 2020
$0.04
$0.04
$0.04
$0.04
$0.04
12 September 2022
25 September 2022
4 October 2022
22 October 2022
13 March 2023
OPTIONS EXPIRED
7,678,571 options expired during the year; no further options have expired since the end of the year.
DIVIDENDS
No dividends were paid to members during the financial year and the Directors do not recommend the payment of a dividend.
17
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
INDEMNIFICATION OF OFFICERS AND AUDITORS
Indemnification
The Company has agreed to indemnify the current Directors and Executives of the Company against all liabilities to another
person (other than the Company or a related body corporate) that may arise from their position as Directors and Executives of
the Company, except where the liability arises out of conduct involving a lack of good faith or gross misconduct.
The agreement stipulates that the Company will meet to the maximum extent permitted by law the full amount of any such
liabilities, including costs and expenses.
INSURANCE PREMIUMS
The Company paid a premium during the year in respect of a director and officer liability insurance policy, insuring the directors
of the Company, the company secretary, and all executive officers of the Company against a liability incurred as such a director,
secretary or executive officer to the extent permitted by the Corporations Act 2001. The directors have not included details of
the nature of the liabilities covered in respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as
such disclosure is prohibited under the terms of the contract.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on
behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of
the Company with leave of the Court under section 237 of the Corporations Act 2001.
NON-AUDIT SERVICES
Details of amounts paid or payable to the Company’s auditor, RSM Australia Partners (RSM), for audit and non-audit services
provided during the year are set out in note 4.
The Board is satisfied that the provision of the non-audit services is compatible with general standard of independence for
auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the
auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
(a) all non-audit services have been reviewed by the Board to ensure they do not impact the impartiality and objectivity of the
auditor; and
(b) none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants.
REMUNERATION REPORT
The Remuneration Report set out on pages 22 to 28 forms part of the Directors’ Report and issigned as part of it.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out immediately
after this Directors’ Report.
18
19 DIRECTORS’ REPORT (cont’d) AUDITOR RSM Australia Partners continues in office in accordance with Section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. Dated at Perth, Western Australia this 30th day of September 2020. Signed in accordance with a resolution of the directors: Mr John Sibley Non-Executive Chairman 30 September 2020 RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Lotus 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:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 30 September 2020
TUTU PHONG
Partner
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
T E N E M E N T S C H E D U L E
Lotus Resources Limited Tenement Schedule as at 27 September 2020
Project
Tenement
Area (km2)
Status
Registered Holder
Ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
New South Wales
Hylea
Malawi
EL8520
EL8641
EL8801
35.09
Granted
140.35
175.44
Granted
Granted
Providence Metals
Pty Ltd
Providence Metals
Pty Ltd
Providence Metals
Pty Ltd
Paladin Africa
Limited
Paladin Africa
Limited
Paladin Africa
Limited
Paladin Africa
Limited
Paladin Africa
Limited
Paladin Africa
Limited
Kayelekera
ML152
55.50
Nthalire
EPL489
137.04
Granted
Granted
Uliwa
Rukuru
EPL418
348.80
Granted
EPL417
146.30
Mapambo
EPL225
Juma-Miwango
EPL502
14.00
28.65
Granted
Granted
Granted
21
A U D I T E D R E M U N E R A T I O N R E P O R T
This Remuneration Report outlines the director and executive remuneration arrangements of the Group in accordance with
the requirements of the Corporations Act 2001 (the Act) and its Regulations. This information has been audited as required
by Section 308 (3C) of the Act.
For the purposes of this report, key management personnel (KMP) of the Group are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly,
including any director (whether executive or otherwise) of the Group.
KEY MANAGEMENT PERSONNEL
The following were key management personnel of the Group at any time during the financial year and unless otherwise
indicated were key management personnel for the entire financial year:
Name
Mr John Sibley
Position held
Chairman Non-Executive – Appointed 24 June 2020
Mr Eduard Smirnov Managing Director – Appointed 29 June 2020
Mr Grant Davey
Non-Executive - Appointed 22 June 2020
Mr Stuart McKenzie
Non-Executive - Appointed 22 June 2020
Mr Simon Andrew
Mr Tim Kestell
Mr Mark Milazzo
Managing Director – Appointed 2 January 2019 - resigned 19 May 2020, CEO appointed 19 May
2020- terminated 26 June 2020
Non-Executive Director - Resigned 31 May 20
Non-Executive Director - Resigned 23 June 2020
Mr Andrew Mirco
Mr James Eggins
Non-Executive Director - Appointed 15 May 2020 – Resigned 23 June 2020
Chairman Non-Executive – Appointed 15 May 2020 – Resigned 23 June 2020
NOMINATION & REMUNERATION COMMITTEE
The Nomination and Remuneration Committee and the Board of Directors of the Company are responsible for determining
and reviewing remuneration policies for the directors and executives. If necessary, the Nomination and Remuneration
Committee and the Board obtains independent advice on the appropriateness of remuneration packages given trends in
comparable companies and in accordance with the objectives of the Group. No such advice was obtained during the year.
However, the Nominations and Remuneration Committee and the Board regularly assess remuneration in light of market
conditions and peer companies.
Further information on the Nomination and Remuneration Committee’s role, responsibilities and membership is set out in
Corporate Governance Statement in this Annual Report.
PRINCIPLES OF REMUNERATION
The remuneration structures explained below are competitively set to attract and retain suitably qualified and experienced
candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for
shareholders. The remuneration structures take into account:
o
o
o
the capability and experience of the key management personnel;
the key management personnel’s ability to control the achievement of strategic objectives;
the Group’s performance including:
▪
▪
the growth in share price; and
the amount of incentives within each key management person’s compensation.
Given the evaluation and developmental nature of the Group’s principal activity, the overall level of compensation does not
have regard to the earnings of the Group.
REMUNERATION STRUCTURE
In accordance with best practice corporate governance, the structure of non-executive directors’ remuneration is clearly
distinguished from that of executives.
22
A U D I T E D R E M U N E R A T I O N R E P O R T ( c o n t ’ d )
REMUNERATION STRUCTURE (cont’d)
EMPLOYMENT AND CONSULTANCY AGREEMENTS
The Company has entered into an employment agreement with its executive directors. The employment agreements outline
the components of remuneration paid to the executives and are reviewed on an annual basis.
Fixed remuneration
Fixed remuneration consists of base compensation (which is calculated on a total cost basis and includes any fringe benefits
charges related to employee benefits including motor vehicles) as well as employer contributions to superannuation funds.
Fixed remuneration is reviewed annually by the Nomination and Remuneration Committee and the Board through a process
that considers individual and overall performance of the Group. As noted above, the Nomination and Remuneration
Committee and the Board has access to external advice independent of management.
Executive remuneration
Remuneration for executives is set out in employment agreements. Details of these employment agreements are provided
below.
Component
Fixed remuneration
Contract duration
Termination
Sign on incentive
Managing Director – Eduard Smirnov
$300,000 USD Inclusive of superannuation
No fixed term
Statutory entitlements will be paid as required by law. If termination by the company
other than for cause, unvested options vest
•
6,000,000 zero priced options that vest subject to raising capital at such timing and
prices as approved by the Board
6,000,000 zero priced Options that vest subject to:
o
The appointment of independent Directors and/or advisers, African Govt
relations, and other positions to attract institutional investment and ensure
corporate Governance and independence as approved by the board.
Completion of a restart study showing the viability of restarting the Mine
including but not limited to letters of intent with respect to offtake
agreements.
o
6,000,000 zero priced Options that vest on the earlier of three continuous years of
service or the Company’s market capitalisation exceeds a value of A$200million for
30 consecutive trading days on the ASX (based on the VWAP of the Company’s
shares on the ASX)
•
•
Other Equity incentives
(All the above options are subject to shareholder approval and have not been granted as
at the reporting date)
The Executive is eligible to receive an Equity Incentive Award at the Board’s discretion
and subject to the Executive’s performance against agreed KPI’s for the relevant
performance-based period.
Executive directors may receive performance related compensation but do not receive any retirement benefits, other than
statutory superannuation.
Previous Managing Director, Mr Simon Andrew’s remuneration package consisted of $250,000 per year plus superannuation
with a six-month payout upon termination. Mr Andrew’s employment was terminated by the Company on 26 June 2020.
23
A U D I T E D R E M U N E R A T I O N R E P O R T ( c o n t ’ d )
REMUNERATION STRUCTURE (cont’d)
Non-executive director remuneration
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be
determined from time to time by a general meeting. Total remuneration for all non-executive directors, last voted upon by
shareholders at the 2007 General Meeting, is not to exceed $500,000 per year. Directors’ fees cover all main board activities
and membership of committees.
Non-executive Directors do not receive any retirement benefits, other than statutory superannuation.
Non-Executive Director arrangements
Details of the agreements are provided below.
Component
Fixed remuneration
Contract duration
Termination
Sign on incentive
Equity incentives
Non-Executive Chairman – John Sibley
$100,000 Inclusive of superannuation
No fixed term
Statutory entitlements will be paid as required by law. If termination by the
company other than for cause, unvested options vest
3,000,000 zero priced Options that vest to 18 months of continued service
(Options are subject to shareholder approval and as at reporting date have
not been granted).
The executive is eligible to receive an Equity Incentive Award at the Board’s
discretion and subject to the Chairmans’s performance against agreed KPI’s
for the relevant performance-based period.
Other Non-executive Directors
Non-executive director fees are reviewed annually by the Board taking into account comparable roles and market data.
Fees for the financial year are as follows:
Name
Base Salary/fees (Annual)
Term of Agreement Notice Period
Mr John Sibley(i)
Mr Grant Davey(ii)
Mr Stuart McKenzie(ii)
Mr Simon Andrew (iii)
Mr Mark Milazzo(iv)
Mr Tim Kestell(v)
Mr James Eggins (vi)
Mr Andrew Mirco (vi)
$100,000
$150,000
$57,713
$250,000
$50,000
$50,000
$80,000
$50,000
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
3 months
Statutory
Statutory
3 months
3 months
3 months
3 months
3 months
(i)Appointed 24 June 2020
(iii)Resigned as MD 19 May 2020
(v)Resigned 31 May 2020
(ii)Appointed 22 June 2020
(iv)Resigned 23 June 2020
(vi)Appointed 15 May 2020 - Resigned 23 June 2020
Non-Executive Directors have no entitlement to termination payment in the event of removal for misconduct or gross
negligence.
Short-term and Long-term incentive
The Group adopted an incentive option plan on 28th November 2019.The group considers performance based remuneration
to be a critical component of the overall remuneration framework, by providing remuneration structure that rewards
employees for achieving goals that are aligned to the group’s strategy and objectives. Both STI’s and LTI’s will be issued under
the Lotus Resources Limited Option Plan in the 2021 financial year.
24
A U D I T E D R E M U N E R A T I O N R E P O R T ( c o n t ’ d )
REMUNERATION STRUCTURE (cont’d)
Short-term incentives
As at the date of this report the Company had not implemented its STI scheme. With the change of Board and Management
shortly prior to the end of the financial year, the Company is currently implementing a comprehensive STI scheme for the
2021 financial year. The STI scheme will operate to link performance and reward with key measurable financial and non-
financial performance indicators to provide employees with clear and understandable targets that are aligned with the
Group’s objectives and shareholder value.
STI’s will be in the form of zero exercise price options and which vest on completion of the one year period and satisfaction
of a number of key measurable financial and non-financial performance indicators as assessed by the Managing Director and
the Board. A percentage will then be applied to the options granted in order to determine the number of options that vest
and become exercisable. The employee will then have up to three years in which to exercise the options for nil consideration.
