Magnolia Bostad
Annual Report 2019

Plain-text annual report

Magmatic Resources Limited ABN 32 615 598 322 Annual report for the year ended 30 June 2019 Contents Corporate Information Review of operations Directors’ report Auditor’s independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report to the members ASX additional information 3 5 15 24 29 30 31 32 33 51 52 55 Magmatic Resources Limited ABN 32 615 598 322 Corporate Information Directors David Berrie – Non-Executive Chairman David Richardson – Managing Director Malcolm Norris – Non-Executive Director Andrew Viner – Non-Executive Director Company Secretary David Berrie (appointed 1 June 2019) Ildiko Wowesny (resigned 31 May 2019) Registered Office and Principal Place of Business Suite 8, 1297 Hay Street West Perth WA 6005 Share Registry Auditors Solicitors ASX Code Telephone: Email: Website: +61 8 9322 6009 info@magmaticresources.com www.magmaticresources.com Computershare Investor Services Pty Ltd Level 11, 172 St George’s Terrace Perth WA 6000 Telephone: Telephone: 1300 850505 +61 8 9415 4000 BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 Steinepreis Paganin Level 4, The Read Building 16 Milligan Street Perth WA 6000 Magmatic Resources Limited is listed on the Australian Securities Exchange Shares: MAG, Quoted Options: MAGO, MAGOA, Unquoted Options: MAGAG, MAGAJ 3 Magmatic Resources Limited ABN 32 615 598 322 Chairman’s Letter Dear shareholder, I am pleased to present the company’s third annual report since listing on the ASX in May 2017. As with our first complete year of exploration, the Company has been busy trying to add value to its extensive portfolio. We continued to drill our copper-gold targets through a variety of sole funding and via our Joint Venture with the Japanese government resource agency Japan Oil and Gas National Corporation (“JOGMEC”) along with other transactions in an attempt to build shareholder value. In October 2018, we raised a further $994,365 through a rights issue and with the capital markets being so tight have managed, through sound fiscal management and careful allocation of resources, to continue to advance the existing portfolio. We also added to the Yamarna Project which is located alongside the Gruyere Project (5.88M oz) owned by Gold Fields Limited (“Gold Fields”) and Gold Road Resources Limited (“Gold Road”). Significant work was carried out by our team located in our exploration office in Orange, NSW on the existing tenement package in the East Lachlan, including a Porphyry Copper Gold Analysis on our Myall Project. This analysis has enabled the Company to focus on several key prospects at Myall, including an end of hole anomaly with significant copper in it (1m at 0.22% Cu). This work, released to the market in December 2017, will continue to be evaluated and has put the Company in an excellent position to move on drill ready targets at Myall. Magmatic is operator at our Parkes Project JV with JOGMEC, and we have made significant progress advancing the porphyry opportunities at the project, which is only ~20km from the Northparkes porphyry copper-gold mine. An IP Survey identifying at the Parkes East tenement identified eight new porphyry targets and three new orogenic gold targets, which is exciting considering the regions prospectivity for large porphyry discoveries. In late 2018, the Company took advantage of the weak capital markets to purchase a legacy Net Smelter Royalty that had been granted to Clancy Exploration Limited (“Clancy”) by Gold Fields as part of the purchase consideration when Gold Fields acquired the Clancy ground (“the NSR”). The NSR covered all of the projects held by Magmatic in the East Lachlan and ranged from 2-2.5%. Magmatic had identified the NSR as an impediment in dealing with its tenure. Because of the proximity of the Company’s projects to the large Cadia Valley and Northparkes mines, attracting well-funded partners to its projects was being impacted by the NSR. Its purchase has led to an increased interest. We look forward to advancing our near surface gold targets and corporately we hope to announce further joint ventures in the near future, designed to progress our deeper porphyry targets. I want to take this opportunity to thank our personnel across the business for their contributions to the successful execution of both exploration and corporate activities in the reporting period and acknowledge our loyal shareholders for their continued support of the Company. Sincerely David Berrie Chairman 4 Magmatic Resources Limited ABN 32 615 598 322 Review of Operations It has been an eventful couple of years since Magmatic Resources Limited (“Magmatic” or the “Company”) (ASX: MAG) listed on the ASX in May 2017. Magmatic listed on the back of acquiring a 100% interest in four large Gold and Copper exploration projects in New South Wales from the world’s seventh largest gold producer, Gold Fields Limited; and the Company’s initial strategy was to focus exploration on near surface gold targets at the Wellington North, Moorefield and Parkes JV projects, and to identify JV partners for the larger copper-gold porphyry targets at the Myall and Wellington North Projects. Magmatic successfully joint ventured Parkes to JOGMEC and that JV is in the final year of the three year $3M JV. In addition to its exploration advancement strategy for its NSW projects, Magmatic moved in the past 18 months to acquire two strategic Western Australian projects: the Yamarna Gold Project and nearby Mt Venn Copper- Nickel-Cobalt Project, located 150km east of Laverton. In June 2019, we have further advanced our WA gold portfolio by entering into a binding sale and purchase agreement to acquire three gold and copper gold projects, of which one has near mining potential. These acquisitions are subject to a shareholder vote at an upcoming General Meeting on 15th October 2019. Figure 1: Magmatic has four advanced exploration projects in New South Wales and two target generation projects in Western Australia. Plan also shows the proposed the three 2019 WA Gold and Copper Gold acquisitions 5 Magmatic Resources Limited ABN 32 615 598 322 East Lachlan Exploration The Company has four 100%-owned projects with no royalty agreements attached, covering an area of 1,049km2 – Myall, Moorefield, Wellington North and our Parkes JV (with JOGMEC) – comprising eight licences in the East Lachlan, NSW. This province is host to major Gold and Copper mining operations within the Ordovician Macquarie Arc, with significant metal endowments such as:  Newcrest Mining Limited’’s Cadia Valley (48.7Moz Au and 6.5Mt Cu),  China Molybdenum Company Limited’s “(CMOC”) – Sumitomo Group’s (“Sumitomo”) Northparkes (3.8Moz Au and 3.4Mt Cu),  Evolution Mining Limited’s (“Evolution”) Cowal (8.35Moz Au).  Alkane Resources Limited’s (“Alkane”) Tomingley gold mine (800koz Au) Other advanced projects in the region include Regis Resources Limited’s McPhillamys (2.2Moz Au) and Sandfire Resources NL’s Temora (2.1Moz Au and 0.8Mt Cu). Alkane has recently announced some exciting results south of their Tomingley Mine and, with Evolution aggressively exploring at Cowal, and other majors now exploring here as well, the East Lachlan continues to be an exciting place to be exploring. Figure 2: Location of Magmatic’s East Lachlan Projects 6 Magmatic Resources Limited ABN 32 615 598 322 Wellington North Gold and Copper-Gold Project (100% MAG) Targeting: Porphyry Copper Gold and Gold deposits The Wellington North Project is located just North of the town of Wellington in the East Lachlan region of NSW. The Project consists of three licences (EL6178, EL7440 and EL8357) covering 176.7km2. Wellington North is in the Molong Volcanic Belt which hosts Newcrest’s Cadia Valley porphyry copper-gold deposits (48.7Moz Au and 6.5Mt Cu) 110km to the South. Wellington North is a core focus project for Magmatic. The project is under thin-to-no cover and has delivered outstanding results from the newly discovered Lady Ilse prospect and at the historical Bodangora mines which have a recorded previous production of 230,000oz with an average grade of 26g/t Au. Drilling this year at Bodangora confirmed high grade mineralisation and identified a new area of near surface gold mineralisation. Results from near Bodangora Mines included 2m @ 5.3g/t Au from 14m and 2m @ 2.7g/t Au from 21m and complemented previous exploration results near historical 230,000oz @ 26 g/t Au gold mine. The Company was also highly encouraged by the results from the new area of near surface mineralisation at Bodangora South, where a mineralised vein identified under cover returned an intersection of 3m @ 1.3g/t Au from 18m. The drilling had the dual goals of confirming the grade and tenor of previously identified mineralised veins at the Bodangora Mines and testing a new area of interpreted mineralisation at the Bodangora South target – with both aspects of the program proving successful. Future work being planned will include mapping and sampling of surface veins, and targeted follow-up drilling. Figure 3: Magmatic’s Wellington North Project. 7 Magmatic Resources Limited ABN 32 615 598 322 Parkes JV Copper-Gold and Gold Project (100% MAG) Targeting: Porphyry Copper Gold and Gold deposits The Parkes JV Project is located just North of the town of Parkes in the East Lachlan region of NSW and consists of two licences (EL7676 and EL7424) covering 159km2. The project is within the Junee-Narromine Volcanic belt of the Ordovician Macquarie Arc, which hosts porphyry Copper Gold deposits at Northparkes and Temora as well as the Cowal low-sulphation epithermal Gold deposit. It is within structurally-prominent stratigraphy East of Northparkes porphyry Copper Gold deposit, and along the strike to the South from Alkane’s Tomingley Gold Mine and Peak Hill Gold Mine. In line with the Company’s strategy of joint venturing the larger copper-gold porphyry projects, we successfully joint ventured out Parkes with JOGMEC (Japanese National government resources agency). This JV is now in the third year of the three year $3M JV. Magmatic believe the best intercept at Buryan (135m at 0.29% Cu, 0.17 g/t Au, including 28m at 0.50% Cu, 0.28g/t Au) has the following features which are strong indicators of being in a mineralised porphyry Copper Gold system:  Laminated magnetite-pyrite bearing veins and quartz-carbonate-pyrite±chalcopyrite veins  Multiple mineralisation events recorded in structural features  Broadly follows typical metal and alteration assemblage zonation with an outer carbonate-base- metal-gold veins on periphery (propylitic alteration), becoming more pyritic (phyllic alteration), and pyritic-chalcopyritic in the central mineralised section (potassic alteration) The high-grade zone at Buryan is of similar grade to the CMOC/Sumitomo Northparkes Porphyry Copper Gold mine (3.4Mt Cu and 3.8M oz Au) with a published resource grade of 0.56% Cu and 0.18g/t Au. The Parkes JOGMEC JV completed two diamond holes during the year with drillhole 19ATDD013 (930.05m) at Buryan Porphyry Copper Gold target intersected porphyry Copper Gold mineralisation with best results of:  10m at 0.49 g/t Au (from 448m), incl. 2m at 1.67 g/t Au (from 456m)  57m at 0.17% Cu, 0.11 g/t Au (from 822m), and  79m at 0.11% Cu, 0.06 g/t Au (from 545m) Towards the end of the previous financial year, Magmatic completed a detailed aeromagnetic survey focussing along EL7676. The interpretation of the survey has highlighted 12 new targets (9 Cu-Au, 3 Au-only) with no previous drilling and little sampling. Under the JOGMEC JV, Copper targets were prioritise for drilling and two targets Blackridge (Cu Target 9) and Kaoru (Cu Target 3) were prioritised for work. An IP survey and RC drilling programme was completed at Blackridge, and an AC and RC program was completed at Kaoru. There were no significant results. 