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2023 ReportMetalicity Limited For the year ended 30 June 2019 Corporate Directory Directors Mathew Longworth – Non-executive Chairman Jason Livingstone – Managing Director Justin Barton – Finance Director Andrew Daley – 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 Page 3 23 24 28 29 30 31 32 33 61 2 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 2019. 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 Mathew Longworth Non-Executive Chairman (appointed Chairman on 1 July 2019) Jason Livingstone Managing Director (appointed 1 July 2019) Justin Barton Finance Director Andrew Daley Non-Executive Director (resigned as Chairman on 1 July 2019) Mathew Gauci Managing Director (appointed 26 September 2012 – resigned 10 January 2019) The above-named Directors held office during and since the financial year, except as otherwise indicated. Principal Activities The Group’s principal activity as at the date of this report is mineral exploration and development. Review of Operations and Results Throughout the year the Company completed a strategic review of its mineral project operations and refocussed Metalicity’s activities to drive value to shareholders. As part of this review, the Company identified and executed acquisitions of some key projects in Western Australia, with a strong primary focus on the Kookynie and Yundamindra gold projects, where exploration has yielded immediate and highly encouraging results. Kookynie & Yundamindra Gold Projects On the 6th May 2019 the Company announced it had entered into a farm-in agreement with Nex Metals (ASX: NEX) for the Kookynie and Yundamindra projects, which has seen Metalicity enter the Eastern Goldfields region to explore for precious metals. Under the agreement with Nex Metals the Company has the right to farm-in to the projects for an initial spend of $500,000 within the first 12 months with the right to earn a 51% interest in the projects by spending an additional $5 million within five years. As of 31st August 2019, the Company had spent a total of $379,658 at the projects through an exploration program as well as the purchase of (i) an additional prospecting tenement adjacent to the Champion Lease and (ii) two farm in agreements. The Kookynie and Yundamindra Projects are located approximately 180km north of the town of Kalgoorlie, and present the opportunity to develop a high-grade gold resource based off historic exploration within the region. The Kookynie project hosts the historical mining centres of Diamantina-Cosmopolitan-Cumberland, known as the DCC trend, as well as McTavish, Leipold, Champion and Altona. Each of the historic mining operations were highly successful, with the Cosmopolitan gold mine producing 360,000 ounces of gold from discovery from 1895 to 1922. During the early part of last century, the Cosmopolitan mine ranked as one of the largest and most profitable gold mines in Western Australia. These former mining operations have remained untested by modern exploration, particularly the potentially rich plunge extensions of the main mineralised shoots. 3 A JORC 2012 compliant Exploration Target has been developed based off previous production and exploration work. Directors’ Report Project: Kookynie Grade Range Tonnage Range Ounces Prospect Diamantina-Cosmopolitan-Cumberland (DCC) Trend The Champion Prospect The McTavish Prospect The Leipold Prospect Lower g/t Au Upper g/t Au Lower tonnes Upper Tonnes Lower ounce range Upper Ounce Range 250,000 60,000 100,000 100,000 500,000 300,000 500,000 750,000 Table 1 – Kookynie Gold Project Exploration Target(1) 250,000 120,000 80,000 500,000 150,000 20,000 30,000 30,000 15.0 6.0 4.0 4.0 10.0 3.6 1.8 1.5 (1) Please note the “Exploration Target” cautionary statement: The potential quantity and grade is conceptual in nature and there has been insufficient exploration to estimate a Mineral Resource. It is uncertain if further exploration will result in the estimation of a Mineral Resource. Based on the above tabulation the Kookynie Gold Project has a total Exploration Target of between 230,000 and 510,000 ounces. At Cosmopolitan, the mineralisation is extrapolated some 150 metres to 200 metres down dip from historic workings to estimate the Exploration Target. No mineralisation is assumed within the area of historic workings. The upper end grade is estimated to be the historic mined grade. At Diamantina and Cumberland, mineralisation is extrapolated up to 250 metres to 350 metres down dip and 500 metres along strike. The maximum grade is assumed to be the historically mined grade of Cosmopolitan as the Diamantina and Cumberland are strike continuations of that mineralisation. At Champion, McTavish and Leipold, the mineralisation is extrapolated between 100 metres to 120 meters down dip and along strike. The upper grade is assumed to be between 4 g/t Au and 6 g/t Au based on averages of significant drill hole intersections within the structures hosting mineralisation. Preliminary Kookynie Exploration Post the financial year end Metalicity completed an initial round of exploration drilling at Kookynie to test plunge extensions at the historic mining centres, with a series of highly prospective results confirming significant mineralisation potential (See ASX Announcement “Metalicity Confirms Mineralisation” dated 31/07/19). Results included: • Cosmopolitan – 2 metres @ 22.1 g/t Au from 76 metres. • McTavish – 4 metres @ 6.4 g/t Au from 67 metres, including 1m @ 15.47 g/t Au from 67m. • Cumberland – 2 metres @ 1.4 g/t Au from 72 metres • Diamantina – mineralised zone over 9 metres with: o 0.72 metres @ 3.1 g/t Au from 167 metres, o 0.21 metres @ 8.8 g/t Au from 173.07 metres o 1.15 metres @ 1.5 g/t Au from 174.85 metres. • Channel sampling of the exposed DCC Trend structure in the Cumberland Pit returns 1.85 metres @ 4.3 g/t Au, including 0.68 metres at 7.1 g/t Au. The table below summarises the significant intercepts returned from this recent drilling programme. 4 Directors’ Report MGA94_Zone 51 South Prospect Hole ID Tenement Hole Type Collar Easting Collar Northing Collar RL Dip Magnetic Azimuth Final Depth (m) From (m) To (m) McTa vi s h McTRC0001 M40/77 RC 350,647 6,754,118 423 -60 270 94 i ncl udi ng 67 67 71 68 Down Hole Width 4 1 Grade (Au g/t) 6.4 15.47 Comments 4m @ 6.4 g/t Au from 67m Cha mpi on CPRC0001 M40/27 RC 352,224 6,757,503 417 -60 270 112 Stope fi l l i nters ected - s tructure pres ent, but mi ned out. DCC Trend CDRCDD0001 M40/61 RC/DD tai l 354,377 6,753,209 427 -60 270 186.33 173.07 173.28 167 167.72 0.72 0.21 1.15 2 3.1 8.8 1.5 1.4 0.72m @ 3.1 g/t Au from 167m 0.21m @ 8.8 g/t Au from 173.07 1.15m @ 1.5 g/t Au from 174.85m 2m @ 1.4 g/t Au from 72m 174.85 72 176 74 Structure di l uted by Proterozoi c Dol eri te Dyke DCC Trend CLRC0001 M40/61 RC 354,153 6,754,058 429 -90 DCC Trend CDDD0001 E40/332 DD 354,728 6,753,398 432 -60 270 270 136 529.5 DCC Trend CDRC0001 M40/61 RC 354,284 6,753,513 430 78 270 Table 2 – Significant Drill Hole Intercepts 148 -60 76 2 22.1 2m @ 22.1 g/t Au from 76m This preliminary programme tested the DCC Trend, as well as a single hole into McTavish and Champion. Please refer to Figure 1 for Prospect, tenure and drill hole collar locations. The DCC Trend was inspected by four holes: CDRC0001, CDDD0001, CLRC0001, and CDRCDD0001. Figure 1 – Kookynie Prospect Locality Map with recent drill holes and mineralised trends. CDRC0001 was designed to test the area between Diamantina and Cosmopolitan. Historically, reports show that drive development occurred in this area, The Exploration Target completed by the Company assumed that areas of historical workings have zero potential and the location was chosen to test this concept. The drill hole was highly successful in not only intersecting the structure but showing that underground development in this area is restricted to drive development only. Significant mineralisation still exists in this 5 Directors’ Report area. Given the reasonably shallow depth of the intercept and the lack of historical drilling in the drill hole vicinity, CDRC0001 has demonstrated that a sizeable portion of this structure is present and remains available for mineral resource definition. Similarly, CDRCDD0001 and CLRC0001 which were designed to test the down plunge aspect of the Diamantina and Cumberland areas respectively, also intersected the DCC Trend structure returning mineralised zones. The Company completed a single Reverse Circulation (RC) drill hole at the McTavish Prospect (McTRC0001) to a depth of 94 metres in an area that is below the known historical workings and