ABN 92 086 839 992
Annual report for the financial year ended
30 June 2018
Corporate Directory
Directors
Andrew Daley – Non-executive Chairman
Matthew Gauci – Managing Director
Justin Barton – Finance Director
Mathew Longworth – Non-executive Director
Company Secretary
Neil Hackett
Auditors
Stantons International
Level 2
1 Walker Avenue
WEST PERTH WA 6005
Solicitors
Steinepreis Paganin
Level 4, The Read Buildings
16 Milligan Street
PERTH WA 6000
Bankers
ANZ
Cnr Hay and Outram Street
WEST PERTH WA 6005
Registered Office
6 Outram Street
WEST PERTH WA 6005
Telephone:
Facsimile:
+61 8 9324 1053
+61 8 9324 3366
Share Registry
Link Market Services Limited
Level 14
152 St Georges Terrace
PERTH WA 6000
Investor Enquiries:
Facsimile:
1300 554 474
(02) 9287 0303
Securities Exchange Listing
Securities of Metalicity Limited are listed on the Australian Securities Exchange (ASX).
ASX Code: MCT
Web Site: www.metalicity.com.au
1
Contents
Directors’ report
Auditor’s independence declaration
Independent auditor’s report
Directors’ declaration
Annual financial statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Australian Securities Exchange (ASX) Additional Information
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Directors’ Report
The Directors of Metalicity Limited submit herewith the annual financial report of the Company and its
subsidiaries (the “Group”) for the financial year ended 30 June 2018.
Officers and Directors
The names and particulars of the Directors of the Company during or since the end of the financial year
are:
Name
Particulars
Andrew Daley
Non-Executive Chairman (appointed 19 August 2013)
Matthew Gauci
Managing Director (appointed 26 September 2012)
Justin Barton
Finance Director (appointed 1 January 2018)
Mathew Longworth Non-Executive Director (appointed 29 September 2014)
Chris Bain
Non-Executive Director (appointed 19 August 2013 – resigned 1 January 2018)
The above-named Directors held office during and since the financial year, except as otherwise
indicated.
Principal activities
The Group’s principal activity at the date of this report is mineral exploration.
Review of operations and results
Admiral Bay Zinc Project
The Admiral Bay Zinc Project is located in the Kimberley region of Western Australia, approximately 140 km
south of Broome. The general area in which the Project is located is characterised by low elevation and fairly
flat terrain. The Project consists of 2 granted mining leases (MLs) and an exploration licence (EL) and during
the year was 100%-owned by Metalicity.
3
Figure 1: Admiral Bay Zinc Project: Tenement Holdings and Historical Drilling
Directors’ Report
Source: Metalicity
Pre-feasibility Study
During the period, the Company commenced a Pre-Feasibility Study (PFS) on Admiral Bay. To de-risk
Admiral Bay through to decision to mine the PFS was undertaken in two stages, PFS stage 1 and PFS stage
2. The initial phase of PFS work at Admiral Bay has involved:
• The refinement of the preferred PFS pathway including the design of drilling options
• The compilation of a new MRE for Admiral Bay including the high grade zone
• Mining optionality work including mineral processing (Ore Sorting), geotechnical, hydrogeological,
geothermal, ventilation studies
• Metallurgical testwork studies
High Grade Zone Mineral Resource Estimate
Metalicity commissioned SRK to carry out a technical review on the Geology and Mineral Resource aspects
of the Admiral Bay deposit. The Geological and Mineral Resource review focussed on M04/249, and
evaluated the previous geological and grade estimation models, specifically on M04/249 where most of the
drilling has been completed. SRK’s review was informed by the latest Mineral Resource estimation by Ridley
(2016).
The work program involved SRK reviewing all of the exploration data and Ridley’s mineralisation domains.
Seismic data for relevant lines were extracted and examined to provide guidance for the development of
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Directors’ Report
surfaces of important stratigraphic contacts. SRK then developed new mineralisation domains that broadly
following Ridley’s interpretation. The geological modelling relies on a limited set of drilling data, and is
therefore poorly constrained at present. Reprocessing of the existing seismic datasets and integration of
these 2D data into a 3D geological model may help refine the geological model. Acquisition of a new 3D
seismic dataset across M04/249 should also be considered in order to improve the 3D geological models and
assist drill targeting.
Mineralisation is spatially controlled by the presence of the thickest part of the bioherm accumulation in the
Goldwyer and Nita formations. These form an antiformal feature, with mineralisation rapidly thinning away
from the antiformal hinge. Drilling should therefore firstly focus on the delineation of this hinge, with
subsequent drilling targeting the limbs. The GSAZ defines a zone of structural complexity, which makes
prediction of the location of mineralisation east of the drill section ABRD011–ABRD003–ABRD009 more
challenging. SRK therefore recommends that drilling should be focused to the west of this section, where
mineralisation seems structurally less complex. Re-estimation, using the updated geological models and
mineralisation domains developed by SRK, and using a more local approach to grade, may help better define
higher-grade zones to target for future drill planning.
Figure 2: Antiformal geometry of Goldwyer and Nita formation within M 04/249
Source: Metalicity
Direct Shipping Ore (DSO) Starter Mine Concept
As part of the PFS Stage 1 ore sorting studies and testwork were undertaken. Ore Sorting has the potential
to materially improve head grade feed, reduce waste and optimise the mining and process flow sheet design
at Admiral Bay. Case studies on various underground zinc-lead mines have demonstrated an improvement
in head grade feed of up to 250% and a reduction in waste of up to 40%. This potential material addition to
the PFS by improving head grade feed to potentially between 30% and 40% ZnEq has the potential to deliver
a Direct Shipping Ore (DSO) product to accelerate cashflow and substantially reduce pre-production capital.
5
Figure 3: 3D Isometric view of a preliminary mining design layout for the DSO Concept
Directors’ Report
Source: Metalicity
Metalicity contracted Outotec to evaluate the potential benefits of implementing an ore-sorting technology.
This technology allows a separation of waste material from ore material through sensors. The sensors scan
the run of mine (ROM) material and segregate material based on the mineralogical composition. Metalicity
notes that clients of Outotec have reported encouraging results on Mississippi Valley Type (MVT) deposit
when testing the ore-sorting technology. Low grade zinc ore, recorded results of up to 92% head grade
increase. A review on the suitability of the ore to be sorted using ore-sorting technology based on existing
relevant mineralogical reports was initially carried out.
Subsequently 20kg of ore drill core was selected and a sensor selection test was performed at the TOMRA
laboratory in Sydney for testing. The task was to confirm that the DE-XRT sensor was capable of detecting
the density difference between the high and low grade regions in the samples received. The samples were
colour photographed and imaged on TOMRA’s DE-XRT sensing system. In addition, some XRF analysis was
completed of various portions on the rocks, in order to gain an understanding of the XRT’s sensor response
to the various mineralogies.
The preliminary test work results concluded the following:
• The DE-XRT sensor is capable of detecting the density differences between the high density ore
(high grade) and low density material (waste) in the samples received.
• The barite is a possible candidate for optical sorting, where the whiteness of the rock can be used to
differentiate between it and other material. This will not, however be effective in identifying between
the high zinc sulphide and waste areas with a similar colouring.
Geotechnical Study
The primary objective of the geotechnical PFS is to construct a preliminary Geotechnical Domain Model
(GDM) to support mine planning, using the existing data and available drill core. This will result in gaining a
better understanding of the effects of mining on the surrounding rock mass, especially the rock mass between
the estimated mining areas and the overlying Grant aquifer system. This will assist in the assessment of the
risk related to groundwater ingress under the proposed mining methodologies, and will provide key
geotechnical design recommendations.
Evaluation of a potential longwall layout indicated that the height of disturbed/caved zone is sensitive to
horizontal stress ratio (Kh). Based on a panel height of 4 m and 150 m in cross section, the disturbed zone
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Directors’ Report
may extend approximately 170m above the panel (for Kh of 2), depending on stress regime and rock mass
quality. The height of disturbed/caved zone increases as the longwall panel is progressively extracted.
Indications are that panel strike lengths should be limited to 300 m for Kh values of 1.0 and 200m for Kh
values of 1.5 (Figure 5). Evaluation of potential open stope layouts considered two scenarios; one with backfill
and one without. Using FLAC 3D software, the model indicates potential maximum heights of the damage
above the stope crowns to be 85m with backfill and up to 135m without backfill. The height of disturbed zone
is again sensitive to horizontal stress ratio with the maximum height of damage occurring under anisotropic
stress conditions. Preliminary results indicate that the damage zone for the stope panel will not exceed 150
m height (the expected height for the aquifer).
The optionality of implementing longwall mining, is deemed geotechnically feasible based on current data
and using recommended geometric restrictions (Figure 6).
Hydrogeological Study
The primary objective of the groundwater study was to develop an updated conceptual model of the local
hydrogeology, to inform development of a PFS-level understanding of the local hydrogeology, and specifically
to assess the identified risk associated with catastrophic ingress of groundwater in the mine working area.
Preliminary results of the geotechnical modelling indicate that under an isolated example of conventional
stope and backfill methods, disturbance of the Carribuddy Formation will not extend into the overlying Grant
formation. This means the Carribuddy Formation will continue to act as an effective aquitard under these
conditions, minimizing risk of catastrophic ingress of groundwater into underground workings. For the cases
reviewed, it may eliminate the requirement for dewatering the Grant Aquifer.
Based on estimated permeabilities (10-9 to 10-6 m/s), conventional dewatering via bores drilled from surface
would most likely be the lowest risk option. If dewatering is required, it has been estimated that it can be
accomplished through a network of 10-15 bores over the current full extension of the Admiral Bay Project
(~18km strike length). High groundwater temperatures were not considered a major obstacle to the
dewatering plan. Considering the likelihood of having to manage hypersaline water, the estimated capital cost
is approximately $1.5M AUD/bore.
Ventilation Study
Metalicity has undertaken a review of the accuracy of the VRT (virgin rock temperature) measurements at a
Scoping study level and a preliminary economic impact of the VRT on the project. The study was carried out
by Metalicity.
There are three previous reports covering the ventilation requirements for Admiral Bay; (a) an order of
magnitude study for CRA Exploration (CRAE, 1989), (b) a study prepared by Mining Plus Pty Ltd (Mining
Plus) for the PFS document prepared by RSV Australia Pty Ltd (RSV, 2009) and (c) a review conducted by
BBE Consulting Australasia (BBE) for the Scoping Study of the Project (SRK, 2016).
The current study evaluated two issues. Data from two different drilling campaigns and the published literature
was reviewed with the intent of confirming the estimation of the expected VRT at target depth. In addition, a
sensitivity analysis on the cost of energy consumption for the ventilation component and number of ventilation
shafts on the overall project economics based on different ventilation requirements suggested for the Admiral
Bay deposit by subject matter experts. Further review of the original data confirms the estimated virgin rock
temperatures within the zone of interest, to between 80° and 85°Celsius. The data showed no major
differences in temperature gradient along the entire length of the project. It is suggested that the temperature
gradient defined from the data points, can be extrapolated across the project area and provide the accuracy
required for a pre-feasibility study (Figure 8).
Based on the preliminary economic assessment of the ventilation and associated power requirements of the
project, it is suggested that incorrect estimates would not have a material impact on the Project economics.
In addition, the construction of additional ventilation shafts as the mining extends along the resource outside
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Directors’ Report
M04/249 do not overly impact the economic viability of the project. It should however be noted that final
ventilation requirements and consequent cost impact will be very dependent on the selected mining method.
Within the scope of accuracy of the current project study, additional refrigeration power requirements are not
considered as a fatal flaw either from a technical or an economic perspective.
Metallurgical Testwork Studies with China Minmetals
On 19 July 2017, the Company signed a MOU with CMN for future offtake from Admiral Bay. The MOU
contemplates the supply of an initial 10% of future offtake from an anticipated production of 174,000t of zinc
concentrate and 115,000t of lead concentrate per annum from Admiral Bay in exchange for preliminary
metallurgical and beneficiation testwork.
The Company’s metallurgical and mineral processing test work carried out to date delivered positive results
including (1) The material does not currently demonstrate any deleterious metallurgical behaviour (2) It
appears readily amenable to processing through a simple, conventional flotation plant to achieve high zinc,
lead and silver recoveries (3) Preliminary metal recovery expectations are in the range of 90-95% across
zinc, lead and silver (4) Concentrate product grades were good (Pb +60% and Zn +48%), although selectivity
of zinc and lead was not ideal and there is scope for further optimisation.
The preliminary metallurgical testwork study by CMN was undertaken by Changsha Institute of Mining
Research Co., Ltd under the commissioning of CMN on 52.4kg of diamond core from drill holes ABRD005,
ABRD006, ABRD008 and ABRD009 located primarily within the high-grade zone of Admiral Bay and located
within the granted mining license (ML4/249). The core was selected to be representative of the Admiral Bay
orebody and an advance on previous testwork. Samples were crushed and screened to a particle size of -
2mm, and were then prepared by mixing and division, and taken for beneficiation tests, analysis,
mineralogical studies and standby application. Four composites (ABMET1, ABMET2, ABMET3, ABMET4)
were assayed pre-comminution, each sample representing sections of different drill holes. Composites
ABMET1 & ABMET4 where combined and selected for testing.
Table 1: Sample Information for testing
Sample ID
ABMET1 ABRD 006
ABMET2 ABRD 005
ABMET3 ABRD 008
ABMET4 ABRD 009
Calculated
grade:
total average
Dry
(kg)
26.12
14.44
2.18
9.62
52.36
Weight
Pb
(%)
1.17
0.58
0.3
1.78
1.08
grade
Zn grade
(%)
Au
(g/t)
grade
Ag grade
(g/t)
4.85
3.08
2.01
2.24
3.76
0.1
0.23
0.23
0.21
0.16
24.98
17.54
4.47
16.06
20.44
Bench flotation tests were carried out on the samples to establish the amenability of conventional
beneficiation. The samples were characterised by a mineralogy study and chemical composition. The
objectives of the bench flotation tests were to:
(1) To gain a comprehensive understanding of the properties of the samples via a mineralogy study,
providing a basis for beneficiation testwork study
(2) To determine the economic beneficiation process flowsheet, reagent system and performance
indices indexes for Admiral Bay Zinc-Lead-Silver by conducting systematic beneficiation tests,
investigating the main mineralogical and technological process factors that influence beneficiation
indexes, and providing the basis for the next step in testwork study.