Each Vested STI option represents a right to be issued one Lotus share.
The board will set the objectives of the Managing Director and these are then cascaded down through the organisation to
ensure alignment of objectives.
Long-term incentives
The KMP remuneration structure currently being implemented by the Board will also seek to drive performance and align
with shareholder interests through LTI equity-based remuneration. LTI’s will also be in the form of zero exercise price options
and which vest on completion of a three year period and satisfaction of a number of key measurable financial and non-
financial performance indicators as assessed by the Managing Director and the Board. The performance measure will also
align to longer term shareholder value with a direct link to share price growth.
At the date of this report no options had been issued or vested under the incentive option plan.
Consequences of performance on shareholder wealth
Due to the Group currently being in an evaluation and developmental phase, the Group’s earnings are not considered to be
a principal performance indicator. However, the overall level of key management personnel remuneration takes into account
the achievement of strategic objectives, service criteria and growth in share price.
There were no performance related remuneration transactions during the financial year other than what has been stated
above (2019: nil).
25
A U D I T E D R E M U N E R A T I O N R E P O R T ( c o n t ’ d )
REMUNERATION OF KEY MANAGEMENT PERSONNEL
Details of the nature and amount of each major element of the remuneration of each key management person of the Group
are:
SHORT TERM
Salary & fees
$
Non-
Monetary
$
POST-
EMPLOYMENT
SHARE-BASED
PAYMENTS
Superannuation
$
Options
$
Total
$
Fixed
Remuneration
%
Performance Based
Remuneration
%
Directors
Non-executive
Mr J Sibley(i)
Mr M Milazzo(iv)
Mr Grant Davey(iii)
2020
2019
2020
2019
Mr Stuart McKenzie(iii) 2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Mr A Mirco (vi)
Mr K Chan(vii)
Mr T Kestell(v)
Mr J Eggins(vi)
1,644
-
3,288
-
1,265
-
46,500
36,000
42,333
36,000
10,000
-
6,223
-
-
12,000
Executive
Mr E Smirnov(ii)
Mr S Andrew (viii)
Mr D Berrie (ix)
Total, all directors
and executive
2020
2019
2020
2019
2020
2019
2020
2019
-
-
346,038(x)
54,000
-
170,400
457,291
308,400
(i)Appointed 24 June 2020
(iii)Appointed 22 June 2020
(v)Resigned 31 May 2020
(vii)Resigned 31 October 2018
(ix)Resigned 2 January 2019
SHARE-BASED COMPENSATION
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
156
-
-
-
-
-
-
-
4,022
7,125
950
-
-
-
-
-
-
-
23,750
-
11,756
28,878
18,881
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,800
-
3,288
-
1,265
-
46,500
36,000
46,355
43,125
10,950
-
6,223
-
-
12,000
-
-
369,788
54,000
-
182,156
486,169
327,281
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(ii)Appointed 29 June 2020
(iv)Resigned 23 June 2020
(vi)Appointed 15 May 2020 – 23 June 2020
(viii) Resigned 19 May 2020
(x) Includes a termination payment of $149,038. The Company
has disputed this payment and is of the view that no amount will
be payable. The matter is yet to be formally resolved.
There were no share-based remuneration transactions during the year, other than those disclosed above which at the date
of this report were subject to shareholder approval.
USE OF REMUNERATION CONSULTANTS
During the year, the Group did not use any remuneration consultants.
26
A U D I T E D R E M U N E R A T I O N R E P O R T ( c o n t ’ d )
VOTING AND COMMENTS MADE AT THE COMPANY’S 2019 ANNUAL GENERAL MEETING
Lotus Resources Limited received 99% of “yes” votes on its remuneration report for the 2019 financial year. The
remuneration report resolution received a “no” vote from 1% of shareholders voting at the meeting, either personally or by
proxy. The Company has made certain changes to the structure of the Board and its remuneration, as noted above, since the
AGM results. This is in line with the changes that occurred to the Company this year with its acquisition of the Kayelekera
Project. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
OPTIONS HOLDINGS OF KEY MANAGEMENT PERSONNEL
2020
Mr J Sibley (i)
Mr E Smirnov(ii)
Mr Grant Davey(iii)
Mr Stuart McKenzie(iii)
Mr S Andrew (iv)
Mr M Milazzo(v)
Mr T Kestell(vi)
Mr J Eggins (vii)
Mr A Mirco (vii)
Held at
1 July 2019
Granted as
compensation
Exercised
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other
changes
-
-
13,049,542
175,000
-
-
-
-
-
Held at
date of
resignation
Held at
30 June 2020
-
-
-
-
-
-
-
-
-
-
-
13,049,542
175,000
-
-
-
-
-
Vested
during the
year
-
-
13,049,542
175,000
-
-
-
-
-
(i)Appointed 24 June 2020
(ii)Appointed 29 June 2020
(iii)Appointed 22 June 2020
(iv)Terminated 26 June 2020
(v)Resigned 23 June 2020
(vi)Resigned 31 May 2020
(vii)Appointed 15 May 2020 - Resigned 23 June 2020
SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL
2020
Mr J Sibley (i)
Mr E Smirnov(ii)
Mr Grant Davey(iii)
Mr Stuart McKenzie(iii)
Mr S Andrew (iv)
Mr M Milazzo(v)
Mr T Kestell(vi)
Mr J Eggins (vii)
Mr A Mirco (vii)
Held at
1 July 2019
Held at date
of
appointment
Received on
exercise of
options
Other
changes
Held at date
of
resignation
Held at
30 June
2020
Purchases
-
-
-
-
-
-
-
-
-
-
-
26,099,084
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,099,084
300,000
-
-
-
-
-
(i)Appointed 24 June 2020
(ii)Appointed 29 June 2020
(iii)Appointed 22 June 2020
(iv)Terminated 26 June 2020
(v)Resigned 23 June 2020
(vi)Resigned 31 May 2020
(vii)Appointed 15 May 2020 - Resigned 23 June 2020
27
A U D I T E D R E M U N E R A T I O N R E P O R T ( c o n t ’ d )
Other key management personnel transactions with the Group
Mr Grant Davey, who is a Non-Executive Director of the Company, is a Director and shareholder of Matador Capital Pty Ltd
(Matador Capital). During the financial year ended 30 June 2020, the Company incurred $200,000 for the fee to acquire
Kayelekera Uranium Project and reimbursement of acquisition costs of $100,000 to Matador Capital. The Company also
made payments to Matador Capital under a Shared Services Agreement in which Matador Capital provides office space and
general office costs to the Company at cost plus 2%. The Company also uses Matador Capital’s technical and project
management expertise. During the year the Company incurred costs under this arrangement totalling $213,663. These
services provided by Matador Capital were done so at an arm’s length basis and on normal commercial terms. There is a
balance of $60,293 owing to Matador Capital as at 30 June 2020 in relation to the provision of these services.
During the financial year Mr Davey was a Director of Graphex Mining Limited (Graphex) (now Marvel Gold Limited) (resigned
25 September 2020) and former Director of Matador Mining Ltd (Matador Mining) (resigned 2 June 2020), ASX listed
Companies that are also parties to the Shared Services Agreement with the Company. Under this arrangement Graphex and
Matador Mining provide company secretarial, accounting and administration services. The Company incurred costs from
Graphex and Matador Mining of $53,344 and $4,893, respectively. These amounts were outstanding at year end.
On 23 July 2019, the Company entered into a convertible loan agreement with Matador Capital Ltd for $500,696. Matador
Capital subsequently converted the loan to equity on 24 October 2019, with 25,034,798 fully paid shares being issued at a
share price for $0.02 along with one free attaching option for every two shares issued.
On 29 April 2019, the Company entered into a loan agreement with Neon Capital Ltd (Neon Capital) for $150,000. The terms
of the loan were for the loan to be repaid by 30 September 2019 and interest to be accrued at 8% per annum. Neon Capital
has subsequently participated in the rights issue and the loan was repaid on 23 September 2019. Tim Kestell is a director of
Neon Capital.
There were no other related party transactions with key management personnel during the year.
Amounts owed to related parties
Mr Simon Andrew is owed $160,913 in salary and superannuation and termination entitlements. This includes a termination
payment of $149,038. The Company has disputed this payment and is of the view that no amount will be payable. The matter
is yet to be formally resolved.
Matador Capital, an entity associated with Mr Grant Davey, is owed $60,293.
There were no other key management personnel transactions other than as disclosed above.
Additional Information
The earnings of the Group for the five years to 30 June 2020 are summarised below:
2020
$
2019
$
2018
$
2017
$
2016
$
EBITDA
EBIT
(16,487,057)
(813,199)
(2,149,968)
(1,858,796)
(6,847,799)
(16,550,494)
(821,364)
(2,171,217)
(1,885,394)
(6,873,784)
Loss after Income Tax
(16,569,943)
(821,364)
(2,171,217)
(1,873,559)
(6,873,784)
The factors that are considered to affect total shareholders return are summarised below:
2020
2019
2018
2017
2016
Share price at end of the
year
Basis loss per share
7 cents
4.5 cents
0.7 cents
0.5 cents
0.3 cents
4.58 cents
0.82 cents
0.14 cents
0.90 cents
3.33 cents
[This is the end of the audited remuneration report.]
28
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
The Board and management of Lotus Resources Limited (Lotus Resources or the Company) recognise their duties and
obligations to shareholders and other stakeholders to implement and maintain a robust system of corporate governance.
The Company believes that the adoption of good corporate governance adds value to stakeholders and enhances investor
confidence.
The Company acknowledges that the Corporate Governance Principles and Recommendations of the ASX Corporate
Governance Council 3rd Edition (3rd Edition) have been revised and updated as the Corporate Governance Principles and
Recommendations of the ASX Corporate Governance Council 4th Edition (4th Edition). The Company notes that this Corporate
Governance Statement, which outlines the Company’s corporate governance framework in place for the year ended 30 June
2020, is reported against the 3rd Edition. The Company is currently in the process of reviewing its corporate governance
framework in light of the 4th Edition.
The Company’s corporate governance policies are available on the Company’s website: www.lotusresources.com.au.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Board Charter
The Board is accountable to shareholders for the performance of the Company. The Board operates under a Board Charter
that details its functions, responsibilities and powers and those delegated to management.
On appointment, non-executive directors receive formal letters of appointment setting out the terms and conditions of
appointment. The formal letter of appointment covers the matters referred to in the guidance and commentary for
Recommendation 1.1. Executive directors are employed pursuant to employment agreements.
Company Secretary
The company secretary reports directly to the Board through the Chairman and is accessible to all Directors. The function
performed by the company secretary is noted in the letter of appointment of the company secretary
Evaluation of the performance of the Board and senior executives
The performance of the Board is evaluated in accordance with the Performance Evaluation Policy set out in the Board
Charter. A performance evaluation for senior executives has taken place in the reporting period and was carried out in
accordance with the process disclosed. Owing to a change in the strategic direction of the Company and a change to the
composition of the Board, no performance evaluation of the Board was carried out during the 2019-20 financial year.
The performance of senior executives is evaluated in accordance with the Performance Evaluation Policy. A performance
evaluation for senior executives has taken place in the reporting period and was carried out in accordance with the process
disclosed.
The Board Charter and Performance Evaluation Policy are available on the Lotus Resources website.