significantly down dip from historical drilling. The drill hole intersected the structure, demonstrating the down dip continuance of mineralisation beyond the previously defined limits of drilling, and returned an intercept of 4 metres @ 6.4 g/t Au from 67 metres which is highly encouraging. Channel sampling from the Cumberland Pit vein exposure returned up to 7.1 g/t Au, and 1.85 metres at 4.3 g/t Au from a vertical depth of 28 metres. The Cumberland Pit was mined by Golden Valley Mines NL in 1989 to a vertical depth of 36 metres. Channel sampling results are available in Table 3. Channel sample start coordinate (MGA94 Z51S) - *354,035mE, 6754161mN 399RL Location Cumberland Pit Cumberland Pit Cumberland Pit Cumberland Pit Cumberland Pit Cumberland Pit From (m) To (m) Sample Type 0 0.52 1.2 2.37 3.86 4.75 0.52 Channel 1.2 Channel 2.37 Channel 3.86 Channel 4.75 Channel 5.56 Channel Comments Footwall Footwall lode - true width 48cm Inter-Lode Zone Inter-Lode Zone Hanging wall lode - true width 56cm Hanging wall lode - true width 56cm Au g/t 0.3 7.1 2.7 0.9 0.7 0.7 *Note – handheld GPS location, zone is approximately 28 metres below the natural land surface. Table 3 – Cumberland Pit Channel Sample Fraser Range North During the financial year, the Company also acquired two projects in the northern Fraser Range (E69/3676 and E69/3677), which are prospective for magmatic Copper-Nickel mineralisation. Historic diamond drilling by Kennecott was conducted at these sites in 1980 targeting Olympic Dam-style mineralisation. Although the exploration was not viewed as successful at the time, it did intersect mafic intrusive rocks with trace chalcopyrite. Chalcopyrite is a copper sulphide mineral and a common component of Fraser Range-style VMS nickel copper deposits. The Company immediately sought to further inspect the drill cores, with samples for polished thin sections taken from both drill holes (N3-1 and N1-1) to understand the mineralogy of specific fractions within the layered mafic. A total of 39 samples (four from N1-1 on E69/3676 and 35 from N3-1 on E69/3677) were submitted to Intertek Genalysis for further analysis so as to understand the mineralogy of specific fractions within the layered mafic. The samples were also subjected to a Nickel Sulphide Collection Fire Assay and Comprehensive lithogeochemical characterisation analysis. While the test work returned sub-economic grade intercepts, the Company is very excited by the results. They demonstrate the presence of anomalous mineralisation in an area which was not originally targeting Fraser Range style nickel-copper and thus received no further modern base metals 6 Directors’ Report exploration. It is notable that this discovery has also been made in a region which has delivered globally significant nickel-copper projects, such as the Nova-Bollinger mine and the Silver Knight deposit. Whilst the core sampling work illustrates that the geological model of an anomalous layered mafic intrusion is present, geophysical modelling was also conducted to better understand the nature of the anomalous intrusions. The Company has reprocessed publicly available gravity data to understand the structural framework of the region. Results illustrated that both E69/3676 and E69/3677 host deep seated structures/gravity ridges which represent regional conduits for potential mineralisation. 3D magnetic inversion techniques were also applied to these results, see Figure 2 and 3. Figure 2 – E69/3677 Magnetic Inversion Cross Section with Kennecott Drill Hole Annotated. Figure 3 – E69/3676 Magnetic Inversion Cross Section with Kennecott Drill Hole Annotated. 7 Directors’ Report The modelling highlighted that the two drill holes completed by Kennecott Explorations (Australia) Ltd. did not adequately test the gravity or the magnetic anomalies with regards to magmatic Cu-Ni layered mafic intrusives. The work also highlighted that the possible location of sulphidic bodies within or on the edges of the 3D magnetic inversion model. Paterson Range Metalicity also holds a strong presence in the prolific Paterson Range region of Western Australia, increasing its landholding with a series of project applications prospective for nickel, copper, gold and possible PGM mineralisation. Figure 4 – Metalicity Limited’s Project Locations. The most recent Project Area Applications include a priority target at Warburton, as well as other anomalies at Paterson South and Pandora. Warburton covers a large copper horizon spanning approximately 80km. Analysis conducted by the Company has highlighted this horizon as a priority-one target and the Company has moved to acquire approximately 1,200km2 of this highly prospective area. 8 Directors’ Report Previous exploration within the Warburton area extends back to the 1960’s with a major exploration campaign conducted by WMC from 1966 to 1971. During this time, WMC identified some 200 copper mineral occurrences and geochemically anomalous soils over a significant strike length. The Company believes modern geophysical and geochemical methods, coupled with data collection processing capabilities offers a unique opportunity to refine and add to the collected data to develop a successful exploration campaign. The Paterson South Project, has several strong discrete magnetic anomalies coincident with basement highs and gravity ridges. The Company believes these coincident geophysical anomalies are analogous to Greatland Gold’s Haverion Prospect. Given the similarities to known mineralisation and the strong correlation of these coincident gravity and magnetic anomalies, Metalicity has sought to expanded its footprint with ~1,200km2 of exploration license applications. The Pandora Project is a large cluster of magnetic highs which coincides with known mineralisation at the Pandora Ni-Cu-PGE-Au prospect. The Pandora Prospect was first drilled by Cassini Resources in 2013, which noted highly anomalous copper and nickel results. Whilst sub-economic grades were returned, Metalicity believes, given the Company’s interrogation of available datasets, that the work was not optimised for the target styles and a more relevant work program should be adopted. The Company has also applied for exploration licenses at Mandora and Desert Queen, covering a total area of 2,166 km2. Initial project evaluation was undertaken using geophysical and geological data compilation which revealed four target areas for further inspection. Admiral Bay Metalicity is the largest shareholder in Canadian company Kimberley Mining Limited (KML), (81.1%), KML holds the Admiral Bay Zinc Project and incidental zinc assets. KML’s strategy has been to list on the TSXV. Capital markets in North America and in particular Canada have been exceptionally difficult leading to the deferral of the listing on several occasions. KML is undertaking a strategic review, with a view to raising interim capital and considering the most supportive exchange for the revised direction. Metalicity continues to provide limited assistance on commercial terms to KML through this period with a view to maximising benefits to all shareholders. Disclaimer and Forward Looking Statements 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 9 opinions contained herein necessarily involve significant elements of subjective judgment, analysis and assumptions and you should satisfy yourself in relation to such matters. Directors’ Report 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. 10 Directors’ Report Tenement Schedule The following table shows the tenements the Group has an interest in at 30 June 2019: Project TEN ID Admiral Bay(1) ML04/244 Admiral Bay(1) ML04/249 Admiral Bay(1) EL04/1610 Munglinup Madoonia Downs Emanuel Range(1) Pilbara East(1) Napier(1) Napier Range(1) Napier Range(1) EL74/550 E15/1611 E04/2259 E04/2453 G04/0020 M04/0161 M04/0162 Holder Kimberley Mining Australia Pty Ltd 100% Kimberley Mining Australia Pty Ltd 100% Kimberley Mining Australia Pty Ltd 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% Granted Expires 21/03/1991 20/03/2033 21/03/1991 20/03/2033 04/09/2007 03/09/2019 22/01/2015 30/01/2018 04/07/2016 13/09/2017 03/03/1989 31/12/1987 31/12/1987 21/01/2020 29/01/2023 03/07/2021 12/09/2022 02/03/2031 30/12/2029 30/12/2029 (1)Tenements vended into subsidiary, Kimberly Mining Limited, during year ended 30 June 2019. Results The loss after income tax for the year ended 30 June 2019 was $4,410,376 (30 June 2018: loss $2,302,570). 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. 