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ANNUAL REPORT
Contents
Contents
Chairman’s Statement
Managing Director’s Statement
Review of Operations
Annual Financial Report
Directors’ Report
2
3
4
6
19
20
Auditor’s Independence Declaration
36
Statement of Profit or Loss
37
Statement of Financial Position
38
Statement of Changes in Equity
39
Statement of Cash Flows
40
Notes to the Financial Statements
41
Directors’ Declaration
Independent Auditor’s Report
79
80
Additional Shareholder Information
85
Directors
F Poullas
(Chairman)
M Vogts
(Managing Director)
J C Jooste-Jacobs
(Non-Executive Director)
W Smith
(Non-Executive Director)
L Hosking
(Non-Executive Director)
P Tsegas
(Non-Executive Director)
M S Whittingham
(Non-Executive Director)
Chief Executive Officer
F Houllis
Company Secretary
D N Richardson
Chief Financial Officer
M K McPherson
ABN 26 115 111 763
Registered Office
Suite 9.03,
88 Phillip Street
Sydney NSW 2000 Australia
Tel +61 2 8397 9888
Tanzania Office
House No 19,
Plot No. 890
Yacht Club Road
Masaki, Dar es Salaam,
Tanzania
Tel +255 739 500 023
Internet Address
www.magnis.com.au
Email Address
info@magnis.com.au
Share Register
Link Market Services
Tower 4, 727 Collins Street
Melbourne VIC 3000
Australia
Tel 1300 554 474
Fax +61 3 9287 0303
Auditors
BDO East Coast Partners,
Level 11, 1 Margaret Street
Sydney NSW 2000 Australia
Tel +61 2 9251 4100
Bankers
National Australia Bank Ltd
Level 15, 680 George Street
Sydney NSW 2000 Australia
Tel +61 2 9237 9290
Stock Exchange Listing/
ASX
Magnis Energy
Technologies Ltd shares
(code MNS) are listed on
the Australian Securities
Exchange. The Company
was formerly named
Magnis Resources Limited,
but effectively changed
name to Magnis Energy
Technologies Ltd after
shareholder approval at
the previous Annual
General Meeting.
ANNUAL REPORT 2019
2
MAGNIS ENERGY TECHNOLOGIES
01040302050607080910111213141501
Chairman’s Statement
Dear Shareholders,
The past year has certainly seen some progress for
the Company with many developments occurring to
create foundations and set Magnis up for a breakout
year ahead.
There has been a strong focus to execute on a quick
cashflow strategy and the two projects to allow the
Company to execute on that strategy are the New York
Battery Plant and the Nachu Graphite mine with a lead
time to revenue of approximately 20-24 months from
commencement of the execution phase. A large amount
of work to date has gone into organising the funding
for both projects and I believe we have taken some
significant steps to execute on our strategy.
While sentiment towards lithium-ion battery material
companies during the year have taken a substantial
hit, I believe we are in a unique position to differentiate
ourselves from our peers. As far as I know we are the
only company able to produce a high performing battery
grade anode via mechanical processes only and secondly
the ability to produce lithium-ion battery cells projected
to be in the lowest cost quartile.
The Townsville feasibility study has progressed and is
days away from being submitted and to date all forms
of government have been very supportive. Having
National Australia Bank on board as the financial advisor
is another huge step especially when you take into
account they have closed over $9 billion of funding for
renewable energy projects in Australia. We look forward
to developing a local lithium-ion cell manufacturing plant
and personally I think the plant can become an enabler
for other forms of manufacturing within the country
and with thousands of jobs being created and the
downstream impact will be immense.
We are in the early stages of the lithium-ion battery
revolution and the year ahead will see us make great
progress towards production. Apart from the projects
announced we remain confident in the coming year of
announcing further opportunities which will be advanced.
We believe our technologies give us an advantage today
and we will keep our focus on driving these through
to fruition.
I have been delighted with Board and Management
Teams and how the business continues to evolve under
its leadership. The appointment of Marc Vogts as the
Managing Director has added significant experience and
expertise especially in running large projects and we also
welcomed Les Hosking on the Board and his wealth of
knowledge and experience has been invaluable to
the Company.
I would like to once again thank all our shareholders, staff
and strategic partners for the continued support that
Magnis has received and we all look forward to a positive
year ahead with great anticipation of the movement into
battery manufacturing along with developing the Nachu
Graphite Project.
Chairman,
F. Poullas
Frank Poullas
The 2019 Annual General Meeting of the members of Magnis Energy Technologies Ltd will be held at the offices of
ANNUAL GENERAL MEETING
BDO (Magnis’ Auditors),
Level 11, 1 Margaret Street, Sydney NSW 2000
on Thursday 31 October 2019 at 9:30am
A formal notice of meeting and proxy form will be mailed separately to all shareholders.
3
02MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 03Managing Director’s Statement
Demand for lithium-ion batteries continues to
increase significantly in the electric vehicle (EV)
and power storage market for households and
businesses. Less reliance on fossil fuel energy with
a shift to renewables and storing energy in battery
packs has dominated news feeds in recent times
and focus has also switched to less reliance on main
power grids with back-up power or electricity being
sourced from remote mechanisms.
Magnis has aligned our growth objectives with this
compelling strategic business of the future through
a suite of projects that includes lithium-ion battery
technology manufacturing in various continents
combined with development of its Nachu Graphite
resource in Tanzania. The end goal is to become one of
the important participants in the total end-to-end supply
chain for the manufacturing and supply of lowest cost,
competitive performance lithium-ion batteries to support
the energy storage market.
The focus of management effort last year and in the
immediate future remains on advancing our near-term
strategic growth opportunities of the Nachu graphite
project in Tanzania, LIB production plant in Townsville,
and commissioning of the LIB production plant in New
York. Additionally, opportunities are being investigated
to supply battery packs directly to the emerging demand
from retail, commercial and industrial consumers for
electricity storage solutions.
We continue to explore longer term growth opportunities
for our LIB production facilities and have initiated
discussions of opportunities for LIB plants and funding in
parts of Asia and the Middle East, including Saudi Arabia,
UAE and Oman.
For Nachu, we have engaged an international engineering
organisation to undertake an engineering, procurement,
and construction (EPC) estimate of the 240ktpa Nachu
project that was duly completed and is under review. Our
current focus is to secure financing for the project with
anticipation of progressing into the execution phase of
the project by year-end.
The New York battery production equipment is under care
and maintenance in the proposed production building
with installation and commissioning to be prioritised as
soon as funding is secured.
An initial draft version of the feasibility study for the
proposed 18GWh Lithium ion battery production plant
in Townsville was completed and submitted to the
Queensland Government. The final documentation is
on schedule for submission to the Government by
30 September. The Feasibility Study is conservatively
compiled from process, cost and execution perspectives
to assess business viability for funding. Feedback from
the review by an independent consultant, and in-depth
discussions with equipment vendors gives the
following insights:
›› Confidence in the developed design concept and
technical solutions
›› Significant opportunities to reduce cost and improve
operability in part by applying mining discipline and
undertaking a testing/piloting program
›› Biggest business risk and opportunity is
manufacturing yield
›› Target market for initial production should focus on
energy stationary storage systems due to geography
and power cost dynamics
Looking ahead into 2020 our aim is to be well into
the execution phase of the Nachu Graphite project;
installation and commissioning underway for the New
York battery production equipment; and advancing the
project pre-execution phase of the Townsville project,
including successful completion of the development
assessment and other regulatory pre-project approvals,
detailed marketing analysis, and well advanced towards
securing of project funding.
Managing Director,
M Vogts
Marc Vogts
4
ANNUAL REPORT 2019MAGNIS ENERGY TECHNOLOGIES 5
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 Review of Operations
BATTERY MANUFACTURING AND
ENERGY STORAGE
A key part of lithium-ion battery production and its
components is graphite, along with cobalt and lithium.
Recent cobalt prices and other potential ethical factors
have led to an interest in technological advancements
to produce batteries without cobalt. Magnis with its
consortium partner and investee company Charge CCCV
(C4V), are developing battery cells without the use of
cobalt. Graphite is used in the anode of the battery
and it is where oxidation takes place of lithium metal
that is formed in the charging of the battery. The freed
electrons from oxidation flow out of the battery to
discharge the stored energy.
In the past few years, Magnis has rigorously tested the
graphite qualities from Nachu and the outstanding
performances and results achieved during this time
has directed attention to focus on a multi approach
strategy where Magnis has also become involved in
battery production and development. There has been
an escalation in resources devoted to its lithium-ion
commercial anode development programs. These
resources include additional downstream technical
expertise and industry leading battery test facilities
to allow for cells and battery fabrication development
utilising Nachu anode material.
The past twelve months has provided developments in
the following areas:
IMPERIUM3 (IM3) GLOBAL CONSORTIUM
Members and equal shareholders of the iM3 Global
Consortium (Magnis, C4V and Boston Energy and
Innovation – BEI) have been working together to develop
a sustainable supply chain to produce lithium-ion
batteries across the globe in multiple locations.
The iM3 consortium has unique and patented
lithium-ion battery intellectual property. Its members
have been involved in battery production with the
requisite knowledge, experience, expertise and
capabilities for lithium-ion battery manufacture from
raw materials to particle engineering, systems
electronics and cell/battery manufacturing. At the
management level, in addition to the highest level battery
expertise, the consortium comprises successful senior
executives in all disciplines from a variety of
multi-national companies.
The organisational structure will be grown to enable
the necessary and critical agility for rapid
commercialisation of new lithium-ion battery
technologies, including support for open innovation that
is necessary for sustained high performance and low-
cost battery products.
iM3 have two projects based in New York, USA and
Townsville, Australia that have been developing with
purpose in the past year and these projects are expanded
upon in more detail in this report.
STRATEGIC INVESTMENT INTO C4V
The Company announced to the ASX in September
last year that it completed a transaction to acquire a
10% interest in C4V, a US-based intellectual property
company based in Binghamton, New York, with expertise
and patented discoveries in lithium-ion battery
composition and manufacture. C4V leverages its
expertise in electrode design and process development
to create next-generation storage materials that
can be seamlessly integrated into current cell
manufacturing lines.
C4V have made some positive advancements in the
past year including completing production of a working
prototype of a solid-state battery that was demonstrated
at a battery conference in New York. With solid state
batteries, the liquid electrolyte is replaced majorly with
a solid electrolyte to effectively produce a lower cost
battery that is higher in capacity, higher density, higher
performance and reduced charging times than existing
battery solutions.
C4V announced in May this year that it has supplied
batteries to an offtake customer Maritime Tactical
Systems (Martac) using its proprietary BMLMP cathode
technology for its unmanned water and surface vessels.
These batteries are 20KW in size and will be used in
commercial marine vessels for demonstration and
testing purposes. The aim of the extreme condition
testing program would be to make the BMLMP batteries
compatible in many applications.
The C4V Generation 1 battery cells were built in
prismatic form factor with the BMLMP cathode and
delivered to Martac as fully built battery packs for drop
in replacement. The prismatic cells built are of the
exact size that are aiming to be commercially produced
from the New York Battery Plant. Martac have signed a
commercial in confidence agreement on cost and supply
terms of batteries to be used in maritime boats. It is
anticipated Martac would need several hundred MWh of
batteries over the next five years to satisfy the demand
levels they currently have for their vessels.
The Company announced to the
ASX in September last year that it
completed a transaction to acquire
a 10% interest in C4V, a US-based
intellectual property company
6
04ANNUAL REPORT 2019MAGNIS ENERGY TECHNOLOGIES
ANNUAL REPORT 2019
7
MAGNIS ENERGY TECHNOLOGIES
Review of Operations
TOWNSVILLE
iM3 Townsville, a subsidiary of iM3, has received
government approval for a $3.1 million grant supporting
the feasibility study into the establishment of a
15 GWh Lithium-ion Battery (LIB) manufacturing plant
in Townsville, Queensland. The Jobs and Regional Growth
Fund Assistance Agreement was formally signed in
August last year by iM3 Townsville directors and the
State of Queensland, acting through the Department
of State Development, Manufacturing, Infrastructure
and Planning.
The Assistance Agreement defined three distinct
payment milestones associated with the staged delivery
of components of the feasibility study and supporting
information. The expenditure end date in the Agreement
has been set as 30 September 2019 and at the time of
writing, solid advances have been made on the feasibility
study. An initial draft version of the feasibility study was
submitted to the Queensland Government at the end of
July 2019.
Subsequent design work has resulted in a modular
design that captured economies of scale whilst allowing
the project to be staged. The study and relevant costings
are now focused on three 6 GWh modules, effectively
making the facility an 18 GWh plant.
The study to date is confirming the suitability of
Townsville in large-scale manufacturing because of:
›› Market proximity to rapidly growing Asian economies
where electrification of transport and energy storage
are emerging as disruptors in global markets;
›› Logistics with easy access to Townsville Port and local
availability of battery materials and precursors such
as lithium and manganese;
›› Townsville’s plans to be a leading city of the future
with an ambition to become the centre of high
technology manufacturing with an emphasis on
sustainability.
›› Growing Government Support. The average cost
of energy generated by renewable solar and wind
projects fell below the average cost of existing
alternatives in 20181. This has encouraged public
support for climate action in many jurisdictions
around the world through lower power prices, new
policies incentivising electromobility, renewables
and LIB storage;
›› Local Business Engagement. iM3TSV is also
investigating and identifying future participation
of local businesses in both the construction and
operating phases of the project. iM3TSV’s scoping
study established local content opportunities to be
in the order of A$300 million across a range of items
including labour, power, fuel, security and logistics;
›› Global Partnering. iM3TSV is continuing to
establish global partnerships with component
suppliers, industry specialists and tertiary education
organisations (international and national). Testing
and qualification of battery input materials involving
over 30 well known global suppliers has occurred
over the past 12 months in iM3NY’s facility located
in upstate New York;
›› Downstream Co-Location Opportunities.
Opportunities representing an additional potential
economic gain to the local economy in the order of
US$750M to US$1.5B annually; and
›› Cost Competitiveness. iM3TSV is engaging with each
level of government to seek to create supportive
policy, targeted incentivisation and collaboration for
future R&D initiatives.
The economic and strategic benefits of the Townsville
project include:
›› Creating approximately 1150 jobs in a high technology
industry;
›› Promoting sustainable industries in North Australia;
›› Supporting Townsville through the current local
economic downturn;
›› The right people to execute with a supportive
›› Realising higher value from Australia’s resource
government and project team with unrivalled expertise
in LIB innovation, business development and
project delivery;
endowment; and
›› Transitioning Australia to a lower carbon economy and
associated industries.
The business case for the facility at Townsville continues
to positively evolve across the following key areas:
›› Strong Battery Market Fundamentals. Electrification
of mobility and the transition to renewables continued
unabated in 2018. Global growth in electric vehicle
sales was over 50% above that for 2017 with 2019
forecast to deliver even greater growth as automotive
manufacturers broaden their EV offering across
their fleet;
iM3 …. received government
approval for a $3.1 million grant
….. the establishment of a
15 GWh Lithium-ion Battery ….
manufacturing plant
in Townsville
8
ANNUAL REPORT 2019MAGNIS ENERGY TECHNOLOGIES
Creating Australia’s first large scale LIB manufacturing
facility has required bringing together the technical
expertise of global equipment vendors with local
engineering specialists. In particular Ausenco, based in
Brisbane, are overseeing process development and the
GHD office in Townsville has managed site development
and building design.
To date iM3TSV is encouraged by the response it has
received from the financial community and government
groups regarding financial participation in the project.
All groups are awaiting the feasibility study which will
be a major catalyst prior to making a commitment.
1. https://reneweconomy.com.au/australias-plunging-wind-solar-
storage-costs-stun-fossil-fuel-industry-60383/
Review of Operations
NEW YORK
Imperium3 New York, Incorporated (iM3NY) is a
company established in the USA that owns battery
plant assets located in a planned lithium-ion battery
manufacturing facility based at the Huron Campus
in Endicott, New York. iM3NY purchased the plant
equipment and machinery for US$5 million from
a plant based in North Carolina, USA and included
machinery from operations such as slurry making
to coating to cell assembly and formation.
The assets were then disassembled, packaged and
shipped from the North Carolina location to the Huron
Campus in the second half of last year.
Magnis has a 50.86% ownership via its direct and
indirect shareholding in the iM3NY company and NY
battery plant project.
iM3NY received New York State Government support
and financial incentives to build the first Gigafactory
(15GWh/year) for lithium-ion battery cell production
in New York. The first production line is for a planned
1GWh/year capacity and then expand to the full
capacity. Significant capital and investment are
required for the start-up of operations and production
for iM3NY.
In March this year, a Term Sheet for US$52 million was
signed by iM3NY for funding via a pre-issued European
bond used to fund renewable energy projects. Final
debt finance documents have since been received
for the debt finance, however these required further
changes and clarification before any progression on
the offer could be made. At this present time, no
further progress on this offer has been made.
During the past few months, financial institutions
including large overseas investment banks have been
conducting some due diligence on project funding for
New York. iM3NY believes a number of these groups
are in their final stages of review with potential of
looking at a split of debt and equity into the
New York project.
OTHER BATTERY PLANTS
Over the last few years the Company and its partners
have highlighted some future growth areas to produce
lithium-ion batteries. Government and corporate
meetings in the sub-continent, the Middle East and
Asia have yielded early promising results with regard
to establishing future lithium-ion battery
manufacturing plants and these opportunities will be
pursued with vigour.
10
ANNUAL REPORT 2019 NACHU GRAPHITE PROJECT
The Nachu Graphite Project is located near Ruangwa,
in the south-east of Tanzania and approximately
220km to the Tanzanian port of Mtwara.
The Nachu Graphite Project is shovel ready with a Special
Mining Licence (SML) SML 550/2015 on the project
granted by the Ministry of Energy and Minerals (MEM) of
Tanzania in September 2015. The SML was granted to
UTZ, the 100% owned Tanzanian subsidiary of Magnis.
The global Mineral Resource Estimate at Nachu was
announced on 1 February 2016 and comprises 174
Million Tonnes (Mt) at an estimated grade of 5.4%
Graphitic Carbon (Cg)2 and is reported in accordance
with the 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and
Ore Reserves (JORC Code, 2012). The Nachu Project
represents one of the largest Mineral Resources of large
flake graphite in the world.
The Nachu Graphite Project Mineral Resource Estimate
was carried out by independent mining consultancy
AMC Consultants Pty Ltd (AMC).
A Bankable Feasibility Study (BFS) for the Nachu Graphite
Project was released to the ASX on 31 March 2016
and there have been no further alterations to this
BFS at present.
The Ore Reserve was estimated by Orelogy Consulting Pty
Ltd (Orelogy) and as announced on 31 March 2016. The
total Proved and Probable Ore Reserve comprises 76 Mt
at 4.8% Cg for 3.6 million tonnes of contained graphite3.
This Ore Reserve provides sufficient material for an
initial operating life of approximately 15 years. This
comprises approximately 11.7 years at 240,000 tpa
nameplate concentrate output after which lower grade
ore stockpiles are processed for another 3.5 years at an
average concentrate output rate of 160,000 tpa.
There is strong potential for extension of operating life
at or near nameplate capacity (240,000 tpa) with further
conversion of high grade Mineral Resources into future
mine planning scenarios.
2: ASX Announcement 1 February 2016, Nachu Graphite Project Updated
Mineral Resource
3: ASX Announcement 31 March 2016, Nachu Bankable Feasibility Study
Finalised
This Ore Reserve provides
sufficient material for an
initial operating life of
approximately 15 years
Review of Operations
SEZ
Special Export Zone (SEZ) legislation was introduced in
Tanzania in 2006. The legislation provides incentives
for companies to create value addition and advance
employment and development of the country.
