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Exploring Golden Frontiers
Middle Island
RESOURCES LIMITED
C o r p o r a t e D i r e c t o r y
ABN 70 142 361 608
DIRECTORS
Peter Thomas
(Non-Executive Chairman)
Richard Yeates
(Managing Director)
Beau Nicholls
(Non-Executive Director)
Brad Marwood
(Non-Executive Director)
Dennis Wilkins
(Alternate for Beau Nicholls)
COMPANY SECRETARY
Dennis Wilkins
REGISTERED OFFICE
Suite 2
11 Ventnor Avenue
West Perth WA 6005
SOLICITORS
Williams and Hughes
28 Richardson Street
West Perth WA 6005
SHARE REGISTER
Automic Pty Ltd
Level 2
267 St Georges Terrace
Perth WA 6000
Telephone: 1300 288 664
www.automicgroup.com.au
AUDITORS
Elderton Audit Pty Ltd
Level 2
267 St Georges Terrace
Perth WA 6000
EMAIL
info@middleisland.com.au
PRINCIPAL PLACE OF BUSINESS
INTERNET ADDRESS
Suite 1
2 Richardson Street
West Perth WA 6005
POSTAL ADDRESS
PO Box 1017
West Perth WA 6872
www.middleisland.com.au
STOCK EXCHANGE LISTING
Middle Island Resources Limited
shares are listed on the Australian
Securities Exchange (ASX code: MDI).
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Operations Overview
2020
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Managing Director’s Overview
Operations Overview
Directors’ Report
Corporate Governance Statement
Auditors Independence Declaration
Consolidated Statement Of Profit Or Loss And Other Comprehensive Income
Consolidated Statement Of Financial Position
Consolidated Statement Of Changes In Equity
Consolidated Statement Of Cash Flows
Notes To The Consolidated Financial Statements
Directors’ Declaration
Independent Auditors’ Report
ASX Additional Information
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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 2 0
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O p e r a t i o n s O v e r v i e w
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Dear fellow shareholders,
What a difference a year (or in this case, four months)
makes! Winston Churchill once said “never let a good crisis
go to waste”. The COVID-19 pandemic is one such crisis
that, with the assistance of sound Federal Government, WA
State Government and mining industry leadership, along with
a measure of good fortune, I believe your Company has
utilised to maximum advantage in 2019/20 and continues to
do so in 2020/21.
Credit for much of this must go to the Copulos Group which
was prepared to share and substantially back Middle Island’s
vision to systematically assess a multitude of priority gold
exploration targets in order to increase the open pit resource
inventory to inform a recommissioning decision at our
wholly-owned Sandstone gold project in central WA. This
funding commitment was initiated at a time when junior
equity markets were at a low ebb and few were prepared to
provide any essential, let alone meaningful, exploration
funding. As a long-term shareholder, I fully appreciate the
dilution this represented, even though the Company did
ensure that existing shareholders had an opportunity to
participate on the same basis and, I believe, have been
financially well rewarded since with the share price gain.
Credit for the success we have experienced must also go to
the Middle Island Board for its courage and commitment to
continue an aggressive exploration campaign at Sandstone so
early in the COVID-19 pandemic, when equity markets were
in freefall and most of our peers elected to hibernate and sit
on their cash. As it transpired, the already strong
fundamentals underpinning the gold market were
accentuated by the pandemic, along with the associated
economic fallout and remedial stimuli, seeing the gold price
(in absolute terms) escalate to, or near, record levels in both
US$ and A$ terms. These positive circumstances continued
into the current financial year and most commentators
predict the gold market still has a long way to run – factors
further favouring the planned Sandstone restart.
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During the course of CY20 (predominantly between February and June 2020), your
Company’s cash balance increased 835%, our market capitalisation increased 864%, the
number of shareholders increased by 235%, trading liquidity increased 508% and
Sandstone’s Mineral Resources increased 425% (with the five new satellite deposits still to be
quantified). This is an extremely pleasing outcome for all shareholders and there is still
plenty more in store.
An exploration and resource definition drilling campaign of ~17,000m commenced at
Sandstone in January 2020 to extend existing deposits and assess 14 new targets. The
original program and budget was predicated on one new discovery as the targeted
outcome. In the event, five new discoveries were made. To date, some 50,000m of drilling
has been completed to bring these new satellite deposits into an Indicated Resource
category for consideration as Ore Reserves in the Sandstone feasibility study (FS). This record
drilling meterage required additional capital to be raised via a placement in May 2020.
Further, the additional drilling, driven by the success of the ongoing drilling, served to delay
the anticipated completion of the FS. It just made plain common sense, and good practice
dictated, we should bring some of the additional Resource base being generated under the
umbrella of the FS. Although victims of our own success in this respect, key outcomes
favour the pathway to a decision to recommission Sandstone.
In line with its strategy, your Company has continued to simultaneously, but selectively,
pursue consolidation opportunities during the year. Despite what seems to Middle Island to
represent overwhelming commercial logic, Middle Island was unable to consummate the
takeover offer for (or any other form of merger or alliance with) Alto Metals Limited
(ASX:AME, Alto) and the offer lapsed in November 2019. However, as Middle Island sees it,
the commercial logic and synergies remain just as compelling, if not more so, for both sets
of shareholders.
Even with the planned completion date for the Sandstone FS having slipped, depending
on market sentiment, it is expected to be both positive and to support project financing
with it being intended that the project will be developed and producing gold in the 2021
financial year.
While the onset of the COVID-19 pandemic created considerable uncertainty in March 2020,
working closely with our host communities and industry bodies, the Company rapidly
implemented appropriate policies and procedures to ensure stakeholder health and safety
remained the number one priority, and to minimise the pandemic’s impact on the
Company’s Sandstone and corporate operations. While the threat of a further outbreak is
ever-present, and we must guard against any complacency, the approach to date has proved
extremely successful.
Following divestment early in the financial year of the Reo gold project in Burkina Faso in
West Africa, and in-line with our stated objectives, the Company was very pleased to
announce the successful application for 10 Exploration Licences comprising the 100%-
owned Barkly copper-gold project in the Northern Territory (NT) during the year. This
project, based on an ‘incubator’ model with considerable optionality, is highly prospective
for Tier 1 iron oxide/copper/gold (IOCG) deposits in basement rocks beneath extensive
sedimentary cover.
I extend the Board’s heartfelt thanks to all our shareholders, both new and enduring, for
your on-going support during a very positive year. I look forward to sharing many more
exciting Sandstone drilling results, resource enhancements, the FS outcome and, hopefully,
project re-development progress, with you during 2020/21.
Yours faithfully,
Rick Yeates
Managing Director
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 2 0
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O p e r a t i o n s O v e r v i e w
CORPORATE
Finance
Middle Island had a cash balance of A$5.19m as at 30 June 2020. This comprises A$4.71m in cash and A$0.48m in Tajiri
Resource Corp. (TSX-V:TAJ) fully paid ordinary shares.
In November 2019, Middle Island announced a two-tranche placement (refer ASX Release dated 19 November 2019) of up
to 260 million new fully paid ordinary shares (Shares) at A$0.004 per share to raise up to $1.04m (before costs)
(Placement), with each participant in the Placement to be issued options (Options) expiring in January 2022 and
exercisable at A$0.0077, on the basis of one (1) Option for every one (1) Share issued.
Tranche 1 of the Placement comprised the issue of 130.0m shares at A$0.004 per Share to raise A$520,000 under the
Company’s existing ASX Listing Rule 7.1 capacity, together with a 1 for 1 Option, with 27.0 million Options issued without
the requirement for shareholder approval under the Company’s remaining ASX Listing Rule 7.1 capacity and the balance
subject to shareholder approval. The Placement was made to new unrelated sophisticated and professional investors,
corner-stoned by prominent mining investor, Mr Stephen Copulos (and related entities), who committed to investing at least
50% in Tranche 1 and had an option to participate to that extent in Tranche 2.
Subsequent to completion of the Tranche 1 Placement, Tranche 2 was cancelled by mutual agreement between the
Company and new substantial shareholders (refer ASX Release dated 20 December 2019). Instead, Middle Island
announced a fully underwritten, pro-rata, non-renounceable entitlement issue on the basis of one (1) new share for every
two (2) ordinary shares held on the record date, at an issue price of A$0.004 per new share to raise gross proceeds of
approximately A$2.35 million, before costs (Entitlement Issue).
Each participant in the Entitlement Issue was issued one (1) Option for every one (1) Share issued (expiring January 2022,
with an A$0.0077 exercise price).
The Entitlement Issue was fully underwritten and lead-managed by Pinnacle Corporate Finance Pty Ltd (now Lazarus
Corporate Finance Pty Ltd).
On 20 May 2020, Middle Island completed a fully subscribed placement of approximately 363.6 million ordinary shares at
an issue price of $0.011 per Share to raise a further A$4.0m before costs in order to fund the expanded resource definition
and exploration drilling campaign.
During the June quarter and subsequent to year end, some 596m options were exercised, realising proceeds of
approximately A$4.6m. A further 496m in-the-money options remain to be exercised, representing potential proceeds of a
further A$3.9m that may become available to the Company prior to the option exercise date of 31 January 2022.
Shareholder Meetings
The Company’s Annual General Meeting was held in Perth on 28 November 2019. All resolutions were passed, with in excess
of 99% affirmative votes recorded in each case (refer ASX Release dated 28 November 2019).
A General Meeting of the Company was held on 31 March, 2020, to variously ratify the issue of placement shares and options,
approve the issue of the Placement and Underwriter options, and elect Mr Brad Marwood as a Non-Executive Director. All
resolutions were unanimously passed by way of a poll called to determine the outcome of each resolution put before the
meeting.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 Director Appointment
Mr Brad Marwood was appointed as a Non-Executive Director of the Company in December 2019 (refer
ASX Release dated 2 December 2019), which appointment was ratified at the General Meeting on 31
March 2020.
Mr Marwood, a Mining Engineer, brings 30 years of development, operational, management and
corporate experience to Middle Island, having participated in the construction and/or commissioning of
some 26 projects worldwide, including Australia. His appointment comes at a key point in Middle
Island’s history as it looks to the planned transition from WA gold explorer to gold developer/producer.
Strategy
Middle Island’s activities during FY 2020, continued to focus on the Company’s unambiguous
primary strategy, being to recommission its 100%-owned Sandstone gold processing plant at the
earliest opportunity. The Company continues to pursue a dual approach as follows:-
»
The discovery and definition of higher grade, low strip ratio, satellite open pit deposits within
MDI’s permitted Sandstone tenure in order to enhance the front end of the proposed production
re-start schedule, with a planned transition to more sustained underground production.
Progressing one or more of several possible consolidations of proximal third-party gold deposits
»
within the broader Sandstone district in the central goldfields of WA.
The Company’s more recent focus on, and considerable success with, the drill bit will likely serve to
underpin a positive stand-alone mill recommissioning decision in the near future with a current fiscal
year production start-up target.
COVID-19
Middle Island temporarily closed its Perth Office and Sandstone Contractor’s Camp between 16
March and 18 May, 2020 as a precautionary measure to minimise exposure of the Company’s staff,
contractors and host community to COVID-19. During this period, office personnel worked from
self-isolation at home, which generally proved very effective.
The health and well-being of the Company’s employees, contractors, regional host communities and
the broader public, remain paramount.
To the end of June, 2020, and working in collaboration with the Sandstone Shire, the Company’s
activities and operations around its flagship Sandstone gold project in central WA, continued to be
relatively unaffected by the pandemic.
While the approach to date has proved extremely successful, the threat of a further outbreak is ever
present and we must guard against any complacency.
Takeover Offer for Alto Metals
Middle Island’s Takeover Offer for fellow Sandstone regional gold play, Alto Metals Limited
(ASX:AME, Alto), proved unsuccessful and the Offer was allowed to lapse on 29 November 2019
(refer ASX Releases dated 22 November 2019 and 5 December 2019).