8
Summary of Results
Directors’ Report
(1) Samples were characterised as zinc-lead primary sulphides with the main recoverable minerals being
sphalerite and galena. The mineralogy was characterised as sphalerite, galena, pyrite and
chalcopyrite, with gangue minerals being mainly calcite, quartz, barite and sericite.
(2) Sequential flotation is the preferred method with lead flotation followed by zinc flotation from lead
tailings. The reagent regimes selected were: (a) CaO (Lime) was chosen to depress pyrite, with (b)
ZnSO4 and NaSo3 selected to depress zinc and (c) ETC and BX have a selective collecting effect on
Lead minerals, these were adopted as a collector blend in the Lead flotation
(3) Full process, close-circuit, tests were carried out with Zinc recoveries of 88.27% to a zinc concentrate
with a grade of 51.27% Zn and 181.2 g/t Ag achieved, while Lead recoveries to lead concentrate
were 91.88% at a lead concentrate grade of 65.13% Pb and 137g/t Ag (refer to Table2).
(4) The grade of deleterious elements will not attract penalties.
(5) Gold and silver are up to 0.23g/t Au and 23.22g/t Ag respectively with a significant recovery value.
Table 2: Testwork summary results for Pb/Zn & Ag grades in concentrate with respective recoveries
Pb grade
(%)
Zn grade
(%)
Ag grade
(g/t)
Product
Pb Concentrate
Zn Concentrate
Tailings
Yield Rate (% of Mass)
1.89
7.36
90.75
65.13
0.49
0.08
3.95
51.27
0.47
137.65
181.20
7.90
Pb
Recovery
(%)
91.88
2.69
5.43
Zn
Recovery
(%)
1.75
88.27
9.98
Ag
Recovery
(%)
11.25
57.72
31.03
Acquisition of High- grade Lennard Shelf Zinc Project (100% MCT)
During the period the Company strengthened its zinc project pipeline through the exercise of the option to
acquire the high grade Napier Range Zinc Project and the Emanuel Range Zinc Project (collectively the
Lennard Shelf Zinc Project), located in the Lennard Shelf of the Kimberley Region, WA.
Napier Range represents a low capital and near term producing zinc production opportunity, while Emanuel
Range represents an early stage but highly prospective zinc exploration project with an extensive 30km strike
of largely untested targets. These projects will complement the development of its large scale long life Admiral
Bay Zinc Project, located in the adjoining Canning Basin of the Kimberley Region, WA. The Napier Range
Zinc Project consists of 2 granted mining licenses, an exploration license application and a granted general
purpose license (Table 1). It includes the Wagon Pass deposit, with a JORC 2012 compliant Inferred Mineral
Resource Estimate of 750Kt at 5.8% Zn, 7.2% Pb, 54g/t Ag (13.6% ZnEq) and an adjoining Exploration Target
Range (ETR) of 100Kt-200Kt at 10%-13% ZnEq.
The most recent MRE of 750Kt at 5.8% Zn, 7.2% Pb, 54g/t Ag (13.6% ZnEq) at Wagon Pass was completed
by Cube Consulting in 2016, using a 5% Zn + Pb cut off, 2m downhole compositing, and an assumed bulk
density of both waste and mineralised material of 3.0 g/cm3. The deposit is located between 150-200m depth
below surface. Additional details on key parameters of the MRE are presented in ASX Announcement “High
Grade Near Surface Zinc Projects on 30/10/17. Extensions to the Wagon Pass deposit and additional
deposits are considered likely if systematically explored, by leading independent geological consultant CSA
Global, who recently completed a comprehensive targeting exercise and commented that the area is
underexplored (CSA Global 2016). The report outlines 9 targets, 1 for resource extensions to the Wagon
Pass deposit and 8 further targets.
9
Figure 4: Location of the Lennard Shelf Zinc Projects
Directors’ Report
Source: Metalicity
At Wagon Pass, mineralisation potential exists to extend the resource to west of the deposit, with an
Exploration Target Range of 100-200Kt at 10-15% ZnEq. The remaining 8 targets are located further south,
mostly in analogous settings to Wagon Pass. CSA further commented ‘Although drilling has occurred in the
project area, many drill holes did not test the favorable Lower Napier stratigraphy.
In addition, the footprint of the Wagon Pass deposit is small and the area is significantly under-explored for
additional deposits 0.5 to 1 Mt size.’ Based on the CSA Global analysis the Company is targeting multiple
occurrences of 0.5-1Mt size, resulting in an Exploration Target Range (ETR) at Napier Range of 1-4 Mt @
10-15% ZnEq. The grade and tonnage range is based on the grade and geometry of the Wagon Pass deposit,
and the clustering nature of this deposit type. Additional details on key parameters of the ETR are presented
in ASX Announcement “High Grade Near Surface Zinc Projects on 30/10/17. The Exploration Target Ranges
(ETR) stated above are conceptual in nature and the potential quantities and grades are conceptual in nature.
There has been insufficient exploration to estimate a Mineral Resource Estimate outside that known at Wagon
Pass, and it is uncertain whether further exploration will result in the estimation of additional Mineral
Resources.
The Emmanuel Range Zinc Project consists of one exploration tenement and two tenement applications in
close proximity to the Pillara, Kapok, Cadjebut and Goongewa Mines, in the Emmanuel Range of the
Kimberley Region, WA. (Figure 3). All of the tenements in this project cover the prospective stratigraphy and
structural positions, in very close proximity to existing deposits or mines. For example, E04/2453 is located
less than 2km from the Pillara deposit, the largest Pb-Zn deposit yet discovered in the Lennard Shelf.
A number of synergistic opportunities may be likely with the development of the Company’s 100% owned
large scale long life and low cost Admiral Bay Zinc Project. The primary synergy is the potential of Napier
Range to be a high grade low capital near term producing asset, that would generate sufficient cashflow to
help support the development of Admiral Bay.
10
TSX-V Listing of Zinc Assets
Directors’ Report
Subsequent to the end of the period the Company received strong shareholder approval for the sale of the
Admiral Bay and Lennard Shelf projects (“Zinc projects”) to Kimberley Mining Limited (“Kimberley Mining”),
paving the way for the listing of Kimberley Mining on the TSX-V.
The terms of the sale and purchase of the zinc projects with Kimberley Mining will potentially deliver C$32.5M
cash and shares to Metalicity (up to C$12.5M cash and retaining 25M shares valued at C$20M), while
Metalicity will retain approximately 40% of the expanded capital of Kimberley Mining post the October listing,
still representing one of the largest exposures to the zinc sector of any active zinc exploration and
development company on the ASX.
Metalicity has formed a subsidiary in Vancouver, Kimberley Mining, and is now in the process of effectively
vending the zinc projects into Kimberley Mining. Kimberley Mining is completing a seed capital raising
targeting C$2M with strong support from new North American institutional, retail and strategic investors with
the raising anticipated to be completed shortly.
Kimberley Mining will then file a preliminary long form prospectus with the Securities Commission before
reviewing any comments, and then filing a final long form prospectus and undertaking an initial public offering
(“IPO”) to seek a listing on the TSX-V concurrently with the completion of the IPO, targeted for December
2018.
Drilling and Field Work Builds on Yerrida Cobalt Project (100% MCT)
The Yerrida Cobalt Project is located in the Yerrida Basin, WA, which has a geological setting considered
amenable to hosting structural/stratigraphic-controlled copper-cobalt mineralization.
During the period the Company completed a two-hole (446m) RC drill program at the K1 prospect and wide
spaced soil sampling field exploration program at the K2-K4 prospects at the Yerrida Cobalt Project (Figure
2). The results continue to build on the prospectivity of the project area and support the company’s exploration
model where certain characteristics are considered analogous to the prolific Central African Copperbelt.
The targeting rational at the Yerrida Cobalt project is derived from a geological evaluation and concept study
for the region, from which it was concluded that the evolution of the Yerrida basin is compatible to the
geological history and setting of copper-cobalt and nickel-cobalt deposits of the prolific Central African
Copperbelt, where new discoveries continue to be made based on advances in exploration concepts.
Assay results of the previous drill program showed consistent near surface base metal enrichment which
accounts for some of the surface anomalism, however, a 8m to 12m thick, shallow south dipping anomalous
base metal (400 to 500 ppm Cu and 50 to 60 ppm Co; 4 x Cu and 2 x Co back ground values) horizon was
intersected in all drill holes. It was inferred that this anomalous horizon could show gradual down dip
enrichment particularly if major structures were intersected. The objective for this program was to step out
and test this possibility to build on the exploration model.
The recent RC drill program at the K1 prospect intersected the same stratigraphic sequence of sandstones
of the Yelma Formation near the surface unconformably overlying Maraloo Formation black shales at depth.
The 446m RC drill program targeted down dip potential source structures feeding the previously reported
shallow, south-dipping, zone of 8m to 12m cobalt horizon. Exploration previously intersected anomalous
copper-cobalt mineralisation which provides support for the geological setting’s potential to host further high-
grade copper-cobalt mineralisation associated with the underlying “red bed” sandstones of the Yerrida Basin
at depth.
The company is therefore targeting postulated higher grade structurally controlled feeder zones to the
stratigraphically controlled mineralisation. The next phase of exploration will aim to locate and map these
structures and prioritising them for drill testing. Geophysics, targeted geochemistry and detailed geological
mapping may identify the highgrade feeder zones and possibly the red bed associated mineralisation. The
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Directors’ Report
field exploration program at the K2-K4 prospects included geological mapping and rock chip sampling, using
a 250m X 250m pattern over an area of 3km by 5km at K3 and K4 for 160 samples and 2.5km X 2.5km at K2
for 116 samples. Within the area of K2, a number of geochemically anomalous soil samples were returned
requiring further assessment and infill sampling. In particular a coincident copper-cobalt in soil anomaly in
the north east corner of the K2 target, which warrants follow up exploration.
The Company will now focus its efforts to target the base of the Maraloo Formation and the main transition
zone from the underlying “red-bed” sandstones, which represents the primary target and most prospective
setting for mineralization at K1 and, pending geological mapping and sampling results, across K2-K4.
Detailed sampling, mapping and high resolution airborne magnetic geophysics will be required particularly
with regard to structural interpretation and targeting of higher grade mineralization.
Figure 6: Regional Location Map showing cobalt rich high priority target area
6,400ppm Co, 3,000ppm Cu
544ppm Co, 2,400ppm Ni
1,220ppm Co, 3,590ppm Ni
839ppm Co, 2,100ppm Ni
K3
K4
K2
E51/1755
K1
E51/1756
248ppm Co, 553ppm Ni
808ppm Zn
Recent drill holes
Interpreted NW trending Fault
Source: Metalicity
E53/1894
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Directors’ Report
Field Work Identifies 8km Lithium Target at Pilgangoora North (100% MCT)
The Pilgangoora North tenements are located some 80 km south-southeast of Port Hedland in the Pilbara
region of Western Australia. Access to the tenements is currently from the south via the access road to Pilbara
Minerals Limited (ASX:PLS) and Altura Mining Limited (ASX:AJM) operations and then via a mix of private
station tracks.
The Pilgangoora North project area covers northern extensions of the greenstone belt hosting the lithium-
bearing Pilgangoora group of pegmatites currently being developed by Pilbara Minerals and Altura Mining.
Preliminary mapping, satellite imagery interpretation and rock ship sampling defined a series of pegmatites
over a 10 km trend. The recent reconnaissance mapping and rock chip sampling, combined with the earlier
rock chip sampling results, has identified priority target areas for further work.
The project area also contains portions of two monzogranite suites, namely the Motherin Monzogranite and
the Sisters Supersuite Monzogranites both of which appear to have characteristics indicative of fertile granites
and therefore potentially the source of the lithium ± tantalum bearing pegmatites present in the Pilgangoora
district. The recent field work by Metalicity has confirmed the Motherin Monzogranite has geochemical
signatures indicative of fertile granites is therefore a potential source of lithium bearing pegmatites.
The recent field work comprised visits to point localities identified as possible pegmatites from satellite
imagery and field traverses across portions of the greenstone belts hosting or likely to host pegmatites to
visually inspect outcropping pegmatites for lithium bearing minerals.
Rock chip samples were collected from any pegmatites that visually appeared to host lithium mineralisation,
as well as samples of blocky-K-feldspar and muscovite to understand the pegmatite fractionation trends. In
addition, the Motherin Monzogranite was sampled to determine if this granite has characteristics indicative of
being a fertile granite and therefore potentially capable of producing pegmatite hosted lithium ± tantalum
mineralisation. The geochemical results indicate the Motherin Monzogranite is likely a fertile granite and
further information is available at ASX:MCT 3/7/18.
Based on these recent results and the results of previous rock chip sampling programmes (ASX:MCT
14/12/17) two areas have been selected (PN 2 and PN 3) in which to undertake additional reconnaissance
mapping and rock chip sampling. In addition, pegmatites identified to date as being potentially mineralised
will be evaluated in more detail to allow effective drill planning.
The two future target areas named PN 2 and PN 3 are shown on Figure 3.
13
Figure 7: Pilgangoora North priority targets at PN2 and PN3
Directors’ Report
Source: Metalicity; ASX:PLS May Presentation; ASX:AJM June Presentation
14
Desktop Work Identifies 1.5km Graphite Target at Munglinup North (100% MCT)
Directors’ Report
The Munglinup North Project is located 20km north of the Munglinup Graphite deposit (owned by Mineral
Commodities Limited ASX:MRC) one of the worlds highest grade graphite deposits. Previous limited assaying
for graphite from shallow drilling on E70/550 intersected 12m at 7.4% carbon, including 4m at 10.33% carbon,
from 20m beneath the surface. The project tenements are located across and adjacent to the boundary of
the Yilgarn Craton and the Albany Fraser Belt.