SEZ licences are issued by the Minister of Industry
and Trade with key benefits including the exemption
from payment of corporate tax for up to 10 years, the
exemption of taxes and duties for machinery, equipment
and construction materials for the development of SEZ
infrastructure and the exemption from payment of
withholding tax on rent, dividends and interest
for 10 years.
To date the majority of existing SEZ license owners
come from the Agriculture Processing, Assembly and
Engineering and Textile and Apparel sectors.
Magnis was provided approval by the Export Processing
Zones Authority (EPZA) in March 2017 to operate within a
SEZ in Tanzania which will allow the Company to apply the
advanced technologies it has been developing to produce
value enhanced graphite products.
The SEZ under the jurisdiction of the Department of
Industry, Trade and Investment, governs the operation of
the graphite processing plant and is not subject to the
changes in the mining legislation announced late in 2017.
Following the introduction of new mining sector
legislation in Tanzania during the second half of 2017,
Magnis has continued to progress discussions with
the Government of Tanzania (GOT) regarding the
development of the mining and processing projects.
The GOT has expressed its desire to see the
implementation of large projects that will add significant
value to the country’s economy and development.
Those discussions led to Magnis submitting a proposal
outlining that the entire Nachu processing plant will
operate under MTT in the SEZ licence area, with the
products from the SEZ continuing to be advanced
graphite products that can be made using Magnis’
proprietary technology.
MTT will initially produce refined Jumbo and Super Jumbo
Flake products and spheroidal graphite products for the
lithium-ion battery market. UTZ will operate under the
laws and regulations applicable to the country’s mining
industry under the Ministry of Minerals (previously
Ministry of Energy and Minerals).
The impacts of the amended SEZ on MTT and UTZ is
tabled below.
Uranex Tanzania
Magnis Technologies Tanzania
Government Jurisdiction:
Government Jurisdiction:
• Ministry of Minerals
• Ministry of Industry, Trade and Investment
Scope of Operations:
Scope of Operations:
• Ownership of mining license
• Establish mining quarry to
deliver ore to SEZ and includes
operation of mining pits and
waste stockpiles
• Contract mining operations
• Ownership of processing plant in SEZ
• Ownership of utilities including power plant located within the SEZ
• Ownership of warehouse and port storage facilities
• Graphite rock crushing, grinding and flotation circuit operations for
concentrate production
• Operation of purification operations for high purity graphite production
• Processing of high purity graphite to make value added products for
applications that include lithium ion battery
• Marketing and export of products
Capital Expenditure:
• ~US$40 million
Capital Expenditure:
• ~US$230 million
Incentives:
• Tax and duty breaks
• Full ownership by Magnis
• International arbitration
• No restriction of retaining earnings outside of Tanzania
12
ANNUAL REPORT 2019MAGNIS ENERGY TECHNOLOGIES The SEZ area covers 206 hectares and has been excised
from the original Nachu SML. A map showing the SEZ
licence area is shown in the figure below.
Within the past year the progression of the SEZ
development has included formal surveying, clearing of
land and processing plant location boundaries, updated
engineering design and layout of administration and
support site facilities to be included within the SEZ.
PROCESSING OXIDES
The Company has been investigating methods to
provide significant improvements in graphite processing
techniques. Under the direction of Magnis Chief
Executive Officer, Mr Frank Houllis, who has over 25
years’ experience in processing metallurgy, a continuous
improvement program was undertaken in recent months
with one significant result being the ability to process
oxide material as mined.
Oxide material previously to be stockpiled for later batch
processing at end of mine life, can now be processed
as mined through one simplified action and will result
in reductions of volume of oxide material entering the
process stream. This enables the removal of the oxide
stockpile and associated rehandling costs to realise
improved upfront efficiency in mining sequence.
Dr Houllis has been instrumental in taking advantage of
the excellent crystal structure of graphite in the Nachu
ore to produce >99% purity graphite products with only
four stages of flotation when the industry standard is
~95% purity using significantly more stages of flotation.
These improvements in project fundamentals are
supporting the capture of engineering cost efficiencies
and will assist to negotiating finance for the Nachu
Graphite Project.
SITE WORKS AND PROGRESS TO CONSTRUCTION
COMMENCEMENT
Progress has been made with site works around Nachu,
with the clearing of access roads and community
diversion roads. The main access road and southern
road to the Special Mining Licence area has been cleared
and internal mining lease access roads continue to be
surveyed and cleared to optimise logistics for project
implementation. The southern diversion road is a
new access road along the SML boundary, specifically
developed to keep communities connected without the
need to traverse the mining lease.
The progress made with the site works combined with the
improved processing and mining fundamentals provides
additional support of the full Nachu Graphite Project BFS3
outcomes. These improvements are being captured in
The key change under the amended agreement is that
MTT will now purchase graphite ore directly from UTZ,
which is the holder of the SML for Nachu. This differs
from the previous arrangement whereby, it was agreed
that MTT would buy graphite concentrate from UTZ.
The sale price of graphite ore from Nachu, as per the
proposal to the GOT, will be based on an agreed formula
for the value of the ore at the gate with consideration to
international benchmark pricing to ensure transparency.
At a project level, UTZ will control the mining or quarry
operations, water supply system and tailings dam
operation, and will deliver ore to the MTT processing
plant. UTZ will also operate in accordance with the
legislation changes made in 2017 regarding
GOT participation.
The SEZ is sited over the original SML plant infrastructure
location allowing for continued best case economics
for ore transportation. Magnis continues to reassess
the previous BFS with revised pricing and obtain
separate Capex and Opex costs for both MTT and UTZ.
Engineering, Procurement and Construction costs are
currently being sourced, together with the all-important
project funding opportunities.
ANNUAL REPORT 2019
13
MAGNIS ENERGY TECHNOLOGIES
Review of Operations
the completion by third parties of full engineering
and procurement contract work programs that are
occurring in parallel with full project financing efforts.
As part of the Magnis valuation and compensation
program that was successfully completed during the
past financial year, there is a need to look after the
relocation of families that resided within the SML
area. 59 households ranging from relatively well-
built local clay fired brick houses that are roofed with
corrugated iron sheets to poorly built mud walled, and
grass thatched houses were identified to be inside the
SML area. These people must be resettled elsewhere
or placed into short term rental accommodation whist
new housing is built to make way for development of
the mine and its infrastructure.
Magnis has decided to build alternative modern
houses outside the SML and to do so has acquired 54
acres of land outside the SML area to build houses for
the affected households falling inside the SML. This
village land is currently named Nachu Village and since
it will host a minimum of 59 households, key social
facilities will be required to support the population of
the area. The Nachu Village will likely in time, become
a small township and for this reason, a separate ESIA
study was completed to identify, assess and focus on
all positive and negative impacts generated by the
establishment of such a small township to properly
mitigate the negative impacts and enhance positive
benefits of establishing such a village. The ESIA is a
key planning and management tool of the township
during the construction and operational phase of the
Nachu Village project.
UTZ received the Environmental Certificate approving
and accepting the ESIA report and the measures
within and in turn allowing the next phase of
proceeding with the resettlement village including
a local District building permit and finalisation of
construction tender processes.
The preparation activities are now quickly being
finalised along with a schedule towards Nachu being
the next quality African graphite project to commence
construction. The Board and Management are
focused on achieving a suitable financing package in
an appropriate format for this to occur.
3: ASX Announcement 31 March 2016, Nachu Bankable Feasibility
Study Finalised
14
Magnis continues to visit all
99 schools within the district
(83 primary schools and 16
secondary schools) with an
estimated 34,000 students
ANNUAL REPORT 2019
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Magnis Group is committed to practices of good
corporate citizenship with safety, environmental and social
integration providing sustainable economic and self-
perpetuating social improvement being at the forefront
of our endeavours. This includes task assessments
and consultations as standard procedure, integrating
all aspects of an activity to ensure the appropriate and
balanced path is taken to satisfy regulatory requirements
whilst in line with best practice and the highest
international standards.
Magnis is committed to support the host communities
and our various stakeholders. Magnis continues its
excellent track record on stakeholder engagement and is
building on the positive relationships with governments
and local communities.
The broader Magnis involvement in battery manufacturing
and the potential of the Special Economic Zone (SEZ) will
bring to Tanzania has been very positively received by the
GOT since substantial value addition will be made within
the country. The Local Villages and District Government
have been very supportive to the Nachu Graphite Project
resulting from a united inclusive approach with regular
consultations and progress updates.
The Magnis Community Partnership Program (MCPP)
contributes various inputs, from time and planning skills,
to materials and equipment for community development
programs in matters such as cultural awareness,
education, agriculture, environment, sport and health.
The MCPP has extended its programs addressing access
to learning material and plans to assist in the setup of a
central library supporting the local schools. Magnis has
four freight containers of books and furniture available
for the library with land surveyed and cleared by Magnis in
Ruangwa aligned with the District development plan.
Magnis continues to visit all 99 schools within the district
(83 primary schools and 16 secondary schools) with an
estimated 34,000 students to gain valuable information
via a continuous improvement school survey, initially
conducted as a familiarisation exercise for the Company
to understand the different challenges each school
experiences and what the Company incorporate into future
assistance programs to provide the greatest benefit.
Programs undertaken within the education area during
the year included teacher support systems and delivery of
learning material purchased by Magnis. Through February
to March 2019, Magnis provided to the district primary
schools, 2,730 English story books and 86 Tanzanian Maps
to support the curriculum.
Subsequently in May 2019, Magnis provided the district
secondary schools with a total of 1,960 science textbooks
and periodic tables.
Other school programs Magnis has been able to assist with
include desk repairs for primary schools within Ruangwa,
whereby a total of 35 desks were repaired by the UTZ
CSR team, thus providing the school with an additional
105 seats for the students. Other programs included
maintenance of the proposed community garden site
which was cleared and cleaned by UTZ allowing a base for
future design and development but importantly reduces
community contact with snakes and pests as all overgrown
vegetation and bushes were cleared from site, leaving it
accessible to the general public.
Magnis actively promotes dynamic employee participation
in continuous improvement processes within the broader
area of Occupational Health and Safety. Through employee
training and engagement in this area, Magnis has a high
standard of safety, with no work-related incidents over the
past year. Continuous improvement is always a focus in
minimising the risk to employee safety as the Magnis Group
moves through the stages of project development.
Magnis have previously provided sponsorships in district
events in the Ruangwa region including events supporting
women’s empowerment and education, the establishment
of the local running club and providing resources for
national festival events. This involvement and minor
contributions continue and creates local participation
within the community and a positive environment.
The Magnis commitment to maintaining the Ruangwa
operations office contributes directly to the economic and
social development of the local community.
Our presence benefits local populations by creating direct
employment and indirect economic benefits through the
local procurement of food, accommodation and other
supplies like construction materials where possible.
An example was the November to December 2018 grave
relocation program required as part of the SML land
acquisition and land and asset valuation compensation
process. Supplies were purchased for locally made
headstones and caskets were made locally. Additionally,
the ongoing site clearing program allows for suitable timber
to be taken and utilised by local communities for projects
such as schools and other community buildings. This
naturally aids the positive community relationship providing
a platform for Magnis for future success in project
development and local benefits that go together with the
ongoing and planned support programs.
Review of Operations
CAPITAL MARKETS
Magnis announced in September last year that AL Capital
Holding (ALC) had invested $11.1 million in the Company.
The placement involved the issue of 30,000,000 shares
to ALC at A$0.37 per share.
ALC is the private investment arm of Aqualand Group
which has established itself as a leading property
development company.
The funds raised allowed Magnis to capitalise on current
and future growth opportunities in the battery technology
sector; and, to fund the ongoing investment in the future
development of the Company’s 100% owned Nachu
Graphite project.
ALC then provided further support in the following weeks
in their investment, by increasing their holding in Magnis
through on market acquisitions of the Company’s shares
and becoming a substantial shareholder.
DIRECTOR MOVEMENTS
A few days after the ALC funding news, the Company
announced that The Hon. Warwick Smith AM had been
appointed as a Non-Executive Director of the Company.
Mr Smith is current Chairman of ALC and his detailed
experience and credentials are disclosed in the Directors
Report section on page 22.
Dr Ulrich Bez resigned as a Non-Executive Director of
the Company in February 2019, whilst the Company
in March 2019 appointed Mr Les Hosking as a Non-
Executive Director. Mr Hosking’s detailed experience and
credentials are also disclosed in the Directors Report
section on page 22.
In November 2018, Mr Marc Vogts moved into the newly
created Managing Director role, after previously holding
the position of Non-Executive Director.
$11.1 million.... allowed
Magnis to .... investment in
the future development of
the Company’s 100% owned
Nachu Graphite project
ANNUAL REPORT 2019
16
Review of Operations
COMPETENT PERSONS STATEMENT
All information with respect to geology, assay results,
results interpretation or resource statements of the
Nachu tenements have been extracted from ASX
announcements made by the Company during 2016
and 2017 as listed below, and which are available to
view at www.magnis.com.au. The Company confirms
that it is not aware of any new information or data
subsequent to those announcements that materially
affects the information included in this document and
that all material assumptions and technical parameters
underpinning the estimates continue to apply and have
not materially changed. The Company also confirms that
the form and context in which the Competent Person’s
findings are presented have not been materially altered.
Previous related ASX announcements include: 31
March 2016; Nachu Graphite Bankable Feasibility Study
Finalised (C Moormann, Orelogy Consulting Pty Ltd, A
Proudman, AMC Consultants and B Laws, Exploration
Manager Magnis Resources Ltd), 1 February 2016; Nachu
Graphite Project Updated Mineral Resource (A Proudman,
AMC Consultants and B Laws, Exploration Manager
Magnis Resources Ltd)
The information in this report that relates to Ore
Reserves is based on information reviewed or work
undertaken by Mr Carel Moormann, a Competent Person
who is a Fellow of The Australasian Institute of Mining
and Metallurgy. Mr Moormann is a Principal Mining
Consultant employed by Orelogy Consulting Pty Ltd. Mr
Moormann has sufficient experience which is relevant
to the style of mineralisation and type of deposit under
consideration and to the preparation of mining studies
to qualify as a Competent Person as defined in the
2012 Edition of the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore
Reserves’. Mr Moormann consents to the inclusion of this
information in the form and context in which it appears
in this report.
The information in this report that relates to the Mineral
Resources is based on information compiled by Mr A
Proudman, a Competent Person who is a Fellow and
Chartered Professional Geology of the Australian Institute
of Mining and Metallurgy. Mr Proudman is employed by
AMC Consultants Pty Ltd. Mr Proudman has no financial
interests in Magnis Energy Technologies Ltd and is
independent of the company. Mr Proudman has sufficient
experience that is relevant to the style of mineralisation
and type of deposit under consideration and to the
activity being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the ‘Australasian
Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Mr A Proudman consents
to the inclusion in the report of the matters based on his
information in the form and context in which it appears.
Mr Laws is a full time employee of Magnis Energy
Technologies Ltd and has sufficient experience which
is relevant to the style of mineralisation and type of
deposit under consideration and to the activity which
he is undertaking to qualify as a Competent Person as
defined by the 2012 Edition of the Australasian Code for
reporting of Exploration Results. Mr Laws, a Competent
Person who is a registered Member of the Australasian
Institute of Mining & Metallurgy, consents to the
inclusion of the data in the form and context in
which it appears.
SCHEDULE OF MINERAL TENEMENTS
Tenement Number
Project / Tenement Name
Locality
Group Ownership %
SML550/2015
PL10906/2016
SML Nachu
Nachu
Tanzania
Tanzania
100
100
18
ANNUAL REPORT 2019MAGNIS ENERGY TECHNOLOGIES Annual Financial Report
YEAR ENDED 30 JUNE 2019
05 Directors’ Report
06
The Directors present their report, together with the financial statements, on the consolidated entity (referred to
hereafter as the ‘consolidated entity’) consisting of Magnis Energy Technologies Limited (referred to hereafter as the
‘Company’ or ‘Parent Entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2019.
DIRECTORS
The following persons were Directors of Magnis Energy Technologies Limited during the whole of the financial year and
up to the date of this report, unless otherwise stated:
Frank Poullas
(Chairman)
Appointed 10 September 2010 (Director), 29 August
2014 (Chairman).
Frank is an information technology consultant and in his
personal capacity, a professional investor specialising in
the graphite, lithium-ion battery material and uranium
sectors. For the past thirteen years he has been involved
in various ventures increasing shareholder value in these
sectors. Frank has a significant number of share holdings
in the Company collective with his pro-active nature of
business.
Current and former directorships of listed companies in
last three years:
None.
Special responsibilities
Frank is the Chairman of the Remuneration Committee
and is also a member of the Audit and Sustainability
Committees.
Marc Vogts
(Managing Director)
Appointed 2 November 2016. Appointed as Managing
Director 15 November 2018.
Marc is a project executive with over four decades of
experience in the mining industry and over 30 years
experience as a Senior Executive in major projects in
South Africa, Madagascar, Australia, Canada, Chile, Papua
New Guinea and USA.
Marc has held project executive director roles for the likes
of BHP Billiton and Rio Tinto during his career. In recent
roles Marc was Project Director for the QMM Project
in Madagascar for Rio Tinto, Vice President for Project
Management for BHP Billiton and Vice President for all
Uranium Projects including Olympic Dam for BHP Billiton.
Prior to assuming the Managing Director role at Magnis,
Marc was the foundational Chief Executive Officer of the
John Grill Centre for Project Leadership at the University
of Sydney, a world leading project leadership executive
education for value creation and realisation in large-scale
projects.
Current and former directorships of listed companies in
last three years:
None.
Special responsibilities
He became a member of the Remuneration Committee on
20 April 2018.
20
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES Distinguished Professor
Michael Stanley Whittingham
(Non-Executive Director)
Appointed 4 November 2016
Professor Stanley Whittingham has over four decades of
experience in the lithium-ion battery industry and is best
known for being a key figure in the invention of the lithium-
ion battery technology which earned him a nomination for
the Nobel Science Prize.
During his illustrious career Professor Whittingham has
headed large projects for the US Department of Energy,
Exxon and Schlumberger. He has 16 US patents and has
been involved in writing over 240 pieces of scientific and
engineering literature.
Currently, Professor Whittingham is a professor of
Chemistry and Materials Science and Engineering at
Binghamton University which is part of the State University
of New York. Professor Whittingham is also Director of the
Northeast Center for Chemical Energy Storage (NECCES),
which is an effort being led by Binghamton University,
and includes as partners Rutgers University, Stony
Brook University, Cambridge University, MIT, University of
Michigan, University of California at Santa Barbara and
University of California at San Diego. He was elected a
member of the National Academy of Engineering in 2018.
Current and former directorships of listed companies in
last three years:
None.
Special responsibilities
None.
Peter Tsegas
(Non-Executive Director)
Appointed 16 June 2015
Peter has over 19 years of experience in Tanzania where
he has been a resident for the past fourteen years. He
has worked to engage both the private and government
sectors on a number of projects and was Managing
Director of Tancoal Energy Ltd which he successfully took
from an exploration company through to a JV with the
Tanzanian government and then into production.
Current and former directorships of listed companies in
last three years:
None.
Special responsibilities:
He became Chairman of the Sustainability Committee
from 1 January 2016 and was appointed to the Audit
Committee on 11 March 2016.