Despite the Offer lapsing, Middle Island Directors remain firmly of the belief that combining the
Middle Island and Alto gold assets offers both groups of shareholders a substantial growth
opportunity for a more robust gold operation, processing the two companies’ Mineral Resources
through Middle Island’s proximal gold plant, and consolidating the exploration potential of the
entire Sandstone greenstone belt under a single entity.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
SANDSTONE GOLD PROJECT (100%) – WESTERN AUSTRALIA
The Sandstone gold project is shown in Figure 1.
Figure 1. Sandstone Gold Project
Open Pit Re-optimisation and PFS Update
Given sustained, significantly higher Australian dollar gold prices, a re-optimisation of open pit deposits at Sandstone was
undertaken early in the December quarter 2019 (refer ASX Release dated 25 October 2019).
The Two Mile Hill, Shillington and Wirraminna open pit deposits were included in the re-optimisation. However, the JORC
2004 Mineral Resources comprising the Plum Pudding, Eureka and Goat Farm deposits were not assessed.
The re-optimisation study utilised a range of contemporary gold prices from A$2,000/oz to A$2,500/oz, considerably higher
than the base-case gold price of A$1,600/oz utilised in the original PFS. Geotechnical parameters were adjusted to emulate
the existing pit slope angles, which are still standing more than 10 years since mining ceased. All other applied parameters
were consistent with the 2017 PFS.
The re-optimisation study demonstrated that the Sandstone gold processing plant could be profitably refurbished utilising
feed from MDI’s existing Mineral Resources. Materially, the positive optimisation study captures approximately 90%
Indicated and only 10% Inferred Mineral Resources.
On the basis of the positive re-optimisation outcome, an updated PFS (and subsequently FS) was commissioned with a view
to updating all parameters in advance of a recommissioning decision. While a meaningful start was made to the PFS
update, a detailed technical review was simultaneously undertaken of the open pit exploration opportunities within Middle
Island’s permitted tenure. This review identified 17 priority targets and deposits within 5km of Middle Island’s 100%-
owned gold processing plant and that offer significant potential to enhance open pit Mineral Resources. Aspects of the
feasibility update had to be deferred as the major drilling campaign proved far more successful than we had dared hope, let
alone forecast, meaning it became necessary to quantify additional Mineral Resources prior to completing the FS.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 2020 Drilling Campaign
The Company completed Phase 1 and commenced Phase 2 of the substantial 2020 drilling
campaign during H1CY20, collectively comprising some 30,000m of exploration and resource
definition drilling to 30 June at the Company’s 100%-owned Sandstone gold project in Western
Australia. At the time of reporting, the Phase 2 RC and diamond drilling had just been completed,
collectively amounting to some 50,000m of drilling to date in 2020.
The Phase 1 aircore and RC drilling campaign proved extremely successful, identifying five new
satellite gold deposits, being McClaren, McIntyre, Ridge, Old Town Well and Plum Pudding. The
new satellite deposits, all located on permitted Mining Leases within 2.5km of the processing plant,
are anticipated to considerably enhance the planned open pit mining inventory to underpin the FS
prior to a planned recommissioning of the Sandstone gold project.
Diamond drilling comprised ~1,000m of HQ3 oxide coring from surface (notionally two holes per
satellite deposit) to generate material for bulk density determination, and metallurgical and
geotechnical testwork, permitting the new deposits to be considered as Ore Reserves in the FS.
An exploratory RC drilling component was undertaken at the end of the Phase 2 resource definition
campaign to assess a significant 1.1km long, undrilled target corridor, referred to as the Shillington
Gap, identified between the Shillington and Ridge deposits (Figure 2).
Figure 2. Open pit gold deposits and targets assessed to date in 2020 drilling campaign.
Assay results received from the 2020 drilling campaign to date are highlighted by several bonanza
grade intercepts returned from the new Ridge and McClaren satellite open pit gold deposits (refer
ASX Releases dated 14 April, 26 June and 2 July 2020), comprising:-
»
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Ridge - 4m at 99.5g/t (from 13m in MSRC530), including 1m at 390g/t Au (repeat assay 502g/t).
Ridge - 4m at 50.5g/t (from 3m in MSRC544), including 1m at 198g/t Au.
» McClaren - 4m at 90.6g/t Au (from 60m in MSRC341).
Subsequent to the reporting period, further exceptional drilling results have also been reported from
the McIntyre, Old Town Well and Plum Pudding deposits. Final assay results for the McClaren and
Ridge extension deposits, along with those derived from reconnaissance drill traverses across the
Shillington Gap exploration target, remained outstanding at the time of reporting.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Operations Overview Geological Mapping
Detailed geological mapping in the vicinity of the McClaren-McIntyre-Ridge satellite gold deposits was completed during
FY2020, which, together with high resolution airborne magnetic data and on-going RC and diamond drilling, will assist in
resolving the complex stratigraphic and structural architecture in this highly prospective area. Given the close proximity of
these satellite deposits, it is possible that further work will ultimately demonstrate continuity between two or more of these
deposits.
Mapping identified several banded iron formation (BIF) units, which dip very shallowly to the northeast, within mafic
volcanic rocks. The BIF units comprise the southeast extension of the Shillington BIF package, which hosts the more
substantial Shillington and Shillington North deposits, ~1.5km to the northwest. At McClaren-McIntyre-Ridge, the BIF units
form prominent ridges that strike northwest and are disrupted by north to northeast-trending structural breaks.
Airborne Surveys
A high resolution airborne magnetic and radiometric survey was completed over the core project tenements during the year.
The survey was undertaken on a 25m line spacing and 25m survey height, with the flight line orientation optimised to
provide maximum architectural definition of the Shillington banded iron formation (BIF) package, which, in addition to the
Shillington deposit, hosts the new McClaren, McIntyre and Ridge satellite gold deposits.
The airborne magnetic interpretation, in conjunction with recent detailed geological mapping and on-going drilling, is not
only assisting to resolve the relative disposition of mineralisation, but is identifying new targets within this highly
prospective terrain.
Land Surveys Pty Ltd completed a high resolution (+/-50mm) digital terrain model, utilising a UAV, over the two granted
Mining Leases and Wirraminna Prospecting Licence, in advance of the feasibility study update.
Feasibility Study
On completion of Phase 1 drilling, preliminary resource estimates and pit optimisations were completed on the new
McClaren, McIntyre, Ridge, Old Town Well and Plum Pudding satellite deposits to assist in refining planned Phase 2 resource
definition RC and diamond drilling.
On completion of Phase 2 drilling, updated and maiden resource estimates will be progressively completed for the existing
Two Mile Hill, Shillington, Wirraminna, Goat Farm and Twin Shafts deposits, where infill and extension resource definition
drilling has been completed, prior to final pit optimisation studies and pit designs for the FS. Subsequent to the reporting
period, updated Mineral Resources have been announced for the Shillington, Two Mile Hill and Wirraminna open pit
deposits, with the first two deposits resulting in increases of 52% and 13% respectively (refer ASX Releases dated
24 July 2020 and 14 August 2020).
Final resource estimates, pit optimisations and mine designs will then be progressively undertaken on the new satellite
deposits as the Phase 2 drilling results are received and compiled, prior to inclusion in the feasibility study.
Given the low capital intensity of the project recommissioning and the growing level of confidence in the probability that
the study will demonstrate recommissioning to be a viable proposition, what was originally planned as a pre-feasibility
study (PFS) update, has been upgraded to a full feasibility study (FS) to provide a greater level of confidence and facilitate
project financing for an immediate start.
Given the significant additional drilling requirement to quantify the five new satellite deposits to an Indicated Resource
status and the more extensive work required to complete the FS (as opposed to a PFS), the estimated FS completion date
has been necessarily postponed until December 2020. However, given a backlog of some 10,000 Phase 2 resource
definition drilling assays at the laboratory, the December FS completion timeframe may be further deferred.
Two Mile Hill Deeps Resource Update
An Inferred Mineral Resource of 500,000oz gold has been estimated by independent consultants Mining Plus Pty Ltd for the
Two Mile Hill deeps deposit at Sandstone.
The new Inferred Mineral Resource comprises 480,000oz associated with the tonalite-hosted portion of the deposit and
20,000oz within the banded iron formation (BIF)-hosted element.
Addition of the Two Mile Hill deeps underground deposits increased the aggregate Sandstone project JORC Code 2012
Mineral Resources to 624,000oz gold, representing a near five-fold increase (refer Table 2). Progressive open pit resource
upgrades have further increased this total to 657,600oz subsequent to financial year end (refer Table 1), with the five new
satellite deposits still yet to be quantified.
The new tonalite deeps Inferred Mineral Resource is derived from a partial reclassification of the previous Exploration Target,
extending from 140m below surface (representing the base of quantified open pit Mineral Resources) to ~500m depth.
The new BIF deeps Mineral Resource is derived via the upgrade of a former JORC Code 2004 resource estimate to a formal
JORC Code 2012 Inferred Mineral Resource.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 The remainder of the original tonalite deeps Exploration Target, extending from 500m to 700m
depth, will require re-quantification as an Exploration Target, primarily underpinned by a diamond
drill intercept of 508.3m at 1.38g/t Au (refer ASX Release dated 14 November 2017), including an
interval of 160m at 2.13g/t Au from 432m depth. Alternatively, this may also be upgraded to a
formal Mineral Resource with further diamond drilling.
Although relatively insensitive to gold price, the Two Mile Hill tonalite deeps Mineral Resource
estimate does not comprise part of the planned recommissioning inventory at Sandstone, with the
present intention being to only review development of the tonalite deeps and BIF deeps deposits
later in the planned production schedule, once open pit mining and processing is well advanced.
The significant increase in aggregate Mineral Resources comprising the Sandstone gold project
provides far greater valuation transparency of both the Sandstone project and the Company.
Tenure
Due to lack of exploration success at Dandaraga, Middle Island elected to withdraw from the Option
Agreement over that property (E57/1028), located approximately 16km southeast of the Sandstone
processing plant, during FY2020.
Tribute Gold Production
No tribute gold production was derived from the Sandstone project during FY2020.
Mineral Resources (as at 14 August 2020)
Mineral Resources applicable to the Sandstone gold project as at 14 August 2020, including further
upgrades to Mineral Resource estimates reported after 30 June 2020 (being increases to the Two
Mile Hill Open Pit and Shillington Mineral Resource estimates – refer to ASX releases dated
24 July 2020 and 14 August 2020) are provided in Table 1.
Table 1. Sandstone Gold Project Mineral Resource Statement (14 August 2020)
Deposit
COG
(g/t Au)
Tonnes
Grade
(g/t Au)
Contained
Gold (oz.)
JORC
Classification
JORC
Code
1,155,000
1.39
52,000 Indicated
2012
+Two Mile Hill
– Open Pit
+Two Mile Hill
– Open Pit
^Two Mile Hill
– Tonalite Deeps
^Two Mile Hill
– BIF Deeps
#Shillington
– Open Pit
#Shillington
– Open Pit
#Wirraminna
– Open Pit
#Wirraminna
– Open Pit
0.7
0.7
0.5
0.5
0.5
99,000
1.00
3,000 Inferred
NA*
14,000,000
1.10
480,000 Inferred
NA*
200,000
3.10
20,000 Inferred
0.5
1,230,000
1.30
50,200 Indicated
2012
840,000
1.10
30,600 Inferred
2012
300,000
1.30
12,100 Indicated
2012
280,000
1.10
9,700 Inferred
Total Indicated
2,685,000
1.32
114,300 Indicated
Total Inferred
15,419,000
1.10
543,300 Inferred
Total Resource
18,104,000
1.13
657,600 Ind. & Inf.
2012
2012
2012
2012
2012
2012
2012
* The Two Mile Hill Tonalite Deeps and BIF Deeps have been reported within optimised wireframes. All wireframes include waste and have an
aggregate grade at or above the cut-off of 0.64og/t Au.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Operations Overview Previously Reported Information
Table 1 includes information that relates to Mineral Resources which was prepared and first reported under JORC Code
2012. The information is extracted from the Company’s previous ASX announcements, which are available to view on the
Company’s website, as follows:
+ ASX Release dated 14 August 2020.
^ ASX Release dated 14 April 2020.