Recent interpretation and modelling undertaken on data from three previously flown airborne electromagnetic
surveys acquired by the Company, has highlighted seven anomalies considered highly prospective for
graphite mineralisation. The G1 target has the highest conductivity modelled and corresponds to the strongest
conductivity in the Conductivity Depth Inversion (CDI), and known graphite mineralisation from previous
drilling. The modelled conductivity of 480mS/m is of similar tenure to the Munglinup Graphite deposit located
further to the south. The G1 target extends over 1.5km and the company is preparing a first pass drilling
program to test for further high grade graphite mineralisation (See ASX:MCT 17/03/2016).
Figure 8: Munglinup North Graphite Target
Source: Metalicity
15
Disclaimer and Forward Looking Statements
Directors’ Report
This report is not a prospectus nor an offer of securities for subscription or sale in any jurisdiction nor a
securities recommendation. The information in this report is an overview and does not contain all information
necessary for investment decisions. In making investment decisions, investors should rely on their own
examination of Metalicity Limited and consult with their own legal, tax, business and/or financial advisers in
connection with any acquisition of securities. The information contained in this report has been prepared in
good faith by Metalicity Limited. However, no representation or warranty, express or implied, is made as to
the completeness or adequacy of any statements, estimates, opinions or other information contained in this
report. To the maximum extent permitted by law, Metalicity Limited, its directors, officers, employees and
agents disclaim liability for any loss or damage which may be suffered by any person through the use of, or
reliance on, anything contained in or omitted from this report. Certain information in this report refers to the
intentions of Metalicity Limited, but these are not intended to be forecasts, forward looking statements, or
statements about future matters for the purposes of the Corporations Act (Cth, Australia) or any other
applicable law. The occurrence of events in the future are subject to risks, uncertainties and other factors
that may cause Metalicity Limited’s actual results, performance or achievements to differ from those referred
to in this report to occur as contemplated. The report contains only a synopsis of more detailed information
to be published in relation to the matters described in this document and accordingly no reliance may be
placed for any purpose whatsoever on the sufficiency or completeness of such information and to do so could
potentially expose you to a significant risk of losing all of the property invested by you or incurring by you of
additional liability. Recipients of this report should conduct their own investigation, evaluation and analysis of
the business, data and property described in this document. In particular, any estimates or projections or
opinions contained herein necessarily involve significant elements of subjective judgment, analysis and
assumptions and you should satisfy yourself in relation to such matters.
Competent Person Statement
Competent Person Statement Regarding Napier Range Zinc Project
See Metalicity Announcement 30/10/17
Competent Person Statement Regarding Admiral Bay Project
See Metalicity ASX Announcement 19/04/2017.
Competent Person Statement Regarding Lithium Projects
See Metalicity ASX Announcement 28/04/2017
Competent Person Statement Regarding Kyarra Cobalt Project
See Metalicity ASX Announcements of 21/06/2017 and 21/07/2017
16
Directors’ Report
Tenement Schedule
The following table shows the tenements the Group has an interest in at 30 June 2018:
Project
Admiral Bay(1)
Admiral Bay(1)
Admiral Bay(1)
Turner River
Turner River
Munglinup
Lynas Find
Lynas Find
Lynas Find
Kyarra
Kyarra
Kyarra
Madoonia Downs
Murphies Gap
Murphies Gap
Stannum
Emanuel Range(1)
Pilbara East(1)
Napier(1)
Napier Range(1)
Napier Range(1)
TEN ID
ML04/244
ML04/249
EL04/1610
EL45/4675
EL45/4676
EL74/550
EL45/4148
EL45/4227
EL45/4356
EL51/1755
EL51/1756
EL53/1894
E15/1611
EL45/3438
EL45/4498
EL45/4677
E04/2259
E04/2453
G04/0020
M04/0161
M04/0162
Holder
Granted
Expires
Metalicity Limited 100%
Metalicity Limited 100%
Metalicity Limited 100%
Metalicity Limited 100%
Metalicity Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Ridgecape Holdings Pty Ltd 100%
Ridgecape Holdings Pty Ltd 100%
Ridgecape Holdings Pty Ltd 100%
Ridgecape Holdings Pty Ltd 100%
Ridgecape Holdings Pty Ltd 100%
21/03/1991
21/03/1991
04/09/2007
06/07/2017
24/11/2016
22/01/2015
26/08/2013
24/07/2014
17/11/2014
24/05/2017
24/05/2017
24/05/2017
30/01/2018
01/03/2011
01/10/2015
10/10/2016
04/07/2016
13/09/2017
03/03/1989
31/12/1987
31/12/1987
20/03/2033
20/03/2033
03/09/2019
05/07/2022
23/11/2021
21/01/2020
25/08/2018
23/07/2019
16/11/2019
23/05/2022
23/05/2022
23/05/2022
29/01/2023
28/02/2021
30/09/2020
09/10/2021
03/07/2021
12/09/2022
02/03/2031
30/12/2029
30/12/2029
(1)Tenements vended into subsidiary, Kimberly Mining Limited, after 30 June 2018.
Results
The loss after income tax for the year ended 30 June 2018 was $2,302,570 (30 June 2017: loss $2,825,445).
Significant changes in state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Environmental regulations
The Group is aware of its environmental obligations with regards to its exploration activities and ensures that
it complies with all regulations when carrying out exploration work.
Dividends
No dividends have been paid or declared since the beginning of the financial year and none are
recommended.
17
Directors’ Report
Subsequent events
Other than the following, the directors are not aware of any significant events since the end of the reporting
period which significantly affect or could significantly affect the operations of the consolidated entity in future
financial years:
1) On 27 July 2018, the Company announced that the proposed IPO and TSX-V listing of KML and
associated sale of the Company’s zinc projects was approved by the Company’s shareholders at a
general meeting on that date.
2) On 11 September 2018, Metalicity Limited announced it had completed the sale of its Admiral Bay
Zinc Project and Lennard Shelf Zinc Projects to its newly created Canadian subsidiary, Kimberley
Mining Limited and has received the first cash payment related to the transaction of C$500,000
(A$531,436) of a total of up to C$12.5M cash (A$13.28M), subject to successful completion of the
initial public offering (“IPO”) of KML and certain milestones (see ASX:MCT 29/05/18).
The Company also announced, further to its ASX announcement dated 10 July 2018, that KML has
closed the first tranche of its C$2M seed capital raising. KML has elected to separate the seed capital
raising into two separate tranches, with the second and final tranche expected to close within the
next two weeks.
Likely developments and expected results of Operations
The Group will continue to explore and assess its mineral projects.
18
Information on Directors
Directors’ Report
Matthew Gauci - Managing Director – appointed 26 September 2012
Experience and Expertise
Mr Gauci is a Mining Executive with more than 20 years’ experience in strategic management and
corporate finance in the mining industry having successfully financed and managed private and public
mining exploration companies operating in Australia, Africa and South America. Mr Gauci has managed
teams in the exploration, development and feasibility of a number of mining exploration projects in
precious metals, base metals and bulk commodities. Mr Gauci has a BSc. and an MBA from the
University of Western Australia.
Other Current Directorships
None
Former Directorships in the Last Three Years
None
Special Responsibilities
Managing Director
Interests in Shares and Options
11,739,033 ordinary shares and 33,500,000 unlisted options
Andrew Daley - Non-executive Chairman – appointed 19 August 2013
Experience and Expertise
Mr Daley is a Mining Engineer and Investment Banker. He has a Bachelor of Science (Honours), is a
Chartered Engineer (UK), a Fellow of the Australasian Institute of Mining and Metallurgy and Member
of IOM3 (UK). He has over 40 years’ experience in resources having worked with Anglo American, Rio
Tinto, Conoco Minerals and Fluor Australia in mining operations, project evaluation and mining
development. Mr Daley then moved into resource project finance with National Australia Bank , Chase
Manhattan and from 1999 was a Director of the Mining Team at Barclays Capital in London.
Subsequently, Mr Daley was a Director of Investor Resources Finance Pty Limited, a company based
in Melbourne which provided financial advisory services to the resources industry globally.
Other Current Directorships
None
Former Directorships in the Last Three Years
None
Special Responsibilities
Chairman of the Remuneration and Nomination Committee.
Interests in Shares and Options
2,588,682 ordinary shares and 12,750,000 unlisted options.
19
Directors’ Report
Justin Barton – Finance Director – appointed 1 January 2018
Experience and Expertise
Mr Barton is a Chartered Accountant with over 20 years experience in accounting, international finance, M&A
and the mining industry. He worked for over 13 years in the Big 4 Accounting firms in Australia and Europe
and advised many of the worlds largest mining, oil & gas companies and financial institutions, including Rio
Tinto, Chevron, Macquarie, Merrill Lynch, Morgan Stanley and Deutche Bank. Justin also worked for 4 years
at Paladin Energy Limited as Group Tax and Finance Manager. More recently, he has worked as the CFO
and has been a Board Member of a number of junior exploration companies.
Other Current Directorships
None
Former Directorships in the Last Three Years
Eneabba Gas Limited (appointed 1 March 2017, resigned 10 October 2017)
Interposed Holdings Limited (appointed 10 January 2017, resigned 11 December 2017)
Special Responsibilities
Finance Director, member of the Audit Committee and member of the Remuneration and Nomination
Committee.
Interests in Shares and Options
277,778 ordinary shares and 13,500,000 unlisted options
Mathew Longworth - Non-executive Director – appointed 29 September 2014
Experience and Expertise
Mr Longworth is a geologist with 30 years’ experience across exploration, project evaluation/development,
operations and corporate management. He previously held roles as Exploration Manager, COO and
CEO/Managing Director with Australian listed companies, and mining analyst with a boutique investment
fund. In his senior corporate roles, Mathew led multidisciplinary project evaluation and development teams.
Mr. Longworth is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute
of Company Directors.
Other Current Directorships
None
Former Directorships in the Last Three Years
Echo Resources Limited (appointed 19 October 2012, resigned 8 February 2016)
Special Responsibilities
Chair of the Audit Committee
Interests in Shares and Options
634,167 ordinary shares and 10,200,000 unlisted options
20
Directors’ Report
Chris Bain - Non-executive Director – appointed 19 August 2013, resigned 1 January 2018
Experience and Expertise
Mr Bain is a geologist and mineral economist. He has over 35 years’ experience in resources having
worked in underground mine geology in Mt Isa and Tasmania and exploration around Broken Hill. Mr
Bain has been instrumental in mining project divestitures and acquisitions, evaluations and valuations,
capital raisings including several initial public offerings and ASX listings. Mr Bain was also a Director of
Investor Resources Finance Pty Limited, a company based in Melbourne which provided financial
advisory services to the resources industry globally. Mr Bain is a member of the Australasian Institute
of Mining and Metallurgy and a graduate member of the Australian Institute of Company Directors.
Other Current Directorships
KGL Resources Limited (appointed 5 September 2013)
Former Directorships in the Last Three Years
Dart Mining Limited (resigned 18 February 2014)
Special Responsibilities
Chair of the Remuneration and Nomination Committee and Member of the Audit Committee
Interests in Shares and Options (at time of resignation)
870,000 ordinary shares and 10,200,000 unlisted options
Company Secretary
The company secretary is Neil Hackett. Neil was appointed to the position of company secretary on 4
December 2014. Neil has over 20 years of company secretarial, compliance and company directorship
experience, including 10 years with the ASIC and seven years as an ASX 200 listed company secretary. He
is currently Chairman, Director and Company Secretary of various ASX listed and private entities. Neil holds
a Bachelor of Economics, is a Fellow of FINSIA, and is a Graduate and Facilitator with the Australian Institute
of Company Directors.
21
Directors’ meetings
Directors’ Report
The number of meetings of the Company’s board held during the year ended 30 June 2018 that each director
was eligible to attend, and the number of meetings attended by each director were:
Director
Number of Meetings
Eligible to attend
Attended
Matthew Gauci
Andrew Daley
Justin Barton
Mathew Longworth
Chris Bain
13
13
6
13
7
11
13
6
13
6
Remuneration Report (audited)
The Remuneration Report is set out under the following main headings:
(1) Principles used to determine the nature and amount of remuneration;
(2) Details of remuneration;
(3) Service agreements; and
(4) Share-based compensation.
The information provided in this Remuneration Report has been audited as required by Section 308(3C) of
the Corporations Act 2001.
1
Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with achievement of
strategic objectives and the creation of value for shareholders, and conforms to market best practice for
delivery of reward. The board ensures that executive reward satisfies the following key criteria for good
reward governance practices:
(i) competitiveness and reasonableness;
(ii) acceptability to shareholders;
(iii) performance linkage / alignment of executive compensation;
(iv) transparency; and
(v) capital management.
The Group has structured an executive remuneration framework that is market competitive and
complimentary to the reward strategy of the organisation.
Alignment to shareholders’ interests:
focuses on sustained growth in shareholder wealth; and
(i)
(ii) attracts and retains high calibre executives.
Alignment to program participants’ interests:
rewards capability and experience; and
(i)
(ii) provides a clear structure for earning rewards.
22
Directors’ Report
Remuneration Report (audited) (continued)
2
Details of remuneration
Executive fees
The fees and payments to the executive reflect the demands which are made on, and the responsibilities of
the executive, and are in line with market. The executives’ remuneration is reviewed annually by the board
to ensure that the fees and payments remain appropriate and in line with the market.
The remuneration packages of the Executives are detailed below under “Service agreements”.
Non-executive directors
Fees to the non-executive directors are determined by the Remuneration Committee as appropriate having
regard to the market and the aggregate remuneration specified in the Company’s Constitution and determined
by the shareholders in general meeting. The fees are reviewed annually.
Retirement allowances and benefits
There are no retirement or termination allowances, or benefits paid to directors.
The amount of remuneration of the directors of the Company (as defined in AASB 124 Related Party
Disclosures) and other key management personnel is set out in the following table.