Johann C Jooste-Jacobs
(Non-Executive Director)
Appointed 27 August 2010
Johann has more than 35 years experience in the resource
sector where he has managed established companies,
acquisitions, expansions and start-up mining operations
in Australia, South Africa and Indonesia. He is currently
Executive Chairman of King Island Scheelite Limited and
a Non-Executive Director of Erinbar Limited (delisted in
January 2016 and previously known as Australian Zircon
NL).
Current and former directorships of listed companies in
last three years:
King Island Scheelite Limited (ASX:KIS)
Special responsibilities:
He is Chairman of the Audit Committee and a member of
the Remuneration Committee.
21
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Directors’ Report
Leslie Hosking
(Non-Executive Director)
Appointed 5 March 2019.
Les has a long and distinguished career which spans over
four decades in Australian business with a strong focus
in the energy and the global futures industries. Currently,
he is serving as an Independent Non-Executive Director of
AGL Energy Limited (ASX: AGL) and is an Adjunct Professor
of the University of Sydney John Grill Centre for Project
Leadership.
Previously Les was the Chief Executive Officer and
Managing Director of the Sydney Futures Exchange,
Chairman of Adelaide Brighton Limited (ASX: ABC),
Chief Executive Officer of Axiss Australia an Australian
Government inward investment agency used to promote
Australia as a global financial service and a Director
at the Australian Government’s Industry Research and
Development Board.
In the domestic energy industry, Les has served as the
Chief Executive Officer and Managing Director at National
Electricity Market Management Company (NEMMCO),
Director of the Australian Energy Market Operator (AEMO),
The Carbon Market Institute Limited and Innovation
Australia Pty Ltd.
Current and former directorships of listed companies in
last three years:
AGL Energy Limited (ASX:AGL)
Adelaide Brighton Limited (ASX:ABC)
Special responsibilities
Sustainability Committee Member
Hon. Warwick Smith AM
(Non- Executive Director)
Appointed 7 September 2018
Warwick has extensive public policy and commercial
acumen and a wealth of experience from national and
international business relations in a variety of industries
including property, financial services, natural resources,
energy, transportation, heavy machinery and equipment,
health, media, technology and entertainment.
He is Chairman Advisory Board - Australian Capital
Equity, holders of interests in Seven Group Holdings, West
Australian News, Coates Hire, WesTrac and Caterpillar
industrial services and equipment in Western Australia and
New South Wales. He is Executive Chairman of AL Capital
and Aqualand Australia and Director of Global Strategy,
Shanghai Shenglong Investment Group Limited.
Warwick has served as Chairman of the Australia–China
Council for over 8 years and has just been announced
as Chair of the National Foundation for Australia-China
Relations. He concurrently serves as Chairman of the
China Leadership Group of the Business Council of
Australia. In addition, he is current Global Trustee of the
Asia Society and Chairman Emeritus of the Asia Society in
Australia; Special Envoy – Trade and Investment Trade and
Investment, New South Wales Government - Department
of Industry NSW Trade & Investment.
During his Parliamentary career spanning 15 years, Mr.
Smith held many portfolios as a Federal Government
Minister including Minister of Sport, Territories and Local
government along with Minister Assisting the Prime
Minister on the Olympic Games in Sydney and Minister
of Family Services. Various Shadow Minister roles
included Communications, Privatisation, Aboriginal Affairs
and Science and Energy and Leader of the House of
Representatives.
Previously, Warwick was an Executive Director with the
Macquarie Bank Group (ASX: MQG), Chairman New South
Wales and Australian Capital Territory and former Senior
Managing Director for the ANZ Banking Group Limited
(ASX: ANZ), Chairman of E*TRADE Limited, Chairman of
the Australian Sports Commission and Australia’s first
Telecommunications Ombudsman. He has received a
Centenary Medal and has twice been awarded an
Order of Australia.
Current and former directorships of listed companies in
last three years:
Seven Group Holdings (ASX:SVW)
Estia Health Limited (ASX:EHE)
Special responsibilities
None.
22
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES COMPANY SECRETARY
Doug Richardson
(Company Secretary)
B.Com (Economics & Finance),
Grad Dip. Applied Finance & Investment
Appointed 14 January 2015
Doug Richardson has over 24 years experience in the
financial services and resources sectors. His experience
has included investment research, analytics and client
advising for various organisations including GIO Asset
Management, The Australian Prudential Regulation
Authority, Suncorp and Philo Capital Advisers.
Dr Ulrich Helmut Bez
(Non-Executive Director)
Appointed 7 February 2017.
Resigned 28 February 2019.
Dr Bez has over four decades of experience in the
automotive industry. He is viewed as one of the key figures
contributing to the future of the industry in the last 40
years. He had executive roles in some of the world’s most
recognised luxury car brands, as well as premium and
mass car manufacturers.
During his career Dr Bez was the Chairman and Chief
Executive Officer for Aston Martin between 2000 and
2014. During that period Dr Bez has been internationally
acclaimed for turning Aston Martin into the global luxury
brand that it is today.
Dr Bez has played an important role in shaping global
powerhouses Porsche and BMW. In Porsche Dr Bez kept
the iconic Porsche 911 alive with the 993 development,
ignoring the Boards desire to replace the 911. He led the
design and development of the 911 Turbo along with many
other models while in BMW he created the BMW Technik
GmbH division which included the design of the critically
acclaimed Z1 model.
Dr Bez has also held director level roles with the likes of
Daewoo and has been an advisor of some of the world’s
largest automotive organisations.
Current and former directorships of listed companies in
last three years:
None.
Special responsibilities
None.
DIRECTORS’ INTERESTS
As at the date of this report, the interests (directly or indirectly held) of the Directors in the shares and options of the
Company were:
Director
Frank Poullas
Hon. Warwick Smith
Leslie Hosking
Johann Jooste-Jacobs
Marc Vogts
Stanley Whittingham
Peter Tsegas
Ordinary Shares
Options over Ordinary Shares
15,193,895
650,200
100,000
5,330,714
3,114,759
-
770,000
1,000,000
1,000,000
-
1,000,000
1,000,000
1,000,000
1,000,000
23
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Directors’ Report
NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES
The Group has a multi strategy business of lithium-ion battery technology manufacturing in the USA and Australia
combined with pre-mine development of its Nachu Graphite project in Tanzania. The Group is committed to minimum
expenditure requirements in relation to its Nachu tenements.
Magnis continues to advance its multi strategy business plan of developing:
›› As a strategic partner, the rapid advancement of two (2) proposed lithium-ion battery (‘LIB’) gigafactories in the
USA and Australia.
›› The mining and processing of high purity natural flake graphite from the Group’s 100% owned Nachu Graphite
Project
DIVIDENDS
No dividends have been paid during the year (2018: $NIL). The Directors do not recommend the payment of a dividend
for this financial year.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The Directors are not aware of any developments that might have a significant effect on the operations of the Group in
subsequent financial years that are not already disclosed in this report.
CORPORATE INFORMATION
Magnis Energy Technologies Limited is a Company limited by shares that is incorporated and domiciled in Australia.
The shares are listed on the Australian Securities Exchange (“ASX”) under the ASX code MNS.
Unlisted options issued to Directors beneficially via the Company’s employee option trust scheme are included in the
option aggregate.
Details of shares or interests issued during and after the end of the financial year as a result of exercise of an option
are:
Issuing entity
Number of shares
issued
Magnis Energy Technologies Limited
750,000
Class of
shares
Ordinary
Total amount
paid for shares
Amount unpaid on
shares
$300,000
$nil
EMPLOYEES
Magnis Energy Technologies Limited had six employees as at 30 June 2019 (2018: six employees).
Category of employee
All Employees and Board
Senior Executives
Board
Total
12
5
7
Male
10
4
7
Uranex Tanzania Limited had eleven full time employees as at 30 June 2019.
Category of employee
All Employees
Total
11
Male
8
Gender
Gender
Female
2
1
-
Female
3
24
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES CORPORATE
Director Movements
The Hon. Warwick Smith was appointed as Non-Executive Director on 7 September 2018.
Mr Leslie Hosking was appointed as Non-Executive Director on 5 March 2019.
Mr Marc Vogts was appointed as Managing Director on 15 November 2018.
Dr Ulrich Helmut Bez resigned from his position of Non-Executive Director on 28 February 2019.
Placements
On 4 September 2018, Magnis announced it had secured a $11.1million investment through the issue of 30,000,000
fully paid ordinary shares at $0.37 per share to AL Capital Holdings (“ALC”). The investment resulted in a 4.98% equity
holding in Magnis and The Hon. Warwick Smith, AO, joining the Board of Directors as representative of ALC.
The funds raised were used to strengthen the balance sheet to allow Magnis to capitalise on current and future growth
opportunities in the battery technology sector and to fund the ongoing investment in the future development of the
Company’s 100% owned Nachu Graphite project.
On 12 September 2018, Magnis announced that it had completed the strategic 10% investment in Charge CCCV LLC
(“C4V”). The parties amended their agreement that allowed a US$3million cash payment to be settled by way of US$1
million cash and US$2 million via the issues of shares in Magnis. The number of ordinary shares issued to C4V was
7,507,508. The number of shares issued was determined by using a share price of $0.37 and an exchange rate of
AU$1=US$0.72.
Exercise of Listed Options
There were no listed options that were exercised. No options are currently listed on the market.
Exercise of Unlisted Options
There were 750,000 unlisted options that were exercised during the period. The proceeds from the exercising of these
unlisted options amounted to $300,000.
Company Staffing
Travis Peluso’s position as Investor Relations – Director was made redundant on 20 June 2019.
OPERATING RESULTS FOR THE YEAR
The Group incurred an operating loss after tax of $5,549,553 (2018: $5,417,885). Refer to Note 1 of the financial
statements for accounting policies used. Summarised segment operating results are as follows:
Lithium-ion Battery investments
Graphite exploration and development
Intersegment elimination
Income and losses before tax
2019
Income
$
43,404
Results
$
(301,144)
295,150
(5,248,409)
-
-
338,554
(5,549,553)
The Group has maintained a reduced exploration and evaluation expenditure programme following the announcement
in July 2017 of amendments to the Tanzanian Mining and Resources Legislation. The Group has however completed a
number of pre-development initiatives during the year such as completing the Compensation Program and minor land
clearing works. Exploration costs for the year amounted to $1,479,190 (2018: $1,449,655).
The Group has continued to increase its strategic investments in the businesses of lithium-ion battery technology
manufacturing in the USA and Australia, via a global consortium Imperium3 Pty Ltd.
25
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Directors’ Report
REVIEW OF FINANCIAL POSITION
Liquidity and Capital Resources
The statement of cash flows shows an increase in cash and cash equivalents for the year ended 30 June 2019 of
$305,077 (2018 decrease: $6,030,109). During the year the Group raised $11,100,000 (2018: $5,000,040) before costs
from a share placement and $300,000 (2018: $1,051,247) from options exercised. At year end the Group has liquid
funds of $1,829,817 (2018: $1,523,886) available for future operational use and has no borrowings (2018: $Nil).
Subsequent event - capital raising
On 27 September 2019, Magnis announced that it had secured a $8 million investment through the issue of fully paid
ordinary shares to Middle East based Negma Group Limited. Negma will provide up to $8 million over a 12-month period
with a maximum monthly subscription of $700,000. The price of the shares issued will be at an 8% discount to the
previous ten day Volume Weighted Average Price (‘VWAP’). The Company has the flexibility to call the monthly amounts
and can cancel the agreement at any stage. In addition, the Company will issue of 4,000,000 Unlisted Options in the
Company at an exercise price of $0.40 per share with an expiry date of 30 April 2021 subject to shareholder approval.
The funds will be used for working capital and advancing all projects.
Shares and Options Issues
During the year the Company raised funds from equity as follows:
›› $11,100,000 (2018: $5,000,040) from a share placement of 30,000,000 (2018: 12,500,100) ordinary fully paid
shares.
›› $300,000 (2018: $1,051,247) from the exercise of options then subsequent issue of 750,000 (2018: 3,750,000)
ordinary fully paid shares.
›› A further 7,507,508 fully paid ordinary shares were issued to Charge CCCV LLC (‘C4V’) at $0.37 per share as part
consideration to complete Magnis’ 10% investment in C4V.
Capital Expenditure
Capital expenditure on plant and equipment during the year was $12,461 (2018: $65,954).
GROUP PERFORMANCE
Annual Net Income
2019
2018
2017
2016
2015
Consolidated loss after tax
5,549,553
5,417,885
9,756,434
12,026,781
13,244,576
Shareholder Returns
Share price at financial year end ($)
Basic loss per share (cents)
Diluted loss per share (cents)
2019
0.19
0.92
0.92
2018
0.38
0.97
0.97
2017
0.515
2.09
2.09
2016
0.975
3.42
3.42
2015
0.24
4.22
4.22
RISK MANAGEMENT
The Board is responsible for ensuring that risks are identified on a timely basis and that the Group’s activities manage
the risks identified by the Board.
The Group believes that it is crucial for all Board members to be a part of this process. The Board has not established
a separate risk management committee but reviewed the major risks to the business with management and has the
following processes in place to monitor it:
›› The Board has undertaken strategic reviews of its activities and conveyed to management and shareholders its
objectives.
›› The Board approved operating budgets and at its meetings, monitors actual expenditure to budget.
›› The Board reviews sovereign, operating and environmental risks with management and from time to time external
consultants provide reports on its practices.
26
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES ›› The Board assesses political and sovereign risks relating to its international assets by monitoring local media and
politics. Group representatives liaise with all levels of Government to maintain awareness as to matters that may
affect the Company. The Company has a resident Board member in Africa to assist with the monitoring of sovereign
risk for its Tanzanian assets.
The Directors have identified risks associated with our business. Inherently, evaluation, pre-development, technological
advancements and competition is a risky undertaking that often provides substantial rewards to investors whenever
success is achieved. This is the foremost risk that the Board endeavours to mitigate through its strategic identification
of potential mineralisation targets and oversight of management subsequently conducting the respective exploration
programmes. The Board is very aware of the financial risks associated with the exploration and mining industry and the
technology risks associated with the battery and energy storage industry. The Group presently accesses funds through
the capital markets in order to fund its future business needs. The capital markets are subject to prevailing economic
conditions so the Directors are attuned to raising funds to meet future needs when circumstances permit.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
None to report.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group’s exploration activities in Tanzania are subject to environmental regulations and guidelines operating in
the licenced areas. Failure to meet environmental conditions attaching to the group’s mineral tenements could lead
to forfeiture of the tenements. No environmental breaches have occurred or have been notified by any government
agencies during the year ended 30 June 2019. The New York lithium-ion battery plant scheduled for operation in the
2020 calendar year will be subject to Environmental and Planning Regulations from various government authorities,
that will be strictly managed and adhered to by the consortium members of iM3NY.
DIRECTORS MEETINGS
The number of Directors meetings held (including meetings of committees of Directors) and the number of meetings
attended by each of the Directors of the Company during the financial year are:
Number of meetings attended:
J C Jooste-Jacobs
F Poullas
P Tsegas
L Hosking
M Vogts
W Smith
MS Whttingham
U Bez
Directors
Meeting
Audit
Committee
Remuneration
Committee
Sustainability
Committee
A
8
8
4
4
8
7
5
6
B
8
8
8
4
8
7
6
6
A
2
2
-
*
*
*
*
*
B
2
2
2
*
*
*
*
*
A
-
-
*
*
-
-
*
*
B
-
-
*
*
-
-
*
*
A
*
-
-
-
*
-
*
*
*
-
-
-
*
-
*
*
Notes
A Number of meetings attended.
B Number of meetings held during the year whilst the director held office.
* Not a member of the relevant committee.
The Audit Committee comprised J C Jooste-Jacobs (Chairman), F Poullas, and P Tsegas. The Remuneration Committee comprised F Poullas (Chairman), J C Jooste-
Jacobs and M Vogts. The Sustainability Committee comprised of P. Tsegas (Chairman), F. Poullas and L.Hosking. L.Hosking joined the Sustainability Committee in
March 2019
REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place for Directors and executives.
27
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Directors’ Report
REMUNERATION POLICY
The Board recognises that the performance of the Group depends upon the quality of its Directors and executives. To
achieve its operating and financial activities the Group must attract, motivate and retain highly skilled Directors and
executives.
The Group’s policy for determining the nature and amount of emoluments of Board members and executives of the
Company is assessed annually at the end of each calendar year and are set by reference to the mineral exploration
industry market place. The Remuneration Committee submits its recommendation to the Board for its consideration.
All remuneration paid to Directors and executives is valued at the cost to the Group and expensed.
The Board policy is to remunerate Non-Executive Directors at market rates for comparable companies for time,
commitment and responsibilities based on recommendations from the Remuneration Committee. The Board
determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market
practice, duties and accountability.
The current maximum aggregate of Non-Executive Directors fees payable is $650,000; having been approved by
members on 17 November 2017 and this represented the first increase to the maximum aggregate amount in 9
years. Presently, Non-Executive Directors receive annual fees of between $65,000 to $70,000 and the Non-Executive
Chairman $120,000. An additional $5,000 per annum is paid to Directors who act as Chairman of Committees.
Superannuation is based on each individual Director’s service agreement.
DIRECTOR AND OTHER EXECUTIVES DETAILS
Listed on pages 20-23 of the Directors Report are persons who acted as a director of the Company during or since the
end of the financial year.
For the purposes of this report, Key Management Personnel (KMP) of the Group are those persons having authority
and responsibility for planning directing and controlling the major activities of the Company and the Group, directly or
indirectly, including any Director (whether executive or otherwise) of the Company, and senior or key management.
In addition to the Directors, the following were KMP during the financial year:
Marc Vogts- Managing Director
Dr Frank Houllis – Chief Executive Officer
Travis Peluso- Investor Relations- Director (to 20 June 2019)
PERFORMANCE BASED REMUNERATION
The Group currently has no performance-based remuneration component built into the Managing Director’s or
Chief Executive’s remuneration package. Bonuses may be payable at the Board’s discretion following the annual
performance review. The Company does not have policies regarding risk management of flexible components of
remuneration packages.
COMPANY PERFORMANCE, SHAREHOLDER WEALTH AND DIRECTORS AND EXECUTIVES
REMUNERATION
In accordance with the remuneration policy noted above, the Group includes the following principles in its
remuneration framework:
›› Competitive rewards are set to attract high calibre executives;
›› Executive rewards are linked to shareholder value.
For executives the Group’s policy is to position total employment costs within a peer group. The mix of fixed and
variable components of employment costs is derived from data assessing market rate labour costs by position.
There are no financial measures that are included in the assessment but the Remuneration Committee considers the
growth in market capitalisation an important parameter. For non-financial measures a range of factors are considered;
market position, relationship with a range of stakeholders, risk management, leadership and team contribution.
28
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES SHARE OPTION PLAN
Magnis Energy Technologies Limited operates an ownership-based scheme for Directors and Employees of the
consolidated entity. In accordance with the provisions of the plan, shares and options are held on behalf of Plan
Participants by the Trustee of the Magnis Option Share Trust (“MOST”).
During the financial year 1,000,000 options (2018: 7,000,000) on varying terms and conditions were allotted to the
Trust under the share scheme.
SERVICE AGREEMENTS
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Remuneration agreements are set out below:
Mr Marc Vogts - Managing Director
›› No agreement expiry date;
›› Remuneration is $300,000 per annum including statutory superannuation guarantee;
›› The agreement and the employment created by it may be terminated by either Magnis Energy Technologies Limited
or Mr Vogts giving the other party 3 months’ notice; and
›› The agreement is subject to annual review.