# ASX Release dated 24 July 2020.
Notwithstanding the significant increase in gold price since some of these Mineral Resource estimates were prepared, and
recognising that the substantial 2020 drilling campaign is anticipated to result in increases and/or upgrades to project
Mineral Resources, the Company confirms that it is not aware of any new information or data that materially affects the
information included in the original market announcements and that all material assumptions and technical parameters
underpinning the estimates in the relevant market announcements continue to apply and have not materially changed.
The Company confirms that the form and context in which any Competent Person’s findings are presented have not been
materially modified from the original market announcements.
The information in this annual report that relates to previously reported Sandstone gold project Exploration Results is
extracted from the Company’s ASX releases noted in the text of the report and are available to view on the Company’s
website. The Company confirms it is not aware of any new information or data that materially affects the information
included in the original market announcements and that the form and context in which any Competent Person’s findings
are presented have not been materially modified from the original market announcement.
BARKLY COPPER-GOLD PROJECT (100%) – NORTHERN TERRITORY
All 10 of Middle Island’s exploration licence applications comprising the Barkly copper-gold super project in the Northern
Territory have been listed for grant. The NT Department of Primary Industry and Resources (DPIR) has offered to withhold
formal granting of the licences until the COVID-19 travel restrictions are lifted or at the Company’s earlier election. Middle
Island has elected not to trigger formal grant at this stage.
Collectively, Middle Island’s Barkly super-project comprises 10 exploration licences covering 3,253km2, extending semi-
continuously for >350km along the axis of the East Tennant Proterozoic basement ridge from Tennant Creek east to the
Queensland border (Figure 3). This tenure is held 100% by Barkly Operations Pty Ltd, a wholly-owned subsidiary of Middle
Island Resources Limited.
Five of Middle Island’s exploration licences in the Barkly area surround or adjoin Newcrest Mining applications along the axis
of the East Tennant Ridge, while those in the Tennant Creek area immediately adjoin new Rio Tinto tenements.
Figure 3. Middle Island’s Exploration Licences
comprising the Barkly super-project, Northern Territory.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
The Barkly project tenure includes, or lies immediately peripheral to, priority targets and corridors
identified from pre-competitive research data generated under the collaborative Federal and
Territory/State Governments’ Exploring for the Future (EFTF) initiative. Importantly, several of the
Company’s exploration licences include or immediately adjoin several areas reserved for highly
anticipated EFTF basement stratigraphic drilling and additional deep seismic traverses, originally
planned to be undertaken during 2020, which may now be deferred due to COVID-19 limitations.
The Barkly super-project positions the Company as a first-mover and one of the largest tenement
holders within the newly identified East Tennant province, extending beneath Georgina Basin cover
across the Barkly Tableland, which is considered highly prospective for Tier 1 IOCG targets.
The Barkly project exploration model is consistent with major recent mineral discoveries in basement
rocks reported from ‘blind’ targets veneered by younger sedimentary cover in WA’s Paterson Province
(Winu and Havieron) and extensions of the prolific Victorian gold belts under Murray Basin
sedimentary cover (Four Eagles and Tandarra). These regional examples were, at least in part,
similarly generated as a result of extensive, pre-competitive, government research projects.
Significant examples of ‘blind’ Tier 1, iron oxide-copper-gold (IOCG) deposits discovered beneath
substantial sedimentary cover include BHP’s Olympic Dam and Oak Dam deposits in South Australia’s
Gawler Craton, which are respectively overlain by approximately 400m and 900m of post-mineral
sedimentary cover.
The Tier 1 IOCG potential of the Barkly Project area is interpreted to lie beneath the Georgina Basin,
which extends east from Tennant Creek across the Queensland border to Mount Isa. The Georgina
Basin is subdivided into smaller sub-basins by several basement highs, the principal one being the
East Tennant Ridge, which extends in a sinuous northeast orientation under the Barkly Project area.
The interpreted depth of cover ranges from 100m to 250m along the ridge axis, near the intersection
of the Barkly and Tablelands highways, increasing to ~800m along the flanks of the ridge.
The East Tennant Ridge is of particular significance in that, aside from phosphate exploration within
the overlying Georgina Basin, previous exploration activity within the Proterozoic basement rocks is
extremely limited or non-existent. Despite this, significant deposits of IOCG and sedimentary
exhalative (Sedex) affinity occur within Proterozoic basement rocks marginal to the Georgina Basin
(Figure 4), including Tennant Creek, Mt Isa and Century.
Once COVID-19 travel restrictions are lifted and the licences formally granted, initial Middle Island
work will focus on stakeholder engagement, the capture of any outstanding open file and pre-
competitive data, more detailed modelling of identified exploration targets and the planning of
high-resolution geophysical surveys to refine modelled targets in preparation for drill testing.
Figure 4. Middle Island’s Barkly Super Project tenements
relative to major deposits peripheral to the Georgina Basin.
11
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Operations Overview SAFETY, ENVIRONMENTAL & SOCIAL
Health & Safety
No injuries or incidents were recorded at the Company’s projects and premises during FY2020.
Additional road signage was emplaced and intersection clearing undertaken on internal access roads at the Sandstone
project to accommodate increased heavy vehicle movements associated with the multi-rig 2020 drilling campaign.
Upgraded hygiene and social distancing protocols were implemented at the Company’s Perth headquarters and project sites
in response to the COVID-19 pandemic, particularly when the office and camps were re-opened and project activities were
ramped up in May 2020. No COVID-19 infections have been recorded amongst staff or contractors and the Company has
managed to continue its aggressive exploration and resource development campaign relatively seamlessly.
Environment
No environmental incidents were recorded at the Company’s projects during FY2020.
A flora survey was undertaken within portions of M57/129 during the June quarter, primarily to comply with the
requirement to expand the program of work (POW) to accommodate additional infill and extension drilling required to
quantify the new McClaren, McIntyre, Ridge and Plum Pudding satellite deposits, and to assess the Shillington Gap target.
Rehabilitation of disturbed areas at the Sandstone gold project, primarily drill sites and temporary access tracks, is being
progressively undertaken in accordance with POW and other environmental requirements. Rehabilitation of drill pads
utilised in the Phase 2020 drilling campaign will commence once further sampling of RC drill cuttings has been completed
for metallurgical leach testing and waste classification purposes.
Sampling of tailings monitoring bores is being undertaken on a six-monthly basis in accordance with permit requirements,
with all readings remaining well below statutory thresholds.
Social
The Company continues to engage with the Shire of Sandstone, pastoralists, prospectors and the local community. This
process includes the procurement of labour, materials and services locally, wherever practically possible, and sponsorship of
various community events and heritage activities.
Most recently, Middle Island has engaged with the Sandstone Shire to collaborate on the Company’s COVID-19 strategy
and protocols to minimise any impact on the relatively isolated Sandstone community, which is characterised by an older,
more vulnerable demographic.
In consultation with the Shire of Sandstone, the Company has recently agreed to sponsor the charitable Outback Grave
Markers group to assist in researching, identifying and marking grave sites in outback Western Australia, more generally,
and the Shire of Sandstone in particular, including the historic Nunngarra (original Sandstone) town site reserve that lies
within the Company’s tenure.
A similar philosophical approach to community engagement is planned in the NT, once formal grant of the Barkly project
tenements is triggered.
Sandstone Gold Project - Resources and Reserves Statement (30 June 2020)
Mineral Resources applicable to the Sandstone gold project as at 30 June 2020 are provided in Table 2.
In addition to the updated Mineral Resources reported above, the residual portion of the Two Mile Hill tonalite deeps
Exploration Target, lying between 500m and 700m below surface, is not included and remains to be re-quantified as an
Exploration Target or, with further drilling, a Mineral Resource.
The Company’s Mineral Resources at Sandstone show changes from the Mineral Resources as at 30 June 2019 (Table 3).
The material changes arise from the estimation of new JORC Code 2012 Mineral Resource for the Two Mile Hill deeps gold
deposit (refer to the Company’s ASX release dated 14 April 2020).
Subsequent to 30 June 2020, resource updates were announced for the Shillington and Two Mile Hill Deeps deposits - refer
to Table 1 for the latest statement of Mineral Resources. At the time of reporting, Mineral Resource updates were imminent
for the Goat Farm and Twin Shafts open pit deposits, along with maiden Mineral Resource estimates for the new McClaren,
McIntyre, Ridge, Old Town Well and Plum Pudding open pit deposits.
There are no Ore Reserves currently reported in relation to the Sandstone gold project.
Middle Island Resources Limited has a firm policy to only utilise the services of external independent consultants to estimate
Mineral Resources. The Company also has established practices and procedures to monitor the quality of data applied in
Mineral Resource estimation, and to commission and oversee the work undertaken by external independent consultants.
12
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 Table 2. Sandstone Gold Project Mineral Resource Statement (30 June 2020)
Deposit
COG
(g/t Au)
Tonnes
Grade
(g/t Au)
Contained
Gold (oz.)
JORC
Classification
JORC
Code
1,012,000
1.36
44,000 Indicated
2012
+Two Mile Hill –
Open Pit
+Two Mile Hill –
Open Pit
^Two Mile Hill
– Tonalite Deeps
^Two Mile Hill
– BIF Deeps
+Shillington –
Open Pit
+Shillington –
Open Pit
#Wirraminna –
Open Pit
#Wirraminna –
Open Pit
0.7
0.7
0.7
0.5
0.5
114,000
1.10
4,000 Inferred
NA*
14,000,000
1.10
480,000 Inferred
NA*
200,000
3.10
20,000 Inferred
0.7
1,015,000
1.33
43,000 Indicated
2012
272,000
1.17
10,000 Inferred
2012
307,000
1.50
14,600 Indicated
2012
243,000
1.10
8,400 Inferred
Total Indicated
2,334,000
1.37
101,600 Indicated
Total Inferred
14,829,000
1.09
522,000 Inferred
Total Resource
17,163,000
1.13
623,600 Ind. & Inf.
2012
2012
2012
2012
2012
2012
2012
* The Two Mile Hill Tonalite Deeps and BIF Deeps have been reported within optimised wireframes. All wireframes include waste and have
an aggregate grade at or above the cut-off of 0.64og/t Au.
Table 2 includes information extracted from the Company’s previous ASX announcements, which are available to view on the Company’s
website, as follows:
+ ASX Release dated 14 December 2016.
^ ASX Release dated 14 April 2020.
# ASX Release dated 8 December 2017.
Table 3. Comparative Sandstone Gold Project Mineral Resource Statement
Deposit
Tonnes
Grade
(g/t Au)
Contained
Gold (oz.)
JORC
Classification
JORC
Code
As at 30 June 2019
Total Indicated estimate
2,334,000
1.37
102,500 Indicated
Total Inferred estimate
629,000
1.13
22,900 Inferred
Total Resource
2,963,000
1.32
125,300 Ind. & Inf.
As at 30 June 2020
Total Indicated estimate
2,334,000
1.37
101,600 Indicated
Total Inferred estimate
14,829,000
1.09
522,000 Inferred
Total Resource
17,163,000
1.13
623,600 Ind. & Inf.
2012
2012
2012
2012
2012
2012
In all cases, Mineral Resources are estimated and reported in accordance with the 2012 Edition of
the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the
JORC Code). Information in this release relating to Mineral Resources is based on, and fairly
represents, information and supporting documentation variously prepared by Mr Brett Gossage of
EGRM Consulting Pty Ltd, Mr Shaun Searle of Ashmore Advisory Pty Ltd and Ms Lisa Bascombe of
Mining Plus Pty Ltd on behalf of Middle Island Resources Limited. The Competent Persons’ are
Members of the Australasian Institute of Mining and Metallurgy (AusIMM) and/or the Australian
Institute of Geoscientists (AIG) and qualify as Competent Persons’ as defined in the JORC Code.
13
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Operations Overview The Mineral Resources and Ore Reserves Statement as a whole has been approved by Mr Rick Yeates who is an executive
director of Middle Island Resources Limited. Mr Yeates is a Member of the Australasian Institute of Mining and Metallurgy
and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to
the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Yeates has given his prior written
consent to the inclusion in this report of the Mineral Resources and Ore Reserves statement in the form and context in
which it appears. Mr Yeates is a shareholder in the Company and entities associated with Mr Yeates hold unlisted options
in the capital of the Company as disclosed in Appendix 3Y notices released to ASX.
