Lucapa Diamond Company Limited
Annual Report for the year ended 31 December 2014
ASX Code: LOM/LOMO
LUCAPA DIAMOND COMPANY LIMITED
ACN 111 501 663
34 Bagot Road ǀ Subiaco WA 6008 ǀ Tel +61-8 9489 9200 ǀ Fax +61-8 9489 9201
Email general@lucapa.com.au ǀ www.lucapa.com.au
Annual report for the year ended 31 December 2014
Chairman’s Letter
Review of Operations
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Competent Person’s Statement
1
2
10
18
19
25
26
27
28
29
47
48
50
Information included in this document that relates to previously released exploration data disclosed under the JORC Code 2004 has
been updated to comply with the JORC Code 2012. The information has not materially changed since it was last reported and is based
on and fairly represents information and supporting documentation prepared and compiled by Albert Thamm MSc F.Aus.IMM (CP),
who is a Corporate Member of the Australasian Institute of Mining and Metallurgy. Mr Thamm is a Director of Lucapa Diamond
Company Limited. Mr Thamm has sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the
Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. Mr Thamm and consents to the inclusion in
the document of the matters based on this information in the form and context in which it appears
Forward-Looking Statements
This document has been prepared by Lucapa Diamond Company Limited. This document contains background information about
Lucapa Diamond Company Limited and its related entities current at the date of this document. This is in summary form and does not
purport to be all inclusive or complete. Recipients should conduct their own investigations and perform their own analysis in order to
satisfy themselves as to the accuracy and completeness of the information, statements and opinions contained in this document.
This document is for information purposes only. Neither this document nor the information contained in it constitutes an offer,
invitation, solicitation or recommendation in relation to the purchase or sale of shares in any jurisdiction.
This document may not be distributed in any jurisdiction except in accordance with the legal requirements applicable in such
jurisdiction. Recipients should inform themselves of the restrictions that apply in their own jurisdiction. A failure to do so may result
in a violation of securities laws in such jurisdiction. This document does not constitute investment advice and has been prepared
without taking into account the recipient’s investment objectives, financial circumstances or particular needs and the opinions and
recommendations in this document are not intended to represent recommendations of particular investments to particular persons.
Recipients should seek professional advice when deciding if an investment is appropriate. All securities transactions involve risks,
which include (among others) the risk of adverse or unanticipated market, financial or political developments.
No responsibility for any errors or omissions from this document arising out of negligence or otherwise is accepted. This document
does include forward-looking statements. Forward-looking statements are only predictions and are subject to risks, uncertainties and
assumptions which are outside the control of Lucapa Diamond Company Limited. Actual values, results, outcomes or events may be
materially different to those expressed or implied in this document. Given these uncertainties, recipients are cautioned not to place
reliance on forward-looking statements.
Any forward-looking statements in this document speak only at the date of issue of this document. Subject to any continuing
obligations under applicable law and ASX Listing Rules, Lucapa Diamond Company Limited does not undertake any obligation to
update or revise any information or any of the forward-looking statements in this document or any changes in events, conditions or
circumstances on which any such forward-looking statement is based.
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Chairman’s Letter
Dear Shareholder
2014 has been a year of significant achievement and progress for Lucapa Diamond Company Limited at the Lulo Diamond Concession
in Angola which has put the Company on a sound footing to achieve its goals.
The primary goal for Lucapa is to generate sustainable long-term cash flows from the mining and sale of alluvial diamonds at Lulo
while advancing our efforts to locate the primary kimberlite sources of these exceptional gems.
To this end, Lucapa achieved milestones on several key fronts during 2014.
On the licencing front, we were successful in extending both our alluvial and kimberlite exploration licences for a further two years
until May 2016. Then, in November, we secured a 35 year licence to mine the alluvial diamonds at Lulo.
The fact that we already had key infrastructure in place at Lulo, including a 150tph diamond plant, enabled us to move quickly to
commence alluvial diamond mining operations in January 2015.
Securing these licences was further proof of the strong in-country relationships we have built with the Angolan Government and our
partners through our tireless efforts over recent years to unlock the true value of the Lulo concession. Our confidence in Lulo has never
wavered.
Our extensive bulk sampling operations throughout 2014 continued to underline the rare and valuable nature of the Lulo diamond
field. This bulk sampling yielded diamonds of premium quality, including special stones of up to 95.45 carats (the second biggest
diamond recovered from Lulo), a high proportion of rare Type IIa gems and fancy coloured stones.
The value of Lulo diamonds was demonstrated by the sale prices we achieved for the second parcel of Lulo diamonds tendered in May
2014. This parcel of 371.35 carats sold for gross proceeds of A$2.92 million, representing an exceptional average sale price of A$7,873
per carat.
There was success on the kimberlite front as well, with 96 of the kimberlite targets identified at Lulo classified as confirmed or
probable kimberlites. The outcropping or shallow-buried nature of the Lulo kimberlites enabled us to commence a preliminary surface
excavation program, from which 14 macro diamonds were recovered from three separate kimberlite pipes. These pipes included L251
which, with a surface area of approximately 220 hectares, is the biggest kimberlite discovered at Lulo to date. In addition, a micro
diamond was recovered during mineral chemistry analysis from a fourth kimberlite pipe at Lulo.
Adding to our excitement is the fact that the kimberlite diamonds included rare Type IIa stones, emphasising the huge potential of
the main prize we are pursuing at Lulo.
The achievements of 2014 give Lucapa great confidence going into 2015. With the Angolan wet season winding down, the period
ahead is most exciting. Our alluvial mining operations are about to move to the areas where we recovered our largest and most
valuable diamonds during the bulk sampling phase, while our new kimberlite exploration plans are also set to commence to further
evaluate known diamond-bearing pipes and other priority kimberlite targets.
The new management team we put in place during the year means your Company is in very good hands as we enter this exciting new
phase. In Chief Executive Stephen Wetherall and Chief Operating Officer Nick Selby we have two extremely capable executives with
decades of global diamond industry experience behind them and who have been working with our dedicated mine site management
and staff to realise Lulo’s full potential.
I would also like to pay tribute to my predecessor Gordon Gilchrist, who moved to the position of Non-Executive Director during the
year and whose invaluable diamond knowledge and direction has guided Lucapa through challenging circumstances.
Lulo is ticking every box as one of the most exciting new diamond projects in the world and I greatly look forward to further
developments in 2015.
Miles Kennedy
Chairman
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Review of Operations for the year ended 31 December 2014
Lucapa Diamond Company Limited (the Company or Lucapa) achieved some significant milestones during 2014 and enters 2015 with
clear and well-developed plans for both its alluvial and kimberlite operations at the Lulo Diamond Concession in Angola.
Lucapa operates Lulo in partnership with Endiama, the Angolan Government’s diamond concessionary, and private group Rosas &
Petalas.
The 3,000km2 Lulo concession is located in the Lunda Norte province, a diamond heartland within the ideal tectonic and stratigraphic
setting where the Lucapa Graben crosses the diamond-rich Cuango Basin. The Lucapa Graben is the geological belt hosting most of
Angola’s kimberlite diamond mines including the Alrosa-operated Catoca, the world’s fourth largest diamond mine.
The milestones achieved by Lucapa in 2014 included:
Securing a 35-year licence to mine the exceptional alluvial diamonds at Lulo, enabling diamond mining operations to
commence in January 2015.
The discovery of four diamond-bearing kimberlite pipes at Lulo from the 96 targets already classified as confirmed or
probable kimberlites.
The sale of a second parcel of Lulo alluvial diamonds for A$2.92 million, taking to A$6 million the gross proceeds generated
from the sale of Lulo diamonds at an exceptional average sale price of close to A$7,000/carat.
Confirmation that a high proportion of the diamonds recovered from Lulo are rare and valuable Type IIa gems, including both
alluvial and kimberlite diamonds.
The renewal of both the kimberlite and alluvial exploration licences at Lulo for a further two years until May 2016.
Building a new management team for the transition to mining headed by ex De Beers and Gem Diamonds executives
Stephen Wetherall (Chief Executive/Managing Director) and Nick Selby (Chief Operating Officer)
Achieving these milestones has enabled Lucapa to develop clear plans for 2015, which are being stepped up to coincide with the finish
of the Angolan wet season.
These plans for 2015 include:
Commencement of alluvial mining operations on a commercial scale
The mining of alluvial diamonds at the areas which produced the highest diamond grades during bulk sampling including
BLK_08 and BLK_06 & 19. These areas are where some of the largest diamonds have been recovered from Lulo, including
stones weighing 131.4 carats, 95.4 carats, 53.2 carats, 38.4 carats, 32.2 carats and 24.4 carats
The start of a new kimberlite program to further evaluate the four known diamond-bearing pipes at Lulo as part of a broader
plan to test more than 80 kimberlite targets in both the western and eastern kimberlite provinces.
Lulo diamonds: exceptional quality, premium value
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Review of Operations for the year ended 31 December 2014
Alluvial Diamond Exploration
Lucapa continued its alluvial diamond bulk sampling programs throughout 2014, achieving more significant results. Lucapa’s bulk
sampling programs have consistently yielded exceptional diamonds, including special stones of up to 131.4 carats, a high provenance
of Type IIa diamonds, D-colour exceptional whites and fancy pinks and yellows.
In January 2014, Lucapa’s alluvial diamond recoveries included large special diamonds weighing 95.45 carats and 32.2 carats from the
BLK_19 bulk sample. Both diamonds were confirmed as rare and valuable Type IIa gems.
The last two bulk samples processed during 2014 – BLK_29 and BLK_31 – produced in-situ diamond grades of 35 carats per 100m3 and
15.7 carats per 100m3 respectively.
The gems recovered from BLK_29 included diamonds weighing 34.70 carats, 25.05 carats, 17.35 carats and 9.90 carats, while BLK_31
included diamonds weighing 14.40 carats, 6.90 carats, 6.60 carats and 4.35 carats. The average stone size from BLK_31 was an
exceptional 2.18 carats per stone.
Alluvial bulk sampling at Lulo
Lucapa’s alluvial bulk sampling results, as set out in the ASX announcement of 29 January 2015, are summarised in Table 1. The table
includes a total of 1,942.75 carats recovered from alluvial bulk sampling at Lulo for an average diamond size of 1.12 carats.
Lucapa also completed a review of bulk sample results and diamond size distributions at Lulo, as at 18 December 2014, as part of the
Company’s mine planning process.
In summary, the review showed:
•
•
•
Diamonds > 3 carats in weight:
Represent 52% of the carats recovered to date – but only 6% of the stones recovered;
Average stone size of this category is 9.28 carats per stone
Diamonds > 3 carats < 10.8 carats in weight:
Represent 24% of the carats recovered to date – but only 5% of the stones recovered;
Average stone size of this category is 4.99 carats per stone
Diamonds > 10.8 carats in weight:
Represent 28% of the carats recovered to date – but only 1% of the stones recovered;
Average stone size of this category is 36.22 carats per stone
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Review of Operations for the year ended 31 December 2014
The large average diamond stone size recovered to date - coupled with top white colour and quality diamonds, a high Type IIa
population and the recovery of a number of fancy colour diamonds - illustrate the exceptional potential of the Lulo diamond field.
Bulk
Sample
No
BLK_01
BLK_02
BLK_03
BLK_04
BLK_05
BLK_06
BLK_07
BLK_08
BLK_09
BLK_10
BLK_11
BLK_12
BLK_13
BLK_14
BLK_15-17
BLK_18
BLK_19
BLK_20
BLK_21
BLK_22
BLK_23
TMB-1
BLK_24
BLK_25
BLK_26
BLK_27
BLK_29
BLK_30
BLK_31
TOTAL
Carats
Stones
In-situ Grade
(cphm3)
Avg stone-
size (ct/stn)
Largest stone
(ct)
In-situ
Volume
Treated (m3)
232.00
368.30
276.30
256.70
123.50
457.60
310.20
198.90
42.90
117.00
31.20
159.19
259.88
240.00
69.70
3,361.16
971.55
1,164.33
1,138.32
1,603.44
907.29
3,629.16
391.68
333.54
408.51
82.62
449.81
1,118.43
4.80
47.60
31.00
9.20
2.50
184.15
25.30
189.05
0.45
2.65
8.65
3.55
19.95
52.45
1.00
159.80
318.85
110.30
69.75
56.00
61.00
293.50
35.10
31.85
1.95
0.75
157.50
24.95
7
44
40
11
7
116
43
24
2
3
5
5
20
52
3
202
147
87
124
82
54
392
52
43
7
3
87
48
2.07
12.92
11.22
3.58
2.02
40.24
8.16
95.05
1.05
2.26
27.72
2.23
7.68
21.85
1.43
4.75
32.82
9.47
6.13
3.49
6.72
8.09
8.96
9.55
0.48
0.91
35.01
2.23
0.69
1.08
0.78
0.84
0.36
1.59
0.59
7.88
0.23
0.88
1.73
0.71
1.00
1.01
0.33
0.79
2.17
1.27
0.56
0.68
1.13
0.75
0.68
0.74
0.28
0.25
1.81
0.52
249.40
18,952.61
39.15
1,942.75
18
1,728
15.70
10.25
2.18
1.12
Table 1: Summary of bulk sampling results
1.45
22.25
4.25
5.05
1.50
53.20
2.40
131.40
0.30
2.10
2.75
2.40
5.35
6.95
0.50
9.30
95.45
13.30
6.25
6.30
10.15
16.50
4.25
3.25
0.40
0.35
34.70
2.80
14.40
131.40
Note: Some information included in the above table relates to previously released exploration data disclosed under the
JORC Code 2004 which has not been updated to comply with the JORC Code 2012 on the basis that the information has not
materially changed since it was last reported. This table does not include the subsequent results from BLK_28, which are
incomplete.