Short term benefits
Post
employment
benefits
Equity settled
share based
payments
2018
Salary,
fees &
leave
Annual
leave
Other
Super-
annuation
Options
Total
Performance
related %
Executive director
Matthew Gauci
Justin Barton (f)
Non-executive directors
Andrew Daley (a)
Mathew Longworth (b)
Chris Bain (c)
Other executives
Leonardo Romero
Pip Darvall (d)
Neil Hackett (e)
Totals
275,000
173,516
(5,645)
4,448
-
-
90,000
60,000
27,397
182,648
78,870
48,000
935,431
-
-
-
2,107
-
-
910
-
7,500
-
-
-
7,455
14,955
26,125
16,484
-
-
2,603
17,352
-
-
62,564
-
-
-
-
-
295,480
194,448
90,000
67,500
30,000
259,970
57,863
78,870
-
70,815
15,360
73,223 1,087,083
0.0%
0.0%
0.0%
0.0%
0.0%
22.3%
0.0%
21.7%
23
Remuneration Report (audited) (continued)
Directors’ Report
Short term benefits
Post
employment
benefits
Equity settled
share based
payments
2017
Salary,
fees &
leave
Annual
leave
Other
Super-
annuation
Options
Total
Performance
related %
Executive director
Matthew Gauci
Non-executive directors
Andrew Daley (a)
Chris Bain
Mathew Longworth (b)
Other executive
Michael Hannington
Pip Darvall (d)
Leonardo Romero
Justin Barton
Neil Hackett (e)
Chris Hilbrands (f)
Totals
289,759
9,676
90,000
54,795
60,000
177,727
194,539
188,068
91,324
43,500
11,416
1,201,128
-
-
-
(10,431)
-
(236)
2,810
-
-
1,819
-
-
-
-
-
-
-
-
-
26,125
145,705
471,265
30.9%
-
5,205
-
12,202
-
14,418
8,676
-
1,084
67,710
-
-
-
90,000
60,000
60,000
117,052
117,052
117,052
117,052
117,052
-
296,550
311,591
319,302
219,862
160,552
12,500
730,965 2,001,622
0.0%
0.0%
0.0%
39.5%
37.6%
36.7%
53.2%
72.9%
0.0%
The fees paid to director related entities were for the provision of services of the particular director to the
Company are as follows:
(a) Dalenier Enterprises Pty Ltd, an entity associated with Andrew Daley, was paid or is payable $90,000
(2017: $90,000) for director’s fees.
(b) Mat Mining Pty Ltd, an entity associated with Mathew Longworth, was paid or is payable $60,000 (2017:
$60,000) for director’s fees.
(c) Chris Bain resigned as non-executive director on 1 January 2018.
(d) EPI Space Pty Ltd, an entity associated with Pip Darvall, was paid or is payable $78,870 (2017:
$194,539) for geological consulting fees. EPI Space Pty Ltd’s contract ceased in October 2017.
(e) Corporate Starboard Pty Ltd, an entity associated with Neil Hackett, was paid or is payable $55,455
(2017: $43,500).
(f) Justin Barton was appointed as finance director on 1 January 2018.
Short term incentives
Short term incentives (STI) are an ‘at risk’ component of senior employees remuneration packages and are
awarded based on annual review of past year’s performance against specific goals.
No STI’s were paid during the year ended 30 June 2018.
Long term incentives
Long term incentives (LTI) are “at risk” benefits awarded to the Managing Director and potentially senior
executives for achieving certain specified goals related to the long term growth and development of the
Group.
No LTI’s were awarded during the year ended 30 June 2018.
24
Directors’ Report
Remuneration Report (audited) (continued)
Service agreements
3
Directors
There is an Executive Contract with Matthew Gauci, to perform the function of Managing Director from 1
October 2013 until termination in accordance with the contract. The details are:
1. Remuneration of $275,000 per annum (excluding superannuation but including directors fees)
subject to an annual review;
2. The Company may pay a performance based bonus of up to 50% over and above the salary;
3. The Company reimburses costs and expenses reasonably incurred;
4. Either party can terminate the agreement on three months (3) months written notice.
There are letters of director appointment with each director which set out the annual fixed fee and terms and
conditions of the appointment including compliance with the Company’s Constitution and Corporate
Governance Policies; re-election, retirement and office vacancy; duties; remuneration; insurance and
indemnity; disclosure of interests; and confidentiality. They serve until they resign, are removed, cease to be
a director or prohibited from being a director under the provisions of the Corporations Law 2001, or are not
re-elected to office. They are remunerated on a monthly basis with no termination payments payable.
It is the Group’s policy that service contracts for non-executive directors are unlimited in term and capable of
termination by either party upon written notice.
Key Management Personnel
There is a Consultancy Agreement with Corporate Starboard Pty Ltd for Neil Hackett to perform the function
of Company Secretary, commencing 1 December 2014 until the termination of the contract. The details are:
1. Monthly retainer of $4,000 exclusive of GST per month. Additional time to be charged at $175/hr;
and
2. Either party can terminate the agreement by giving two weeks written notice
There was a Consultancy Agreement with EPI Space Pty Ltd for Pip Darvall to perform the function of
Exploration Manager of Non Admiral Bay Projects which commenced on 18 May 2016 and ceased in October
2017. The details are:
1. Remuneration of $1,200 per day exclusive of GST.
In the case of wilful or fraudulent misconduct, the Group retains the right to terminate all service contracts
without notice.
Key management personnel are entitled to receive on termination of employment their statutory entitlements,
including any accrued annual and long service leave, together with any superannuation benefits. Each service
contract outlines the components of compensation paid to the key management personnel but does not
prescribe how compensation levels are modified year to year.
4
Share-based compensation
During the financial year, the following performance rights for key management personnel were granted:
During the financial year
Name
Exercise price
No. granted
and vested
Grant date
Expiry Date
Leonardo Romero
Neil Hackett
$0.00
$0.00
1,506,846
400,000
31/01/2018
31/01/2018
15/03/2021
15/03/2021
Value of
options
granted at
grant date (a)
$57,863
$15,360
5,400,000 options issued to directors or key management personnel were exercised during the year. No
options issued to directors or key management personnel were cancelled during the year.
25
Remuneration Report (audited) (continued)
Directors’ Report
5
Share and option holdings of Key Management Personnel (KMP)
(i) Option and performance right holdings
The numbers of options over ordinary shares in the Company held during the financial year by each KMP,
including their personally related parties, are set out below:
2018
Balance at
the start
of the
year
Granted
during
the year
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the
year/date
of
resignation
Vested and
exercisable
at the end
of the
year/date
of
resignation
Vested but
not
exercisable
at end of
year
Options
Directors
Matthew Gauci
Andrew Daley
Justin Barton
33,500,000
12,750,000
6,000,000
Mathew Longworth
10,200,000
Chris Bain1
10,200,000
Other executives
Leonardo Romero
Pip Darvall
Neil Hackett
6,000,000
6,000,000
6,000,000
90,650,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,500,000
33,500,000
12,750,000
12,750,000
6,000,000
6,000,000
10,200,000
10,200,000
10,200,000
10,200,000
6,000,000
6,000,000
6,000,000
6,000,000
6,000,000
6,000,000
90,650,000
90,650,000
-
-
-
-
-
-
-
-
-
The options issued to directors on 2 July 2015 (34,500,000 options) were released from escrow and became
exercisable on 6 October 2017.
1On 1 January 2018, Chris Bain resigned as non-executive director.
The numbers of performance rights over ordinary shares in the Company held during the financial year by each
KMP, including their personally related parties, are set out below:
2018
Performance Rights
Leonardo Romero
Neil Hackett
Balance at
the start
of the
year
Granted
during
the year
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the
year/date
of
resignation
Vested and
exercisable
at the end
of the
year/date
of
resignation
Vested but
not
exercisable
at end of
year
-
-
-
1,506,846
400,000
1,906,846
-
-
-
-
-
-
1,506,846
400,000
1,906,846
-
-
-
-
-
-
26
Remuneration Report (audited) (continued)
Directors’ Report
5
Share and option holdings of Key Management Personnel (KMP) (continued)
(i) Option and performance right holdings (continued)
2017
Balance at
the start
of the
year
Granted
during the
year
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
Vested but
not
exercisable
at end of
year
Directors
Matthew Gauci
25,500,000
8,000,000
Andrew Daley
Chris Bain
12,750,000
10,200,000
Mathew Longworth
10,200,000
Other executives
-
-
-
-
-
-
-
Michael Hannington
6,000,000
6,000,000
(4,000,000)
Pip Darvall
Leonardo Romero
Justin Barton
Neil Hackett
-
-
-
-
6,000,000
6,000,000
6,000,000
6,000,000
-
-
-
-
64,650,000 38,000,000
(4,000,000)
-
-
-
-
-
-
-
-
-
33,500,000
18,500,000
15,000,000
12,750,000
5,250,000
7,500,000
10,200,000
4,200,000
6,000,000
10,200,000
4,200,000
6,000,000
8,000,000
8,000,000
6,000,000
6,000,000
6,000,000
6,000,000
6,000,000
6,000,000
6,000,000
6,000,000
-
-
-
-
-
98,650,000
64,150,000
34,500,000
(ii) Share holdings
The numbers of shares in the Company held during the financial year by each director, including their
personally related parties, are set out below:
Balance at the
start of the year
Received during the
year on the exercise
of options
Other changes during the
year
2018
Directors
Matthew Gauci
Andrew Daley
Justin Barton
Mathew Longworth
Chris Bain
Other executives
Leonardo Romero
Neil Hackett
Pip Darvall
11,456,428
2,172,015
-
217,500
870,000
-
339,801
-
15,055,744
-
-
-
-
-
-
-
-
-
Balance at the
end of the
year/date of
resignation
11,739,033
2,588,682
277,778
634,167
870,000
-
340,801
-
282,605
416,667
277,778
416,667
-
-
1,000
-
1,394,717
16,450,461
27
Remuneration Report (audited) (continued)
Directors’ Report
5
Share and option holdings of Key Management Personnel (KMP) (continued)
(ii) Share holdings (continued)
The numbers of shares in the Company held during the financial year by each director, including their
personally related parties, are set out below:
2017
Directors
Matthew Gauci
Andrew Daley
Chris Bain
Mathew Longworth
Other executives
Justin Barton
Leonardo Romero
Neil Hackett
Pip Darvall
Michael Hannington
Balance at the
start of the year
Received during the
year on the
exercise of options
Other changes during
the year
Balance at the
end of the year
10,601,927
1,845,245
870,000
-
-
-
339,801
-
-
13,656,973
-
-
-
-
-
-
-
-
854,501
326,770
-
217,500
11,456,428
2,172,015
870,000
217,500
-
-
-
-
-
-
-
339,801
-
-
1,398,771
15,055,744
(End of Remuneration Report)
28
Directors’ Report
Additional Information
(a) Shares under option
At the date of this report, the Company had 164,281,693 options and 2,274,713 performance rights over
ordinary shares under issue (30 June 2017: 129,916,670). These options are exercisable as follows:
Details
Management incentive options
Other options
Details
No of
Options
9,500,000
8,100,000
11,500,000
8,050,000
8,050,000
8,050,000
13,000,000
13,000,000
13,000,000
2,000,000
2,500,000
2,500,000
2,500,000
1,500,000
4,000,000
3,000,000
1,000,000
3,000,000
5,000,000
12,766,670
26,265,023
3,000,000
3,000,000
164,281,693
No of
Options
Grant Date
Date of Expiry Conversion Price $
02/07/2015
02/07/2015
02/07/2015
27/11/2015
27/11/2015
27/11/2015
29/11/2016
29/11/2016
29/11/2016
29/11/2016
27/08/2018
27/08/2018
27/08/2018
17/02/2016
13/06/2016
17/02/2016
18/04/2016
17/02/2016
16/01/2017
18/08/2017
21/02/2018
15/03/2018
15/03/2018
23/07/2020
23/07/2020
23/07/2020
10/12/2020
10/12/2020
10/12/2020
31/12/2019
31/12/2019
31/12/2019
31/12/2019
26/08/2021
26/08/2021
26/08/2021
31/12/2019
13/06/2019
31/12/2019
31/12/2019
31/12/2019
16/01/2020
18/08/2020
14/02/2023
12/03/2021
12/03/2021
0.025
0.03
0.04
0.03
0.04
0.05
0.06
0.08
0.10
0.12
0.06
0.08
0.10
0.04
0.06
0.08
0.10
0.12
0.08
0.08
0.08
0.06
0.08
Grant Date
Date of Expiry Conversion Price $
Performance Rights
2,274,713
15/03/2018
15/03/2021
0.00
Refer to note 15 for details of options cancelled and exercised during the year.
At the date of this report, Kimberly Mining Limited, a Canadian subsidiary of the Company, had the following
warrants on issue:
Details
Founder Warrants
Special Warrants
Brokers Special Warrants
No of
Options
5,329,750
2,952,000
176,620
8,458,370
(b)
Insurance of officers
Grant Date
Date of Expiry Conversion Price $
29/08/2018
29/08/2018
29/08/2018
29/08/2023
31/12/2018
29/08/2020
0.40
0.05
0.05
During the financial year, the Group paid a premium in respect of a contract insuring the directors of the
Company, the Company Secretary, and any executive officers of the Company and of any related body
corporate against a liabiDlity incurred as such a director, secretary or executive officer to the extent permitted
by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and
the amount of the premium.
29
Directors’ Report
Additional Information (continued)
(c) Agreement to indemnify officers
The Group has entered into agreements with the directors to provide access to Group records and to
indemnify them. The indemnity relates to any liability as a result of being, or acting in their capacity as, an
officer of the Company to the maximum extent permitted by law; and for legal costs incurred in successfully
defending civil or criminal proceedings.
No liability has arisen under these indemnities as at the date of this report.
(d) Proceedings on behalf of the Group
No person has applied to the court under Section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the
purpose of taking responsibility on behalf of the Group for all or part of those proceedings. No proceedings
have been brought or intervened in on behalf of the Group with leave of the court under Section 237.
(e) Non-audit services
No non-audit services were provided by the auditor or any entity associated with the auditor for the year
ended 30 June 2018 (2017: Nil).
(f)
Corporate Governance
The Directors of the Group support and adhere to the principles of corporate governance, recognising the
need for the highest standard of corporate behaviour and accountability. Please refer to the corporate
governance statement dated 29 September 2016 released to ASX and posted on the Company’s website
www.metalicity.com.au.
(g) Environmental Liabilities
There are no environmental liabilities at the date of this report.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 31 of the annual report.