Mining Tenements
Middle Island Resources Limited advises the following information required under ASX Listing Rule 5.3.3 as at 30 June 2020.
Tenements
Mining tenements
acquired during the year
Mining tenements
disposed during the year
Mining tenements held
at the end of the year
Tenement
location
M57/128
M57/129
P57/1384
P57/1395
P57/1442
E57/1102
E57/1028
EL 32291
EL 32290
EL 32305
EL 32308
EL 32309
EL 32292
EL 32297
EL 32298
EL 32301
EL 32304
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Option to acquire 100%
-
-
-
-
-
-
-
-
-
100%
100%
100%
Western Australia
Western Australia
Western Australia
Option to acquire 100%
Western Australia
100%
100%
Western Australia
Western Australia
Western Australia
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
Listed for Grant – 100%
Northern Territory
-
-
Listed for Grant – 100%
Northern Territory
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 be 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.
14
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 Directors’ Report
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 2020.
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 a wide range of corporate and
commercial advice to explorers and miners. His exposure (variously as legal practitioner, corporate advisor and director – both
oil & gas and hard rock) has extended to operations in the USA, UAE, NZ, Africa and South America. Since the mid-1980s, he
has served on the boards of various listed companies. He was the founding chairman of both copper producer Sandfire
Resources NL and mineral sands producer Image Resources NL. He is also non-executive director of ASX-listed Image Resources
NL and Emu NL.
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.
Beau Nicholls, (Non-Executive Director)
Mr Nicholls has 25 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, Mr Nicholls 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. Mr Nicholls is currently principal Consultant with Sahara Natural Resources. He is also non-
executive director of ASX-listed Big River Gold Limited.
Brad Marwood, (Non-Executive Director, appointed 2 December 2019)
Mr Marwood is a mining engineer and a highly experienced resources executive with more than 30 years of experience. He
was instrumental in bringing into production the copper mines at Kipoi (DRC) and Rapu Rapu (Philippines); completing
development of the Svartliden gold mine (Sweden) and has managed numerous Feasibility Studies and advanced stage
resource projects in Australia, Africa, North America and Asia.
He has worked in senior roles for groups such as Normandy, Dragon Mining, Lafayette, Moto Goldmines and Perseus
Mining before his most recent as Managing Director of Tiger Resources Limited. Mr Marwood’s involvement has seen
growth in several companies with a significant increase in their market capitalisation and by protecting investments through
restarting suspended mine projects. He is currently the managing director of ASX-listed Consolidated Zinc Limited.
15
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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 variously 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 ASX-listed Key Petroleum 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
Brad Marwood
Dennis Wilkins
PRINCIPAL ACTIVITIES
Ordinary
Shares
29,677,500
95,196,243
21,075,000
10,657,954
1,166,667
Options over
Ordinary Shares
26,487,500
56,232,081
17,025,000
-
-
During the year, the Group carried out exploration on its tenements and applied for or acquired additional tenements with
the primary objective of identifying deposits of gold to support the recommissioning of the Company’s 100% owned
processing plant at Sandstone. Whilst not the objective of the Group to explore for or seek to acquire mineral deposits
other than of gold, the Group reserves the right to follow up leads (thrown up by its gold exploration/investigative activities)
for other commodities and globally where the Board 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.
FINANCIAL REVIEW
Finance Review
During the year, the Company raised $7,000,627, before costs, from the issue of 1,092,957,216 fully paid ordinary shares.
Revenue from tribute production and gold sales of $14,756 (2019: $37,488) was received, and other income was
generated from the sale of mining interests, reimbursement of expenditure on mining interests, sale of property, plant and
equipment and rental of accommodation of $98,416 (2019: $370,049). The Group also received government COVID-19
cashflow boost grants of $67,811 (2019: n/a) during the year.
During the year, total exploration expenditure incurred by the Group amounted to $2,352,412 (2019: $1,308,546). 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 administration related revenue, amounted to $1,003,308 (2019: $1,753,384).
This resulted in an operating loss after income tax for the year ended 30 June 2020 of $3,174,737 (2019: $2,654,033).
At 30 June 2020, cash assets available totalled $4,712,409.
16
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Directors’ Report Operating Results for the Year
Summarised operating results are as follows:
Revenue and loss for the year from ordinary activities before income tax expense
183,265
(3,174,737)
2020
Revenues
$
Loss
$
Shareholder Returns
Basic loss per share (cents)
Risk Management
2020
2019
(0.2)
(0.3)
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. Where appropriate the board enlists the support of other suitably
qualified professionals to join board committees.
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.
•
•
•
Regular review of management’s activities and the Company’s circumstances.
Continuing review of capital and resources market sentiment.
Continuing review of economic trends and circumstances
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.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
During the period from the reporting date to the date of this report, a total of 584,656,072 fully paid ordinary shares have
been issued upon the exercise of unlisted options, raising a total of $4,545,245.
During August 2020, all 10 exploration licence applications, comprising the Group’s 100% owned Barkly super-project in
the Northern Territory, have been approved by the Northern Territory Government for granting. The formal grant is
dependent on the lifting of COVID-19 travel restrictions or at the Group’s earlier election.
The positive results of the exploration effort over the 2020 financial year together with those derived during the period
subsequent to the reporting date are likely to see the Company make a decision to mine with first production of gold from
the Sandstone Gold Project (following the recommissioning of the plant and pre-strip) expected, as at the date of this
report, before the end of the 2021 financial year.
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.
17
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Directors’ Report LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Group’s primary focus for the coming financial year is to extend and enhance the proposed gold production profile for
the Sandstone Project in order to recommission its processing plant at the earliest opportunity. The exciting Barkly Project
will be progressed at a cautious rate but the fact that priority accorded to it ranks behind the Sandstone Project is in no
way to be taken to suggest that the Barkly Project is not considered to be a very valuable opportunity. The Company will
continue to review projects globally with a view to identifying potential value add mineral asset acquisitions.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is subject to significant environmental regulation in respect to its 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 was designed to align key management personnel objectives
with shareholder and business objectives by providing a fixed remuneration component and offering, variously, short term
and long term securities incentives. The board designed the remuneration policy with a view to attracting and retaining
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 and evolves as circumstances require. All executives receive a base salary (based on factors
such as experience), superannuation and, possibly, a package of equity incentives in the Company. The board reviews each
executive package as and when it considers it appropriate to do so in accordance with its remuneration policy and by
reference to the Group’s fiscal wherewithal, performance, the executive’s performance and comparable information from
industry sectors and other listed companies in similar circumstances.
The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is to design
remunerative packages that reward executives for performance which results in long term growth in shareholder wealth.
The executive directors and executives receive the superannuation guarantee contribution required by the government of
Australia, which was 9.5% for the 2020 financial year 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 a methodology such as Black Scholes. The board
does not accept that the “fair value” represents market or realisable value. Rather, the board use a commonly accepted
methodology purely for the purposes of complying with the Australian Accounting Standards.
The board’s policy is to remunerate non executive directors at market rates for comparable companies, for time,
commitment and responsibilities, albeit all non-executive directors are currently remunerated below or at the lower end of
the market rate range (most certainly that is the case insofar as cash remuneration is concerned). 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 change with the approval of shareholders in general meeting, currently
$300,000. Fees for non executive directors are not linked to the performance of the Group. However, to align directors’
interests with shareholder interests, the directors are encouraged to hold shares in the Company and, subject to shareholder
approval in general meeting may be offered participation in employee share and option arrangements.
Performance based remuneration
The Group policy allows the use of performance-based remuneration, to attract and motivate employees, in the form of
options. Where utilised, options may be issued but not vest until certain hurdles have been met where the hurdles are
directed at advancing the Company towards its objectives potentially within prescribed periods.
18
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Directors’ Report Company performance, shareholder wealth and key management personnel remuneration
No direct relationship exists between key management personnel remuneration and Group performance (including
shareholder wealth).
Use of remuneration consultants
The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2020.
Voting and comments made at the Company’s 2019 Annual General Meeting
The Company received approximately 99.5% of “yes” votes on its remuneration report for the 2019 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(1)
Total
Non-Monetary
Superannuation
Retirement
Benefits
$
$
$
$
$
Directors
Peter Thomas (2)
2020
2019
Richard Yeates
2020
2019
Beau Nicholls (3)
2020
2019
Salary
& Fees
$
40,487
36,530
216,667
210,000
28,919
30,000
-
-
-
-
-
-
-
-
-
3,846
3,470
20,583
19,950
2,747
-
1,663
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,000
44,333
70,000
-
237,250
30,000
259,950
-
30,000
31,666
60,000
-
-
-
-
90,000
19,167
-
-
332,416
389,950
Brad Marwood (appointed 2 December 2019)
2020
17,504
Dennis Wilkins (4)
2020
2019
-
-
Total key management personnel compensation
2020
2019
303,577
276,530
-
-
28,839
23,420
(1) Share-based payments represents share options granted during the 2019 financial year. These options were valued in accordance with Australian Accounting Standards
which specifies that an option-pricing model be applied to employees’ or directors’ stock options to estimate their fair value as at their grant date. The expression “fair
value” – and derivatives thereof – wherever used in this report bears the meaning ascribed to that expression by the Australian Accounting Standards Board. “Fair value”
commonly does not reflect realisable value and the Board does not represent or accept that stated fair values reflected market values at the relevant date. This observation is
over-riding and shall prevail over any inconsistent possible interpretation.
(2) In addition to his director fees disclosed in the table above, Mr Thomas was paid $3,000 (2019: nil) for the provision of services provided to the Group during the year. The
amounts paid were at usual commercial rates.
(3) In addition to his director fees disclosed in the table above, a total of $41,440 (2019: nil) was paid to E2M Ltd, a business of which Mr Nicholls is a director and substantial
shareholder. E2M Ltd provided geological consulting services to the Group during the year. The amounts paid were at usual commercial rates with fees charged on an
hourly basis.
(4) Mr Wilkins is not remunerated for his role as alternate director, however, a total of $194,716 (2019: $215,499) was paid to DWCorporate Pty Ltd, a business of which Mr
Wilkins is principal. DWCorporate Pty Ltd provided company secretarial, corporate advisory and accounting services to the Group during the year. The amounts paid were at
usual commercial rates with fees charged on an hourly basis.
19
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Directors’ Report Service agreements
Richard Yeates, Managing Director:
•
Term of agreement – commenced 2 March 2010 and continues until terminated.
• Annual salary was initially (2010) $300,000 excluding superannuation; reduced to $200,000 from 1 February 2014,
and further reduced to $180,000 on 1 July 2014; increased to $210,000 on 1 July 2018, and further increased to
$250,000 from 1 May 2020.
•
The agreement may be terminated by the Company giving 12 months’ written notice or by Mr Yeates giving 3 month’s
written notice (shorter notice periods apply in the event breach of contract by either party). No benefits are payable
on termination other than entitlements accrued to the date of termination.
Dennis Wilkins, Alternate Director and Company Secretary:
•
Term of agreement – Commencing 17 March 2010 until terminated in writing by either party.
• Mr Wilkins’ firm, DWCorporate Pty Ltd, is engaged to provide company secretarial, corporate advisory and accounting
services. Fees are charged on an hourly basis, and all amounts are disclosed in the remuneration table above.
None of the other directors have service agreements in place.
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.
No options were granted to and none vested in any key management personnel during the year.
No ordinary shares in the Company were issued as a result of the exercise of remuneration options during the year.
Equity instruments held by key management personnel
Direct and indirect interests in options over ordinary shares
Balance at
start of the
year
Granted as
compensation Exercised
Other
changes (2)
Balance at
end of the
year
Vested and
exercisable Unvested
Directors of Middle Island Resources Limited
Peter Thomas
16,595,000
Richard Yeates
34,482,069
Beau Nicholls
17,025,000
Brad Marwood
Dennis Wilkins
(1) -
-
-
-
-
-
-
-
9,892,500 26,487,500 26,487,500
- 21,750,012 56,232,081 56,232,081
-
-
-
- 17,025,000 17,025,000
8,078,977
8,078,977
8,078,977
-
-
-
-
-
-
-
-
(1) Balance held at date of appointment, 2 December 2019.