8 Magmatic Resources Limited ABN 32 615 598 322 Figure 4: Magmatic’s Parkes JV licence area straddles the highly prospective Parkes Fault Zone 9 Magmatic Resources Limited ABN 32 615 598 322 Myall Gold-Copper Project (100% MAG) Targeting: porphyry Copper Gold deposits The Myall Project is located 18km Southwest of Narromine in the East Lachlan Province, NSW. The project consists of one licence (EL6913) of 244km2. Myall is within the Junee-Narromine Volcanic Belt which hosts CMOC/Sumitomo’s Northparkes porphyry Copper Gold deposits. The licence covers one of the largest volcano-intrusive complexes in the East Lachlan, being a similar age to Newcrest’s Cadia Valley and Northparkes porphyry Copper Gold systems. The Narromine Intrusive Complex is one of three intrusive complexes in the Junee-Narromine Volcanic Belt and the only complex not currently producing gold. Magmatic believe that the Myall project has the geological features and unexplored space available to identify a Northparkes style porphyry Copper Gold deposit. Extensive lithogeochemical analysis completed by Magmatic’s consultants identified possible Wombin Volcanics equivalent (host rocks to, and age equivalent of Northparkes mineralisation) in Myall’s Narromine Igneous Complex (NIC) for the first time which Magmatic consider a major milestone for the project. Magmatic completed petrography which confirmed that the conclusions of the lithogeochemical study; that is, that the Narromine Igneous Complex contains Wombin Volcanics, and particularly quartz monzonite porphyry, which are considered a pre-requisite for Northparkes- style mineralisation. Additionally, the Greater Kingswood area copper anomaly (figure below) shows similar dimensions and tenor to Northparkes copper anomaly. Previous intercepts at Myall include:  121m at 0.4% Cu, 0.09 g/t Au, including 70m at 0.54 Cu, 0.15 g/t Au, at Kingswood. Magmatic are working with potential joint venture partners to progress this project. Figure 5: Myall Project: Greater Kingswood area copper anomaly at 500ppm Cu and 1000ppm Cu versus Northparkes copper geochemistry at the same scale. Shows similar anomaly dimensions 10 Magmatic Resources Limited ABN 32 615 598 322 Moorefield Gold and Base Metals Project (100% MAG) Targeting: Gold and Base Metal deposits The Moorefield Project is located 25km Northeast of Condobolin in the East Lachlan region of NSW. Moorefield consists of two tenements (EL7675 and EL8669) covering 478km2. The project is immediately adjacent to Australian Mines Limited’s and CleanTeQ Holding Limited’s nickel-cobalt-scandium projects. Moorefield is located in a North-trending belt of Ordovician metasediments (Girilambone Group) and Siluro- Devonian volcanics and sediments (Derriwong Group). The area is prospective for near surface gold and skarn mineralisation in the Girilambone Group, and also host gold occurrences and VMS mineralisation in the Derriwong Group. An aeromagnetic survey was flown at 50m line spacing over most of the Moorefield licence (EL7675) and part of the Derriwong licence (EL8669) in March 2018 targeting the Ghost Hill skarn and the Boxdale-Carlisle Reefs gold trend, where earlier drilling by Magmatic returned a best result of 30m @ 1.60g/t Au from 80m (MFRC013), including 11m at 2.68 g/t Au (from 95m). Interpretation and targeting of the survey was completed during the period and shown in the figure below. Figure 6: Moorefield interpreted aeromagnetic image and target (1VD rtp TMI) 11 Magmatic Resources Limited ABN 32 615 598 322 Western Australian Projects Magmatic are very excited with our potential new additions to our Western Australian exploration projects, Western Australian exploration projects, which, if the merger and demerger are approved will result in the formation of a gold-focussed junior explorer with the potential to be producing gold in a short period of time. Magmatic have also been pegging new ground in the Yamarna - Mt Venn region and now have five exploration licences, of which two new licences were granted during the period taking the granted licences to four. Magmatic are looking forward to completing on-ground work on these projects, or alternatively identifying a suitable JV partner to take these projects forward. These strategic ground positions are in a proven mineralised district of Western Australia which adds the in-demand commodities of Gold, Cobalt and Nickel to the Company’s pipeline of targets. Figure 7: Magmatic’s Yamarna and Mt Venn projects 12 Magmatic Resources Limited ABN 32 615 598 322 Mt Venn Copper, Nickel and Cobalt (100% MAG) Targeting: Mt Venn-style Copper Nickel Cobalt deposits Mt Venn is located 120km east of Laverton in Western Australia. It consists of 2 tenements (E38/2961 and E38/3351) for ~87km2 which covers 60% of the Mt Venn Intrusion, where Great Boulder Resources (“GBR”) recently discovered Copper Nickel Cobalt mineralisation at its Mt Venn Project. GBR Intercepts included 48m at 0.75% Cu, 0.2% Ni and 0.07% Co and 61m at 0.51% Cu, 0.19% Ni and 0.06% Co. Magmatic identified undrilled EM conductors at its Mt Venn Copper Nickel Cobalt Project following the acquisition and interpretation of previous VTEM and ground EM datasets. One of the larger conductors, MVVA2, is along strike from a previous drilling intercept which may indicate a repeat of GBR’s Mt Venn mineralisation on Magmatic’s tenement. Magmatic completed a reconnaissance field program at the Mt Venn Copper-Nickel-Cobalt Project, completing initial soil and rock chip sampling and confirmed the EM anomalies are under shallow cover. An additional exploration licence application (Mt Venn North E38/3351) was made immediately north of Mt Venn E38/2961 and was granted during the year. This tenement was applied for because it has an undrilled EM anomaly. EM anomalies within the belt are found to consistently host massive sulphides, of which, some also have Copper and Nickel sulphides. Yamarna Gold Project (100% MAG) Targeting: Gruyere-style gold mineralisation The Yamarna Project is 150km northeast of Laverton in the underexplored Yamarna Greenstone Belt of WA, 40km northeast of the Company’s Mt Venn Project. Magmatic has applied for a further exploration tenement this year (E38/3327) to add to the prospective tenements E38/2918 and E38/3312 (under application). The project covers about 355km2. The Yamarna Project is 15km northwest of the Gruyere (5.88Moz) gold mine under construction (Gold Fields/ Gold Road JV). Gruyere gold mine is expected to commence production in mid-2019. Magmatic completed the acquisition of Landslide Investments Pty Ltd, holder of Exploration Licence E38/2918, which forms part of the Company’s Yamarna Gold Project. Major international gold producer Gold Fields has recognised the potential of the Yamarna greenstone belt as being a long term, high margin production opportunity for its portfolio, opting to participate in a 50% joint venture partnership with Australian explorer Gold Road to develop the Gruyere mine and continue to explore the associated tenements. Gold Fields has also invested in a strategic 10% corporate shareholding of Gold Road. Magmatic acquired its advanced New South Wales project portfolio from Gold Fields prior to listing in May 2017 and Gold Fields also continues to maintain a strategic 15% shareholding in Magmatic. The Magmatic exploration team have identified a large-scale regional structure transecting the Company’s new tenements, interpreted to be prospective for gold. Previous exploration is limited and includes minor shallow RAB and AC drilling which Magmatic plans to assess with on the ground work. Future WA Project Acquisitions Targeting Gold and Copper Gold deposits Magmatic has entered into agreements to acquire three Western Australian gold and copper assets to complement its existing WA Yamarna and Mt Venn projects. Magmatic has signed binding sale and purchase agreements to acquire 100% of the issued share capital of each of Kokoda Exploration Pty Ltd, Ashburton Metals Group Pty Ltd and North Iron Cap Pty Ltd, in respect of the Calyerup, Ashburton, and North Ironcap Projects. The binding sale and purchase agreements are to acquire 100% of the issued share capital of Kokoda Exploration Pty Ltd, Ashburton Metals Group Pty Ltd and North Iron Cap Pty Ltd who hold the the Calyerup, Ashburton and North Ironcap projects respectively. The proposed acquisition is conditional upon the Company receiving shareholder approval of both the transaction and the demerger of its East Lachlan, N.S.W Exploration Projects by way of an in-specie distribution to existing Magmatic shareholders. Shareholders will vote at a General Meeting on the 15 October 2019. 13 Magmatic Resources Limited ABN 32 615 598 322 Calyerup Targeting: Archaean Gold deposits Calyerup covers a sequence of Archaean layered mafic granulites of metasedimentary origin. There are small shallow historical gold workings with production recorded and modern exploration has confirmed the potential for small gold deposits. Ashburton Targeting: Proterozoic Copper Gold deposits The Ashburton project covers the Proterozoic Morrissey Metamorphic suite within the Capricorn Orogen. Gold mineralisation is within narrow quartz veins with associated minor Copper mineralisation hosted within schists and gneisses, and adjacent to and within dolerite dykes. Nine prospects have been identified. North Ironcap Targeting: Archaean Gold deposits – potential small Gold mining operation North Iron Cap Pty Ltd is the owner of the Gold Rights for the North Iron Cap tenement, which is held by Western Areas Ltd. North Ironcap is within the Archaean Forrestania Greenstone Belt south of the Marvel Loch Gold Mine. It is one of several moderate-sized, low-grade laterite/ supergene Gold deposits on the western edge of the Forrestania Greenstone Belt. The gold mineralisation is stratigraphically controlled in a gossanous metasedimentary package within a meta-mafic package. The mineralised sequence sub-crops and is generally continuous over about 1km of strike with 50-100m long pods varying in width from 1m to 13m. Previous explorers have completed extensive exploration and development drilling which is likely to allow for early estimates of Mineral Resources and commencement of Mining studies. MAG ASX release dates used in Operations Report WA Project acquisitions: 7/6/2019 Wellington North: 17/5/2019, 20/8/2018 Parkes: 29/1/2019, 31/7/2019 Myall: 31/1/2019 Moorefield: 17/10/2019 Competent Persons Statement Information in this report which relates to Exploration Results for the Calyerup, Ashburton and North Ironcap projects is based on information compiled by Andrew Viner, a Member of the Australasian Institute of Mining and Metallurgy. Mr Viner has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.” Mr Viner consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. Mr Viner is a shareholder of Magmatic Resources Limited The information in this document that relates to Exploration Results for the East Lachlan, Yamarna and Mt Venn projects is based on information compiled by Mr Steven Oxenburgh who is a Member of the AusIMM (CP) and a Member of the Australian Institute of Geoscientists. Mr Oxenburgh is a full-time employee of Magmatic Resources Limited and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Oxenburgh consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Additionally, both Mr Viner and Mr Oxenburgh confirms that the entity is not aware of any new information or data that materially affects the information contained in the ASX releases referred to in this report. 14 Magmatic Resources Limited ABN 32 615 598 322 Directors’ Report Your directors present their annual financial report on the consolidated entity (referred to hereafter as the “Group”) consisting of Magmatic Resources Limited (the “Company” or “parent entity”) and its wholly owned subsidiaries Modeling Resources Pty Ltd (“Modeling”), Landslide Investments Pty Ltd (“Landslide”) and Australia Gold and Copper Ltd (“AGC”). In order to comply with the provisions of the Corporations Act, the directors report as follows: Directors The names of the directors of the Company during or since the end of the year are noted below. Directors were in office for the entire period unless otherwise stated: David Berrie – Non-Executive Chairman David Richardson – Managing Director Malcolm Norris – Non-Executive Director Andrew Viner – Non-Executive Director (appointed 16 September 2019) Company Secretary David Berrie (appointed 1 June 2019) Ildiko Wowesny (appointed 1 December 2017, resigned 31 May 2019) Principal activities The principal activity of the Group during the financial year was mineral exploration. Dividends No dividend has been paid or declared since the start of the financial year and the directors do not recommend the payment of a dividend in respect of the financial year. Review of operations Information on the operations of the Group is set out in the Review of Operations report on pages 5 to 14 of this Annual Report. Financial review The Group incurred a loss of $1,993,025 after income tax for the financial year (2018: loss of $2,533,870). As at 30 June 2019, the Group had net assets of $1,196,256 (30 June 2018: $2,205,562), including cash and cash equivalents of $233,431 (30 June 2018: $553,484). Significant changes in the state of affairs There have been no significant changes in the state of affairs of the Group to the date of this report. Matters subsequent to the end of the financial year The Company issued a short form prospectus dated 13 September 2019 offering to transfer on 18 October 2019 117,242,568 shares in its fully owned subsidiary Australian Gold and Copper Ltd (AGC) on an in-specie distribution basis to the shareholders on record on 17 October 2019 in exchange for the Company’s New South Wales based exploration licences. The general meeting of shareholders at which this offer will be put to a vote is scheduled for 15 October 2019 and full details of this proposed transaction are contained in the notice of that meeting which was released to the market on 13 September 2019. On 16 September 2019 Andrew John Viner was appointed a Director of the Company. Subsequent to year end, the Company received $350,000 as a result of unsecured Director and major shareholder loans made to the Company. Other than those, there has not been any matter or circumstance that has arisen after reporting date that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. Likely developments and expected results Additional comments on expected results of certain operations of the Group are included in the Review of Operations. 