Dr Frank Houllis - Chief Executive Officer
›› No agreement expiry date;
›› Remuneration is $300,000 per annum plus statutory superannuation guarantee;
›› The agreement and the employment created by it may be terminated by either Magnis Energy Technologies Limited
or Dr Houllis giving the other party 12 months’ notice. The agreement also includes a 6 month ‘non-compete’ clause
for Dr Houllis; and
›› The agreement is subject to annual review.
Travis Peluso – Investor Relations- Director, (resigned 20 June 2019)
›› No agreement expiry date;
›› Remuneration is $250,000 per annum plus statutory superannuation guarantee.
›› The agreement and the employment created by it may be terminated by either Magnis Energy Technologies Limited
or Mr Peluso giving the other party 3 month’ notice; and
›› The agreement is subject to annual review.
Other transactions with key management personnel
A total of $744,468 was paid in consultancy fees to related parties of the Non-executive directors during the financial
year (2018: $341,574). The consultancy services are provided under normal commercial terms and are disclosed in
detail under note 24 and note 25.
29
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Directors’ Report
Table 1: Remuneration for the year ended 30 June 2019
Non Executive Directors
F Poullas3
W L Smith (appointed 7 September 2018)
J C Jooste-Jacobs 3
L Hosking (appointed 5 March 2019)
P Tsegas3
M S Whittingham
U Bez (resigned February 19)
Key management personnel
M Vogts
F Houllis
T Peluso (resigned 20 Jun 19)
Salary &
Fees
$
120,000
51,879
70,000
21,074
70,000
70,000
43,328
195,608
300,000
253,337
1,195,226
Cash
Bonuses
$
Termination
Benefits
$
Post
Employment
Benefits1
$
Share Based
Payments
Options2
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,231
19,231
11,400
4,929
6,650
-
-
-
-
19,257
44,534
23,156
-
131,400
11,400
-
-
-
-
-
-
-
-
68,208
76,650
21,074
70,000
70,000
43,328
214,865
344,534
295,724
109,926
11,400
1,335,783
1 Includes superannuation and movements in compensated absences.
2 Share based payments consist of shares, options and rights issued.
3 Fees paid to related entities.
Table 2: Remuneration for the year ended 30 June 2018
Non Executive Directors
F Poullas3
J C Jooste-Jacobs 3
P Tsegas3
M Vogts
M S Whittingham
U Bez
P Sarantzouklis (resigned 16 Apr 18)
Key management personnel
F Houllis
T Peluso (appointed 4 Dec 17)
R J Chittenden (resigned 15 Sep 17)
Salary & Fees
$
120,000
70,000
70,000
65,000
70,000
64,992
51,599
295,333
144,178
92,078
1,043,180
1 Includes superannuation and movements in compensated absences.
2 Share based payments consist of shares, options and rights issued.
3 Fees paid to related entities.
Cash
Bonuses
$
Post
Employment
Benefits1
$
Share Based
Payments
Options2
$
-
-
-
-
-
-
-
-
-
-
-
11,400
6,650
-
-
-
-
-
43,652
17,498
9,441
88,641
Total
$
131,400
76,650
70,000
113,700
118,700
113,692
100,299
385,485
187,326
101,519
-
-
-
48,700
48,700
48,700
48,700
46,500
25,650
-
266,950
1,398,771
30
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES Compensation options granted and vested
During the financial year, the following share-based payments were awarded, vested or lapsed:
Table 1: Options Awarded
Grant Date and
Vesting Date
26-Oct-18
26-Oct-18
Expiry Date
26-Oct-21
26-Apr-20
Grant Date Fair
Value
$
Original Exercise
Price of Option
$
Fair Value Expense under
AASB 2
$
Number
0.0114
1,000,000
0.0021
5,000,000
0.70
0.70
11,400
10,500
Table 2: Options Exercised
Grant Date and
Vesting Date
29-Mar-16
29-Mar-16
Table 3: Options Lapsed
Expiry Date
06-Nov-18
06-Nov-18
Grant Date Fair
Value
$
0.0977
0.0754
Number
375,000
375,000
Original Exercise
Price of Option
$
Fair Value Expense under
AASB 2
$
0.35
0.45
36,638
28,275
Grant Date and
Vesting Date
26-Nov-15
26-Nov-15
03-Aug-16
12-Dec-16
07-Apr-17
14-Dec-17
22-Jun-18
Expiry Date
06-Nov-18
06-Nov-18
03-Aug-19
12-Dec-18
07-Apr-20
17-Nov-19
18-Jun-21
Grant Date Fair
Value
$
Original Exercise
Price of Option
$
Fair Value Expense under
AASB 2
$
Number
0.1255
1,000,000
0.1004
0.2789
750,000
500,000
0.2357
1,500,000
0.0911
250,000
0.0487
2,750,000
0.031
250,000
0.40
0.50
0.70
0.75
1.00
0.70
0.70
125,500
75,300
139,450
353,550
22,775
113,525
7,750
31
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Directors’ Report
ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL
Shareholding
The number of shares in the company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary
shares
F Poullas
W L Smith1
J C Jooste-Jacobs
L Hosking2
P Tsegas
M Vogts
M S Whittingham
U Bez (resigned 28 Feb 19)
F Houllis
T Peluso (resigned 20 June 19)3
Balance at start
of the year
14,501,360
-
5,305,714
-
20,000
314,759
-
-
637,945
6,547,000
27,326,778
Granted
Additions
Disposals/
others
Balance at the
end of the year
-
-
-
-
-
-
-
-
-
-
611,106
650,200
25,000
100,000
750,000
2,800,000
-
-
-
-
-
-
-
-
220,000
(220,000)
15,112,466
650,200
5,330,714
100,000
770,000
3,114,759
-
-
-
-
-
-
637,945
6,547,000
5,156,306
(220,000)
32,263,084
1 opening balance as at 7 September 2018
2 opening balance as at 5 March 2019
3 at time of resignation as Director/ key management personnel.
Option holding
The number options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties,
is set out below:
Options over ordinary shares
Balance at start
of the year
Granted
Additions
Disposals/
others
Balance at the
end of the year1
F Poullas
J C Jooste-Jacobs
P Tsegas
M Vogts
M S Whittingham
W L Smith (appointed 7 Sept 18)2
L Hosking (appointed 5 Mar 19)3
F Houllis
T Peluso (resigned 20 June 19)4
U Bez (resigned 28 Feb 19)
1,000,000
1,000,000
1,750,000
1,000,000
1,000,000
-
-
1,500,000
750,000
1,000,000
9,000,000
-
-
-
-
-
1,000,000
-
-
-
-
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
(750,000)
-
-
-
-
-
-
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
-
1,500,000
750,000
-
(1,750,000)
8,250,000
1 all options vest immediately and are exercisable at anytime
2 opening balance as at 7 September 2018
3 opening balance as at 5 March 2019
4 at time of resignation as Director/ key management personnel
32
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES
During or since the financial year, no Director of the Company has received or become entitled to receive a benefit,
other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors
shown in the consolidated accounts, by reason of a contract entered into by the Company or an entity that the
Company controlled or a body corporate that was related to the Company when the contract was made or when the
Director received, or became entitled to receive, the benefit with:
›› a Director, or
›› a firm of which a Director is a member, or
›› an entity in which a Director has substantial financial interest except the usual professional fees for their services
paid by the Company to:
Identity of
Related Party
Strong
Solutions Pty
Limited
Peter Tsegas
Dr Ulrich Bez
HonDTech
M Stanley
Whittingham
Nature of Relationship
Frank Poullas is a related party of Strong
Solutions Pty Limited and a director of
Magnis Energy Technologies Limited
Peter Tsegas is a Director of Magnis Energy
Technologies Ltd
Type of
Transaction
Consulting
fees and P&E
purchases
Consulting Fees
Dr Ulrich Bez is a Director of Magnis Energy
Technologies Limited
Consulting Fees
M Stanley Whittingham is a Director of
Magnis Energy Technologies Limited
Consulting Fees
Terms &
Conditions of
Transaction
Normal
commercial terms
Normal
commercial terms
Normal
commercial terms
Normal
commercial terms
2019
$
2018
$
314,568
300,064
420,000
-
9,900
25,300
-
16,210
2018 REMUNERATION REPORT
The Remuneration Report received positive shareholder support from members (98%) at the
2018 Annual General Meeting.
This concludes the remuneration report, which has been audited.
SHARES UNDER OPTION
Details of unissued shares under option as at 30 June 2019 in Magnis Energy Technologies Limited are:
Number of ordinary shares
under option
Class of shares
Exercise price of option
$
Expiry date of option
1,300,000
3,000,000
2,000,000
750,000
2,000,000
750,000
5,000,000
1,000,000
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
0.7
0.7
0.7
0.7
0.7
1
0.7
0.7
Aug-19
Oct-19
Nov-19
Dec-19
Jun-21
Apr-20
Apr-20
Oct-21
The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest
issue of the Company or of any other body corporate or registered scheme. No voting rights attached to the options.
There were 750,000 (2018: 3,750,000) shares issued during the 2019 financial year as a result of exercising of options.
33
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Directors’ Report
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the directors and executive officers for any breach of laws by the Company for
which they may be held personally liable. The agreement provides for the Company to pay liabilities or legal expenses to
the extent permitted by law.
During or since the financial year, the Company has paid premiums insuring all the Directors of Magnis Energy
Technologies Limited against costs incurred in defending proceedings for conduct other than:
›› (a) a wilful breach of duty;
›› (b) a contravention of sections 182 or 183 of the Corporations Act 2001,
as permitted by section 199B of the Corporations Act 2001.
The total amount of insurance contract premiums paid is confidential under the terms of the insurance policy.
INDEMNIFICATION AND INSURANCE OF AUDITOR
To the extent permitted by law, the Company has not agreed to indemnify its auditors, BDO East Coast Partnership,
as part of the terms of its audit engagement agreement against claims by third parties arising from the audit
(for an unspecified amount). No payment has been made to indemnify BDO East Coast Partnership during or since
the financial year.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings
on behalf of the Company, or to intervene in any proceedings to which the Company is party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
SUBSEQUENT EVENTS
Subsequent events since the end of the year are outlined in Note 21 ‘Subsequent events’ to the Financial Statements.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the
auditor are outlined below:
›› Taxation services –Australia & Tanzania $67,489
›› Corporate services- Australia $8,903
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 21 to the financial statements do not
compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
›› all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
›› none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
34
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES ROUNDING OF AMOUNTS
The company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the
directors’ report and the financial statements are rounded off to the nearest dollar, unless otherwise indicated.
AUDITOR INDEPENDENCE
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 36.
Signed in accordance with a resolution of the Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
F Poullas
F. Poullas
Non - Executive Chairman
Sydney, 30 September 2019
35
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS 07Auditor’s Independence Declaration
Tel: +61 2 9251 4100
Fax: +61 2 9240 9821
www.bdo.com.au
Level 11, 1 Margaret St
Sydney NSW 2000
Australia
DECLARATION OF INDEPENDENCE BY GARETH FEW TO THE DIRECTORS OF MAGNIS ENERGY
TECHNOLOGIES LIMITED
As lead auditor of Magnis Energy Technologies Limited for the year ended 30 June 2019, I declare that,
to the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Magnis Energy Technologies Limited and the entities it controlled
during the period.
Gareth Few
Partner
BDO East Coast Partnership
Sydney, 30 September 2019
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
36
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
08Statement of Profit or Loss
& Other Comprehensive Income YEAR ENDED 30 JUNE 2019
Consolidated
Notes
2019 - $
2018 - $
Income
Interest received
R&D Grant
Foreign exchange gain
Profit on sale of fixed assets
Other revenue
Total income
Expenditure
Administration expenses
Depreciation expense
Directors fees
Employee benefits expense
Legal and consulting expenses
Share based payment to employees
Share based payment to non-employees
Share of net loss of associate accounted for using the equity method
29(a)
29(a)
28
Exploration and evaluation expenses
Total expenditure
(Loss) before income tax expense
Income tax expense
Net (loss) for the year
Other comprehensive income/(loss)
Items that may be subsequently reclassified to profit or loss
Foreign currency translation
Other comprehensive income / (loss) for the year, net of tax
Total comprehensive income / (loss) for the year, net of tax
Attributable to non-controlling interests
Attributable to owners of Magnis Energy Technologies Limited
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
105,747
210,684
22,123
-
-
25,799
241,698
96,114
4,988
22
338,554
368,621
1,314,104
1,128,561
120,901
552,859
120,124
589,955
1,303,271
1,070,023
794,738
1,069,408
11,400
10,500
301,144
290,200
16,125
52,455
1,479,190
1,449,655
5,888,107
5,786,506
(5,549,553)
(5,417,885)
5
-
-
(5,549,553)
(5,417,885)
240,831
141,762
240,831
141,762
(5,308,722)
(5,276,123)
-
(5,308,722)
-
(5,276,123)
23
23
0.92
0.92
0.97
0.97
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
37
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS 09Statement of Financial Position AS AT 30 JUNE 2019
Consolidated
Current assets
Cash and cash equivalents
Trade and other receivables
Loan receivables
Total current assets
Non current assets
Other receivables
Financial assets at FVOCI
Investment accounted for using the equity method
Development assets
Plant & equipment
Total non current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non current liabilities
Provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated Profits/(Losses)
Total equity
Notes
2019 - $
2018 - $
6, 18(b)
1,829,817
1,523,886
7
8
9
10
28
11
12
13
14
14
307,623
140,969
1,822,647
3,960,087
1,664,855
-
150,977
10,020,084
5,848,713
5,291,105
4,020,647
5,466,492
5,176,682
53,298
158,205
20,830,979
15,355,224
24,791,066
17,020,079
590,800
1,025,764
137,740
127,016
728,540
1,152,780
40,821
40,821
33,755
33,755
769,361
1,186,535
24,021,705
15,833,544
15(a)
17
124,177,419
110,637,523
6,396,921
7,036,953
(106,552,635)
(101,840,932)
24,021,705
15,833,544
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
38
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES 10Statement of Changes in EquityYEAR ENDED 30 JUNE 2019
Issued
Capital
$
Options
$
Notes
110,637,523
-
-
-
13,474,983
-
-
-
-
-
At 1 July 2018
Loss for the period
Other comprehensive income/
(loss)
Total comprehensive income/
(loss) for the year
Transactions with owners :
Contributions of equity, net of
transaction costs
Share based payments
29
Forfeiture of share-based
payments
-
-
-
-
21,900
(837,850)
Reclassification from reserve
64,913
(64,913)
At 30 June 2019
124,177,419
-
1,290,644
5,106,277 (106,552,635)
Share
Based
Payment
Reserves
$
Foreign
Currency
Translation
Reserve
$
Accumulated
(Losses)
$
Non
controlling
interests
$
Total Equity
$
2,171,507
4,865,446 (101,840,932)
-
15,833,544
-
(5,549,553)
(5,549,553)
240,831
-
240,831
240,831
(5,549,553)
-
(5,308,722)
-
-
-
-
-
-
837,850
-
-
-
-
-
-
13,474,983
21,900
-
-
24,021,705
Share
Based
Payment
Reserves
$
Foreign
Currency
Translation
Reserve
$
Accumulated
(Losses)
$
Non
controlling
interests
$
Total Equity
$
3,274,077
4,723,684
(97,502,472)
(72)
11,773,619
(5,417,885)
141,762
-
141,762
(5,417,885)
-
-
-
-
-
-
1,079,497
-
(72)
72
2,171,507
4,865,446 (101,840,932)
-
-
-
-
-
(5,417,885)
141,762
(5,276,123)
9,029,723
306,325
-
-
-
15,833,544
-
-
-
Issued
Capital
$
Options
$
Notes
At 1 July 2017
Loss for the period
Other comprehensive income/
(loss)
Total comprehensive income/
(loss) for the year
Transactions with owners :
Contributions of equity, net of
transaction costs
Share based payments
29
Equity transfer on acquisition of
share capital in controlled entity
Forfeiture of share-based
payments
101,278,402
-
-
-
9,029,723
-
-
-
Reclassification from reserve
329,398
At 30 June 2018
110,637,523
-
-
-
-
-
-
-
-
-
-
-
-
-
-
306,325
-
(1,079,497)
(329,398)
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes
39
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS 11Statement of Cash Flows
YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Payments to suppliers and employees
Payment of exploration expenditure
Payment for development assets
Interest received
R&D grant
Consolidated
Notes
2019
$
2018
$
(3,874,219)
(3,808,251)
(1,559,015)
(1,531,310)
(425,077)
62,227
210,684
-
25,799
241,698
Net cash used in operating activities
18(a)
(5,585,400)
(5,072,064)
Cash flows from investing activities
Acquisition of plant & equipment
Acquisition of interest in associate
Acquisition of interest in financial asset
Payment of loan to related parties
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from issues/sale of ordinary shares and options
Capital raising expenses
Net cash flows from financing activities
(12,461)
(65,954)
(1,571,602)
(4,073,102)
(1,393,592)
(2,599,428)
(1,829,073)
-
(4,806,728)
(6,738,484)
11,400,000
(702,795)
6,051,287
(270,848)
10,697,205
5,780,439
Net increase/(decrease) in cash and cash equivalents
305,077
(6,030,109)
Net foreign exchange differences
Add opening cash and cash equivalents
Closing cash and cash equivalents
18(b)
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
854
1,523,886
1,829,817
(990)
7,554,985
1,523,886
40
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES 12Notes to the Financial Statements
YEAR ENDED 30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial report are set out below. The financial
report covers the consolidated group of Magnis Energy Technologies Limited and controlled entities (“the Group”).
Magnis Energy Technologies Limited is a company, limited by shares, incorporated in Australia whose shares are
publicly traded on Australian Securities Exchange (“ASX”).
The following is a summary of the material accounting policies adopted by the consolidated Group in the preparation
of the financial report. The accounting policies have been consistently applied to all years presented,
unless otherwise stated.
BASIS OF PREPARATION
These general purpose financial statement have been prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting Standards Board [“AASB’] and the Corporations Act 2001, as
appropriate for -profit orientated entities.
[i] Statement of Compliance
These financial statements also comply with International Financial Reporting Standards [“IFRS”] as issued by the
International Accounting Standards Board [“IASB”]
[ii] Historical cost convention
The financial report has been prepared on an accrual basis under the historical cost convention, as modified by the
revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of
accounting has been applied.
[iii] Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in Note 2.
The financial report is prepared in Australian dollars.
GOING CONCERN
The Group has a multi strategy business of lithium-ion battery technology manufacturing in the USA and Australia
combined with pre-mine development of its Nachu Graphite project in Tanzania. The Group is committed to minimum
expenditure requirements in relation to its Nachu tenements.
For the year ended 30 June 2019 the Group reported a net loss of $5,549,553 (2018: $5,417,885) and net operating
cash outflows of $5,585,400 (2018: $5,072,064). The operating cash outflows have been funded by cash inflows from
equity raisings of $11,400,000 (2018: $6,051,287) during the year. As at 30 June 2019 the Group had net current
assets of $3,231,547 (2018: $512,075) including cash reserves of $1,829,817 (2018: $1,523,886).
Subsequent to year end, Magnis announced that it had secured a $8 million investment through the issue of fully paid
ordinary shares to Middle East based Negma Group Limited. Negma will provide up to $8 million over a 12-month period
with a maximum monthly subscription of $700,000. The agreement includes the option to for an additional $4 Million
subscription on the same terms. The Group’s cash reserves are considered sufficient to meet planned expenditure
budget, including consortium investment activities, Nachu exploration and development activities, operating and
administrative expenditure, for the 12 months to 30 June 2020.
As such, the financial statements have been prepared on a going concern basis which contemplates the continuity of
normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.