Alluvial Diamond Mining Licence
The exceptional alluvial diamonds recovered by Lucapa and its Angolan partners from bulk sampling programs at Lulo encouraged the
Company and its partners to apply for an alluvial diamond mining licence over a 218km2 area covering more than 50km of the Cacuilo
River, its valley and terraces.
This licence was signed on 21 November 2014, within five months of the formal application being lodged, in a ceremony televised on
Angolan national television.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Review of Operations for the year ended 31 December 2014
Signing of the 35 year Lulo alluvial diamond mining licence agreement in November 2014
In parallel with the mining licence agreement, Lucapa also negotiated a new shareholders’ agreement with Endiama and Rosas &
Petalas and by-laws for the incorporation of a new diamond mining company into which the alluvial mining licence will be gazetted.
Under the agreements, Lucapa retained a 40% shareholding in the new mining company and remained sole operator of the Lulo
diamond mine.
Key points of the mining licence agreements include:
•
•
•
•
•
•
An initial 35 year term, the maximum period under Angola’s new Mining Code.
Rolling 10 year extension options.
Ability for Lucapa to repatriate its share of dividends and capital gains.
Ability for Lucapa to be repaid all past and future alluvial exploration and development expenditures from free cash flow
distribution.
Favourable tax and royalty regime including 25% corporate tax rate and 5% royalty rate.
Ability for continuous mining operations.
Securing the mining licence was a key part of Lucapa’s strategy to generate sustainable long term cash flows from diamond sales to
fund ongoing mining exploration programs to find the primary kimberlite sources of the exceptional Lulo alluvial diamonds within the
concession.
Alluvial diamond mining commenced at Lulo in January 2015, utilising existing infrastructure including the 150 tonne per hour (tph)
diamond plant and the existing fleet of earth moving equipment.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
The 150tph diamond treatment plant at Lulo
Review of Operations for the year ended 31 December 2014
Lucapa’s phase 1 mining plan involves the progressive scaling up of monthly throughput from 3,500 bulk cubic metres (bcm) in January
2015 to 10,000bcm/month by June 2015. The final step up to 14,000bcm/month will be achieved via the sourcing of additional earth
moving equipment.
The Phase 2 mining plan targets throughput of 40,000bcm/month through additional earth moving fleet and the in-field screening of
alluvial gravels to create a concentrated feed for trucking to the diamond plant.
Diamond Sales
During the year, Lucapa completed the sale of a second parcel of Lulo alluvial diamonds via tender through Angolan Government
diamond agency SODIAM in Luanda.
The 371.35 carat parcel of diamonds sold for gross proceeds of A$2.92 million, representing an exceptional average sale price of
A$7,873 per carat. It followed the sale in June 2013 of an initial parcel of Lulo diamonds for gross proceeds of A$3.12 million. In total,
the two sales of rough diamonds generated gross proceeds of more than A$6 million for an average sale price of ~ A$7,000 per carat,
providing further evidence of the premium value of Lulo diamonds.
A third parcel of Lulo alluvial diamonds, weighing a total of more than 1,500 carats, is scheduled for sale in April 2015.
Kimberlite Exploration
In parallel with its alluvial bulk sampling and mining activities, Lucapa also achieved significant milestones with its kimberlite
exploration activities in 2014.
To date, Lucapa has identified 296 kimberlite targets at Lulo in two distinct provinces – the main western kimberlite province where
the Company has been recovering its alluvial diamonds and the newer eastern kimberlite province, which was identified from
aeromagnetic surveys flown over the area in late 2013. Of those, 96 have already been confirmed as proven or probable kimberlites.
Significantly, most of the Lulo kimberlites either outcrop or are close to surface. This enabled Lucapa to commence a preliminary
program of excavating surface samples from priority kimberlites and processing that material through the diamond plant to test for
diamonds.
Lulo kimberlite diamonds including Type IIa gems
This kimberlite exploration met with immediate success, with a total of 14 diamonds recovered from three Lulo kimberlites (Figure 1).
These diamond-bearing kimberlites were L257, L19 and L251, L251 with an estimated surface area of ~ 220 hectares, is the biggest
kimberlite defined at Lulo to date. The largest individual kimberlite diamond recovered weighed 1.6 carats, with a significant
proportion of the kimberlite diamonds subsequently confirmed as Type IIa stones.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Review of Operations for the year ended 31 December 2014
In addition to the 14 macro diamonds, a micro diamond was recovered from the L170 kimberlite (Figure 1) during mineral chemistry
analysis.
Figure 1: Location of four diamond-bearing kimberlites in the western kimberlite province at Lulo and the priority L46 pipe, which will
be bulk sampled in the June 2015 quarter
Lucapa then initiated a comprehensive review of its kimberlite exploration results and data to formulate its next phase of kimberlite
exploration. This review included input from independent expert consultants and Lulo’s geological team.
The outcomes of this review were incorporated into a new kimberlite program unveiled in March 2015 to build on the positive results
achieved to date.
As outlined in the ASX announcement of 23 March 2015, this new 24-month program includes:
•
•
•
Testing of more than 80 kimberlite targets including drilling of 48 priority targets in the main western kimberlite province and
preliminary sampling of 38 targets in the eastern province (Figures 2 and 3).
Extensive further evaluation of four known diamond-bearing pipes at Lulo and laboratory analysis of drill core (Figure 1).
Excavating first bulk samples from the priority L46 kimberlite, which has been identified as a likely source of the high-grade
diamonds recovered from the E46 alluvial area at Lulo (Figure 1).
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Review of Operations for the year ended 31 December 2014
Figure 2: 48 priority targets to be progressively drilled and sampled in the main western kimberlite province
The Company’s confidence of finding the primary kimberlite sources of the exceptional Lulo kimberlite diamonds is supported by a
range of factors including:
Lulo lies within the ideal tectonic and stratigraphic setting where the Lucapa Graben crosses Angola’s most diamond rich Cuango
basin. The Lucapa Graben is the same geological belt hosting most of Angola’s producing kimberlite mines, including
neighbouring Catoca, the world’s fourth largest diamond mine.
The existence of two large kimberlite provinces at Lulo with 296 targets already identified.
The widespread discovery of alluvial diamonds within the concession.
Diamonds recovered include large high-quality gems occurring with smaller stones of lower quality, indicating proximity to the
source of the larger diamonds and possible multiple sources.
The Lulo diamonds (specifically the large diamonds) are irregular shaped and have jagged edges, indicating they have not
travelled far from the source.
Surface texture studies of all Lulo diamonds show very little sign of abrasion, which also points to a proximal source.
Certain size frequency distribution curve graphs of alluvial diamonds recovered are more akin to kimberlite curves i.e. flatter and
poorly sorted.
Lulo kimberlite targets have positive mineral chemistry; including recovery of G3D, G4D and G10D garnets amongst other
indicator minerals.
The first stage of the new kimberlite program will commence in April 2015 and continue throughout the June quarter. This will include
excavating more extensive bulk samples to further evaluate and prove up the four diamond-bearing pipes already identified at Lulo,
bulk sampling of the priority L46 kimberlite and sending existing drill core for micro probing analysis.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Review of Operations for the year ended 31 December 2014
Stage one will also include the first systematic phase of exploration to be carried out at the eastern kimberlite province at Lulo since
38 kimberlite targets were identified in this area in 2013.
Figure 3: The 38 kimberlite targets in the eastern kimberlite province at Lulo
The second stage of the new kimberlite program is scheduled to commence in the September 2015 quarter and will take an estimated
21 months to complete. This will include the progressive drilling and sampling of 48 priority targets in the main western kimberlite
province at Lulo (Figure 2).
Lucapa and its Angolan partners will utilise the original 10tph diamond sampling plant at Lulo to process kimberlitic sample from the
new kimberlite program, enabling the main and larger 150tph treatment plant to be used for continuous alluvial diamond mining
operations.
The existing earthmoving fleet will be scheduled between the alluvial mining operations and kimberlite program, until additional
earthmoving fleet is sourced to expand mining capacity.
In preparation for the second stage program, Lucapa and its partners will immediately begin the process of seeking an extension of
the Lulo kimberlite exploration licence beyond its current May 2016 date.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Directors’ Report for the year ended 31 December 2014
The directors present their report together with the financial report of Lucapa Diamond Company Limited for the financial year ended
31 December 2014 and independent auditor’s report thereon. In 2013, the Company changed its financial year end to 31 December to
synchronise with that of its operations in Angola, effective 1 March 2013. As such, all 2013 comparative numbers reflect activities for a
10 month period.
1.
Directors
The directors of the Company at any time during or since the end of the financial period are:
Name
M Kennedy
S Wetherall
G Gilchrist
A Thamm
D Jones
Position
Non-Executive Chairman
Chief Executive Officer/Managing Director
Non-Executive Director
Non-Executive Director
Technical Director
Date of appointment
12 September 2008
13 October 2014
27 March 2012
9 May 2014
26 February 2010
Date of resignation
-
-
-
-
21 May 2014
The qualifications, experience and other directorships of the directors in office at the date of this report are:
Miles Kennedy
Non-Executive Chairman
Mr Kennedy has held directorships of Australian listed resource companies for the past 29 years.
He is Chairman of RNI NL. Mr Kennedy was Chairman of Sandfire Resources NL, Kimberley
Diamond Company NL, Blina Diamonds NL, Macraes Mining Company Ltd and MOD Resources
Limited and has extensive experience in the management of public companies with specific
emphasis in the resources industry. He lives in Perth, Western Australia.
Stephen Wetherall
Chief Executive Officer /
Managing Director
Gordon Gilchrist
Non-Executive Director
Albert Thamm
Non-Executive Director
Mr Wetherall is a qualified chartered accountant with more than 20 years’ experience in financial
and operational management, corporate transactions and strategic planning. He has held senior
financial and executive roles with global diamond giant De Beers and London-listed Gem
Diamonds, where after successfully establishing the marketing and diamond manufacturing
operations for Gem Diamonds served as the company’s Group Sales and Marketing Executive
responsible for the global marketing and manufacturing division and Director on the Letseng
Diamond Company Board. He lives in Perth, Western Australia.
Mr Gilchrist holds a MSc in Business and MA in Physics. In 1993, Mr Gilchrist was appointed
Managing Director of Argyle Diamond Mines in Western Australia, a position he held until 2002.
During that time, Argyle grew to become the world’s biggest diamond producer, by volume. Mr
Gilchrist then became the founding Managing Director of Rio Tinto Diamonds, based out of
Antwerp in Belgium, and served in that capacity until 2005. He lives in Perth, Western Australia.
Mr Thamm is a senior geologist with broad industry experience spanning 28 years. His experience
includes kimberlite diamond exploration in Russia, alluvial and kimberlite development in Angola,
alluvial mining in South Africa and diamond exploration and mining in Australia. He was previously
Chief Geologist and Alternate Registered Manager at the Ellendale diamond mine in Western
Australia prior to the takeover by Gem Diamonds in 2007. He holds a M.Sc. from the University of
Cape Town and is both a Fellow of the Society of Economic Geologists and the Australian Institute
of Mining and Metallurgy. He is a JORC Competent Person for diamond exploration results,
resources and reserves. He is currently Non-Executive Director of ASX-listed RNI NL. He lives in
Perth, Western Australia.
David Jones resigned as Technical Director on 21 May 2014.
2.
Company Secretary
Mr Mark Clements was appointed to the position of Company Secretary on 2 July 2012. Mr Clements holds a Bachelor of Commerce
degree from the University of Western Australia and is a Fellow of the Institute of Chartered Accountants of Australia. Mr Clements is
also a member of the Australian Institute of Company Directors and an affiliated member of the Institute of Chartered Secretaries in
Australia.