(2) Other changes comprise free attaching options acquired through participation in the Company’s Entitlements Issue completed in February 2020.
Direct and indirect interests in ordinary shares
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 (2)
Balance at
end of the
period
Ordinary shares
Peter Thomas
Richard Yeates
Beau Nicholls
Brad Marwood
Dennis Wilkins
19,785,000
73,446,231
21,075,000
(1) -
1,166,667
-
-
-
-
-
9,892,500
29,677,500
21,750,012
95,196,243
-
21,075,000
8,078,977
-
8,078,977
1,166,667
(1) Balance held at date of appointment, 2 December 2019.
(2) Other changes comprise shares acquired through participation in the Company’s Entitlements Issue completed in February 2020.
20
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Directors’ Report D i r e c t o r s ’ R e p o r t
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 corporate advisory
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 2020 there was nil (2019:
$6,765) owing to DWCorporate Pty Ltd.
Quenda Investments Pty Ltd (“Quenda”), a company of which Mr Yeates is a director and shareholder, lent securities held
in Middle Island Resources Limited to the provider of a controlled placement facility during the current reporting period
for which Quenda was paid a stock borrow fee of $6,000 for the year ended 30 June 2020 (2019: $6,000). The amounts
paid were on arms’ length commercial terms. At 30 June 2020 there was $500 (2019: $500) owing to Quenda
Investments Pty Ltd.
In addition to his director fees, Mr Thomas was paid $3,000 (2019: nil) for the provision of special exertion services
provided to the Group during the year. The amounts paid were on arms’ length commercial terms and are disclosed in the
remuneration report in conjunction with Mr Thomas’ compensation. At 30 June 2020 there was nil (2019: nil) owing to
Mr Thomas for the provision of special exertion services.
In addition to his director fees, a total of $41,440 (2019: nil) was paid to E2M Ltd, a business of which Mr Nicholls is a
director and substantial shareholder. E2M Ltd provided geological consulting services to the Group during the year. The
amounts paid were on arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr
Nicholls’ compensation. At 30 June 2020 there was $6,560 (2019: nil) owing to E2M Ltd for the provision of geological
consulting services.
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
Brad Marwood (appointed 2 December 2019)
Dennis Wilkins (alternate for Beau Nicholls)
Directors Meetings Committee Meetings Committee Meetings
Audit
Remuneration
A
6
6
6
5
5
B
6
6
6
5
6
A
-
*
-
*
-
B
-
*
-
*
-
A
1
1
1
*
*
B
1
1
1
*
*
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.
SHARES UNDER OPTION
Unissued ordinary shares of Middle Island Resources Limited under option at the date of this report are as follows:
Expiry Date
Exercise Price (cents)
Number of Options
Date Options Issued
18 November 2018
18 January 2019, 26 November 2019
& 14 April 2020
8 November 2021
31 January 2022
19 February 2020, 21 February 2020 &
14 April 2020
31 January 2022
Total number of options outstanding at the date of this report
2.9900
0.0079
0.0077
30,000,000
260,633,419
236,192,532
526,825,951
21
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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 $9,993.
NON AUDIT SERVICES
The following details any non audit services provided by the entity’s auditor, Elderton Audit Pty Ltd 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.
Elderton Audit Pty Ltd 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
2020
$
2,900
2019
$
5,200
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 24.
Signed in accordance with a resolution of the directors.
Richard Yeates
Managing Director
Perth, 30 September 2020
22
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020Directors’ Report
C o r p o r a t e G o v e r n a n c e S t a t e m e n t
The Board of Middle Island Resources Limited (“Board”) is committed to ensuring that the Company’s obligations and
responsibilities to its various stakeholders are fulfilled through its corporate governance practices. The directors of the
Company (“Directors”, being either “Non-Executive Directors” or Executive Directors”) undertake to perform their duties
with honesty, integrity, care and due diligence, to act in good faith in the best interests of the Company in a manner that
reflects the highest standards of corporate governance.
The Company’s Board is committed to a high standard of corporate governance practices, ensuring that the Company
complies with the Corporations Act 2001 (Cth), ASX Listing Rules, Company Constitution and other applicable laws and
regulations.
CORPORATE GOVERNANCE COMPLIANCE
For the year ended 30 June 2020 the Company has followed the 3rd edition of the ASX Corporate Governance Council’s
Principles and Recommendations (“Principles and Recommendations”) where the Board has considered the
recommendations to be an appropriate benchmark for its corporate governance practices.
Where, after due consideration, the Company’s corporate governance practices depart from a recommendation, the Board
has offered full disclosure and reason for adoption of its own practice, in compliance with the “if not, why not” regime.
During the 2020 financial year the Company performed a review of existing corporate governance practices and, where
considered appropriate, updated policies and procedures for changes made by the ASX Corporate Governance Council in
the 4th edition of the Principles and Recommendations. The 4th edition of the Principles and Recommendations is effective
for the Company commencing 1 July 2020.
The 2020 Corporate Governance Statement was approved by the Board on 22 October 2020 and can be viewed at
middleisland.com.au.
23
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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
ELDERTON
AUDIT PTY LTD
24
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
C o n s o l i d a t e d S t a t e m e n t O f P r o f i t O r L o s s A n d
O t h e r C o m p r e h e n s i v e I n c o m e
FOR THE YEAR ENDED 30 JUNE 2020
Notes
REVENUE
Sale of commodities
Other income
EXPENDITURE
Administrative expenses
Depreciation expense
Exploration expenses
Fair value gains/(losses) on financial assets
Finance costs
Salaries and employee benefits expense
Share-based payments expense
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 LOSS FOR THE PERIOD ATTRIBUTABLE
TO OWNERS OF MIDDLE ISLAND RESOURCES LIMITED
Basic and diluted loss per share for loss attributable to the ordinary
equity holders of the Company (cents per share)
2020
$
14,756
168,509
2019
$
37,488
378,055
4(a)
4(b)
(603,934)
(763,081)
5
(47,311)
(9,750)
26(b)
6
(2,352,412)
(1,308,546)
99,995
(7,796)
(467,772)
(1,971)
(446,544)
(428,456)
-
(90,000)
(3,174,737)
(2,654,033)
-
-
(3,174,737)
(2,654,033)
10,135
10,135
5,663
5,663
(3,164,602)
(2,648,370)
25
(0.2)
(0.3)
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.
25
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
C o n s o l i d a t e d S t a t e m e n t O f F i n a n c i a l Po s i t i o n
AS AT 30 JUNE 2020
Notes
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets
Non-current asset held for sale
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Right-of-use assets
Tenement acquisition costs
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Borrowings
Employee benefit obligations
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
7
8
9
28
10
11
12
2020
$
4,712,409
62,593
479,745
-
2019
$
564,618
56,268
379,750
213,386
5,254,747
1,214,022
2,056,347
2,065,632
28,545
1,525,989
3,610,881
8,865,628
-
1,327,754
3,393,386
4,607,408
13
717,665
104,426
26,517
70,464
79,964
894,610
-
32,104
55,905
192,435
14
15
16
1,384,900
1,384,900
2,279,510
6,586,118
1,203,417
1,203,417
1,395,852
3,211,556
42,737,460
36,305,796
633,286
515,651
(36,784,628)
(33,609,891)
6,586,118
3,211,556
The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Financial Statements.
26
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
C o n s o l i d a t e d S t a t e m e n t O f C h a n g e s I n E q u i t y
FOR YEAR ENDED 30 JUNE 2020
Contributed
Equity
Notes
Share-
based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Accumulated
Losses
$
$
$
$
Total
$
BALANCE AT 1 JULY 2018
34,954,474
729,000
419,988
(31,684,858)
4,418,604
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
Shares issued during the year
Share issue transaction costs
Employee options expired
during the year
Options issued to employees
during the year
15
15
26
26
-
-
-
1,395,803
(44,481)
-
-
-
-
-
-
-
(729,000)
90,000
-
(2,654,033)
(2,654,033)
5,663
-
5,663
5,663
(2,654,033)
(2,648,370)
-
-
-
-
-
-
1,395,803
(44,481)
729,000
-
-
90,000
BALANCE AT 30 JUNE 2019
36,305,796
90,000
425,651
(33,609,891)
3,211,556
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
-
-
-
Shares issued during the year
15
7,000,627
-
-
-
-
Share issue transaction costs
15, 26
(568,963)
107,500
-
(3,174,737)
(3,174,737)
10,135
-
10,135
10,135
(3,174,737)
(3,164,602)
-
-
-
-
7,000,627
(461,463)
BALANCE AT 30 JUNE 2020
42,737,460
197,500
435,786 (36,784,628)
6,586,118
The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements.
27
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
C o n s o l i d a t e d S t a t e m e n t O f C a s h F l o w s
FOR YEAR ENDED 30 JUNE 2020
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Government COVID-19 cashflow boost grant received
Payments to suppliers and employees
Expenditure on mining interests
Reimbursements of expenditure on mining interests
Interest received
Interest paid
Other income received
2020
$
14,756
67,811
2019
$
37,488
-
(991,229)
(1,154,849)
(1,784,340)
(1,600,297)
93,987
2,494
(7,796)
-
353,346
3,983
(1,971)
16,722
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
24(a)
(2,604,317)
(2,345,578)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of mining properties
Payments for tenement acquisition costs
Payments for property, plant and equipment
NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares
Payments for share issue transaction costs
Principal element of lease payments
Proceeds from borrowings
Repayments of borrowings
221,490
(16,752)
-
204,738
-
-
(26,034)
(26,034)
7,000,627
1,395,803
(461,463)
(44,481)
(36,614)
88,140
(49,780)
-
40,190
(8,086)
NET CASH INFLOW FROM FINANCING ACTIVITIES
6,540,910
1,383,426
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
4,141,331
(988,186)
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
564,618
1,552,529
6,460
275
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
7
4,712,409
564,618
The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements.
28
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d 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 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 30 September 2020. 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
The Group has adopted all the new, revised or amending Accounting Standards and Interpretations issued by the
AASB that are relevant to their operations and effective for the current annual reporting period.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are
relevant to the Group include:
• AASB 16 Leases; and
•
Interpretation 23 Uncertainty Over Income Tax Treatments.
AASB 16 Leases
Change in accounting policy
The Group has adopted AASB 16 Leases from 1 July 2019 which has resulted in changes in the classification,
measurement and recognition of leases. The new standard requires recognition of a right-of-use asset (the leased
item) and a financial liability (lease payments) and removes the former distinction between ‘operating’ and ‘finance’
leases. The exceptions are short-term leases and leases of low value assets.
The Group has adopted AASB 16 using the modified retrospective approach under which the reclassifications and
adjustments arising from the new leasing rules are recognised in the opening statement of financial position on
1 July 2019. There is no initial impact on accumulated losses under this approach and comparatives have not been
restated.
From 1 July 2019, where the Group is lessee, the Group recognises a right-of-use asset and a corresponding liability
at the date at which the lease asset is available for use by the Group. Each lease payment is allocated between the
liability and the finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
•
•
•
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
29
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined,
the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and
conditions.
The Group’s current lease agreement does not contain any extension options.
Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before commencement date less any lease incentives received, and any initial direct costs.
Where the terms of a lease require the Group to restore the underlying asset, or the Group has an obligation to
dismantle and remove a leased asset, a provision is recognised and measured in accordance with AASB 137. To the
extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset.
Where leases have a term of less than 12 months or relate to low value assets the Group may apply exemptions in
AASB 16 to not capitalise any such leases and instead recognise the lease payments on a straight-line basis as an
expense in profit or loss.
Impact on adoption of AASB 16
The Group leases office premises with a two year term. Prior to 1 July 2019 the lease was classified as an operating
lease with payments charged to profit or loss on a straight-line basis over the period of the lease. Upon adoption of
AASB 16 the Group recognised a lease liability for this lease, measured at the present value of the remaining lease
payments, discounted using the Group’s incremental borrowing rate as of 1 July 2019, being 10%.