15 Magmatic Resources Limited ABN 32 615 598 322 Environmental legislation The Group is subject to significant environmental legal regulations in respect to its exploration and evaluation activities. The group is compliant with the NGER Act 2007. There have been no known breaches of these regulations and principles. During the financial year the Company has paid premiums in respect of insuring directors and officers of the Company against liabilities incurred as directors or officers. The amount paid is confidential under the terms of the terms of the insurance policy. The Company has no insurance policy in place that indemnifies the Company’s auditors. Information on directors David Berrie; LLB Non-Executive Chairman (appointed 28 October 2016) Company Secretary (appointed 01 June 2019) Experience and expertise Mr. David Berrie has over 30 years’ experience in the mining industry. Mr Berrie worked as a solicitor in the mining team at Clayton Utz before joining the international mining house Western Mining Corporation in 1987 with much of that time spent in the exploration division before transitioning over to BHP Billiton. Mr Berrie has extensive public company experience. Mr Berrie has a Bachelor of Laws and a Bachelor of Juris prudence from the University of Western Australia. Mr Berrie is not considered to be independent due to his interest in the securities of the Company. Other current directorships: Summit Resources Limited Former directorships in the last 3 years: Hylea Metals Limited (appointed 6 February 2018, resigned 2 January 2019) Special responsibilities: Non-Executive Chairman Interests in shares and options at the date of this report: 12,669,044 ordinary shares (indirectly held) and 919,375 options (indirectly held). David Richardson; B. Comm MBA Managing Director (appointed 28 October 2016) Experience and expertise Mr. David Richardson is an experienced international Executive and has worked in strategic partnerships, international business development and fund-raising in the Asia-Pacific region for over 25 years. He has lived and worked in Asia extensively, speaks fluent Japanese and is a founding board member of the Telethon Adventurers charity for childhood cancer research. David holds a Masters of Business Administration from the University of Southern California in Los Angeles and undertook post graduate Japanese studies at Keio University in Tokyo. Mr Richardson is not considered to be independent due to his executive role as Managing Director of the Company and interest in the securities of the Company. Other current directorships: Nil Former directorships in the last 3 years: Nil Special responsibilities: Managing Director Interests in shares and options at the date of this report: 37,962,571 ordinary shares (indirectly held) and 5,121,875 options (indirectly held). Malcolm Norris; MSc, MAppFin Non-Executive Director (appointed 20 December 2016) Experience and expertise Mr. Malcolm Norris is a geologist with extensive experience in business management, asset transactions and exploration with a focus on porphyry discovery. He is currently the managing director of Sunstone Metals Limited (ASX:STM). Previously chief executive officer and managing director of SolGold Plc, Mr Norris holds a Bachelor of Science (Geology, Hons 1) from the University of Queensland, a Master of Science from the University of Western Ontario and a Master of Applied Finance (Kaplan). The Board considers Mr. Norris to be an independent Director as he is not a member of management and is free of any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in a material respect his capacity to bring an independent judgement to bear on issues before the Board. Other current directorships: Sunstone Metals Limited Former directorships in the last 3 years: Nil Special responsibilities: Nil Interests in shares and options at the date of this report: 750,000 options (directly held). 16 Magmatic Resources Limited ABN 32 615 598 322 Andrew Viner; B. App Sc (Geology) Non-Executive Director (appointed 16 September 2019) Experience and expertise Mr. Andy Viner is a geologist with over 35 years technical, managerial and corporate experience in mineral exploration and development. During his career he has generated and managed projects for a number of commodities, with a particular focus on precious metals, in Australia, Asia and South America. Andy was the founding Managing Director of Jackson Gold Limited from 2002 to 2007 and Executive Director of Matsa Resources Limited from 2008 to 2010 before joining Alloy Resources Limited in 2011 where he has been Executive Chairman since 2014. The Board considers Mr. Viner to be an independent Director as he is not a member of management and is free of any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in a material respect his capacity to bring an independent judgement to bear on issues before the Board. Other current directorships: Alloy Resources Limited, Eskay Resources Pty Ltd Former directorships in the last 3 years: Nil Special responsibilities: Nil Interests in shares and options at the date of this report: 10,000 ordinary shares (directly held) and 5,000 options (directly held) 30,000 ordinary shares (indirectly held) and 15,000 options (indirectly held). Meetings of directors During the financial year there were five formal directors’ meetings. All other matters that required formal Board resolutions were dealt with via written circular resolutions. In addition, the directors met on an informal basis at regular intervals during the financial year to discuss the Group’s affairs. The Company has no separate Audit committee or Remuneration committee as is not of a sufficient size to warrant these. All matters usually dealt with by these committees are dealt with by the whole Board. The number of meetings of the Company’s board of directors attended by each director were: D Berrie D Richardson M Norris A Viner Shares under option Directors’ meetings held Directors’ meetings attended 5 5 5 N/A 5 5 5 N/A Outstanding share options at the date of this report are as follows: Grant date Date of expiry Exercise price Number of options 11 May 2017 11 May 2017 30 August 2018 7 May 2019 17 May 2020 11 May 2020 30 August 2021 29 May 2024 $0.30 $0.20* $0.10 $0.03 17,980,613 2,500,000 (Tranche 3) 26,859,141 2,000,000 *Unlisted options exercisable at a price which is greater of $0.20 or a 5% discount to the 20-day weighted average price of shares on ASX. No option holder has any right under the options to participate in any other share issue of the Company or any other controlled entity. Shares issued on the exercise of options There have been no shares issued upon the exercise of options. 17 Magmatic Resources Limited ABN 32 615 598 322 Remuneration Report (Audited) This report outlines the remuneration arrangements in place for the key management personnel of Magmatic Resources Limited (the “Company” or “Parent”) for the financial year ended 30 June 2019. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001. The remuneration report details the remuneration arrangements for key management personnel (“KMP”) who are defined as 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 parent company, and includes all executives in the Parent and the Group receiving the highest remuneration. Key Management Personnel (i) Directors David Berrie - Non-Executive Chairman David Richardson – Managing Director Malcolm Norris – Non-Executive Director Andrew Viner – Non-Executive Director (ii) Executives Michael Franklin - Chief Financial Officer (appointed 1 June 2019) Ildiko Wowesny – Chief Financial Officer and Company Secretary (appointed 01 December 2017, resigned 31 May 2019) Details of directors’ and executives’ remuneration are set out under the following main headings: A B C D Principles used to determine the nature and amount of remuneration Details of remuneration Employment contracts/Consultancy agreements Share-based compensation Principles used to determine the nature and amount of remuneration A The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aims to align executive reward with the creation of value for shareholders. The key criteria for good remuneration governance practices adopted by the Board are:      competitiveness and reasonableness acceptability to shareholders performance incentives transparency capital management The framework provides a mix of fixed salary, consultancy, agreement based remuneration and share based incentives. The broad remuneration policy for determining the nature and amount of emoluments of Board members and senior executives of the Company is governed by the full board. Although there is no separate remuneration committee, the Board’s aim is to ensure the remuneration packages properly reflect directors’ and executives’ duties and responsibilities. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention and motivation of a high quality Board and executive team. The current remuneration policy adopted is that no element of any director or executive package is directly related to the Company’s financial performance. Indeed there are no elements of any director or executive remuneration that are dependent upon the satisfaction of any specific condition however the overall remuneration policy framework is structured to advance and create shareholder wealth. 18 Magmatic Resources Limited ABN 32 615 598 322 Non-executive directors Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Board and are intended to be in line with the market. Non-executive directors receive a board fee and fees for chairing or participating on board committees. They do not receive performance-based pay or retirement allowances. For the year ended 30 June 2019, exclusive of superannuation guarantee the annual cash remuneration for the Non-Executive Director was $40,000 with the Chairman receiving $60,000. The non-executive directors fee pool approved by shareholders is $250,000 per annum. Directors’ fees On appointment to the Board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including remuneration relevant to the office of director. The Board policy is to remunerate non-executive directors at commercial market rates for comparable companies for their time, commitment and responsibilities. Non-executive directors receive a Board fee but do not receive fees for chairing or participating on Board committees. Board members are allocated superannuation guarantee contributions as required by law, and do not receive any other retirement benefits. From time to time, some individuals may choose to sacrifice their salary or consulting fees to increase payments towards superannuation. Fees for non-executive directors are not linked to the performance of the Group. Retirement allowances for directors Apart from superannuation payments paid on salaries there are no retirement allowances for directors. Executive pay The executive pay and rewards framework has the following components:   base pay and benefits such as superannuation where appropriate long-term incentives through participation in employee equity issues Base pay All executives are either full time employees or consultants who are paid on an agreed basis that has been formalised in a consultancy agreement. Benefits Apart from superannuation paid on executive salaries there are no additional benefits paid to executives. Short-term incentives There are no current short-term incentive remuneration arrangements. Performance based remuneration To ensure that the Company has appropriate mechanisms in place to continue to attract and retain the services of suitable directors and employees, the Company has, in the past, issued options and performance rights to some key personnel. No options or performance rights were issued during the year ended 30 June 2019. Company performance, shareholder wealth and directors’ and executives’ remuneration No relationship exists between shareholder wealth, director and executive remuneration and Company performance due to the nature of the Company’s operations being a non-producing resources exploration company. The table below shows the losses and earnings per share of the Company for the last three financial years: 2019 2018 2017 Net loss Share price at year end (cents) Loss per share (cents) $1,993,025 1.8 1.76 $2,533,870 6.1 3.1 $3,794,220 12.0 6.6 19 Magmatic Resources Limited ABN 32 615 598 322 B Details of remuneration Amounts of remuneration Details of the remuneration of the directors and other key management personnel (as defined in AASB 124 Related Party Disclosures) of the Company and the Group for the year ended 30 June 2019 are set out in the following tables. The key management personnel of the Group comprise the directors of the Company and persons who have the authority and responsibility for planning, directing and controlling the activities of the Group. Given the size and nature of the Group, there are no other employees who are required to have their remuneration disclosed in accordance with the Corporations Act 2001. No cash remuneration is linked to performance. Year ended 30 June 2019 Name Director D Berrie D Richardson M Norris Key Management Personnel M Franklin (appointed 1 June 2019) I Wowesny (appointed 1 December 2017, resigned 31 May 2019) Year ended 30 June 2018 Name Director D Berrie D Richardson M Norris Key Management Personnel I Wowesny (appointed 1 December 2017) I Hobson (appointed 20 January 2017, resigned 1 December 2017) 60,000 180,000 40,000 10,256 137,500 427,756 Salary / Fees $ 60,000 150,000 40,000 70,334 46,640 Post- employment benefits Superannuation Salary / Fees $ $ Share- based payments $ Other* Total $ $ 5,700 17,100 3,800 - 15,438 42,038 - - - - - - - - - - 65,700 197,100 43,800 10,256 25,000 177,938 25,000 494,794 Post- employment benefits Superannuation $ Share-based payments $ Other $ Total $ 5,700 14,250 3,800 6,757 - - - - - - - - - - - - - 65,700 164,250 43,800 77,091 46,640 397,481 366,974 30,507 * Other benefits include termination benefits paid to Ms Wowesny in 2019. Refer to note 17 for details. C Employment contracts/Consultancy agreements On appointment to the Board, all Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. Remuneration of the Managing Director and other executives are formalised in letters of appointment and employment agreements. These agreements provide details of the salary and employment conditions relating to each employee. 