In the event that the assumptions underpinning the basis of preparation do not occur as anticipated, there is material
uncertainty that may cast significant doubt whether the Group will continue to operate as a going concern. If the Group
is unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities other than
in the normal course of business and at amounts different to those stated in the financial statements.
41
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
No adjustments have been made to the financial report relating to the recoverability and classification of the
asset carrying amounts or the classification of liabilities that might be necessary should the Group not continue
as a going concern.
The financial statements were authorised for issue by the directors on 30 September 2019.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
(i) New and amended standards adopted by the Group
The accounting policies adopted are consistent with those of the previous financial year except as follows;
AASB 15: Revenue from Contracts with Customers
The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for revenue
recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of
promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition
model with a measurement approach that is based on the allocation of the transaction price. Credit risk is presented
separately as an expense rather than an adjustment against revenue. Contracts with customers are presented in
an entity’s statement of financial position as a contract liability, a contract asset, or a receivable, depending on the
relationship between the entity’s performance and the customer’s payment. Customer acquisition costs and costs to
fulfill a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract period.
The impact on the financial performance and position of the Group from the adoption of this Accounting Standard is
not significant as the Group does not have any revenue from contracts with customers for the period ending
30 June 2019.
(ii) Early adoption of standards
FINANCIAL INSTRUMENTS
The Group elected to apply the following pronouncement from the financial year beginning on 1 July 2017:
›› AASB 9 ‘Financial Instruments’
AASB 9 ‘Financial Instruments’ replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’, bringing
together all three aspects of the accounting for financial instruments: classification and measurement; impairment
and hedge accounting.
AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall be measured
at amortised cost, if it held within a business model whose objective is to hold assets in order to collect contractual
cash flows, which arise on specific dates and solely payments of principle and interest. All other financial instrument
assets are to be classified and measured at fair value through profit and loss unless the entity makes an irrevocable
election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other
comprehensive income (‘OCI’). For financial liabilities, the standard requires the portion of the change in fair value that
relates to the entity’s own credit risk to be presented in OCI (unless it would create and accounting mismatch). New
impairment requirements use an ‘expected credit loss (’ECL’) model to recognise an allowance against the financial
assets measured at amortised cost. Impairment is be measured under a 12-month ECL method unless the credit risk
on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method
is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss
allowance is available.
As at 30 June 2019, the Company’s financial instruments consist of cash and cash equivalents, trade and other
receivables, investment in equity instruments and trade and other payables.
Cash and cash equivalents and trade and other receivables previously designated as loans and receivables under AASB
139 are now classified as amortised cost under AASB 9. Trade and other payables are designated as other financial
liabilities, which are measured at amortised cost.
Cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair value due to
their short-term nature.
42
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES The Company classified the fair value of the financial instruments according to the following fair value hierarchy based
on the amount of observable inputs used to value the instruments.
The three levels of the fair value hierarchy are:
›› Level 1- Values abased on unadjusted quoted prices available in active markets for identical assets or liabilities as of
the reporting date.
›› Level 2- Values based on inputs, including quoted prices, time value and volatility factors, which can be substantially
observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the
reporting date.
›› Level 3- Values based on prices or valuation techniques that are not based on observable market data.
The Group has made the irrevocable election on initial recognition of its equity investment in Charge CCCV LLC to
present gains and losses in fair value (as it is not held-for-trading) in other comprehensive income (‘FVTOCI’). The new
impairment model under AASB 9 does not apply to this equity instrument.
Impairment of financial assets
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with an ‘expected credit loss’ (“ECL”) model. The new impairment
model is applied to financial assets measured at amortised cost, contract assets and debt investments at Fair Value
Through Other Comprehensive Income (“FVOCI”), but not to investments in equity instruments.
Under AASB 9, loss allowances are measured on either of the following basis:
›› 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting
date; and
›› Lifetime ECL: these are ECLs that result from all possible default events over the expected life of a financial
instrument.
ECLs are probability-weighted estimates of credit losses. Credit losses are measured at the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash
flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.
The Group has two types of financial assets that are subject to the expected credit loss model:
›› Trade and other receivables
›› Loan receivables
These financial assets are recognised at amortised cost less expected credit loss allowance.
While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the expected credit loss is
not significant.
The Group has not elected to early adopt any other new standard.
(iii) Accounting Standards and Interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
effective and have not been adopted by the Group for the annual reporting period ending 30 June 2019 are outlined in
the table below:
Standard/Interpretation
AASB 16 Leases
Effective for the annual reporting period
beginning on
Expected to be initially applied in the
financial year ending
January 1, 2019
June 30, 2020
43
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117:
Leases. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be
classified as operating or finance leases. The main changes introduced by the new Standard include:
›› Recognition of a right-to use asset and an associated lease liability excluding short-term leases with less than 12
months of tenure and leases relating to low-value assets);
›› Depreciation of right-to-use assets in line with AASB 116: Property Plant and Equipment in profit or loss and
unwinding of the liability in principle and interest components;
›› Variable lease payments that depend on an index or a rate are included in the initial measurement of the lease
liability using the index or rate at the commencement date;
›› By applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead
account for all components as a lease;
›› Additional disclosure requirements.
The Directors initial assessment of the impact of AASB 16 has determined that it will not have a significant impact on
the Group’s financial statements.
Standard/Interpretation
Interpretation 23- Uncertainty over
Income Tax Treatments
Effective for the annual reporting period
beginning on
Expected to be initially applied in the
financial year ending
January 1, 2019
June 30, 2020
Interpretation 23 sets out how to determine the accounting tax position when there is uncertainty over income tax
treatments. The Interpretation requires an entity to:
›› whether uncertain tax positions are assessed separately or as a group, and
›› whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an
entity in its income tax filings.
If yes, the entity should determine its accounting tax position consistent with the tax treatment used or planned to be
used in its income tax filings.
If no, the entity should reflect the effect of uncertainty in determining its accounting tax position.
The interpretation is effective for annual periods beginning on or after 1 January 2019. Entities can apply the
Interpretation with either full retrospective application or modified retrospective application without restatement of
comparatives retrospectively or prospectively.
Interpretation 23 is not expected to have a significant impact on the financial report of the Group in the year or period
of initial application.
There are no other standards that are not yet effective and that would be expected to have a significant impact on the
Group in the current or future reporting periods and on foreseeable future transactions.
EXPLORATION AND EVALUATION COSTS
Exploration and evaluation expenditure is expensed directly to profit and loss when incurred. Accounting policies for the
Group’s development assets are outlined in Note 10 ‘Development Assets’.
FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes,
the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date; and assumes that the transaction will take place
either: in the principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on
44
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use
of unobservable inputs
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the
fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is
either not available or when the valuation is deemed to be significant. External valuers are selected based on market
knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to
another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a
comparison, where applicable, with external sources of data.
LEASES
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement
and requires an assessment of whether the fulfilment of the arrangement is dependent on the use a specific asset or
assets and the arrangement conveys a right to use an asset
Leases under which the lessor retains substantially all of the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognised in profit or loss on a straight-line basis over
the lease term.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all
the risks and benefits incidental to ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets,
or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal
component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining
balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter of
the asset’s useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain
ownership at the end of the lease term.
GOODS AND SERVICES TAX (GST AND/OR VAT)
Revenues, expenses and assets are recognised net of the amount of GST/VAT except:
›› where the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
›› receivables and payables are stated with the amount of GST/VAT included.
The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the statement of financial position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST/VAT component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are
classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to,
the taxation authority.
Withholding tax and other indirect taxes are incurred on amounts of VAT recoverable from, or payable to,
the taxation authority.
45
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary economic
environment in which that entity operates. The consolidated financial statements are presented in Australian dollars
which is the parent entity’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date
of the transaction. Foreign currency monetary items are re-translated at the year-end exchange rate. Non-monetary
items measured at historical cost continue to be carried at the exchange rate at the date of the transaction.
Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values
were determined.
Exchange differences arising on the translation of monetary items are recognised in profit or loss.
Financial statements of foreign operations
The financial results and position of foreign operations whose functional currency is not Australian dollars, the Group’s
presentation currency, are translated as follows:
›› assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
›› income and expenses are translated at average exchange rates for each month during the period.
Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign
currency translation reserve in other comprehensive income. These differences are recognised in the statement of
comprehensive income in the period in which the operation is disposed.
EMPLOYEE BENEFITS
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting
date. These benefits include wages and salaries, annual leave, and long service leave when it is probable that
settlement will be required.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled
within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which
are expected to be paid when the liability is settled including related on-costs, such as workers compensation and
payroll tax.
REVENUE RECOGNITION
Interest revenue is recognised as interest accrues using the effective interest method.
CONTRIBUTED EQUITY
Ordinary shares are classified as equity. Any transaction costs arising on the issue of ordinary shares are recognised
directly in equity as a reduction of the share proceeds received.
RESTATEMENT OF COMPARATIVES
When required by accounting standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
46
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES 2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements
and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its
judgements, estimates and assumptions on historical experience and on other various factors, including expectations
of future events, management believes to be reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to
the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees and directors by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value of share options is determined by an
external valuer using a binomial option pricing model that uses the assumptions detailed in note 29(f).
Indirect tax receivables and liabilities
The Group is subject to indirect taxes in Australia and the jurisdiction where it has foreign operations. Significant
judgement is required in determining the amounts recorded as receivables for recovery of such taxes and payables for
payment of such taxes. The Group is subject to an audit by a tax authority in a jurisdiction in which it operates. The tax
authority is disputing the quantum of goods and services tax receivable and withholding taxes payable. Discussions
with the relevant tax authority are ongoing. The Group recognises liabilities for anticipated tax audit issues based
on estimates of whether additional taxes will be due. The Group has adequately recorded receivables and payables
for the amounts it believes will ultimately be payable. Where the final outcome of any matters is different from
amounts recorded, such differences will impact the indirect tax receivables or provision in the period in which such
determination is made.
Fair value estimates of financial instruments
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based
on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to
determine what is significant to fair value and therefore which category the asset or liability is placed in can
be subjective
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These
include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on
unobservable inputs.
3. SEGMENT INFORMATION
a)
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the
executive management team (chief operating decision maker) in assessing performance and in determining the
allocation of resources.
During the financial year, the Group continued its participation in global consortium, including ownership, to operate
lithium-ion battery gigafactories in Australia and the USA. As a member of these consortiums, Magnis’ role will be to
provide anode materials and associated technologies to assist in the production process.
This activity is supplemented by the involvement in the development and ultimate mining of natural flake graphite for
use in various industries, including in particular, batteries for storing electrical energy.
47
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
Due to the infancy of its interests in the lithium-ion battery sector, the Group has determined its reportable segments
for the financial year ended 30 June 2019 as follows:
›› Lithium-ion Battery investments
›› Graphite exploration and development
b)
Identification of reportable segments
2019
Segment financial information
Segment revenue
Segment loss before tax
Segment current assets
Segment non-current assets
Segment liabilities
2018
Segment financial information
Segment revenue
Segment loss before tax
Segment current assets
Segment non-current assets
Segment liabilities
Lithium-ion Battery
Investment
USA
$
Lithium-ion Battery
Investment
Australia
$
Graphite Exploration
& Development
Tanzania
$
38,986
(301,144)
1,343,230
15,311,189
-
4,418
-
479,418
-
-
295,150
(5,248,409)
2,137,439
5,519,790
(769,361)
Lithium-ion Battery
Investment
USA
$
Lithium-ion Battery
Investment
Australia
$
Graphite Exploration
& Development
Tanzania
$
-
(52,455)
-
9,869,360
-
-
-
-
-
-
368,621
(5,365,430)
1,664,855
5,485,864
1,186,535
Consolidated
$
338,554
(5,549,553)
3,960,087
20,830,979
(769,361)
Consolidated
$
368,621
(5,417,885)
1,664,855
15,355,224
1,186,535
Accounting policies
The Group applies AASB 8 Operating Segments and determines its operating segments to be based on its geographical
location and also by operational type. Lithium-Ion Battery Investment refers to the Groups ownership in planned
Gigafactories via the Global Consortium Imperium3 Pty Ltd. Graphite exploration and development currently refers
to the pre-development operation of the Nachu Graphite Project in Tanzania. The financial performance of these
segments are reported to the Board on a monthly basis. The accounting standards adopted in preparing internal
reports to the Board are consistent with those adopted in preparing this annual report. Operating segments are subject
to risks and returns that are different to those of segments operating in other economic environments.
Inter-segment transactions
To avoid asymmetrical allocation within segments which management believe would be inconsistent policy is that if
items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are
also not allocated to segments.
Segment assets and liabilities
Segment assets include all assets used by a segment and consist primarily of cash and cash equivalents. Development
assets, plant and equipment and trade and other receivables. While most of these assets can be directly attributable
to individual segments, the carrying amounts of certain assets used jointly by segments are not allocated. Segment
liabilities consist primarily of trade and other creditors and employee benefits. Segment assets and liabilities do not
include deferred income taxes.
48
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES 4. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends
has been made.
5.
INCOME TAX
Current income tax
Current income tax credit/(expense)
Tax losses not recognised as not probable
Deferred income tax
Consolidated
2019
$
2018
$
1,510,567
1,018,075
(1,455,331)
(1,519,547)
55,236
(501,472)
Relating to origination and reversal of temporary differences
(55,236)
501,472
Tax losses brought to account to offset net deferred tax liability
Income tax credit/(expense) reported in the Statement of Comprehensive Income
a) STATEMENT OF CHANGES IN EQUITY
Deferred income tax related to items charged or credited directly to equity
Share issue costs
Deferred tax offset
Income tax benefit reported in Equity
b) TAX RECONCILIATION
A reconciliation between tax expense and the product of accounting profit before
income tax multiplied by the Group’s applicable income tax rate is as follows:
Accounting (loss) before tax
At the Group’s statutory 30% tax rate (2018: 30%)
Share based payment expense
Movement in temporary differences
Share of net P & L of associate accounted for using equity method
Exploration and evaluation expense write off
Non-assessable R&D offset income
Deductible option issue costs
Other adjustments
Tax losses not brought to account
Income tax (expense) reported in the Statement of Comprehensive Income
-
-
-
-
-
-
102,708
(18,571)
(102,708)
18,571
-
-
(5,549,553)
(5,417,885)
1,664,866
1,625,366
(3,150)
(59,547)
(90,343)
(4,838)
87,122
15,736
(229,113)
(104,759)
63,205
113,734
72,509
91,481
(4,321)
(212,619)
(1,455,331)
(1,570,209)
-
-
49
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Notes to the Financial Statements
At the reporting date, the Group has estimated tax losses of $95,709,965 (2018: $90,163,829) available to offset
against future taxable income subject to continuing to meet relevant statutory tests. To the extent that it does not
offset a deferred tax liability, a deferred tax asset has not been recognised for these losses because it is not probable
that future taxable income will be available to use against such losses.
ACCOUNTING POLICIES
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based
on the national income tax rate for each jurisdiction adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
financial statements, and to unused tax losses.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all temporary differences, except:
›› where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; or
›› when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary difference, and the carry-forward of unused tax assets and unused tax losses can be used, except:
›› where the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
›› when the deductible temporary differences is associated with investments in subsidiaries, associates or interests
in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the
temporary difference will reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be applied.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset
to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates [and tax laws] that have been enacted or substantively
enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of
financial position.
Tax consolidated group
The Company and its wholly owned Australian subsidiaries have elected to form a tax consolidated group from 1 July
2015, with Magnis Energy Technologies Limited being the head entity within that group. These entities are taxed as a
single entity.
50
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES 6. CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
Consolidated
2019
$
6,448
2018
$
3,779
1,823,369
1,520,107
1,829,817
1,523,886
ACCOUNTING POLICIES
For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at
call with financial institutions, other short-term highly liquid investments that are readily convertible to known amounts
of cash and which are subject to insignificant risk of change in value, and bank overdrafts.
7. TRADE AND OTHER RECEIVABLES
Accrued interest
Goods and services tax recoverable
Prepayments and other receivables
Less: allowance for expected credit loss
Security deposit
Consolidated
2019
$
1,562
30,661
2018
$
1,445
24,921
231,637
114,603
(107,214)
150,977
-
307,623
140,969
ACCOUNTING POLICIES
Other receivables are recognised and measured at amortised cost, less any allowance for expected credit losses.
ALLOWANCE FOR EXPECTED CREDIT LOSSES
The consolidated entity has recognised a loss of $107,214 (2018: nil) in profit or loss in respect of the expected credit
losses related to trade and other receivables for the year ended 30 June 2019.
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
Consolidated
2019
$
-
107,214
-
-
107,214
2018
$
-
-
-
-
-
51
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Notes to the Financial Statements
8. LOAN RECEIVABLES
Accrued interest
Short-term loan- Charge CCCV LLC
Less: allowance for expected credit loss
Short-term loan- Imperium3 Townsville
Consolidated
2019
$
43,404
1,354,073
(49,830)
475,000
1,822,647
2018
$
-
-
-
-
-
ACCOUNTING POLICIES
Loan receivables are recognised and measured at amortised cost, less any allowance for expected credit losses.
ALLOWANCE FOR EXPECTED CREDIT LOSSES
The consolidated entity has recognised a loss of $149,830 (2018: nil) in profit or loss in respect of the expected credit
losses related to trade and other receivables for the year ended 30 June 2019.
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
9. NON CURRENT ASSETS - RECEIVABLES
Security deposit
Consolidated
2019
$
-
49,830
-
-
49,830
2018
$
-
-
-
-
-
Consolidated
2019
$
-
-
2018
$
150,977
150,977
52
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
10. FINANCIAL ASSETS AT FVOCI
Equity investment in Charge CCCV LLC
Consolidated
2019
$
2018
$
10,020,084
5,848,713
10,020,084
5,848,713
On 29 March 2018, Magnis announced a strategic investment to acquire a 10% interest in leading US based, lithium-
ion battery technology group, Charge CCCV LLC (‘C4V’) and secured an exclusive agreement over selective patents,
which will assist in driving the Company’s growth in the lithium-ion battery sector.
Under the terms of the Agreement, Magnis acquired a 10% stake in C4V for total consideration of US$7.5million,
comprising an upfront cash payment of US$2m together with the issue of 6,940,544 ordinary shares in Magnis
(representing US$2.5m in value). A further cash payment of US$1million was made on 12 September 2018 together
with the issue of 7,507,508 ordinary shares in Magnis. As at 30 June 2019, Magnis held a 10% stake in C4V.
Magnis has appointed one representative to the Board of Directors of C4V and has also secured a first right of refusal
for any future capital raising initiatives that C4V undertake. Further to the agreement, Magnis also has an exclusive
agreement for 5 years over selected C4V patents, which will expand the Company’s material technologies in the rapidly
growing lithium-ion Battery sector.
ACCOUNTING POLICIES
(i) Classification of financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income comprise:
›› equity securities which are not held for trading, and for which the group has made an irrevocable election at
initial recognition to recognise changes in fair value through OCI rather than profit or loss as these are strategic
investments and the group considered this to be more relevant, and
›› debt securities where the contractual cash flows are solely principal and interest and the objective of the group’s
business model is achieved both by collecting contractual cash flows and selling financial assets.
(ii) Equity investments at fair value through other comprehensive income
Equity investments at fair value through other comprehensive income (FVOCI) comprise the following investment:
Non-current assets
Unlisted securities- Charge CCCV LLC
Consolidated
2019
$
2018
$
10,020,084
5,848,713
10,020,084
5,848,713
Upon disposal of these equity investments, any balance within the OCI reserve for these equity investments is
reclassified to retained earnings and is not reclassified to profit or loss.