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: On 27 August 2019, the Company announced a placement to raise $123,000 and a rights issue to raise up to $936,634 , proposed to close on 26 September 2019. On 16 September 2019, the Company announced and extension of Closing Date of the rights issue to 2 October 2019. Likely developments and expected results of Operations The Group will continue to explore and assess its mineral projects. 11 Directors’ Report Information on Directors Jason Livingstone - Managing Director – appointed 1 July 2019 Experience and Expertise Mr Livingstone is a geologist with 20 years’ experience across exploration through to production environments on four continents. Mr Livingstone holds a Bachelor of Science (Geology) from the West Australian School of Mines, a Masters of Business Administration from the Curtin Graduate School of Business, is a member of the Australian Institute of Geoscientists and the Australian Institute of Mining and Metallurgy, and has completed the Company Directors Course at the Australian Institute of Company Directors. Other Current Directorships None Former Directorships in the Last Three Years None Special Responsibilities None Interests in Shares and Options 4,000,000 unlisted options Mathew Longworth - Non-executive Chairman – appointed 1 July 2019 (previously Chief Executive Officer since 10 January 2019 and Non-executive Board member since 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. Other Current Directorships None Former Directorships in the Last Three Years None Special Responsibilities Chair of the Audit Committee Interests in Shares and Options 634,167 ordinary shares and 10,200,000 unlisted options 12 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 the Remuneration and Nomination Committee. Interests in Shares and Options 777,778 ordinary shares and 13,500,000 unlisted options Andrew Daley - Non-executive Director – appointed 1 July 2019 (previously Non-executive Chairman since 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 45 years’ experience in resources having worked with Anglo American Corp, 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 Audit and Risk Committee and the Remuneration and Nomination Committee. Interests in Shares and Options 3,678,036 ordinary shares and 12,750,000 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. 13 Directors’ meetings Directors’ Report The number of meetings of the Company’s board held during the year ended 30 June 2019 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 13 20 20 20 5 20 20 20 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; (4) Share-based compensation; and (5) Share and option holdings of Key Management Personnel (KMP) 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: (i) rewards capability and experience; and (ii) provides a clear structure for earning rewards. 14 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 2019 Salary, fees & leave Annual leave Other Super- annuation Options Total Performance related % Executive director Matthew Gauci(a) Justin Barton Non-executive directors Andrew Daley (b) Mathew Longworth (c) Other executives Jason Livingstone (d) Leonardo Romero (e) Neil Hackett (f) Totals 162,003 182,656 - 6,556 140,000 - 21,771 17,352 - 5,894 323,774 212,458 83,750 55,833 67,732 19,433 54,400 625,807 - - - 143,909 5,269 - - 11,825 - - - 283,909 - - 6,435 1,846 - 47,404 - - 83,750 199,742 10,795 - - 16,689 90,231 21,279 54,400 985,634 0.0% 2.8% 0.0% 0.0% 12.0% 0.0% 0.0% 15 Remuneration Report (audited) (continued) Directors’ Report 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 Non-executive directors Andrew Daley (b) Mathew Longworth (c) Chris Bain (g) Other executives Leonardo Romero Pip Darvall (h) Neil Hackett (f) 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 - 15,360 70,815 73,223 1,087,083 0.0% 0.0% 0.0% 0.0% 0.0% 22.3% 0.0% 21.7% The fees paid to director related entities were for the provision of services of the particular director to the Company are as follows: (a) Matthew Gauci resigned on 9 January 2019 and was paid a termination payment of $137,500. An associated entity of Mr Gauci, Macro Capital Partners, has a post termination consultancy agreement for $500 a month for 18 months, of which $2,500 was paid during the year. (b) Dalenier Enterprises Pty Ltd, an entity associated with Andrew Daley, was paid or is payable $83,750 (2018: $90,000) for director’s fees. (c) Mat Mining Pty Ltd, an entity associated with Mathew Longworth, was paid $199,742 (2018: $67,500) for director’s fees and consultancy services. (d) Jason Livingstone was appointed as Exploration Manager on 18 February 2019 and Managing Director on 1 July 2019. (e) Leonardo Romero resigned on 31 August 2018. (f) Corporate Starboard Pty Ltd, an entity associated with Neil Hackett, was paid or is payable $54,400 (2018: $70,815). (g) Chris Bain resigned as Non-executive Director on 1 January 2018. (h) Pip Darvel’s contract ended in October 2017. 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 2019. 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. LTI’s were awarded to Jason Livingstone and Justin Barton during the year ended 30 June 2019. 16 Directors’ Report Remuneration Report (audited) (continued) Service agreements 3 Directors There is an Executive Contract with Jason Livingstone, to perform the function of Managing Director from 1 July 2019 until termination in accordance with the contract. The details are: 1. Remuneration of $230,000 per annum (including superannuation and 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 six months (6) months written notice. There was an Executive Contract with Matthew Gauci, to perform the function of Managing Director from 1 October 2013 until resignation on 9 January 2019. 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 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. 17 Directors’ Report Remuneration Report (audited) (continued) 4 Share-based compensation During the financial year, the following options for Directors and key management personnel were granted: During the financial year Name Exercise price No. granted Grant date Expiry Date Justin Barton Justin Barton Justin Barton Jason Livingstone Jason Livingstone $0.06 $0.08 $0.10 $0.025 $0.035 2,500,000 2,500,000 2,500,000 2,000,000 2,000,000 27/07/2018 27/07/2018 27/07/2018 10/04/2019 10/04/2019 26/08/2021 26/08/2021 26/08/2021 14/01/2022 14/01/2022 Value of options granted at grant date (a) $3,725 $1,526 $643 $5,961 $4,834 No 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. 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: 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 2019 Directors Matthew Gauci Andrew Daley Justin Barton Balance at the start of the year 33,500,000 12,750,000 - - 6,000,000 7,500,000 Mathew Longworth 10,200,000 - Other executives Jason Livingstone - 4,000,000 Leonardo Romero 6,000,000 Neil Hackett 6,000,000 - - 74,450,000 11,500,000 - - - - - - - - - - 33,500,000 33,500,000 12,750,000 12,750,000 13,500,000 6,000,000 - 10,200,000 10,200,000 - - - - 4,000,000 4,000,000 6,000,000 6,000,000 6,000,000 6,000,000 85,950,000 78,450,000 - - - - - - - - 18 Directors’ Report Remuneration Report (audited) (continued) 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 Bain 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 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: 2019 Performance Rights Leonardo Romero Neil Hackett 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 - - - - - - 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 - - - - - - 19 Remuneration Report (audited) (continued) Directors’ Report 5 Share and option holdings of Key Management Personnel (KMP) (continued) (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: 2019 Directors Matthew Gauci Andrew Daley Justin Barton Mathew Longworth Other executives Jason Livingstone Leonardo Romero Neil Hackett 2018 Directors Matthew Gauci Andrew Daley Justin Barton Mathew Longworth Chris Bain Other executives Leonardo Romero Neil Hackett Pip Darvall 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 11,739,033 2,588,682 277,778 634,167 - - 340,801 15,580,461 - - - - - - - - (397,000) 1,089,354 500,000 - - - - 11,342,033 3,678,036 777,778 634,167 - - 340,801 1,192,354 16,772,815 Balance at the start of the year Received during the year on the exercise of options Other changes during the year 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 (End of Remuneration Report) 20 Directors’ Report Additional Information (a) Shares under option At the date of this report, the Company had 175,538,837 options and 2,274,713 performance rights over ordinary shares under issue. 