Major Drilling Group International
Annual Report 2015

Plain-text annual report

A N N U A L R E P O R T 2 0 1 5 Middle Island RESOURCES LIMITED MIDDLE ISLAND RESOURCES LIMITED ABN 70 142 361 608 Annual Report for the period ended 30 June 2015 C O N T E N T S MANAGING DIRECTOR’S OVERVIEW ------------------------------------------------------------------ 1 OPERATIONS OVERVIEW ---------------------------------------------------------------------------------- 3 DIRECTORS’ REPORT --------------------------------------------------------------------------------------- 7 AUDITOR’S INDEPENDENCE DECLARATION ------------------------------------------------------- 15 CORPORATE GOVERNANCE STATEMENT ----------------------------------------------------------- 16 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ----------------------------------------------------------- 17 CONSOLIDATED STATEMENT OF FINANCIAL POSITION --------------------------------------- 18 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ---------------------------------------- 19 CONSOLIDATED STATEMENT OF CASH FLOWS -------------------------------------------------- 20 NOTES TO THE FINANCIAL STATEMENTS ---------------------------------------------------------- 21 DIRECTORS’ DECLARATION ---------------------------------------------------------------------------- 40 INDEPENDENT AUDITOR’S REPORT ------------------------------------------------------------------ 41 ASX ADDITIONAL INFORMATION -------------------------------------------------------------------- 43 M A N A G I N G D I R E C T O R ’ S O V E R V I E W Dear Fellow Shareholders, Although challenged by circumstances largely outside our control, on behalf of the Directors, I have pleasure in presenting our 2015 Annual Report, which provides a summary of the past year’s activities and future opportunities. Equity markets showed little or no overall improvement during FY15 and conditions for junior resource explorers remain extremely challenging. This situation has necessitated further cost reduction measures, which have variously included closing the Niger office and exploration camps, regrettably terminating the employment of all associated staff, selling or redeploying equipment, relocating the Burkina Faso office to smaller premises, implementing further redundancies in Burkina Faso, subletting half of the Company’s modest office in West Perth, reducing administrative salaries, and implementing the further sharing of Perth administrative functions and costs. Although redundancies, due diligence costs and legal fees have negatively impacted our 2014-15 financial result, the overall outcome is a leaner organisation with a considerably lower fixed cost profile. The Company’s cash balance was also supplemented during FY15 by the disposal of its containerised sample preparation facility in Burkina Faso and an R&D Tax Incentive refund. Having completed and consolidated actions to minimise expenditure, the Company has continued to primarily focus on capitalising on the weak sentiment to consummate a project or corporate transaction that will positively enhance Middle Island’s longer term future. This search has been restricted to lower risk jurisdictions in order to reduce shareholder exposure to some of the sovereign issues, both real and perceived, that have confronted the Company to date. Some 270 project and corporate opportunities have now been reviewed, of which eight were shortlisted. Technical due diligence has been undertaken on three of these, and full technical, legal and financial reviews have been completed on the best opportunity. In the latter case, the Company is now finalising documentation with a view to concluding a transaction on what the Directors consider is an advanced project of significant potential. Assuming a transaction can be successfully consummated (which is still by no means certain), in June 2015 the Company launched a modest but highly successful, non-renounceable rights issue, fully underwritten by the Directors. The Rights Issue closed subsequent to year’s end. Proceeds will ensure initial exploration on the proposed new project is adequately funded and, if the preferred transaction is not consummated, to provide funds that will be applied to transacting and exploring an identified alternative project. The share issue was structured to provide every possible opportunity for our extraordinarily loyal and patient shareholders to be well-positioned to take maximum advantage of the contemplated transaction (or any future opportunity the Company may elect to pursue). This was the first occasion since the IPO in 2010 that Middle Island has sought financial support from shareholders. The response has been overwhelming, for which the Directors are sincerely appreciative. In relation to the 100%-owned Reo gold project in Burkina Faso, the Company’s preferred position remains a partial divestment to fund the resource definition drilling and feasibility stages of the project, and this process is continuing. As an alternative, Middle Island recommencing a more measured program toward a staged, lower cost, heap leach development scenario in its own right, is still an option under review. The extent and duration of this campaign would, however, variously be dependent on new project acquisitions, tenure status, the outcome of October 2015 elections in Burkina Faso and further improvements in equity markets. I again sincerely thank the Board and continuing technical and administration teams at Middle Island Resources for their dedication over the year. I again acknowledge the stoicism and understanding of further colleagues who have accepted redundancies and salary reductions during FY15. They have individually and collectively made a significant contribution to Middle Island and their loyalty is unquestioned, making these decisions all the harder. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 1 M A N A G I N G D I R E C T O R ’ S O V E R V I E W Figure 1. Middle Island Resources project locations. I particularly wish to acknowledge the services of former exploration manager, Andrew Chubb, who has overseen the systematic and technically very successful programs we have undertaken over the past 5 years. Andrew remains available to the Company on a contract basis when required. In 2015-16, the Board looks forward to rewarding fellow shareholders with one or more exciting acquisitions that will breathe new life and prosperity into the Company’s fortunes. Yours faithfully, Rick Yeates Managing Director 2 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 O P E R A T I O N S O V E R V I E W CORPORATE Finance Middle Island held cash of approximately A$565,000 and no debt as at 30 June 2015. During FY15 the Company’s cash balance was supplemented by an R&D Tax Incentive refund of $243,000. The R&D refund represented a partial reimbursement of Middle Island’s expenditure in relation to due diligence activities on the Samira Hill gold mine in Niger, West Africa, resulting from the development of a customised and reusable mine optimisation methodology. The Company also disposed of its containerised sample preparation facility in Burkina Faso, realising US$200,000 (A$208,000) in the process, relocated the Burkina Faso office to smaller premises, implemented further redundancies in Burkina Faso, sublet half of the Company’s modest office in West Perth, reduced administrative salaries, and implemented the further sharing of administrative functions and costs. Subsequent to the end of the financial year, Middle Island successfully completed a A$503,000 (before costs) equity capital raising, comprising a non-renounceable 1-for-1 rights issue to all existing shareholders, fully underwritten by the Directors and sub-underwritten by major shareholders. The proceeds of the issue are planned to be applied to the possible acquisition and exploration of a new project acquisition, in addition to working capital. If the current priority transaction is not consummated as intended, the funds will then be applied to transacting and exploring an identified and short-listed alternative project opportunity, on which technical due diligence has been completed. Aside from expenditure related to redundancies, due diligence activities and legal documentation on recent shortlisted project acquisition opportunities, your Company has continued to implement and consolidate incremental cost savings during FY15 in order to conserve the Company’s cash. In the absence of positive progress on the status of the Deba & Tialkam permits in Niger, and in view of the significant deterioration in the sovereign risk profile in that country, Middle Island closed its Niger office, regrettably making the remaining staff redundant, and has sold or redeployed the associated field and office equipment. At the end of FY15, the Company had one fulltime executive (on a significantly reduced salary), two part-time administrative staff in Perth (again on reduced salaries) and a further two part-time national staff in Burkina Faso (representing the minimum required to preserve a local registration). Whilst opportunities for further cost savings are continuing to be pursued, Middle Island management considers that these are likely to be incremental only. Strategy Middle Island’s strategic focus remains two-fold; to identify an appropriate partner to invest in resource definition drilling and feasibility studies at the Reo gold project in Burkina Faso, and to consummate a new project transaction that will generate significant additional shareholder and investor interest. Since October 2014, Middle Island has identified and investigated some 270 new project opportunities, primarily within Australia and Africa. The Company shortlisted eight of these opportunities for more detailed review, and technical due diligence was completed on three of these. Full technical, legal and financial due diligence has been successfully completed on the most advanced opportunity, which is currently the subject of final documentation and review. Although taking considerably longer than initially anticipated, your Directors hope to successfully conclude this transaction early in the December quarter of 2015. If successfully concluded as contemplated, the transaction should transform the Company’s fortunes. It is stressed, however, that legal documentation relating to this proposed transaction is still incomplete and there is absolutely no assurance that it will be successfully completed. No meaningful farm-in offers on the Reo project have been forthcoming. However, five entities are still reviewing the data, including two companies that are revisiting the opportunity. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 3 O P E R A T I O N S O V E R V I E W Annual General Meeting The Annual General Meeting of Middle Island was held in Perth on 24 November 2014. All resolutions were overwhelmingly supported by shareholders, with in excess of 99% affirmative votes in each case. REO GOLD PROJECT – BURKINA FASO The Reo gold project in Burkina Faso comprises a 100% interest in seven contiguous permits covering an aggregate area of 1,166km2 lying approximately 150km west of the capital city of Ouagadougou (Figure 2 below). Figure 2. Reo Project permits and prospects superimposed on magnetic image. Exploration Following further deterioration in equity markets during FY15, no exploration was undertaken within the Company’s Reo gold project, with the focus being on identifying an appropriate partner to help fund the project through to feasibility. The Reo gold project remains highly prospective, with significant unfinished resource definition and exploration activities still to be completed. Tenure All Reo project permits remain in good standing. Five companies are still in the process of reviewing technical data on the Reo gold project in Burkina Faso with a view to a possible partial divestment. Given no improvement in equity markets, the Company will leave the project on ‘care and maintenance’ for the immediate future. 4 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 O P E R A T I O N S O V E R V I E W SIRBA GOLD PROJECT – NIGER The Sirba gold project in Niger comprises a 70-100% interest in six semi-contiguous permits and applications, extending over a 100km strike length from the Burkina Faso border in the southwest to the Niger River in the northeast (Figure 3). The project area of 1,319km2 straddles the Samira Hill gold mine and processing plant, located approximately 100km west of the capital city of Niamey. Figure 3. The seven permits comprising the consolidated Sirba project (blue) straddling the Samira Hill gold mine (red). Exploration No exploration has been undertaken within the Sirba project during FY15 due to the further deterioration in equity markets and the high level of sovereign risk currently associated with Niger. Tenure In August 2014, Middle Island received written advice from the Niger Mines Ministry that extension applications for the Deba and Tialkam permits had been refused. Middle Island is confident that the Ministry’s decision is incorrect and inconsistent with the law. The Company appealed the decision via an Administrative Application (Recours Gracieux) and lodged new applications for the Deba and Tialkam permits in its own right. No advice has been received on the outcome of either the Administrative Application or the new permit applications during FY15. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 5 O P E R A T I O N S O V E R V I E W Similarly, renewal applications for the Dogona and Boulkagou JV permits, in which Middle Island is earning a 90% interest, are still pending. These applications were lodged in August 2014 on behalf of JV partner Cassidy Gold Limited. Middle Island also elected to withdraw from its farm-in agreement with AMI Resources Inc. on the Boksay permit during FY15. While still prospective, much of the Boksay permit lies under sand dunes and thick, saturated alluvial deposits associated with palaeo-valleys of the Niger and Sirba rivers, making exploration challenging and expensive. Given this, Middle Island provided formal notification to AMI of its intention to withdraw from the Boksay farm-in agreement in August 2014. Opportunities to dispose of the Company’s Niger permit interests continue to be pursued. However, given the current investment climate in Niger, the book value of these assets has regrettably been written back to zero. NUON RIVER GOLD PROJECT – LIBERIA Having not identified a suitable partner for the Nuon River gold project in Liberia, the single remaining permit (Zwedru North) was relinquished during FY15. SAFETY & ENVIRONMENTAL PERFORMANCE Health, Safety & Environment No injuries, safety or environmental incidents were recorded at the Company’s projects and premises during FY15. Social Funding of the Company’s community development initiatives is proportional to exploration expenditure. Given the hiatus in exploration, runoff programs have now all been completed and no further expenditure is budgeted until exploration recommences. Irrespective of this, close contact with our host communities is being maintained to ensure they are kept appropriately informed of our situation and plans. Forward Looking Statements Certain statements made during or in connection with this communication, including, without limitation, those concerning the economic outlook for the mining industry, expectations regarding gold prices, exploration costs and other operating results, growth prospects and the outlook of Middle Island’s operations contain or comprise certain forward looking statements regarding Middle Island’s exploration operations, economic performance and financial condition. Although Middle Island believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes that could result from future acquisitions of new exploration properties, the risks and hazards inherent in the mining business (including industrial accidents, environmental hazards or geologically related conditions), changes in the regulatory environment and other government actions, risks inherent in the ownership, exploration and operation of or investment in mining properties in foreign countries, fluctuations in gold prices and exchange rates and business and operations risks management, as well as generally those additional factors set forth in our periodic filings with ASX. Middle Island undertakes no obligation to update publicly or release any revisions to these forward looking statements to reflect events or circumstances after today’s date or to reflect the occurrence of unanticipated events. 6 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 D I R E C T O R S ’ R E P O R T From left to right: Dennis Wilkins, Richard Yeates, Beau Nicholls, Linton Kirk, Peter Thomas Your directors submit their report on the consolidated entity (referred to hereafter as the Group) which consists of Middle Island Resources Limited and the entities it controlled at the end of, or during, the year ended 30 June 2015. DIRECTORS The names and details of the Company’s directors in office during the year and until the date of this report follow. Each Director was in the office for this entire period unless otherwise stated. Names, qualifications, experience and special responsibilities Peter Thomas, (Non-Executive Chairman) Mr Thomas was a practising solicitor from 1980 until June 2012 specialising in the provision of corporate and commercial advice to explorers and miners. Since the mid-1980s, he has served on the boards of various listed companies. He was the founding chairman of Sandfire Resources NL. He is also non-executive director of ASX-listed Image Resources NL, Meteoric Resources NL and Emu NL. Within the last 2 years he served as a non-executive director of ASX listed Magnetic Resources NL – he resigned that position 16 July 2013. Richard Yeates, (Managing Director) Mr Yeates is a geologist whose professional career has spanned more than 30 years, initially working for major companies such as BHP, Newmont and Amax, prior to co-founding the consulting firm of Resource Service Group (subsequently RSG Global) in 1987, which was ultimately sold to ASX listed consulting firm, Coffey International, in 2006 to become Coffey Mining. Mr Yeates has considerable international experience, having worked in some 30 countries, particularly within Africa and South America, variously undertaking project management assignments, feasibility studies and independent reviews for company listings, project finance audits and technical valuations. Mr Yeates was also responsible for developing and overseeing all marketing and promotional activities undertaken by RSG, RSG Global and Coffey Mining over a 23 year period. Mr Yeates is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM), a Member of the Australian Institute of Geoscientists (AIG) and is a Graduate Member of the Australian Institute of Company Directors (AICD). He currently serves as a non-executive director of ASX 200 nickel producer Western Areas Limited, and a non-executive director of Atherton Resources Limited. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 7 D I R E C T O R S ’ R E P O R T Beau Nicholls, (Non-Executive Director) (Resigned as Executive (Technical) Director and was appointed as Non-Executive Director on 1st February 2014) Beau Nicholls has 20 years in mining and exploration geology, ranging from grass roots exploration management through to mine production environments. He is a Member of the Australian Institute of Geoscientists (AIG) with a proven track record on four continents (Australia, Eastern Europe, Africa and the Americas) and in over 20 countries, Beau has been instrumental in the discovery and/or development of a number of world class deposits. Mr Nicholls also has over 10 year’s international consulting experience with RSG, RSG Global and Coffey Mining, including 3 years as the resident Regional Manager in West Africa. Linton Kirk, (Non-Executive Director) Mr Kirk is a Fellow of the AusIMM whose career variously encompasses mining, earthmoving, contracting, management and consulting activities covering both open pit and underground operations. His operating experience mostly involved him filling the positions of Mining Manager and/or General Manager of gold, iron ore and copper projects in Australia, Zambia, Papua New Guinea, Zimbabwe and Ghana. He has been a fulltime consultant since 1997, servicing projects in some 20 countries. In this capacity he held the position of Manager – Mining Engineering with Global Mining Services then Manager – Mining Engineering and Partner at RSG Global, then, following the sale of RSG Global to Coffey International Limited in 2006, Chief Mining Engineer with Coffey Mining. Since 1997, Mr Kirk has been involved in and/or managed major feasibility studies, technical audits, owner mining studies and mining contract tenders on projects across the globe. Dennis Wilkins, B.Bus, AICD, ACIS (Alternate Director for Beau Nicholls) Mr Wilkins is the founder and principal of DWCorporate Pty Ltd, a private corporate advisory firm servicing the natural resources industry. Since 1994 he has been a director of, and involved in the executive management of, several publicly listed resource companies with operations in Australia, PNG, Scandinavia and Africa. From 1995 to 2001 he was the Finance Director of Lynas Corporation Ltd during the period when the Mt Weld Rare Earths project was acquired by the group. He was also an advisor to Atlas Iron Limited at the time of Atlas’ initial public offering in 2006. Since July 2001 Mr Wilkins has been running DWCorporate Pty Ltd, where he advises on the formation of, and capital raising for, emerging companies in the Australian resources sector. Mr Wilkins is currently a director of Key Petroleum Limited, Mawson West Limited and Shaw River Manganese Limited. Within the last 3 years Mr Wilkins has also been but no longer is a director of Minemakers Limited, Duketon Mining Limited and A1 Consolidated Gold Limited. COMPANY SECRETARY Dennis Wilkins Interests in the shares and options of the Company and related bodies corporate As at the date of this report, the relevant interests of the directors in the shares and options of Middle Island Resources Limited were: Peter Thomas Richard Yeates Beau Nicholls Linton Kirk Dennis Wilkins Ordinary Shares Options over Ordinary Shares 10,800,000 40,000,020 12,600,000 2,139,638 1,000,000 - - - - - 8 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 D I R E C T O R S ’ R E P O R T PRINCIPAL ACTIVITIES During the year the Group carried out exploration