This Directors’ report is signed in accordance with a resolution of Directors made pursuant to s.298 (2) of the
Corporations Act 2001.
On behalf of the Directors
Matthew Gauci
Managing Director
Perth, Western Australia
26 September 2018
30
Directors’ declaration
In the directors’ opinion:
1.
the financial statements and notes set out on pages 37 to 64 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 2018 and
of its performance for the financial year ended on that date; and
2.
3.
4.
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable;
the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board; and
the audited remuneration disclosures set out on pages 22 to 28 of the Directors’ Report comply with
accounting standard AASB 124 Related Party Disclosures and the Corporations Regulations 2001.
The directors have been given the declarations required by Section 295(A) of the Corporations Act 2001
from the Managing Director and the Company Secretary for the year ended 30 June 2018.
This declaration is made in accordance with a resolution of the directors.
Matthew Gauci
Managing Director
Perth, Western Australia
26 September 2018
36
Consolidated statement of profit or loss and other comprehensive income
for the financial year ended 30 June 2018
Continuing operations
Revenue
Expenses
Loss from continuing operations before income tax
Income tax expense
Loss after income tax from continuing operations
Other comprehensive income
Items that may be reclassified subsequently to profit or
loss
Items that will not be reclassified subsequently to profit
or loss
Other comprehensive loss for the period, net of tax
Note
4
5
6
Consolidated Group
2017
2018
$
$
520,752
(2,823,322)
(2,302,570)
-
(2,302,570)
501,387
(3,326,832)
(2,825,445)
-
(2,825,445)
-
-
-
-
-
-
Total comprehensive loss for the year
(2,302,570)
(2,825,445)
Loss attributable to:
Owners of the parent
Total comprehensive loss attributable to:
Owners of the parent
Non controlling interest
Basic loss per share (cents)
- Continuing operations
Diluted loss per share (cents)
- Continuing operations
(2,302,570)
(2,302,570)
(2,825,445)
(2,825,445)
(2,302,570)
-
(2,302,570)
(2,825,445)
-
(2,825,445)
24(a)
24(b)
(0.43)
(0.43)
(0.43)
(0.43)
(0.62)
(0.62)
(0.62)
(0.62)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
37
Consolidated statement of financial position
as at 30 June 2018
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Non-current assets held for sale
Total current assets
Non-current assets
Exploration and evaluation expenditure
Plant & equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Liabilities related to assets held for sale
Total current liabilities
Non-current liabilities
Deferred income
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Other reserves
Accumulated losses
Total equity
Note
7(a)
8
9
10
11
13
14
10
15
16
Consolidated Group
2017
2018
$
$
1,866,233
93,961
82,368
9,175,727
11,218,289
1,823,365
60,761
76,178
-
1,960,304
2,304,094
2,830
2,306,924
7,372,235
8,373
7,380,608
13,525,213
9,340,912
546,428
43,406
8,553,180
9,143,014
367,613
41,009
-
408,622
-
-
7,053,180
7,053,180
9,143,014
7,461,802
4,382,199
1,879,110
46,638,047
2,026,708
(44,282,556)
41,977,929
1,881,167
(41,979,986)
4,382,199
1,879,110
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes.
38
Consolidated statement of changes in equity
for the financial year ended 30 June 2018
Issued
capital
$
Share
Based
Payments
Reserve
$
Option
Premium
Reserve
Accumulated
losses
Total
$
$
$
Balance at 1 July 2016
41,257,521
943,167
1,500
(39,154,541)
3,047,647
(Loss) for the year
Total comprehensive loss for the year
-
-
Transactions with owners in their capacity as owners
Issue of share capital (options
exercised)
Share based payments
Acquisition of tenements
Share issue costs
Total transactions with owners
510,408
-
(120,000)
720,408
330,000
-
-
-
789,492
147,008
-
936,500
-
-
-
-
-
-
-
(2,825,445)
(2,825,445)
(2,825,445)
(2,825,445)
-
-
-
-
-
330,000
1,299,900
147,008
(120,000)
1,656,908
Balance at 30 June 2017
41,977,929
1,879,667
1,500
(41,979,986)
1,879,110
Issued
capital
$
Share
Based
Payments
Reserve
$
Option
Premium
Reserve
Accumulated
losses
Total
$
$
$
Balance at 1 July 2017
41,977,929
1,879,667
1,500
(41,979,986)
1,879,110
(Loss) for the year
Total comprehensive loss for the year
-
-
Transactions with owners in their capacity as owners
Issue of share capital
Issue of share capital (options
exercised)
Share based payments
Share issue costs
Total transactions with owners
1,050,000
(302,979)
4,660,118
3,761,097
152,000
-
-
-
-
145,541
-
145,541
-
-
-
-
-
-
-
(2,302,570)
(2,302,570)
(2,302,570)
(2,302,570)
-
-
-
-
-
3,761,097
152,000
1,195,541
(302,979)
4,805,659
Balance at 30 June 2018
46,638,047
2,025,208
1,500
(44,282,556)
4,382,199
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
39
Consolidated statement of cash flows
for the financial year ended 30 June 2018
Cash flows from operating activities
Payments to suppliers and employees
R& D Rebate
Lease income
Interest expense
Interest received
Net cash used in operating activities
Cash flows from investing activities
Payment for plant and equipment
Proceeds from sale of shares
Proceeds from sale of tenements
Payment for exploration and acquisition of
tenements
Net cash used in investing activities
Cash flows from financing activities
Proceeds from shares issued
Transaction costs
Net cash provided by financing activities
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at the beginning of
the financial year
Effect of exchange rates on cash holdings in
foreign currencies
Cash and cash equivalents at the end of the
financial year
Note
7(b)
Consolidated Group
2017
$
2018
$
(2,148,325)
258,940
71,300
(113)
2,546
(1,815,652)
(1,851,684)
442,849
51,946
(316)
7,466
(1,349,739)
(285)
283,377
50,000
(8,232)
-
-
(2,142,408)
(2,008,547)
(1,809,316)
(2,016,779)
3,913,052
(278,995)
3,634,057
330,000
-
330,000
9,089
(3,036,518)
1,823,365
4,924,011
33,779
(64,128)
7(a)
1,866,233
1,823,365
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
40
Notes to Financial Statements for the financial year ended 30 June 2018
1. General information
Metalicity Limited (“the Company” or “MCT”) is a company limited by shares, incorporated and domiciled
in Australia. Its shares are listed on the Australian Securities Exchange. MCT and its wholly owned
subsidiaries, Stuart Town Gold Pty Ltd, Metalicity Energy Pty Ltd, Ridgecape Holdings Pty Ltd, Kimberly
Mining Australia Pty Ltd, Kimberly Mining Holdings Pty Ltd and Kimberly Ming Limited (95% owned),
are referred to as the ‘Group’ or ‘Consolidated Entity’.
The Financial Report of MCT for the year ended 30 June 2018 was authorised for issue in accordance
with a resolution of the board of directors on 26 September 2018.
2.
Significant accounting policies
The principal accounting policies adopted in the preparation of the Financial Report are set out below.
These policies have been consistently applied to the years presented, unless otherwise stated.
(a) Basis of preparation
This general purpose Financial Report has been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB),
Australian Accounting Interpretations and the Corporations Act 2001.
It is recommended that this financial report be read in conjunction with the public announcements made
by the Company during the year in accordance with the continuous disclosure requirements arising
under the ASX Listing Rules.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to International Financial Reporting
Standards (AIFRS). Compliance with AIFRS ensures that the Financial Report of the Group complies
with International Financial Reporting Standards (IFRS).
Historical cost convention
These financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying
the Group’s accounting policies. Where these are areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements, these
are disclosed in Note 2(q).
Comparative figures
When required by accounting standards, comparative figures have been adjusted to conform to changes
in presentation for the current year. When the Group applies an accounting policy retrospectively, makes
a retrospective restatement or reclassifies items in its financial statements, a statement of financial
position as at the beginning of the earliest comparative period will be disclosed.
Going concern basis
The financial statements have been prepared on the going concern basis which contemplates the
continuity of normal business activity and the realisation of assets and the settlement of liabilities in the
normal course of business. For the year ended 30 June 2018 the Group incurred a loss after tax of
$2,302,570 (2017: $2,825,445) and a net cash outflow from operations of $1,815,652 (2017:
$1,349,739). At 30 June 2018, the Group has working capital surplus of $2,075,275 (2017: working
capital of $1,551,682) and current cash holding was $1,866,233 (2017: $1,823,365).
The directors have reviewed the business outlook and cash flow forecasts and are of the opinion that
the use of the going concern basis of accounting is appropriate as they believe the Group will continue
to raise further funds through the disposal of the Groups zinc assets via listing on the Toronto Stock
Exchange and subsequent capital raisings and will meet its expenditure commitments as required.
41
Notes to Financial Statements for the financial year ended 30 June 2018
2.
Significant accounting policies (continued)
(a) Basis of preparation (continued)
At the date of this report, the Company has disposed of its zinc assets to Kimberly Mining Limited (KML)
(note 27) and KML has completed its seed capital raising. The Company has received C$500,000
($532,311) as its first instalment of the sale of the zinc assets and will receive C$4m upon listing of KML
on the Toronto Stock Exchange, anticipated before 31 December 2018, and may receive up to a further
C$8m in the subsequent 24 months, depending on the performance of KML following listing.
Should the Group be unable to continue as a going concern, it may be required to realise its assets and
extinguish its liabilities other than in the normal course of business and at amounts different to those
stated in the financial statements. The financial statements do not include any adjustment relating to
the recoverability and classification of liabilities that may be necessary should the Group be unable to
continue as a going concern.
(b) Principles of Consolidation
The consolidated financial statements incorporate the assets and liabilities of subsidiaries of the
Company as at 30 June 2018 and the results of the subsidiaries for the period then ended.
Stuart Town Gold Pty Ltd, Metalicity Energy Pty Ltd, Ridgecape Holdings Pty Ltd, Kimberly Mining
Australia Pty Ltd, Kimberly Mining Holdings Pty Ltd and Kimberly Mining Limited are the subsidiaries
over which the Company has the power to govern the financial and operating policies as the holder of
all of the voting rights. The subsidiaries are fully consolidated from the date of acquisition of the
subsidiary. Consolidation will cease from the date that control of the subsidiary ceases. Any and all
intercompany transactions and balances between the Company and the subsidiary are eliminated on
consolidation.
(c) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value which is calculated as the sum of the
acquisition-date fair values of assets less liabilities transferred to the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange
for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at
their fair value, except that:
• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119
‘Employee Benefits’ respectively;
•
liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with AASB 2 ‘Share-based Payment’ at
the acquisition date; and
• Assets (or disposal groups) that are classified as held for sale in accordance with AASB 5
‘Noncurrent Assets Held for Sale and Discontinued Operations’ are measured in accordance with
that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in
the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest
42
Notes to Financial Statements for the financial year ended 30 June 2018
2.
Significant accounting policies (continued)
(c) Business combinations (continued)
in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase
gain.
(d) Revenue recognition
Interest revenue is recognised on a time proportionate basis using the effective interest method.
(e) Cash and Cash Equivalents
For statement of cash flow presentation purposes, cash and cash equivalents includes cash on hand,
deposits held at call with banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts.
(f)
Income Tax
The income tax expense or revenue for the period is the tax payable on a current period’s taxable
income based on the income tax rate adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
Deferred tax is accounted for using the liability method in respect of temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a
business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is
realised or liability is settled. Deferred tax is credited in the income statement except where it relates to
items that may be credited directly to equity, in which case the deferred tax is adjusted directly against
equity. Deferred income 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 tax losses.
(g) Exploration Expenditure
Exploration and evaluation expenditure incurred on granted exploration licences is accumulated in
respect of each identifiable area of interest. These costs are carried forward where the rights to tenure
of the area of interest are current and to the extent that they are expected to be recouped through the
successful development of the area or where activities in the area have not yet reached a stage that
permits reasonable assessment of the existence of economically recoverable reserves. Accumulated
costs in relation to any abandoned area will be written off in full against profit in the year in which the
decision to abandon the area is made. When production commences, the accumulated costs for the
relevant area of interest will be amortised over the life of the area according to the rate of depletion of
the economically recoverable reserves. A regular review will be undertaken of each area of interest to
determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
(h) Other receivables
Other receivables are recognised at fair value and subsequently measured at amortised cost, less
provision for impairment.
(i)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
financial year which are unpaid. The amounts are unsecured and usually paid within 30 days of
recognition.
43
Notes to Financial Statements for the financial year ended 30 June 2018
2.
Significant accounting policies (continued)
(j)
Borrowings
Loans are carried at their principal amounts, which represent the present value of future cash flows
associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded
as part of other creditors.
(k) Contributed equity
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 from the proceeds.
(l)
Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the result attributable to equity holders of the
Company by the weighted number of shares outstanding during the year. Diluted EPS adjusts the
figures used in the calculation of basic EPS 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 or known to have been issued in relation to dilutive potential ordinary shares.
(m) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount
of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables in the statement of financial position are shown exclusive of GST. Cash flows
are presented in the statement of cash flow on a gross basis, except for the GST component of investing
and financing activities, which are disclosed as operating cash flows.
(n) Employee Benefits
Provision is made for the Group’s liability for employee benefits arising from services rendered by
employees to balance date. Employee benefits that are expected to be settled within one year have
been measured at the amounts expected to be paid when the liability is settled. Employee benefits
payable later than one year have been measured at the present value of the estimated future cash
outflows to be made for those benefits. Those cash flows are discounted using market yields on national
government bonds with terms to maturity that match the expected timing of cash flows. In calculating
the present value of future cash flows in respect of long service leave, the probability of long service
leave being taken is based on historical data.
(o) Equity-Settled Compensation
The Group operates equity-settled share-based payment share and option schemes to Directors and
employees. The fair value of the equity to which Directors and employees become entitled is measured
at grant date and recognised as an expense over the vesting period, with a corresponding increase to
an equity account. The fair value of shares is ascertained as the market bid price. The fair value of
options is ascertained using a Binomial or Black and Scholes pricing model which incorporates all
market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted
at each reporting date such that the amount recognised for services received as consideration for the
equity instruments granted shall be based on the number of equity instruments that eventually vest.