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 2,000,000 2,000,000 1,500,000 3,000,000 1,000,000 3,000,000 5,000,000 12,766,670 26,265,023 11,257,144 3,000,000 3,000,000 175,538,837 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 27/07/2018 27/07/2018 27/07/2018 10/04/2019 10/04/2019 17/02/2016 17/02/2016 18/04/2016 17/02/2016 16/01/2017 18/08/2017 21/02/2018 10/06/2019 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 14/01/2022 14/01/2022 31/12/2019 31/12/2019 31/12/2019 31/12/2019 16/01/2020 18/08/2020 14/02/2023 51/05/2022 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 0.025 0.035 0.04 0.08 0.10 0.12 0.08 0.08 0.08 0.02 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 5,818,450 8,279,750 273,370 14,371,570 (b) Insurance of officers Grant Date Date of Expiry Conversion Price $ 29/08/2018 29/08/2018 29/08/2018 None 28/09/2023 28/09/2020 0.40 0.05 0.40 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 liability 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. 21 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 2019 (2018: 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 23 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 Jason Livingstone Managing Director Perth, Western Australia 30 September 2019 22 PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants 30 September 2019 The Directors Metalicity Limited 6 Outram Street West Perth WA 6005 Dear Sirs RE: METALICITY LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Metalicity Limited. As Audit Director for the audit of the financial statements of Metalicity Limited for the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully, STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Samir Tirodkar Director Liability limited by a scheme approved under Professional Standards Legislation Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF METALICITY LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Metalicity Limited the Company and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Relating to Going Concern Without modification to the audit opinion expressed above, attention is drawn to the following matter. As referred to in note 2(a) to the financial report, the financial report has been prepared on a going concern basis. At 30 June 2019, the Group had net assets of $2,792,073, cash and cash equivalents of $666,560 and net working capital surplus of $2,586,749. The Group had incurred a loss after income tax for the year ended 30 June 2019 of $4,410,376. The ability of the Group to continue as a going concern and meet its administration and other commitments is dependent upon the Company raising further working capital or commercialization of its exploration assets. In the event the Company is unable to raise further working capital or commercialize its exploration assets, the company may not be able to meet its liabilities as they fall due, or realise its assets at their stated values. Liability limited by a scheme approved under Professional Standards Legislation Key Audit Matters In addition to the matter described in the material uncertainty related to going concern, we have determined the matter described below to be a key audit matter to be communicated in the report. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matters How the matter was addressed in the audit Carrying Value of Capitalised Exploration and Evaluation Expenditure and Related Reversal of Deferred Income. Inter alia, our audit procedures following: included the as Exploration As at 30 June 2019, Capitalised Exploration and Evaluation Expenditure totals $2,939,073 of which $2,734,940 is disclosed as non-current assets held for sale (refer to Note 10 of the financial report) and $204,133 and Evaluation expenditure (refer to Note 11 of the financial there was a reversal of report). Additionally, Deferred Income relating to the Admiral Bay Project of $7,053,180 (refer to Note 10) following the Board’s decision to impair Admiral Bay assets and consequently reverse the related Deferred Income. 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. The carrying value of Capitalised Exploration and Evaluation Expenditure and Related Reversal of Deferred Income is a key audit matter due to: the total Capitalised The significance of Exploration and Evaluation balance (70% of total assets); The significance of the reversal of deferred income on the consolidated statement of profit and loss and other comprehensive income The necessity to assess management’s application of the requirements of the for and accounting standard Exploration Evaluation of Mineral Resources (“AASB 6”), in light of any indicators of impairment that may be present; and The assessment of significant judgements made by management in relation to the Capitalised Exploration and Evaluation Expenditure. i. Assessing the Group’s right to tenure over exploration assets by corroborating the ownership of for the relevant mineral resources to government registries and relevant third party documentation; licences ii. Reviewing the directors’ assessment of the the exploration and carrying value of evaluation expenditure, ensuring the veracity of the data presented and that management has considered the effect of potential impairment indicators, commodity the Group’s the stage of prices and projects against AASB 6; iii. Evaluation of Group documents for consistency with the intentions for the continuing of exploration and evaluation activities in certain areas of interest, and corroborated of management. Inter alia, the documents we evaluated included: enquiries with Minutes of meetings of the board and management; Announcements made by the Group to the Australian Securities Exchange; and Cash forecasts; iv. Consideration of the standard AASB requirements of 6. We accounting assessed in relation to AASB 6 to ensure appropriate disclosures are made; financial statements the v. Reviewing the director’s assessment to impair the carrying value of the Admiral Bay Project, and consequently reverse the corresponding deferred income; and vi. Consideration of the related disclosures regarding the decision to recognise the deferred income in the current year. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2019, but does not include the financial report and our auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in Internal control that we identify during our audit. The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the consolidated financial report of the current period and are therefore key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the Remuneration Report included in pages 14 to 20 of the directors’ report for the year ended 30 June 2019. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion on the Remuneration Report In our opinion the Remuneration Report of Metalicity Limited for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Samir Tirodkar Director West Perth, Western Australia 30 September 2019 Directors’ declaration In the directors’ opinion: 1. the financial statements and notes set out on pages 29 to 60 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 2019 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Consolidated Entity 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 14 to 20 of the Directors’ Report comply with accounting standard AASB 124 Related Party Disclosures and the Corporations Regulations 2001. 2. 3. 4. 