3.
Directors’ meetings
There were 6 directors’ meetings held during the year which were attended by Gordon Gilchrist and Miles Kennedy. David Jones
attended 3 prior to his resignation and Albert Thamm and Stephen Wetherall attended 4 after their appointment. There were 10 other
occasions when resolutions of the Board were made by circular resolution.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Directors’ Report for the year ended 31 December 2014
4.
Nature of operations and principal activities
The Company’s principal activity during the course of the financial period was the exploration of diamond projects in Angola.
5.
Operating and financial review
The total comprehensive loss for the year attributable to owners of the Company for the year ended 31 December 2014 was $2,599,898
(10 month period ended 31 Dec 2013: $1,173,029). The Company had net assets of $36,950,975 (31 Dec 2013: $27,276,644).
Review of financial condition
The Company is focused on its Angolan diamond mining evaluation and exploration interests in the Lulo Project. This project requires
ongoing evaluation and exploration work and funding until such time as mining operations produce sufficient cash flows to sustain
operations. Based on the potential of the diamond concession, alluvial sampling recoveries to date, projected cash flow forecasts for a
scaled up mining operation and strategic development initiatives/or plans, the directors are satisfied that the going concern basis of
preparation is appropriate.
Significant changes in the state of affairs
Corporate
The Company completed the following issued capital and option transactions during the period.
Transaction
Issue of shares (pre-consolidation)
Issue of options (pre-consolidation)
Exercise of options
Issue of options
Expiry of options
Expiry of options
Number
925,000,000
537,500,000
22,617,835
90,240,470
4,166,668
833,334
Issue/exercise
price
$0.006
$0.01
$0.30
$0.30
$0.57
$0.90
Funds raised
Option expiry
$5,550,000.00
-
$6,785,350.50
-
-
-
-
29 August 2015
-
29 August 2015
25 September 2014
2 December 2014
6.
Dividends
No dividends were paid or declared during the current period or prior financial year.
7.
Environmental regulation
The Company’s exploration activities are subject to various environmental regulations. The Board is responsible for the regular
monitoring of environmental exposures and compliance with environmental regulations. The Company is committed to achieving a
high standard of environmental performance and conducts its activities in a professional and environmentally conscious manner and
in accordance with applicable laws and permit requirements. The Board believes that the Company has adequate systems in place for
the management of its environmental requirements and is not aware of any breach of those environmental requirements as they
apply to the project.
8.
Events subsequent to reporting date
On 21 January 2015 the Company announced it had signed a term sheet for a US$15 million bridge financing facility with a well
established mining investment company. The term sheet is for a 12 month bridge facility and remains subject to the satisfactory
completion of due diligence, investment approvals, security and customary legal documentation.
On 22 January 2015 the Company announced the successful commencement of alluvial diamond mining at the Lulo Diamond
Concession. The Company had completed the preliminary processing of mining at the block 29 area which produced a highly
encouraging diamond in-situ grade of 17.33 carats per 100 cubic metres. A total of 286 diamond weighing 266.70 carats were recovered
from block 29 over the first 8 days of alluvial mining.
On 27 February 2015 the Company announced that the investment group had completed their detailed operational, technical and
resource potential reviews of part of the due diligence and has formally advised the company that no material concerns or fatal flaws
were raised. The investment group further confirmed the US$15 million bridge finance facility offer will remain in place for a further
three months to enable the Company to complete the gazetting and incorporation formalities which are required to provide the
necessary in-country security for the investment group. The Company further announced that it had successfully raised $4.8 million
via the issue of new shares to enable the Company to continue ramping up alluvial diamond mining operations at Lulo. The placement
involved the issue of 24 million ordinary fully paid Lucapa shares at an issue price of 20 cents per share, with an attached one-for-one
listed option, exercisable at 30 cents on or before 29 August 2015 at no additional cost, subject to shareholder approval at a general
meeting to be convened on 17 April 2015.
On 10 March 2015 the Company announced that earthmoving equipment had been mobilised to the BLK_08 and BLK_06 & 19 areas at
Lulo to prepare for mining of these high grade areas in the dry season. The Company also announced that the planned sale of the third
11 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Directors’ Report for the year ended 31 December 2014
parcel of diamonds had been deferred to March/April 2015 to potentially benefit from more favourable market conditions and possibly
supplement additional diamonds to increase the parcel size.
On 23 March 2015 the Company announced that it was preparing to commence the next phase of its kimberlite exploration program at
Lulo. The aim of the 24 month program is to build on the positive exploration results achieved to date to further evaluate the known
diamondiferous pipes at Lulo and explore for other possible kimberlite sources. The new kimberlite program will be undertaken in two
stages, the first of which will commence in April 2015 and continue through the June 2015 quarter at a budgeted cost of $500,000. The
second stage is scheduled to commence in the September 2015 quarter and will include the progressive drilling and sampling of 48
priority targets in the main western kimberlite provence at Lulo.
Other than the above, there has not arisen in the interval between the end of the year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations
of the Company, the results of those operations, or the state of affairs of the Company, in future financial years.
9.
Likely developments
As outlined in the Review of Operations and Events subsequent to reporting date sections of the Directors’ Report, the directors
consider the following as a summary of the likely developments and expected results for the next 12 months.
•
•
•
•
•
The mining of alluvial diamonds at the areas which produced the highest diamond grades during bulk sampling including
BLK_08 and BLK_06 & 19. These areas are where the largest diamonds have been recovered from Lulo, including stones
weighing 131.4 carats, 95.4 carats, 53.2 carats, 38.4 carats, 32.2 carats and 24.4 carats
The start of a new kimberlite program to further evaluate the four known diamond-bearing pipes at Lulo as part of a broader
plan to test more than 80 kimberlite targets in both the western and eastern kimberlite provinces
Progress Lucapa’s Phase 1 mining plan which involves the progressive scaling up of monthly throughput from 3,500 bulk
cubic metres (bcm) in January 2015 to 10,000bcm/month by June 2015. The final step up to 14,000bcm/month will be
achieved via additional earth moving equipment
Initiate the Phase 2 mining plan which targets throughput of 40,000bcm/month through additional earth moving fleet and
the in-field screening of alluvial gravels to create a concentrated feed for trucking to the diamond plant.
Sale of a third parcel of Lulo alluvial diamonds, weighing a total of more than 1,500 carats
The primary goal for Lucapa is to generate sustainable long-term revenues from the mining and sale of alluvial diamonds at Lulo while
advancing our efforts to locate the primary kimberlite sources of these exceptional gems.
10.
Directors’ interests
The relevant interest of each director in the shares and options over such instruments issued by the Company and other related bodies
corporate, as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is
as follows.
Ordinary
shares
Fully paid
751,668
65,000
295,001
29,470
Options over
ordinary shares
Expiring 29
August 2015
710,835
-
117,501
90,000
Director
M Kennedy
S Wetherall
G Gilchrist
A Thamm
11.
Share options
Unissued shares under options
At the date of this report unissued ordinary shares of the Company under option are:
Expiry date
29 August 2015
Exercise
price
Number
of options
Quoted
$0.30
112,051,451
112,051,451
These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
12 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Directors’ Report for the year ended 31 December 2014
Options granted to directors and executives of the Company
During or since the end of the financial period, the Company has not granted options to directors of the Company.
Share options
The following options over ordinary shares were issued by the Company during or since the end of the financial period.
Expiry date
29 August 2015
Exercise of options
Exercise
price
Number
of shares
Quoted
$0.30
108,157,137
108,157,137
No options over ordinary shares were exercised during or since the end of the financial period.
Lapse of options
The following options over ordinary shares lapsed during or since the end of the financial period.
Expiry date
25 September 2014
2 December 2014
Exercise
price
$0.57
$0.90
Number
of shares
4,166,668
833,334
12.
12.1
Remuneration report – audited
Principles of compensation
Key management personnel (KMP) have authority and responsibility for planning, directing and controlling the activities of the
Company, including directors of the Company and other executives. Currently, KMP comprises the directors and operations
management of the Company.
Compensation levels for KMP are competitively set to attract and retain appropriately qualified and experienced directors and
executives. The directors of the Company obtain independent advice on the appropriateness of compensation packages of both KMP
given trends in comparative companies both locally and internationally, and the objectives of the Company’s compensation strategy.
The compensation structures are designed to attract suitably qualified candidates, reward the achievement of strategic objectives,
and achieve the broader outcome of creation of value for shareholders. Compensation packages include a mix of fixed compensation,
equity-based compensation as well as employer contributions to superannuation funds.
Shares and options may only be issued to directors subject to approval by shareholders in general meeting.
Fixed compensation
Fixed compensation consists of base compensation, determined from a market review, to reflect core performance requirements and
expectations of the relevant position and statutory employer contributions to superannuation funds. Compensation levels are
reviewed periodically by the Board through a process that considers individual, segment and overall performance of the Company.
Directors’ fees
Total compensation for directors and non-executive directors is set based on advice from external advisors with reference to fees paid
to other directors of comparable companies. Directors’ fees are presently limited to a total of A$950,000 per annum, excluding the
fair value of any options granted. Directors’ fees cover all main Board activities and membership of any committee. The Board has no
established retirement or redundancy schemes in relation to directors.
Use of remuneration consultants
The Company did not employ the services of any remuneration consultants during the financial year ended 31 December 2014.
Equity-based compensation (Long term incentive)
None
Short-term and long-term incentive structure and consequences of performance on shareholder wealth
Given the Company’s principal activity during the course of the financial period consisted of exploration and evaluation of mineral
resources, the Board has given more significance to service criteria and performance instead of market related criteria in setting the
Company’s incentive schemes. Accordingly, at this stage the Board does not consider the Company’s earnings or earning measures to
be an appropriate key performance indicator. The issue of options as part of the remuneration package of directors is an established
practice for listed exploration companies and has the benefit of conserving cash whilst appropriately rewarding the directors. In
considering the relationship between the Company’s remuneration policy and the consequences for the Company’s shareholder
wealth, changes in share price are analysed.
13 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Directors’ Report for the year ended 31 December 2014
Service contracts
Stephen Wetherall
Mr Wetherall has been engaged to act as an Executive Director. Mr Wetherall is entitled to receive directors fees of $420,000 (gross)
per annum which is subject to review by the Board at the end of June 2015 and on each subsequent anniversary of that review. Mr
Wetherall was promoted to CEO/MD in December 2015 and did not seek a review to his remuneration package. He will be eligible to
participate in any future incentive plans implemented by the Board. Shareholder approval will be sought for his participation in any
incentive plan involving equity of the Company. The appointment may be terminated for various causes of a standard nature. Upon
termination, no benefits are due.
Miles Kennedy
Mr Kennedy was engaged to act as the Company’s Chief Executive Officer until 11 December 2014. Mr Kennedy was entitled to receive
director fees of $300,000 (gross) per annum which was subject to review by the Board from time to time. The appointment could have
been terminated for various causes of a standard nature. Upon termination, no benefits were due. Mr Kennedy was appointed Non-
Executive Chairman on 11 December 2014 and under a new contract will be entitled to receive director fees of $120,000 (gross) per
annum, which is subject to review by the Board from time to time. The appointment may be terminated for various causes of a
standard nature. Upon termination, no benefits are due.
Gordon Gilchrist
Mr Gilchrist was engaged on 22 March 2012 to act as the Company’s Non-executive Chairman and has a fixed term contract for 3 years,
subject to the provisions of the Company's Constitution and Corporations Act. Mr Gilchrist is entitled to a gross annual remuneration
package of $120,000 (inclusive of all benefits and superannuation) and this is subject to annual CPI increases upon the anniversary of
the commencement of his employment. To date, no CPI increases have been implemented. The appointment may be terminated by
the Company for various causes of a standard nature and Mr Gilchrist may terminate the Agreement by resigning as director of LOM in
accordance with Corporations Act and the Company's Constitution. Total payments to Mr Gilchrist on retirement or termination may
not exceed any limits imposed by the Corporations Act and ASX Listing Rules. On 11 December 2014, Mr Gilchrist stepped down as
Chairman and remained Non-Executive Director of the Company. Mr Gilchrist’s contract is in the process of being renewed at the time
of this report.
Albert Thamm
Mr Thamm was appointed on 9 May 2014 as Non Executive Director. Mr Thamm is entitled to receive director fees of $70,000 (gross)
per annum which was increased to $80,000 (gross) per annum on 1 December 2014 to take into account Mr Thamm’s
duties/responsibility as competent person for LOM. The appointment may be terminated for various causes of a standard nature.
Upon termination, no benefits are due.