(p)
Financial Instruments
Initial Recognition and Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the
group becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted
for financial assets that are delivered within timeframes established by market place convention.
44
Notes to Financial Statements for the financial year ended 30 June 2018
2.
Significant accounting policies (continued)
(p) Financial Instruments (continued)
Financial instruments are initially measured at fair value plus transactions costs where the instrument
is not classified as at fair value through the profit and loss. Transaction costs related to instruments
classified as at fair value through profit or loss are expensed to the Statement of Profit or Loss
immediately. Financial instruments are classified and measured as set out below.
Classification and Subsequent Measurement
Available for Sale Financial Assets
Available for sale financial assets represent non-derivative financial assets that are not suitable to be
classified into other categories of financial assets due to their nature, or they are designated as such by
management. They comprise investments in the equity of other entities where there is neither a fixed
maturity nor determinable payments. Available for sale financial assets are included in non-current
assets, except those which are expected to mature within 12 months after the end of the reporting
period.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market and are subsequently measured at amortised cost using the effective
interest rate method. The fair value of trade and other receivables, which is determined for disclosure
purposes, is estimated as the present value of future cash flows, discounted at the market rate of
interest at the reporting date.
Financial Liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at
amortised cost using the effective interest rate method. The fair value, which is determined for
disclosure purposes, is calculated based on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the reporting date.
Fair Value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques
are applied to determine the fair value for all unlisted securities, including recent arm’s length
transactions, reference to similar instruments and options pricing models.
Impairment
At each reporting date, the Group assesses whether there is objective evidence that a financial
instrument has been impaired. A financial asset or a group of financial assets is deemed to be impaired
if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”)
having occurred, which has an impact on the estimated future cash flows of the financial asset(s).
In the case of available-for-sale financial assets, a significant or prolonged decline in the market value
of the instrument is considered to constitute a loss event. Impairment losses are recognised in the profit
or loss immediately. Also, any cumulative decline in fair value previously recognised in other
comprehensive income is reclassified to profit or loss at that point.
In the case of financial assets carried at amortised cost, loss events may include: indications that the
debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in
interest or principal payments; indications that they will entre bankruptcy or other financial
reorganisation; and changes in arrears or economic conditions that correlate with defaults.
For financial assets carried at amortised cost (including loans and receivables), a separate allowance
account is used to reduce the carrying amount of financial assets impaired by credit losses. After having
taken all possible measures of recovery, if management establishes that the carrying amount cannot
be recovered by any means, at that point the written-off amounts are charged to the allowance account
45
Notes to Financial Statements for the financial year ended 30 June 2018
2.
Significant accounting policies (continued)
(p) Financial Instruments (continued)
or the carrying amount of impaired financial asset is reduced directly if no impairment amount was
previously recognised in the allowance account.
When the terms of financial assets that would otherwise have been past due or impaired have been
renegotiated, the Group recognised the impairment for such financial assets by taking into account the
original terms as if the terms have not been renegotiated so that the loss events that have occurred
are duly considered.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the
asset is transferred to another party whereby the Group no longer has any significant continuing
involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised
where the related obligations are either discharged, cancelled or expire. The difference between the
carrying value of the financial liability extinguished or transferred to another party and the fair value of
consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in the
profit or loss.
(q) Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the financial report based on
historical knowledge and best available current information. Estimates assumed a reasonable
expectation of future events and are based on current trends and economic data, obtained both
externally and within the Group.
Key Estimates – Impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group
that may lead to an impairment of assets. Where an impairment trigger exists, the recoverable amount
of the asset is determined. Value-in- use calculations performed in assessing recoverable amounts
incorporate a number of key estimates. This includes as assessment of the carrying values of
intangibles and capitalised exploration and evaluation costs
Key Estimates – Share based payment transactions
The Group measures the cost of equity-settled transactions with employees (including directors) by
reference to the fair value of the equity instruments at the date at which they are granted. The fair
value is determined by an internal valuation using a Black-Scholes option pricing model, using the
assumptions detailed in Note 15.
(r)
Application of new and revised Accounting Standards
The Group has considered the implications of new and amended Accounting Standards applicable for
the annual reporting periods beginning after 1 July 2016 but determined that their application to the
financial statements is either not relevant or not material.
(s) New Accounting Standards for Application in Future Periods
Accounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together
with an assessment of the potential impact of such pronouncements on the Group when adopted in
future periods, are discussed below:
• AASB 9 : Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018.
The Standard will be applicable retrospectively and includes revised requirements for the
classification and measurement of financial instruments, revised recognition and derecognition
requirements for financial instruments and simplified requirements for hedge accounting.
46
Notes to Financial Statements for the financial year ended 30 June 2018
2.
Significant accounting policies (continued)
(s) New Accounting Standards for Application in Future Periods (continued)
The key changes that may affect the Group on initial application include certain simplifications
to the classification of financial assets, simplifications to the accounting of embedded
derivatives, upfront accounting for expected credit loss, and the irrevocable election to
recognise gains and losses on investments in equity instruments that are not held for trading in
other comprehensive income. The group has assessed the impact of the adoption of AASB 9
and has concluded that no material changes are expected to result from the adoption of the
new standard. The Group will adopt this standard from 1 July 2018.
• AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018.
The standard provides a single standard for revenue recognition. The core principle of the
standard is that an entity will recognise revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The standard will require: contracts
(either written, verbal or implied) to be identified, together with the separate performance
obligations within the contract; determine the transaction price, adjusted for the time value of
money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or
estimation approach if no distinct observable prices exist; and recognition of revenue when
each performance obligation is satisfied. Credit risk will be presented separately as an expense
rather than adjusted to revenue. For goods, the performance obligation would be satisfied when
the customer obtains control of the goods. For services, the performance obligation is satisfied
when the service has been provided, typically for promises to transfer services to customers.
For performance obligations satisfied over time, an entity would select an appropriate measure
of progress to determine how much revenue should be recognised as the performance
obligation is satisfied. Contracts with customers will be presented in an entity's statement of
financial position as a contract liability, a contract asset, or a receivable, depending on the
relationship between the entity's performance and the customer's payment. Sufficient
quantitative and qualitative disclosure is required to enable users to understand the contracts
with customers; the significant judgements made in applying the guidance to those contracts;
and any assets recognised from the costs to obtain or fulfil a contract with a customer. The
Group has assessed the impact of AASB15 on its revenue in relation to its material contracts
with customers and has concluded that no material changes are expected to result from the
adoption of the new standard. The Group will adopt this standard from 1 July 2018.
• AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019.
The standard replaces AASB 117 ‘Leases’ and for lessees will eliminate the classifications of
operating leases and finance leases. Subject to exceptions, a ‘right-of-use’ asset will be
capitalised in the statement of financial position, measured as the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to
short-term leases of 12 months or less and leases of low-value assets (such as personal
computers and small office furniture) where an accounting policy choice exists whereby either
a ‘right-of-use’ asset is recognised or lease payments are expensed to profit or loss as incurred.
A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any
future restoration, removal or dismantling costs. Straight-line operating lease expense
recognition will be replaced with a depreciation charge for the leased asset (included in
operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB
16 will be higher when compared to lease expenses under AASB 117. However EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the
47
Notes to Financial Statements for the financial year ended 30 June 2018
2.
Significant accounting policies (continued)
(s) New Accounting Standards for Application in Future Periods (continued)
operating expense is replaced by interest expense and depreciation in profit or loss under AASB
16. For classification within the statement of cash flows, the lease payments will be separated
into both a principal (financing activities) and interest (either operating or financing activities)
component. For lessor accounting, the standard does not substantially change how a lessor
accounts for leases. The group will adopt this standard from 1 July 2019 but the impact of its
adoption is yet to be fully assessed by the group. However, the Group expects its commitments
in regards to operating leases to be impacted by this standard. The Group’s operating lease
commitments is disclosed under note 22(b).
3.
Segment information
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and
used by the Board of Directors (chief operating decision makers) in assessing performance and
determining the allocation of resources.
The Group has one geographic segment being Australia and operates in one industry being the
exploration of minerals.
4.
Revenue
An analysis of the Group’s revenue for the year is as follows:
R&D Rebate
Lease Income
Interest earned
Gain on sale of shares
Foreign exchange gain
Sale of tenements
Consolidated Group
2018
$
258,940
71,300
2,546
74,147
33,779
80,040
520,752
2017
$
442,849
51,070
7,468
-
-
-
501,387
48
Notes to Financial Statements for the financial year ended 30 June 2018
5. Expenses
Accounting & audit
ASX
Company secretarial fees
Consulting fees
Depreciation
Employee benefits
Foreign exchange loss
Insurance
Impairment - exploration
Interest expense
Investor relations
KML transaction costs
Legal fees
Project work & generation - cash
Rent & office costs
Seminars & conferences
Share based payments
Share registry fees
Travel & accommodation
Other
Total expenses
6.
Income taxes
Consolidated Group
2018
$
92,732
37,805
62,065
114,036
5,827
620,490
-
20,084
454,466
113
55,948
324,194
108,132
200,190
227,275
25,235
145,541
25,940
150,056
153,193
2,823,322
2017
$
129,731
46,119
43,500
118,429
3,421
507,757
64,128
32,481
824,607
316
25,903
-
53,784
158,027
201,402
53,448
789,492
20,032
124,346
129,909
3,326,832
Consolidated Group
2017
$
2018
$
27
a) Numerical reconciliation of income tax expense to
prima facie tax payable
Loss from continuing operations before income tax expense
(2,302,570)
(2,825,445)
Tax at the Australian tax rate of 27.5% (2017: 27.5%)
(633,207)
(776,997)
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income
Tax effect of amounts which are deductible (taxable) in
calculating taxable income
168,527
285,059
(566,920)
(657,864)
R&D Rebate
(71,008)
(121,783)
Under/(over) from prior year
Tax losses not recognised
Income tax expense
212,491
197,751
890,117
1,073,834
-
-
49
Notes to Financial Statements for the financial year ended 30 June 2018
6.
Income taxes (continued)
b) Tax losses
Unused tax losses for which no deferred tax asset has been
recognised
Potential tax benefit at 27.5%
Consolidated Group
2017
$
2018
$
13,093,947
10,629,851
3,600,836
2,923,209
Tax losses have not been recognised as a deferred tax asset as recoupment is dependent on, amongst
other matters, sufficient future assessable income being earned. That is not considered certain in the
foreseeable future and accordingly there is uncertainty that the losses can be utilised. There are
deferred tax liabilities of approximately $3,156,951 relating to capitalised exploration costs claimed for
tax as at 30 June 2018 (2017: $2,027,365). These are offset with the deferred tax assets that have
been recognised to the extent of the deferred tax liabilities.
7. Cash and cash equivalents
(a) Reconciliation of cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and
in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and
cash equivalents at the end of the financial year as shown in the consolidated statement of cash flows
are reconciled to the related items in the consolidated statement of financial position as follows:
Cash and cash equivalents
Consolidated Group
2017
2018
$
$
1,866,233
1,823,365
A term deposit of $20,197 relating to securing a credit card facility is included in the above.
(b) Reconciliation of loss for the year to net cash flows from operating activities
Loss for the year
Share based payments
Foreign exchange (gain)/loss
Depreciation
Impairment of exploration
and evaluation
(Increase) in trade and other receivables and other assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash (used in) operating activities
(c) Non cash investing and financing activities
(2,302,570)
195,541
(33,779)
5,827
(2,825,445)
789,492
64,128
3,421
454,466
824,607
(39,390)
(98,144)
2,397
(1,815,652)
(44,568)
(152,182)
(9,192)
(1,349,739)
For shares issued to acquire exploration tenements, refer to note 12 and note 16(a).
50
Notes to Financial Statements for the financial year ended 30 June 2018
8.
Trade and other receivables
GST Receivable
Lease fee receivable
Other receivables
9. Other assets
Tenement applications and deposits
Prepayments
Rental security
Expenditure incurred
Consolidated Group
2017
2018
$
$
52,033
81,112
4,070
4,070
4,658
8,779
60,761
93,961
Consolidated Group
2017
2018
$
$
17,928
24,713
16,750
19,155
41,500
38,500
76,178
82,368
10. Non-Current Assets Held for Sale and Liabilities Related to Non-Current Assets
Held for Sale
Non-Current Assets Held for sale
Balance at beginning of the period
Assets reclassified as held for sale:
- Admiral Bay
- Napier and Emanual Range
Balance of assets held for sale
Liabilities Related to Non-Current Assets Held for Sale
Balance at beginning of the period
Liabilities reclassified:
- Deferred income(1)
- Deferred acquisition
costs(2)
Balance at period end
Consolidated Group
2017
2018
$
$
-
5,777,436
3,398,291
9,175,727
Consolidated Group
2017
2018
$
$
-
7,053,180
1,500,000
8,553,180
-
-
-
-
-
-
-
-
During the year, the Company announced that it was proposing to list its zinc assets, consisting of the
Admiral Bay Project and the Lennard Shelf Project held by subsidiary Ridgecape Holdings Pty Ltd. At
year end, the transaction had progressed sufficiently that the sale of these assets had become highly
probable and they have now been reclassified as available for sale.
51
Notes to Financial Statements for the financial year ended 30 June 2018
10. Non-Current Assets Held for Sale and Liabilities Related to Non-Current Assets
Held for Sale (continued)
(1) The Company sold a 1% Net Smelter Royalty over the Admiral Bay Project for US$5,000,000
($7,053,180) which was received during the year ended 30 June 2016. The Company has recognised
this amount as deferred income and will recognise the income upon the commencement of production,
over the life of the mine/Net Smelter Royalty. This amount is not refundable.
(2) The deferred acquisition costs at 30 June 2018 relate to the final two payments, of $500,000 and
$1,000,000, for the acquisition of the Napier Range tenements (see note 11).