on its tenements, reviewed tenement opportunities and applied for or acquired additional tenements with the primary objective of identifying economic gold deposits. It is not the objective of the Group to explore for or seek to identify other economic mineral deposits albeit the Group reserves the right to follow up leads (thrown up by its gold exploration activities) for other commodities where the Board of the Company considers that doing so may add value. DIVIDENDS No dividends were paid or declared during the year. No recommendation for payment of dividends has been made. OPERATING AND FINANCIAL REVIEW Finance Review During the year, total exploration expenditure incurred by the Group amounted to $564,567 (2014: $2,708,598). In line with the Group’s accounting policies, all exploration expenditure, other than acquisition costs, were written off as they were incurred. Other expenditure incurred, net of revenue, amounted to $731,139 (2014: $1,567,283). This resulted in an operating loss after income tax for the year ended 30 June 2015 of $1,295,706 (2014: $4,275,881). At 30 June 2015 cash assets available totalled $564,733. Operating Results for the Year Summarised operating results are as follows: Revenues and losses for the year from ordinary activities before income tax expense 368,872 (1,295,706) 2015 Revenues Results $ $ Shareholder Returns Basic loss per share (cents) Risk Management 2015 2014 (1.0) (3.4) The board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with the risks and opportunities identified by the board. The Group believes that it is crucial for all board members to be a part of this process, and as such the board has not established a separate risk management committee. The board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified by the board. These include the following: • • Board approval of a strategic plan, which encompasses strategy statements designed to meet stakeholders’ needs and manage business risk. Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets. • A risk matrix designed to identify and quantify the various risk factors and implement mitigating strategies accordingly. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Other than as disclosed in this Annual Report, no significant changes in the state of affairs of the Group occurred during the financial year. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 9 D I R E C T O R S ’ R E P O R T SIGNIFICANT EVENTS AFTER THE BALANCE DATE Middle Island Resources Limited announced on 24 June 2015 its intention to undertake a non-renounceable entitlement offer to raise approximately $500,000. The Company subsequently issued 125,856,904 fully paid ordinary shares on 30 July 2015 at an issue price of $0.004 each and raised $503,428 before costs. No matters or circumstances, aside from those disclosed above, have arisen since the end of the year which 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 The Group’s strategy for the coming financial year, in light of market conditions, is to carefully manage exploration expenditure so that the Group has an even more focused approach towards assets that have the potential to deliver early results. There are no expected substantive changes in the entity’s operations. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group is subject to significant environmental regulation in respect to its exploration activities. The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the year under review. REMUNERATION REPORT The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. Principles used to determine the nature and amount of remuneration Remuneration Policy The remuneration policy of Middle Island Resources Limited has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific short term and long term incentives. The board of Middle Island Resources Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain suitable key management personnel to run and manage the Group. The remuneration policy, setting the terms and conditions for the executive directors and other senior executives (if any), was developed by the board. All executives receive a base salary (which is based on factors such as experience), superannuation and a package of options over shares in the Company. The board will review executive packages as and when it considers it appropriate to do so in accordance with its remuneration policy and by reference to the Group’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to reward executives for performance that results in long term growth in shareholder wealth. Executives are also entitled to participate in the employee share and option arrangements. The executive directors and executives receive a superannuation guarantee contribution required by the government of Australia, which was 9.50% for the 2015 financial year (9.50% effective 1 July 2014) but are not entitled to receive any other retirement benefits. All remuneration paid to directors and executives is “valued” at the cost to the Group and expensed. Options are ascribed a “fair value” in accordance with Australian Accounting Standards using the Black Scholes methodology. The board’s policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities, albeit that the non-executive directors are currently remunerated at the lower end of the market rate range. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought as and when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting (currently $300,000). Fees for non-executive directors are not linked to the performance of the Group. 10 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 D I R E C T O R S ’ R E P O R T However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the employee option plan. Performance based remuneration The Group utilises performance based remuneration to attract and motivate employees in the form of options. Where utilised, options are issued but do not vest until certain hurdles have been met. The hurdles are based around future events that will advance the Company towards its objectives within certain prescribed time periods. Company performance, shareholder wealth and key management personnel remuneration No relationship exists between shareholder wealth, key management personnel remuneration and Group performance. Use of remuneration consultants The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2015. Voting and comments made at the Company’s 2014 Annual General Meeting The Company received approximately 99% of “yes” votes on its remuneration report for the 2014 financial year. Details of remuneration Details of the remuneration of the directors and the key management personnel of the Group are set out in the following table: Key management personnel of the Group Short-Term Post Employment Share-based Payments Total Non-Monetary Superannuation Retirement $ $ Benefits $ $ $ Salary & Fees $ 36,530 56,064 180,000 258,333 30,000 135,492 27,397 43,661 - - Directors Peter Thomas 2015 2014 Richard Yeates 2015 2014 Beau Nicholls 2015 2014 Linton Kirk 2015 2014 Dennis Wilkins(1) 2015 2014 - - - - - - - - - - - - 3,470 5,186 17,100 23,896 - - 2,603 4,039 - - 23,173 33,121 - - - - - - - - - - - - - - - - - - - - - - - - 40,000 61,250 197,100 282,229 30,000 135,492 30,000 47,700 - - 297,100 526,671 Total key management personnel compensation 2015 2014 273,927 493,550 (1) Mr Wilkins is not remunerated for his role as alternate director, however, a total of $60,213 (2014: $125,504) was paid to DW Corporate Pty Ltd, a business of which Mr Wilkins is principal. DW Corporate Pty Ltd provided company secretarial, accounting and bookkeeping services to the Group during the year. The amounts paid were at usual commercial rates with fees charged on an hourly basis. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 11 D I R E C T O R S ’ R E P O R T Service agreements Peter Thomas, Non-Executive Chairman: • Term of agreement – Commenced on 2 March 2010, no notice period of termination is required, and no monies are payable on termination. Richard Yeates, Managing Director: • Term of agreement – Commencing 2 March 2010 until terminated. • Annual salary of $300,000 excluding superannuation was reduced to $200,000 from 1 February 2014, and subsequently $180,000 on 1 July 2014. • The agreement may be terminated by the Company giving 12 months’ notice in writing, or by Mr Yeates giving 3 month’s written notice, or applicable shorter periods upon breach of contract by either party. No benefits are payable on termination other than entitlements accrued to the date of termination. Beau Nicholls, Non-Executive Director: • Term of agreement – Beau Nicholls was appointed as non-executive director on 1 February 2014 and from that date was remunerated at the rate of $38,100 per annum. His remuneration was further reduced to $30,000 on 1 July 2014. • The agreement requires no notice period for termination, and no monies are payable on termination. Linton Kirk, Non-Executive Director: • Term of agreement – Commenced on 1 September 2011, no notice period of termination is required, and no monies are payable on termination. Dennis Wilkins, Alternate Director and Company Secretary: • Term of agreement – Commencing 17 March 2010 until terminated in writing by either party, no notice period of termination is required. • Mr Wilkins’ firm, DWCorporate Pty Ltd, is engaged to provide company secretarial and corporate advisory services. Fees are charged on an hourly basis, and all amounts are included in Mr Wilkins’ remuneration. Share-based compensation Options may be issued to key management personnel as part of their remuneration. The Group has a formal policy in relation to the key management personnel limiting their exposure to risk in relation to the securities which actively discourages key management personnel from granting mortgages over securities held in the Group. Equity instruments held by key management personnel Option holdings The numbers of options over ordinary shares in the Company held during the financial year by each director of Middle Island Resources Limited and other key management personnel of the Group, including their personally related parties, are set out below: Balance at start of the year Granted as compensation Exercised Other changes Balance at end of the year Vested and exercisable Unvested DIRECTORS OF MIDDLE ISLAND RESOURCES LIMITED Peter Thomas Richard Yeates Beau Nicholls Linton Kirk Dennis Wilkins 2,000,000 10,000,000 2,500,000 300,000 500,000 - - - - - - - - - - (2,000,000) (10,000,000) (2,500,000) (300,000) (500,000) - - - - - - - - - - - - - - - 12 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 D I R E C T O R S ’ R E P O R T Share holdings The numbers of shares in the Company held during the financial year by each director of Middle Island Resources Limited and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation. DIRECTORS OF MIDDLE ISLAND RESOURCES LIMITED Balance at start of the period Received during the period on the exercise of options Other changes during the period Balance at end of the period Ordinary shares Peter Thomas Richard Yeates Beau Nicholls Linton Kirk Dennis Wilkins 3,200,000 20,000,010 2,900,000 230,000 500,000 - - - - - 7,600,000 10,800,000 20,000,010 40,000,020 9,700,000 12,600,000 1,909,638 500,000 2,139,638 1,000,000 Loans