Diversity Policy
Given the size and nature of the Company at this stage, the Board has elected to not have a Diversity Policy. However, the
Company recognises that a diverse and talented workforce is a competitive advantage and that the Company’s success is the
result of the quality and skills of our people.
The Company has not set measurable objectives for achieving gender diversity during the reporting period of 2019 – 2020.
Our policy is to recruit and manage on the basis of qualification for the position and performance, regardless of gender, age,
nationality, race, religious beliefs, cultural background, sexuality or physical ability. It is essential that the Company employs
the appropriate person for each job and that each person strives for a high level of performance.
The Company has not set measurable objectives for achieving gender diversity during the reporting period of 2019 – 2020.
29
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Nomination Committee
The Board does not have a Nomination Committee.
The Board considers it has an appropriate balance of skills, knowledge, experience, independence and diversity to enable it
to discharge its duties and responsibilities effectively. Board succession issues are discussed by the whole Board when
required
Composition of the Board
The Board currently consists of a non-executive chairman, a managing director and two non-executive directors. Details of
their skills, experience and expertise and the period of office held by each director have been included in the Directors’
Report. The number of board meetings and the attendance of the directors are set out in the Directors’ Report.
The Board considers that this composition is appropriate given the current size of the Company. The Board Charter
summarises the roles and responsibilities of the Managing Director.
The Board has identified that the appropriate mix of skills and diversity required of its members on the Board to operate
effectively and efficiently is achieved by Directors having substantial skills and experience in operational management,
exploration and geology, corporate law, finance, listed resource companies, equity markets.
Independence of non-executive directors and the Chairman of the Board
The Board has assessed the independence of the non-executive directors and the Chairman using defined criteria of
independence and materiality consistent with the guidance and commentary for Recommendation 2.1.
The Chairman is considered to be an independent director.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee consisted of three members and was chaired by Mr Milazzo (from 1 July
2019-23 June 2020). From 23 June 2020, the Company determined that it was not of a size that warranted a Nomination and
Remuneration Committee and that until the Company moved closer to restart of production at Kayelekera, this function
would be discharged by the Board.
The current Nomination and Remuneration Committee Charter sets out its role, responsibilities and membership
requirements. The Charter reflects the matters set out in the commentary and guidance for Recommendation 2.4.
For information on the skills, experience and expertise of the Nomination and Remuneration Committee members, refer to
the Directors’ Report. Details of the members and their attendance at meetings of the Nomination and Remuneration
Committee are included in the Directors’ Report. In accordance with Recommendation 2.4, the Nomination and
Remuneration Committee consisted of a majority of independent directors.
Owing to the size of the Company, its number of employees and scale of activities, the Board elected to disband the
Remuneration Committee and the functions of the Remuneration Committee were performed by the Board as a whole.
Board renewal and succession planning
The appointment of directors is governed by the Company’s Constitution and the appointment and selection of new directors
policy. In accordance with the Constitution of the Company, no director except a managing director shall hold office for a
continuous period in excess of three years or past the third annual general meeting following the director's appointment,
whichever is the longer, without submitting for re-election.
The Company has not adopted a policy in relation to the retirement or tenure of directors.
The appointment of the company secretary is a matter for the Board. Information on the skills, experience and qualifications
of the company secretary can be found in the Directors’ Report.
30
Evaluation of the performance of the Board, its committees and individual directors
The performance of the Board, its committees and individual directors are evaluated in accordance with the Performance
Evaluation Process. Performance evaluations of the Board, the Nomination and Remuneration Committee and individual
directors have taken place in the reporting period and were carried out in accordance with the process disclosed.
Induction and education
When appointed to the Board, a new director will receive an induction appropriate to their experience. Directors may
participate in continuing education to update and enhance their skills and knowledge from time to time, as considered
appropriate.
Access to information and advice
Directors are entitled to request and receive such additional information as they consider necessary to support informed
decision-making. The Board also has a policy under which individual directors and Board committees may obtain
independent professional advice at the Company’s expense in relation to the execution of their duties, after consultation
with the Chairman.
The Company’s Constitution, Nomination and Remuneration Committee Charter and the policy for appointment and
selection of new directors are available on the Company’s website.
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING
Code of Conduct
The Code of Conduct applies to all directors and officers of the Company. It sets out Lotus Resources’ commitment to
successfully conducting business in accordance with all applicable laws and regulations while demonstrating and promoting
the highest ethical standards. The Code of Conduct reflects the matters set out in the commentary and guidance for
Recommendation 3.1.
The Code of Conduct is available on the Lotus Resources website.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Audit and Risk Committee
There is no Audit and Risk committee, the functions of such a committee being performed by the Board. The Board considers
that this approach is appropriate given the current size of the Company. The Board considers it is of a sufficient size and
possesses sufficient technical expertise to effectively discharge the functions of an Audit and Risk committee.
The Board receives the required declaration from the individuals that performs the function of the CEO and the CFO in
relation to full year and half year statutory financial reports during the reporting period in accordance with section 295A of
the Corporations Act 2001.
External auditor
The Board reviews the external auditor’s terms of engagement and audit plan and assesses the independence of the external
auditor. The current practice, subject to amendment in the event of legislative change, is for the rotation of the engagement
partner to occur every five years.
The Company’s independent external auditor is RSM Australia Partners (RSM). The appointment of RSM was ratified by
members at the Annual General Meeting held on 26 November 2015.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
Continuous Disclosure Policy
The Continuous Disclosure Policy sets out the key obligations of the Company’s directors and employees in relation to
continuous disclosure as well as the Company’s obligations under the Listing Rules and the Corporations Act 2001. The Policy
also provides procedures for internal notification and external disclosure, as well as procedures for promoting understanding
of compliance with the disclosure requirements for monitoring compliance.
31
The Policy reflects the matters set out in the commentary and guidance for Recommendation 5.1.
The Continuous Disclosure Policy is available on the Company’s website.
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
The Shareholder Communications Policy sets out the Company’s aims and practices in respect of communicating with both
current and prospective shareholders. The Policy reinforces the Company’s commitment to promoting investor confidence
by requiring:
▪
▪
▪
▪
compliance with the continuous disclosure obligations;
compliance with insider trading laws;
compliance with financial reporting obligations;
compliance with shareholder meeting requirements, including the provision of an opportunity for shareholders
and other stakeholders to hear from and put questions to the Board, management and auditor of the Company;
communication with shareholders in a clear, regular, timely and transparent manner; and
response to shareholder queries in a prompt and courteous manner.
▪
▪
The Policy reflects the matters set out in the commentary and guidance for Recommendation 6.1.
The Shareholder Communications Policy is available on the Lotus Resources website.
Providing information about governance to investors
The Company’s website provides information on the Company including its background, objectives, projects and contact
details, including key policies and the annual report which contains the Corporate Governance Statement. ASX
announcements, Company reports and presentations are uploaded to the website following release to the ASX and editorial
content is updated on a regular basis.
Investor relations
A Shareholder Communication Policy can be found on the Company’s website.
It is the Company’s desire that shareholders receive communications electronically in the interests of the environment and
constraining costs. In an endeavour to drive this objective the Company has a policy of providing hard materials at least cost
(which will generally involve a black & white presentation even where the electronic version is full colour).
Shareholder participation at general meetings
The Company encourages shareholders to attend all general meetings of the Company and sets the time and place of each
meeting to promote maximum attendance by Shareholders. The Company encourages Shareholders to submit questions in
advance of a general meeting, and for the responses to these questions to addressed through disclosure relating to that
meeting.
The Company’s Shareholder Communication Policy is disclosed on the Company’s website.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
Risk Management Policy
Lotus Resources recognises that risk is inherent to any business activity and that managing risk effectively is critical to the
immediate and future success of the Company. The Board has not established a Risk Committee however it does have a Risk
Policy which can be found on the company’s website.
Risk oversight
Lotus Resources’ risk management framework is supported by the Board of Directors and management. The Board is
responsible for approving and reviewing the Company’s risk management strategy and policy. Management is responsible
for monitoring that appropriate processes and controls are in place to effectively and efficiently manage risk.
32
The Board also has, where required, delegated responsibilities in relation to risk management and the financial reporting
process. The Company is subject to, and responsible for, existing environmental liabilities associated with its tenements.
The Company will continually monitor its ongoing environmental obligations and risks and implement rehabilitation and
corrective actions as appropriate to remain compliant. These risks may be impacted by change in Government policy. The
Company does have exposure to economic and social sustainability risks and manages these through a program of active
engagement with local communities, government and key stakeholders.
Internal audit
The CFO, whom is currently a contractor, discusses with its external auditor each end of year and half year whether there
are any issues with internal control and improvements which could be undertaken to improve them. The CFO also has a
background in assurance and advisory including internal audit.
Reporting and assurance
When reviewing the financial reports, the Board receives a written statement declaration in accordance with section 295A
of the Corporations Act 2001, signed by the Managing Director and Chief Financial Officer (or their equivalents), that the
Company’s financial reports give a true and fair view, in all material respects, of the Company’s financial position and comply
in all material respects with relevant accounting standards. This statement also confirms that the Company’s financial
reports are founded on a sound system of risk management and internal control and that the system is operating effectively
in relation to financial reporting risks.
Similarly, in a separate written statement, the Managing Director also confirms to the Board that the Company’s risk
management and internal control systems are operating effectively in relation to material business risks for the period, and
that nothing has occurred since period-end that would materially change that position.
The Risk Management Policy is available on the Lotus Resources website.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
Nomination and Remuneration Committee
The Nomination and Remuneration Committee and the Board has delegated responsibilities in relation to the Company’s
remuneration policies as set out in the Nomination and Remuneration Committee Charter. The Charter reflects the matters
set out in the commentary and guidance for Recommendation 8.1. Further detail regarding the Nomination and
Remuneration Committee can be found above at Principle 2: Structure the board to add value.
Non-executive directors’ remuneration policy
The structure of non-executive directors’ remuneration is clearly distinguished from that of executives. Remuneration for
non-executive directors is fixed. Total remuneration for all non-executive directors, last voted upon by shareholders at the
2007 General Meeting, is not to exceed $500,000 per annum.
There is currently no performance related compensation for non-executive directors in place.
Neither the non-executive directors nor the executives of the Company receive any retirement benefits, other than
superannuation.
Executive directors’ remuneration policy
As noted previously, executive directors are employed pursuant to employment agreements. Summaries of these
employment agreements are set out in the Remuneration Report.
Further details regarding the remuneration arrangements of the Company are set out in the Remuneration Report.
The checklist below summarises the Company’s compliance with the Recommendations for the financial year.
Requirement
Pr 1
Lay solid foundations for management and oversight
Comply
Yes/ No
Reference/
Explanation
33
Companies should establish a code of conduct and disclose the code or
a summary of the code as to:
Yes
Website & Page
31
Rec 1.1
Rec 1.2
Rec 1.3
Companies should establish the functions reserved to the board and
those delegated to senior executives and disclose the functions.
Companies should disclose the process for evaluating the performance
of senior executives.
Companies should provide the information indicated in the Guide to
reporting to Principle 1.
Pr 2
Structure the board to add value
Rec 2.1
A majority of the board should be independent directors.
Rec 2.2
The chairman should be an independent director.
Rec 2.3
Rec 2.4
Rec 2.5
Rec 2.6
Pr 3
Rec 3.1
Rec 3.2
Rec 3.3
Rec 3.4
Rec 3.5
The roles of chairman and chief executive officer should not be
exercised by the same individual.
The board should establish a nomination committee.
Companies should disclose the process for evaluating the performance
of the board, its committees and individual directors.