On initial application the associated right-of-use asset was measured at the amount equal to the lease liability,
adjusted for prepaid lease payments recognised in the statement of financial position as at 30 June 2019.
In the statement of cash flows the Group has recognised cash payments for the principal portion of the lease
liability within financing activities and cash payments for the interest portion of the lease liability as interest paid
within operating activities.
The adoption of AASB 16 resulted in the recognition of a right-of-use asset of $66,571 and lease liability of
$63,131 in respect of the office lease. There was no impact on accumulated losses at 1 July 2019.
Practical expedients applied
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the
standard:
•
the Group has elected not to reassess whether a contract is, or contains, a lease at the date of initial
application. Instead, for contracts entered before the transition date the Group relied on its assessment made
applying AASB 117 Leases and Interpretation 4 Determining whether an Arrangement contains a Lease; and
•
reliance on previous assessments on whether leases are onerous.
Reconciliation of operating lease commitments to lease liability
Below is a reconciliation of total operating lease commitments as at 30 June 2019, as disclosed in the annual
financial statements for the year ended 30 June 2019, and the lease liability recognised on 1 July 2019:
Operating lease commitments disclosed as at 30 June 2019
Adjustment for prepayment at 30 June 2019
Discounted using the lessee’s incremental borrowing rate at the date of initial application
and lease liability recognised as at 1 July 2019
30 Jun 2020
$
72,240
(3,440)
68,800
63,131
30
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(iii) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2020 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of
these new standards and interpretations is that they are not expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future transactions.
(iv) Historical cost convention
These financial statements have been prepared under the historical cost convention, except for certain financial
assets and liabilities measured at fair value.
(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 2020 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.
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. A list of controlled entities is disclosed in note 22 to the financial
statements.
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.
31
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(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. They are deferred in equity if they are attributable to part of the net investment in a
foreign operation.
(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
Sale of commodities
Revenue from gold concentrate sales is recognised when the Group satisfies its performance obligations under its
contract by transferring such goods to the customer’s control. Control is generally determined to be when the
customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good.
Interest
Interest revenue is recognised on a time proportionate basis that considers the effective yield on the financial assets.
Other income
All other income is recognised when the right to receive other income is established.
All revenue is stated net of the amount of goods and services tax.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(f) Government grants
Grants from the government, including exploration incentives and the COVID-19 cashflow boost, are recognised at
their fair value where there is a reasonable assurance that the grant will be received, and the Group will comply
with all attached conditions. Grants relating to expense items are recognised as income over the periods necessary
to match the grant to the costs it is compensating. Grants relating to assets are credited to deferred income at fair
value and are credited to income over the expected useful life of the asset on a straight line basis.
(g) 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 based on 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 based on 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. No deferred tax is recognised for the carried forward losses as the Group
considers there will be no taxable profit available to offset such brought forward tax losses in the future.
(h) Leases
As explained in note 1(a)(ii) above, the Group has changed its accounting policy for leases where the Group is the
lessee. The new policy and the impact of the change are described in note 1(a)(ii).
Until 30 June 2019, 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. 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.
(i) Impairment of non-financial assets
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 period.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(j) 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.
(k) Investments and other financial assets
(i) Classification
The Group classifies its financial assets in the following measurement categories:
•
•
Those to be measured subsequently at fair value (either through OCI or through profit or loss); and
Those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual
terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in
equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable
election at the time of initial recognition to account for the equity investment at fair value through other
comprehensive income (FVOCI). All of the Group’s financial assets are classified at fair value through profit or loss.
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group
commits to purchase or sell the asset. 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.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the
financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash
flows are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and
the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its
debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and presented in other income or expenses. Impairment
losses are presented as a separate line item in the statement of profit or loss.
•
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where
the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements
in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses,
interest income and foreign exchange gains and losses which are recognised in profit or loss. When the
financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to profit or loss and recognised in other income or expenses. Interest income from these financial assets
is included in finance income using the effective interest rate method. Foreign exchange gains and losses are
presented in other income or expenses and impairment losses are presented as a separate line item in the
statement of profit or loss.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
•
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on
a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net
within other income or expenses in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected
to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair
value gains and losses to profit or loss following the derecognition of the investment. Dividends from such
investments continue to be recognised in profit or loss as other income when the Group’s right to receive payment
is established.
Changes in the fair value of financial assets at FVPL are recognised in other income or expenses in the statement of
profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at
FVOCI are not reported separately from other changes in fair value.
(iv) Impairment
From 1 July 2019, the Group assesses, on a forward looking basis, the expected credit losses associated with its
debt instruments carried at amortised cost and FVOCI. The impairment methodology depends on whether there has
been a significant increase in credit risk.
(l) Plant and equipment
All plant and equipment are 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(i)). 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.
(m) 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 is 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 or otherwise of economically 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.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
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.
(n) Non-current asset held for sale
Non-current assets classified as held for sale are generally measured at the lower of carrying amount and fair value
less costs to sell, where the carrying amount will be recovered principally through sale as opposed to continued use.
No depreciation or amortisation is charged against assets classified as held for sale. Classification as “held for sale”
occurs when: management has committed to a plan; sale is expected to occur within one year from the date of
classification; and active marketing has commenced. Such assets are classified as current assets.
Any impairment losses are recognised for any initial or subsequent write down of an asset classified as held for sale
to fair value less cost to sell. Any reversal of impairment recognised on classification as held for sale or prior to such
classification is recognised as a gain in profit or loss in the period in which it occurs.
(o) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to and unpaid at the end of the
financial year. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms.
(p) 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.
Other long-term employee benefit obligations
The group also has liabilities for long service leave that are not expected to be settled wholly within 12 months after
the end of the period in which the employees render the related service. These obligations are therefore measured
as the present value of expected future payments to be made in respect of services provided by employees up to the
end of the reporting period using the projected unit credit method. Consideration is given to expected future wage
and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and
currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of
experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional
right to defer settlement for at least twelve months after the reporting period, regardless of when the actual
settlement is expected to occur.
(q) 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 or service providers render services, or where
vendors sell assets to the Group, in exchange for shares or rights over shares (‘equity-settled transactions’), refer to
note 26.
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.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
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 a 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 remuneration equity-settled transactions is recognised, together with a corresponding increase in equity,
over the period in which any 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.
(r) Provision for rehabilitation
The Group records the estimated cost to rehabilitate operating locations in the period in which the obligation arises
on an undiscounted basis. The nature of rehabilitation activities includes the dismantling and removing of
structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration,
reclamation and revegetation of affected areas.
Typically, the obligation arises when the asset is installed, or the ground/environment is disturbed at the production
location. When the liability is initially recorded, the value of the estimated cost of eventual rehabilitation is
capitalised by increasing the carrying amount of the related mining assets. Additional disturbances or changes in
rehabilitation costs will be recognised as additions or changes to the corresponding asset and rehabilitation liability
when incurred.
Costs incurred that relate to an existing condition caused by past operations, and do not have future economic
benefit, are expensed as incurred.
(s) 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.
(t) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss 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.
(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.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(u) 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.
(v) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(w) 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 consider 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 a
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.
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 notes 1(i), 1(k)
and 1(m).
Provision for rehabilitation
The Group assesses its mine rehabilitation provision half-yearly in accordance with accounting policy note 1(r).
Significant judgement is required in determining the provision primarily relating to the estimation of costs in the
Mine Closure Plan that is lodged with the Department of Mines, Industry Regulation and Safety.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
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 the Group’s West African based subsidiary company is the West African CFA franc. Given
the current scale of the operations in West Africa, the foreign exchange exposure is not considered to be material to
the Group.
(ii) Price risk
The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified
in the statement of financial position as financial assets at fair value through profit or loss. Given the current level
of operations, the Group’s financial statements for the year ended 30 June 2020 are not exposed to commodity
price risk.
To minimise the risk, the Group’s investments are of high quality and are publicly traded on reputable international
stock exchanges. The investments are managed on a day to day basis so as to pick up any significant adjustments to
market prices.
Sensitivity analysis
At 30 June 2020, if the value of the equity instruments had increased by 15% with all other variables held constant,
post-tax loss for the Group would have been $71,962 lower, with no changes to other equity balances, as a result
of gains on equity securities classified as financial assets at fair value through profit or loss (2019: $56,962 lower).
At 30 June 2020, if the value of the equity instruments had decreased by 15% with all other variables held
constant, post-tax loss for the Group would have been $71,962 higher, with no changes to other equity balances,
as a result of losses on equity securities classified as financial assets at fair value through profit or loss (2019:
$56,962 higher).
(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 $4,712,409
(2019: $564,618) is subject to interest rate risk. The weighted average interest rate received on cash and cash
equivalents by the Group was 0.22% (2019: 0.48%).
Sensitivity analysis
At 30 June 2020, if interest rates had changed by - 10 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 $1,035 lower (2019: - 50 basis
points $4,117 lower) as a result of lower or higher interest income from cash and cash equivalents.
At 30 June 2020, if interest rates had changed by + 50 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 $1,035 higher (2019: + 50
basis points $4,117 higher) as a result of lower or higher interest income from cash and cash equivalents.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(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.
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 of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes. The equity investments held by the Group are classified at fair value through profit or loss. The
market value of all equity investments represents the fair value based on quoted prices on active markets (TSX) as at
the reporting date without any deduction for transaction costs. These investments are classified as level 1 financial
instruments.
The carrying amounts and estimated fair values of financial assets and financial liabilities are as follows:
Consolidated
Consolidated
2020
$
4,712,409
62,593
479,745
2019
$
564,618
56,268
379,750
5,254,747
1,000,636
717,665
104,426
26,517
70,464
814,646
-
32,104
136,530
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Total Financial Assets
Financial Liabilities
Trade and other payables
Lease liabilities
Borrowings
Total Financial Liabilities
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
The methods and assumptions used to estimate the fair value of financial instruments are outlined below:
Cash
The carrying amount is fair value due to the liquid nature of these assets.
Receivables/Payables/Borrowings
Due to the short-term nature of these financial rights and obligations, their carrying amounts are estimated to
represent their fair values.
Fair value measurements of financial assets
The carrying values of financial assets and liabilities of the Group approximate their fair values. Fair values of
financial assets and liabilities have been determined for measurement and / or disclosure purposes.
Fair value hierarchy
The Group classifies assets and liabilities carried at fair value using a fair value hierarchy that reflects the significance
of the inputs used in determining that value. The following table analyses financial instruments carried at fair value
by the valuation method. The different levels in the hierarchy have been defined as follows:
Level 1:
Level 2:
Level 3:
quoted prices (unadjusted) in active markets for identical assets or liabilities;
inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs).
30 June 2020
Financial assets
Total as at 30 June 2020
30 June 2019
Financial assets
Total as at 30 June 2019
Level 1
Level 2
Level 3
$
479,745
479,745
379,750
379,750
$
-
-
-
-
$
-
-
-
-
Total
$
479,745
479,745
379,750
379,750
41
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
3.
SEGMENT INFORMATION
For management purposes, the Group has identified two reportable segments, being exploration activities undertaken
in Australia and West Africa. These segments include activities associated with the determination and assessment of
the existence of commercial economic reserves from the Group’s mineral assets in these geographic locations.
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.
Segment revenue – Australia
Segment revenue – West Africa
Segment revenue – Total
Reconciliation of segment revenue to total revenue and other income:
Interest revenue
Other income
Consolidated
Consolidated
2020
$
14,756
93,987
108,743
2,282
72,240
2019
$
37,488
353,346
390,834
3,983
20,726
TOTAL REVENUE AND OTHER INCOME
183,265
415,543
Segment result – Australia
Segment result – West Africa
Segment result – Total
Reconciliation of segment result to net loss before tax:
- Other income
Fair value gains/(losses)
Other corporate and administration
NET LOSS BEFORE TAX
Segment operating assets – Australia
Segment operating assets – West Africa
Segment operating assets – Total
Reconciliation of segment operating assets to total assets:
Other corporate and administration assets
TOTAL ASSETS
Segment operating liabilities – Australia
Segment operating liabilities – West Africa
Segment operating liabilities – Total
Reconciliation of segment operating liabilities to total liabilities:
Other corporate and administration liabilities
TOTAL LIABILITIES
(2,234,682)
(917,049)
(8,988)
(663)
(2,243,670)
(917,712)
74,522
99,995
24,709
(467,772)
(1,105,584)
(1,293,258)
(3,174,737)
(2,654,033)
3,581,665
3,386,491
-
213,386
3,581,665
3,599,877
5,283,963
8,865,628
1,007,531
4,607,408
2,012,332
1,229,822
80
80
2,012,412
1,229,902
267,098
165,950
2,279,510
1,395,852
42
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
4.