to key management personnel There were no loans to key management personnel during the year. Other transactions with key management personnel DWCorporate Pty Ltd, a business of which Mr Wilkins is principal, provided company secretarial and other corporate services to the Middle Island Group during the year. The amounts paid were on arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr Wilkins’ compensation. At 30 June 2015 there was nil (2014: nil) owing to DWCorporate Pty Ltd. Mr Nicholls is a director and 35% shareholder of PowerXplor Ltd, which owns Sahara Mining Services SARL. As part of a cost sharing arrangement between Sahara Mining Services SARL and Middle Island Resources, the two companies shared administration and exploration costs during the year; with Middle Island recharging $83,526 to Sahara Mining Services SARL during the year ended 30 June 2015 (2014: nil). The amounts paid by Sahara Mining Services SARL to Middle Island Resources were on arms’ length commercial terms. Mr Yeates is a director and shareholder of Atherton Resources Ltd (previously Mungana Goldmines Ltd). As part of a cost sharing arrangement between Atherton Resources Ltd and Middle Island Resources, the two companies have shared office space in West Perth resulting in Middle Island recharging $7,405 to Atherton Resources Ltd during the year ended 30 June 2015 (2014: nil). The amounts paid by Atherton Resources Ltd to Middle Island Resources were on arms’ length commercial terms. End of audited section DIRECTORS’ MEETINGS During the year the Company held six meetings of directors. The attendance of directors at meetings of the board and committees were: Peter Thomas Richard Yeates Beau Nicholls Linton Kirk Dennis Wilkins (alternate for Beau Nicholls) Committee Meetings Committee Meetings Directors Meetings Audit Remuneration / Nomination A 6 6 5 6 6 B 6 6 6 6 6 A 2 2 * 2 2 B 2 2 * 2 2 A 2 * 2 2 2 B 2 * 2 2 2 Notes: A – Number of meetings attended. B – Number of meetings held during the time the director held office during the period. * – Not a member of the relevant committee. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 13 D I R E C T O R S ’ R E P O R T SHARES UNDER OPTION Unissued ordinary shares of Middle Island Resources Limited under option at the date of this report are as follows: Date Options Issued Expiry Date Exercise Price (cents) Number of Options 15 October 2014 15 October 2014 15 October 2014 7 July 2017 7 July 2017 7 July 2017 Total number of options outstanding at the date of this report 10.0 15.0 20.0 600,000 100,000 100,000 800,000 No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate. INSURANCE OF DIRECTORS AND OFFICERS During or since the financial year, in accordance with each director’s Deed of Indemnity, Insurance and Access with Middle Island Resources Limited, the Group has paid premiums insuring all the directors of Middle Island Resources Limited against all liabilities incurred by the director acting directly or indirectly as a director of the Company to the extent permitted by law, including legal costs incurred by the director in defending proceedings, provided that the liabilities for which the director is to be insured do not arise out of conduct involving a wilful breach of the director’s duty to the Company or a contravention of sections 182 or 183 of the Corporations Act 2001. The total amount of insurance contract premiums paid is $11,101. NON-AUDIT SERVICES The following details any non-audit services provided by the entity’s auditor, Somes Cooke or associated entities. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; • None of the services undermine the general standard of independence for auditors. Somes Cooke received or are due to receive the following amounts for the provision of non-audit services: Taxation compliance services PROCEEDINGS ON BEHALF OF THE COMPANY 2015 $ 2014 $ 3,000 6,530 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 any part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 15. Signed in accordance with a resolution of the directors. Richard Yeates Managing Director Perth, 25 September 2015 14 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N 35 Outram St PO Box 709 T 08 9426 4500 F 08 9481 5645 Chartered Accountants (Aus) West Perth West Perth W somescooke.com.au Business Consultants WA 6005 WA 6872 E info@somescooke.com.au Financial Advisors Profit from our Resources To those charged with the governance of Middle Island Resources Limited AUDITOR’S INDEPENDENCE DECLARATION As auditor for the audit of Middle Island Resources Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: i) no contraventions of the independence requirements of the Corporations Act 2001 in relation to the audit; and ii) no contraventions of any applicable code of professional conduct in relation to the audit. SOMES COOKE NICHOLAS HOLLENS Partner Perth 25 September 2015 Liability limited by a scheme approved under Professional Standards Legislation An independent member of KS International M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 15 C O R P O R A T E G O V E R N A N C E S T A T E M E N T Middle Island Resources Limited and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2015 Corporate Governance Statement is dated at 30 June 2015 and reflects the corporate governance practices in place throughout the 2015 financial year. The 2015 Corporate Governance Statement was approved by the Board on 25 September 2015. A description of the Group’s current corporate governance practices is set out in the Group’s Corporate Governance Statement which can be viewed at www.middleisland.com.au. 16 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME YEAR ENDED 30 JUNE 2015 Notes Consolidated Consolidated REVENUE 4 368,872 159,205 2015 $ 2014 $ EXPENDITURE Exploration expenses Administration expenses Salaries and employee benefits expense Depreciation expense Share-based payments expense Impairment of capitalised tenement acquisition costs Impairment of receivables LOSS BEFORE INCOME TAX INCOME TAX BENEFIT / (EXPENSE) LOSS FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF MIDDLE ISLAND RESOURCES LIMITED OTHER COMPREHENSIVE INCOME Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Other comprehensive income for the period, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF MIDDLE ISLAND RESOURCES LIMITED 23 10 6 (564,567) (592,754) (338,399) (62,474) 855 (55,165) (52,074) (2,708,598) (686,486) (651,407) (246,440) 109,355 (251,510) - (1,295,706) (4,275,881) - - (1,295,706) (4,275,881) 10,536 10,536 39,251 39,251 (1,285,170) (4,236,630) Basic and diluted loss per share for loss attributable to the ordinary equity holders of the Company (cents per share) 22 (1.0) (3.4) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the Notes to the Consolidated Financial Statements. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 17 CONSOLIDATED STATEMENT OF FINANCIAL POSITION YEAR ENDED 30 JUNE 2015 Notes Consolidated Consolidated CURRENT ASSETS Cash and cash equivalents Trade and other receivables TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment Tenement acquisition costs TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY 7 8 9 10 11 12 13 2015 $ 564,733 167,192 731,925 20,769 2,801,086 2,821,855 3,553,780 227,967 227,967 227,967 2014 $ 1,588,439 52,058 1,640,497 261,251 2,838,709 3,099,960 4,740,457 128,619 128,619 128,619 3,325,813 4,611,838 25,733,440 25,733,440 317,251 550,310 (22,724,878) (21,671,912) 3,325,813 4,611,838 The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Financial Statements. 18 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 JUNE 2015 Contributed Equity Notes Share- based Payments Reserve Foreign Currency Translation Reserve Accumulated Losses Consolidated $ $ $ $ Total $ BALANCE AT 1 JULY 2013 25,733,440 359,200 261,214 (17,396,031) 8,957,823 Loss for the period OTHER COMPREHENSIVE INCOME Exchange differences on translation of foreign operations TOTAL COMPREHENSIVE INCOME FOR THE PERIOD TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS Options issued/vesting to employees - - - - - - - - (4,275,881) (4,275,881) 39,251 - 39,251 39,251 (4,275,881) (4,236,630) (109,355) - - (109,355) BALANCE AT 30 JUNE 2014 25,733,440 249,845 300,465 (21,671,912) 4,611,838 Loss for the year OTHER COMPREHENSIVE INCOME Exchange differences on translation of foreign operations TOTAL COMPREHENSIVE INCOME TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS Options expired during the year Options issued/vesting to employees 23 - - - - - - - - (1,295,706) (1,295,706) 10,536 - 10,536 10,536 (1,295,706) (1,285,170) (242,740) 242,740 - (855) - - (855) BALANCE AT 30 JUNE 2015 25,733,440 6,250 311,001 (22,724,878) 3,325,813 The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 19 CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2015 Notes Consolidated Consolidated 4 21 CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Expenditure on mining interests R&D Tax Incentive Interest received Other revenue NET CASH OUTFLOW FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Payments for plant and equipment Proceeds from sale of plant and equipment NET CASH OUTFLOW FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares Payments of share issue costs NET CASH INFLOW FROM FINANCING ACTIVITIES 2015 $ (831,404) (736,872) 242,913 36,049 7,889 2014 $ (1,312,980) (3,005,307) - 195,778 50,720 (1,281,425) (4,071,789) - 243,068 243,068 (16,615) 57,585 40,970 - - - - - - NET (DECREASE) IN CASH AND CASH EQUIVALENTS (1,038,357) (4,030,819) Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 7 1,588,439 14,651 564,733 5,631,116 (11,858) 1,588,439 The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements. 20 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below. The financial statements are for the consolidated entity consisting of Middle Island Resources Limited and its subsidiaries. The financial statements are presented in the Australian currency. Middle Island Resources Limited is a company limited by shares, domiciled and incorporated in Australia. The financial statements were authorised for issue by the directors on 25 September 2015. The directors have the power to amend and reissue the financial statements. (a) 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. Middle Island Resources Limited is a for-profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS The consolidated financial statements of the Middle Island Resources Limited Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) New and amended standards adopted by the Group None of the new standards and amendments to standards that were mandatory for the first time for the financial year beginning 1 July 2014 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. (iii) Early adoption of standards The Group did not elect to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2014. (iv) Historical cost convention and going concern basis These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, which have been measured at fair value. The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity, the realisation of assets and the settlement of liabilities in the normal course of business. The consolidated entity had net assets of $3,325,813 at 30 June 2015 (2014: $4,611,838), incurred a net loss after tax of $1,295,706 (2014: loss $4,275,881) and experienced net cash outflows of $1,038,357 (2014: $4,030,819). Whilst the directors have instituted measures to preserve cash and secure additional finance, they recognised that the Group’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business plans. The Company expects to be able to raise additional capital from the capital market, and on that basis, the directors believe that the going concern basis of the presentation is appropriate. Nonetheless, the group’s working capital position and other year-end financial indicators show a significant uncertainty whether the Group will be able to continue as a going concern. Should the Company be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial report. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Middle Island Resources Limited (“Company” or “parent entity”) as at 30 June 2015 and the results of all subsidiaries for the year then ended. Middle Island Resources Limited and its subsidiaries together are referred to in these financial statements as the Group or the consolidated entity. Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 21 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position respectively. (ii) Changes in ownership interests The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Middle Island Resources Limited. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a jointly controlled entity or associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. (c) Segment reporting An operating segment is defined as a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the full Board of Directors. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Middle Island Resources Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. 22 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S (iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange rates (unless that is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. (e) Revenue recognition Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial assets. (f) Income tax The income tax expense or revenue for the year is the tax payable on the current year’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 and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associated operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. 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. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 23 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S (g) Leases Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases (note 17). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. (h) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (i) Cash and cash equivalents For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. (j) Investments and other financial assets Classification The Group classifies all of its financial assets as loans and receivables. Management determines the classification of its financial assets at initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are recognised initially at fair value and subsequently at amortised cost less impairment. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position. Collectability of loans and receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables or in an otherwise timely manner. The amount of the impairment allowance is the difference between the asset’s carrying amount and the estimated future cash flows. None of the Group’s loans and receivables has an applicable interest rate hence the cash flows are not discounted. The amount of the impairment loss is recognised in the statement of profit or loss and other comprehensive income within impairment expenses. When a loan or receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of profit or loss and other comprehensive income. Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at “fair value” (as used in this report, “fair value” bears the meaning ascribed by the AASB which can produce a result that does not reflect market or realisable value) plus transaction costs for all financial assets not carried at “fair value” through profit or loss. Financial assets carried at “fair value” through profit or loss are initially recognised at “fair value” and transaction costs are expensed to the statement of profit or loss and other comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. 24 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Measurement Loans and receivables are carried at amortised cost using the effective interest method. Impairment The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is evidence of impairment for any of the Group’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the statement of profit or loss and other comprehensive income. (k) Plant and equipment All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the statement of profit or loss and other comprehensive income during the reporting period in which they are incurred. Depreciation of plant and equipment is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term. The rates vary between 25% and 40% per annum. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(h)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit or loss and other comprehensive income. (l) Exploration and evaluation costs It is the Group’s policy to capitalise the cost of acquiring rights to explore areas of interest. All other exploration expenditure is expensed to the statement of profit or loss and other comprehensive income. The costs of acquisition are carried forward as an asset provided one of the following conditions are met: • • Such costs are expected to be recouped through the successful development and exploitation of the area of interest, or alternatively, by its sale; or Exploration activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence of otherwise of recoverable reserves, and active and significant operations in relation to the area are continuing. When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any capitalised exploration and evaluation expenditure is reclassified as capitalised mine development. Prior to reclassification, capitalised exploration and evaluation expenditure is assessed for impairment. Impairment The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the cash generating unit level whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. An impairment exists when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Any impairment losses are recognised in the statement of profit or loss and other comprehensive income. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 25 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S (m) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms. (n) Employee benefits Wages and salaries and annual leave Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (o) Share-based payments The Group may provide benefits to employees (including directors) of the Group, and to vendors and suppliers, in the form of share-based payment transactions, whereby employees render services, or where vendors sell assets to the Group, in exchange for shares or rights over shares (‘equity-settled transactions’), refer to note 23. The cost of these equity-settled transactions in the case of employees is measured by reference to the “fair value” (not market value) at the date at which they are granted. The “fair value” is determined in accordance with Australian Accounting Standards by an internal valuation using a Black-Scholes (or other industry accepted) option pricing model for options and by reference to market price for ordinary shares. The Directors do not consider the resultant value as determined by the Black-Scholes European Option Pricing Model (or any other model) is necessarily representative of the market value of the share options issued, however, in the absence of reliable measure of the goods or services received, AASB 2 Share Based Payments prescribes the measurement of the fair value of the equity instruments granted. The Black-Scholes European Option Pricing Model is an industry accepted method of valuing equity instruments. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market condition. Where an option is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the option is recognised immediately. However, if a new option is substituted for the cancelled option, and designated as a replacement option on the date that it is granted, the cancelled and new option are treated as a modification of the original option. (p) 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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. (q) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. 26 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (r) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of 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 taxation authority is included with other receivables or 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 taxation authority, are presented as operating cash flows. (s) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (t) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below. New standards and interpretations not mentioned are considered unlikely to impact on the financial reporting of the Group. AASB 9: Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9, AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures and AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments, AASB 2014-1 Amendments to Australian Accounting Standard: Part E Financial Instruments, 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014), AASB2014-8 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) – Application of AASB 9 (December 2009) and AASB 9 (December 2010) (effective from 1 January 2018) AASB 9 replaces the multiple classification and measurement models in AASB 139 Financial instruments: Recognition and measurement with a single model that has only two classification categories: amortised cost and fair value. Classification of debt assets will be driven by the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. A ‘simple’ debt instrument is measured at amortised cost if: a) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and b) the contractual cash flows under the instrument solely represent payments of principal and interest. All other financial assets, including investments in complex debt instruments and equity investments, must be recognised at fair value. All fair value movements on financial assets are taken through the income statement, except for equity investments that are not traded, which may be recorded in the income statement or in reserves. For financial liabilities that are measured under the fair value option entities will need to recognise the part of the fair value change that is due to changes in their own credit risk in other comprehensive income rather than profit or loss. The new hedge accounting rules that were released in December 2013 align hedge accounting more closely with common risk management practices. As a general rule, it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 27 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S In December 2014, the AASB made further changes to the classification and measurement rules and also introduced a new impairment model. With these amendments, AASB 