20 Magmatic Resources Limited ABN 32 615 598 322 Name Term of agreement and notice period Base salary (excl. superannuation) Termination payments David Richardson Managing Director Michael Franklin Chief Financial Officer 2 years 3 months N/A N/A D Share-based compensation $180,000 $100,000 N/A N/A There was no share-based compensation given during the year ended 30 June 2019. Key management personnel equity holdings 2019 Ordinary shares Directors D Berrie D Richardson M Norris Other Key management personnel M Franklin (appointed 1 June 2019) I Wowesny (resigned 31 May 2019) Options Directors D Berrie D Richardson M Norris Other Key management personnel M Franklin (appointed 1 June 2019) I Wowesny (resigned 31 May 2019) Performance shares Directors D Berrie D Richardson M Norris Other Key management personnel M Franklin (appointed 1 June 2019) I Wowesny (resigned 31 May 2019) Balance at beginning of year Net movement during the year Balance at the end of year 11,994,044 32,952,571 675,000 5,000,000 12,669,044 37,962,571 - - - Balance at beginning of year - - - - - Net movement during the year - Balance at the end of year 244,375 121,875 750,000 - - 675,0001 5,000,0001 - - - 1,360,000 4,480,000 (1,360,000) (4,480,000) - - - - - - 919,375 5,121,875 750,000 - - - - - - - 1 Options attached to each share subscribed for in the Company’s August 2018 renounceable entitlement issue. No remuneration consultants have been used. Other than disclosed above, there are no other transactions with key management personnel. 21 Magmatic Resources Limited ABN 32 615 598 322 Loans to Key Management Personnel There were no loans to individuals or members of key management personnel during the financial year. Transactions with Key Management Personnel Mr David Richardson (Managing Director) During the financial year the son of Mr Richardson provided casual administrative services to the Company to the value of $703. These services were provided on normal commercial terms and conditions. Mr David Berrie (Non-Executive Chairman) During the financial year, the daughter of Mr Berrie provided casual administrative services to the Company to the value of $0 (2018: $3,506). Fees of $18,612 (2018: $3,300) provided by Mr Berrie’s related entity, Hylea Metals Limited, were incurred during the year. All services were provided on normal commercial terms and conditions. Other than described above, there were no transactions with key management personnel during the financial year or the previous financial year E Voting and comments made at the Company’s 2018 Annual General Meeting Magmatic Resources Ltd received more than 98% of “yes” votes on its remuneration report for the 2019 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. End of audited remuneration report. Auditor’s independence and non-audit services Section 307C of the Corporations Act 2001 requires our auditors, BDO Audit (WA) Pty Ltd to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 24 and forms part of this directors’ report for the year ended 30 June 2019. Non-audit services The Company may decide to employ the auditors on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the consolidated entity are important. The Company has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Details of remuneration paid to the auditors are: Assurance services BDO Audit (WA) Pty Ltd Audit and review of financial statements Total remuneration for audit services Consolidated 2019 $ 2018 $ 28,077 28,077 33,765 33,765 Total auditor’s remuneration 28,077 33,765 Proceedings on behalf of Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. 22 Magmatic Resources Limited ABN 32 615 598 322 Insurance of Directors and Officers The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. This report is made in accordance with a resolution of the directors. D Berrie Chairman PERTH, Western Australia Dated: 26 September 2019 23 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF MAGMATIC RESOURCES LIMITED As lead auditor of Magmatic Resources 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 Magmatic Resources Limited and the entities it controlled during the period. Dean Just Director BDO Audit (WA) Pty Ltd Perth, 26 September 2019 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 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 Audit (WA) Pty Ltd 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. 24 Magmatic Resources Limited ABN 32 615 598 322 Corporate Governance Statement ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations – 3rd edition As at 30 June 2019 and approved by the Board The Company is committed to high standards of corporate governance designed to enable the Company to meet its performance objectives and better manager its risks. The Company has adopted a comprehensive governance framework in the form of a formal corporate governance charter together with associated policies, protocols and related instruments. A full copy of the Company’s corporate governance charter and associated policies, protocols and related instruments is available on the Company’s website at: www.magmaticresources.com. The Company intends to follow the ASX CGC P&R in all respects other than as specifically provided below. The independent director of the Company is Mr Norris. When determining the independent status of a Director the Board used the Guidelines detailed in the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations. Recommendation Current Practice 1.1 A listed entity should disclose: a. The respective roles and responsibilities of its Satisfied. The functions reserved for the Board and delegated to senior executives have been established. 1.2 1.3 1.4 1.5 board and management; and b. Those matters expressly reserved to the board and those delegated to management. A listed entity should: a. Undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and b. Provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. Satisfied. Appropriate checks have been undertaken. Satisfied. Agreements are in place. The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with proper functioning of the board. Satisfied. This practice is in place. A listed entity should: a. Have a diversity policy; b. Disclose that policy or a summary of it; c. Disclose the measurable objectives for achieving gender diversity and the its progress towards achieving them; and d. The respective proportions of men and women. Satisfied. Satisfied, see corporate governance section of website. Not satisfied. The measurable objectives are yet to be set. Board – 100% men; Senior Executives – 100% men; whole organisation – 100% men. 25 Magmatic Resources Limited ABN 32 615 598 322 A listed entity should: 1.6 a. Have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and b. Disclose whether performance evaluations were undertaken. 1.7 A listed entity should: Satisfied, see process in corporate governance policies. Not satisfied. No evaluations have been undertaken to date a. Have and disclose a process for periodically Satisfied, see process in corporate governance policies. evaluating the performance of senior management; and b. Disclose whether performance evaluations were undertaken. 2.1 A listed entity should have a nomination committee which: - Consists of at least 3 members, a majority of whom are independent directors; Is chaired by an independent director; - And disclose: - - - The charter of the committee; The members of the committee The number of times the committee met and individual attendance at those meetings Not satisfied. No evaluations have been undertaken to date. Not Satisfied. The board has not established a nomination committee as the company is not of sufficient size to warrant such a committee. The role of the committee is undertaken by the full board. 2.2 2.3 If it does not have a nomination committee disclose that fact and the process it follows to address that role. To be developed as the Company’s size increases A listed entity should have and disclose a board skills matrix. Satisfied. See corporate governance section of website. A listed entity should disclose: - The names of the directors considered by the board to be independent directors and length of service. If a director has an interest / association / relationship that meets the factors of assessing independence. - Satisfied. Mr Norris is the Non-Executive independent director as defined in ASX guidelines. N/A 2.4 A majority of the board should be independent directors. Not satisfied, only one of the three directors is an independent director. The Company is not of sufficient size to warrant a larger board. 2.5 The chair should be an independent director. Not Satisfied. Mr David Berrie is not an independent Non-Executive Director. The roles of Chair and Chief Executive Officer should not be exercised by the same individual. Satisfied. 2.6 A listed entity should have a program for inducting new directors. Not Satisfied. 3.1 A listed entity should: - have a code of conduct; and - disclose the code or a summary of it. The board has not established this process due to the Company’s size. Satisfied. The Code of Conduct is available at in the Corporate Governance Section on the Company’s website. 26 Magmatic Resources Limited ABN 32 615 598 322 4.1 4.2 4.3 5.1 The board of a listed entity should have an audit committee which: - Has at least three members all of whom are non- executive directors and a majority of independent directors; and Is chaired by an independent chair, who is not chair of the board. - Disclose: - - - The charter of the committee; The relevant member qualifications; The number of times the committee met and individual attendance at those meetings Not Satisfied. The board has not established an audit committee as it would comprise the same 3 members. The role of the committee is undertaken by the full board. The audit committee charter is available at www.magmaticresources.com in the Corporate Governance Section. The board should receive declarations for CEO & CFO in accordance with S.295A of Corporations Act before approving financial statements. Satisfied. A listed entity should ensure its external auditor attends its AGM. Satisfied. A listed entity should: - Have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and disclosure that policy or a summary of it. - Satisfied. Continuous disclosure policy is available at www.magmaticresources.com Satisfied - in the Corporate Governance Section. 6.1 A listed entity should provide information about itself and its governance to investors via its website. Satisfied. 6.2 6.3 6.4 7.1 A listed entity should design and implement an investor relations program to facilitate effective two- way communication with investors. Satisfied. See www.magmaticresources.com in the Corporate Governance Section. See www.magmaticresources.com in the Corporate Governance Section. A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. Satisfied. See communication policy at www.magmaticresources.com in the Corporate Governance Section. A listed entity should give security holders the option to receive communications from, and send communication to, the entity and its security registry electronically. The board of a listed entity should have a committee to oversee risk, which: - Has at least three members all of whom are non- executive directors and a majority of independent directors; and Is chaired by an independent chair, who is not chair of the board. - Disclose: Satisfied. See welcome pack to investors. The board has not established a risk committee as it would comprise the same 3 board members. The role of the committee will be undertaken by the full board. The company has established policies for the oversight and management of material business risks. 27 Magmatic Resources Limited ABN 32 615 598 322 - - - The charter of the committee; The members of the committee; and The number of times the committee met and individual attendance at those meetings If it does not have a risk committee disclose that fact and the process it follows to address that role. Risk management program is available at www.magmaticresources.com in the Corporate Governance Section. 7.2 The board or a committee of the board should: - Review the entity’s risk management framework Not satisfied. at least annually to satisfy itself that it continues to be sound; and - Disclose whether such a review has taken place. 