Companies should provide the information indicated in the Guide to
reporting to Principle 2.
Requirement
Promote ethical and responsible decision making
▪
▪
▪
the practices necessary to maintain confidence in the
company’s integrity;
the practices necessary to take into account their legal
obligations and the reasonable expectations of their
stakeholders; and
the responsibility and accountability of
reporting and investigating reports of unethical practices.
individuals for
Companies should establish a policy concerning diversity and disclose
the policy or a summary of that policy. The policy should include
requirements for the Board to establish measurable objectives for
achieving gender diversity for the Board to assess annually both the
objectives and progress in achieving them.
Companies should disclose in each annual report the measurable
objectives for achieving gender diversity set by the Board in accordance
with the Diversity Policy and progress towards achieving them.
Companies should disclose in each annual report the proportion of
women employees in the whole organisation, women in senior
executive positions and women on the Board.
Companies should provide the information indicated in the Guide to
reporting on Principle 3.
Pr 4
Safeguard integrity in financial reporting
Rec 4.1
The board should establish an audit committee.
Rec 4.2
The audit committee should be structured so that it:
▪
▪
▪
▪
consists only of non-executive directors;
consists of a majority of independent directors;
is chaired by an independent chair, who is not the chair of the
board; and
has at least three members.
34
Yes
Yes
Yes
Yes
N/A
Yes
Yes
Yes
Yes
Website & Page
29
Website & Page
29
Website & Page
29
Website & Page
30
Website & Page
30
Website & Page
30
Website & Page
30
Website & Page
31
Website & Page
31
Comply
Yes/ No
Reference/
Explanation
Yes
Website & Page
29
Website & Page
29
Website & Page
29
Website & Page
31
Website & Page
31
Website & Page
31
No
Yes
Yes
No
No
No
No
No
Rec 4.3
The audit committee should have a formal charter.
Rec 4.4
Pr 5
Rec 5.1
Rec 5.2
Pr 6
Rec 6.1
Rec 6.2
Pr 7
Rec 7.1
Rec 7.2
Rec 7.3
Rec 7.4
Companies should provide the information indicated in the Guide to
reporting on Principle 4.
Make timely and balanced disclosure
Companies should establish written policies designed to ensure
compliance with ASX Listing Rule disclosure requirements and to ensure
accountability at a senior level for that compliance and disclose those
policies or a summary of those policies.
Companies should provide the information indicated in the Guide to
reporting on Principle 5.
Respect the rights of shareholders
Companies should design a communications policy for promoting
effective communication with shareholders and encouraging their
participation at general meetings and disclose their policy or a summary
of that policy.
Company should provide the information indicated in the Guide to
reporting on Principle 6.
Requirement
Recognise and manage risk
Companies should establish policies for the oversight and management
of material business risks and disclose a summary of those policies.
The board should require management to design and implement the
risk management and internal control system to manage the company’s
material business risks and report to it on whether those risks are being
managed effectively. The board should disclose that management has
reported to it as to the effectiveness of the company’s management of
its material business risks.
The board should disclose whether it has received assurance from the
chief executive officer (or equivalent) and the chief financial officer (or
equivalent) that the declaration provided in accordance with section
295A of the Corporations Act 2001 is founded on a sound system of risk
management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks.
Companies should provide the information indicated in the Guide to
reporting on Principle 7.
Pr 8
Remunerate fairly and responsibly
Rec 8.1
The board should establish a remuneration committee.
Rec 8.2
The remuneration committee should be structured so that it:
▪
▪
▪
consists of a majority of independent directors;
is chaired by an independent chair; and
has at least three members.
Rec 8.3
Rec 8.4
Companies should clearly distinguish the structure of non-executive
directors’ remuneration from that of executive directors and senior
executives.
Companies should provide the information indicated in the Guide to
reporting on Principle 8.
No
Yes
Yes
Yes
Yes
Yes
Website & Page
31
Website & Page
31
Website & Page
31
Website & Page
31
Website & Page
32
Website & Page
32
Comply
Yes/ No
Reference/
Explanation
Yes
Yes
Website & Page
32
Website & Page
32
Yes
Website & Page
33
Yes
Yes
Yes
Yes
Yes
Website & Page
33
Website & Page
33
Website & Page
33
Website & Page
33
Website & Page
33
35
S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R
C O M P R E H E N S I V E I N C O M E
for th e year en d ed 30 J u n e 2 02 0
Other income
Corporate and administrative expenses
Exploration and evaluation salary and general expenses
Care and maintenance costs
Exploration and evaluation impairment
Loss before income tax
Income tax expense
Loss after income tax
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Total other comprehensive income
Note
Consolidated
2020
$
Consolidated
2019
$
3(a)
3(b)
3(c)
9
160,324
(1,978,085)
-
(1,970,565)
(12,781,617)
41,683
(790,890)
(72,157)
-
-
(16,569,943)
(821,364)
5
-
-
(16,569,943)
(821,364)
(726,132)
(726,132)
-
-
Total comprehensive loss for the period
(17,296,075)
(821,364)
Loss attributable to:
Non-controlling interests
Members of the parent
Total comprehensive loss attributable to:
Non-controlling interests
Members of the parent
(647,723)
(15,922,220)
(16,569,943)
(660,220)
(16,635,855)
(17,296,075)
-
-
(821,364)
-
-
(821,364)
Loss per share
Basic and diluted loss per share (cents)
21
(4.58)
(0.82)
The statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
36
S T A T E M E N T O F F I N A N C I A L P O S I T I O N
as at 30 J u n e 20 20
Current Assets
Cash and cash equivalents
Other assets
Total Current Assets
Non-Current Assets
Plant and equipment
Exploration and evaluation assets
Right-of-use assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Lease liabilities
Other liabilities
Total Current Liabilities
Non-Current Liabilities
Other liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Equity attributable to owners of the Company
Non-controlling interest
Total Equity
Note
Consolidated
2020
$
Consolidated
2019
$
6
7
8
9
10
11
12
13
14
14
15
16
17
18
16,496,834
611,441
17,108,275
72,846
63,678
136,524
-
65,056,336
24,402
1,917
11,789,470
-
65,080,738
11,791,387
82,189,013
11,927,911
1,385,645
-
27,284
1,456,134
2,869,063
10,280,670
61,427,529
71,708,199
236,758
150,000
-
-
386,758
-
-
-
74,577,262
386,758
7,611,751
11,541,153
57,157,521
350,804
(51,427,354)
6,080,971
1,530,780
43,790,848
1,064,439
(33,314,134)
11,541,153
-
7,611,751
11,541,153
The above statement of financial position should be read in conjunction with the accompanying notes.
37
S T A T E M E N T O F C H A N G E S I N E Q U I T Y
for th e year en d ed 30 J u n e 2 02 0
Contributed
Equity
Share
Based
Payment
Reserve
Option
Premium
Reserve
$
43,790,848
$
46,040
$
1,018,399
Consolidated
2020
Balance at 1 July 2019
Loss after income tax
Other comprehensive income
Total comprehensive loss for the year
-
-
-
NCI at acquisition date
Placement of shares
Shares issued on exercise of options
Shares issued on conversion of con
notes
Shares consideration on acquisition of
subsidiary
Share issue costs
-
8,000,701
2,284,681
500,696
3,060,000
(479,405)
Foreign
exchange
reserve
$
-
-
(713,635)
Accumulated
Losses
Non-
controlling
interest
Total
Equity
$
(33,314,134)
$
$
-
11,541,153
(15,922,220)
(647,723)
(16,569,943)
-
(12,497)
(726,132)
(713,635)
(15,922,220)
(660,220)
(17,296,075)
-
-
-
-
-
-
(2,191,000)
-
-
2,191,000
-
-
-
-
-
-
-
-
-
8,000,701
2,284,681
500,696
3,060,000
(479,405)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 30 June 2020
57,157,521
46,040
1,018,399
(713,635)
(51,427,354)
1,530,780
7,611,751
Consolidated
2019
Contributed
Equity
Share
Based
Payment
Reserve
Option
Premium
Reserve
Foreign
exchange
reserve
Balance at 1 July 2018
Loss after income tax
Other comprehensive income
Total comprehensive loss for the year
$
43,790,848
$
46,040
$
1,018,399
$
-
-
-
-
-
-
-
-
-
Balance at 30 June 2019
43,790,848
46,040
1,018,399
-
-
-
-
-
Accumulated
Losses
$
(32,492,770)
(821,364)
-
(821,364)
(33,314,134)
Non-
controlling
interest
$
-
-
-
-
-
Total
Equity
$
12,362,517
(821,364)
-
(821,364)
11,541,153
The above statement of changes in equity should be read in conjunction with the accompanying notes
38
S T A T E M E N T O F C A S H F L O W S
for th e year en d ed 30 J u n e 2 02 0
Cash flows from operating activities
Receipts from customers
Interest received
Payments to suppliers and employees
Payments for care and maintenance
Interest paid
Note
Consolidated
2020
$
Consolidated
2019
$
175,850
6,607
(1,714,258)
(2,298,648)
(19,450)
37,440
4,243
(815,023)
-
-
Net cash outflow from operating activities
24
(3,849,899)
(773,340)
Cash flows from investing activities
Payments for plant and equipment
Payments for exploration expenditure – acquisition costs
Payments for exploration expenditure – capitalised costs
Cash acquired on acquisition of subsidiary
(2,954)
(3,393,358)
(1,074,141)
14,643,349
(5,361)
-
(379,684)
-
Net cash inflow/(outflow) from investing activities
10,172,896
(385,045)
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Repayment of loan
Proceeds from loan
Repayment of lease liabilities
10,786,080
(479,405)
(150,000)
-
(55,684)
-
-
-
150,000
-
Net cash inflow from financing activities
10,100,991
150,000
Net increase/(decrease) in cash held
16,423,988
(1,008,385)
Cash and cash equivalents at the beginning of the financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
6
6
72,846
1,081,231
-
-
16,496,834
72,846
The above statement of cash flows should be read in conjunction with the accompanying notes.
39
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
This financial report includes the financial statements and notes of Lotus Resources Limited and controlled entities
(“consolidated entity” or the “Group”). The separate financial statements and notes of Lotus Resources Limited as an
individual parent entity (“Company”) have not been presented within this financial report as permitted by the Corporations
Act 2001.
The financial report was authorised for issue on 30 September 2020 by the Directors of the Company.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees
eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value
assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-
line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in
operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods
of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under
AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating
expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash
flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately
disclosed in financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for
leases.
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The
impact of adoption on opening retained profits as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental borrowing rate of
7.12% (AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities - non-current (AASB 16)
Reduction in opening retained profits as at 1 July 2019
1 July 2019
$
76,656
(3,107)
73,549
(58,157)
(15,392)
-
When adopting AASB 16 from 1 July 2019, the consolidated entity has applied the following practical expedients:
•
•
•
•
•
applying a single discount rate to the portfolio of leases with reasonably similar characteristics;
accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short-term leases;
excluding any initial direct costs from the measurement of right-of-use assets;
using hindsight in determining the lease term when the contract contains options to extend or terminate the lease;
and
not apply AASB 16 to contracts that were not previously identified as containing a lease.
40
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Basis of Preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting
Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting
Standards Board (“AASB”) and the Corporations Act 2001.
The financial report covers Lotus Resources Limited and its subsidiaries and has been prepared in Australian dollars. Lotus
Resources Limited is a listed public company, incorporated and domiciled in Australia.
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 to which they apply. Compliance with
Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial
Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below.