9 is now complete. The changes introduce: • • a third measurement category (FVOCI) for certain financial assets that are debt instruments; and a new expected credit loss (ECL) model which involves a three-stage approach whereby financial assets move through the three stages as their credit quality changes. The stage dictates how an entity measures impairment losses and applies the effective interest rate method. A simplified approach is permitted for lease and trade receivables. On initial recognition, entities will record a day-1 loss equal to the twelve month ECL (or lifetime ECL for trade receivables), unless the assets are considered impaired. For financial years commencing before 1 February 2015, entities can elect to apply AASB 9 early for any of the following: • • • the own credit risk requirements for financial liabilities; classification and measurement (C&M) requirements for financial assets; C&M requirements for financial assets and financial liabilities; or The full current version of AASB 9 (C&M requirements for financial assets and liabilities and hedge accounting). After 1 February 2015, the new rules must be adopted in their entirety. Based on the financial assets and liabilities currently held, the Group does not anticipate any impact on the financial statements upon adoption of this standard. The Group does not presently engage in hedge accounting. None of the other amendments or Interpretations are expected to affect the accounting policies of the Group. (u) Critical accounting judgements, estimates and assumptions 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: Exploration and evaluation costs The costs of acquiring rights to explore areas of interest are capitalised, all other exploration and evaluation costs are expensed as incurred. These costs of acquisition are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: (i) such costs are expected to be recouped through successful development and exploitation or from sale of area; or (ii) exploration and evaluation activities in the area have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations in, or relating to, the area are continuing. When an area of interest is abandoned or the directors decide that it is not commercial, any capitalised acquisition costs in respect of that area are written off in the financial year the decision is made. Taxation Balances disclosed in the financial statements and the notes thereto related to taxation are based on the best estimates of the directors. These estimates take into account both the financial performance and position of the Group as they pertain to current income taxation legislation, and the directors understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position represents that directors’ best estimate, pending an assessment by the Australian Taxation Office. Share-based payments Share-based payment transactions, in the form of options to acquire ordinary shares, are valued using the Black- Scholes option pricing model. This model uses assumptions and estimates as inputs. The Directors do not consider the resultant value as determined by the Black-Scholes European Option Pricing Model is necessarily representative of the market value of the share options issued, however, in the absence of reliable measure of the goods or services received, AASB 2 Share Based Payments prescribes the measurement of the fair value of the equity instruments granted. The Black-Scholes European Option Pricing Model is an industry accepted method of valuing equity instruments, at the date of grant. 28 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Impairments The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using the directors’ best estimate of the asset’s fair value, which can incorporate various key assumptions. Any amounts in excess of the fair value are impaired, in line with accounting policy disclosures in parts 1.h) and 1.l). 2. FINANCIAL RISK MANAGEMENT The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. Risk management is carried out by the full Board of Directors as the Group believes that it is crucial for all board members to be involved in this process. (a) Market risk (i) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the A$, the US dollar and the West African CFA franc. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The Group has not formalised a foreign currency risk management policy however, it monitors its foreign currency expenditure in light of exchange rate movements. The functional currency of subsidiary companies is either the US dollar or the West African CFA franc. Given the current scale of the operations in West Africa, the foreign exchange exposure is considered not being material to the group. (ii) Commodity price risk Given the current level of operations, the Group’s financial statements for the year ended 30 June 2015 are not exposed to commodity price risk. (iii) Interest rate risk The Group is exposed to movements in market interest rates on cash and cash equivalents. The Group policy is to monitor the interest rate yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The entire balance of cash and cash equivalents for the Group $564,733 (2014: $1,588,439) is subject to interest rate risk. The weighted average interest rate received on cash and cash equivalents by the Group was 2.73% (2014: 3.5%). Sensitivity analysis At 30 June 2015, if interest rates had changed by -/+ 100 basis points from the weighted average rate for the year with all other variables held constant, post-tax loss for the Group would have been $11,500 lower/higher (2014: $31,000 lower/higher) as a result of lower/higher interest income from cash and cash equivalents. (b) Credit risk The Group has no significant concentrations of credit risk. The maximum exposure to credit risk at balance date is the carrying amount (net of provision for impairment) of those assets as disclosed in the statement of financial position and notes to the financial statements. All surplus cash holdings within the Group are currently invested with AA- rated financial institutions. (c) Liquidity risk The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with a view to initiating appropriate capital raisings. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 29 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S The financial liabilities of the Group are confined to trade and other payables as disclosed in the statement of financial position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date. (d) Fair value estimation The fair value (not market value) of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All financial assets and financial liabilities of the Group at the balance date are recorded at amounts approximating their carrying amount due to their short term nature. 3. SEGMENT INFORMATION For management purposes, the Group has identified only one reportable segment as exploration activities undertaken in West Africa. This segment includes activities associated with the determination and assessment of the existence of commercial economic reserves, from the Group’s mineral assets in this geographic location. Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Group’s accounting policies. EXPLORATION SEGMENT Segment revenue Reconciliation of segment revenue to total revenue before tax: Profit on sale of assets R&D Tax Incentive Interest revenue Other revenue TOTAL REVENUE Consolidated Consolidated 2015 2014 $ - 86,718 242,913 31,352 7,889 368,872 $ - - - 108,485 50,720 159,205 Segment results (600,081) (3,381,382) Reconciliation of segment result to net loss before tax: Other corporate and administration NET LOSS BEFORE TAX (695,625) (894,499) (1,295,706) (4,275,881) Segment operating assets 2,962,066 3,133,961 Reconciliation of segment operating assets to total assets: Other corporate and administration assets TOTAL ASSETS 591,714 1,606,496 3,553,780 4,740,457 Segment operating liabilities 318 64,434 Reconciliation of segment operating liabilities to total liabilities: Other corporate and administration liabilities TOTAL LIABILITIES 227,649 227,967 64,185 128,619 30 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 4. REVENUE FROM CONTINUING OPERATIONS Other revenue Profit on sale of assets R&D Tax Incentive (1) Interest revenue Dispute Settlement (2) Other revenue Consolidated Consolidated 2015 $ 86,718 242,913 31,352 - 7,889 368,872 2014 $ - - 108,485 50,000 720 159,205 (1) The Company has received an R&D Tax Incentive refund of $242,913 for the 2013/14 financial year. The R&D Tax Incentive refund represents a 45% return of Middle Island’s expenditure in relation to due diligence activities on the Samira Hill gold mine and results from the development of a customised and reusable mine optimisation methodology. The Company does not expect to receive further tax incentive refunds within the next financial year. (2) A finding was made in favour of the Company in the arbitration with Desert Star Resources Limited (formerly Island Arc Exploration Corp) in British Columbia, Canada, in relation to the Nassilé permit in Niger. As a consequence Desert Star was required to dilute 100% of its interest in the permit direct to a 1% net smelter royalty. As part of a settlement agreement entered into with the Company, Desert Star also agreed to pay the Company A$50,000 as a contribution to the Company’s legal costs of the arbitration. Desert Star also agreed to a reduction in the buyout price of the royalty from US$1 million to US$50,000. 5. EXPENSES LOSS BEFORE INCOME TAX INCLUDES THE FOLLOWING SPECIFIC EXPENSES: Defined contribution superannuation expense Minimum lease payments relating to operating leases 38,144 51,120 48,793 54,338 6. INCOME TAX (A) INCOME TAX EXPENSE Current tax Deferred tax - - - - (B) NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Loss from continuing operations before income tax expense (1,295,706) (4,275,881) Prima facie tax benefit at the Australian tax rate of 30% (388,712) (1,282,764) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Section 40-880 Share-based payments Sundry items Other items Movements in unrecognised temporary differences Tax effect of current period tax losses for which no deferred tax asset has been recognised Income tax expense (68,028) (257) 356 47,942 (68,028) (32,807) 266 - (408,699) (1,383,333) (41,586) 35,221 450,285 1,354,005 - - M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 31 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S (C) UNRECOGNISED TEMPORARY DIFFERENCES Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. The Group’s ability to use losses in the future is subject to the Group satisfying the relevant tax authority’s criteria for using these losses. 7. CURRENT ASSETS - CASH AND CASH EQUIVALENTS Cash at bank and in hand Short-term deposits Consolidated Consolidated 2015 $ 490,533 74,200 2014 $ 124,239 1,464,200 Cash and cash equivalents as shown in the statement of financial position and the statement of cash flows 564,733 1,588,439 Cash at bank and in hand at 30 June 2015 comprises A$549,282 (2014: A$1,550,376), with the balance held in US dollars and West African CFA francs. Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. 