David Jones
Mr Jones was engaged to act as the Company’s Technical Director. Mr Jones was entitled to receive director fees of $48,000 (gross) per
resigned on 21 May 2014.
annum, which was subject to
review by the Board from time to time. Mr
Jones
14 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Directors’ Report for the year ended 31 December 2014
12.
Remuneration report – audited (continued)
12.2
KMP Remuneration
Details of the nature and amount of each major element of remuneration (in AUD) of each KMP of the Company are:
Key management personnel
Short-term benefits
Period ended
Salary & fees
Post employment
benefits
Superannuation
benefits
Equity-settled
share based
payments
Options
Executive Director
Mr Stephen Wetherall, Chief Executive Officer / Managing Director (appointed 13
October 2014)
Non-Executive Directors
Mr Miles Kennedy, Non-Executive Chairman
Mr Gordon Gilchrist, Non-Executive Director
Mr Albert Thamm, Non-Executive Director (appointed 9 May 2014)
Former Director
Mr David Jones, Technical Director (resigned 21 May 2014)
Total
Notes in relation to the table of KMP remuneration
*
The December 2013 figures are for the 10 months to 31 December 2013.
Dec 2014
Dec 2013 *
Dec 2014
Dec 2013 *
Dec 2014
Dec 2013 *
Dec 2014
Dec 2013 *
Dec 2014
Dec 2013 *
Dec 2014
Dec 2013 *
123,999
-
266,322
165,800
109,714
91,617
36,994
-
18,700
40,000
555,729
297,417
10,000
-
-
-
10,286
8,383
4,673
-
-
-
24,959
8,383
-
-
-
-
-
-
Total
133,999
-
266,322
165,800
120,000
100,000
41,667
-
-
-
-
-
18,700
40,000
580,688
305,800
15 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Directors’ Report for the year ended 31 December 2014
12.
Remuneration report – audited (continued)
12.3
Equity instruments
All options refer to options over ordinary shares of Lucapa Diamond Company Limited, which are exercisable on a one-for-one basis.
12.3.1
Analysis of movements in options and shares
Options over equity instruments
The movement during the reporting period in the number of options over ordinary shares in the Company held, directly, indirectly or
beneficially, by each KMP, including their related parties, is as follows.
Held at
1 Jan 2014 or
date of
appointment
2,050,000
-
25,587,500
-
-
Held at
1 March 2013
or date of
appointment
16,000,000
10,000,000
50,000,000
Directors
M Kennedy
S Wetherall
G Gilchrist
A Thamm
D Jones
Directors
M Kennedy
D Jones
G Gilchrist
Movements in shares
Held following
consolidation
Exercise of
options
Expired without
exercise
Options
acquired
Held at
31 Dec 2014
Vested &
exercisable
68,334
-
852,918
42,804
-
-
-
(19,584)
(26,136)
-
-
-
(833,334)
-
-
642,501
-
117.501
23,333
-
710,835
-
117,501
40,001
-
710,835
-
117,501
40,001
-
Granted as
compensation Rights Issue
Expired without
exercise
Held at
31 Dec 2013
Released
from escrow
during the
period
-
-
-
2,050,000
-
587,500
(16,000,000)
(10,000,000)
(25,000,000)
2,050,000
-
25,587,500
-
-
-
Vested &
exercisable
2,050,000
-
25,587,500
The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by
each KMP, including their related parties, is as follows.
Held at
1 Jan 2014
or date of
appointment
38,050,000
-
6,462,500
-
3,312,500
Held at
1 Jan 2013
or date of
appointment
36,500,000
3,312,500
875,000
Directors
M Kennedy
S Wetherall
G Gilchrist
A Thamm
D Jones
Directors
M Kennedy
D Jones
G Gilchrist
Held following
consolidation
Received upon
exercise of options
Sales
Purchases
Held at
resignation
Held at
31 Dec 2014
1,285,002
-
215,417
-
-
-
-
19,584
26,136
-
(533,334)
-
-
-
-
-
65,000
60,000
-
-
-
-
-
-
3,312,500
751,668
65,000
295,001
26,136
-
Held following
consolidation
Received upon
exercise of options
Sales
Purchases
Held at
resignation
Held at
31 Dec 2013
-
-
-
2,050,000
-
587,500
-
-
-
-
-
5,000,000
- 38,050,000
3,312,500
-
6,462,500
-
No shares were granted to KMP during the reporting period as compensation in 2014 or 2013.
End of audited section.
16 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Corporate Governance Statement
ROLE OF MANAGEMENT
The Board has delegated responsibilities and authorities to the executive staff and consultants to enable management to conduct the
Company’s day-to-day activities. Matters which are not covered by these delegations, such as approvals which exceed certain limits or
do not form part of the approved budget require Board approval.
An evaluation of the performance of senior management and consultants, including the Chief Executive Officer is undertaken
periodically at Board level, with the Chairman discussing this review separately with the Chief Executive Officer. This is considered to
be an appropriate process given the size of the Company and its stage of development.
ETHICAL STANDARDS
As part of the Board’s commitment to the highest standard of conduct, the Company has adopted a Code of Conduct to guide
executives, management, employees and contractors in carrying out their duties and responsibilities. The Code of Conduct is
incorporated with the Charter and encompasses:
- responsibilities to shareholders;
- compliance with laws and regulations;
- relationships with clients and customers;
- conflicts of interest;
- employment practices; and
- responsibilities to the community.
DIVERSITY
The Board is committed to having an appropriate blend of diversity on the Board and in all areas of the Group’s business. The Board
has established a policy regarding gender, age, ethnic and cultural diversity.
The Company and all its related bodies corporate are committed to workplace diversity.
The Company recognises the benefits arising from employee and Board diversity, including a broader pool of high quality employees,
improving employee retention, accessing different perspectives and ideas and benefiting from all available talent.
Diversity includes, but is not limited to, gender, age, ethnicity and cultural background.
To the extent practicable, the Company will address the recommendations and guidance provided in the ASX Corporate Governance
Council’s Principles and Recommendations.
The Diversity policy does not impose on the Company, its directors, officers, agents or employee any obligation to engage in, or
justification for engaging in, any conduct which is illegal or contrary to any anti-discrimination or equal employment opportunity
legislation or laws in any State or Territory of Australia or of any foreign jurisdiction.
The key objectives of the Diversity Policy are to achieve:
(a)
(b)
(c)
(d)
(e)
a diverse and skilled workforce, leading to continuous improvement in service delivery and achievement of corporate goals;
a workplace culture characterised by inclusive practices and behaviours for the benefit of all staff;
improved employment and career development opportunities for women;
a work environment that values and utilises the contributions of employees with diverse backgrounds, experiences and
perspectives through improved awareness of the benefits of workforce diversity and successful management of diversity;
and
awareness in all staff of their rights and responsibilities with regards to fairness, equity and respect for all aspects of
diversity, (collectively, the Objectives).
Diversity Reporting
The Group’s gender diversity as at the end of the reporting period is as follows:
31 December 2014
31 December 2013
Gender representation
Female
Male
Female
Male
Board representation
Group representation
No
0
6
%
0
6.3
No
4
89
%
No
100
93.7
0
9
%
0
26.5
No
3
25
%
100
73.5
19 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Corporate Governance Statement
The following senior positions with the Group are currently held by female employees:
•
•
Financial Manager
Office Manager
The Company’s proposed diversity objectives for the 2015 financial year are to continue to assess and proactively monitor gender
diversity at all levels of the business and report to the Board.
TRADING IN THE COMPANY’S SHARES
To safeguard against insider trading the Company’s Securities Trading policy prohibits directors, employees and consultants from
trading the Company’s securities if they are aware of any information that would be expected to have a material effect on the price of
the Company’s securities.
Directors must consult with the Chairman of the Board, or in his absence or conflict, the Company Secretary, before dealing in shares
or other securities of the Company.
Dealings (whether purchases or sales) in the Company’s shares or other securities by related personnel may not be carried out other
than in the dealing “window”, being the period commencing 2 days prior to and ending 2 days following the date of announcement of
the Company annual or half yearly results or a major announcement leading to a fully informed market.
“Major” is defined as an announcement that may as a direct result, affect the share price, or an announcement affecting the
operations of the Company. If within that period any further announcement arises that may separately affect the share price, the
Chairman or in his absence the Company Secretary may impose a lock-down period on the ability to trade.
All related persons must give details of any acquisitions or disposal of shares or other securities in the Company, within one business
day to the Company Secretary of the Company.
All related persons must ensure that they at all times observe the insider trading rules of the Corporations Act.
The Company discloses to ASX any transaction conducted by the directors in the Company’s securities in accordance with the ASX
Listing Rules.
The Board has resolved that the relevant sections of the Charter, particularly the Code of Conduct, corporate ethics policy, securities
dealings restrictions and continuous disclosure obligations should also extend to cover all executives, employees and consultants of
the Company.
CONTINUOUS DISCLOSURE AND SHAREHOLDER COMMUNICATION
The Board is committed to the promotion of investor confidence by ensuring that trading in the Company’s securities takes place in an
efficient, competitive and informed market in accordance with continuous disclosure obligations under the ASX Listing Rules, the
Company has procedures in place to ensure that all price sensitive information is identified, reviewed by management and disclosed to
the ASX in a timely manner. These are also detailed in the Charter. All information disclosure to the ASX is posed on the Company’s
website.
Shareholders are forwarded the Company’s Annual Report if requested and documents relating to each general meeting, being the
Notice of Meeting, any explanatory memorandum and a proxy form, and are invited to attend these meetings. The Company’s external
auditor is also required to be present at the Annual General Meetings to answer any queries shareholders may have with regard to the
audit and preparation and content of the Audit Report.
MANAGING BUSINESS RISK
The Board constantly monitors the operational and financial aspects of the Company’s activities and is responsible for the
implementation and ongoing review of the business risks that could affect the Company. Duties in relation to risk management that
conducted by the Board include, but are not limited to:
- initiate action to prevent or reduce the adverse effects of risk;
- control further treatment of risks until the level of risk becomes acceptable;
- identify and record any problems relating to the management of risk;
- initiate, recommend and provide solutions through designated channels;
- verify the implementation of solutions; and
- communicate and consult internally and externally as appropriate.
in accordance with section 295A of the Corporations Act 2001, the persons performing the roles of Chief Executive Officer and Chief
Financial Officer are required to provide a declaration to the Board that the financial records of the Company have been properly
maintained, the financial statements comply with the accounting standards and give a true and fair view of the Company’s financial
position and performance. In addition, as required by the Recommendations, the declaration is founded on a found system of risk
management and internal control which implements policies adopted by the Board and the Company’s risk management and
internal compliance control system is operating efficiently and effectively in all material respects
in relation to the financial reporting risks.
20 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Corporate Governance Statement
PRINCIPLIES & RECOMENDATIONS
COMPLIANCE
PRINCIPLE 1 - LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
1.1
Companies should establish the functions
reserved to the board and those delegated
to senior executives and disclose those
functions.
The Board
is responsible for the overall
corporate governance of the Company. The
Board has adopted a Board charter that
formalises its roles and responsibilities and
defines the matters that are reserved for the
Board and specific matters that are delegated
to management. On appointment of a
director, the Company
letter of
appointment setting out the terms and
conditions of appointment to the Board
issues a
COMPLY
Complies.
1.2
1.3
Companies should disclose the process for
evaluating the performance of senior
executives.
The non-executive members of the Board
the
undertake
executives’ performance.
assessment of
annual
Complies to the extent that non-
executive members of the Board
undertake
of
executives’ performance.
assessment
Companies should provide the information
indicated in the Guide to reporting on
Principle 1.
A summary of the Board’s functions and
responsibilities has been disclosed on the
Company’s website and is summarised in this
Corporate Governance Statement.
Complies.
PRINCIPLE 2 - STRUCTURE THE BOARD TO ADD VALUE
2.1
A majority of the board should be
independent directors.
50% of the Board’s directors are independent.
Mr Miles Kennedy was an executive of the
Company within the last 3 years and therefore
is not considered independent. Mr Gordon
Gilchrist
are
independent non-executive directors. Mr
Stephen Wetherall is an executive director.
and Mr Albert Thamm
Does not comply however the
skills and experience of both the
independent
non-
independent directors allow the
Board to act in the best interests
of shareholders.
and
2.2
2.3
The chair should be an
director.
independent
Mr Miles Kennedy is a non-executive director
of the Board, but is not independent.
not
Does
explanation in 2.1.
comply
–
refer
The roles of chair and chief executive
officer should not be exercised by the
same individual.
Mr Miles Kennedy is the chairman and Mr
Stephen Wetherall
is the Chief Executive
Officer.
Complies.
2.4
The board should establish a nomination
committee.