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 2019. This declaration is made in accordance with a resolution of the directors. Jason Livingstone Managing Director Perth, Western Australia 30 September 2019 28 Consolidated statement of profit or loss and other comprehensive income for the financial year ended 30 June 2019 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 Foreign currency transalation Other comprehensive loss for the period, net of tax Note 4 5 6 Consolidated Group 2018 2019 $ $ 327,544 (4,737,920) (4,410,376) - (4,410,376) 520,752 (2,823,322) (2,302,570) - (2,302,570) - - (35,676) (35,676) - - - - Total comprehensive loss for the year (4,446,052) (2,302,570) 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 (4,410,376) (4,410,376) (2,302,570) (2,302,570) (4,446,052) - (4,446,052) (2,302,570) - (2,302,570) 23(a) 23(b) (0.74) (0.74) (0.74) (0.74) (0.43) (0.43) (0.43) (0.43) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 29 Consolidated statement of financial position as at 30 June 2019 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 Total liabilities Net assets Equity Issued capital Other reserves Accumulated losses Total equity Note 7(a) 8 9 10 11 12 13 10 15 Consolidated Group 2018 2019 $ $ 666,560 76,723 499,847 2,734,940 3,978,070 1,866,233 93,961 82,368 9,175,727 11,218,289 204,133 1,191 205,324 2,304,094 2,830 2,306,924 4,183,394 13,525,213 334,310 22,070 1,034,941 1,391,321 546,428 43,406 8,553,180 9,143,014 1,391,321 9,143,014 2,792,073 4,382,199 46,955,647 4,529,358 (48,692,932) 46,638,047 2,026,708 (44,282,556) 2,792,073 4,382,199 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 30 Consolidated statement of changes in equity for the financial year ended 30 June 2019 Issued capital $ Share Based Payments Reserve $ Option Premium Reserve $ Foreign Currency Reserve Accumulated losses Total $ $ Balance at 1 July 2018 46,638,047 2,025,208 1,500 - (44,282,556) 4,382,199 (Loss) for the year Other comprehensive loss Total comprehensive loss for the year - - - - - - Transactions with owners in their capacity as owners Issue of share capital Issue of special warrants in KML Issue of employee options Deferred transaction costs Total transactions with owners 157,600 - - 160,000 317,600 - 2,521,637 16,689 - 2,538,326 - - - - - - - - - (35,676) (4,410,376) - (4,410,376) (35,676) (35,676) (4,410,376) (4,446,052) - - - - - - - - - - 157,600 2,521,637 16,689 160,000 2,855,926 Balance at 30 June 2019 46,955,647 4,563,534 1,500 (35,676) (48,692,932) 2,792,073 Issued capital $ Share Based Payments Reserve $ Option Premium Reserve $ Foreign Currency Reserve Accumulated losses Total $ $ Balance at 1 July 2017 41,977,929 1,879,667 1,500 (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 - - - - - - - Balance at 30 June 2018 46,638,047 2,025,208 1,500 - - - - - - - - - (41,979,986) 1,879,110 (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 (44,282,556) 4,382,199 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 31 Consolidated statement of cash flows for the financial year ended 30 June 2019 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 in relation to tenements Payments for assets held for sale Net cash provided by/(used in) investing activities Cash flows from financing activities Proceeds from shares issued KML capital raised 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 2018 $ 2019 $ (4,219,170) 80,440 67,992 - 4,426 (4,066,312) (2,148,325) 258,940 71,300 (113) 2,546 (1,815,652) - 44,125 1,519,007 (285) 283,377 50,000 (826,872) (2,142,408) (500,000) 236,260 - (1,809,316) 157,600 2,521,637 - 2,679,237 3,913,052 - (278,995) 3,634,057 (1,150,815) 9,089 1,866,233 1,823,365 (48,858) 33,779 7(a) 666,560 1,866,233 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 32 Notes to Financial Statements for the financial year ended 30 June 2019 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, KYM Mining Pty Ltd, Kimberly Mining Australia Pty Ltd, Kimberly Mining Holdings Pty Ltd and Kimberly Mining Limited (~81% owned), are referred to as the ‘Group’ or ‘Consolidated Entity’. The Financial Report of MCT for the year ended 30 June 2019 was authorised for issue in accordance with a resolution of the board of directors on 30 September 2019. 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 2019 the Group incurred a loss after tax of $4,410,376 (2018: $2,302,570) and a net cash outflow from operations of $4,066,312 (2018: $1,815,652). At 30 June 2019, the Group has working capital surplus of $2,586,749 (2018: working capital of $2,075,275) and current cash holding was $666,560 (2018: $1,866,233). 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 subsequent capital raisings and will meet its expenditure commitments as required. 33 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (a) Basis of preparation (continued) 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 2019 and the results of the subsidiaries for the period then ended. Stuart Town Gold Pty Ltd, Metalicity Energy Pty Ltd, KYM Mining 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 in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. 34 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (d) Revenue recognition The Group has applied AASB 15 Revenue from Contracts with Customers effective from 1 July 2018 using the cumulative effective method. Therefore, the comparative information has not been restated and continues to be presented under AASB 118: Revenue. The adoption of AASB 15 does not have a significant impact on the Group as the Group does not currently have any significant revenues from customers. Revenue from rendering goods and services is measured at the fair value of consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities when control of the asset is transferred to the customer or services rendered. (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) Trade and other receivables Trade and other receivables are initially recognised at fair value and subsequently measured at amortised costs using the effective interest method, less provision for impairment. Trade and other receivables are general receivable within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Amounts that are known to be uncollectible are written off by reducing the carrying amount directly 35 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (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. (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. 36 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (p) Financial Instruments Recognition, initial measurement and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial instruments (except for trade receivables) are measured initially at fair value adjusted by transactions costs, except for those carried “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss. Where available, quoted prices in an active market are used to determine the fair value. In other circumstances, valuation techniques are adopted. Subsequent measurement of financial assets and financial liabilities are described below. Trade receivables are initially measured at the transaction price if the receivables do not contain a significant financing component in accordance with AASB 15. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and subsequent measurement Financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments, are classified into the following categories upon initial recognition: § amortised cost; § § fair value through other comprehensive income (FVOCI); and fair value through profit or loss (FVPL). Classifications are determined by both: § The contractual cash flow characteristics of the financial assets; and § The entities business model for managing the financial asset. Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVPL): § § they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Financial assets at fair value through other comprehensive income (Equity instruments) The Group measures debt instruments at fair value through OCI if both of the following conditions are met: § The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding; and 37 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (p) Financial Instruments (continued) § The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling the financial asset. For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under AASB 132Financial Instruments: Presentation and are not held for trading. Financial assets at fair value through profit or loss (FVPL) Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Financial liabilities Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss. All interest-related charges and, if applicable, gains and losses arising on changes in fair value are recognised in profit or loss. Impairment From 1 July 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by AASB, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Comparative information The Group has applied AASB 9 Financial Instruments retrospectively, but has elected not to restate comparative information. As a result, the comparative information provided continues to be accounted for in accordance with the Group’s previous accounting policy. Classification Until 30 June 2018, the group classified its financial assets in the following categories: § § financial assets at fair value through profit or loss; loans and receivables; § held-to-maturity investments; and § available-for-sale financial assets. 