8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES Trade Debtors Bad Debt Provision Prepaid tenement acquisition costs Other 9. NON-CURRENT ASSETS - PLANT AND EQUIPMENT PLANT AND EQUIPMENT Cost Accumulated depreciation Net book amount PLANT AND EQUIPMENT Opening net book amount Exchange differences Additions Disposals Depreciation charge Closing net book amount 86,262 (48,504) 127,912 1,522 167,192 41,906 - - 10,152 52,058 457,395 862,161 (436,626) (600,910) 20,769 261,251 261,251 (2,998) - (175,010) (62,474) 20,769 585,517 27,797 16,615 (122,238) (246,440) 261,251 32 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 10. NON CURRENT ASSETS - TENEMENT ACQUISITION COSTS Tenement acquisition costs carried forward in respect of mining areas of interest Opening net book amount Exchange variances Impairment of capitalised tenement acquisition costs Closing net book amount 11. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES Trade payables Other payables and accruals 12. ISSUED CAPITAL (A) SHARE CAPITAL Consolidated Consolidated 2015 $ 2014 $ 2,838,709 3,046,632 17,542 (55,165) 43,587 (251,510) 2,801,086 2,838,709 97,746 130,221 227,967 2,278 126,341 128,619 2015 2014 Notes Number of Shares $ Number of Shares $ Ordinary shares fully paid 12(b), 12(d) 124,987,349 25,733,440 124,987,349 25,733,440 Total issued capital 124,987,349 25,733,440 124,987,349 25,733,440 (B) MOVEMENTS IN ORDINARY SHARE CAPITAL Beginning of the financial year 124,987,349 25,733,440 124,987,349 25,733,440 End of the financial year 124,987,349 25,733,440 124,987,349 25,733,440 (C) MOVEMENTS IN OPTIONS ON ISSUE Beginning of the financial year Issued, exercisable at 10 cents, on or before 7 August 2017 Issued, exercisable at 15 cents, on or before 7 August 2017 Issued, exercisable at 20 cents, on or before 7 August 2017 Expired on 1 November 2014, exercisable at 51.0 cents Expired on 1 November 2014, exercisable at 53.0 cents Expired on 15 December 2014, exercisable at 56.0 cents Expired on 31 December 2014, exercisable at 25.0 cents Expired on 31 December 2014, exercisable at 37.5 cents Number of Options 2015 2014 16,525,000 18,475,000 600,000 600,000 600,000 (275,000) (200,000) (300,000) (250,000) (250,000) - - - - - - - - M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 33 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Expired on 31 December 2014, exercisable at 50.0 cents Cancelled, exercisable at 15 cents, on or before 7 August 2017 Cancelled, exercisable at 20 cents, on or before 7 August 2017 Expired on 30 June 2015, exercisable at 25.0 cents Expired on 1 November 2013, exercisable at 37.5 cents Cancelled, exercisable at 50 cents, on or before 16 December 2014 End of the financial year (D) ORDINARY SHARES (250,000) (500,000) (500,000) (15,000,000) - - - - - - (450,000) (1,500,000) 800,000 16,525,000 Ordinary fully paid shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of the shares held. On a show of hands every holder of ordinary fully paid shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll is entitled to one vote for each share held. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. (E) CAPITAL RISK MANAGEMENT The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it may strive to provide returns for shareholders and benefits for other stakeholders. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group at 30 June 2015 and 30 June 2014 are as follows: Cash and cash equivalents Trade and other receivable Trade and other payables Working capital position 13. RESERVES AND ACCUMULATED LOSSES (A) RESERVES Foreign currency translation reserve Share-based payments reserve (see note 23) (B) NATURE AND PURPOSE OF RESERVES (i) Foreign currency translation reserve Consolidated Consolidated 2015 $ 564,733 167,192 2014 $ 1,588,439 52,058 (227,967) (128,619) 503,958 1,511,878 311,001 6,250 317,251 300,465 249,845 550,310 Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1(d) and accumulated within a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. 34 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S (ii) Share-based payments reserve The share-based payments reserve is used to recognise the fair value of options issued. 14. DIVIDENDS No dividends were paid during the financial year. No recommendation for payment of dividends has been made. 15. REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms: (A) AUDIT SERVICES Somes Cooke – audit and review of financial reports Total remuneration for audit services (B) NON-AUDIT SERVICES Somes Cooke – taxation compliance services Total remuneration for other services 16. CONTINGENCIES Consolidated Consolidated 2015 $ 24,000 24,000 3,000 3,000 2014 $ 27,500 27,500 6,530 6,530 There are no material contingent liabilities or contingent assets of the Group at the reporting date. 17. COMMITMENTS (A) EXPLORATION COMMITMENTS The Group has certain (contingent) commitments to meet minimum expenditure requirements on the mining exploration assets it has an interest in. Outstanding exploration commitments are as follows: within one year later than one year but not later than five years (B) LEASE COMMITMENTS: GROUP AS LESSEE Operating leases (non-cancellable): Minimum lease payments within one year later than one year but not later than five years Aggregate lease expenditure contracted for at reporting date but not recognised as liabilities 1,200,000 700,000 1,800,000 2,800,000 3,000,000 3,500,000 38,301 - 59,810 23,835 38,301 83,645 The property lease is a non-cancellable lease with a three-year term, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require the minimum lease payments to increase in accordance with CPI movements on each annual anniversary of the commencement date. An option exists to renew the lease at the end of the three-year term for an additional term of two years. The lease allows for subletting of all lease areas. M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 35 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 18. RELATED PARTY TRANSACTIONS (A) PARENT ENTITY The ultimate parent entity within the Group is Middle Island Resources Limited. (B) SUBSIDIARIES Interests in subsidiaries are set out in note 19. (C) KEY MANAGEMENT PERSONNEL COMPENSATION Short-term benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments Consolidated Consolidated 2015 $ 273,927 23,173 - - - 2014 $ 493,550 33,121 - - - 297,100 526,671 Detailed remuneration disclosures are provided in the remuneration report on pages 10 to 13. (D) TRANSACTIONS AND BALANCES WITH OTHER RELATED PARTIES DWCorporate Pty Ltd, a business of which Mr Wilkins is principal, provided company secretarial, bookkeeping and other corporate services to the Middle Island Group during the year. The amounts paid were on arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr Wilkins’ compensation. At 30 June 2015 there was nil (2014: nil) owing to DWCorporate Pty Ltd. Mr Nicholls is a director and 35% shareholder of PowerXplor Ltd, which owns Sahara Mining Services SARL. As part of a cost sharing arrangement between Sahara Mining Services SARL and Middle Island Resources, the two companies shared administration and exploration costs during the year; with Middle Island recharging $83,526 to Sahara Mining Services SARL during the year ended 30 June 2015 (2014: nil). The amounts paid by Sahara Mining Services SARL to Middle Island Resources were on arms’ length commercial terms. Mr Yeates is a director and shareholder of Atherton Resources Ltd (previously Mungana Goldmines Ltd). As part of a cost sharing arrangement between Atherton Resources Ltd and Middle Island Resources, the two companies have shared office space in West Perth resulting in Middle Island recharging $7,405 to Atherton Resources Ltd during the year ended 30 June 2015 (2014: nil). The amounts paid by Atherton Resources Ltd to Middle Island Resources were on arms’ length commercial terms. Included in trade and other receivables at 30 June 2015 is a balance of $12,550 owed by Sahara Mining Services SARL and a balance of $2,715 owed by Atherton Resources Ltd, in relation to the above cost sharing arrangements. (E) LOANS TO RELATED PARTIES Middle Island Resources Limited has provided unsecured, interest free loans to each of its wholly owned subsidiaries totalling $19,451,738 at 30 June 2015 (2014: $19,332,454). An impairment assessment is undertaken each financial year by examining the financial position of the subsidiary and the market in which the subsidiary operates to determine whether there is objective evidence that the subsidiary is impaired. When such objective evidence exists, the Company recognises an allowance for the impairment loss. The value of the loans was fully impaired as at 30 June 2015. 36 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 19. SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b): Name Country of Incorporation Class of Shares Equity Holding(1) Middle Island Resources – Burkina Faso SARL Burkina Faso Middle Island Resources – Liberia Limited Middle Island Resources – Niger SARL(2) Liberia Niger Ordinary Ordinary Ordinary (1) The proportion of ownership interest is equal to the proportion of voting power held. (2) Middle Island Resources – Niger SARL was deregistered in January 2015. 20. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE 2015 2014 % 100 100 0 % 100 100 100 Middle Island Resources Limited announced on 24 June 2015 its intention to undertake a non-renounceable entitlement offer to raise approximately $500,000. The Company subsequently issued 125,856,904 fully paid ordinary shares on 30 July 2015 at an issue price of $0.004 each and raised $503,428 before costs. No matters or circumstances, aside from those disclosed above, have arisen since the end of the year which 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. 21. STATEMENT OF CASH FLOWS RECONCILIATION OF NET LOSS AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Net loss for the year NON-CASH ITEMS Depreciation of non current assets Share-based payments Net exchange differences CHANGE IN OPERATING ASSETS AND LIABILITIES (Increase)/decrease in trade and other receivables (Decrease)/increase in trade and other payables Accounting profit on sale of asset Impairment of capitalised tenement acquisition costs Consolidated Consolidated 2015 $ 2014 $ (1,295,706) (4,275,881) 62,474 (855) - (115,133) 99,348 (86,718) 55,165 246,440 (109,355) - 112,339 (341,220) 44,378 251,510 Net cash outflow from operating activities (1,281,425) (4,071,789) 22. LOSS PER SHARE (A) RECONCILIATION OF EARNINGS USED IN CALCULATING LOSS PER SHARE Loss attributable to the owners of the Company used in calculating basic and diluted loss per share (1,295,706) (4,275,881) M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 37 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Consolidated Consolidated Number of shares Number of shares 2015 2014 (B) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 124,987,349 124,987,349 (C) INFORMATION ON THE CLASSIFICATION OF OPTIONS As the Group has made a loss for the year ended 30 June 2015, all options on issue are considered antidilutive and have not been included in the calculation of diluted earnings per share. These options could potentially dilute basic earnings per share in the future. 