REVENUE AND OTHER INCOME
(a) Revenue from continuing operations
Sale of commodities
Tribute production
(b) Other income
Interest revenue
Net gain on sales of mining interests
Reimbursements of expenditure on mining interests
Net gain on disposal of property, plant and equipment
Accommodation rental
Net foreign exchange gains
5.
EXPENSES
Loss before income tax includes the following specific expenses:
Defined contribution superannuation expense
Minimum lease payments relating to operating leases
Depreciation expenses:
Plant and equipment
Right-of-use assets
Consolidated
Consolidated
2020
$
2019
$
14,756
37,488
2,282
-
93,987
67,811
-
4,429
3,983
15,883
353,346
-
1,180
3,663
168,509
378,055
46,224
39,964
9,285
38,026
47,311
30,567
40,420
9,750
-
9,750
43
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
6.
INCOME TAX
(a) Income tax expense
Current tax
Deferred tax
Consolidated
Consolidated
2020
2019
$
-
-
$
-
-
(b) Numerical reconciliation of income tax expense to prima facie
tax payable
Loss from continuing operations before income tax expense
(3,174,737)
(2,654,033)
Prima facie tax benefit at the Australian tax rate of 27.5% (2019: 27.5%)
(873,053)
(729,859)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Foreign losses – West Africa excluded
Share-based payments
Other
Movements in unrecognised temporary differences
Tax effect of current year tax losses for which no deferred tax asset has
been recognised
Income tax expense
(c) Unrecognised temporary differences
Deferred Tax Assets (at 27.5% (2019: 27.5%))
Capital raising costs
Financial assets
Other temporary differences
Carry forward foreign losses
Carry forward tax losses
Deferred Tax Liabilities (at 27.5% (2019: 27.5%))
Tenement acquisition costs
Net deferred tax assets
(2,472)
-
(734)
4,185
24,750
(813)
(876,259)
(701,737)
(83,002)
46,362
959,261
-
655,375
-
170,668
105,467
29,307
7,218,679
4,881,038
55,514
132,965
24,985
7,216,207
4,011,816
369,739
(365,132)
12,035,420
11,076,355
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.
In April 2017, the Australian Government enacted legislation which reduces the corporate rate for small and
medium business (base rate) entities from 30% to 25% over the next decade. For the 2017 financial year the
corporate tax rate reduced to 27.5% for small business entities with turnover less than $10 million. This turnover
threshold progressively increased until it reached $50 million in the 2020 financial year. For the 2021 financial year,
the tax rate will decrease to 26% and then 25% for the 2022 and later financial years. Middle Island Resources
Limited satisfies the criteria to be a base rate entity.
44
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
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7.
CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
Consolidated
Consolidated
2020
$
4,671,649
40,760
2019
$
523,858
40,760
Cash and cash equivalents as shown in the statement of financial position
and the statement of cash flows
4,712,409
564,618
Cash and cash equivalents at 30 June 2020 comprise A$4,707,819 (2019: A$563,911), 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.
The Group has provided a bank guarantee of $20,760 for a property lease.
8.
CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Trade Debtors (1)
Other
Consolidated
Consolidated
2020
$
58,628
3,965
62,593
2019
$
12,903
43,365
56,268
(1) The Group assesses, on a forward looking basis, the expected credit losses associated with trade debtors. All amounts recorded at balance date are considered
recoverable in full.
9.
CURRENT ASSETS – FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Canadian listed equity securities
479,745
379,750
Changes in fair values of financial assets are shown at ‘fair value gains/(losses) on financial assets’ in the statement
of profit or loss and other comprehensive income. Refer to note 2 for details of the fair value measurement.
45
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
10.
NON-CURRENT ASSETS - PLANT AND EQUIPMENT
At 1 July 2018
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2019
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2019
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2020
Opening net book amount
Depreciation charge
Closing net book amount
At 30 June 2020
Cost
Accumulated depreciation
Net book amount
Freehold
Land
Plant and
Equipment
$
$
Total
$
126,929
2,244,405
2,371,334
-
(321,986)
(321,986)
126,929
1,922,419
2,049,348
126,929
1,922,419
2,049,348
-
-
26,034
(9,750)
26,034
(9,750)
126,929
1,938,703
2,065,632
126,929
2,277,399
2,404,328
-
(338,696)
(338,696)
126,929
1,938,703
2,065,632
126,929
1,938,703
2,065,632
-
(9,285)
(9,285)
126,929
1,929,418
2,056,347
126,929
2,234,706
2,361,635
-
(305,288)
(305,288)
126,929
1,929,418
2,056,347
Plant and equipment associated with the Sandstone gold project with a net book value at 30 June 2020 of
$1,912,170 (2019: $1,912,170) is on care and maintenance.
46
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
11.
LEASES
(a) Amounts recognised in the statement of financial
position
The statement of financial position shows the following
amounts relating to leases:
Right-of-use assets
Buildings
Lease liabilities
Current
Notes
Consolidated
Consolidated
2020
1 July 2019 *
$
$
28,545
68,800
26,517
63,131
* In the previous year the Group did not recognise any lease assets or lease liabilities as the Group did not have any ‘finance leases’ under AASB 117 Leases. For
adjustments recognised on adoption of AASB 16 on 1 July 2019, please refer to note 1(a)(ii).
There were no additions to right-of-use assets during the 2020 financial year.
(b) Amounts recognised in the statement of profit or
loss and other comprehensive income
The statement of profit or loss and other comprehensive
income shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Buildings
Interest expense (included in finance cost)
5
The total cash outflow for leases in 2020 was $41,280.
(c) The Group’s leasing activities
38,026
4,666
-
-
The Group leases office premises with a two year term. For further information and adjustments recognised on
adoption of AASB 16 on 1 July 2019, please refer to note 1(a)(ii).
47
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
12.
NON-CURRENT ASSETS – TENEMENT ACQUISITION COSTS
Tenement acquisition costs carried forward in respect of mining areas of
interest
Opening net book amount
Additions
Increase in rehabilitation provision
Closing net book amount
13.
CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade payables (1)
Other payables and accruals
Consolidated
Consolidated
2020
$
2019
$
1,327,754
1,327,754
16,752
181,483
-
-
1,525,989
1,327,754
543,410
174,255
717,665
55,559
48,867
104,426
(1) The increase to the balance of trade payables at 30 June 2020 compared with the 2019 financial year is a reflection of the increased exploration activity being
undertaken on the Group’s Sandstone gold project following the successful capital raisings completed during the 2020 financial year.
14.
NON-CURRENT LIABILITIES - PROVISIONS
Rehabilitation
Carrying amount at start of year
Additional provision charged to tenement acquisition costs
Carrying amount at end of year
1,203,417
1,203,417
181,483
-
1,384,900
1,203,417
The Group records the undiscounted estimated cost to rehabilitate operating locations in the period in which the
obligation arises. The nature of rehabilitation activities includes the dismantling and removing of structures,
rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation
and revegetation of affected areas. The provision includes rehabilitation costs associated with the Sandstone Gold
Project based on the latest estimated future costs contained in the Mine Closure Plan (MCP) lodged with the
Government of Western Australia Department of Mines, Industry Regulation and Safety (DMIRS). An updated MCP
was lodged with DMIRS during November 2019 containing an updated estimate of the closure costs, resulting in an
increase to the provision during the reporting period. The updated MCP is still being finalised with DMIRS, with an
extension granted until February 2021 for completion.
48
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
15.
ISSUED CAPITAL
(a) Share capital
Ordinary shares fully paid
2020
Number of
Shares
2019
$
Number of
Shares
$
2,139,809,372
42,737,460
1,046,852,156
36,305,796
Notes
15(b),
15(d)
Total issued capital
2,139,809,372
42,737,460
1,046,852,156
36,305,796
(b) Movements in ordinary share capital
Beginning of the financial year
1,046,852,156
36,305,796
697,901,437
34,954,474
Issued for cash at 0.4 cents per share
718,426,078
2,873,704
348,950,719
1,395,803
Issued for cash at 0.77 cents per share
upon exercise of options (1)
Issued for cash at 0.79 cents per share
upon exercise of options (1)
9,543,133
84,258
1,351,641
42,665
Issued for cash at 1.1 cents per share
363,636,364
4,000,000
Share issue transaction costs
-
(568,963)
-
-
-
-
-
-
-
(44,481)
End of the financial year
2,139,809,372
42,737,460
1,046,852,156
36,305,796
(1) A total of $42,763 had been received prior to 30 June 2020 for option exercises for which the shares were not issued until July 2020.
(c) Movements in options on issue
Beginning of the financial year
Number of Options
2020
2019
378,950,719
30,000,000
Issued, exercisable at 0.79 cents, on or before 31 January 2022
130,000,000
348,950,719
Issued, exercisable at 0.77 cents, on or before 31 January 2022
613,426,078
-
Issued, exercisable at 2.99 cents, on or before 8 November 2021
Expired on 18 November 2018, exercisable at 10 cents
Exercised at 0.79 cents, expiring on 31 January 2022
Exercised at 0.77 cents, expiring on 31 January 2022
End of the financial year
-
-
30,000,000
(30,000,000)
(1,351,641)
(9,543,133)
-
-
1,111,482,023
378,950,719
49
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(d) Ordinary shares
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 2020 and 30 June 2019 are as follows:
Cash and cash equivalents
Trade and other receivables
Financial assets
Trade and other payables
Lease liabilities
Borrowings
Employee benefits obligations
Working capital position
16.
RESERVES AND ACCUMULATED LOSSES
(a) Reserves
Foreign currency translation reserve
Share-based payments reserve (see note 26)
(b) Nature and purpose of reserves
(i) Foreign currency translation reserve
Consolidated
Consolidated
2020
$
4,712,409
62,593
479,745
2019
$
564,618
56,268
379,750
(717,665)
(104,426)
(26,517)
(70,464)
(79,964)
4,360,137
-
(32,104)
(55,905)
808,201
435,786
197,500
633,286
425,651
90,000
515,651
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.
(ii) Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options issued.
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MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
17.
DIVIDENDS
No dividends were paid during the financial year. No recommendation for payment of dividends has been made.
18.
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
Elderton Audit Pty Ltd – audit and review of financial reports
Total remuneration for audit services
(b) Non-audit services
Elderton Audit Pty Ltd – taxation compliance services
Total remuneration for other services
19.
CONTINGENCIES
Consolidated
Consolidated
2020
$
31,700
31,700
2,900
2,900
2019
$
32,272
32,272
5,200
5,200
The purchase price for the Sandstone Gold Project included a deferred payment of $500,000 payable within 28 days
of the receipt of proceeds from the first sale of gold produced from the Sandstone Assets. This payment is contingent
on the production and sale of gold from the Sandstone Assets.
The Sandstone tenements were acquired subject to legacy royalties, including a royalty equal to 2% of the net smelter
return on all minerals produced from M57/128 and M57/129 and a royalty of A$1 per tonne of ore mined and
treated from M57/129.