38 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (p) Financial Instruments (continued) The classification depended on the purpose for which the investments were acquired. Management determined the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluated this designation at the end of each reporting period. Valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability. The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: • Market approach: valuation techniques that use prices and other relevant information generated • by market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. • Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or 39 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (p) Financial Instruments (continued) (ii) if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. (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. Key Estimates – Exploration expenditure The write-off and carrying forward of exploration acquisition costs is based on an assessment of an area of interest’s viability and/or the existence of economically recoverable reserves. Key Estimates – Deferred taxation Deferred tax assets in respect of tax losses have not been brought to account as it is not considered probable that future taxable profits will be available against which they could be utilised (r) Application of new and revised Accounting Standards The Group has adopted AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments which became effective for financial reporting periods commencing on or after 1 January 2018 AASB 15 Revenue from contracts with customers AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue-related Interpretations. AASB 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue to be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The Group has applied the new Standard effective from 1 July 2018 using the modified retrospective approach. Under this method, the cumulative effect of initial application is recognised as an adjustment to the opening balance of retained earnings at 1 July 2018 and comparatives are not restated. The adoption of AASB 15 does not have a significant impact on the Group as the Group does not currently have any revenue from customers. 40 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (r) Application of new and revised Accounting Standards (continued) AASB 9 Financial Instruments AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement, impairment, and hedge accounting. As a result of adopting AASB 9 Financial Instruments, the Group has amended its financial instruments accounting policies to align with AASB 9. AASB 9 makes major changes to the previous guidance on the classification and measurement of financial assets and introduces an ‘expected credit loss’ model for impairment of financial assets. There were no financial instruments which the Group designated at fair value through profit or loss under AASB 139 that were subject to reclassification. The Board assessed the Group’s (or Company’s) financial assets and determined the application of AASB 9 does not result in a change in the classification of the Group’s financial instruments. The adoption of AASB 9 does not have a significant impact on the financial report. (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 16: Leases applies to annual reporting periods beginning on or after 1 January 2019. Interpretation 4 Determining whether an This Standard supersedes AASB 117 Leases, Arrangement contains a Lease, AASB intrpretation 115 Operating Leases-Incentives and AASB intrpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of lease. AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under AASB 117. The key features of AASB 16 are as follows: - Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. - A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. - Assets and Liabilities arising from the lease are initially measured on a present value basis. The measurement (including includes non-cancellable inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend to lease, or not to exercise an option to terminate the lease. lease payments - AASB 16 contains disclosure requirements for leases. Lessor accounting - AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. - AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk. 41 Notes to Financial Statements for the financial year ended 30 June 2019 2. Significant accounting policies (continued) (s) New Accounting Standards for Application in Future Periods (continued) Due to the adoption of AASB 16, the Group’s operating profit will improve, while its interest expense will increase. This is due to the change in the accounting for expenses of leases that were classified as operating leases under AASB 117. At 30 June 2019, the Group has only 6 months remaining on current leases, therefore impact on current leases will be immaterial but will impact future leases entered into by the Group. Other standards not yet applicable There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 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 two geographic segment being Australia and Canada and operates in one industry being the exploration of minerals. Segment result Segment revenue Australia Canada Segment expenses Australia Canada Income tax (Loss) after tax Consolidated 30 June 2019 $ 285,301 42,243 327,544 30 June 2018 $ 520,752 - 520,752 (3,140,376) (1,597,544) (4,737,920) (2,823,322) - (2,823,322) - (4,410,376) - (2,302,570) 42 Notes to Financial Statements for the financial year ended 30 June 2019 3. Segment information (continued) Segment assets and liabilities Australia Canada Australia Canada Consolidated Consolidated Non-current assets Non-current liabilities 30 June 2019 $ 205,324 - 205,324 30 June 2018 $ 2,306,924 - 2,306,924 30 June 2019 $ 30 June 2018 $ - - - - - - Total assets Total liabilities 3 June 2019 $ 1,385,542 2,797,852 4.183,394 30 June 2018 $ 13,525,213 - 13,525,213 30 June 2019 $ 226,421 1,164,900 1,391,321 30 June 2018 $ 9,143,014 - 9,143,014 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 Other Consolidated Group 2019 $ 80,440 67,992 4,426 44,125 48,858 - 81,703 327,544 2018 $ 258,940 71,300 2,546 74,147 33,779 80,040 - 520,752 43 Notes to Financial Statements for the financial year ended 30 June 2019 5. Expenses Accounting & audit ASX Company secretarial fees Consulting fees Depreciation Employee benefits Insurance Interest expense Impairment of exploration Investor relations KML transaction costs Legal fees Project work & generation - cash Rent & office costs Seminars & conferences Share based payments Share registry fees Travel & accommodation Impairment of assets held for sale Reversal of deferred income Cost of tenements sold Other Total expenses 6. Income tax expense Consolidated Group 2019 $ 100,377 40,261 54,400 68,789 1,640 615,130 26,201 - 634,834 114,116 678,614 152,032 1,372,772 212,878 32,950 16,689 44,022 53,034 6,824,415 (7,053,180) 549,365 198,581 4,737,920 2018 $ 92,732 37,805 62,065 114,036 5,827 620,490 20,084 113 454,466 55,948 324,194 108,132 200,190 227,275 25,235 145,541 25,940 150,056 - - - 153,193 2,823,322 Consolidated Group 2018 $ 2019 $ a) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense (4,410,376) (2,302,570) Tax at the Australian tax rate of 27.5% (2017: 27.5%) (1,212,853) (633,207) Tax effect of amounts which are not deductible in calculating taxable income Tax effect of amounts which are non (taxable) in calculating taxable income 506,027 168,527 (355,994) (553,170) R&D Rebate (Over)/under provision from prior year Tax losses not recognised Income tax expense (22,121) (110,765) 1,195,706 - (71,008) 212,491 876,367 - 44 Notes to Financial Statements for the financial year ended 30 June 2019 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 2018 $ 2019 $ 17,441,969 13,093,947 4,796,541 3,600,836 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 $56,136 relating to capitalised exploration costs claimed for tax as at 30 June 2019 (2018: $3,156,951). 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. 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 2018 2019 $ $ 666,560 1,866,233 A term deposit of $20,197 relating to securing a credit card facility is included in the above (2018: $20,197). (b) Reconciliation of loss for the year to net cash flows from operating activities Loss for the year Share based payments Foreign exchange loss/(gain) Depreciation Impairment of exploration and evaluation Cost of tenements sold Reversal of deferred income Impairment of asset held for sale Gain on sale of shares (Increase) in trade and other receivables and other asset (Decrease) in trade and other payables (Decrease)/increase in provisions Net cash (used in) operating activities (c) Non cash investing and financing activities For shares issued to acquire exploration tenements, refer to note 16(a). (4,410,376) 16,689 48,119 1,640 (2,302,570) 195,541 (33,779) 5,827 634,834 454,466 549,365 (7,053,180) 6,824,415 (44,125) (400,240) (212,117) (21,336) (4,066,312) - - - - (39,390) (98,144) 2,397 (1,815,652) 45 Notes to Financial Statements for the financial year ended 30 June 2019 8. Trade and other receivables GST Receivable Lease fee receivable Other receivables None of these receivables are past due or impaired. 