7.3 7.4 8.1 8.2 8.3 A listed entity should disclose: - - If has an internal audit function, how the function is structured and what role it performs; If it does not have an internal audit function, disclose that fact and the process it follows to address that function. Not satisfied. The entity does not have an internal audit function. The function is performed by the full board. The entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks, and if it does, how it manages those risks. The entity does not have material exposure in these areas. The board of a listed entity should: - have a remuneration committee which has at least three members all of whom are non- executive directors and a majority of independent directors; and Is chaired by an independent director; and Not Satisfied. The board has not established a remuneration and nomination committee as it would comprise the same 3 board members. The role of the committee is undertaken by the full board. - Disclose: - - - The charter of the committee; The members of the committee; and The number of times the committee met and individual attendance at those meetings If it does not have a remuneration committee disclose that fact and the process it follows to address that role. Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. Satisfied. The structure of Directors’ remuneration is disclosed in the annual report. A listed entity which has an equity-based remuneration scheme should: - Have a policy on whether participants are permitted to enter into transactions which limit the economic risk of participating in the scheme; - Disclose that policy or a summary of it. There is no broad policy. Further information about the Company’s corporate governance practices is set out on the Company’s website at www.magmaticresources.com 28 Magmatic Resources Limited ABN 32 615 598 322 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2019 Consolidated Note 2019 $ 2 3 3 4 Continuing Operations Other income Corporate administration expenses Exploration expenditure incurred Exploration asset impairments Share based payment expense Finance costs Loss before tax Income tax Net loss for the period Other comprehensive income, net of tax Items that will not be classified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss Total comprehensive loss for the year Total comprehensive loss for the period attributable to the members of Magmatic Resources Limited: 2018 $ 225,608 225,608 (1,138,923) (1,620,554) - - - (2,759,477) 97,289 97,289 (1,129,482) (471,707) (445,000) (42,898) (1,227) (2,090,314) (1,993,025) (2,533,870) - - (1,993,025) (2,533,870) - - - - (1,993,025) (2,533,870) (1,993,025) (2,533,870) Loss per share attributable to the members of Magmatic Resources Limited Loss per share (dollars) 5 $0.176 $0.031 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 29 Magmatic Resources Limited ABN 32 615 598 322 Consolidated Statement of Financial Position as at 30 June 2019 Current Assets Cash and cash equivalents Other receivables Total Current Assets Non-Current Assets Plant and Equipment Security Bonds Exploration assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Total Current Liabilities Non-Current Liabilities Trade and other payables Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Consolidated Note 2019 $ 2018 $ 7 8 9 10 11 12 12 13 14 233,431 108,561 553,484 89,551 341,992 643,035 36,420 91,300 1,628,350 75,419 101,300 2,043,350 1,756,070 2,220,069 2,098,062 2,863,104 901,806 531,015 901,806 531,015 - - 126,527 126,527 901,806 657,542 1,196,256 2,205,562 6,733,855 3,156,749 (8,694,348) 5,838,182 3,068,703 (6,701,323) 1,196,256 2,205,562 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 30 Magmatic Resources Limited ABN 32 615 598 322 Consolidated Statement of Changes in Equity for the year ended 30 June 2019 Consolidated Share Based Payments Reserved $ Capital Restructure Reserve $ Issued Capital $ Accumulated Losses $ Total Equity $ Balance at 1 July 2017 3,763,182 4,668,453 250 (4,167,453) 4,264,432 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners recorded directly in equity Conversion of “A” Class Performance shares Issue of ordinary shares Total transactions with owners recorded directly in equity - - - - - - 1,600,000 475,000 (1,600,000) - 2,075,000 (1,600,000) - - - - - (2,533,870) (2,533,870) - - (2,533,870) (2,533,870) - 475,000 475,000 - - Balance at 30 June 2018 5,838,182 3,068,453 250 (6,701,323) 2,205,562 Balance at 1 July 2018 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners recorded directly in equity Issue of ordinary shares Capital raising expenses Total transactions with owners recorded directly in equity 5,838,182 3,068,453 250 (6,701,323) 2,205,562 - - - 42,898 - 42,898 1,004,365 (108,692) - 45,148 895,673 45,148 - - - - - (1,993,025) (1,950,127) - - (1,993,025) (1,950,127) - - 1,004,365 (63,544) 940,821 Balance at 30 June 2019 6,733,855 3,156,499 250 (8,694,348) 1,196,256 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 31 Magmatic Resources Limited ABN 32 615 598 322 Consolidated Statement of Cash Flows for the year ended 30 June 2019 Cash flows from operating activities Payments to suppliers and employees Payments for exploration expenditure Proceeds from earn-in partner Interest received Consolidated Note 2019 $ 2018 $ (971,330) (1,253,997) 1,000,000 4,452 (876,134) (2,796,915) 1,482,965 9,238 Net cash used in operating activities 19(a) (1,220,875) (2,180,846) Cash flows from investing activities Payments for property, plant & equipment Tenement security bonds Payment for tenements Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Proceeds from the issue of shares Payment of capital raising costs Net cash from financing activities - - (30,000) (66,035) (30,000) (250,000) (30,000) (346,035) - - 994,365 (63,544) 930,821 - - - - - Net increase/(decrease) in cash and cash equivalents (320,053) (2,526,881) Cash and cash equivalents at the beginning of the year 553,484 3,080,365 Cash and cash equivalents at the end of the year 7 233,431 553,484 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 32 Magmatic Resources Limited ABN 32 615 598 322 Notes to the consolidated financial statements for the year ended 30 June 2019 Note 1: Statement of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) New, revised or amending Accounting Standards and Interpretations adopted The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any material impact on the financial performance or position of the Group. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. AASB 9 Financial Instruments The consolidated entity has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or 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 or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, 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 an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured using 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. (b) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Magmatic Resources Limited is a for-profit entity for the purpose of preparing the financial statements. Historical cost convention The financial statements have been prepared under the historical cost convention. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company'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 1(u). (c) Going Concern For the year ended 30 June 2019 the entity recorded a net loss of $1,993,025 (2018: $2,533,870), had net cash outflows from operating activities of $1,220,875, cash balance of $233,431 and future exploration commitments of $264,599 (Refer to Note 16). The ability of the entity to continue as a going concern is 33 Magmatic Resources Limited ABN 32 615 598 322 dependent on securing additional funding through capital raising or joint venture of projects to continue to fund its exploration and marketing activities. These conditions indicate a material uncertainty that may cast a significant doubt about the entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. Management believe there are sufficient funds to meet the entity’s working capital requirements as at the date of this report. Subsequent to year end, the Company received $350,000 as a result of unsecured Director and major shareholder loans made to the company while it finalises a planned $1,500,000 capital raising. The financial statements have been prepared on the basis that the entity is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business as the directors are confident the Group will raise funds through capital raising events or joint venture projects as and when required. Should the entity not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements and that the financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the entity not continue as a going concern. (d) (e) (f) (g) Statement of compliance The financial report was authorised by the Board of directors for issue on 19 September 2019. The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS). Principles of consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent entity (Magmatic Resources Limited) and its controlled subsidiaries; Modeling Resources Pty Ltd, Landslide Investments Pty Ltd and Australian Gold and Copper Ltd. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is current when it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non- current. A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. 34 Magmatic Resources Limited ABN 32 615 598 322 (h) (i) (j) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The Group accounts for long term restricted security deposits as ‘other’ non-current assets. Other receivables Other receivables are recognised at amortised cost, less any provision for impairment. Plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Plant and equipment 3-7 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the company. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. (k) 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 of a specific asset or assets and the arrangement conveys a right to use the asset. Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease. (l) (m) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. 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 principle market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. (n) Exploration expenditure Exploration expenditure is expensed to the statement of profit or loss as incurred and acquisition costs are capitalised as noncurrent assets. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Where uncertainty exists as to the future viability of certain areas, the value of the area of interest is written off or provided against. Due to the speculative nature, when exploration assets have been acquired through equity 35 Magmatic Resources Limited ABN 32 615 598 322 instruments, the fair value of the asset cannot be measure reliably, therefore the fair value of the equity instrument is used to determine the fair value of the asset. Impairment testing of exploration and evaluation expenditure Exploration and evaluation expenditure is assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Exploration and evaluation expenditure is tested for impairment when any of the following facts and circumstances exist:  The term of exploration licence in the specific area of interest has expired during the reporting period or will expire in the near future, and is not expected to be renewed;  Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area are not budgeted nor planned;  Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the decision was made to discontinue such activities in the specified area; or  Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. Where a potential impairment is indicated, an assessment is performed for each area of interest. The Group performs impairment testing in accordance with accounting policy note 1(l). Asset acquisition policy The Group has determined that the acquisition of the Yamarna project through the acquisition of Landslide Investments Pty Ltd is not deemed a business acquisition. In assessing the requirements of IFRS 3 Business Combinations, the Group has determined that the asset acquired does not constitute a business. The asset acquired consists of a granted mineral exploration tenement in the Mt Venn region of Western Australia. When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying amount based on their relative fair values in an asset purchase transaction and no deferred tax will arise in relation to the acquired asset and assumed liabilities as the initial recognition exemption for deferred tax under AASB 112 applies. No goodwill will arise on the acquisition and transaction costs of the acquisition. Share based payments Equity-settled share-based payment transactions to Directors and seed capitalists for services are measured in reference to the fair value of equity instruments granted. Equity-settled share-based payments in return for goods and services are measured at fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments. The fair value of options and performance rights with non-vesting conditions and no service conditions attached issued to Directors, seed capitalists and suppliers, are valued with a Black-Scholes pricing model. The fair value is measured at the grant date of the equity instrument and is recognised in equity in the share- based payment reserve. The number of instruments expected to vest is estimated based on the non-market vesting conditions. The total expense is recognised at the date of grant of the options and rights. (o) (p) (q) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 36 Magmatic Resources Limited ABN 32 615 598 322 (r) Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. (s) Deferred tax Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. 