Given the size of the Board, it was determined
that the Board will execute the functions of a
nomination committee and that a separate
nomination committee is unnecessary.
Does not comply for reasons given
under 2.6 below.
2.5
2.6
Companies should disclose the process for
evaluating the performance of the board,
its committees and individual directors.
The Company did not conduct a performance
evaluation of the Board, and has not adopted
a performance evaluation policy.
Does not comply. Refer 1.2 above.
should
Companies
the
information indicated in the Guide to
reporting on Principle 2.
provide
the
ASX
Corporate
This information has been disclosed (where
applicable) in the Directors’ Report in the
Company’s Annual Report. A director
is
considered independent when he substantially
satisfies the test for independence as set out
in
Governance
Recommendations. Members of the Board are
able to take independent professional advice
at the expense of the Company. The Board
carries out the functions of a nomination
committee.
the
information suggested in Guide to Reporting
on Principle 2, the Company has disclosed full
details of its Directors in the
accordance with
In
a
of
the
Board,
committee
In addition,
Does not comply. Given the size of
the
Directors
determined that it will execute the
nomination
functions
committee and that a separate
is
nomination
unnecessary.
the
Board does not consist of a
majority of independent directors
however the skills and experience
of both the independent and non-
independent directors allows the
Board to act in the best interests
of shareholders.
21 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Corporate Governance Statement
PRINCIPLIES & RECOMENDATIONS
COMPLIANCE
COMPLY
PRINCIPLE 2 - STRUCTURE THE BOARD TO ADD VALUE CONTINUED
2.6
Directors’ Report. Other disclosure material as
suggested in Guide to Reporting on Principle 2
has been made available on the Company’s
website.
PRINCIPLE 3 - PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING
3.1
Companies should establish a code of
conduct and disclose the code or a
summary of the code as to:
•
•
•
in
the
the practices necessary to maintain
confidence
company’s
integrity
the practices necessary to take into
account their legal obligations and
the reasonable expectations of their
stakeholders
the responsibility and accountability
of
individuals for reporting and
investigating reports of unethical
practices.
3.2
3.3
3.4
3.5
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 measureable objectives
for achieving gender diversity and for the
board to assess annually both the
objectives and progress
in achieving
them.
Companies should disclose in each annual
report the measureable objectives for
achieving gender diversity set by the
board in accordance with the diversity
policy and progress in achieving them.
the
Companies should disclose in each annual
report
of women
proportion
employees
in the whole organisation,
women in senior executive positions and
women on the board.
should
Companies
the
information indicated in the Guide to
reporting on Principle 3.
provide
Complies
The Board has adopted a code of conduct that
is contained within the Board charter. The
code establishes a clear set of values that
emphasise a culture encompassing strong
corporate
business
practices and good ethical conduct. The code
of conduct is encompassed within the Board
Charter and is available on the Company’s
website.
governance,
sound
The Company has adopted a Diversity Policy.
Complies.
The information is disclosed in the Annual
Report.
Complies.
The information is disclosed in the Annual
Report.
Complies.
The code of conduct and securities trading
policy are available on the Company’s website.
The securities trading policy is summarised in
this Corporate Governance Statement.
Complies.
PRINCIPLE 4 - SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
4.1
The board should establish an audit
committee.
An audit committee has not been established
by the Board
Does not comply. Given the size
of the Board, the Directors
determined that it will execute
the
functions of an audit
committee and that a separate
audit committee is unnecessary
22 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Corporate Governance Statement
PRINCIPLIES & RECOMENDATIONS
COMPLIANCE
COMPLY
PRINCIPLE 4 - SAFEGUARD INTEGRITY IN FINANCIAL REPORTING CONTINUED
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 chair of the board
has at least three members.
4.3
The audit committee should have a
formal charter.
4.4
Companies should provide the
information indicated in the Guide to
reporting on Principle 4.
The full board is made up of four members,
one of whom is an executive director, and
three are non-executive directors, two of
which are considered independent.
Does not comply, for reasons
given in 4.1 above.
An audit committee has not been established
by the Board. The functions of an audit
committee are reserved for the Board and
operate under the Board Charter
The functions associated with safeguarding
the integrity in financial reporting are carried
out by the Board; is encompassed within the
Board Charter which
is available on the
Company’s website and summarised in this
Corporate Governance Statement
Does not comply, for reasons
given in 4.1 above.
Does not comply, for reasons
given in 4.1 above.
5.1
5.2
6.1
PRINCIPLE 5 - 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 executive level
for that compliance and disclose those
policies or a summary of those policies.
Companies should provide the
information indicated in Guide to
Reporting on Principle 5.
The Company has adopted a continuous
disclosure policy, to ensure that it complies
with the continuous disclosure regime under
the ASX Listing Rules and the Corporations
Act 2001. This policy is available on the
Company’s website.
Complies.
The Company’s continuous disclosure policy is
available on the Company’s website
Complies.
PRINCIPLE 6 - 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.
Complies.
shows,
The Company has adopted a shareholder
communications policy. The Company uses its
website www.lucapa.com.au, annual report,
road
market
announcements and media disclosures to
communicate with its shareholders, as well as
encourage participation at general meetings.
This policy is available on the Company’s
website.
presentations,
6.2
Companies should provide the
information indicated in the Guide to
reporting on Principle 6.
The Company’s shareholder communications
policy is available on the
Complies.
Company’s website.
PRINCIPLE 7 - RECOGNISE AND MANAGE RISK
7.1
Companies should establish policies for
the oversight and management of
material business risks and disclose a
summary of those policies.
The Company has not adopted a
management statement.
risk
comply. However
Does not
ultimate responsibility for risk
oversight and risk management
the Board and
rests with
the Board
operates under
Charter.
23 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Corporate Governance Statement
PRINCIPLIES & RECOMENDATIONS
COMPLIANCE
COMPLY
PRINCIPLE 7 - RECOGNISE AND MANAGE RISK CONTINUED
he 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
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.
The Company has identified key risks within
In the ordinary course of
the business.
business, management monitor and manage
these risks. Key operational and financial risks
are presented to and reviewed by the Board at
each Board meeting.
Complies.
Complies.
The Board has received a declaration under
section 295A of the Corporations Act 2001
from the Chief Executive Officer and the
Financial Accountant (CFO equivalent) that
the financial accounting system is founded on
a sound system of risk management and
is
internal control and that the system
operating efficiently and effectively
in all
material respects in relation to the financial
reporting risks.
Companies should provide the
information indicated in Guide to
Reporting on Principle 7.
The Board has not adopted an audit and risk
charter, however has
identified key risks
within the business.
Complies.
PRINCIPLE 8 - RENUMERATE FAIRLY AND RESPONSIBLY
board
The
remuneration committee.
should
establish
a
The Board has not established a remuneration
a
and has not
committee
remuneration charter.
adopted
7.2
7.3
7.4
8.1
Does not comply. Given the size
of the Board, the Directors have
determined that it will execute
the functions of a remuneration
committee and that a separate
remuneration
is
unnecessary.
committee
Does not comply, for reasons given
in 8.1 above.
8.2
The remuneration committee should be
structured so that it:
•
•
•
consists of a majority of independent
directors
is chaired by an independent director
has at least three members
The full Board is made up of four. An executive
director and three non-executive directors, two
of whom are considered independent.
8.3
8.4
Companies should clearly distinguish the
directors’
of
structure
remuneration
that of executive
directors and senior executives.
non-executive
from
The Company complies with the guidelines for
executive remuneration packages and non-
executive director remuneration.
Complies.
Companies should provide the information
indicated in the Guide to reporting on
Principle 8.
The Board has not adopted a remuneration
committee charter. The Company does not have
any schemes for retirement benefits other than
superannuation for non-executive directors.
Does not comply. Given the size of
the Board has
the Board,
determined that it will execute the
functions of a
remuneration
committee and that a separate
is
remuneration
unnecessary. With respect to this
compliance issue, the Board will
review its position annually.
committee
24 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2014
In AUD
Finance income
Consulting expenses
Depreciation expense
Employee benefits expenses
Other expenses
Loss before income tax
Income tax expense
Loss after income tax for the period
Other comprehensive income
Total other comprehensive income for the period
Note
31 Dec 2014
(12 months)
31 Dec 2013
(10 months)
7
5
6
9
1,163
2,223
(233,606)
(2,959)
(51,331)
(2,347)
(1,187,889)
(698,517)
(1,176,607)
(423,057)
(2,599,898)
(1,173,029)
-
-
(2,599,898)
(1,173,029)
-
-
-
-
Total comprehensive income for the period attributable to owners of the company
(2,599,898)
(1,173,029)
Loss per share
Basic (loss) per share (cents)
Diluted (loss) per share (cents)
10
10
(1.6)
(1.6)
(1.0)
(1.0)
The statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
25 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Statement of Financial Position
as at 31 December 2014
In AUD
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Deferred exploration and evaluation costs
Property, plant and equipment
Total non-current assets
Total assets
Liabilities
Trade and other payables
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
Note
17a
11
12
13
14
15
16
16
31 Dec 2014
31 Dec 2013
1,498,693
305,960
34,601
60,000
78,819
-
1,593,294
384,779
36,802,511
28,344,568
14,491
10,601
36,817,002
28,355,169
38,410,296
28,739,948
753,201
1,463,304
706,120
-
1,459,321
1,463,304
1,459,321
1,463,304
36,950,975
27,276,644
76,239,506
64,130,565
546,888
1,896,623
(39,835,419)
(38,750,544)
36,950,975
27,276,644
The statement of financial position is to be read in conjunction with the accompanying notes.
26 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Statement of Changes in Equity
for the year ended 31 December 2014
In AUD
Share capital
Reserves
Accumulated
losses
Total
Balance at 1 March 2013
61,836,670
1,815,963
(37,878,455)
25,774,178
Total comprehensive income for the year
Loss for the period
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly in
equity
Issue of share capital
Expiry of options
Share issue expenses
Share based payments
Total transactions with owners
Closing balance at 31 Dec 2013
Balance at 1 January 2014
Total comprehensive income for the period
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded directly in
equity
Issue of share capital
Issue of options
Expiry of options
-
-
-
2,672,947
-
-
-
-
(1,173,029)
(1,173,029)
-
-
(1,173,029)
(1,173,029)
-
2,672,947
-
(300,940)
300,940
-
(379,052)
-
-
2,293,895
381,600
80,660
-
-
(379,052)
381,600
300,940
2,675,495
64,130,565
1,896,623
(38,750,544)
27,276,644
64,130,565
1,896,623
(38,750,544)
27,276,644
-
-
-
12,334,025
-
-
-
-
-
-
451,202
(2,599,898)
(2,599,898)
-
-
(2,599,898)
(2,599,898)
-
-
12,334,025
451,202
(1,515,023)
1,515,023
-
-
(510,998)
Transfer of reserves on exercise of options
285,914
(285,914)
Share issue expenses
(510,998)
-
-
-
Total transactions with owners
Closing balance at 31 Dec 2014
12,108,941
(1,349,735)
1,515,023
12,274,229
76,239,506
546,888
(39,835,419)
36,950,975
The statement of changes in equity is to be read in conjunction with the accompanying notes.
27 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Statement of Cash flows
for the year ended 31 December 2014
In AUD
Cash flows from operating activities
Cash paid to suppliers and employees
Interest received
Note
31 Dec 2014
(12 months)
31 Dec 2013
(12 months)
(2,906,738)
(1,109,507)
1,163
2,223
Net cash used in operating activities
17b
(2,905,575)
(1,107,284)
Cash flows from investing activities
Payments for exploration costs
Payments for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from investors for share capital
Proceeds from issue of options
Share issue costs
(8,169,072)
(3,618,498)
(6,849)
-
(8,175,921)
(3,618,498)
12,334,025
2,672,947
451,202
16
(510,998)
63,600
(61,052)
Net cash generated from financing activities
12,274,229
2,675,495
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
1,192,733
(2,050,287)
305,960
2,356,247
Cash and cash equivalents at end of period
17a
1,498,693
305,960
The statement of cash flows is to be read in conjunction with the accompanying notes.
28 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
1.
Reporting entity
Lucapa Diamond Company Limited (the ‘Company’) is a company domiciled and incorporated in Australia. The address of the
Company’s registered office is 34 Bagot Road, Subiaco WA 6008. The Company is primarily involved in the mining and exploration of
diamond projects in Africa, specifically Angola.
2.
(a)
Basis of preparation
Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards
(AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. The financial report of the Company complies with International Financial Reporting Standards (IFRSs) and interpretations
adopted by the International Accounting Standards Board (IASB).
The financial statements were authorised for issue by the Board of Directors on the date of the directors’ report.