9. Other assets Tenement applications and deposits Prepayments Rental security Shares held for sale Expenditure incurred Consolidated Group 2018 2019 $ $ 81,112 70,246 4,070 6,477 8,779 - 93,961 76,723 Consolidated Group 2018 2019 $ $ 24,713 325,010 19,155 34,196 38,500 38,500 - 102,141 82,368 499,847 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 Capitalisation of exploration expenditure Assets reclassified as held for sale (note 11): - Admiral Bay - Napier and Emanual Range Impairment of Assets Held for Sale Balance of assets held for sale Liabilities Related to Non-Current Assets Held for Sale Balance at beginning of the period Translation difference Liabilities reclassified: - Deferred income(1) (Note 14) - Deferred acquisition costs(2) (Note 12) Payment of deferred acquisition costs(2) Reversal of deferred income(1) Balance at period end Consolidated Group 2018 2019 $ $ 9,175,727 383,629 - - (6,824,416) 2,734,940 - - 5,777,436 3,398,291 - 9,175,727 Consolidated Group 2018 2019 $ $ 8,553,180 34,941 - - - - 7,053,180 1,500,000 (500,000) (7,053,180) 1,034,941 - - 8,553,180 46 Notes to Financial Statements for the financial year ended 30 June 2019 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 previously recognised this amount as deferred income and has now reversed the income net against impairment of assets held for sale upon proposed divestment of the asset. This amount was 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. The first payment of $500,000 was made during the year ended 30 June 2019. 11. Exploration and evaluation expenditure 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 Consolidated Group 2018 2019 $ $ 2,304,094 - 603,245 (634,834) (2,068,372) - 204,133 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 - Kookynie and Yundamindra - Lynas Find and Other Total carried forward exploration expenditure 204,133 - 204,133 - 2,304,094 2,304,094 12. Trade and other payables Trade payables and accruals Superannuation BAS payable Reclassification of liabilities related to assets held for sale (see note 10) 13. Provisions Consolidated Group 2018 2019 $ $ 320,561 - 13,749 2,001,975 20,329 24,124 - (1,500,000) 334,310 546,428 Consolidated Group 2018 2019 $ $ Employee benefits – annual leave 22,070 43,406 47 Notes to Financial Statements for the financial year ended 30 June 2019 14. Deferred income Deferred income Reclassification of liabilities related to assets held for sale (see note 10) Consolidated Group 2018 2019 $ $ - - - 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 has now reversed the income net against impairment of assets held for sale upon proposed divestment of the asset. This amount was not refundable. 15. Issued capital 624,422,475 (2018: 592,463,745) fully paid ordinary shares 46,955,647 46,638,047 2019 $ 2018 $ (a) Movement in ordinary share capital 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 30/06/2018 Balance at the end of the year Number of shares 464,544,654 25,233,333 14,661,149 1,000,000 13,888,888 2,000,000 3,400,000 $ 41,977,929 908,400 527,800 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 48 Notes to Financial Statements for the financial year ended 30 June 2019 15. Issued capital (continued) (a) Movement in ordinary share capital (continued) Date Details 01/07/2018 Opening balance 12/11/2018 Deferred consideration(1) 10/06/2019 Share placement at $0.06 30/06/2019 Reversal of prior year shares incorrectly issued(2) 30/06/2019 Balance at the end of the year Number of shares 592,463,745 10,000,000 22,514,285 (555,556) 624,422,474 $ 46,638,047 160,000 157,600 - 46,955,647 (1)During the year ended 30 June 2018, 10,000,000 shares were issued to FMG in satisfaction of deferred consideration on acquisition of assets. (2)During the year ended 30 June 2018, 555,556 shares were incorrectly issued as part of a placement and were subsequently reversed on reconciliation. 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. (b) Options At year end 30 June 2019, the Company had 175,538,837 options over ordinary shares under issue (30 June 2018: 156,781,693). These options are exercisable as follows: Grant Date Date of Expiry Exercise Price $ 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 2,500,000 2,500,000 2,500,000 2,000,000 2,000,000 2,000,000 1,500,000 3,000,000 1,000,000 3,000,000 5,000,000 12,766,670 26,265,023 11,257,144 3,000,000 3,000,000 175,538,837 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 27/07/2018 27/07/2018 27/07/2018 10/04/2019 10/04/2019 29/11/2016 17/02/2016 17/02/2016 18/04/2016 17/02/2016 16/01/2017 18/08/2017 21/02/2018 10/06/2019 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 26/08/2021 26/08/2021 26/08/2021 14/01/2022 14/01/2022 31/12/2019 31/12/2019 31/12/2019 31/12/2019 31/12/2019 16/01/2020 18/08/2020 14/02/2023 31/05/2022 12/03/2021 12/03/2021 The weighted average exercise price of the above options is $0.062 (2018: $0.065) 0.025 0.03 0.04 0.03 0.04 0.05 0.06 0.08 0.10 0.06 0.08 0.10 0.025 0.035 0.12 0.04 0.08 0.10 0.12 0.08 0.08 0.08 0.02 0.06 0.08 49 Notes to Financial Statements for the financial year ended 30 June 2019 15. Issued capital (continued) (a) Options (continued) Balance at beginning of the year Granted during the year (see note 16(a)) Exercised during the year Forfeited/expired/cancelled during the year Balance at the end of the year (b) Performance Rights 2019 No. 156,781,693 22,757,144 - (4,000,000) 175,538,837 2018 No. 117,150,000 45,031,693 (5,400,000) 156,781,693 At the date of this report, the Company had 2,274,713 performance rights over ordinary shares under issue (30 June 2018: 2,274,713). 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 16(a)) Exercised during the year Forfeited/expired/cancelled during the year Balance at the end of the year (c) Capital Management 2019 No. 2,274,713 - - - 2,274,713 2018 No. - 2,274,713 - - 2,274,713 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. 16. 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: Expense arising from equity-settled share-based payment transaction: - Shares issued as consideration for corporate advisory - 50,000 Consolidated Group 2018 2019 $ $ services (reported as consulting expenses) - Options issued as consideration for advisory services - Performance rights issued to employees/contractors - Options issued to employees Total - - 16,689 16,689 58,192 87,349 - 195,541 50 Fair Value at Grant Date $0.0015 $0.0006 $0.0003 $0.0030 $0.0024 Fair Value at Grant Date $0.00(1) $0.00(1) $0.01055 $0.0089 Notes to Financial Statements for the financial year ended 30 June 2019 16. Share Based Payments (continued) (a) Recognised share-based payment expense (continued) The following option and performance right arrangements were issued during the current and prior reporting periods: 30 June 2019 Option Series Number Grant Date Expiry Date Exercise Price Issued 29/08/2018 Issued 29/08/2018 Issued 29/08/2018 Issued 10/04/2019 Issued 10/04/2019 2,500,000 2,500,000 2,500,000 2,000,000 2,000,000 27/07/2018 27/07/2018 27/07/2018 10/04/2019 10/04/2019 26/08/2021 26/08/2021 26/08/2021 14/01/2022 14/01/2022 0.06 0.08 0.10 0.025 0.035 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 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. 51 Notes to Financial Statements for the financial year ended 30 June 2019 16. (b) Share Based Payments (continued) Types of share-based payment plans (i) There were $16,689 share based payments relating to options in 2019 (2018: $145,541). Options The following tables lists the inputs to the model used to value the options issued during the financial year ended 30 June 2019: No of options 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) 2,500,000 2,500,000 2,500,000 2,000,000 2,000,000 27/07/18 $0.022 $0.06 1.975% 6 months if 20day VWAP exceeds exercise price 26/08/21 85% 0.745 80% 0.0% 0.149 27/07/18 $0.022 $0.08 1.975% 6 months if 20day VWAP exceeds exercise price 26/08/21 85% 0.610 90% 0.0% 0.061 27/07/18 $0.022 $0.10 1.975% 6 months if 20day VWAP exceeds exercise price 26/08/21 85% 0.514 95% 0.0% 0.026 10/04/19 $0.01 $0.025 1.49% Nil 10/04/19 $0.01 $0.035 1.49% Nil 14/01/22 94% 0.373 Nil 20% 0.298 14/01/22 94% 0.302 Nil 20% 0.242 Shares (ii) There was $1,000,000 of share based payments relating to shares in the financial year ended 30 June 2019 (2018: $1,050,000), being $1,000,000 for deferred acquisition consideration of Lynas Find assets from FMG. 