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. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. (t) Amendments to AASBs and the new Interpretation that are mandatorily effective for the current reporting period The Group has adopted the new and revised Standards and Interpretations AASB 9 and AASB 15 issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current year. The adoption of AASB 9 had no impact except for accounting policy changes and the adoption of AASB 15 had no impact as no revenue was earned from contracts with customers during the financial year. Standards issued but not yet effective A number of new standards, amendment of standards and interpretations have recently been issued but are not yet effective and have not been adopted by the Group as at the financial reporting date. The Group has reviewed these standards and interpretations, and with the exception of the items listed below for which the final impact is yet to be determined, not of the new or amended standards will significantly affect the Group’s accounting policies, financial position or performance. Reference and title AASB 16 Leases Summary Application date of standard* Application date for Group * 1 January 2019 1 July 2019 This Standard introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The Group is yet to assess the impact of AASB16 at this stage. * designates the beginning of the applicable annual reporting period. 37 Magmatic Resources Limited ABN 32 615 598 322 (u) Critical accounting estimates and judgements The preparation of these 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: Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its property plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technica innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Impairment of Exploration and Evaluation Asset Determining the recoverability of exploration and evaluation expenditure capitalised in accordance with the Group’s accounting policy (refer Note 1(n)), requires judgements as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. If, after having capitalised the expenditure under accounting policy 1(n), a judgement is made that recovery of the expenditure is unlikely, an impairment loss is recorded in the income statement in accordance with accounting policy 1(n). The carrying amounts of exploration and evaluation assets are set out in Note 11. During the year, an impairment of $445,000 was recognised in the statement of profit or loss and other comprehensive income in relation to the Mt Venn exploration assets in order to reduce the carrying value down to the recoverable amount. Share-based payments The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Refer to note (p). Note 2: Other income JV management fee Interest income Other Note 3: Expenses Corporate and administration expenses Depreciation Consulting Fees Investor Relations Legal Fees Travel Employee Expenses Rental Expense Other Stamp Duty Exploration and evaluation expenses Exploration expenses incurred Less: reimbursement from JV partner Net exploration and evaluation expense Consolidated 2019 $ 92,492 4,452 345 97,289 2018 $ 100,370 9,237 116,001 225,608 40,706 39,821 21,834 146,674 40,124 553,827 73,663 212,833 1,129,482 35,149 26,980 6,338 9,140 62,052 432,576 117,257 322,904 126,527 1,138,923 1,622,795 (1,151,088) 471,707 2,858,131 (1,237,577) 1,620,554 38 Magmatic Resources Limited ABN 32 615 598 322 Note 4: Income tax (a) Income tax benefit The prima facie income tax expense on pre-tax accounting result from operations reconciles to the income tax benefit in the financial statements as follows Accounting loss from continuing operations before income tax At the statutory income tax rate of 27.5% (2018: 27.5%) Add - Share based payments - Deductible equity costs - Tax loss not brought to account Income tax (benefit) reported in the statement of comprehensive income (b) Unrecognised deferred tax balances The following deferred tax assets have not been brought to account Deferred tax assets comprise: Accruals Employee entitlements Share issues & capital costs Exploration expenditure Losses available for offset against future income – revenue Deferred tax liabilities comprise: Prepayments Capitalised expenditure deductible for tax purposes Consolidated 2019 $ 2018 $ (1,993,025) (548,082) (2,533,870) (696,814) 11,797 (28,186) 576,471 - (24,691) 721,505 - - 19,668 16,560 125,276 49,708 1,508,435 1,719,647 866 6,015 6,881 6,188 13 101,237 18,407 1,126,920 1,252,765 732 10,949 11,681 Net unrecognised deferred tax assets 1,712,766 1,241,084 Deferred tax assets have not been recognised in respect of these items because it is not certain that future taxable profit will be available against which the Group can utilise the benefit thereof. Tax Losses As at 30 June 2019, the Consolidated Entity has $5,485,218 (2018: $4,091,444) of taxable losses that are available for offset against future taxable profits of the consolidated entity, subject to the loss recoupment requirements in the Income Tax Assessment Act 1997. No deferred tax assets have been recognised in the Statement of Financial Position in respect of the amount of these losses, as it is not presently probable future taxable profits will be available against which the company can utilise the benefit. Note 5: Loss per share Total basic loss per share The loss and weighted average number of ordinary shares used in the calculation of basic loss per share is as follows: Net loss for the period The weighted average number of ordinary shares The diluted loss per share is not reflected as the result is anti-dilutive. Consolidated 2019 $ 2018 $ 0.0176 0.031 (1,993,025) (2,533,870) 112,920,483 82,871,804 39 Magmatic Resources Limited ABN 32 615 598 322 Note 6: Segment information AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. AASB 8 “Operating Segments’” states that similar operating segments can be aggregated to form one reportable segment. Following incorporation, the Company acquired Modeling Resources Pty Ltd, Landslide Investments Pty Ltd and incorporated Australian Gold and Copper Ltd. The Group has one reportable operating segment being gold exploration projects in Australia. Note 7: Cash and cash equivalents Cash at bank and on hand Consolidated 2019 $ 2018 $ 233,431 233,431 553,484 553,484 (Refer to Note 15 (f) which contains risk exposure analysis for cash and cash equivalents) Note 8: Other receivables Goods and services tax receivable Other No receivables are past their due date and therefore no impairment recognised. Note 9: Property, plant and equipment Office equipment - At cost - Accumulated depreciation Total office equipment Information Technology - At cost - Accumulated depreciation Total Information Technology Exploration equipment - At cost - Accumulated depreciation Total exploration equipment Consolidated 2019 $ 2018 $ 98,409 10,152 108,561 79,518 10,033 89,551 Consolidated 2019 $ 2018 $ 10,241 (10,241) - 66,811 (52,264) 14,548 53,822 (31,950) 21,872 10,241 (6,259) 3,982 65,103 (33,480) 31,623 53,822 (14,008) 39,814 Total property, plant and equipment 36,420 75,419 40 Magmatic Resources Limited ABN 32 615 598 322 Movement in carrying amounts Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the year 2018 Consolidated Balance at the beginning of the year Acquisitions Depreciation expense Disposals Carrying amount at the end of the year 2019 Consolidated Balance at the beginning of the year Acquisitions Depreciation expense Disposals Carrying amount at the end of the year Note 10: Security Bonds Office equipment Information Technology Exploration equipment 7,396 - (3,414) - 3,982 37,135 12,214 (17,726) - 31,623 - 53,822 (14,008) - 39,814 Office equipment Information Technology Exploration equipment 3,982 - (3,982) - - 31,623 1,709 (18,784) - 14,548 39,814 - (17,942) - 21,872 Office bond Tenement bonds Note 11: Exploration project acquisition costs Opening balance Project acquisition costs Impairment of acquired exploration projects* Acquisition costs in respect of areas of interest in the exploration phase Consolidated 2019 $ 2018 $ 1,300 90,000 91,300 1,300 100,000 101,300 Consolidated 2019 $ 2018 $ 2,043,350 30,000 (445,000) 1,368,350 675,000 - 1,628,350 2,043,350 *$445,00 has been impaired during the period in relation to the Mt Venn area of interest in order to bring the carrying value of the exploration asset down to the recoverable amount based on an independent valuation report Exploration expenditure is expensed to the statement of profit or loss as incurred and acquisition costs are capitalised as non-current assets. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Where uncertainty exists as to the future viability of certain areas, the value of the area of interest is written off or provided against. The carrying value of capitalised exploration expenditure is assessed for impairment at each area of interest whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amounts. An impairment exists when the carrying amount of an asset or area of interest exceeds its estimated recoverable amount. The asset or area of interest is then written down to its recoverable amount. Any impairment losses are recognised in the profit or loss account. 41 Magmatic Resources Limited ABN 32 615 598 322 Project acquisition costs The project acquisition costs of $30,000 in the 2019 financial year were in relation to the acquisition of Landslide Investments Pty Ltd, the owner of the Yamarna South tenement. In consideration for the acquisition of E38/2918 the Company has agreed to the following payment structure with Landslide Investment’s shareholder (the seller): Consideration • Payment of A$20,000 in cash and A$10,000 worth of ordinary fully paid MAG shares; The above transaction was completed on 9 October 2018. The Company paid $20,000 in cash, and satisfied the share based payment of A$10,000 MAG shares by the issue of 362,942 fully paid ordinary shares at $0.0276 per share. The number of issued shares was arrived at by calculation based on a 30-day Volume Weighted Average Price during the 30 days preceding 23 March 2018, the date the offer to purchase was made and accepted, to the value of $40,000 as per the Agreement and was agreed by both Magmatic and the seller. The project acquisition costs of $675,000 in the 2018 financial year were in relation to the acquisition of the Mt Venn tenement. In consideration for the acquisition of E38/2961 the Company has agreed the following payment structure with Montezuma (the seller): Consideration • Contingent Consideration • Payment of A$250,000 in cash and A$425,000 in ordinary fully paid MAG shares on acquisition; Should Magmatic define a JORC 2012 Mineral Resource of 20Mt @ >= 1% CuEq at E38/2961, Magmatic will pay to Montezuma A$350,000 in cash and A$350,000 in ordinary fully paid MAG shares; Should Magmatic make a Decision to Mine at E38/2961, Magmatic will pay to Montezuma A$350,000 in cash and A$350,000 in ordinary fully paid MAG shares; Montezuma will retain a 2.0% Net Smelter Royalty (“NSR”) on production at E38/2961. Magmatic has been granted a buyback option over the NSR which can be exercised at any time in return for an A$5,000,000 cash payment to Montezuma. Magmatic must expend a minimum of A$500,000 on exploration at E38/2961 within the first 18 months following acquisition. Should Magmatic not reach the required expenditure, Magmatic can elect to pay to Montezuma the difference between actual incurred expenditure and A$500,000 or Montezuma will regain tenure at E38/2961. • • • On 18 April 2019, the Group signed an amendment with Montezuma by which the above A$500,000 minimum expenditure clause would be removed and the Group would allot 2,000,000 options to the seller, exercisable at $0.03 expiring 5 years from the date of allotment. Refer to Note 13 for further details. Note 12: Trade and other payables Current Trade and other payables Trade creditors * Other creditors Goods and services tax payable JOGMEC – Funds Received in Advance** Consolidated 2019 $ 224,713 625,452 4,448 47,193 901,806 2018 $ 160,301 75,527 4,412 290,774 531,015 * Trade payables are non-interest bearing and are normally paid on 30 day terms. ** JOGMEC can earn up to a 51% interest in two exploration tenements EL7427 and EL7676 owned by the Company, located in East Lachlan NSW known as the Parkes Project by funding up to $3,000,000 of exploration expenditure. See Note 23 for details. Non-Current Trade and other payables Stamp Duty Payable Consolidated 2019 $ - - 2018 $ 126,527 126,527 42 Magmatic Resources Limited ABN 32 615 598 322 Note 13: Issued capital (a) Ordinary shares issued Consolidated 2019 $ 2018 $ 117,242,568 (2018: 92,020,485) ordinary shares 6,733,855 5,838,182 Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the parent entity, ordinary shareholders rank after all creditors and are fully entitled to any proceeds on liquidation. (b) Movements in ordinary share capital: Details Date Balance as at 30 June 2017 4 August 2017 29 March 2018 2 May 2018 Issue of shares Conversion of “A” class performance shares Issue of shares Number of shares 80,000,000 250,000 8,000,000 3,770,485 $ 3,763,182 50,000 1,600,000 425,000 Balance as at 30 June 2018 92,020,485 5,838,182 31 August 2018 8 October 2018 Renounceable entitlements issue Landslide Investments Vendor Consideration Capital Raising Expenses 24,859,141 362,942 994,365 