11. Exploration and evaluation expenditure
Consolidated Group
2017
2018
$
$
Exploration at cost at the beginning of the period
Acquisition costs
Expenditure incurred
Impairment expense
Tenements sold
Reclassification as assets held for sale (see note 10)
Closing balance
7,372,235
3,086,875
1,654,367
(454,466)
(179,190)
(9,175,727)
2,304,094
Total expenditure incurred and carried forward in respect of specific projects
- Admiral Bay Project
- Napier and Emanuel Range
- Lynas Find and Other
- Rocky Gully Project
Total carried forward exploration expenditure
-
-
2,304,094
-
2,304,094
5,357,642
800,979
2,038,221
(824,607)
-
-
7,372,235
5,349,877
-
1,651,819
370,539
7,372,235
12. Acquisition of assets
Lennard Shelf Project
On 11 September 2017, the Group completed the acquisition of 100% of the shares in Ridgecape
Holdings Pty Ltd, which holds the Emanuel Range Zinc Projects and the option to acquire the high grade
Napier Range Zinc Project for:
-
-
-
$100,000 cash;
$500,000 of shares in the Company, issued on 20 September 2017 see note 16(a)); and
$500,000 of shares in the Company upon exercise of option, issued on 16 March 2018 (see
note 16(a)).
The net assets acquired included tenement acquisition costs of $1,031,918.
On 12 October 2017, the Group announced the exercise of the option (acquired by Ridgecape for
$50,000 prior to acquisition by the Company) to acquire the Napier Range Zinc Project for
• $450,000 cash payment (net of $50,000 option fee), paid on 1 March 2018;
• $500,000 cash payment 6 months after above payment (now payable on 9 November 2018);
and
• $1,000,000 cash payment 12 months after first payment, being 1 March 2019.
52
Notes to Financial Statements for the financial year ended 30 June 2018
13. Trade and other payables
Trade payables and accruals
Superannuation
BAS payable
Reclassification of liabilities related to assets held for sale (see
note 10)
14. Provisions
Consolidated Group
2017
2018
$
$
2,001,975
20,329
24,124
288,089
15,833
63,691
(1,500,000)
-
546,428
367,613
Consolidated Group
2017
2018
$
$
Employee benefits – annual leave
43,406
41,009
15. Deferred income
Deferred income
Reclassification of liabilities related to assets held for sale (see
note 10)
Consolidated Group
2017
2018
$
$
7,053,180
7,053,180
(7,053,180)
-
-
7,053,180
The Company sold a 1% Net Smelter Royalty over the Admiral Bay Project for US$5,000,000
($7,053,180) which was received during the year ended 30 June 2016. The Company has previously
recognised this amount as deferred income and will recognise the income upon the commencement of
production, over the life of the mine/Net Smelter Royalty. This amount is not refundable and has been
reclassified as liabilities related to non-current assets held for sale (refer note 10).
53
Notes to Financial Statements for the financial year ended 30 June 2018
16.
Issued capital
2018
$
2017
$
592,463,745 (2017: 464,544,654) fully paid ordinary shares
46,638,047
41,977,929
(a) Movement in ordinary share capital
Date
Details
01/07/2016 Opening balance
03/11/2016 Exercise of options at $0.025 and $0.03
16/01/2017 Exercise of options at $0.04
16/01/2017
08/03/2017 Exercise of options at $0.04
Issued as consideration for tenements at $0.078
09/03/2017 Exercise of options at $0.04
30/06/2017 Balance at the end of the year
Date
Details
01/07/2017 Opening balance
18/08/2017 Share placement at $0.036
07/09/2017 Share purchase plan at $0.036
07/11/2017 Share placement at $0.036
20/09/2017
Issued as consideration for acquisition of
Ridgecape at $0.036 (tranche 1)
15/01/2018 Exercise of options at $0.03
25/01/2018 Exercise of options at $0.025 and $0.03
21/02/2018 Share placement at $0.045
16/03/2018 Share placement at $0.045
16/03/2018
16/03/2018
Issued as consideration for advisory services at
$0.038
Issued as consideration for acquisition of
Ridgecape at $0.036 (tranche 2)
Share issue costs
30/06/2017 Balance at the end of the year
Number of
shares
450,044,654
4,000,000
2,500,000
5,000,000
2,000,000
1,000,000
464,544,654
Number of
shares
464,544,654
25,233,333
14,661,149
1,000,000
13,888,888
2,000,000
3,400,000
$
41,257,521
110,000
100,000
390,408
80,000
40,000
41,977,929
$
41,977,929
908,400
527,800
36,000
500,000
60,000
92,000
52,530,042
2,288,852
1,000
45
1,315,791
50,000
13,888,888
500,000
-
(302,979)
592,463,745
46,638,047
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the
Company in proportion to the number of and amounts paid on the shares held. On a show of hands or
on a poll every holder of ordinary shares present at a meeting in person or by proxy is entitled to one
vote.
54
Notes to Financial Statements for the financial year ended 30 June 2018
16.
Issued capital (continued)
(b) Options
At year end 30 June 2018, the Company had 156,781,693 options over ordinary shares under issue (30
June 2017: 117,150,000). These options are exercisable as follows:
Details
Management incentive options
Other options
No of
Options
9,500,000
8,100,000
11,500,000
8,050,000
8,050,000
8,050,000
13,000,000
13,000,000
13,000,000
2,000,000
1,500,000
4,000,000
3,000,000
1,000,000
3,000,000
5,000,000
12,766,670
26,265,023
3,000,000
3,000,000
156,781,693
Grant Date
Date of Expiry Exercise Price $
02/07/2015
02/07/2015
02/07/2015
27/11/2015
27/11/2015
27/11/2015
29/11/2016
29/11/2016
29/11/2016
29/11/2016
17/02/2016
13/06/2016
17/02/2016
18/04/2016
17/02/2016
16/01/2017
18/08/2017
21/02/2018
15/03/2018
15/03/2018
23/07/2020
23/07/2020
23/07/2020
10/12/2020
10/12/2020
10/12/2020
31/12/2019
31/12/2019
31/12/2019
31/12/2019
31/12/2019
13/06/2019
31/12/2019
31/12/2019
31/12/2019
16/01/2020
18/08/2020
14/02/2023
12/03/2021
12/03/2021
0.025
0.03
0.04
0.03
0.04
0.05
0.06
0.08
0.10
0.12
0.04
0.06
0.08
0.10
0.12
0.08
0.08
0.08
0.06
0.08
The weighted average exercise price of the above options is $0.065 (2017: $0.058)
Balance at beginning of the year
Granted during the year (see note 17(a))
Exercised during the year
Forfeited/expired/cancelled during the year
Balance at the end of the year
(c) Performance Rights
2018
No.
117,150,000
45,031,693
(5,400,000)
-
156,781,693
2017
No.
82,650,000
46,000,000
(9,500,000)
(2,000,000)
117,150,000
At the date of this report, the Company had 2,274,713 performance rights over ordinary shares under
issue (30 June 2017: Nil). These performance rights are exercisable as follows:
Details
No of
Options
Grant Date
Date of Expiry Exercise Price $
Performance rights
2,274,713
31/01/2018
15/03/2021
0.000
Balance at beginning of the year
Granted during the year (see note 17(a))
Exercised during the year
Forfeited/expired/cancelled during the year
Balance at the end of the year
2018
No.
-
2,274,713
-
-
2,274,713
2017
No.
55
-
-
-
-
-
Notes to Financial Statements for the financial year ended 30 June 2018
16.
Issued capital (continued)
(d) Capital Management
Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio,
generate long-term shareholder value and ensure that the Group can fund its operations and continue
as a going concern.
The Group’s debt and capital include ordinary share capital and financial liabilities, supported by
financial assets.
The Group is not subject to any externally imposed capital requirements. Management effectively
manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure
in response to changes in these risks and in the market. These responses include the management of
debt levels, distributions to shareholders and share issues.
17.
Share Based Payments
(a) Recognised share-based payment expense
The expense recognised for options and shares issued during the year is shown in the table below:
Consolidated Group
2017
2018
$
$
Expense arising from equity-settled share-based payment
transaction:
- Shares issued as consideration for corporate advisory
50,000
-
services (reported as consulting expenses)
- Options issued as consideration for advisory services
- Performance rights issued to employees/contractors
- Options issued to employees
Total
58,192
87,349
-
195,541
-
-
789,492
789,492
The following option and performance right arrangements were issued during the current and prior
reporting periods:
30 June 2018
Option
Series/Performance
Rights
Options
Issued 18/08/2017
Issued 19/02/2017
Issued 15/03/2018
Issued 15/03/2018
Performance rights(2)
Issued 15/03/2018
Number
Grant
Date
Expiry
Date
Exercise
Price
12,766,670
26,265,023
3,000,000
3,000,000
45,031,693
18/08/2017
21/02/2017
15/03/2018
15/03/2018
108/08/202
14/02/2023
12/03/2021
12/03/2021
0.08
0.08
0.06
0.08
Fair Value
at Grant
Date
$0.00(1)
$0.00(1)
$0.01055
$0.0089
2,274,713
31/01/2018
15/03/2021
0.00
$0.03840
(1) No fair value is attributable to these options as they are free attaching options issued in relation
to the Placements completed on 18 August 2017 and 21 February 2018.
(2) Performance rights, with zero exercise price, were issued to employees on 15 March 2018,
which vest when share price of the Company is $0.06.
56
Notes to Financial Statements for the financial year ended 30 June 2018
17.
Share Based Payments (continued)
30 June 2017
Option Series
Number
Grant
Date
Expiry
Date
Exercise
Price
Issued 29/11/2016
Issued 29/11/2016
Issued 29/11/2016
Issued 29/11/2016
Issued 16/01/2017
13,000,000
13,000,000
13,000,000
2,000,000
5,000,000
29/11/2016
29/11/2016
29/11/2016
29/11/2016
16/01/2017
31/12/2019
31/12/2019
31/12/2019
31/12/2019
16/01/2020
0.06
0.08
0.10
0.12
0.08
Fair Value
at Grant
Date
$0.0228
$0.0192
$0.0165
$0.0143
$0.0294
(b)
Types of share-based payment plans
Options
(i)
There were $145,716 share based payments relating to options and performance rights in 2018 (2017:
$789,492).
The following tables lists the inputs to the model used to value the options issued during the financial
year ended 30 June 2018:
No of options
3,000,000
3,000,000
Grant date
Share price
Exercise price
Risk-free interest rate
Vesting Conditions and Period
Expiry date
Volatility
Fair value at grant date (cents)
Discount for vesting condition
Discount for being unlisted
Fair value after discounts (cents)
15/03/18
$0.031
$0.06
2.05%
Nil
12/03/21
85%
1.234
Nil
20%
0.9876
15/03/18
$0.031
$0.08
2.05%
Nil
12/03/21
85%
1.033
Nil
20%
0.8267
The performance rights issued during the year ended 30 June 2018 were valued at the share price at
the date of grant, with a 20% discount for being unlisted and 100% vesting probability.
Shares
(ii)
There were $1,050,000 share based payments relating to shares in the financial year ended 30 June
2018 (2017: nil), being $1,000,000 for the acquisition of Ridgecape Holdings Pty Ltd (refer note 12) and
$50,000 for corporate advisory services.
Summary of share based payment options granted
(c)
The following table illustrates the number and weighted average exercise price (WAEP) of, and
movements in, share options issued during the year:
2018
No
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired/forfeited/cancelled during the year
117,150,000
45,031,693
(5,400,000)
-
Outstanding at the end of the year
156,781,693
2018
WAEP
0.0582
0.0787
0.0324
-
0.0646
2017
2017
No WAEP
82,650,000
46,000,000
(9,500,000)
(2,000,000)
0.0434
0.0817
0.0347
0.1000
117,150,000
0.0582
57
Notes to Financial Statements for the financial year ended 30 June 2018
17.
Share Based Payments (continued)
(d) Weighted average of remaining contractual life
The weighted average remaining contractual life for the share options outstanding as at 30 June 2018
is 2.37 years (2017: 2.81 years).
The weighted average remaining contractual life for the performance rights outstanding as at 30 June
2018 is 2.70 years (2017:nil)
Range of exercise price
(e)
The range of exercise prices for options outstanding at the end of the year was $0.025-$0.12 (2017:
$0.025-$0.12).
The performance rights do not have an exercise price.
Weighted average fair value
(f)
The weighted average fair value of options granted during the year, excluding free attaching options,
was approximately $0.0097 (2017: $0.0136).
The weighted average fair value of performance rights granted during the year was approximately
$0.0384 (2017: nil)
(g)
The following options were exercised during the year.
Share options exercised during the year
2018
Option Series
Number
Grant
Date
Expiry
Date
Exercise
Price
Issued 23/07/2015
Issued 23/07/2015
Issued 11/12/2015
2,000,000 23/07/2015 23/07/2020
2,000,000 23/07/2015 23/07/2020
1,400,000 11/12/2015 10/12/2020
5,400,000
$0.03
$0.025
$0.03
2017
Option Series
Number
Grant
Date
Expiry
Date
Exercise
Price
Issued 23/07/2015
Issued 23/07/2015
Issued 23/07/2015
Issued 17/02/2016
Issued 11/03/2014
2,000,000 23/07/2015 08/07/2020
2,000,000 23/07/2015 08/07/2020
2,000,000 23/07/2015 08/07/2020
2,500,000 17/02/2016 31/12/2019
1,000,000 07/03/2014 11/03/2017
9,500,000
$0.025
$0.03
$0.04
0.04
0.04
Fair Value
at Grant
Date
0.00384
0.00568
0.00315
Fair Value
at Grant
Date
$0.0057
$0.0038
$0.0021
$0.0386
$0.0016
58
Notes to Financial Statements for the financial year ended 30 June 2018
18. Financial Risk Management
Risk management is the role and responsibility of the board. The Group's current activities expose it to
minimal risk. However, as activities increase there may be exposure to interest rate, market, credit, and
liquidity risks.