(iii) Debt investments at fair value through other comprehensive income
There are no debt investments at fair value through other comprehensive income (FVOCI) for both years.
Information about the methods and assumptions used in determining fair value is provided in Note 16.
53
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Notes to the Financial Statements
11. DEVELOPMENT ASSETS
Development assets
Consolidated
2019
$
2018
$
5,466,492
5,176,682
5,466,492
5,176,682
ACCOUNTING POLICIES
Development assets are stated at cost less accumulated depreciation and impairment losses. Cost represent the
accumulation of all the compensation and resettlement expenditure incurred by, or on behalf of, the entity in relation to
areas of interest in which construction or development has commenced. Compensation and resettlement expenditures
are capitalised as development assets.
Development costs in which the Group has an interest are amortised other the life of the area of interest to which the
costs relate on a units of production basis over the estimated proven and probable ore reserves and proportion of
other measured and indicated mineral resources where there is a high degree of confidence that they can be extracted
economically. Changes in the life of the area of interest and/or ore reserves and other mineral resources are accounted
for prospectively.
Impairment
At each reporting date, the Group reviews the carrying values of its development assets to determine whether there is
any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset,
being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value.
Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
As at 30 June 2019, no impairment to the carrying value of the development assets has been deemed necessary.
Movements in development assets
Movements in development assets during the financial year, are set out as follows:
At 1 July 2018
Development costs capitalised during the year
Currency translation difference
At 30 June 2019
Development Asset
$
5,176,682
57,087
232,723
5,466,492
54
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
Consolidated
Plant and
equipment
$
Office
equipment
$
Software
$
Office
furniture
and fittings
$
Office
improvements
$
Motor
vehicles
$
Total
$
-
-
-
-
-
-
-
-
5,020
50,840
17,105
158,205
-
-
-
11,360
-
226
3,933
945
5,605
(4,609)
(32,574)
(6,909)
(121,872)
637
22,199
11,141
53,298
16,025
65,327
35,860
641,204
(15,388)
(43,128)
(24,719)
(587,906)
637
22,199
11,141
53,298
12. PLANT AND EQUIPMENT
Year ended 30 June 2019
Balance at 1 July 2018 net of
accumulated depreciation
Additions
Disposals
Currency translation differences
58,224
-
-
51
27,015
11,360
-
451
Depreciation charge for the year
(58,168)
(19,612)
Balance at 30 June 2019 net of
accumulated depreciation
107
19,214
427,303
96,689
(427,196)
(77,475)
107
19,214
At 30 June 2019
Cost
Accumulated depreciation and
impairment
Net carrying amount
Year ended 30 June 2018
Balance at 1 July 2017 net of
accumulated depreciation
Additions
Disposals
135,950
40,526
129
9,551
-
23,005
209,161
2,507
7,849
(118,838)
(36,325)
-
-
-
60,842
-
71,198
(155,163)
136
-
878
154,343
Currency translation differences
116,448
36,881
Depreciation charge for the year
(77,843)
(21,915)
(129)
(4,666)
(10,001)
(6,778)
(121,333)
Balance at 30 June 2018 net of
accumulated depreciation
At 30 June 2018
Cost
Accumulated depreciation and
impairment
58,224
27,015
-
5,020
50,840
17,105
158,205
412,861
84,190
717
15,301
60,842
33,982
607,893
(354,637)
(57,176)
(717)
(10,281)
(10,001)
(16,877)
(449,688)
Net carrying amount
58,224
27,015
-
5,020
50,840
17,105
158,205
ACCOUNTING POLICIES
Each class of plant and equipment is carried at cost, less, where applicable, any accumulated depreciation and
impairment losses.
The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs
and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associate with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to profit and loss during the financial period in which they are incurred.
55
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
Depreciation
Depreciation is provided on plant and equipment, motor vehicles, office equipment, furniture and fittings, and is
calculated on a straight line basis, commencing form the time the asset is first used, so as to write off the net costs of
each asset over the expected useful life.
The following useful lives are used in the calculation of depreciation;
›› Plant & Equipment
›› Vehicles
›› Office equipment, furniture & fittings
2 to 5 years
2 to 5 years
2 to 20 years
Both assets residual value and useful life are reviewed, and adjusted if appropriate, at each reporting date. Gains and
losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
Impairment
At each reporting date, the Group reviews the carrying values of its plant & equipment assets to determine whether
there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the
asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying
value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
13. TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables and accruals
Consolidated
2019
$
2018
$
94,734
81,622
496,066
944,142
590,800
1,025,764
ACCOUNTING POLICIES
Trade and other payables are recognised when the Group becomes obliged to make further payments from the
purchase of goods and services and are measured at amortised cost using the effective interest method, less any
impairment losses.
14. PROVISIONS
Current
Provision for annual leave (a)
Non-current
Provision for long service leave (a)
Provision for lease liability (b)
Consolidated
2019
$
137,740
137,740
40,821
-
40,821
2018
$
127,016
127,016
31,641
2,114
33,755
56
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
Movements in provisions
Movements in each class of provision during the financial year, other than provisions relating to employee benefits, are
set out as follows:
At 1 July 2018
Additions/(utilised/reversed)
At 30 June 2019
(a) Annual Leave and Long Service Leave
Lease liability
$
2,114
(2,114)
-
An estimate of annual leave is provided after reviewing relevant workplace agreements and industrial awards for
respective employees and determining entitlement at the reporting date. The cost includes an account of direct
employment costs.
The significant assumptions applied in the measurement of this provision include devising probabilities for
employees complying with the legislative requirements [years of service] and the computed employment costs
discounted by using RBA bond rates applied for the respective years of service.
(b) Lease liability
The lease liability for the Company’s registered office as per AASB 16 Operating Lease
ACCOUNTING POLICIES
Provisions are recognised when the Group has a present obligation [legal or constructive] as a result of a past event,
and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. If the effect of the time value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability. The increase in the provision resulting from the
passage of time is recognised in finance costs.
57
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
15. CONTRIBUTED EQUITY
a) Issued capital and options
Ordinary shares fully paid
In addition to the above, 15,800,000 unlisted options were not exercised as at
30 June 2019. Please refer to Note 29(d) for further details.
Fully paid ordinary shares carry on vote per share and carry a right to dividends.
Option holders are not entitled to vote and dividend.
b) Movements in fully paid shares
At 1 July 2018
Shares issued
Number of shares
and options
2019
$
611,135,996
124,177,419
611,135,996
124,177,419
572,878,488
110,637,523
37,507,508
13,877,777
Exercise of unlisted rights and options
750,000
300,000
(702,795)
64,913
611,135,996
124,177,419
Transaction costs
Reallocation
At 30 June 2019
During the year the Company raised funds from equity as follows:
›› $11,100,000 (2018: $5,000,040) from share placements of 30,000,000 fully paid ordinary shares. Transaction costs
amounted to $702,795.
›› $300,000 (2018: $1,051,247) from the exercise of rights and options, subsequent issue of 750,000 (2018:
3,750,000) ordinary fully paid shares.
›› A further 7,507,508 fully paid ordinary shares were issued to Charge CCCV LLC (‘C4V’) at $0.37 per share as part
consideration to complete Magnis’ 10% investment in C4V.
c) Capital management
Management’s prime objective when managing the Group’s capital is to ensure the entity continues as a going concern
as well as ensuring that funds expended provide shareholders with optimal returns. The capital structure is intended to
provide the lowest cost of capital available to the Group considering its present phase of operations.
Management is continually reviewing the Group’s equity needs. During the financial year the entity raised $13,877,777
(2018: $8,249,324) via share placements and $300,000 (2018: $1,051,247) via the exercise of unlisted options before
transaction costs of $702,795 (2018: $270,848).
The Group is undertaking an exploration and evaluation program that requires a significant outlay of funds.
Management monitors this expenditure against the budget approved by the Board. A new term capital raising or asset
sale should ensure the Group has a safety margin of funds available to continue with its desired level of operations -
refer Note 1.
Capital risk management
During the previous year the Company used an equity instrument combination of shares and options to raise funds.
The group is undertaking an exploration program that requires a significant outlay of funds. Management monitors
this expenditure against the budget approved by the Board. A near term capital raising or asset sale should ensure the
group has a safety margin of funds available to continue with its desired level of operations – refer Note 1.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
58
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current company’s share price at the time of the investment. The consolidated entity is not
actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses
in order to maximise synergies.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current company’s share price at the time of the investment. The consolidated entity is not
actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses
in order to maximise synergies.
The capital risk management policy remains unchanged from the 30 June 2018 Annual Report.
16. FAIR VALUE MEASUREMENT
The fair value of financial assets and financial liabilities are the equivalent to the net carrying amount. Fair values are
those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an
arm’s length transaction.
The carrying amounts of cash, trade and other receivables and trade and other payables are assumed to approximate
their fair values due to their short-term nature.
The Group classified the fair value of its other financial instruments according to the following fair value hierarchy
based on the amount of observable inputs used to value the instruments;
The three levels of the fair value hierarchy are:
›› Level 1- Values based on unadjusted quoted prices available in active markets for identical assets or liabilities as of
the reporting date.
›› Level 2- Values based on inputs, including quoted prices, time value and volatility factors, which can be substantially
observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as
of the reporting date.
›› Level 3- Values based on prices or valuation techniques that are not based on observable market data.
Financial assets measured at fair value
Financial assets at FVOCI
Investment accounted for using the equity method
Level in
Fair Value
hierarchy
3
3
Consolidated
2019
$
2018
$
10,020,084
5,848,713
5,291,105
4,020,647
15,311,189
9,869,360
Financial assets at FVOCI
Financial assets at FVOCI comprise the Group’s investment in private US based, lithium-ion battery technology
group, Charge CCCV LLC (‘C4V’) which is accounted for as a financial asset measured at fair value through other
comprehensive income. The investment is not quoted in an active market and accordingly the fair value of this
investment is included within Level 3 of the hierarchy.
C4V has expertise and patented discoveries in lithium-ion battery composition and manufacture. C4V has executed
binding agreements to receive royalty income from the exclusive use of both its patented anode chemistry and its
cobalt and nickel free cathode chemistry. C4V also retains the right to receive a once off reservation fee upon the
granting of exclusive use of its patented IP at each of the approved iM3 battery plants.
The royalty income is dependent upon the successful development of three key projects which involves either the
mining and processing of natural flake graphite or the production of lithium-ion batteries.
59
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
C4V also has a 46.21% strategic investment in a New York lithium-ion battery production plant, Imperium3 New York
Inc (‘iM3NY’). iM3NY owns battery plant assets located in a planned lithium-ion battery manufacturing facility based at
the Huron Campus in Endicott, New York.
Valuation Techniques- Level 3
The Group has utilised a combination of the discounted cash flow (DCF) method together with the fair value of C4V’s
strategic investment in iM3 NY to calculate the enterprise value of C4V. The DCF involves the projection of a series
of cash flows and to this an appropriate market derived discount rate is applied to establish the present value of the
income stream. The fair value of C4V’s investment in iM3NY has been determined by independent valuation of the plant
equipment purchased in 2018.
The valuation of the plant equipment was undertaken in August 2019 by leading engineering firm O’Brien & Gere who
assessed of all the items purchased. In its current status and condition the external valuer has attributed a valuation of
US$71.34 Million of which C4V has a direct interest equivalent to US$33.49 Million.
The Group decides its valuation policies and procedures in line with its business objectives and with reference to
the Group’s assessment of its investment in individual projects. Position papers are prepared to apprise the audit
committee of the valuation techniques adopted. The Group reviews the valuation of its financial assets at FVOCI at least
once every six months, in line with the group’s half-yearly reporting requirements. Changes in level 3 fair values are
analysed at the end of each reporting period during this review.
Quantitative information on significant unobservable inputs- Level 3
The following table summarises the quantitative information about the significant unobservable inputs used in the fair
value measurement of the Group’s investment in C4V.
Unobservable
inputs
Valuation
Method
Nachu Graphite
Project
Imperium3 Townsville
Imperium3
New York
Relationship of Unobservable
input to fair value
Preliminary
(Bankable
Feasibility Study)
Preliminary (Feasibility
Study)
n/a
The more advanced the project
the higher the fair value
2 yrs post finance
2 years post finance
n/a
Project Status
DCF
Timeline to
production
Project life
Risk adjusted
discount rate
DCF
DCF
DCF
20yrs
20%
20yrs
45%
Capital required
DCF
AU$400M
(US$270M)
AU$3Billion
Expected annual
volumes
Valuation of battery
manufacturing
equipment
DCF
240,000 tpa
18GWh
FV
n/a
n/a
The longer the time to production
the lower the fair value
The longer the lifespan the higher
the fair value
The higher the discount rate the
lower the fair value
The higher the capital required the
lower the fair value
The higher the annual volumes the
higher the fair value
n/a
n/a
n/a
n/a
AU$102M
(US$71.34)
The lower the recoverable amount
of the equipment the lower the
fair value
Project and Investment Risk
The fair value of the Group’s investment in C4V is measured against the enterprise value of C4V which is calculated
using fair value incorporating present value techniques. The present value calculations use cash flows that are
estimates rather than known amounts. There is inherent uncertainty in this valuation technique. As a result, the fair
value is exposed to various forms of risk. The fair value of as at 30 June 2019 is measured using a number of significant
unobservable inputs. Risks specific to these unobservable inputs are detailed below and have been factored into the
individual projects through the risk adjusted discount rate applied.
The Group has performed detailed risk analysis using international frameworks on each of the individual projects
during feasibility study. In performing this analysis, the Group has identified areas of key risk and has developed risk
management and mitigation strategies to implement in order to reduce the likely exposure to these risks.
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES Project status
The current status of the projects has been determined as being preliminary. The projects are also characterised as
being greenfield projects which relates to the lack of existing facility to verify outcomes.
There is a risk that the projects will not be advanced due to the significant capital required to commence construction.
There is also a risk that legislative approvals required to commence construction may be delayed or not granted.
Project status is aligned to the timeline to production. Any slippage in timeline milestone will reduce the fair value.
Detailed implementation plans have been established for each of the individual projects. The implementation plan
identifies areas that are critical to the successful advancement of the projects. Strategies to mitigate and manage
risk associated with project success have been documented in detail for implementation. This includes pre-finance
testing and market development work. Establishment of strategic partnerships with creditable industry professionals
such as engineering, procurement and construction contractors, original equipment manufacturers, and financing
professionals such as National Australia Bank is also considered critical in reducing the risk of greenfield operations.
Timeline to production
Scheduling for the projects has not factored significant delays or cost overruns. Factors which could create significant
delays include adverse weather conditions, constructions risks particularly in-ground risks, the securing water supply
for construction and requisite approvals for infrastructure upgrades.
There is a risk that such delays or cost overruns will impact the payback capability of the project and reduce the overall
cashflows. An increase to the timeline to production will result in a lower fair value.
Capital required
The estimated total construction costs of the 18Gwh factory in Townsville is AU$3Bn. Project development has been
phased into 3 stages of 6GWh to reduce the upfront capital requirement. Stage One construction costs are estimated
to be AU$1.12Bn. Without a demonstrated ability in capital raising of this quantum, there is a risk that the capital
required won’t be secured or will be significantly delayed. As there is no prior history of manufacture at scale, there is
also a risk that finance may be on less favourable terms.
There is also risk that battery cell offtake agreements will not be secured for each of the three stages or that the
price will be less than estimated. This could impact the projects ability to repay project finance and result in a
lower fair value.
To mitigate these risks, iM3TSV has appointed National Australia Bank (‘NAB’) in the capacity of financial advisor to
jointly develop the Project funding strategy as part of this feasibility study. In the role of financial advisor, NAB brings
extensive experience on seeking funding for large projects in the renewables sector including working alongside
government bodies, to advise projects in North Queensland.
iM3TSV will also implement a testing and market development program involving battery production testing in a
commercial setting at equipment vendor facilities. Generated product will be provided for customer evaluation and
qualification towards procuring offtake contracts. This program will take place prior to securing the construction costs
for Stage One. Securing offtake following confirmation of product specification will assist is securing project funding.
The total construction cost of the Nachu Graphite Project is AUD$400M (US$270M). This is also considered a significant
amount of capital. This is compounded by the sovereign risk of developing a graphite mine in Tanzania. There is a risk
that the capital required is not secured or that the funding will be on less favourable terms. The Group has identified
target funding partners with experience in Tanzania, who have in-depth appreciation and understanding of developing a
large-scale resource projects in a jurisdiction with high sovereign risk.
Expected annual production
Project development of iM3 TSV has been phased into three stages of 6GWh each. The benefit of a stage approach
is to reduce the upfront capital requirement but also to allow for the project expansion to occur in line with
market development.
However, there is a risk that capital for the second or third stage may not be secured or that changes in
global competition and technological advancement over construction and the first stage may impact the
viability of expansion.
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
There is also a risk that the project will achieve lower battery cell production yields than forecast.
To mitigate these risks an extensive product development and testing program will be undertaken by iM3 TSV prior to
securing Stage One funding. Such testing programs once fully implemented can be utilised to train employees prior to
construction and commissioning to ensure an inexperienced workforce does not delay ramp up.
The Nachu Graphite Project has been reported as the largest mineral resources of large flake graphite in the world.
There is a risk, at a production rate of 240,000tpa, that supply will outstrip demand resulting in an unsustainable
production rate. The project is also subject to significant sovereign risk arising from changes in legislation, government,
environmental permits, employment, disease, community relations all of which could impact the annual production.
A reduction in the expected annual production would reduce the fair value.
The Nachu Graphite Project is however capable of being phased into two stages of production. The staged approach
allows the project risks and the Group’s response to be tested at a smaller scale with reduced capital outlay.
Royalties & Reservation Fee
C4V has executed binding agreements to receive royalty income from the exclusive use of both its patented anode
chemistry and its cobalt and nickel free cathode chemistry. C4V also retains the right to receive a once off reservation
fee upon the granting of exclusive use of its patented IP at each of the approved iM3 battery plants.
The royalty income is dependent upon the successful development of three key projects which involves either the
mining and processing of natural flake graphite or the production of lithium-ion batteries.
There is a risk that C4V will not receive the estimated reservation fee or royalty income if the Group is unsuccessful in
securing the required capital to commence construction of the individual projects.
There is also a risk that the annual royalty income derived from the individual projects will be less than estimated due to
delays in production timelines or reduction in the expected annual production.
Any reduction in annual royalty income or reservation fee income will lower the fair value.
The contracts between C4V and Magnis and iM3 contain commercially sensitive information and as such cannot be
disclosed in the financial report as it would likely be prejudicial to Magnis. The contracted royalty and reservation fees
have been used by the Group in determining the fair value of C4V.
Recoverable amount- C4V’s investment in iM3 NY
Realising the recoverable amount of C4V’s investment in iM3 NY is dependent on proceed of sale equalling the
estimated US$71.34 Million. There is a risk that there may be significant advancements in state of the art equipment
and that buyers will become increasingly difficult to identify. The valuation of the battery manufacturing equipment
does not factor in the cost of relocating the equipment from iM3 NY to the buyer(s). In the event that iM3 NY was
unsuccessful in assigning these costs to the buyer, the fair value would be reduced.
There is also a risk that C4V’s investment in iM3 NY may be diluted as iM3 NY seeks the capital required to commence
recommissioning of the plant. This would lower the fair value.