They have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals 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.
Going concern
These financial statements have been prepared on the going concern basis, which contemplates the continuity of normal
business activities and the realisation of assets and settlement of liabilities in the normal course of business.
As disclosed in the financial statements, the consolidated entity incurred a loss of $16,569,943 and had net cash outflows
from operating activities of $3,849,899 for the year ended 30 June 2020. The ability of the consolidated entity to continue
as a going concern is principally dependent upon the ability of the consolidated entity to secure funds by raising capital from
equity markets and managing cash flows in line with available funds.
These factors indicate a material uncertainty which may cast significant doubt as to whether the consolidated entity will
continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course
of business and at amounts stated in the financial report.
The Directors believe that it is reasonably foreseeable that the consolidated entity will continue as a going concern and that
it is appropriate to adopt the going concern basis in the preparation of the financial report after consideration of the following
factors:
•
•
•
As disclosed in Note 29, subsequent to the reporting date, 65,934,365 unlisted options were exercised at $0.04 per
options for gross proceeds before costs of $2,637,375;
The Company has the ability to issue additional equity securities under the Corporations Act 2001 to raise further
working capital; and
The consolidated entity has the ability to curtail administrative, discretionary exploration and overhead cash
outflows as and when required.
Accordingly, the Directors believe that the consolidated entity will be able to continue as a going concern and that it is
appropriate to adopt the going concern basis in the preparation of the financial report.
The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities
that might be necessary if the consolidated entity does not continue as a going concern.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in Note 27.
41
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Lotus Resources Limited as
at 30 June 2020 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Company has control. The Company controls an entity when they are
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. Subsidiaries are fully consolidated from the date on which control is
transferred to the Company. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity. Losses incurred by the
consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the Company loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Company
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates
in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and
estimates on historical experience and on other various factors it believes to be reasonable under the circumstances.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amount recognised in the financial statements are outlined below:
Share based payments transactions
The consolidated entity measures the cost of equity-settled transactions with employees 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 an appropriate valuation
model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates
and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets
and liabilities within the next annual reporting period but may impact profit or loss and equity.
Exploration and evaluation costs
Exploration and evaluation costs have been capitalised on the basis that activities in the area have not yet reached a stage
that permits reasonable assessment of the existence of economically recoverable reserves. Key judgements are applied in
considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating
overheads between those that are expensed and capitalised.
Rehabilitation provision
A provision has been made for the anticipated costs for future rehabilitation of land explored or mined. The consolidated
entity's mining and exploration activities are subject to various laws and regulations governing the protection of the
environment. The consolidated entity recognises management's best estimate for assets retirement obligations and site
rehabilitations in the period in which they are incurred. Actual costs incurred in the future periods could differ materially
from the estimates. Additionally, future changes to environmental laws and regulations could affect the carrying amount of
this provision.
42
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the consolidated entity based on known information. This consideration extends to the nature of the products and
services offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other
than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial
statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity
unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic.
Summary of Significant Accounting Policies
Foreign currency
Functional and presentation currency
Both the functional and presentation currency of Lotus Resources Limited is Australian Dollars ($).
Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
Segment reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and
incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make
decisions about resources to be allocated to the segment and assess its performance and for which discrete financial
information is available. This includes start up operations which are yet to earn revenues. Management will also consider
other factors in determining operating segments such as the level of segment information presented to the Board of
Directors.
Operating segments have been identified based on the information provided to the chief operating decision makers – being
the Board of Directors.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes,
cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the
statement of financial position.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30
days.
The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
43
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction
price which takes into account estimates of variable consideration and the time value of money; allocates the transaction
price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or
service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts
the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration
is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues
until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject
to the constraining principle are recognised as a refund liability.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Earnings per share
Basic earnings per share
Basic earnings per share are calculated by dividing:
•
•
The profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary
shares.
By the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account:
•
The after-income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares, and
The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of
all dilutive potential ordinary shares.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either
amortised cost or fair value depending on their classification. Classification is determined based on both the business model
within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting
mismatch is being avoided.
44
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, it's carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as
financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where
they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii)
designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity
intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured
at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon
the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk
has increased significantly since initial recognition, based on reasonable and supportable information that is available,
without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected
credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable
to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where
it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit
losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of
anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within
other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.
Exploration and evaluation expenditure
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest.
These costs are only carried forward to the extent that they are expected to be recouped through the successful development
of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence
of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against
profit in the year in which the decision to abandon the area is made. A regular review is undertaken of each area of interest
to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
Provisions
A provision has been made for the anticipated costs for future rehabilitation of land explored or mined. Provisions are
recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is
probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount
of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the
time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase
in the provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled
wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are
settled.
45
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at
the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated
future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Plant and equipment
Recognition and measurement
Items of plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of the asset.
Subsequent costs
The cost of replacing part of an item of plant and equipment is recognised in the carrying amount of the item if it is probable
that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The
costs of day-to-day servicing of plant and equipment are recognised in profit or loss as incurred.
Depreciation
Items of plant and equipment are depreciated using the diminishing value method over their estimated useful lives of each
part of an item of plant and equipment. The depreciation rates used for each class of asset for the current period are as
follows:
Plant and Equipment
Fixtures and Fittings
▪
▪
▪ Motor Vehicles
33%
25%
25%
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
Income tax
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
(a)
(b)
except where the deferred income tax liability arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, except where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
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 taxable profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:
(a)
except where the deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss; and
46
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
(b)
in respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be
utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Lotus Resources Limited has unused tax losses. However, no deferred tax balances have been recognised, as it is considered
that asset recognition criteria have not been met at this time.
Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount
of GST incurred is not recoverable from the Australian Tax Office (ATO). 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 are stated with the amount of GST included. The net amount of GST recoverable from, or payable
to, the ATO is included as a current asset or liability in the Statement of Financial Position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from
investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at
the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit
or loss as incurred.
Trade and other payables
Liabilities are initially recognised at fair value and subsequently measured at cost for amounts to be paid in the future for
goods or services received, whether or not billed to the Group. Trade accounts payable are normally settled within 60 days.
Loans and borrowings
Loans are recognised at their principal amount, subject to set-off arrangements. Borrowing costs are recognised as an
expense when incurred.
47
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Contributed equity
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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a
business are not included in the cost of the acquisition as part of the purchase consideration.
If the Company reacquires its own equity instruments, for example as a result of a share buy-back, those instruments are
deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the
consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.
Share-based payment transactions
Equity-settled and cash-settled share-based compensation benefits are provided to Key Management Personnel and
employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash
is determined by reference to the share price.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying an
appropriate valuation model, taking into consideration the terms and conditions on which the award was granted. The
cumulative charge to profit or loss until settlement of the liability is calculated as follows:
•
•
During the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied
by the expired portion of the vesting period.
From the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at
the reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition
is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award
is treated as if they were a modification.
48
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise
of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is
reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on
an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is
made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully
written down.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within
12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used
to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is
no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other
liabilities are classified as non-current.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit
or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated
entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest
in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount
is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest
in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the
acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value
of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly
in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement
of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the
acquirer's previously held equity interest in the acquirer.
49
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends
on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information
possible to determine fair value.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2020. The
consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most
relevant to the consolidated entity, are set out below.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early
adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance
on measurement that affects several Accounting Standards. Where the consolidated entity has relied on the existing
framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with
under the Australian Accounting Standards, the consolidated entity may need to review such policies under the revised
framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the
consolidated entity's financial statements.
2. FINANCIAL RISK MANAGEMENT
Overview
The Group has exposure to the following risks from their use of financial instruments:
▪ credit risk
▪ liquidity risk
▪ market risk
This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes
for measuring and managing risk, and the management of capital. There has been no change from prior year in relation to
all of the exposures. Further quantitative disclosures are included in Note 19.
50
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
2. FINANCIAL RISK MANAGEMENT (cont’d)
The Group’s risk management framework is supported by the Board and management. The Board is responsible for
approving and reviewing the Group’s risk management strategy and policy. Management are responsible for monitoring
that appropriate processes and controls are in place to effectively and efficiently manage risk. The Board is responsible for
identifying, monitoring and managing significant business risks faced by the Group and considering the effectiveness of its
internal control system.
The Board has established an overall Risk Management Policy which sets out the Group’s system of risk oversight,
management of material business risks and internal control.
Financial risk management objectives
The overall financial risk management strategy focuses on the unpredictability of the finance markets and seeks to minimise
the potential adverse effects on financial performance and protect future financial security.
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s cash and cash equivalents. For the Company, it arises from receivables
due from subsidiaries.
The Group does not hold any credit derivatives to offset its credit exposure.
Liquidity risk
Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet their obligations to
repay their financial liabilities as and when they fall due.
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Board has determined an
appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding
and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and
continuously monitoring budgeted and actual cash flows and matching the maturity profiles of financial assets, expenditure
commitments and liabilities.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and commodity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters, while optimising return.
Foreign currency risk
The Group is not materially exposed to foreign currency risk.
Interest rate risk
The Group’s exposure to interest rates primarily relates to the Group’s cash and cash equivalents and held to maturity
investments. The Group manages market risk by monitoring levels of exposure to interest rate risk and assessing market
forecasts for interest rates.
Fair value measurements
The fair values of financial assets and liabilities are determined in accordance with generally accepted pricing models based
on estimated future cash flows. The Directors consider that the carrying amounts of financial assets and financial liabilities
recorded in the financial statements approximate their fair values.
51
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
3. OTHER INCOME AND EXPENSES
(a) Other income
Interest income
Australian tax office COVID relief
Other
(b) Corporate and administrative expenses
Employee benefits and director fees
Depreciation - Plant and equipment
Depreciation - Right-of-use asset
Accounting fees
Interest expense
Legal fees1
Other administrative costs
1 Includes acquisition and s249D legal costs.
(c) Care and maintenance costs
Processing costs
Engineering fees
Site services costs
Security fees
Other costs
Consolidated
2020
$
Consolidated
2019
$
6,607
44,050
109,667
160,324
483,737
4,871
58,564
169,913
19,449
479,900
761,651
1,978,085
219,101
865,172
181,602
223,758
480,932
1,970,565
4,243
-
37,440
41,683
349,962
8,165
-
76,904
219
-
355,640
790,890
-
-
-
-
-
-
4. AUDITOR’S REMUNERATION
The following amounts were paid or payable for services provided by the auditors of the Group and its related practices.
Audit services:
RSM Australia Partners
- audit and review of financial reports
50,000
50,000
28,500
28,500
5. TAXATION
The prima facie tax on loss before income tax is reconciled to the income tax expense as follows:
Income tax expense
-
-
52
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
At 30 June 2020, the Group had net operating loss-forward totalling $351,302,061. No deferred tax assets have been
recognized with respect to these operating or capital losses. The deferred tax asset has not been bought to accounts t at
reporting date because the Directors do not believe it is appropriate to regard realisation of the deferred tax asset as
probable at this point in time. This benefit will only be obtained if:
•
•
•
The company derives future assessable income of a nature and of an amount sufficient to enable the benefits from
the deduction for the losses to be realised;
the company continues to comply with the conditions for deductibility imposed by tax legislation; and
no changes in tax legislation adversely affect the company in realising the benefit from the deduction for the losses.
6. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash1
Consolidated
2020
$
Consolidated
2019
$
1,935,494
14,561,340
16,496,834
72,846
-
72,846
1 As at 30 June 2020, restricted cash consists of a collateral deposit in the form of a bond issued for rehabilitation
obligations of the Kayelekera Uranium Project in Malawi in the amount of US$10,000,000. The security for environmental
protection, rehabilitation and closure costs has been provided in the form required by the relevant Malawian authorities.
The bond was transferred to the Company as part of the Kayelekera Uranium Project acquisition.
The Company acquired the bond as part of the acquisition of the Kayelekera Uranium Project. This is restricted cash that
cannot be used to fund operations whilst the environmental performance bond is in place. The Company is currently
working with its bank and insurance company to put insurance in place that would allow the Company to access part of
the funds currently restricted by the bond. Refer to Note 26.
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note
19.
7. OTHER ASSETS
Other receivables
Prepayments
GST
Security bond
41,545
340,677
199,219
30,000
611,441
63,678
-
-
-
63,678
The Group’s exposure to credit risk related to other receivables is disclosed in Note 19.
Allowance for expected credit losses
The Group did not recognise any losses (2019: Nil) in profit or loss in respect of the expected credit losses for the year
ended 30 June 2020.
53
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
8. PLANT AND EQUIPMENT
At 30 June 2020 (Consolidated)
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2020 (Consolidated)
At 1 July 2019, net of accumulated depreciation
Additions
Depreciation charge for the year
At 30 June 2020, net of accumulated depreciation
At 30 June 2019 (Consolidated)
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2019 (Consolidated)
At 1 July 2018, net of accumulated depreciation
Additions
Depreciation charge for the year
At 30 June 2019, net of accumulated depreciation
Furniture &
Fixtures
$
Plant &
Equipment
$
Motor
Vehicles
$
Total
$
78,850
(78,850)
-
1,917
2,954
(4,871)
-
75,896
(73,979)
1,917
4,721
5,361
(8,165)
1,917
13,941
(13,941)
26,000
(26,000)
118,791
(118,791)
-
-
-
-
-
-
-
-
-
-
13,941
(13,941)
26,000
(26,000)
-
-
-
-
-
-
-
-
-
-
-
1,917
2,954
(4,871)
-
115,837
(113,920)
1,917
4,721
5,361
(8,165)
1,917
As outlined in note 26 the Company acquired the Kayelekera Uranium Project during the year. As part of the acquisition the
Company acquired a significant amount of infrastructure, property plant and equipment. Given the mine is currently in care
and maintenance, these assets have been provisionally assessed to have a nil fair value.
9. EXPLORATION AND EVALUATION ASSETS
Consolidated
2020
$
Consolidated
2019
$
Exploration and evaluation expenditure carried forward in respect of areas of
interest (net of amounts written off)
65,056,336
11,789,470
Reconciliation
Carrying amount at the beginning of the year
Exploration and evaluation expenditure
Assets acquired 1
Provision for impairment 2
Carrying amount at the end of the year
1Refer to Note 26 for acquisition.
11,789,470
3,978,327
62,070,156
(12,781,617)
11,553,758
235,712
-
-
65,056,336
11,789,470
2On 13 March 2020 the Company completed the acquisition of the Kayelekera Project which completed a changed in strategic
direction for the Company. The amount of $12,781,617 held on the statement of financial position related to exploration
tenements in Australia including its cobalt tenements in New South Wales. Given that the Group is not expected to allocate
its resources to these tenements in the near future and their decrease in value due to a decline in the cobalt price, the Group
has impaired the entire amount previously capitalised in relation to these tenements.
54
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
10. RIGHT-OF-USE ASSETS
Head office space - right-of-use
Less: accumulated depreciation
Consolidated
2020
$
Consolidated
2019
$
82,966
(58,564)
24,402
-
-
-
The Company’s lease on its previous office premises has been agreed to be terminated effective 30 September 2020.
11. TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
448,375
937,270
1,385,645
186,758
50,000
236,758
The Group’s exposure to credit and liquidity risks related to trade and other payables are disclosed in Note 19.
12. BORROWINGS
Loan payable
-
150,000
This loan payable from Neon Capital Ltd, is with interest rate of 8% per annum, repayable by 30 September 2019.
The loan was fully repaid on 23 September 2019. See Note 23 for further details.
13. LEASE LIABILITIES
Head office space - lease liability
14. OTHER LIABILITIES
Environmental bond - current
Environmental bond - non - current
Deferred shares consideration to be issued on the date that is 3 years after
completion – non-current
27,284
27,284
1,456,134
7,280,670
3,000,000
11,736,804
-
-
-
-
-
-
As disclosed in Note 26, the Group entered into an agreement with ASX listed Paladin Energy Limited (ASX: PDN) to
acquire a 65% interest in the Kayelekera Uranium Project (Kayelekera), located in Malawi.
In addition to the consideration, Paladin Africa must repay (or procure that the Company repays on its behalf) the amount
of US$10,000,000 which had previously been advanced by Paladin to Paladin Africa to fund the environmental bond in
favour of the GoM (Environmental Bond). The following amounts will be payable to Paladin in respect of the
environmental bond advance:
US$4,000,000 on completion (completion occurred 13 March 2020);
i.
ii.
US$1,000,000 ($1,456,134 AUD) on the date that is 1 year after Completion;
iii. US$2,000,000 ($2,912,268 AUD) on the date that is 2 years after Completion; and
iv. US$3,000,000 ($4,368,402 AUD) on the date that is 3 years after Completion.
55
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
15. PROVISIONS
Mine closure provision
Rehabilitation provision
Consolidated
2020
$
Consolidated
2019
$
7,280,670
54,146,859
61,427,5291
-
-
-
1 Refer to Note 26 for acquisition which includes the acquisition of the above end of mine provisions.
A mine closure plan for Kayelekera was prepared in 2019 and presented various options for rehabilitation. Following a review
of the different options presented in the mine closure plan, management decided on the option that was the most likely to
be implemented at Kayelekera which resulted in the provision stated above.
The Company also has in place a cash backed environmental performance bond of $14,561,340 (US$10,000,000) as outlined
in Note 6. The bond is restricted cash to cover closure and rehabilitation costs of the project. The bond is the minimum
amount required to be maintained in accordance with the terms of the Mine Development Agreement for the Kayelekera
Uranium Project and relevant local regulations.
16. CONTRIBUTED EQUITY
Fully paid ordinary shares
Consolidated
2020
$
Consolidated
2019
$
57,157,521
43,790,848
2020
Number of
Shares
2019
Number of
Shares
2020
$
2019
$
Movements during the year:
Opening balance
Shares issued for acquisition
of Kayelekera Uranium
Project
Shares issued via placement
of shares
Exercise of options
Issue of shares on
conversion of convertible
note
Share issue costs
Share consolidation 28:1
Closing balance
100,139,194
2,803,873,559
43,790,848
43,790,848
90,000,000
400,035,033
57,117,025
25,034,798
-
-
672,326,050
-
-
-
-
-
(2,703,734,365)
100,139,194
3,060,000
8,000,701
2,284,681
500,696
(479,405)
-
57,157,521
-
-
-
-
-
-
43,790,848
Ordinary shares entitle the holder to participate in dividends and the proceeds from winding up of the Company in
proportion to the number and amounts paid on the shares held.
On a show of hands every holder of ordinary securities present at a shareholder meeting in person or by proxy is, entitled
to one vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
56
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
17. RESEREVES
Share based payment reserve
Option premium reserve
Foreign exchange reserve
Movement in reserves
Share based payment reserve
Opening balance
Movement during the year
Closing balance
Option premium reserve
Opening balance
Movement during the year
Closing balance
Foreign exchange reserve
Opening balance
Exchange rate differences on translating foreign operations
Closing balance
Movement in options:
Opening balance
Granted
Exercised
Expired
Option consolidation 28:1
Closing balance
Weighted average exercise price of outstanding options (Cents)
Weighted average remaining life of outstanding options (Years)
Share - based payments reserve
Consolidated
2020
$
Consolidated
2019
$
46,040
1,018,399
(713,635)
350,804
46,040
1,018,399
-
1,064,439
46,040
-
46,040
1,018,399
-
1,018,399
-
(713,635)
(713,635)
46,040
-
46,040
1,018,399
-
1,018,399
-
-
-
7,678,571
212,535,006
(57,117,025)
(7,678,571)
-
155,417,981
215,000,000
-
-
-
(207,321,429)
7,678,571
2020
$
4.00
2.48
2019
$
8.00
0.58
This reserve is used to record the value of equity-settled share-based payments provided to employees and directors as
part of their remuneration.
Option premium reserve
This reserve is used to record the value of monies raised from issue of options and from issue of incentive options.
Option expired
7,678,571 options expired during the year.
Foreign currency translation reserve
The foreign currency translation reserve records exchange rate differences on translating foreign operations.
57
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
18. ACCUMULATED LOSSES
Accumulated losses at the beginning of the year
Loss for the year
NCI on acquisition of Kayelekera Uranium Project (Note 26)
Accumulated losses at the end of the year
Consolidated
2020
$
Consolidated
2019
$
(33,314,134)
(15,922,220)
(2,191,000)
(32,492,770)
(821,364)
-
(51,427,354)
(33,314,134)
19. FINANCIAL INSTRUMENTS
For financial risk exposure and management objectives please refer to note 2.
Credit risk
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure.
The Group’s maximum exposure to credit risk at the reporting date was:
Cash and cash equivalents
Other assets (excluding prepayments and GST receivables)
Liquidity risk
Carrying Amount
Consolidated
2020
$
Consolidated
2019
$
16,496,834
71,545
16,568,376
72,846
63,678
136,524
The following are the contractual maturities of financial liabilities on an undiscounted basis, including estimated interest
payments. Cash flows for assets and liabilities without fixed amount or timing are based on conditions existing at year
end.
Consolidated
30 June 2020
Carrying
amount
Contractual
cash flows
1 year
2-5 years
>5 years
Financial Liabilities
Trade and other payables
Lease liabilities
Other liabilities
1,385,645
27,284
11,736,804
(1,385,645)
(27,284)
(11,736,804)
(1,385,645)
(27,284)
(1,456,134)
13,149,733
(13,149,733)
(2,869,063)
-
-
(10,280,670)
(10,280,670)
-
-
-
Consolidated
30 June 2019
Carrying
amount
Contractual
cash flows
1 year
2-5 years
>5 years
Financial Liabilities
Trade and other payables
Borrowings
236,758
150,000
368,235
(236,758)
(150,000)
(236,758)
(150,000)
(368,235)
(368,235)
-
-
-
-
-
-
58
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
19. FINANCIAL INSTRUMENTS DISCLOSURE (CONT’D)
Interest rate risk
Profile
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Variable rate instruments
Financial assets
Financial liabilities
Carrying Amount
Consolidated
2020
$
Consolidated
2019
$
16,496,834
-
16,496,834
72,846
-
72,846
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at reporting date would have increased/(decreased) equity and profit or
loss by the amounts shown below. The Board assessed a 100-basis point movement as being reasonably possible based
on short term historical movements. This analysis assumes that all other variables remain constant. The analysis is
performed on the same basis for 2019.
Financial instruments with interest rate
Financial assets
Financial liabilities
Financial instruments with interest rate
Financial assets
Financial liabilities
Consolidated
2020
+100 basis points
-100 basis points
Profit
$
1,650
-
Equity
$
1,650
-
Profit
$
(1,650)
-
Equity
$
(1,650)
-
Consolidated
2019
+100 basis points
-100 basis points
Profit
$
Equity
$
Profit
$
Equity
$
73
-
73
-
(73)
-
(73)
-
The weighted average effective interest rate on variable rate instruments was 0.30% (2019: 0.50%).