(b)
Basis of measurement
The financial statements have been prepared on the historical cost basis, except for equity settled share-based payments. The
methods used to determine fair values of equity settled share-based payments are discussed further in Note 3. The financial
statements have been prepared on the going concern basis.
Going concern basis
The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities
and the realisation of assets and settlement of liabilities in the ordinary course of business. Whilst the Company has achieved
exploration success at the Lulo Project, the directors recognise that the Company will have to seek additional funding in order to
continue to exploit and develop the Lulo Project.
The Company recorded a loss of $2,599,898 for the year ended 31 December 2014 and had net assets of $36,950,975 as at 31 December
2014 (Dec 2013: loss of $1,173,029 for the 10 month period and net assets of $27,276,644).
On 27 February 2015 the Company announced that an investment group had completed their detailed operational, technical and
resource potential reviews as part of their due diligence and had formally advised the Company that no material concerns or fatal
flaws were raised. The investment group further confirmed the US$15 million bridge finance facility offer will remain in place for a
further three months to enable the Company to complete the gazetting and incorporation formalities which are required to provide
the necessary in-country security for the investment group. The Company further announced that it had successfully raised $4.8
million via the issue of new shares to enable the Company to continue ramping up alluvial diamond mining operations at Lulo. The
placement involved the issue of 24 million ordinary fully paid shares at an issue price of 20 cents per share, with an attached one-for-
one listed option, exercisable at 30 cents on or before 29 August 2015 at no additional cost, subject to shareholder approval at a
general meeting to be convened on 17 April 2015.
The ability of the Company to continue to pay its debts as and when they fall due for a twelve month period from the date the
financial report is signed is dependent upon:
•
•
continued cash management according to exploration success; and
the placement of securities under the ASX Listing Rule 7.1, or otherwise
The Directors believe that the above funding strategies can be achieved and the going concern basis is appropriate for the following
reasons:
•
•
The Company operates on a program of income and expenditure designed to ensure that there are at all times sufficient funds in
hand to continue operations for the foreseeable future, whilst at the same time continuing the exploration at Lulo in an
effective manner; and
The historical ability of the Company to raise capital via equity placements and capital raisings given the prospectivity of the
Lulo Project.
However, should the Company be unable to obtain sufficient funding as advised above, there is a material uncertainty which may cast
doubt as to whether or not the Company will be able to continue as a going concern and whether it will realise its assets and
extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts
nor to the amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.
(c)
Functional and presentation currency
These financial statements are presented in Australian Dollars, which is the Company’s functional currency.
(d)
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from
29 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
Judgements made by management in the application of Australian Accounting Standards that have significant effect on the financial
statements and estimates with a significant risk of material adjustment in the next year are discussed in Note 3.
3.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have
been applied consistently by the Company.
The Company adopted all new or revised accounting standards that became effective for reporting periods commencing on 1 January
2014. The adoption of these standards has not resulted in any material changes to the Company’s accounting policies.
Other standards that have been issued but are not yet effective are considered to have no significant effect on the financial
statements.
(a)
Foreign currency
Foreign currency transactions and balances
Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the foreign exchange rate at that date. Foreign exchange differences arising on retranslation are recognised in
the statement of profit or loss and other comprehensive income.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to
Australian dollars at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are
translated to Australian dollars at exchange rates approximating the foreign exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity.
When a foreign operation is disposed of in part or in full, the relevant amount in equity is transferred to the statement of profit or loss
and other comprehensive income.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of
which is neither planned nor likely in the foreseeable future, are considered to form part of the net investment in a foreign operation
and are recognised directly in equity.
(b)
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and
trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss,
any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as
described below.
A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets
are derecognised if the Company’s contractual rights to the cash flows from the financial assets expire or if the Company transfers the
financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases
and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself to purchase or sell the
asset. Financial liabilities are derecognised if the Company’s obligations specified in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
Accounting for finance income and expense is discussed in Note 3(k).
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment
losses.
Share capital
Equity instruments, including preference shares, issued by the Company are recorded at the proceeds received. Incremental costs
directly attributable to the issue of equity instruments are recognised as a deduction from equity, net of any tax effects.
(c)
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the
cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended
use, and the costs of dismantling and removing the items and restoring the site on which they are located.
30 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are recognised net within “other income” in the Statement of profit or
loss and other comprehensive income.
Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of an item if it is probable
that the future economic benefits embodied within the item will flow to the Company and the cost of the item can be measured
reliably. The carrying amount of the replaces part is derecognised. All other costs are recognised in the statement of profit or loss and
other comprehensive income as an expense incurred.
Depreciation
Depreciation is recognised in the statement of profit or loss and other comprehensive income on a reducing balance basis over the
estimated useful lives of each part of an item of property, plant and equipment.
The estimated useful lives in the current and comparative periods are as follows:
Computer equipment
Office equipment
3 years
5-10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(d)
Deferred exploration and evaluation costs
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only
carried forward to the extent that the right to tenure of each identifiable area of interest are current, and either the costs are expected
to be recouped through successful development of the area, or activities in the area have not yet reached a stage that permits
reasonable assessment of the existence of economically recoverable reserves. As the exploration assets are currently not available for
use they are not amortised.
Exploration and evaluation assets are initially measured at cost and include acquisition of mining tenements, studies, exploratory
drilling, trenching and sampling and associated activities and an allocation of depreciation of assets used in exploration activities.
General and administrative costs are only included in the measurement of exploration costs where they are related directly to
operational activities in a particular area of interest.
Deferred exploration and evaluation costs in relation to an abandoned area are written off in full against profit or loss in the period in
which the decision to abandon that 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.
(e)
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out
principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in
bringing them to their existing location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses.
(f)
Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A
financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the
estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying
amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the statement of profit or loss and other comprehensive income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was
recognised. For financial assets measured at amortised cost the reversal is recognised in the statement of profit or loss and other
comprehensive income.
Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than inventories, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
31 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the statement of profit or loss and other comprehensive income. Impairment losses recognised
in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units
(group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount dies not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(g)
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity
and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution
superannuation funds are recognised as an expense in the statement of profit or loss and other comprehensive income as incurred.
Short-term employee benefits
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting
date represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted
amounts based on remuneration wage and salary rates that the Company expects to pay as at reporting date including related on-
costs, such as workers compensation insurance and payroll tax.
Long-term employee benefits
The Company’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned
in return for their service in the current and prior periods plus related on-costs: that benefit is discounted to determine its present
value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on government bonds
that have maturity dates approximating the terms of the Company’s obligations.
Termination benefits
Termination benefits are recognised as an expense when the Company is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy.
Share-based payment transactions
The fair value of options granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at
grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of
the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions upon
which the options were granted. The amount recognised is adjusted to reflect the actual number of share options that vest except
where forfeiture is only due to market conditions not being met.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as
measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as
a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
(h)
Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, when appropriate, the risks specific to the liability.
(i)
Revenue
Provision of services
Revenue from services rendered is recognised in the statement of profit or loss and other comprehensive income in proportion to the
stage of completion of the transaction at the reporting date.
32 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
Sale of non-current assets
The net gain/(loss) on the sale of non-current assets is included as revenue or expense at the date control of the assets passes to the
buyer. The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal
and the net proceeds on disposal (including incidental costs).
(j)
Leases
Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases.
Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the
minimum lease payments. Subsequent to the initial recognition, the asset is accounted for in accordance with the accounting policy
applicable to that asset.
Other leases are operating leases and the leased assets are not recognised in the Company’s balance sheet.
Payments made under operating leases are recognised in the statement of profit or loss and other comprehensive income on a
straight-line basis over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate
of interest on the remaining balance of the liability.
(k)
Finance income and expenses
Finance income and expenses comprises interest income on funds invested, interest expense on borrowings calculated using the
effective interest method and unwinding of discounts on provisions.
Interest income is recognised in the statement of profit or loss and other comprehensive income as it accrues, using the effective
interest method. All borrowing costs are recognised in the statement of profit or loss and other comprehensive income using the
effective interest method.
(l)
Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable
profit (loss) for the period. Taxable profit differs from net profit as reported in the statement of profit or loss and other
comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative
goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet 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 asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.
Deferred tax is charged or credited in the statement of profit or loss and other comprehensive income, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis.
(m)
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) or value added tax (VAT), except
where the amount of GST or VAT incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense. Receivables and payables are stated with the amount of GST or VAT included.
The net amount of GST and VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST and VAT component of cash flows arising from
investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
(n)
Segment reporting
The Company determines and presents operating segments based on the information that internally is provided to the Board of
Directors, which is the Company’s chief operating decision maker.
An operating segment is a component of the Company 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 Company’s other components. All operating
33 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
segments’ operating results are regularly reviewed by the Company’s CEO to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial information is available.
The Company engages in business activities within one segment, being the exploration of diamond projects in Africa. The Company
maintains an administrative office in Western Australia to support and promote the exploration activities in Africa.
(o)
Adoption of new and revised accounting standards
The Company has chosen not to early-adopt any accounting standards and interpretations that have been issued, but are not yet
effective. The Company has carefully considered each accounting standard that has been issued but is not yet effective and does not
consider any of the pronouncements to have a material impact on the financial statements. Furthermore, these changes in standards
and interpretations are not expected to have a material impact on the accounting treatment in the current or future reporting periods
and on foreseeable future transactions.
(p)
Loss per share
Basic loss per share is calculated by dividing the net loss attributable to the ordinary shareholders of the Company by the weighted
average number of ordinary shares of the Company during the period. Diluted loss per share is determined by adjusting the net loss
attributable to the ordinary shareholders and the number of shares outstanding for the effects of all dilutive potential shares, which
comprise share options.
(q)
Accounting estimates and judgements
Management discusses with the Board the development, selection and disclosure of the Company’s critical accounting policies and
estimates and the application of these policies and estimates. The estimates and judgements that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Exploration and evaluation assets
The Company assesses the carried value of exploration and evaluation assets in accordance with the accounting policy noted above.
As noted in that policy, the basis of carrying value involves numerous estimates and judgements resulting from the assessment of
ongoing exploration activities.
Share-based payment transactions
The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at
which they are granted. Where required, the fair value of options granted is measured using the Black-Scholes option pricing model,
taking into account the terms and conditions as set out within Note 15. 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 expenses and equity.
Provisions for rehabilitation
Included in liabilities at the end of each reporting period is an amount that represents an estimate of the cost to rehabilitate the land
upon which the Company has carried out its exploration and evaluation for mineral resources. Provisions are measured at the present
value of management's best estimate of the costs required to settle the obligation at the end of the reporting period. Actual costs
incurred in future periods to settle these obligations could differ materially from these estimates. Additionally, future changes to
environmental laws and regulations, life of mine estimates, and discount rates could affect the carrying amount of this provision
Impairment
The Company assesses impairment at the end of each reporting year by evaluating conditions specific to the Company that may be
indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using calculations which incorporate various
key assumptions.
(r)
Determination of fair values
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of
interest at the reporting date.
Non derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash
flows, discounted at the market rate of interest at the reporting date.
Share-based payment transactions
The fair value of options issued is measured using the Black-Scholes option pricing formula or direct method. Measurement inputs
include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic
volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments
(based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on
government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in
determining fair value.
4.
Segment reporting
The Company determines and presents operating segments based on the information that is internally provided to the Board, which is
the Company’s “chief operating decision maker.”
34 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
An operating segment is a component of the Company 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 Company’s other components. All operating
segments’ operating results are regularly reviewed by the Company’s Board to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial information is available.
The Company engages in business activities within one segment, being the exploration of diamonds in Angola. The Company
maintains an administrative office in Western Australia to support and promote the exploration activities in Angola.
All transactions disclosed in the statement of profit or loss and other comprehensive income during the year to 31 December 2014 and
the period to 31 December 2013, relate to the administration and management of the Company, in Western Australia. Assets and
Liabilities of the business are split as follows:
As at 31 December 2014:
In AUD
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
Deferred exploration costs
Property, plant & equipment
Total Non-Current Assets
Liabilities
Trade and other payables
Provisions
Total Liabilities
As at 31 December 2013:
In AUD
Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Deferred exploration costs
Property, plant & equipment
Total Non-Current Assets
Liabilities
Trade and other payables
Total Liabilities
5.