There may be a further legacy royalty payable in relation to the tenements acquired by the Company. Pursuant to an
Agreement (Deed of Sale – Sandstone) dated 27 September 2004 (Sale Deed) a royalty may be payable in relation to a
portion of any gold produced from the Sandstone tenements. Royalties payable under the Sale Deed are to be
calculated using a complex formula driven by the specific tenements from which gold is produced, the “deemed
entitlement to gold” of persons having a 33.3% participating interest in “the Sandstone Joint Venture”, and a royalty
rate of $12.50 per ounce of gold. Eighty six tenements are covered by the Sale Deed, only two of which were
acquired by the Company. The Company’s understanding is that the Sandstone Joint Venture no longer exists. The
royalty only commences when 50,000 ounces of gold have been produced across the eighty six tenements and it
ceases when $4 million has been paid in total across the eighty six tenements under the Sale Deed. Accordingly,
depending on how much gold has been produced from the other eighty four tenements and the status of the
Sandstone Joint Venture, it is possible that a $12.50 royalty per ounce of gold produced is payable on 1/3 of the gold
produced from certain portions of the tenements acquired by the Company. The Company will inform the market if
and as soon as the status of that potential further royalty has been resolved.
51
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
20.
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, which the Group has the right to
vary by such methods as applying for exemptions, surrendering tenements, relinquishing portions of tenements or
entering farm-out arrangements, are as follows:
within one year
later than one year but not later than five years
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
Consolidated
Consolidated
2020
$
233,360
895,160
1,280,700
2,409,220
2019
$
233,360
915,160
1,477,900
2,626,420
-
-
-
41,280
30,960
72,240
The property lease is a non-cancellable lease with a two-year term, with rent payable monthly in advance. The lease
does not contain any provisional rent increase clauses. The lease allows for subletting of all lease areas subject to
the approval of the lessor, who cannot unreasonably withhold such approval.
From 1 July 2019, upon adoption AASB 16, the Group has recognised a right-of-use asset for this lease, refer to
note 1(a)(ii).
21.
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 22.
(c) Key management personnel compensation
Short-term benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
303,577
28,839
-
-
-
332,416
276,530
23,420
-
-
90,000
389,950
Detailed remuneration disclosures are provided in the remuneration report on pages 18 to 21.
52
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(d) Transactions and balances with other related parties
DWCorporate Pty Ltd, a business of which Mr Wilkins is principal, provided company secretarial and corporate
advisory 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
2020 there was nil (2019: $6,765) owing to DWCorporate Pty Ltd.
Quenda Investments Pty Ltd (“Quenda”), a company of which Mr Yeates is a director and shareholder, lent securities
held in Middle Island Resources Limited to the provider of a controlled placement facility during the current
reporting period for which Quenda was paid a stock borrow fee of $6,000 for the year ended 30 June 2020 (2019:
$6,000). The amounts paid were on arms’ length commercial terms. At 30 June 2020 there was $500 (2019: $500)
owing to Quenda Investments Pty Ltd.
In addition to his director fees, Mr Thomas was paid $3,000 (2019: nil) for the provision of special exertion services
provided to the Group during the year. The amounts paid were on arms’ length commercial terms and are disclosed
in the remuneration report in conjunction with Mr Thomas’ compensation. At 30 June 2020 there was nil (2019:
nil) owing to Mr Thomas for the provision of special exertion services.
In addition to his director fees, a total of $41,440 (2019: nil) was paid to E2M Ltd, a business of which Mr Nicholls
is a director and substantial shareholder. E2M Ltd provided geological consulting services to the Group during the
year. The amounts paid were on arms’ length commercial terms and are disclosed in the remuneration report in
conjunction with Mr Nicholls’ compensation. At 30 June 2020 there was $6,560 (2019: nil) owing to E2M Ltd for
the provision of geological consulting services.
(e) Loans to related parties
Middle Island Resources Limited has provided unsecured, interest free loans to each of its wholly owned subsidiaries
totalling $23,070,723 at 30 June 2020 (2019: $21,613,362). 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.
22.
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 Limited –
Burkina Faso SARL
Middle Island Resources Limited –
Sandstone Operations Pty Ltd
Middle Island Resources Limited –
Barkly Operations Pty Ltd (2)
2020
2019
%
%
Burkina Faso
Ordinary
100
100
Australia
Ordinary
100
100
Australia
Ordinary
100
-
(1) The proportion of ownership interest is equal to the proportion of voting power held.
(2) This entity was incorporated on 18 June 2020 with Middle Island Resources Limited the sole shareholder and was dormant from incorporation until the reporting
date.
53
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
23.
EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
During the period from the reporting date to the date of this report, a total of 584,656,072 fully paid ordinary
shares have been issued upon the exercise of unlisted options, raising a total of $4,545,245.
During August 2020, all 10 exploration licence applications, comprising the Group’s 100% owned Barkly super-
project in the Northern Territory, have been approved by the Northern Territory Government for granting. The formal
grant is dependent on the lifting of COVID-19 travel restrictions or at the Group’s earlier election.
The positive results of the exploration effort over the 2020 financial year together with those derived during the
period subsequent to the reporting date are likely to see the Company make a decision to mine with first production
of gold from the Sandstone Gold Project (following the recommissioning of the plant and pre-strip) expected, as at
the date of this report, before the end of the 2021 financial year.
No other matters or circumstances 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.
24.
STATEMENT OF CASH FLOWS
(a) 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) in trade and other receivables
(Increase)/decrease in financial assets at fair value through profit or loss
Increase/(decrease) in trade and other payables
Increase in employee benefit obligations
Consolidated
Consolidated
2020
$
2019
$
(3,174,737)
(2,654,033)
47,311
-
(4,429)
(9,765)
(99,995)
613,239
24,059
9,750
90,000
(5,681)
(13,431)
467,772
(283,572)
43,617
Net cash outflow from operating activities
(2,604,317)
(2,345,578)
(b) Non-cash investing and financing activities
Non-cash investing and financing activities disclosed in other notes are:
• Acquisition of right-of-use assets – note 1(a)(ii); and
• Options issued to employees, contractors and suppliers for no cash consideration – note 26.
54
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
25.
LOSS PER SHARE
Consolidated
Consolidated
2020
$
2019
$
(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
(3,174,737)
(2,654,033)
Number of shares
2020
2019
(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
1,376,032,243
853,734,224
(c) Information on the classification of options
As the Group has made a loss for the year ended 30 June 2020, 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.
26.
SHARE-BASED PAYMENTS
(a) Options issued to employees, contractors and suppliers
The Group may provide benefits to employees (including directors), contractors and suppliers 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 2020 range from 0.77 cents to 2.99 cents per option, with expiry dates ranging from 8 November 2021 to
31 January 2022.
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 (as 30 June in the stated years):
Consolidated
Consolidated
Consolidated
Consolidated
2020
2020
2019
2019
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
Forfeited/cancelled
Exercised
Expired/lapsed
30,000,000
25,000,000
-
-
-
Outstanding at year-end
Exercisable at year-end
55,000,000
55,000,000
3.0
0.8
-
-
-
2.0
2.0
30,000,000
30,000,000
-
-
(30,000,000)
30,000,000
30,000,000
10.0
3.0
-
-
10.0
3.0
3.0
55
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
The options granted during 2020 were to the underwriter of the Company’s Entitlements Issue completed in
February 2020.
The weighted average remaining contractual life of share options outstanding at the end of the financial year was
1.5 years (2019: 2.4 years), and the exercise prices range from 0.77 cents to 2.99 cents per option.
Fair value of options granted
The weighted average “fair value” (not market value) of the options granted during the year was 0.4 cents per
option (2019: 0.3 cents). The price was calculated 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.
Weighted average exercise price (cents)
Weighted average life of the options (years)
Weighted average underlying share price (cents)
Expected share price volatility
Risk free interest rate
2020
2019
$
0.8
1.8
0.6
$
3.0
3.0
0.7
170.0%
0.2%
114.2%
2.1%
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) and
contractors as part of share-based payments expense
Options granted to/vesting with suppliers as part of share issue transaction
costs
Total share-based payments
Consolidated
Consolidated
2020
$
-
107,500
107,500
2019
$
90,000
-
90,000
56
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
N o t e s To T h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
27.
PARENT ENTITY INFORMATION
The following information relates to the parent entity, Middle Island Resources Limited, at 30 June 2020. 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
28.
NON-CURRENT ASSETS HELD FOR SALE
Reo Gold Project tenement acquisition costs
2020
$
5,152,820
1,702,271
6,855,091
2019
$
985,725
2,178,852
3,164,577
272,400
272,400
165,693
165,693
(2,955,357)
(2,805,400)
(2,955,357)
(2,805,400)
(33,396,912)
(31,320,512)
2,998,884
4,362,962
(2,955,357)
(2,805,400)
(2,955,357)
(2,805,400)
Consolidated
Consolidated
2020
$
-
2019
$
213,386
Divestment of the Reo gold project in Burkina Faso, West Africa, to Tajiri Resources Corp (TSXV: TAJ, Tajiri) was
completed during August 2019, with Tajiri paying the final option extension and exercise fees, aggregating
US$150,000.
57
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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 and notes set out on pages 25 to 57 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 consolidated entity’s financial position as at 30 June 2020 and of its
performance for the financial year ended on that date;
2.
3.
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable; 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.
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, 30 September 2020
58
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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
ELDERTON
AUDIT PTY LTD
59
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
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
60
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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
61
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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
62
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 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 30 September 2020.
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 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:
Ordinary Shares
Number of
Holders
Number of
Shares
42
27
38
9,552
81,963
296,057
1,072
57,456,114
1,281
2,666,621,758
2,460
2,724,465,444
395
7,022,219
Listed Ordinary shares
Number of
Shares
% of Ordinary
Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
TWYNAM INVESTMENTS PTY LTD
CS THIRD NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MCCUSKER HOLDINGS PTY LTD
HARMANIS HOLDINGS PTY LTD
LOMACOTT PTY LTD
EQUITY TRUSTEES LIMITED
ZW 2 PTY LTD
JETOSEA PTY LTD
BPM CAPITAL LIMITED
CITYWEST CORP PTY LTD
EYEON INVESTMENTS PTY LTD
191,400,000
159,509,065
144,465,676
115,000,000
100,361,336
100,000,000
54,759,534
49,080,909
41,837,216
40,000,000
39,000,000
36,000,000
COPULOS SUPERANNUATION PTY LTD
35,800,819
ARC RESOURCES PTY LTD
CS FOURTH NOMINEES PTY LIMITED
ZERO NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
ACUITY CAPITAL INVESTMENT MANAGEMENT PTY LTD
NORTHERN GRIFFIN PTY LTD
OCEANVIEW ROAD PTY LTD
33,000,000
32,070,045
32,000,000
28,228,646
27,793,180
25,650,000
25,000,000
7.03
5.85
5.30
4.22
3.68
3.67
2.01
1.80
1.54
1.47
1.43
1.32
1.31
1.21
1.18
1.17
1.04
1.02
0.94
0.92
1,310,956,426
48.12
63
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020
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:
Number of Shares Disclosed in the Substantial Holding Notice
Regal Funds Management Pty Ltd
Twynam Investments Pty Ltd
Lomacott Pty Ltd
Jetosea Pty Ltd
(d) Voting rights
All ordinary shares carry one vote per share without restriction.
(e) Schedule of interests in mining tenements
166,359,536
161,400,000
145,000,000
31,168,322
Location
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Northern Territory
(f) Unquoted Securities
Tenement
M57/128
M57/129
P57/1384
P57/1395
P57/1442
E57/1102
EL 32291
EL 32290
EL 32305
EL 32308
EL 32309
EL 32292
EL 32297
EL 32298
EL 32301
EL 32304
Percentage held / earning
100%
100%
100%
Option to acquire 100%
100%
100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Pending Grant – 100%
Class
Unlisted 2.99 cents Options,
expiry 8 November 2021
Number of
Securities
Number of
Holders
30,000,000
3
Holder
Name
Quenda Investments Pty Ltd
Number of
Securities
10,000,000
Holders of 20% or more of the class
Unlisted 0.79 cent Options,
expiry 31 January 2022
260,633,419
Unlisted 0.77 cent Options,
expiring 31 January 2022
236,192,532
136
128
64
Northern Griffen Pty Ltd
10,000,000
Beau Nicholls
10,000,000
N/A
N/A
N/A
N/A
MIDDLE ISLAND RESOURCES LIMITED ANNUAL REPORT 2020 Middle Island
RESOURCES LIMITED
Suite 1, 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