Interest Rate Risk
(a)
The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will
fluctuate as a result of changes in market rates and the effective weighted average interest rates on
classes of financial assets and financial liabilities, is as follows:
30 June 2018
Financial Assets
Cash and deposits
Trade and other receivables
Weighted average interest
rate
Financial liabilities
Trade and other payables
30 June 2017
Financial Assets
Cash and deposits
Trade and other receivables
Weighted average interest
rate
Financial liabilities
Trade and other payables
Floating
interest
rate
1 year
or
less
Over 1
year to
5 years
More
than 5
years
Non
interest
bearing
Total
$
$
$
$
$
$
767,600 20,197
-
767,600 20,197
-
0.39%
2.45%
-
-
-
-
35,350 20,197
-
35,350 20,197
-
0.28%
0.20%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,078,436
93,961
1,172,397
1,866,233
93,961
1,960,194
2,046,428
2,046,428
2,046,428
2,046,428
1,767,818
60,761
1,828,579
1,823,365
60,761
1,884,126
367,613
367,613
367,613
367,613
The Group has interest bearing assets and therefore income and operating cash flows are subject to
changes in the market rates. However, market changes in interest rates will not have a material impact
on the profitability or operating cash flows of the Group. A movement in interest rates of +/- 100 basis
points will result in less than a +/- $7,900 (2017: $500) impact on the Group’s income and operating
cash flows. At this time, no detailed sensitivity analysis is undertaken by the Group.
(b) Market risk
The Group is not exposed to equity securities price risk as it holds no investments in securities classified
on the balance sheet either as available-for-sale or at fair value through profit or loss; or to commodity
price risk.
(c) Credit risk
The Group has no significant concentrations of credit risk and as such, no sensitivity analysis is
prepared by the Group. Credit risk related to balances with banks is managed by ensuring that the
surplus funds are only invested with counterparties with a Standard & Poor’s rating of at least AA-.
59
Notes to Financial Statements for the financial year ended 30 June 2018
18. Financial Risk Management (continued)
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and
when they fall due. The Group manages liquidity risk by preparing forecasts and monitoring actual cash
flows and requirements for future capital raisings. The Group does not have committed credit lines
available, which is appropriate given the nature of its operations. Surplus funds are invested in a cash
management account with ANZ which is available as required.
The material liquidity risk for the Group is the ability to raise equity in the future.
(e) Effective interest rate and repricing analysis
Cash and cash equivalents are the only interest bearing financial instruments of the Group.
(f) Currency risk
Currency risk arises from investments that are denominated in a currency other than the respective
functional currencies of Group entities.
The Group is exposed to foreign currency risk in the form of financial instruments held in US Dollars
(USD). The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in
Australian dollars, was as follows:
Cash and cash equivalents
Total Exposure
2018
USD$
779,383
779,383
2017
USD$
1,564,365
1,564,365
Assuming all other variables remain constant, a 10% strengthening of the Australian dollar at 30 June
2018 against the USD would have resulted in an increased loss of $78,000 (2017: $156,000). A 10%
weakening of the AUD would have resulted in a decreased loss of $78,000 (2017: $156,000), assuming
all other variables remain constant. The Group does not currently hedge against currency risk.
19.
Key management personnel disclosures
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Share based payments
Consolidated Group
2018
$
2017
$
951,296
62,564
73,223
1,087,083
1,201,128
67,710
730,965
1,999,803
Detailed remuneration disclosures are provided in sections 1 to 4 of the Remuneration Report in the
Directors’ Report.
Outside the Company’s directors, the Group had 2 employees as at 30 June 2018 (30 June 2017: 5
employees).
60
Notes to Financial Statements for the financial year ended 30 June 2018
20.
Remuneration of auditors
During the year the following fees (exclusive of GST) were paid or
payable for services provided by the auditor of the Group:
Audit services
- Audit and review of financial report and other
audit work under the Corporations Act 2001
- Under provision of audit fees for prior year
Non-audit services
- Other services provided
Total remuneration for audit and other services
Consolidated Group
2018
$
2017
$
39,000
38,617
5,040
-
-
-
44,040
38,617
The auditors of Metalicity Limited and its subsidiaries is Stantons International.
21. Contingent liabilities and contingent assets
The Company had no contingent liabilities or contingent assets at 30 June 2018.
22. Commitments for expenditure
(a) Exploration Commitments
In order to maintain an interest in the mining and exploration tenements in which the Group is involved,
the Group is committed to meet the conditions under which the tenements were granted and the
obligations of any joint venture agreements. The timing and amount of exploration expenditure
commitments and obligations of the Group are subject to the minimum expenditure commitments
required as per the Mining Act, as amended, and may vary significantly from the forecast based upon
the results of the work performed which will determine the prospectivity of the relevant area of interest.
These obligations are not provided for in the financial report and are payable.
Outstanding exploration commitments are as follows (other than detailed below, no estimate has been
given of expenditure commitments beyond 12 months as this is dependent on the Directors' ongoing
assessment of operations and, in certain circumstances, Native Title negotiations):
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Consolidated Group
2018
$
1,045,600
-
-
1,045,600
2017
$
1,614,100
-
-
1,614,100
(b) Operating Lease Commitments
The Group has an operating lease commitments for rental of office space of $140,000 plus outgoings
until 31 December 2019.
61
Notes to Financial Statements for the financial year ended 30 June 2018
23.
Related Party transactions
(a) Key management personnel
During the year ended 30 June 2018, there were no related party transactions with key management
personnel.
All other disclosures relating to key management personnel are set out in Note 19 and in the detailed
remuneration disclosures in the Directors’ Report.
(b) Transaction with related parties
There were no transactions with related parties other than with key management personnel as noted
above.
(c) Outstanding balances arising from sales / purchases of goods and services
There are no balances owing to or from related parties at 30 June 2018 (2017: $Nil).
24. Earnings per share
Consolidated Group
(a) Basic earnings
per share
Loss from continuing operations attributable to the ordinary
equity holders of the Company
(b) Diluted earnings/(loss) per share
Loss from continuing operations attributable to the ordinary
equity holders of the Company
(c) Reconciliation of profit/(loss) used in calculating
earnings per share
Basic and diluted profit/(loss) per share
Loss from continuing operations attributable to the ordinary
equity holders of the Company
Loss from discontinued operations
(d) Weighted average number of shares used as the
denominator
Weighted average number of ordinary shares used as the
denominator in calculating basic earnings/(loss) per share
Adjustment for calculation of diluted profit/(loss) per share -
Options
Weighted average number of ordinary shares and potential
ordinary shares used as the denominator in calculating
diluted earnings/(loss) per share
2018
Cents
(0.43)
(0.43)
(0.43)
(0.43)
2018
$
(2,302,570)
-
(2,302,570)
2018
Number
2017
Cents*
(0.62)
(0.62)
(0.62)
(0.62)
2017
$
(2,825,445)
-
(2,825,445)
2017
Number
535,036,616
456,988,490
-
-
535,036,616
456,988,490
As the Group made a loss for the year ended 30 June 2018 and 30 June 2017, the options on issue
have no dilutive effect. Therefore, dilutive loss per share is equal to basic loss per share.
62
Notes to Financial Statements for the financial year ended 30 June 2018
Country of
incorporation
Interest
2018
Interest
2017
Australia
Australia
Australia
Australia
Australia
Australia
Canada
100%
100%
100%
100%
100%
95%
100%
100%
-
-
-
-
25. Group entities
Parent entity
Metalicity Limited
Subsidiary
Stuart Town Gold Pty Ltd
Metalicity Energy Pty Ltd
Ridgecape Holdings Pty Ltd
Kimberley Mining Australia Pty Ltd
Kimberley Mining Holdings Pty Ltd
Kimberley Mining Limited
26. Parent entity information
Statement of financial position
As at 30 June 2018
ASSETS
Total current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Total current liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Other reserves
Accumulated losses
TOTAL EQUITY
Parent
2018
$
2,000,341
9,980,143
11,980,484
584,205
7,053,180
7,637,385
4,343,099
46,638,047
2,026,708
(44,321,656)
4,343,099
(2,873,581)
(2,873,581)
Parent
2017
$
1,934,575
7,396,789
9,331,364
398,532
7,053,180
7,451,712
1,879,652
41,977,929
1,881,167
(41,979,444)
1,879,652
(2,815,243)
(2,815,243)
(Loss) of the parent entity
Total comprehensive (loss) of the parent entity
The parent entity has not provided any guarantees, or become responsible for contingent liabilities or
contractual commitments of its subsidiaries.
63
Notes to Financial Statements for the financial year ended 30 June 2018
27. Subsequent events
Other than the following, the directors are not aware of any significant events since the end of the
reporting period which significantly affect or could significantly affect the operations of the consolidated
entity in future financial years:
1) On 27 July 2018, the Company announced that the proposed IPO and TSX-V listing of KML
and associated sale of the Company’s zinc projects was approved by the Company’s
shareholders at a general meeting on that date.
2) On 11 September 2018, Metalicity Limited announced it had completed the sale of its Admiral
Bay Zinc Project and Lennard Shelf Zinc Projects to its newly created Canadian subsidiary,
Kimberley Mining Limited and has received the first cash payment related to the transaction of
C$500,000 (A$531,436) of a total of up to C$12.5M cash (A$13.28M), subject to successful
completion of the initial public offering (“IPO”) of KML and certain milestones (see ASX:MCT
29/05/18).
The Company also announced, further to its ASX announcement dated 10 July 2018, that KML
has closed the first tranche of its C$2M seed capital raising. KML has elected to separate the
seed capital raising into two separate tranches, with the second and final tranche expected to
close within the next two weeks.
64
ASX Additional Information
Additional Information required by the Australian Securities Exchange Limited Listing Rules and not
disclosed elsewhere in this report is set out below.
The shareholder information was applicable as at 17 September 2018.
(a) Substantial Shareholder
There are no substantial shareholders at the date of this report.
(b) Voting Rights
Ordinary Shares
On a show of hands every member present at a meeting of shall have one vote and upon a poll each
share shall have one vote.
Options
There are no voting rights attached to the options
(c) Distribution of Equity Security Holders
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Ordinary Fully Paid Shares
311,585
831,400
1,205,445
42,704,174
546,855,588
591,908,192
% Issued Capital
0.05
0.14
0.20
7.21
92.39
100.00
There were 11,470,480 unmarketable parcel of ordinary shares.
65
ASX Additional Information
(d) Equity Security Holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
1.
2.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
3. MR ZHANGHE CHEN
4.
KAGARA LTD
5. MR RICHARD GORDON WHITE
6. MR CHEYNE MICHAEL DUNFORD
7.
ELLIOT HOLDINGS PTY LTD
8. MR HUGH WARNER & MRS DIANNE WARNER
9. MRS AMANDA JANE CROSER
10 MACROCON PTY LTD
11.
CITICORP NOMINEES PTY LIMITED
RANCHLAND HOLDINGS PTY LTD
12.
12. VIMINALE PTY LTD
13. VIREYA PTY LTD
14. MRS TRACEY JANINE WATT
15. HOLLOWAY COVE PTY LTD
16.
E C DAWSON SUPER PTY LTD
17. NEXUS SUPERANNUATION PTY LTD
18.
BNP PARIBAS NOMINEES PTY LTD
19. MS XIAOHUA CHEN
20. MR JOSEPH ADAM LEE
20.
PELRUS PTY LTD
Total
Unquoted equity securities
Options exercisable at 4 cents before 31 December 2019
Options exercisable at 8 cents before 31 December 2019
Options exercisable at 10 cents before 31 December 2019
Options exercisable at 12 cents before 31 December 2019
Options exercisable at 2.5 cents before 1 July 2020
Options exercisable at 3 cents before 1 July 2020
Options exercisable at 4 cents before 1 July 2020
Options exercisable at 3 cents before 26 November 2020
Options exercisable at 4 cents before 26 November 2020
Options exercisable at 5 cents before 26 November 2020
Options exercisable at 6 cents before 13 June 2019
Options exercisable at 6 cents before 31 December 2019
Options exercisable at 8 cents before 31 December 2019
Options exercisable at 10 cents before 31 December 2019
Options exercisable at 12cents before 31 December 2019
Options exercisable at 8 cents before 18 August 2020
Options exercisable at 8 cents before 14 February 2023
Options exercisable at 6 cents before 12 March 2021
Options exercisable at 8 cents before 12 March 2021
Options exercisable at 6 cents before 26 August 2021
Options exercisable at 8 cents before 26 August 2021
Options exercisable at 10 cents before 26 August 2021
Options exercisable at 8 cents before 12 March 2021
Number
Held
26,183,126
20,940,847
16,544,409
15,806,711
12,825,000
12,620,767
11,800,000
11,145,000
10,185,186
9,546,928
8,322,928
6,492,477
6,388,889
6,000,000
6,000,000
5,698,156
5,616,392
5,500,000
5,438,587
5,400,000
5,250,000
5,250,000
218,955,403
Percentage
of Issued
Shares
4.42
3.54
2.8
2.67
2.17
2.13
1.99
1.88
1.72
1.61
1.41
1.1
1.08
1.01
1.01
0.96
0.95
0.93
0.92
0.91
0.89
0.89
36.99
Number on Issue
1,500,000
3,000,000
1,000,000
3,000,000
9,500,000
8,100,000
11,500,000
8,050,000
8,050,000
8,050,000
4,000,000
13,000,000
13,000,000
13,000,000
2,000,000
12,766,670
26,265,023
3,000,000
3,000,000
2,500,000
2,500,000
2,500,000
2,274,713
66
ASX Additional Information
(e) Tenement List:
As at 17 September 2018
Project
Turner River
Turner River
Munglinup
Lynas Find
Lynas Find
Lynas Find
Kyarra
Kyarra
Kyarra
Madoonia Downs
Murphies Gap
Murphies Gap
Stannum
TEN ID
EL45/4675
EL45/4676
EL74/550
EL45/4148
EL45/4227
EL45/4356
EL51/1755
EL51/1756
EL53/1894
E15/1611
EL45/3438
EL45/4498
EL45/4677
Holder
Granted
Expires
Metalicity Limited 100%
Metalicity Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
Metalicity Energy Limited 100%
06/07/2017
24/11/2016
22/01/2015
26/08/2013
24/07/2014
17/11/2014
24/05/2017
24/05/2017
24/05/2017
30/01/2018
01/03/2011
01/10/2015
10/10/2016
05/07/2022
23/11/2021
21/01/2020
25/08/2018
23/07/2019
16/11/2019
23/05/2022
23/05/2022
23/05/2022
29/01/2023
28/02/2021
30/09/2020
09/10/2021
67