Employee benefits expenses
In AUD
Wages, salaries and director remuneration
Bonus
Superannuation costs
Other associated employee expenses
Australia
(Overhead)
Angola
(Exploration and
Evaluation)
1,498,693
34,601
60,000
1,593,294
-
14,491
14,491
78,459
-
78,459
-
-
-
-
36,802,511
-
36,802,511
674,742
706,120
1,380,862
Australia
(Overhead)
Angola
(Exploration and
Evaluation)
305,960
78,819
384,779
-
10,601
10,601
371,313
371,313
-
-
-
28,344,568
-
28,344,968
1,091,997
1,091,997
Total
1,498,693
34,601
60,000
1,593,294
36,802,511
14,491
36,817,002
753,201
706,120
1,459,321
Total
305,960
78,819
384,779
28,344,568
10,601
28,355,169
1,463,310
1,463,310
31 Dec 2014
31 Dec 2013
(12 months)
(10 months)
992,956
687,215
40,208
-
69,448
11,302
85,277
-
1,187,889
698,517
35 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
6.
Other expenses
In AUD
Administrative expenses
Company Secretarial expense
Travel expense
Settlement expense
Operating lease rental expense
7.
Finance income
In AUD
Finance income
Interest on bank deposits
8.
Auditors remuneration
In AUD
Audit services:
Audit and review of financial reports (Somes Cooke)
9.
Income tax (benefit) expense
In AUD
Current tax expense
Domestic
Foreign
Deferred tax expense
Domestic
Foreign
Total income tax expense
31 Dec 2014
31 Dec 2013
(12 months)
(10 months)
594,691
269,955
127,500
50,000
155,616
16,423
170,585
-
128,215
86,679
1,176,607
423,057
31 Dec 2014
31 Dec 2013
(12 months)
(10 months)
1,163
1,163
2,223
2,223
31 Dec 2014
(12 months)
31 Dec 2013
(10 months)
38,000
38,000
38,000
38,000
31 Dec 2014
(12 months)
31 Dec 2013
(10 months)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
Numerical reconciliation between income tax expense and loss before income tax
In AUD
Loss for the period
Total income tax (benefit) expense
Loss excluding income tax
31 Dec 2014
31 Dec 2013
(12 months)
(10 months)
(2,599,898)
(1,173,029)
-
-
(2,599,898)
(1,173,029)
Income tax benefit using the Company’s domestic tax rate of 30% (Dec 2013: 30%)
(779,970)
(351,909)
Non-deductible expenses
Current year tax losses not recognised
210,538
607,791
25,804
-
Recognition of previously unrecognised prior year tax losses
-
877,801
Movement in unrecognised temporary differences
Deductible equity raising costs
Income tax (benefit) / expense
Deferred tax assets not brought to account
(10,252)
(524,159)
(28,107)
(27,537)
-
-
As at 31 December 2014, the Company had estimated tax losses of approximately $10,075,703 (31 Dec 2013: $9,421,713), which may be
available to be offset against taxable income in future years. The availability of these losses is subject to satisfying Australian
taxation legislative requirements. The deferred tax asset attributable to tax losses has not been brought to account in these financial
statements because the directors believe it is not presently appropriate to regard realisation of the future income tax benefits as
probable. The deferred tax assets have not been brought to account in respect to the following:
In AUD
Tax revenue losses
Tax capital losses
Deductible temporary differences
10.
Loss per share
Basic loss per share
Basic loss per share (cents) (i)
31 Dec 2014
(12 months)
31 Dec 2013
(10 months)
3,371,009
2,727,168
6,613,582
6,613,582
91,112
80,963
10,075,703
9,421,713
31 Dec 2014
(12 months)
1.6
31 Dec 2013
(10 months)
1.0
The calculation of basic loss per share at 31 December 2014 was based on the loss attributable to ordinary shareholders of $2,599,898 (31
December 2013: $1,173,029) and a weighted average number of ordinary shares outstanding of 161,188,803 (2013: 112,732,057), calculated
as follows.
Weighted average number of shares
Issued ordinary shares at beginning of period (i)
Effect of shares issued on weighted average
Weighted average number of ordinary shares held during the period
31 Dec 2014
128,420,107
31 Dec 2013
106,145,552
32,768,696
6,586,505
161,188,803
112,732,057
Note
(i)
During the year to 31 December 2014, the Company consolidated its share capital on a 30 to 1 basis. The comparatives have
been restated to show the effect as if the shares had always been consolidated.
37 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
Diluted loss per share
Diluted loss per share (cents)
31 Dec 2014
31 Dec 2013
(12 months)
(10 months)
1.6
1.0
The Company is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, ordinary share capital
in respect of potential ordinary shares would lead to diluted earnings per share that shows an inferior view of the earnings per share.
For this reason, the diluted loss per share is the same as the basic loss per share.
11.
Trade and other receivables
In AUD
Current
GST receivable
Other current receivables
31 Dec 2014
31 Dec 2013
31,154
30,598
3,447
34,601
48,221
78,819
The Company’s exposure to credit and currency risks related to trade and other receivables are disclosed in Note 20.
12.
Deferred exploration and evaluation costs
In AUD
Cost
Balance at beginning of period
Exploration costs incurred in the period
Balance at end of period (i)
31 Dec 2014
31 Dec 2013
28,344,568
23,634,079
8,457,943
4,710,489
36,802,511
28,344,568
Note
(i)
This balance represents the cumulative amount of costs incurred by the Company in relation to the Lulo Project. All of the
funds advanced to the Lulo Project have been spent on diamond exploration and evaluation and the purchase of plant and
equipment required for these activities. The recoupment of funds advanced to the Lulo Project carried forward is dependent
upon the successful development and commercialisation of the areas being explored and evaluated. In the event of a
commercial diamond mining operation being established on the Lulo Project in the future, the Angolan government has
agreed that all alluvial and kimberlite exploration and development funds that the Company has transferred to the Lulo
Project should be reimbursed to the Company from each of the mining operations.
38 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
13.
Property, plant and equipment
In AUD
Cost
Balance at 1 March 2013
Additions
Balance at 31 December 2013
Balance at 1 January 2014
Additions
Disposal
Balance at 31 December 2014
Depreciation
Balance at 1 March 2013
Depreciation for the period
Balance at 31 December 2013
Balance at 1 January 2014
Depreciation accumulated for the year, net of disposals
Balance at 31 December 2014
Carrying amounts
At 1 March 2013
At 31 December 2013
At 31 December 2014
14.
Trade and other payables
In AUD
Trade payables
Accruals and other payables(i)
Computer
Equipment
Office
Equipment
7,518
-
7,518
7,518
5,123
-
12,641
5,169
612
5,781
5,781
1,181
6,962
2,349
1,737
5,679
17,716
-
17,716
17,716
1,919
(1,000)
18,635
7,117
1,735
8,852
8,852
971
9,823
10,599
8,864
8,812
Total
25,234
-
25,234
25,234
7,042
(1,000)
31,276
12,286
2,347
14,633
14,633
2,152
16,785
12,948
10,601
14,491
31 Dec 2014
31 Dec 2013
53,459
107,617
699,742
1,355,687
753,201
1,463,304
Note
(i)
Included within other payables is an amount of $674,742, which represents the value of Lulo Project liabilities, of which it is
operator. The majority of the payable amount relates to historical payroll taxes on staff salaries at Lulo, owed to the Angolan
government. Note that this would be offset by an equal and opposite asset to be reimbursed from free cash flows of any
established mining operations.
The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 20.
15.
Provisions
In AUD
Provision for environmental rehabilitation(i)
31 Dec 2014
31 Dec 2013
706,120
706,120
-
-
Note
(i)
The provision relates to the Lulo Projects, of which the Company is the operator. This would be offset by an equal and opposite
asset to be reimbursed from free cash flows of any established mining operations. The provision is measured at the present
value of management's best estimate of the costs required to settle the obligation at the end of the reporting period. Actual
costs incurred in future periods to settle these obligations could differ materially from these estimates.
39 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
16.
Share capital and reserves
In AUD
Issued and ordinary fully paid shares
Movement in ordinary shares
In shares
31 Dec 2014
31 Dec 2013
76,239,506
64,130,565
Ordinary shares
AUD
Note
31 Dec 2014
31 Dec 2013
31 Dec 2014
31 Dec 2013
On issue at beginning of period
3,852,603,212
3,184,366,555
64,130,565
61,836,670
Issue of shares for cash
(i)
925,000,000
668,236,657
5,550,000
2,672,947
Consolidation 1:30
(4,618,348,305)
Issue on exercise of options, including transfer
from options reserve
(i)
22,617,835
Transaction expenses
-
-
-
-
-
7,069,939
-
-
(510,998)
(379,052)
On issue at end of period
181,872,742
3,852,603,212
76,239,506
64,130,565
Note
(i)
The Company issued the following shares and options during the period to 31 December 2014.
Transaction
Issue of shares (ii)
Issue of options (ii)
Issue of options
Exercise of options
Expiry of options
Expiry of options
Note
(ii)
Pre-consolidation.
Terms and conditions
Number
925,000,000
537,500,000
90,240,470
22,617,835
4,166,668
833,334
Issue/
exercise price ($)
0.006
0.01
0.005
0.30
0.57
0.90
Funds raised ($)
5,550,000
-
451,202
6,784,025
-
-
Option expiry
N/A
29 August 2015
29 August 2015
N/A
25 September 2014
2 December 2014
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company.
Unissued ordinary shares of the Company under option at 31 December 2014 were:
Expiry date
29 August 2015
Lapse of options
Exercise price
Number of shares
$0.30
112,054,385
The following options over ordinary shares lapsed during the financial period:
Expiry date
25 September 2014
2 December 2014
Exercise price
Number of shares
$0.57
$0.90
4,166,668
833,334
40 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
Summaries of options granted
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options
issued during the period:
Outstanding at 1 January 2014
Consolidation 1:30
Granted during the period
Exercised during the period
Expired during the period
Outstanding at 31 December 2014
Exercisable at 31 December 2014
Weighted average remaining contractual life
31 Dec 2014
No.
945,436,657
(913,921,572)
108,157,137
(22,617,835)
(5,000,002)
112,054,385
112,054,385
31 Dec 2014
WAEP
$0.012
-
$0.30
$0.30
$0.625
$0.30
$0.30
The weighted average remaining contractual life for the share options outstanding as at 31 December 2014 is 0.67 years.
Reserves
In AUD
Balance at 1 March 2013
Expiry of options
Share based payments
Share-based
payments
reserve
Option premium
reserve
Total
942,963
873,000
1,815,963
(300,940)
-
(300,940)
-
381,600
381,600
Balance at 31 December 2013
642,023
1,254,600
1,896,623
Expiry of options
Share based payments
Exercise of options
Balance at 31 December 2014
Nature and purpose of reserves
Share-based payments reserve
(642,023)
(873,000)
(1,515,023)
-
-
-
451,202
451,202
(285,914)
(285,914)
546,888
546,888
The share-based payments reserve represents the fair value of equity instruments issued to employees as compensation and issued
to external parties for the receipt of goods and services. This reserve will be reversed against issued capital when the underlying
shares are converted.
Option premium reserve
The option premium reserve records amounts paid by shareholders in acquiring options over ordinary shares. The balance in the
option premium reserve is transferred to issued capital on option conversion and transferred to accumulated losses on option expiry.
41 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
17a.
Cash and cash equivalents
In AUD
Bank balances
The Company’s exposure to interest rate risk is discussed in Note 20.
17b.
Reconciliation of cash flows from operating activities
In AUD
Loss for the period
Adjustments for:
Depreciation expense
Operating loss before changes in working capital and provisions
Increase/(decrease) in trade and other receivables
(Increase) in other assets
(Decrease)/increase in trade and other payables relating to operating
activities
Net cash used in operating activities
17c.
Non cash financing and investing activities
There were no non-cash financing and investing activities during this period.
18.
Contingent liabilities
The Company did not have any contingent liabilities as at 31 December 2014 (31 Dec 2013: Nil).
19.
Commitments
Capital commitments
In AUD
Approved, not yet contracted for:
Less than one year
Between one and five years
20.
Financial risk management
31 Dec 2014
31 Dec 2013
1,498,693
305,960
31 Dec 2014
31 Dec 2013
(12 months)
(10 months)
(2,599,898)
(1,173,029)
2,959
2,347
(2,596,939)
(1,170,682)
44,218
(13,801)
(60,000)
(292,853)
77,199
(2,905,574)
(1,107,284)
31 Dec 2014
31 Dec 2013
-
-
-
-
-
-
The Company has exposure to credit, liquidity and market risks from their use of financial instruments.
This note presents information about the Company’s exposure to each of the above risks, their objectives, policies and processes for
measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial
report.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed to reflect changes in
market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims
to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
42 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
Market risk
Commodity price risk
The Company is focused on its Angolan diamond mining and exploration interests in the Lulo Project. Accordingly, the Company is
exposed to the global pricing structures of the global diamond market.