23. SHARE-BASED PAYMENTS (A) OPTIONS ISSUED TO EMPLOYEES The Group may provide benefits to employees (including directors) and contractors of the Group in the form of share-based payment transactions, whereby options to acquire ordinary shares are issued as an incentive to improve employee and shareholder goal congruence. The exercise prices of the options granted and on issue as at 30 June 2015 range from 10 cents to 20 cents per option and expire on 7 August 2017. Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share of the Company with full dividend and voting rights. Set out below are summaries of the options granted: Consolidated Consolidated Consolidated Consolidated 2015 2015 2014 2014 Number of Options Weighted Average Exercise Price cents Number of Options Weighted Average Exercise Price cents Outstanding at the beginning of the financial year Granted 3,325,000 - Forfeited/cancelled (1,000,000) Exercised Expired/lapsed Outstanding at year-end Exercisable at year-end - (1,525,000) 800,000 700,000 29.0 - 17.5 - 45.6 11.9 10.7 3,475,000 1,800,000 (1) - - (1,950,000) 3,325,000 2,125,000 46.5 15.0 - - 47.1 29.0 35.6 (1) These options were granted on 1 March 2014, but were not issued until 15 October 2014. The weighted average remaining contractual life of share options outstanding at the end of the financial year was 1.7 years (2014: 1.6 years), and the exercise prices range from 10 to 20 cents. There were no options granted during the 2015 financial year. The weighted average “fair value” (not market value) of the options granted during the 2014 financial year was 0.7 cents. The price was calculated in accordance with Australian Accounting Standards by using the Black-Scholes European Option Pricing Model applying the following inputs. The Directors do not consider the resultant value as determined by the Black-Scholes European Option Pricing Model is necessarily representative of the market value of the share options issued: 38 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S Weighted average exercise price (cents) Weighted average life of the option (years) Weighted average underlying share price (cents) Expected share price volatility Weighted average risk free interest rate Consolidated Consolidated 2015 $ - - - - - 2014 $ 15.0 3.0 2.7 93.8% 2.8% Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is indicative of future trends, which may not eventuate. The life of the options is based on historical exercise patterns, which may not eventuate in the future (B) EXPENSES ARISING FROM SHARE-BASED PAYMENT TRANSACTIONS Total expenses arising from share-based payment transactions recognised during the year were as follows: Options granted to/vesting with employees (including directors) as part of share-based payments (855)(1) (109,355)(2) (1) The $855 is the difference between a share-based payments expense reversal of $1,571 recognised for the options cancelled in 2015 and a share-based payments expense amount of $716 recognised for the options granted during the year. (2) Included in this amount for 2014 is share-based payments income of $116,460 in relation to options that lapsed during the year due to the failure to satisfy non- market related performance vesting conditions. A share-based payments expense amount of $7,105 has been recognised for the options granted during the year. 24. PARENT ENTITY INFORMATION The following information relates to the parent entity, Middle Island Resources Limited, at 30 June 2015. The information presented here has been prepared using accounting policies consistent with those presented in Note 1. Current assets Non-current assets TOTAL ASSETS Current liabilities TOTAL LIABILITIES Contributed equity Share-based payments reserve Accumulated losses TOTAL EQUITY Loss for the year TOTAL COMPREHENSIVE LOSS FOR THE YEAR Consolidated Consolidated 2015 $ 588,838 130,787 719,625 227,649 227,649 2014 $ 1,598,168 8,328 1,606,496 124,581 124,581 25,733,440 25,733,440 6,250 249,845 (25,247,714) (24,501,370) 491,876 1,481,915 (989,083) (3,954,543) (989,083) (3,954,543) M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 39 D I R E C T O R S ’ D E C L A R A T I O N In the directors’ opinion: 1. the financial statements comprising the statements of comprehensive income, statements of financial position, statements of changes in equity, statements of cash flows and accompanying notes set out on pages 21 to 39 are in accordance with the Corporations Act 2001, including: (a) (b) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2015 and of their performance for the financial year ended on that date; 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 remuneration disclosures included in the Directors’ Report (as part of the audited Remuneration Report), for the year ended 30 June 2015, comply with Section 300A of the Corporations Act 2001; and a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been included in the notes to the financial statements 2. 3. 4. The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Richard Yeates Managing Director Perth, 25 September 2015 40 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 I N D E P E N D E N T A U D I T O R ’ S R E P O R T 35 Outram St PO Box 709 T 08 9426 4500 F 08 9481 5645 Chartered Accountants (Aus) West Perth West Perth W somescooke.com.au Business Consultants WA 6005 WA 6872 E info@somescooke.com.au Financial Advisors Profit from our Resources Independent Auditor’s Report To the members of Middle Island Resources Limited Report on the Financial Report We have audited the accompanying financial report of Middle Island Resources Limited, which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year end or from time to time during the financial year. Directors’ Responsibility 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 is free from material misstatement, whether due to fraud or error. In Note 1.a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Liability limited by a scheme approved under Professional Standards Legislation An independent member of KS International M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 41 I N D E P E N D E N T A U D I T O R ’ S R E P O R T Opinion In our opinion: (a) the financial report of Middle Island Resources Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.a). Emphasis of matter - Inherent uncertainty regarding continuation as a going concern Without modifying our opinion, we draw attention to Note 1.a) to the financial report, which describes that the ability of the company to continue as a going concern is dependent on future capital raisings. As a result there is material uncertainty related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern, and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. Report on the Remuneration Report We have audited the Remuneration Report included in pages 10 to 13 of the directors’ report for the year ended 30 June 2015. 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 in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Middle Island Resources Limited for the year ended 30 June 2015 complies with section 300A of the Corporations Act 2001. SOMES COOKE NICHOLAS HOLLENS Partner 25 September 2015 Perth 42 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 A S X A D D I T I O N A L I N F O R M A T I O N Additional information required by Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 14 September 2015. (a) Distribution of equity securities Analysis of numbers of equity security holders by size of holding: 1 1,001 5,001 10,001 - - - - 1,000 5,000 10,000 100,000 100,001 and above The number of shareholders holding less than a marketable parcel of shares are: (b) Twenty largest shareholders The names of the twenty largest holders of quoted ordinary shares are: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quenda Inv Pty Ltd Mr Craig Manners LB Management Pty Ltd Amazon Consultoria Em Mineracao E Servicos P S Thomas & S A Goodwin Lomacott Pty Ltd Diamantina Resources Pty Ltd Cannon Partners Fund JP Morgan Nominees Australia Mrs Jayni Francis Manners HSBC Custody Nominees Montana Realty Pty Ltd Gecko Resources Pty Ltd Rollason Pty Ltd Jetosea Pty Ltd Lomacott Pty Ltd Mrs Janyni Franics Manners Citcorp Nominees Pty Limited Jetosea Pty Ltd Gecko Resources Pty Ltd Ordinary Shares Number of Holders Number of Shares 25 45 64 253 156 543 337 8,030 142,914 537,929 10,883,672 239,271,708 250,844,253 7,077,843 Listed Ordinary shares Number of Shares Percentage of Ordinary Shares 32,000,000 20,294,678 19,550,385 12,600,000 10,600,000 10,000,002 8,000,000 6,417,321 5,588,904 5,574,313 5,024,000 4,734,000 3,819,600 3,620,000 3,553,332 3,460,344 3,253,672 3,239,500 3,012,666 3,000,000 12.76 8.09 7.79 5.02 4.23 3.99 3.19 2.56 2.23 2.22 2.00 1.89 1.52 1.44 1.42 1.38 1.30 1.29 1.20 1.20 167,342,717 66.72 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 43 A S X A D D I T I O N A L I N F O R M A T I O N (c) Substantial shareholders The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are: Mr Richard Yeates Mr Craig Manners Amazon Consultoria Em Mineracao E Servicos (d) Voting rights All ordinary shares carry one vote per share without restriction. (e) Schedule of interests in mining tenements Location Burkina Faso Burkina Faso Burkina Faso Burkina Faso Burkina Faso Burkina Faso Burkina Faso Niger Niger Niger Niger Niger Niger Niger Liberia Number of Shares Disclosed in the Substantial Holding Notice 32,000,000 20,294,678 12,600,000 Tenement Percentage Held / Earning Pouni II Dassa Didyr 100% 100% 100% Dassa Sud on reapplication Nebya Bissou Gossina Dogona Boulkagou Nassilé Kakou Tialkam Deba 100% 100% 100% earning 90% earning 90% 100% 100% on reapplication on reapplication Boksay earning 51% to 70% Zwedru North relinquished (f) Unquoted Securities Class Holders of 20% or more of the class Number of Securities Number of Holders Holder Name Number of Securities Unlisted 10 cents Options, expiry 7 August 2017 600,000 Unlisted 15 cents Options, expiry 7 August 2017 100,000 Unlisted 20 cents Options, expiry 7 August 2017 100,000 2 1 1 Mr A Chubb 500,000 Mr A Douyere 100,000 Mr A Douyere 100,000 (g) Use of Funds The Company has used its funds in accordance with its initial business objectives. 44 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 C O R P O R A T E I N F O R M A T I O N DIRECTORS Peter Thomas Richard Yeates Beau Nicholls Linton Kirk (Non-Executive Chairman) (Managing Director) (Non-Executive Director) (Non-Executive Director) Dennis Wilkins (Alternate for Beau Nicholls) COMPANY SECRETARY Dennis Wilkins REGISTERED OFFICE Ground Floor, 20 Kings Park Road, West Perth WA 6005 PRINCIPAL PLACE OF BUSINESS Unit 2, 2 Richardson Street, West Perth WA 6005 POSTAL ADDRESS PO Box 1017, West Perth WA 6872 SOLICITORS Williams and Hughes 28 Richardson Street, West Perth WA 6005 SHARE REGISTER Security Transfer Registrars Pty Ltd 70 Canning Highway, Applecross WA 6153 AUDITORS Somes and Cooke Level 2, 35 Outram Street, West Perth WA 6005 EMAIL info@middleisland.com.au INTERNET ADDRESS www.middleisland.com.au STOCK EXCHANGE LISTING Middle Island Resources Limited shares are listed on the Australian Securities Exchange (ASX code: MDI). u a . m o c . n g i s e d r c j Middle Island RESOURCES LIMITED Unit 2, 2 Richardson Street WEST PERTH WA 6005 Website: www.middleisland.com.au Email: info@middleisland.com.au Tel: +61 8 9322 1430 Fax: +61 8 9322 1474 

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