Interest rate risk
The main interest rate risk arises from expected long-term borrowings to fund the construction costs. Borrowings
obtained at variable rates expose interest rate risk. Borrowings obtained at fixed rates expose the consolidated entity
to fair value risk. There is also a risk that the greenfield status of the project could attract interest rates with embedded
risk premiums.
iM3 TSV has mitigated this risk by appointing NAB to advise of the most advantageous mix of achievable funding
sources and target funding partners to reduce the amount of funding exposed to interest rate risk. This includes
sourcing equity partners and government grants to reduce the quantum of project financing required.
The Group is targeting potential funding partners for the Nachu Graphite Project who have an in-depth knowledge and
experience in Tanzania to reduce the probability of significant risk premiums being added to interest rates. Targeting
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES funding via engineering, construction and procurement contractors who have a vested interest in the success of the
project is one strategy the Group believes will mitigate the risk of attracting finance with substantial risk premium
embedded in the interest rate.
Currency rate risk
The individual projects undertake certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations. A significant portion of the Stage One construction costs for
iM3TSV relate to equipment purchases payable in United States Dollars.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s functional currency. Adverse foreign currency fluctuation
can add significant additional costs to the estimated construction costs of the project.
The Nachu project is exposed to currency fluctuations between the United States Dollar (USD) and the Tanzanian
Schillings (Tzs). Where possible, the Group mitigates this risk by executing supply agreements in USD, however local
content requirements limits the extent that this strategy can be implemented.
In order to protect against exchange rate movements, the Group will consider entering into simple forward foreign
exchange contracts.
Risk adjusted discount rate
The above risks have been factored into the risk adjusted discount rate. Any favourable mitigation of the risks outlined
above would result in a decrease in the discount rate and an increase in the fair value.
Sensitivity analysis
In accordance with the Group policy of reviewing this risk, the following sensitivity analysis based on an increase or
decrease of the risk adjusted discount rate varies and other variables remain constant, the fair value of the investment
would have been affected as shown.
Description
Unobservable inputs
Sensitivity
Financial asset
at FVOCI
Project life
A one year change would increase/ (decrease) fair value by
AU$0.033M/ (AU$0.041M)
Risk adjusted discount rate
Expected annual volumes
Valuation of battery manufacturing equipment
5% change would increase/ (decrease) fair value by
AU$2.104M (AU$1.381M)
5% change would increase/ (decrease) fair value by
AU$0.415M/ (AU$0.415M)
5% change would increase/ (decrease) fair value by
AU$2.41M/ (AU$2.41M)
Investment accounted for using the equity method – Magnis direct investment in IM3NY
Investment accounted for using the equity method comprises the Group’s investment in a private New York lithium-ion
battery production plant, Imperium3 New York Inc (‘iM3NY’). The investment which is accounted for using the equity
method is measured at cost and the carrying value of the investment is subsequently adjusted for the Group’s interest
in the associates profit or loss. The investment is not quoted in an active market and accordingly the fair value of this
investment is included within Level 3 of the hierarchy.
Valuation Techniques- Level 3
The Group has determined the fair value of its strategic investment in iM3 NY by obtaining a third- party valuation of
the recoverable amount of the battery plant equipment purchased in 2018.
The valuation of the battery plant equipment was undertaken in August 2019 by leading engineering firm O’Brien &
Gere who assessed of all the items purchased. In its current status and condition the external valuer has attributed
a valuation of AU$101.4 Million (US$71.34 Million) of which MNS has a direct interest equivalent to AU$52.71 Million
(US$36.41 Million).
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
Quantitative information on significant unobservable inputs - Level 3
Description
Valuation
technique
Investment accounted
for using the equity
method
FV
Unobservable inputs
Valuation of battery
manufacturing
equipment
Imperium3
New York
Sensitivity
AU$102M
(US$71.34M)
5% change would increase/ (decrease) fair
value by AU$2.65m/ (AU$2.65m)
17. RESERVES
a) Reserves
Foreign currency translation
Share based payment
Consolidated
2019
$
2018
$
5,106,277
4,865,446
1,290,644
2,171,507
6,396,921
7,036,953
b) Nature and purpose of reserves
i.
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency
translation reserve, as described in note 1. The reserve is recognised in profit or loss when the net investment is
disposed of.
ii.
Share based payment reserve
The share based payment reserve is used to recognise the fair value of paid options issued to Directors, employees
and contractors.
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
18. STATEMENT OF CASH FLOWS
a) Reconciliation of the net loss after income tax to the net cash flows from operating activities
Operating activities
Net loss
Non cash and non operating items
Depreciation of non current assets
Accrued interest
(Profit)/ Loss on sale of assets
Share based payments
Share of associates net loss accounted for using the equity method
Net foreign currency translation gain (loss)
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments
(Increase)/decrease in security bonds
(Increase) in development assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash outflow from operating activities
b) Reconciliation of cash and cash equivalents
Cash at bank
Cash at bank and in hand
Consolidated
2019
$
2018
$
(5,549,553)
(5,417,885)
120,901
(43,521)
120,124
-
(4,988)
21,900
306,325
301,144
52,544
(23,030)
144,437
34,724
207,378
3,851
(100,527)
11,049
(3,635)
(190,282)
(461,338)
(102,293)
13,157
(97,946)
(5,585,400)
(5,072,064)
1,829,817
1,523,886
1,829,817
1,523,886
Investment commitments
19. COMMITMENTS
a)
As announced to the ASX on 12 September 2018, the Company completed its investment in US lithium-ion battery
technology group Charge CCCV LLC. Pursuant to a deed of amendment, the Group completed its investment by way of
US$1,000,000 cash payment and by the issue of 7,507,508 fully paid ordinary shares at $0.37 per share.
Not later than one year
Consolidated
2019
$
-
-
2018
$
4,052,411
4,052,411
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Notes to the Financial Statements
a) Exploration commitments
The Group has certain commitments to meet minimum expenditure requirements on the mineral exploration assets
in which it has an interest. Note 1 outlines the Group’s future funding options to meet its commitments. Outstanding
exploration commitments are as follows:
Not later than one year
Consolidated
2019
$
88,229
88,229
2018
$
83,608
83,608
Exploration expenditure commitments beyond twelve months could not be reliable determined because the annual
commitment was set at the anniversary date for each tenement.
a) Leasing
Operating lease commitments – the Group as lessee
The Group has commercial leases on commercial property in Australia and Tanzania.
Future minimum rentals payable under non-cancellable operating leases as at 30 June 2019 are as follows:
Within one year
After one year but not more than five years
Total minimum lease payment
Consolidated
2019
$
2018
$
73,775
156,044
-
52,910
73,775
208,954
20. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent liabilities or assets at 30 June 2019. The Group has guarantees for property leases and
banking finance facilities of $150,977 (2018: $150,977).
21. SUBSEQUENT EVENTS
On 27 September 2019, Magnis announced that it had secured a $8 million investment through the issue of fully paid
ordinary shares to Middle East based Negma Group Limited. Negma will provide up to $8 million over a 12-month period
with a maximum monthly subscription of $700,000. The price of the shares issued will be at an 8% discount to the
previous ten day Volume Weighted Average Price (‘VWAP’). The Company has the flexibility to call the monthly amounts
and can cancel the agreement at any stage. In addition, the Company will issue of 4,000,000 Unlisted Options in the
Company at an exercise price of $0.40 per share with an expiry date of 30 April 2021 subject to shareholder approval.
The funds will be used for working capital and advancing all projects.
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
22. AUDITORS’ REMUNERATION
Consolidated
2019
$
2018
$
The auditor of Magnis Energy Technologies Limited in the current year is BDO East Coast Partnership.
a) Amounts received or due and receivable by Magnis Group Auditor’s (Australia) for:
An audit or review of the financial report of the entity and any other entity in the consolidated Group
62,978
68,500
Other services in relation of the entity and any other entity in the consolidated
Group – Taxation services
– Corporate services
67,489
2,595
36,495
2,596
133,062
107,591
b) Amounts received or due and receivable by related practices of Magnis Group Auditor’s (Australia) for:
An audit or review of the financial report of the entity and any other entities in the consolidated Group
13,201
12,900
Other services in relation of other entities in the consolidated Group
– Taxation compliance services
23. LOSS PER SHARE
a) Reconciliation of earnings to profit or loss
Net loss – Loss used in calculating basic loss per share
6,308
19,509
32,251
45,452
Consolidated
2019
$
2018
$
5,549,553
5,417,885
b) Weighted average number of ordinary shares outstanding during the year used in
calculating basic loss per share
Number of
shares 2019
Number of
shares 2018
Weighted average number of ordinary shares used in calculating basic loss per share
604,634,745
558,359,897
c) Effect of dilutive securities
For the year ended 30 June 2019 and for the comparative period there are no dilutive ordinary shares because conversion of share
options and performance rights would decrease the loss per share and hence be non-dilutive.
ACCOUNTING POLICIES
Basic EPS is calculated as the profit [loss] attributable to equity holders of the Company, excluding any costs of
servicing equity other than ordinary shares, dividend by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for any bonus elements in ordinary shares during the year.
Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after income tax effect
of interest and other financing costs associated with dilutive ordinary shares and the weighted average number of
shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Notes to the Financial Statements
24. KEY MANAGEMENT PERSONNEL
a) Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated
entity is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2019
$
2018
$
1,214,457
1,043,180
109,926
88,641
11,400
266,950
1,335,783
1,398,771
b) Other transactions and balances with key management personnel and their related parties
Transactions with Directors’ related entities
Identity of Related
Party
Strong Solutions Pty
Limited
Nature of Relationship
Type of
Transaction
Terms &
Conditions of
Transaction
Frank Poullas is a related party of Strong
Solutions Pty Limited and a director of Magnis
Energy Technologies Limited
Consulting
fees and P&E
purchases
Peter Tsegas
Peter Tsegas is a Director of Magnis Energy
Technologies Ltd
Consulting
Fees
Dr Ulrich Bez HonDTech
Dr Ulrich Bex is a Director of Magnis Energy
Technologies Limited
Consulting
Fees
M Stanley Whittingham M Stanley Whittingham is a Director of Magnis
Energy Technologies Limited
Consulting
Fees
Aggregate Amount
2019
$
2018
$
314,568
300,064
420,000
-
9,900
25,300
-
16,210
Normal
commercial
terms
Normal
commercial
terms
Normal
commercial
terms
Normal
commercial
terms
c) Outstanding balances arises from purchases of goods and services at the reporting date in relation to other
transactions with key management personnel.
Assets and liabilities
Current liabilities
Trade and other payables
Total liabilities
2019
$
2018
$
26,160
26,160
22,009
22,009
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
25. RELATED PARTY DISCLOSURES
PARENT ENTITY
Magnis Energy Technologies Limited is the ultimate Australian parent entity of the consolidated entity. Its interests in
controlled entities are set out in note 27.
WHOLLY OWNED GROUP TRANSACTIONS
Controlled entities made payments and received funds on behalf of Magnis Energy Technologies Limited and other
controlled entities by way of inter-company loan accounts with each controlled entity. These loans are unsecured, bear
no interest and are repayable on demand. However, demand for repayment is not expected in the next twelve months.
Transactions and balances between the Company and its controlled entities were eliminated in the preparation and
consolidation of the financial statements of the group.
KEY MANAGEMENT PERSONNEL
Details relating to key management personnel, including remuneration paid, are included in note 24 and the
Remuneration Report in the Directors Report.
TRANSACTIONS WITH RELATED PARTIES
All amounts payable to related parties are unsecured and at no interest cost.
The amount outstanding will be settled in cash. No guarantees have been given or received. No expense has been
recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.
Entity with significant influence over the Group
MAZZDEL PTY LIMITED controls 8.35% of the ordinary shares in Magnis Energy Technologies Limited (2018: 8.9%).
AL CAPITAL HOLDING PTY LTD controls 5.76% of the ordinary shares in Magnis Energy Technologies Limited (2018: 0%).
26. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Parent
2019
$
2018
$
(6,018,146)
(5,442,822)
(6,018,146)
(5,442,822)
3,843,292
1,581,353
19,171,407
11,679,246
436,150
476,971
429,791
463,546
124,177,418
110,637,523
1,290,645
2,171,508
(106,773,627)
(101,593,330)
18,694,436
11,215,700
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Equity settled employee benefits reserve
Retained profits
Total equity
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Notes to the Financial Statements
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Plant and equipment
The parent entity had no capital commitments for plant and equipment at as 30 June 2019 and 30 June 2018.
Remuneration commitments
The parent entity has a remuneration commitment of $549,896 as at 30 June 2019 (2018: $567,319).
27. INTERESTS IN CONTROLLED ENTITIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1:
Name
Uranex Tanzania Limited
Magnis Technologies [Tanzania] Limited
Uranex Mozambique Limitada
Uranex ESIP Pty Ltd
Faru Resources Limited
Juhudi Minerals Limited
Investor Resources Services Pty Ltd2
Country of
incorporation
Tanzania
Tanzania
Mozambique
Australia
Tanzania
Tanzania
Australia
Class of shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
1 percentage of voting power is in proportion to ownership.
2 Investor Resources Services Pty Ltd was deregistered on 16 January 2019
ACCOUNTING POLICIES
Equity Holding1
2019
%
100
100
100
100
100
100
-
2018
%
100
100
100
100
100
100
100
Principles of consolidation
The consolidation financial statements are those of the consolidated entity, comprising Magnis Energy Technologies
Limited [the parent entity], special purpose entities and all entities which Magnis Energy Technologies Limited
controlled from time to time during the year and at reporting date. Control is achieved when the Group is exposed, or
has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through
ties power over the investee.
Specifically, the Group controls and investee if and only if the Group has:
›› Power over the investee [i.e. existing rights that give it the current ability to direct the relevant activities of the
investee]
›› Exposure, or rights, to variable returns from its involvement with the investee, and
›› The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
›› The contractual arrangement with the other vote holders of the investee
›› Rights arising from other contractual arrangements
›› The Group’s voting rights and potential voting rights
The Group re-assess whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control
over the subsidiary and ceases when the Group losses control of the subsidiary. Assets, liabilities, income and expenses
of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from
the date the Group gains control until the date the Group ceases to control the subsidiary.
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES Profit or loss and each component of other comprehensive income [OCI] are attributed to the equity holders of the
parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having
a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it:
›› De-recognises the assets [including goodwill] and liabilities of the subsidiary
›› De-recognises the carrying amount of any non-controlling interests
›› De-recognises the cumulative translation differences recorded in equity
›› Recognises the fair value of the consideration received
›› Recognises the fair value of any investment retained
›› Recognises any surplus or deficit in profit or loss
›› Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as
appropriate, as would be required if the Group had directly disposed of the related assets or liabilities
Subsidiaries are recorded as a component of other revenues in the separate income statement of the parent entity, and
do not impact the recorded cost of the investment. Upon receipt of dividend payments from subsidiaries, the parent will
assess whether any indicators or impairment of the carrying value of the investment in the subsidiary exist. Where such
indicators exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an impairment
loss is recognised.
28. INVESTMENT IN ASSOCIATES
A)
INFORMATION ABOUT PRINCIPLE ASSOCIATES
During the financial year, Magnis continued to increase its strategic investment in a New York Lithium-Ion Battery
production plant, Imperium3 New York Inc (‘iM3NY’). The plant has initial planned production of 1GWH per annum.
The investment was made partly through a global lithium-ion battery consortium named Imperium3 Pty Ltd (‘iM3AU’).
Imperium3 New York Inc has share capital consisting of ordinary shares and redeemable preference shares. The
proportion of ordinary shares held indirectly by the Group through Australian Holding Company, Imperium3 Pty Ltd,
equals the voting rights held by the Group.
Name of Entity
Classification
Place of
business/
incorporation
2019
%
Imperium3 New York, Inc.
Associate
New York, USA
31.00
Ownership *
Carrying amount
2018
%
31.00
Measurement
Method
2019
%
2018
%
Equity Method
5,291,105
4,020,647
* Proportion of Ordinary Share Interests/ Participating Share held through Australian Holding Company Imperium3 Pty Ltd
In addition to the ordinary shares held indirectly through Imperium3 Pty Ltd, Magnis has made a direct investment in
iM3NY by way of the acquisition of 3,241,331 redeemable preference shares for total consideration of US$4,317,500.
The preference shares give rights to dividends, liquidation preferences and redemption rights. They do not
carry voting rights.
As at 30 June 2019, Magnis’ total direct and indirect interest equates to 50.86% of the entire share capital of iM3NY.
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
B) MOVEMENTS IN EQUITY ACCOUNTED CARRYING VALUES
Carrying amount at 1 July 2018
New investments during the period
Share of losses after income tax
Equity accounted carrying amount at 30 June 2019
2019
$
4,020,647
2018
$
-
1,571,602
4,073,102
(301,144)
(52,455)
5,291,105
4,020,647
C) COMMITMENTS AND CONTINGENT LIABILITIES IN RESPECT OF ASSOCIATES
iM3NY leases its Endicott, New York facility on a month to month basis. The lease is for an area of up to 200,000 square
feet of commercial space for a discounted annual rate of US$2.99 per square foot for the initial two years of the lease.
Subject to the execution of a long-term lease agreement, the lessor reserves the right to recover the discounted rent
and fifty percent of the waived expenses which total approximately US$4.40 per square foot. At June 30, 2019, the
Company leased approximately 85,000 square feet. Additional space will be utilised as operations develop.
D) SUMMARISED AUDITED FINANCIAL INFORMATION FOR ASSOCIATES
Set out below is the summarised financial information for the Group’s material investments in associates. The
disclosed information reflects the amounts presented in the Australian- Accounting Standards financial statements
of the associate including adjustments made by the Group when applying the equity method ad adjustments for any
differences in accounting policies between the Group and the associates.
Statement of profit or loss and other comprehensive income (unaudited)
Loss after income tax
Total comprehensive income
Group’s share of associate’s loss recognised
Statement of financial position
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Equity
Issued capital
Equity settled employee benefits reserve
Retained profits
Total equity
Imperium3 New York
2019
$
2018
$
(971,433)
(169,198)
(971,433)
(169,198)
(301,144)
(52,455)
6,033
159,866
11,734,155
8,299,564
230,849
686,968
-
-
12,686,135
7,949,490
(18,828)
(7,830)
(1,157,968)
(169,198)
11,509,339
7,772,461
ACCOUNTING POLICIES
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate
in the financial and operating decision of the entity but is not control or joint control of these policies. Investments in
associates are accounted for in the consolidated financial statements by applying the equity method of accounting,
whereby the investment is initially recognised at cost (including transaction costs) and adjusted thereafter for the
post-acquisition change in the Group’s share of net assets of the associate. In addition, the Group’s share of the profit
or loss and other comprehensive income is included in the consolidated financial statements.
The carrying amount of the investment includes, when applicable, goodwill relating to the associate. Any discount
on acquisition, whereby the Group’s share of the net fair value of the associate exceeds the cost of investment, is
recognised in profit or loss in the period in which the investment is acquired.
72
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES Profits and losses resulting from transactions between the Group and the associate are eliminated to the extent of the
Group’s interest in the associate.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group discontinues
recognising its share of further losses unless it has incurred legal or constructive obligations or made payment on
behalf of the associate. When the associate subsequently makes profits, the Group will resume recognising its share of
those profits once its share of the profits equals the share of the losses not recognised.
Key estimate and judgements
Recoverable value of investments in associate
The recoverable amount of investment in equity accounted associates is reviewed at each reporting date after taking
into consideration any applicable impairment indicators. Significant judgement is used when assessing impairment and
the reversal of previously recognised impairment for equity accounted associates.
Impairment
At each reporting date, the Group reviews the carrying values of its investment in associates to determine whether
there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the
asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying
value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss.