20. COMMITMENTS
Exploration Project commitments
Commitments for mining license/tenement rentals due within one year: $17,329
Commitments for purchase of spares and other suppliers due within one year: $2,177
59
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
21. LOSS PER SHARE
a.
Reconciliation of earnings to profit or loss:
Loss
Loss used to calculate basic EPS
Loss used in the calculation of dilutive EPS
b.
Weighted average number of ordinary shares outstanding
during the year used in calculating basic EPS
Weighted average number of dilutive options outstanding
Weighted average number of ordinary shares outstanding
Consolidated
2020
$
Consolidated
2019
$
(16,569,943)
(16,569,943)
(16,569,943)
(821,364)
(821,364)
(821,364)
No.
No.
361,566,438
100,139,194
-
-
during the year used in calculating dilutive EPS
361,566,438
100,139,194
22. SEGMENT REPORTING
In the current year, the Group operated in two geographical and business segments, being Africa (Uranium) and Australia
(Minerals).
Operating segments are reported in a manner that is consistent with the internal reporting to the chief operating decision
maker (CODM), which has been identified by the Group as the board of Directors.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other
components.
At 30 June 2020, the Group had the following segments
Operating Profit/(Loss)
30/6/2020
$
30/6/2019
$
Total Assets
Total Liabilities
30/6/2020
$
30/6/2019
$
30/6/2020
$
30/6/2019
$
Uranium (Africa)
(1,850,637)
Minerals (Australia)
(12,781,617)
-
-
82,164,611
-
70,715,596
-
11,789,470
3,000,000
Corporate
(1,937,689)
(821,364)
24,402
1,917
861,666
(16,569,943)
(821,364)
82,189,013
11,791,387
74,577,262
-
-
386,758
386,758
60
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
23. RELATED PARTY DISCLOSURES
(a) Ultimate parent
Lotus Resources Limited is the ultimate Australian entity.
(b) Subsidiaries
Interests in subsidiaries are set out in note 28.
(c) Key management personnel compensation
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set
out below:
Short-term employee benefits
Post-employment benefits
2020
$
457,291
28,878
486,169
2019
$
308,400
18,881
327,281
(d) Loans to related parties
No loans were advanced to related parties during the reporting year (2019: Nil).
(e) Amounts owed to related parties
As at the reporting date, $118,530 were owing to related parties (2019: Nil) as disclosed in detail below.
(f) Other key management personnel transactions with the Group
Mr. Grant Davey, who was a Non-Executive Director of the Company is a Director and shareholder of Matador Capital
Pty Ltd (Matador Capital). During the financial year ended 30 June 2020, the Company incurred $200,000 for the fee to
acquire Kayelekera Uranium Project and reimbursement of acquisition costs of $100,000 to Matador Capital. The
Company also made payments to Matador Capital under a Shared Services Agreement in which Matador Capital provides
office space and general office costs to the Company at cost plus 2%. The Company also uses Matador Capital’s technical
and project management expertise. During the year the Company incurred costs under this arrangement totalling
$213,663. These services provided by Matador Capital were done so at an arm’s length basis and on normal commercial
terms. There is a balance of $60,293 owing to Matador Capital as at 30 June 2020 in relation to the provision of these
services.
During the financial year Mr. Davey was a Director of Graphex Mining Limited (Graphex) (now Marvel Gold Limited)
(resigned 25 September 2020) and former Director of Matador Mining Ltd (Matador Mining) (resigned 2 June 2020), ASX
listed Companies that are also parties to the Shared Services Agreement with the Company. Under this arrangement
Graphex and Matador Mining provide company secretarial, accounting and administration services. The Company
incurred costs from Graphex and Matador Mining of $53,344 and $4,893 respectively. These amounts were outstanding
at year end.
On 23 July 2019, the Company entered into a convertible loan agreement with Matador Capital Ltd for $500,696.
Matador Capital subsequently converted the loan to equity on 24 October 2019, with 25,034,800 fully paid shares being
issued at a share price for $0.02 along with one free attaching option for every two shares issued.
On 29 April 2019, the Company entered into a loan agreement with Neon Capital Ltd (Neon Capital) for $150,000. The
terms of the loan were for the loan to be repaid by 30 September 2019 and interest to be accrued at 8% per annum.
Neon Capital has subsequently participated in the rights issue and the loan was repaid on 23 September 2019. Tim Kestell
is a director of Neon Capital.
There were no other related party transactions with key management personnel during the year.
61
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
24. RECONCILIATION OF CASH FLOWS USED IN OPERATING ACTIVITIES
Cash flows from operating activities
Loss for the year
Adjustments for:
Depreciation
Impairment
Foreign currency translated difference
Operating loss before changes in working capital
Change in other assets
Change in trade and other payables
Net cash used in operating activities
25. CONTINGENT LIABILITIES
Bank Guarantee
Consolidated
2020
$
Consolidated
2019
$
(16,569,943)
(821,364)
63,437
12,781,617
(726,132)
(4,451,021)
(547,763)
1,148,885
(3,849,899)
8,165
-
-
(813,199)
38,452
1,407
(773,340)
The Company has given a bank guarantee of $20,000 (2019: $20,000) to the Department of Mines and Petroleum for a
tenement bond.
Tabac Project
On 7 December 2016, the Company completed the acquisition of the Tabac project. As part of the purchase consideration,
62,500,000 performance shares were issued to the shareholders of Westview Resources Pty Ltd which shall convert to shares
in the Company based on the achievement of certainperformance hurdles. It also assumed a contingent liability for a royalty
payable.
Performance shares
(i)
Class A - 31,250,000 performance shares shall convert to shares in the Company based on the achievement of an
Inferred Mineral Resource in accordance with the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (2012 Edition) (JORC Code) (including cumulative production) of not less than 50,000
tonnes contained Cobalt at a minimum grade of 0.3% Cobalt within the Tenements; and
(ii) Class B - 31,250,000 performance shares: shall convert to shares in the Company based on the achievement of an
Inferred Mineral Resource in accordance with the JORC Code (including cumulative production) of not less than
100,000 tonnes contained Cobalt at a minimum grade of 0.3% Cobalt within the Tenements.
Royalty
2% net smelter return royalty is payable on the gross sales of all future metals obtained from the tenements acquired and
sold on an arm’s length basis.
Hylea Project
On 5 February 2018, the Company completed the acquisition of the Hylea project. As part of the purchase consideration, the
Company assumed a contingent liability for a royalty payable.
Royalty
1.5% net smelter return royalty is payable on the gross sales of all future metals obtained from the tenements acquired and
sold on an arm’s length basis.
62
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
Kayelekera Uranium Project
At 30 June 2020, the Company had three agreements providing for royalty payments to local government and former owners
for production from the Kayelekera Uranium Project. Royalties payable on production comprise an uncapped 3.0% royalty
on revenue to the Malawi Government, a 3.5% royalty on revenue capped at US$5.0 million to Paladin Energy and an
uncapped 0.75% royalty on revenue to Power Resources Limited.
26. ACQUISITION OF KAYELEKERA URANIUM PROJECT
On 24 June 2019, the Group entered into an agreement with ASX listed Paladin Energy Limited (ASX: PDN) to acquire a 65%
interest in the Kayelekera Uranium Project (Kayelekera), located in Malawi. The acquisition was completed on 13 March
2020.
Management has determined that this acquisition meets the definition of a business within AASB 3 Business Combinations.
This transaction has been accounted for as a business combination.
Acquisition Agreement
The consideration payable for the Acquisition is as follows:
o
o
o
o
o
o
$200,000 in cash, plus 90,000,000 Shares to be issued on Completion (Initial Consideration);
a royalty of 3.5% of gross returns at the Kayelekera mine up to a maximum of $5M in favour of the Vendor (Royalty);
and
$3,000,000 worth of Shares to be issued on the third anniversary of Completion, calculated using the lower of;
o
o
the price at which Shares were issued under the most recent capital raising undertaken by the Company
within 90 days prior to issue; and
30-day VWAP for Shares up to and including the business day prior to issue (Deferred Consideration).
the issue of the Deferred Consideration Shares is subject to Shareholder approval;
the Company must convene a meeting of its Shareholders to be held in the 90 day period prior to the issue date,
to seek shareholder approval to issue the Deferred Consideration Shares; and
if Shareholders fail to approve the issue prior to the issue date, the Company must pay the cash equivalent of the
Deferred Consideration Shares (calculated using the applicable deemed issue price referred to above) within 60
days after the relevant issue date.
Environmental Bond
In addition to the Consideration, Paladin Africa must repay (or procure that the Company repays on its behalf) the amount
of US$10,000,000 which had previously been advanced by Paladin to Paladin Africa to fund the environmental bond in favour
of the GoM (Environmental Bond). The following amounts will be payable to Paladin in respect of the environmental bond
advance:
i.
ii.
iii.
iv.
US$4,000,000 on Completion;
US$1,000,000 on the date that is 1 year after Completion;
US$2,000,000 on the date that is 2 years after Completion; and
US$3,000,000 on the date that is 3 years after Completion.
63
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
26. ACQUISITION OF KAYELEKERA URANIUM PROJECT (CONT’D)
At the time these financial statements were authorised for issue, the Company had not yet completed the accounting for
the acquisition of the business. In particular, the fair value of assets and liabilities disclosed below have only been determined
provisionally. If new information obtained within one year of the date of acquisition about facts and circumstances that
existed at the date of acquisition which identifies adjustments to the amounts below, the fair values of the assets and
liabilities will be revised.
Details of the purchase consideration and the net assets acquired are as follows:
Purchase consideration paid by Lotus Resources Limited to acquire Kayelekera Uranium Project:
Cash paid1
Ordinary Shares2
Ordinary shares issued on third anniversary3
Total purchase consideration
2020
$
200,000
3,060,000
3,000,000
6,260,000
1 Cash payment of $200,000 (AUD) (Initial Consideration)
2 90,000,000 Shares issued on Completion (Initial Consideration)
3 $3,000,000 worth of Shares to be issued on the third anniversary of Completion, calculated using the lower of;
o
o
the price at which Shares were issued under the most recent capital raising undertaken by the Company within 90
days prior to issue; and
30-day VWAP for Shares up to and including the business day prior to issue (Deferred Consideration).
The fair value of assets and liabilities recognised as a result of the acquisition are outlined below.
Cash and cash equivalents1
Trade and other receivables
Exploration and evaluation asset
Trade and other payables
Environmental bond payable
Rehabilitation and mine closure provision
Net assets acquired
Net assets acquired attributable to Lotus Resources Limited
Net assets acquired attributable to non-controlling interest
Fair value
$
14,643,349
262,091
62,070,156
(551,263)
(8,736,804)
(61,427,529)
6,260,000
4,069,000
2,191,000
6,260,000
1 The Company acquired a $14,561,340 (out of the total $14,643,349) (USD $10,000,000) cash-backed environmental
performance bond as part of the acquisition of the Kayelekera Uranium Project. This is restricted cash that cannot be used
to fund operations whilst the environmental performance bond is in place. The Company is currently working with its bank
and insurance company to put insurance in place that would allow the Company to access the funds currently restricted by
the bond.