Foreign exchange risk
The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the US dollar and Australian dollar. Foreign exchange risk arises from future commercial transactions, recognised assets
and liabilities and net investments in foreign operations that are not in the entity’s functional currency. The company does not use
hedging, or any other active risk reduction strategy, in managing its foreign exchange risk.
The functional and presentation currency of the Company is Australian Dollars.
The Company’s exposure to foreign currency risk at balance date was a follows, based on notional amounts:
In AUD
Liabilities
Trade and other payables
Provisions
Net balance sheet exposure
31 Dec 2014
31 Dec 2013
(753,201)
(1,463,304)
(706,120)
(1,459,321)
-
(1,463,304)
The potential returns from exploration and evaluation activities (see Note 12), should there be successful development of profitable
diamond mining in the future at the Lulo Project, are liable to foreign exchange fluctuations as the monies advanced are denominated
in United States Dollars, which continues to fluctuate against the Australian Dollar.
Cash flow interest rate risk
Cash flow interest rate risk, is the risk that a financial instrument’s value will fluctuate as a result of changes in the market interest
rates on interest-bearing financial instruments.
The Company is not exposed to significant interest rate risk. Any residual cash flow interest rate risk is in relation to the Company’s
cash and cash equivalent balances. The Company does not currently use derivatives to mitigate these exposures.
The following table details the Company’s exposure to interest rate risk on its interest-bearing financial instruments at 31 December
2014.
Fixed Interest Rate Maturity
Average
Interest
Rate
%
Variable
Interest
Rate
A$
Less than 1
Year
A$
1 to 5
Years
A$
More than 5
Years
A$
Non-
Interest
Bearing
A$
Total
A$
Financial Assets
Cash
2.69
1,498,693
Trade and other receivables
Other assets
3.38
-
-
-
-
60,000
1,498,693
60,000
Financial Liabilities
Trade and other payables
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,498,693
34,601
34,601
-
60,000
34,601
1,593,294
753,201
753,201
753,201
753,201
43 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
The following table details the Company’s exposure to interest rate risk on its interest-bearing financial instruments at 31 December
2013.
Fixed Interest Rate Maturity
Average
Interest
Rate
%
Variable
Interest
Rate
A$
Less than 1
Year
A$
1 to 5
Years
A$
More than 5
Years
A$
Financial Assets
Cash
Trade and other
receivables
2.65
305,960
-
-
305,960
Financial Liabilities
Trade and other payables
-
-
-
Cash flow sensitivity analysis for variable rate instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-
Interest
Bearing
A$
Total
A$
-
305,960
78,819
78,819
78,819
384,779
1,463,304
1,463,304
1,463,304
1,463,304
The sensitivity analysis below has been prepared to demonstrate the sensitivity to a reasonably possible change in interest rates, with
all other variables held constant through the impact on floating rate interest rates.
A change of 100 basis points in interest rates at the reporting date would not have a material impact on the statement of profit of loss
and other comprehensive income. There would be no effect on the equity reserves other than those directly related to statement of
profit of loss and other comprehensive income. The analysis is performed on the same basis as for the period ended 31 December
2013.
Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Company.
The Company’s potential concentration of credit risk mainly relates to amounts advanced to the Lulo Project (Note 12). The
Company’s short term cash surpluses are placed with banks that have investment grade ratings. The maximum credit risk exposure
relating to the financial assets is represented by their carrying values as at the balance sheet date.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Company manages liquidity risk by
maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual cash flows.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements.
In AUD
Trade and other payables
- Within one year
- One to five years
- Greater than five years
Total
Capital risk management
31 Dec 2014
31 Dec 2013
753,201
753,201
-
-
-
-
753,201
753,201
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern, so as to
maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or
adjust the capital structure, the Company may return capital to shareholders, issue new shares or sell assets to reduce debt. The
Company’s focus has been to raise sufficient funds through equity to fund exploration and evaluation activities.
44 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
Fair value
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in Note 3 to the financial statements.
The financial assets and liabilities included in the assets and liabilities of the Company approximate net fair value, determined in
accordance with the accounting policies disclosed in Note 3 to the financial statements.
21.
Related parties
Key management personnel compensation
The key management personnel compensation included in employee benefits expense (see Note 5) is as follows:
In AUD
Short-term employee benefits
Post-employment benefits
31 Dec 2014
31 Dec 2013
(12 months)
(10 months)
555,729
297,417
24,959
8,383
580,688
305,800
Individual directors’ and executives’ compensation disclosures
Information regarding individual directors' and executives' compensation and some equity instruments disclosures as required by
Corporations Regulations 2M.3.03 is provided in the remuneration report section of the directors’ report.
Apart from the details disclosed in this note, no director has entered into a material contract with the Company since the end of the
previous financial year and there were no other material contracts involving directors interests at period-end.
Key management personnel and director transactions
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or
significant influence over the financial or operating policies of those entities. A number of these entities transacted with the
Company in the reporting period. The terms and conditions of the transactions with management persons and their related parties
were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-
director related entities on an arm’s length basis.
Other related party transactions
An amount of $127,978 (31 Dec 2013: $93,416) was paid to The Bagot Road Property Partnership, associated with director Miles
Kennedy, relating to office rent and associated costs during the period. An amount of $839,846 ( 31 December 2013 :$495.573) was
paid to the Bagot Road Group Pty Ltd, a company 50% owned by director Miles Kennedy until 31 May 2014 and thereafter wholly
owned, being disbursements made by Bagot Road Group Pty Ltd relating to the provision of contract staff including a director Albert
Thamm, payroll and BAS services. This contract arrangement with Bagot Road Group Pty Ltd was terminated on 1 December 2014
when all staff were transferred to the Lucapa Diamond Company’s payroll. An amount of $84,626 was paid to RNI NL, a Company
associated with directors Miles Kennedy and Albert Thamm, relating to shared office services during the period. Payments for the
provision of director services, as disclosed within remuneration in the directors’ report, were paid to Ascidian Prospecting Pty Ltd and
Turnicate Consulting, entities associated with director David Jones.
45 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Notes to the Financial Statements
for the year ended 31 December 2014
22.
Subsequent events
On 21 January 2015 the Company announced it had signed a term sheet for a US$15 million bridge financing facility with a well
established mining investment company. The term sheet is for a 12 month bridge facility and remains subject to the satisfactory
completion of due diligence, investment approvals, security and customary legal documentation.
On 22 January 2015 the Company announced the successful commencement of alluvial diamond mining at the Lulo Diamond
Concession. The Company had completed the preliminary processing of mining at the block 29 area which produced a highly
encouraging diamond in-situ grade of 17.33 carats per 100 cubic metres. A total of 286 diamond weighing 266.70 carats were recovered
from block 29 over the first 8 days of alluvial mining.
On 27 February 2015 the Company announced that the investment group had completed their detailed operational, technical and
resource potential reviews of part of the due diligence and has formally advised the Company that no material concerns or fatal flaws
were raised. The investment group further confirmed the US$15 million bridge finance facility offer will remain in place for a further
three months to enable the Company to complete the gazetting and incorporation formalities which are required to provide the
necessary in-country security for the investment group. The Company further announced that it had successfully raised $4.8 million
via the issue of new shares to enable the Company to continue ramping up alluvial diamond mining operations at Lulo. The placement
involved the issue of 24 million ordinary fully paid Lucapa shares at an issue price of 20 cents per share, with an attached one-for-one
listed option, exercisable at 30 cents on or before 29 August 2015 at no additional cost, subject to shareholder approval at a general
meeting to be convened on 17 April 2015.
On 10 March 2015 the Company announced that earthmoving equipment had been mobilised to the BLK_08 and BLK_06 & 19 areas at
the Lulo diamond Concession in Angola to prepare for mining of these high grade areas. The company also announced that the
planned sale of the third parcel of diamonds has been deferred to March/April to potentially benefit from more favourable market
conditions and possibly supplement additional diamonds to increase the parcel size.
On 23 March 2015 the Company announced that the Company was preparing to commence the next phase of its kimberlite exploration
program at the Lulo Diamond Concession in Angola. The aim of the 24 month program is to build on the positive exploration results
achieved to date to further evaluate the known diamondiferous pipes at Lulo and explore for other possible kimberlite sources. The
new kimberlite program will be undertaken in two stages, the first of which will commence in April 2015 and continue through the June
quarter at a budgeted cost of $500,000. The second stage is scheduled to commence in the September 2015 quarter and will include
the progressive drilling and sampling of 48 priority targets in the main western kimberlite provence at Lulo.
Other than the above, there has not arisen in the interval between the end of the period and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the
operations of the Company, the results of those operations, or the state of affairs of the Company, in future financial years.
46 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
ASX Additional Information
Additional information current as at 18 March 2015 required by Australia Securities Exchange Limited Rules and not disclosed
elsewhere in this Report.
1.
Capital Structure
Ordinary Share Capital
205,878,176 ordinary fully paid shares held by 4,301 shareholders.
Spread
1
1,001
5,001
10,001
100,001 and above
to
to
to
to
1,000
5,000
10,000
100,000
Number of
Holders
335
1,053
632
1,655
383
Number of
Shares
143,166
3,001,006
4,882,015
57,423,706
140,428,283
As at 18 March 2015 there were 862 fully paid ordinary shareholders holding less than a marketable parcel.
Options - Quoted
112,051,451 listed options expiring 29 August 2015 exercisable at $0.30 held by 2,296 option holders.
Spread
1
1,001
5,001
10,001
100,001 and above
1,000
5,000
10,000
to
to
to
to 100,000
Number of
Holders
252
661
344
843
196
Number of
29 August 2015
Options
132,652
1,824,705
2,577,854
26,990,308
80,525,932
As at 18 March 2015 there were 1,483 $0.30 29 August 2015 option holders holding less than a marketable parcel.
2.
VOTING RIGHTS
Ordinary Shares
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
Options carry no voting rights. Options convert to one ordinary share upon exercise.
3.
ON-MARKET BUY-BACK
There is no current on-market buy back.
4.
SUBSTANTIAL SHAREHOLDERS
Fully Paid Ordinary Shares
Name
TWYNAM AGRIG GRP PL
Number Held
11,289,737
% of Issued Capital
5.48
50 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
ASX Additional Information
5.
TOP 20 HOLDERS OF QUOTED SECURITIES
Fully Paid Ordinary Shares
Name
TWYNAM AGRIG GRP PL
SLADE TECHNOLOGIES PL
GREGORACH PL
ONE DOG ONE BONE PL
HSBC CUSTODY NOM AUST LTD
DARK BENJAMIN
CITICORP NOM PL
FLEUBAIX PL
ADAMS PETER DANIEL
TT NICHOLS PL
PULLINGTON INV PL
UBS NOM PL
J P MORGAN NOM AUST LTD
TWO TOPS PL
GREGORACH PL
BAYNES ROSS SPENCE
ARNOLD ROBERT NICHOLAS
GREEN MOUNTAINS INV LTD
SINBAD JACKSON PL
PACIFIC DVLMT CAP LTD
Listed Options expiring 29 August 2015 exercisable at $0.30
Name
TWYNAM AGRIG GRP PL
GREGORACH PL
ONE DOG ONE BONE PL
UBS NOM PL
WILLS JILLAINE
FINCL & BUSINESS PLANNING
DARK BENJAMIN
WOLFE A + VAN DIJKEN N
GREGORACH PL
ADAMS PETER DANIEL
FLEUBAIX PL
LAWRENCE CHRIS PAUL
FALVEY SARAH ANN
FALLON JAMES DESMOND
BERTHELOT YANNICK ZOWIE
SUNCITY CORP PL
CG NOM AUST PL
KHOO SEAH KEE
TT NICHOLS PL
TEXMODE PL
Number Held
11,289,737
4,266,668
4,001,452
2,857,446
2,453,666
2,237,091
2,206,436
2,000,000
1,833,334
1,740,703
1,732,600
1,701,607
1,482,013
1,250,000
1,133,251
1,119,924
1,054,177
1,025,716
1,008,836
1,000,000
47,394,657
Number Held
11,203,506
3,970,131
3,915,667
2,312,500
2,000,000
1,636,906
1,431,531
1,141,272
1,133,977
1,083,334
1,000,000
1,000,000
1,000,000
1,000,000
972,827
900,000
750,000
713,210
682,531
675,000
38,522,392
% of Issued Capital
5.48
2.07
1.94
1.39
1.19
1.09
1.07
0.97
0.89
0.85
0.84
0.83
0.72
0.61
0.55
0.54
0.51
0.50
0.49
0.49
23.02
% of Issued Capital
10.00
3.54
3.49
2.06
1.78
1.46
1.28
1.02
1.01
0.97
0.89
0.89
0.89
0.89
0.87
0.80
0.67
0.64
0.61
0.60
34.36
51 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663