10,000 (108,692) Balance as at 30 June 2019 117,242,568 6,733,855 (c) Movements in Class A Performance shares Class A Performance shares: Beginning of the financial year Issued during the year Converted to fully paid ordinary shares during the year Balance at end of financial year (d) Movements in Class B Performance shares Class B Performance shares: Beginning of the financial year Issued during the year Expired during year Balance at end of financial year Number of performance shares 2019 2018 - - - - 8,000,000 - (8,000,000) - Number of performance shares 2019 2018 8,000,000 - (8,000,000) 8,000,000 - - - 8,000,000 43 Magmatic Resources Limited ABN 32 615 598 322 (e) Movements in share options 2019 Weighted average exercise price 2018 Weighted average exercise price Number of Options Number of Options Listed Options to acquire ordinary fully paid shares at $0.30 on or before 17 May 2020: Beginning of the financial year Converted from Listed Issued during the year Expired during the year Balance at end of financial year 17,980,613 - - 17,980,613 Listed Options to acquire ordinary fully paid shares at $0.10 on or before 30 August 2021: Beginning of the financial year ***Issued during the year Expired during the year Balance at end of financial year - 26,859,141 - 26,859,141 2019 0.30 - - 0.30 - 0.10 - 0.10 17,980,613 - - 17,980,613 - - - - 2018 0.30 - - 0.30 - - - - Number of Options Weighted average exercise price Number of Options Weighted average exercise price *Unlisted Options to acquire ordinary fully paid shares on or before 11 May 2018: Beginning of the financial year Issued during the year Expired during the year Balance at end of financial year *Unlisted Options to acquire ordinary fully paid shares on or before 11 May 2019: Beginning of the financial year Issued during the year Expired during the year Balance at end of financial year *Unlisted Options to acquire ordinary fully paid shares on or before 11 May 2020: Beginning of the financial year Issued during the year Expired during the year Balance at end of financial year **Unlisted Options to acquire ordinary fully paid shares on or before 29 May 2024: Beginning of the financial year Issued during the year Expired during the year Balance at end of financial year - - - - - - - - 2,500,000 - (2,500,000) - 2,500,000 - (2,500,000) - 2,500,000 - - 2,500,000 - 2,000,000 - 2,000,000 0.20 - 0.20 - 0.205 - - 0.205 - 0.03 - 0.03 2,500,000 - - 2,500,000 2,500,000 - - 2,500,000 - - - - 0.20 - 0.20 - 0.20 - - 0.20 0.205 - - 0.205 - - - - 44 Magmatic Resources Limited ABN 32 615 598 322 *Unlisted Options exercisable at a price which is the greater of $0.20 or a 5% discount to the 20 day volume weighted average price of shares on ASX. On the assumption that the Options will be exercised on expiry, a Monte Carlo simulation has been prepared in order to assess the higher of the 5% discount to the 20 VWAP or 20 cents for the Options at expiry for the Tranche I, Tranche 2 and Tranche 3 Options. The following exercise prices result: Tranche 1: 20 cents (20 cents was the higher of the two) Monte valuation =19.3 cents. These options have expired. Tranche 2: 20 cents (20 cents was the higher of the two) Monte valuation = 19.7 cents. These options have expired. Tranche 3: 20.5 cents (5% discount to the 20 Day VWAP was higher of the two) ** During the year, the Group issued options with the fair value of $42,898 to Element 25 Limited (formerly Montezuma) as described in Note 11 which vested immediately. The options were valued using a Black-Scholes option pricing model using the following inputs: Expected volatility Fair value per option Grant date share price Dividend Yield Exercise Price Interest Rate Option Life 7 May 2019 $0.03 95% 5.12 years 0.00% 1.07% $0.0214 ***During the year the announced a rights issue where 1 free attaching option would be issued for every one share subscribed for, resulting in 24,859,141 free attaching options issued. In addition to this, 2,000,000 options were issued to the broker as part of the transaction. The fair value of the service provided was not able to be estimated, therefore a Black-Scholes model was used to fair value these options using the following inputs: Grant date share price Exercise Price Expected volatility Option Life Dividend Yield 30 July 2018 $0.10 95% 3.09 years 0.00% Interest Rate 0.96% Fair value per option $0.022 The share-based payment expense of $45,148 has been offset against issued capital as a capital raising cost. Note 14: Reserves Capital Restructure reserve Opening balance Expense for the year Closing balance Option reserve Opening balance Share based acquisition cost Share based expense for year Share based capital raising costs Closing balance Nature of reserves: (a) Capital restructure reserve Consolidated 2019 $ 2018 $ 250 - 250 250 - 250 Consolidated 2019 $ 2018 $ 3,068,452 - 42,898 45,148 4,668,452 (1,600,000) - - 3,156,749 3,068,452 The capital restructure reserve arises from the acquisition of Modeling Resources Pty Ltd (b) Option reserve The option reserve represents share compensation used to record the value of equity benefits provided to consultants and directors as part of their remuneration and to the vending shareholders of the Mt Venn project who were issued options in consideration for their waiver of the Company’s minimum exploration expenditure commitments. 45 Magmatic Resources Limited ABN 32 615 598 322 Note 15: Financial instruments (a) Capital risk management Prudent capital risk management implies maintaining sufficient cash and marketable securities to ensure continuity of tenure to exploration assets and to be able to conduct the Group’s business in an orderly and professional manner. The Board monitors its future capital requirements on a regular basis and will when appropriate consider the need for raising additional equity capital or to farm-out exploration projects as a means of preserving capital. The Board currently has a policy of not entering into any debt arrangements. (b) Categories of financial instruments The Group’s principal financial instruments comprise of cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. It is, and has been throughout the year, the Group’s policy that no trading in financial instruments shall be undertaken during the year. (c) Financial risk management objectives The Group is exposed to market risk (including interest rate risk and equity price risk), credit risk and liquidity risk. The main risks arising from the Group’s financial instruments are interest rate risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. (d) Market risk Equity price risk sensitivity analysis There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous period. (i) Interest rate risk management All cash balances attract a floating rate of interest. Excess funds that are not required in the short term are placed on deposit for a period of no more than 3 months. The Group’s exposure to interest rate risk and the effective interest rate by maturity periods is set out below. Interest rate sensitivity analysis As the Group has no interest bearing borrowings, its exposure to interest rate movements is limited to the amount of interest income it can potentially earn on surplus cash deposits. At 30 June 2019, if interest rates had changed by + 50 basis points and all other variables were held constant, the Group’s loss would have been $1,514 (2018: $43) lower as a result of higher interest income on cash and cash equivalents. If interest rates dropped on average – 50 basis points then the Group may not have earned any interest income which would have increased the Group’s loss by $1,514 (2018: $43). (e) Credit risk management Credit risk relates to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from any defaults. (f) Liquidity risk management Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to ensure continuity of tenure to exploration assets and to be able to conduct the Group’s business in an orderly and professional manner. Cash deposits are only held with major financial institutions. 2019 Weighted Average Interest Rate Less than 1 month 1-3 months 3 months – 1 year 5 + years Financial assets Cash and cash equivalents – non - interest bearing Cash and cash equivalents – interest bearing Trade and other receivables n/a 0.03% n/a $ 132,343 101,088 108,561 341,992 $ - - - - $ - - - - Financial liabilities Trade and other payables n/a 406,020 406,020 396,575 396,575 99,212 99,212 $ - - - - - - 46 Magmatic Resources Limited ABN 32 615 598 322 2018 Financial assets Cash and cash equivalents – non - interest bearing Cash and cash equivalents – interest bearing Trade and other receivables n/a 0.05% n/a Weighted Average Interest Rate $ 75,525 477,959 89,551 643,035 Financial liabilities Trade and other payables Borrowings n/a 531,015 531,015 Less than 1 month 1-3 months 3 months – 1 year $ - - - - - - $ - - - - 126,527 126,527 $ - - - - - - The directors consider that the carrying value of the financial assets and financial liabilities are recognised in the consolidated financial statements approximate their fair values. Note 16: Commitments and contingencies In order to maintain an interest in the exploration tenements in which the Group is involved, the Group is committed to meet the conditions under which the tenements were granted. The timing and amount of exploration expenditure commitments and obligation of the Group are subject to the minimum expenditure commitments over the life of the licenses, required as per the Mining Act 1978, as amended, and may vary significantly from the forecast based upon the results of the work performed which will determine the prospectivity of the relevant area of interest. Currently, the minimum expenditure commitment for the granted tenements are $264,599 (2018: $278,839). Exploration Commitments: Within one year After one year but not more than 5 years More than 5 years Lease Commitments – West Perth head office: Within one year After one year but not more than 5 years More than 5 years Contingent liabilities 2019 $ 2018 $ 42,391 222,208 - 264,599 20,000 - - 284,599 33,975 244,264 - 278,839 11,776 - - 290,615 From time to time the Company may be party to claims from suppliers and service providers arising from operations in the ordinary course of business. As at the date of this report there are no claims or contingent liabilities that are expected to materially impact, either individually or in aggregate, the Company’s financial position or results from operations, other than as set out below. Mt Venn project Pursuant to the Purchase agreement (details refer Note 11), the Group has the following deferred consideration obligations with respect to the Mt Venn project: Event Consideration Relevant condition (if any) Performance hurdle 1 Performance hurdle 2 $350,000 cash; and $350,000 in ordinary fully paid Magmatic shares $350,000 cash; and $350,000 in ordinary fully paid Magmatic shares Magmatic defining a JORC 2012 Mineral Resource of 20Mt @>= 1% CuEq Magmatic making a Decision to Mine 47 Magmatic Resources Limited ABN 32 615 598 322 Event Consideration Relevant condition (if any) Royalty payment 2% Net Smelter Royalty (NSR) on production Magmatic has been granted a buyback option over the NSR in return of a payment of $5,000,000 The consideration will become due and payable in the event that the relevant conditions are met. As at the reporting date, the conditions in respect of each of the items have not been met and therefore the amounts are recognised as contingent liabilities. In order to maintain rights to tenure to its mineral tenements, the Company is required to complete minimum exploration expenditure, which if not completed in the calendar year then continued tenure to the projects could be in jeopardy. Note 17: Key management personnel disclosures (a) Directors At the date of this report the directors of the Company are: D Berrie – Non-Executive Chairman D Richardson – Managing Director M Norris – Non-Executive Director A Viner – Non-Executive Director There were no changes of the key management personnel after the reporting date and the date the financial report was authorised for issue, other than the appointment of Andrew Viner listed above. (b) Key management personnel At the date of this report the other Key management personnel of the Company are: M Franklin (appointed 1 June 2019), Chief Financial Officer I Wowesny (appointed 1 December 2017, resigned 31 May 2019)) Chief Financial Officer and Company Secretary (c) Key management personnel compensation Short-Term Post-employment Share-based payments Termination benefits Consolidated 2019 $ 427,756 42,038 - 25,000 494,794 2018 $ 366,974 30,507 - - 397,481 Detailed remuneration disclosures of directors and key management personnel are in pages 19 to 20 of this report. Note 18: Subsidiaries Name of entity Country of incorporation Class of shares Equity holding Modeling Resources Pty Ltd Landslide Investments Pty Ltd Australian Gold and Copper Ltd Australia Australia Australia Ordinary Ordinary Ordinary 2019 % 100 100 100 2018 % 100 - - 48 Magmatic Resources Limited ABN 32 615 598 322 There were no transactions between Magmatic Resources Limited and its controlled entities during the financial year other than intercompany loan funding to support Landslide Investments Pty Ltd of $30,000 (2018: $2,420,000 to support Modelling Resources operations). There were no loans to