64
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
27. PARENT ENTITY DISCLOSURES
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive loss
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Consolidated
2020
$
Consolidated
2019
$
(16,812,014)
(1,728,656)
(16,812,014)
(1,728,656)
2,202,833
117,822
11,050,185
11,001,917
(861,666)
(368,056)
(3,861,666)
(368,056)
7,188,519
10,633,861
57,157,521
1,064,439
(51,033,441)
43,790,848
1,064,439
(34,221,426)
7,188,519
10,633,861
Guarantees
Lotus Resources Limited has no guarantees other than as disclosed in note 25.
Other Commitments and Contingencies
Lotus Resources Limited has no other commitments and contingencies other than as disclosed in note 20.
Plant and Equipment Commitments
Lotus Resources Limited has no commitments to acquire property, plant and equipment.
Significant Accounting Policies
Lotus Resources Limited accounting policies do not differ from the consolidated entity as disclosed in the notes to the
financial statements.
65
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
28. INTEREST IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned
subsidiaries in accordance with the accounting policy described in note 1:
Name
Westview Resources Pty Ltd
Providence Metals Pty Ltd
Lily Resources Pty Ltd
Paladin (Arica) Limited
Country of
incorporation
Australia
Australia
Australia
Africa
Ownership
Interest
2020
%
100%
100%
76.5%
65%
Ownership
Interest
2019
%
100%
100%
76.5%*
0%
* This entity was incorporated on 5 June 2019. On 29 August 2019, the name of this entity was changed from Lotus Resources
Pty Ltd to Lily Resources Pty ltd.
29. EVENTS OCCURING AFTER THE REPORTING DATE
No matter or circumstance has arisen since the end of the financial year, which will significantly affect, or may significantly
affect, the state of affairs or operations of the consolidated entity in future financial periods other than the following:
o
o
65,934,365 unlisted options were exercised at $0.04 per options for gross proceeds before costs of $2,637,375.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has had no significant impact on the
consolidated entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative,
after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the
Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel
restrictions and any economic stimulus that may be provided.
66
67 DIRECTORS’ DECLARATION In the directors' opinion: ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; ● the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as stated in Note 1 to the financial statements; ● the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2020 and of its performance for the financial year ended on that date; and ● there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Mr John Sibley Non-Executive Director Dated at Perth, Western Australia this 30th day of September 2020. RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF LOTUS RESOURCES LIMITED
Opinion
We have audited the financial report of Lotus Resources Limited (the Company) and its subsidiaries (the Group),
which comprises the statement of financial position as at 30 June 2020, the statement of profit or loss and other
comprehensive income, the statement of changes in equity and the 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:
(i)
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
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
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 1, which indicates that the Group incurred a loss of $16,569,943 and had net cash
outflows from operating activities of $3,849,899 for the year ended 30 June 2020. As stated in Note 1, these
events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that
may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in
respect of this matter.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
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 section, we have
determined the matters described below to be the key audit matters to be communicated in our report.
Key Audit Matter
How our audit addressed this matter
recognised an
Exploration and Evaluation Assets
Refer to Note 9 in the financial statements
The Group has
impairment of
$12,781,617 against the capitalised exploration and
evaluation expenditure during the year ended 30 June
2020. As at the reporting date, the Group has
exploration and evaluation expenditure capitalised on
the statement of financial position of $65,056,336.
We considered this to be a key audit matter due to the
management
in assessing
whether any indicators of impairment existed at the
reporting date and the resulting quantum of the
impairment recognised.
judgments
involved
Acquisition of Kayelekera Uranium Project
Refer to Note 26 in the financial statements
During the year, the Company acquired a 65% interest
in Paladin (Africa) Limited.
Accounting for this acquisition is a key audit matter as
it involves management judgements in determining
the acquisition accounting treatment under AASB 3
Business Combinations, the acquisition date, the fair
value of net assets acquired and the fair value of the
purchase consideration.
Our audit procedures included:
Ensuring that the right to tenure of the area of
interest was current;
Assessing
Agreeing a sample of additions to supporting
documentation and ensuring the amounts are
capital in nature and relate to the area of interest;
evaluating management’s
assessment of whether indicators of impairment
existed as at 30 June 2020; and
and
evaluating management’s
assessment of the impairment loss recognised in
profit or loss.
Assessing
and
Our audit procedures included:
Reviewing
the share sale agreement
to
understand the key terms and conditions of the
transaction
accounting
considerations;
related
and
the
Evaluating management’s determination that the
in
is a business combination
acquisition
accordance with Accounting Standards;
Assessing management’s determination of the
acquisition date, fair value of consideration paid
and the fair value of the net assets acquired; and
Reviewing the adequacy and accuracy of the
relevant disclosures in the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2020 but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
to
are
obtain
objectives
reasonable
from
about
Our
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
assurance
financial
whether
whole
report
free
the
as
is
a
description
further
A
Assurance
description forms part of our auditor's report.
responsibilities
website
of
Standards
our
Board
at:
for
the
audit
report
https://www.auasb.gov.au/auditors_responsibilities/ar2.pdf.
financial
located
Auditing
the
the
of
at
is
and
This
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Lotus 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.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 30 September 2020
TUTU PHONG
Partner
A S X A D D I T I O N A L I N F O R M A T I O N
Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current as at 25 September 2020.
(a) Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary shares are:
Rank
Name
Units
% Units
PALADIN ENERGY LTD
90,000,000
SACHEM COVE SPECIAL OPPORTUNITIES FUND LP
55,303,892
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED -
A/C 2
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY
LIMITED
NATIONAL NOMINEES LIMITED
TR NOMINEES PTY LTD
PROVIDENCE GOLD AND MINERALS PTY LTD
MCNEIL NOMINEES PTY LIMITED
DAVEY HOLDINGS (AUS) PTY LTD
PRECISION OPPORTUNITIES FUND LTD
DAVEY MANAGEMENT (AUS) PTY LTD
NETWEALTH INVESTMENTS LIMITED
CITICORP NOMINEES PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
MR DARREN CRAIG GLOVER
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SANDHURST TRUSTEES LTD
46,547,959
44,301,769
31,762,535
29,314,854
25,000,000
23,309,524
15,229,300
15,034,798
15,000,001
12,760,864
12,223,683
12,005,618
11,904,762
11,597,359
10,000,000
14,064,286
1.91
12.19
7.49
6.31
6.00
4.30
3.97
3.39
3.16
2.06
2.04
2.03
1.73
1.66
1.63
1.61
1.57
1.35
1.05
1.04
SANDHURST TRUSTEES LTD
7,775,000
BNP PARIBAS NOMINEES PTY LTD
7,701,886
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES
(Total)
Total Remaining Holders Balance
490,838,090
66.49
247,426,738
33.51
The names of the twenty largest holders of unlisted options are:
Rank
Name
Units
% Units
1
2
3
4
5
6
7
8
PERSHING AUSTRALIA NOMINEES PT Y LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY
LIMITED
DAVEY HOLDINGS (AUS) PTY LTD
SANDHURST TRUSTEES LTD
TR NOMINEES PTY LTD
GREENSEA INVESTMENTS PTY LTD
MR SAMUEL MCCARDEL
DAVEY MANAGEMENT (AUS) PTY LTD
10,382,125
11.60
9,964,286
11.14
7,517,399
5,000,000
4,017,857
3,223,215
3,125,001
2,532,143
8.40
5.59
4.49
3.60
3.49
2.83
71
Rank
Name
Units
% Units
VONROSS NOMINEES PTY LTD
LONE JET PTY LTD
AT KILEY SUPERANNUATION PTY LTD
SANDHURST TRUSTEES LTD
MINGELA POLO CLUB INCORPORATED
MIDBRIDGE INVESTMENTS PTY LTD
HAWTHORN GROVE INVESTMENTS PTY LTD
BT PORTFOLIO SERVICES LIMITED
ARALAD MANAGEMENT PTY LTD
2,008,929
2,000,000
1,660,715
1,625,001
1,607,143
1,378,431
1,375,000
1,125,000
1,116,072
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
1,116,072
PROVIDENCE GOLD AND MINERALS PTY LTD
1,000,001
2.25
2.24
1.86
1.82
1.80
1.54
1.54
1.26
1.25
1.25
1.12
9
10
11
12
13
14
15
16
17
17
19
20
833,333
0.93
62,607,723
26,871,480
69.97
30.03
MR BRETT MITCHELL + MRS MICHELLE MITCHELL
Totals: Top 20 holders of Unlisted Options
Total Remaining Holders Balance
(b) Distribution of equity security holders
Ordinary Shares
Range
Total holders
Units
565
227
200
562
301
212,565
653,952
1,517,702
20,034,054
715,846,555
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Rounding
Total
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Rounding
Total
% of
Issued
Capital
0.03
0.09
0.21
2.71
96.96
0.00
% of
Issued
Capital
0.02
0.23
0.19
2.63
96.94
-0.01
36
70
23
69
99
14,954
208,396
167,612
2,349,292
86,738,949
297
89,479,203
100.00
72
There are 817 holders of a less than marketable parcel of shares (as at 25 September, a less than marketable parcel is 5,682
shares), representing a total of 999,232 shares.
1,855
738,264,828
100.00
Unlisted Options
Range
Total holders
Units
(c) Substantial Shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Name
PALADIN ENERGY LIMITED
SACHEM COVE SPECIAL OPPORTUNITIES FUND LP
(d) Restricted Securities
There are no restricted securities as at 25 September 2020.
(e) Voting Rights
The voting rights attaching to ordinary shares are:
Number of Shares
90,000,000
53,303,892
%
12.19
7.49
On a show of hands, every member present in person or by proxy shall have one vote, and upon a poll, each share shall
have one vote.
Options do not carry any voting rights.
(f) On Market Buy Back
There is no current on market buy-back.
(g) Unquoted securities (as at 25 September 2020)
CLASS
UNLISTED OPTIONS EXPIRING 04/10/22,
EXERCISABLE @ $0.04
UNLISTED OPTIONS EXPIRING 12/09/22,
EXERCISABLE @ $0.04
UNLISTED OPTIONS EXPIRING 13/03/23,
EXERCISABLE @ $0.04
UNLISTED OPTIONS EXPIRING 22/10/22,
EXERCISABLE @ $0.04
UNLISTED OPTIONS EXPIRING 25/09/22,
EXERCISABLE @ $0.04
TOTAL HOLDINGS
2,018,102
20,523,094
48,856,092
9,517,399
8,564,516
(h) Unquoted Securities >20% Holders (as at 25 September 2020)
Class
Holder
UNLISTED OPTIONS EXPIRING 25/09/22, EXERCISABLE @ $0.04
GREENSEA INVESTMENTS PTY LTD
UNLISTED OPTIONS EXPIRING 04/10/22, EXERCISABLE @ $0.04
SAMUEL LEWIS MCCARDEL
UNLISTED OPTIONS EXPIRING 22/10/22, EXERCISABLE @ $0.04
DAVEY HOLDINGS (AUS) PTY LTD
UNLISTED OPTIONS EXPIRING 22/10/22, EXERCISABLE @ $0.04
UNLISTED OPTIONS EXPIRING 13/03/23, EXERCISABLE @ $0.04
UNLISTED OPTIONS EXPIRING 13/03/23, EXERCISABLE @ $0.04
DAVEY MANAGEMENT (AUS) PTY LTD
PERSHING AUSTRALIA NOMINEES PT Y LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES
PTY LIMITED
Number
3,223,215
500,000
7,517,399
2,000,000
10,078,555
9,964,286
(i)
Interest in Mining Tenements
As at the date of this report, there is no change to the tenement schedule listed on page 21 of the review of operations.
re is no change to the tenement schedule listed on page 22 of the review of operations.
73