As at 30 June 2019, no impairment to the carrying value of the investment in associates has been deemed necessary.
29. SHARE-BASED PAYMENT PLANS
A) RECOGNISED SHARE-BASED PAYMENT EXPENSES
The expense recognised for employees and contractors received during the year is shown below:
Expense arising from the issue of options (employees)
Expense arising from the issue of options (non-employees)
Total expense arising from share-based payment transactions
The share-based payment plans are described below.
B) TYPES OF SHARE-BASED PAYMENT PLANS FOR EMPLOYEE
Consolidated
2019
$
11,400
10,500
21,900
2018
$
290,200
16,125
306,325
Employee share option plan (ESOP)
Share options are granted to Directors, other Key Management Personnel (KMP) and other employees. The ESOP is
designed to align participants’ interests with those of shareholders by increasing the value of the Company’s shares.
Under the ESOP, the exercise price of the options is set by the Board on the date of grant.
The life of options to KMP and other employees granted are for 3 years but these must be exercised within 3 months
of the option holder ceasing employment with Magnis Energy Technologies Limited. There are no cash settlement
alternatives.
C) SHARE-BASED PAYMENT PLANS FOR NON-EMPLOYEE (CONSULTANT OPTIONS)
Share options are granted to selected non-employees from time to time in consideration for the services of the
consultant as a share-based incentive (Consultant options). Prior Shareholder approval of the issue of Consultant
options is required.
Each Consultant Option is granted for nil consideration for services provided by unrelated parties to the Company,
the terms are subject to the same terms of the Company’s existing unlisted options. No funds are raised from the issue
of the Consultant Options, as they are issued to the consultant in consideration for assistance with the Company’s
progress and success. There are no cash settlement alternatives.
73
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
D) SUMMARIES OF OPTIONS AND RIGHTS GRANTED UNDER SHARE-BASED PAYMENT
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in,
share options issued during the year.
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
2019
No.
17,550,000
6,000,000
(750,000)
(7,000,000)
15,800,000
2018
No.
2018
WAEP
2019
WAEP
0.68
0.70
0.40
19,750,000
7,750,000
(3,750,000)
(6,200,000)
0.71
17,550,000
0.52
0.70
0.28
0.68
0.68
Exercisable at the end of the year
15,800,000
0.71
17,550,000
The range of exercise prices for rights and options outstanding at the end of the year was between $0.70 and $1.00
(2018: $0.35 and $1.00).
E) WEIGHTED AVERAGE REMAINING ESTIMATED LIFE
The weighted average remaining estimated life for the share options outstanding as at 30 June 2019 is 0.83 years
(2018: 1.39 years).
F) WEIGHTED AVERAGE FAIR VALUE
The weighted average fair value of options granted during the year was $0.00365 (2018: $0.04).
G) OPTION PRICING MODEL
Equity-settled transactions
The fair value of the equity-settled share options granted under the share based payment is estimated as at the date of
grant using a Binomial Model taking into account the terms and conditions upon which the options were granted.
The following table lists the inputs to the models used for the year ended 30 June 2019;
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Option exercise price (cents)
Weighted average share price at measurement dates (cents)
Exercise price multiple
Model used
2019
Nil
36
1.87 – 1.98
1.5-3
70
29.5
2
Binomial
The effects of early exercise have been incorporated into calculations by using an expected life for the option that is
shorter than the estimated life based on historical exercise behaviour, which is not necessarily indicative of exercise
patterns that may occur in the future. The expected volatility was determined using a historical sample of Company
share-prices. The resulting expected volatility therefore reflects the assumption that the historical volatility is
indicative of future trends which may also not necessarily be the actual outcome. The option holders were assumed to
exercise prior to expiry date when the price is twice that of the exercise price. This reflects the restrictions to trading of
directors and employees outlined in the Company’s share trading policy.
74
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES During the financial year the Magnis Option Share Trust (MOST) acquired and was issued with 1,000,000 options on
varying terms and conditions for allotment to Directors and employees.
ACCOUNTING POLICIES
The Group provides benefits to employees [including directors] of, and consultants to, the Group in the form of share-
based payment transactions, whereby services are rendered in exchange for shares or rights over shares [‘equity-
settled transactions’].
The cost of equity-settled transactions is measured by reference to the fair value at the date at which they are granted.
The fair value of options and performance rights with market based performance criteria is determined by an external
valuer using a binomial option pricing model. The fair value of performance plan rights with non-market performance
criteria is determined by reference to the Company’s share price at date of grant.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance conditions are fulfilled, ending in the date on which the recipient becomes fully entitled to the
award [‘vesting date’].
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects [i]
the extent to which the vesting period has expired and [ii] the number of awards that, in the opinion of the directors,
based on the best available information at reporting date will ultimately vest. No adjustment is made for the likelihood
of market conditions being met as the effect of these conditions is included in determination of fair value at grant date.
The charge or credit for the period represents the movement in cumulative expense recognised as at the beginning and
end of the period. Where awards vest immediately, the expense is also recognised in profit or loss.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market condition.
Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of
the modification, as measured at the date of modification.
Where the terms of 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 the new
award are treated as if they were a modification of the original award as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings
per share.
30. FINANCIAL INSTRUMENTS
A) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments consist of short term deposits, receivables and payables. These activities
expose the Group to a variety of financial risks: market risk, i.e. (interest rate risk and foreign exchange risks), credit
risk and liquidity risk.
The overall objective of the Group’s financial risk management policies is to meet its financial targets whilst protecting
future financial security.
The Board fulfils its corporate governance and oversight responsibilities by monitoring and reviewing the integrity of
financial statements, the effectiveness of internal financial control and the policies on risk oversight and management.
Management is charged with implementing the policies. The management manages the different types of risks to
which the Group is exposed by considering risk and monitoring levels of exposure to interest risk and by being aware
of market forecasts for interest rates. Liquidity risk is monitored through general business budgets and forecasts. The
Board reviews and agrees on policies for managing these risks.
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
B) MARKET RISK
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity
analysis and cash flow forecasting.
The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at the
reporting date were as follows:
Consolidated
US dollars
Assets
Liabilities
2019
$'000
2018
$'000
3,941,559
3,953,862
3,941,559
3,953,862
2019
$’000
183,230
183,230
2018
$’000
535,228
535,228
The Group had net assets denominated in foreign currencies of $3,758,329 (assets of $3,941,559 less liabilities of
$183,230) as at 30 June 2019 (2018: $3,418,634 (assets of $3,953,862 less liabilities of $535,228)). Based on this
exposure, had the Australian dollar weakened by 10%/strengthened by 5% (2018: weakened by 5%/strengthened by
5%) against these foreign currencies with all other variables held constant, the consolidated entity’s profit before tax
for the year would have been $375,833 lower/$187,916 higher (2018: $170,932 lower/$170,932 higher) and equity
would have been $375,833 lower/$187,916 higher (2018: $170,932 lower/$170,932 higher). The percentage change is
the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable
possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at
each reporting date. The actual foreign exchange gain for the year ended 30 June 2019 was $96,114 (2018: loss of
$182,410).
Interest rate risk
The Group is exposed to movements in market interest rates on short-term deposits. Management ensures a balance
is maintained between the liquidity of cash assets and the interest rate return. Presently, the Group has no interest
bearing liabilities.
At reporting date, the Group had the following financial assets and liabilities exposed mostly to Australian variable
interest rates and are unhedged.
Cash and cash equivalents
Consolidated
2019
$
2018
$
1,829,817
1,523,886
The weighted average interest rate for the Group at reporting date was 2.50% (2018: 2.49%).
In accordance with the Group policy of reviewing this risk, the following sensitivity analysis based on interest rate
exposure at reporting date where the interest rate movement varies and other variables remain constant, post tax
loss and equity would have been affected as shown. The analysis has been performed on the same basis for both
2019 and 2018.
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
30 June 2019
Consolidated Entity
Financial asset
Interest Rate Risk -1%
Interest Rate Risk +1%
Carrying Amount
Net Loss
$
Equity
$
Net Loss
$
Equity
$
Cash and cash equivalents
1,829,817
(18,298)
(18,298)
18,298
18,298
30 June 2018
Consolidated Entity
Financial asset
Cash and cash equivalents
1,523,886
(15,239)
(15,239)
15,239
15,239
The sensitivity is higher in 2019 than 2018 because of higher cash balances. The analysis assumes the carrying
amounts noted will be maintained over the next financial year.
C) CREDIT RISK
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying
amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and
notes to the financial statements. The Group does not hold any collateral.
The Group has adopted a simplified lifetime expected loss allowance in estimating expected credit losses to trade and
other receivables.
The Group has no significant concentrations of credit risk. The maximum exposure to credit risk at reporting date is
the carrying amount (net of expected credit loss) of those assets as disclosed in the statement of financial position
and notes to the financial statements.
D) LIQUIDITY RISK
Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet their
obligations to repay their financial liabilities as and when they fall due.
The Group’s objective is to maintain a balance between continuity of funding and flexibility as to its source.
The Directors monitor cash flow monthly and increase the frequency of review when the safety margin is or is nearly
breached. The Board formulates plans to replenish its cash resources when required and implements cost reduction
programmes to reduce cash expenditure.
The table below reflects all contractually fixed pay-offs, repayments and interest from recognised financial liabilities.
For these obligations the undiscounted cash flows for the respective upcoming financial years are presented.
Cash flows for financial assets and liabilities without fixed timing or amount are based on the conditions existing
at 30 June 2019.
77
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS Notes to the Financial Statements
The remaining contractual maturities of the Group entity’s financial liabilities consisting of trade and
other payables are:
On demand
Less than 1 year
1-5 years
> 5 years
E) NET FAIR VALUES
Consolidated
2019
$
-
2018
$
-
590,800
1,025,764
-
-
-
-
590,800
1,025,764
The carrying amounts of financial assets and liabilities as shown in the statement of financial position approximate
their fair value.
78
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES 13Directors’ Declaration
In accordance with a resolution of the Directors of Magnis Energy Technologies Limited, I state that:
1.
In the opinion of the Directors:
a)
the financial statements and notes of the consolidated entity are in accordance with the
Corporations Act 2001, including:
(i)
Giving a true and fair view of its financial position as at 30 June 2019 and performance for the financial
year ended on that date.
(ii)
Complying with Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
b) The financial statements and notes also comply with International Financial Reporting Standards as disclosed
in Note 1.
c)
There are reasonable grounds to believe that the Company, as noted by Directors in Note 1 – Going concern,
will be able to pay its debts as and when they become due and payable.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance
with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2019.
On behalf of the board
F. Poullas
F Poullas
Non - Executive Chairman
Sydney, 30 September 2019
79
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
14Independent Auditor’s Report
Tel: +61 2 9251 4100
Fax: +61 2 9240 9821
www.bdo.com.au
Level 11, 1 Margaret St
Sydney NSW 2000
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Magnis Energy Technologies Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Magnis Energy Technologies Limited (the Company) and its
subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30
June 2019, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial report, including a summary of significant accounting policies
and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation.
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Equity investment in Charge CCCV LLC
Key audit matter
How the matter was addressed in our audit
Refer to Notes 10 and 16 of the financial
report for a description of the accounting
policies and significant estimates and
judgements applied in determining the fair
value of the 10% equity investment in Charge
CCCV LLC (‘C4V’) which is an early stage
investment.
C4V has secured exclusive rights over
selective patents associated with the
production of lithium – ion batteries. C4V
derives its value from holding an investment
in Imperium3 Pty Limited (iM3) which will pay
royalties to C4V based on production from
planned battery Giga factories in New York
(USA) iM3NY and Townsville (Australia)
iM3TSV.
The Giga factories are at an early planning
stage and require significant investment (in
excess of AUD$3Bn) to become productive and
pay a royalty stream to C4V. In addition to
the Giga Factories, C4V has an agreement
with Magnis to receive a royalty on each
tonne of Graphite produced from the planned
Nachu Graphite Mine in Tanzania. The Group
needs to raise AUD$400M to develop the mine
as well as overcome regulatory hurdles in
Tanzania in order for C4V to earn its
production royalty.
In accordance with AASB 13 Fair Value, AASB
9 Financial instruments and AASB 7 Financial
instruments: Disclosure there are numerous
judgements and estimates as well as
disclosure considerations that are required in
Our procedures, amongst others, included:
•
•
•
•
•
•
•
Obtaining and evaluating management’s
assessment and assumptions made in relation to
the investment in C4V to ensure the
classification of the asset continues to be
appropriate
Evaluating management’s financial model to
support the fair value of C4V, including the
challenging of key assumptions as reported in
Note 16 as well as checking the mathematical
accuracy of the model and underlying
calculations
Engaging internal valuation experts to assess
the appropriateness of the valuation models
and discount rates
Evaluating the competence, capability and
objectivity of management’s third party
valuation expert and evaluating their
assessment of the fair value of the purchased
battery manufacturing equipment held within
IM3NY
Gaining an understanding of quantum of funds
required to ensure Nachu, iM3NY and iM3TSV
progress to through development and into
production to produce the royalty cash flows to
C4V
Reviewing the mandate with NAB to act as
financial advisor in seeking funding
Issuing Group instructions for the audit of iM3NY
as at 30 June 2019 and evaluating the results
of procedures to ensure there was no
impairment on the independent valuers
assessment of the carrying value of equipment
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Independent Auditor’s Report
relation to management’s assessment of the
fair value of C4V.
•
As a result we consider the Group’s
investment in C4V to be a key audit matter.
Evaluating the accuracy and completeness of
the disclosures in accordance with AASB 9, AASB
13 and AASB 7.
Carrying value of the investment in Associate
Key audit matter
How the matter was addressed in our audit
Refer to Notes 16 and 28 of the financial
report for a description of the accounting
policies and significant estimates and
judgements applied in determining the
carrying value of iM3NY which is an equity
accounted investment.
iM3NY is an early stage investment, which is
in the process of developing a 1Gwh battery
plant in New York, USA.
iM3NY requires additional funding before
commercial operations commence.
Due to the value carried on the balance sheet
as at 30 June 2019 and the number of
judgements and estimates used by
management the carrying value of iM3NY is a
key audit matter.
Our procedures, amongst others, included:
•
•
•
•
Issuing Group instructions for the audit of iM3NY
as at 30 June 2019 and evaluating the results
of procedures to ensure there was no
impairment on the independent valuers
assessment of the carrying value of equipment
Reading board meeting minutes to identify
indicators of impairment
Evaluating the competence, capability and
objectivity of management’s third party
valuation expert and evaluating their
assessment of the fair value of the purchased
battery manufacturing equipment held within
iM3NY
Evaluating the completeness and accuracy of
the disclosures in accordance with AASB 128
and AASB 13 and AASB 7.
Going concern
Key audit matter
How the matter was addressed in our audit
For the year ended 30 June 2019 the Group
used $5.6M cash in operating activities and
$4.8M in investing activities. As at 30 June
2019 the Group had cash of $1.8M.
The availability of funding sufficient for the
Group to meet its operation cash outflows and
continue to develop its strategy of developing
its Graphite Mine and Battery operations are
significant aspects of our audit.
Our procedures, amongst others, included:
•
•
•
Obtaining and evaluating management’s
assessment of the group’s ability to continue as
a going concern
Evaluating management’s cash-flow forecasts
and challenging key assumptions applied by
management
Reviewing conditions of the funding
arrangement finalised on 27 September 2019,
and its adequacy to meet operational cash flow
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
requirements for the period 12 months from the
date of signing the financial report.
Assessing the mathematical accuracy of
management’s forecast model and agreeing to
underlying assumptions.
The Directors have determined that the use of
the Going Concern basis of accounting is
appropriate in preparing the financial report.
•
The assessment of Going Concern is largely
based on forecasts made by management and
the Directors. These forecasts include
assumptions about future cashflows which are
uncertain in timing and amounts.
The Group’s use of the Going Concern basis of
accounting and the associated extent of
uncertainty is a key audit matter due to the
high level of judgement required by us in
evaluating the Group’s assessment of Going
Concern including any events or conditions
that may cast significant doubt on their
ability to continue as a Going Concern.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2019, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
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MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Independent Auditor’s Report
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of Magnis Energy Technologies Limited, for the year ended 30
June 2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO East Coast Partnership
Gareth Few
Partner
Sydney, 30 September 2019
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ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES
15Additional Shareholder Information
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 21 August 2019.
A) DISTRIBUTION OF EQUITY SECURITIES
The numbers of shareholders, by size of holding, in each class of share are:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
The number of shareholders holding less
than a marketable parcel of shares are:
B) DISTRIBUTION OF OPTION SECURITIES
The numbers of option holders, by size of holding are:
1 – 50,000
50,001 – 100,000
100,001 –500,000
500,001 – 1,000,000
1,000,001 and over
Ordinary shares
Number of holders
Number of shares
401
1,271
813
1,875
652
5,012
1,044
187,390
3,767,463
6,774,669
68,045,328
532,361,146
611,135,996
1,409,733
Ordinary shares
Options
Number of holders
Number of Options
1
1
8
8
2
50,000
100,000
3,050,000
8,000,000
3,300,000
20
14,500,000
›
›
85
MAGNIS ENERGY TECHNOLOGIESANNUAL REPORT 2019 - FINANCIALS
Additional Shareholder Information
C) TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest holders of quoted shares are:
Name
MAZZDEL PTY LIMITED
CITICORP NOMINEES PTY LTD
UBS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR FRANK POULLAS
MR MATTHEW JOHN BOYSEN
MR JURGEN BEHRENS
CHARGE CCCV LLC
CONG MING LIMITED
FINMIN SOLUTIONS PTY LTD
GIBBS PLUMBING SERVICES PTY LTD
MR MARLON PATHER
MISS HAZEL DARCY
MAXMA PTY LTD
MR MARK ANTHONY O'SULLIVAN
MS RUIE YAO
NATIONAL NOMINEES LIMITED
MR EMMANUEL POULLAS
JP MORGAN NOMINEES AUSTRALIA PTY LIMITED
D) SUBSTANTIAL SHAREHOLDERS
Options
Number of Shares
% of Ordinary Shares
51,003,853
49,909,757
35,372,343
23,801,977
16,619,406
15,193,895
11,903,974
8,379,333
8,249,702
5,594,677
5,330,714
5,030,000
5,000,000
4,089,462
4,000,000
3,900,987
3,815,801
3,576,000
3,486,993
2,951,504
8.35
8.17
5.79
3.89
2.72
2.49
1.95
1.37
1.35
0.92
0.87
0.82
0.82
0.65
0.70
0.64
0.62
0.59
0.57
0.48
267,210,378
43.72
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Fully Paid
Number of Shares
Percentage
%
51,003,853
35,202,299
8.35
5.76
MAZZDEL PTY LIMITED
AL CAPITAL HOLDING PTY LTD
Voting rights
All ordinary shares carry one vote per share without restriction.
E) STOCK EXCHANGE LISTING
Magnis Energy Technologies Limited is listed on the Australian Stock Exchange.
The Company’s ASX code for ordinary shares is MNS.
86
ANNUAL REPORT 2019 - FINANCIALSMAGNIS ENERGY TECHNOLOGIES We are in the early stages of the lithium-ion battery
revolution and the year ahead will see us make great
progress towards production. Apart from the projects
announced we remain confident in the coming year of
announcing further opportunities which will be advanced.
We believe our technologies give us an advantage today and
we will keep our focus on driving these through to fruition.
Chairman, Frank Poullas
Suite 9.03, 88 Phillip Street
Sydney NSW 2000 Australia
Tel
Email
+61 2 8397 9888
info@magnis.com.au
www.magnis.com.au
2019
ANNUAL REPORT