individuals or members of key management personnel during the financial year or the previous financial year. Note 19: Reconciliation of loss after income tax to net cash outflow from operating activities a) Reconciliation of loss from ordinary activities after income tax to net cash outflow from operating activities Net loss for the year after income tax (1,993,025) (2,533,870) Consolidated 2019 $ 2018 $ Share based payment expense Finance cost (equity) Share issue costs Depreciation Exploration asset impairments Movements in working capital (Increase) in other receivables (Increase) in prepayments Increase in trade and other payables 42,898 - - 40,706 445,000 (95,773) (3,150) 322,469 50,000 - - 35,149 - 75,099 (2,661) 195,337 Net cash outflows from operating activities (1,240,875) (2,180,846) b) Non-cash financing and investing activities During the financial year ended 30 June 2019, the Group acquired Landslide Investments Pty Ltd including its Yamarna project for $30,000 cash and $10,000 in Magmatic Resources shares (as per note 11). The share consideration component of this transaction is not reflected in the statement of cashflows. Note 20: Parent Entity Disclosures Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 2019 $ 122,150 1,628,300 1,750,451 2018 $ 171,895 5,392,112 5,564,007 347,542 347,542 89,246 89,246 1,402,909 5,474,761 6,693,380 3,196,974 (8,487,445) 5,837,932 3,068,703 (3,431,874) 1,402,909 5,474,761 49 Magmatic Resources Limited ABN 32 615 598 322 Financial performance Loss for the year Other comprehensive income/(loss) Total comprehensive income/(loss) Note 21: Events after the reporting date (1,022,528) (487,898) (1,510,426) (717,448) - (717,448) The Company issued a short form prospectus dated 13 September 2019 offering to transfer on 18 October 2019 117,242,568 shares in its fully owned subsidiary Australian Gold and Copper Ltd (AGC) on an in-specie distribution basis to the shareholders on record on 17 October 2019 in exchange for the Company’s New South Wales based exploration licences. The general meeting of shareholders at which this offer will be put to a vote is scheduled for 15 October 2019 and full details of this proposed transaction are contained in the notice of that meeting which was released to the market on 13 September 2019. On 16 September 2019 Andrew John Viner was appointed a Director of the Company. Subsequent to year end, the Company received $350,000 as a result of unsecured Director and major shareholder loans made to the Company. Other than those, there has not been any matter or circumstance that has arisen after reporting date that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. Note 22: Auditor’s remuneration The auditors of the Group are BDO Audit (WA) Pty Ltd Assurance services BDO Audit (WA) Pty Ltd Audit and review of financial statements Total remuneration for audit services Total auditor’s remuneration Consolidated 2019 $ 2018 $ 28,077 28,077 28,077 33,765 33,765 33,765 Note 23: Interest in jointly controlled operation The Group entered into a Joint Venture (JV) with Japan Oil, Gas and Metals National Corporation (JOGMEC), which commenced effective 30 March 2017. JOGMEC can earn up to a 51% interest in two exploration tenements, EL7427 and EL7676, owned by the Company, located in East Lachlan, NSW, Australia, known as the Parkes Project (Project) by funding up to $3,000,000 of exploration expenditure. The Parkes JV is only the fifth JV JOGMEC has in Australia. The Project is prospective for copper/gold porphyry. Key terms of the JV are set out below:   JOGMEC has the right to earn a 51% interest in the Parkes Project by funding $3,000,000 of exploration expenditure on the Project tenements over a period of up to 3 years. JOGMEC is required to spend a minimum of $300,000 before withdrawing from the Agreement.  MAG to act as Operator of the project on behalf of the parties during the JV until JOGMEC becomes a majority owner at which point the Operator shall be appointed by JOGMEC.  JOGMEC has the right to assign its interest in the agreement to Japanese company(s) (this is in line with JOGMEC’s mission, which is to help source and de-risk opportunities for Japanese corporations). 50 Magmatic Resources Limited ABN 32 615 598 322 Directors’ declaration 1. In the opinion of the directors of Magmatic Resources Limited (the “Company”): a. b. c. the accompanying financial statements and notes are 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 performance for the financial year then ended; and ii. complying with Accounting Standards, Corporations Regulations 2001, professional reporting requirements and other mandatory requirements. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. 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 year ended 30 June 2019. This declaration is signed in accordance with a resolution of the Board of Directors. D Berrie Chairman Perth, Western Australia 26 September 2019 51 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of Magmatic Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Magmatic Resources 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. Material uncertainty related to going concern We draw attention to Note 1 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 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 Audit (WA) Pty Ltd 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. 52 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Recoverability of Exploration and Evaluation Assets Key audit matter How the matter was addressed in our audit At 30 June 2019 the carrying value of the capitalised Our procedures included, but were not limited to: exploration and evaluation assets was disclosed in Note 11. (cid:127) Obtaining a schedule of the areas of interest held As the carrying value of the capitalised exploration and by the Group and assessing whether the rights to evaluation assets represents a significant asset of the Group, tenure of those areas of interest remained current we considered it necessary to assess whether any facts or at balance date; circumstances exist to suggest that the carrying amount of this asset may exceed its recoverable amount. (cid:127) Considering the status of the ongoing exploration programmes in the respective areas of interest by Judgement is applied in determining the treatment of holding discussions with management, and exploration expenditure in accordance with Australian reviewing the Group’s exploration budgets, ASX Accounting Standard AASB 6 Exploration for and Evaluation of announcements and director’s minutes; Mineral Resources. In particular: · · · Whether the conditions for capitalisation are satisfied; Which elements of exploration and evaluation expenditures qualify for recognition; and Whether facts and circumstances indicate that the exploration and expenditure assets should be tested for impairment. (cid:127) (cid:127) (cid:127) Considering whether any such areas of interest had reached a stage where a reasonable assessment of economically recoverable reserves existed; Considering whether any facts or circumstances existed to suggest impairment testing was required; and Assessing the adequacy of the related disclosures in Notes 1(u) and 11 to the Financial Statements. 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. 53 Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located 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 pages 18 to 22 of the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Magmatic Resources 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 Audit (WA) Pty Ltd Dean Just Director Perth, 26 September 2019 54 Magmatic Resources Limited ABN 32 615 598 322 Additional Shareholder Information The following additional information is current as at 24 September 2019. CORPORATE GOVERNANCE: The Company’s Corporate Governance Statement is available on the company’s website at www.magmaticresources.com/corporate-governance SUBSTANTIAL SHAREHOLDERS: Holder Name BILLINGUAL SOFTWARE PTY LTD GOLD FIELDS AUSTRALIA PTY LTD DAVTHEA PTY LTD Holding % IC 32,188,823 17,600,000 12,669,044 27.45% 15.01% 10.81% Ordinary Shares: Holdings Ranges 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - Totals Holders 17 21 97 179 77 391 Total Units 3,907 85,541 901,243 7,482,490 108,769,387 117,242,568 % 0.00 0.07 0.77 6.38 92.77 100.00 There are 58 shareholders with less than a marketable parcel. VOTING RIGHTS Each fully paid ordinary share carries voting rights of one vote per share. THE TOP 20 HOLDERS OF ORDINARY SHARES ARE: Ranking Holder 1 BILLINGUAL SOFTWARE PTY LTD GOLD FIELDS AUSTRALIA PTY LTD DAVTHEA PTY LTD MR DAVID RICHARDSON + MRS RYOKO RICHARDSON MR NEVRES CRLJENKOVIC ELEMENT 25 LIMITED SANCOAST PTY LTD SERCA SUPERFUND PTY LTD MR ALAN JOHN TATE DUERDEN INVESTMENTS PTY LIMITED EXECUTIVE RISK SOLUTIONS PTY LTD THOMAS ASSET DISCOVERY LIMITED GECKO RESOURCES PTY LTD GOSOJO PTY LTD MR ALAN GOODFELLOW MR PETER BENJAMIN DUERDEN + MRS EMMA LOUISE DUERDEN 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Shares Held 32,188,823 17,600,000 12,669,044 5,448,751 5,025,000 3,770,485 3,000,000 3,000,000 2,317,572 1,704,750 1,470,588 1,107,059 1,000,000 1,000,000 900,000 835,531 % 27.45 15.01 10.81 4.65 4.29 3.22 2.56 2.56 1.98 1.45 1.25 0.94 0.85 0.85 0.77 0.71 55 Magmatic Resources Limited ABN 32 615 598 322 17 18 19 20 CRLJENKOVIC SUPER FUND PTY LTD SHOWCITY PTY LTD ERIC MCKENZIE NOMINEES PTY LTD MR ALAN SCHWARTZ Total Total remaining holders 823,250 800,000 784,313 500,000 95,945,166 21,297,402 LISTED OPTIONS EXERCISABLE AT $0.30 EXPIRING 17 MAY 2020: Holdings Ranges Holders Total Units % 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - Totals 1 97 24 106 35 263 5 482,500 164,059 3,389,779 13,944,270 17,980,613 There are 239 shareholders with less than a marketable parcel. THE TOP 20 HOLDERS OF LISTED OPTIONS EXPIRING 17 MAY 2020 ARE: 1 2 3 3 5 6 7 8 8 10 10 12 13 14 15 16 16 16 16 16 16 16 16 16 Holder MELSHARE NOMINEES PTY LTD SERCA SUPERFUND PTY LTD MR MALCOM NORRIS SERCA SUPERFUND PTY LTD ZENIX NOMINEES PTY LTD MR IAN STUART FISHER MR THISARA SAHAN ADIKARI ELSTREE CAPITAL PTY LTD JASPER HILL RESOURCES PTY LTD MR IAN RICHARD HOBSON MR GORDON JAMES MR MICHAEL CARABOTT MR PETER ALAN LAWSON BLU BONE PTY LTD MR CHRISTOPHER LESLIE LAWSON BEIRNE TRADING PTY LTD CONTINENTAL GLOBAL INVESTMENT LIMITED GOSOJO PTY LTD HANWOOD LODGE PTY LTD KAHALA HOLDINGS PTY LTD SANCOAST PTY LTD MR ALAN SCHWARTZ WALLCLIFFE COTTAGES PTY LTD WYTHENSHAWE PTY LTD Total Total remaining holders Holding 2,837,496 1,500,000 750,000 750,000 500,000 428,627 385,000 375,000 375,000 350,000 350,000 329,997 300,000 256,900 255,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 0.70 0.68 0.67 0.43 81.83 18.17 0.00 2.68 0.91 18.85 77.55 100.00 % 15.78 8.34 4.17 4.17 2.78 2.38 2.14 2.09 2.09 1.95 1.95 1.84 1.67 1.43 1.42 1.39 1.39 1.39 1.39 1.39 1.39 1.39 1.39 1.39 11,993,020 5,987,593 66.70 33.30 56 Magmatic Resources Limited ABN 32 615 598 322 LISTED OPTIONS EXERCISABLE AT $0.10 EXPIRING 30 AUGUST 2021: Holdings Ranges Holders Total Units % 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - Totals 6 17 10 34 39 106 1,515 53,868 79,562 1,497,580 25,226,616 26,859,141 0.01 0.20 0.30 5.58 93.92 100.00 There are 58 shareholders with less than a marketable parcel. THE TOP 20 HOLDERS OF LISTED OPTIONS EXPIRING 30 AUGUST 2021 ARE: Holder MR NEVRES CRLJENKOVIC MR DAVID RICHARDSON + MRS RYOKO RICHARDSON SERCA SUPERFUND PTY LTD CRLJENKOVIC SUPER FUND PTY LTD 1,250,000 1 2 3 4 5 5 7 8 9 MR DANIEL ELLIDGE FIRST INVESTMENT PARTNERS PTY LTD DAVTHEA PTY LTD MR PETER RAYMOND MURRELL ACTIVEST CAPITAL PTY LTD 10 BULL EQUITIES PTY LTD 11 MR GABRIEL HEWITT 12 MR GRAHAM ROBERT FOREMAN 12 GECKO RESOURCES PTY LTD 12 GOSOJO PTY LTD 15 MR MARIO IERARDI + MRS POPPY IERARDI 16 MS CHUNYAN NIU 17 MR ALAN GOODFELLOW 18 CEDAR RIDGE PTY LTD 19 MR PAUL JOSEPH MASSARA 20 MR MICHAEL DICKSON 20 MR RICHARD PIEKARSKI + MRS WANDA PIEKARSKI Holding 5,000,000 % 18.62 4,918,751 18.31 1,500,000 1,000,000 1,000,000 675,000 611,186 600,000 575,000 526,666 500,000 500,000 500,000 483,000 454,545 450,000 422,000 380,000 300,000 300,000 5.58 4.65 3.72 3.72 2.51 2.28 2.23 2.14 1.96 1.86 1.86 1.86 1.80 1.69 1.68 1.57 1.41 1.12 1.12 Total Total remaining holders 21,946,148 81.71 4,912,993 18.29 57 Magmatic Resources Limited ABN 32 615 598 322 UNQUOTED EQUITY SECURITIES Number Number of Holders +Class Escrow Period Holders of more than 20% 2,500,000 2,000,000 1 1 Unlisted options* N/A Gold Fields Aust. Pty Ltd (2,500,000 options) Unlisted options** N/A Element 25 Limited (formerly Montezouma) (2,000,000 options) *Exercisable at a price which is the greater of $0.20 or a 5% discount to the 20 day volume weighted average price of shares on ASX and expiring as follows: 2,500,000 options expiring 11 May 2020. **Exercisable at $0-03 on or before 29 May 2024. Use of Funds The entity has used the cash and assets in a form readily convertible into cash in a way that is consistent with its business objectives. There is no current buy-back. Tenement Listing Project Area Wellington North Myall Parkes Wellington North Moorefield Parkes Wellington North Moorefield Yamarna Yamarna Yamarna Mt Venn Tenement Details % Held EL6178 EL6913 EL7424 EL7440 EL7675 EL7676 EL8357 EL8669 E38/2918 E38/3327 E38/3351 E38/2961 100 100 100 (subject to 51% JV earn in) 100 100 100 (subject to 51% JV earn in) 100 100 100 100 100 100 58