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: 2019 No Outstanding at the beginning of the year Granted during the year Exercised during the year Expired/forfeited/cancelled during the year 156,781,693 22,757,144 - (4,000,000) Outstanding at the end of the year 175,538,837 2019 WAEP 0.0646 0.0415 - 0.06 0.062 2018 2018 No WAEP 117,150,000 45,031,693 (5,400,000) - 0.0582 0.0787 0.0324 - 156,781,693 0.0646 (d) Weighted average of remaining contractual life The weighted average remaining contractual life for the share options outstanding as at 30 June 2019 is 1.56 years (2018: 2.37 years). The weighted average remaining contractual life for the performance rights outstanding as at 30 June 2019 is 1.70 years (2018: 2.70 years) 52 Notes to Financial Statements for the financial year ended 30 June 2019 16. Share Based Payments (continued) Range of exercise price (e) The range of exercise prices for options outstanding at the end of the year was $0.025-$0.12 (2018: $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 $0.0884 (2018: $0.0097). The weighted average fair value of performance rights granted during the year was Nil (2018: $0.0384) (g) The following options were exercised during the year. Share options exercised during the year 2019 Nil 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 Fair Value at Grant Date 0.00384 0.00568 0.00315 (h) Kimberly Mining Limited Warrants As at 30 June 2019, there were 14,371,570 in issued ordinary shares in Kimberly Mining Limited under warrants (30 June 2018: Nil). These warrants are exercisable/convertable as follows: Details Special Warrants Special Warrants – Tranche 2 No of Warrants Date of Expiry 5,323,500 2,956,250 8,279,750 23/08/2023 23/09/2023 Conversion Price $ 0.40 0.40 Special warrants were issued for $0.40 per warrant and converted to 1.1 special warrants in Kimberly Mining Limited on 1 January 2019. Details Founder Warrants No of Warrants Date of Expiry 5,818,450 N/A Conversion Price $ 0.05 Founders warrants are convertible to 1 ordinary share in Kimberly Mining Limited upon exercise. Founders warrants are only able to be exercised 18 months following listing of Kimberly Mining Limited on TSX-V Exchange. Details Broker Warrants Broker Warrants – Tranche 2 No of Warrants Date of Expiry 176,620 96,750 273,370 29/08/2020 28/09/2020 Conversion Price $ 0.40 0.40 Founders warrants are convertible to 1 ordinary share in Kimberly Mining Limited upon exercise. 53 Notes to Financial Statements for the financial year ended 30 June 2019 17. 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 2019 Financial Assets Cash and deposits Trade and other receivables Weighted average interest rate Financial liabilities Trade and other payables 30 June 2018 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 $ 80,487 20,197 - 80,487 20,197 - 0.81% 2.45% - - - - 767,600 20,197 - 767,600 20,197 - 0.39% 2.45% - - - - - - - - - - - - - - - - - - - - - - 565,876 76,723 642,599 666,560 76,723 743,283 0.04% 334,310 334,310 334,310 334,310 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 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 +/- $800 (2018: $7,900) impact on the Group’s income and operating cash flows. At this time, no detailed sensitivity analysis is undertaken by the Group. (b) Market risk The Group is not exposed to equity securities price risk as it holds no investments in securities classified on the balance sheet either as available-for-sale or at fair value through profit or loss; or to commodity price risk. (c) Credit risk The Group has no significant concentrations of credit risk and as such, no sensitivity analysis is prepared by the Group. Credit risk related to balances with banks is managed by ensuring that the surplus funds are only invested with counterparties with a Standard & Poor’s rating of at least AA-. 54 Notes to Financial Statements for the financial year ended 30 June 2019 17. Financial Risk Management (continued) (d) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. The Group manages liquidity risk by preparing forecasts and monitoring actual cash flows and requirements for future capital raisings. The Group does not have committed credit lines available, which is appropriate given the nature of its operations. Surplus funds are invested in a cash management account with ANZ which is available as required. The material liquidity risk for the Group is the ability to raise equity in the future. (e) Effective interest rate and repricing analysis Cash and cash equivalents are the only interest bearing financial instruments of the Group. (f) Currency risk Currency risk arises from investments that are denominated in a currency other than the respective functional currencies of Group entities. The Group is exposed to foreign currency risk in the form of financial instruments held in US Dollars (USD). The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows: Cash and cash equivalents Total Exposure 2019 USD$ 327,015 327,015 2018 USD$ 779,383 779,383 Assuming all other variables remain constant, a 10% strengthening of the Australian dollar at 30 June 2019 against the USD would have resulted in an increased loss of $46,600 (2018: $78,000). A 10% weakening of the AUD would have resulted in a decreased loss of $46,600 (2018: $78,000), assuming all other variables remain constant. The Group does not currently hedge against currency risk. 18. Key management personnel disclosures Key management personnel compensation Short-term employee benefits Post-employment benefits Share based payments Consolidated Group 2019 $ 921,541 47,404 16,689 985,634 2018 $ 951,296 62,564 73,223 1,087,083 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 2019 (30 June 2018: 2 employees). 55 Notes to Financial Statements for the financial year ended 30 June 2019 19. 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 2019 $ 2018 $ 50,673 39,000 - - 5,040 - 50,673 44,040 The auditors of Metalicity Limited and its subsidiaries is Stantons International. 20. Contingent liabilities and contingent assets The Company is currently negotiating the amount of duty payable to the Office of State Revenue (OSR) incurred as a result of a difference in valuation of the dutiable property. The Company incurred, and paid, stamp duty totalling $581,015 to the OSR on the acquisition of the Admiral Bay Project. This duty amount was based on a valuation of $11.4 million. Subsequent to the payment of the duty, the OSR communicated to the Company that a compromise assessment be issued, and that duty of the transaction be assessed in the amount of $695,715 (based on a dutiable value of $13.4 million plus costs), being a difference of approximately $114,000. These discussions remain ongoing. There is a risk that a higher amount may be required by the OSR should potential penalties be applied. 21. 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. 56 Notes to Financial Statements for the financial year ended 30 June 2019 21. Commitments for expenditure (continued) (a) Exploration Commitments (continued 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 2019 $ 1,217,400 - - 1,217,400 2018 $ 1,045,600 - - 1,045,600 (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. 22. Related Party transactions (a) Key management personnel During the year ended 30 June 2019, there were no related party transactions with key management personnel. All other disclosures relating to key management personnel are set out in Note 18 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 2019 (2018: $Nil). 57 Notes to Financial Statements for the financial year ended 30 June 2019 23. 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 2019 Cents (0.74) (0.74) (0.74) (0.74) 2019 $ (4,410,376) - (4,410,376) 2019 Number 2018 Cents (0.43) (0.43) (0.43) (0.43) 2018 $ (2,302,570) - (2,302,570) 2018 Number 599,998,774 535,036,616 - - 599,998,774 535,036,616 As the Group made a loss for the years ended 30 June 2019 and 30 June 2018, the options on issue have no dilutive effect. Therefore, dilutive loss per share is equal to basic loss per share. 24. Group entities Country of incorporation Interest 2019 Interest 2018 Parent entity Metalicity Limited Subsidiary Stuart Town Gold Pty Ltd Metalicity Energy Pty Ltd KYM Mining Pty Ltd Kimberley Mining Limited Ridgecape Holdings Pty Ltd Kimberley Mining Australia Pty Ltd Kimberley Mining Holdings Pty Ltd Australia Australia Australia Australia Canada Australia Australia Australia 100% 100% 100% ~81% ~81% ~81% ~81% 100% 100% - 95% 100% 100% 100% 58 Notes to Financial Statements for the financial year ended 30 June 2019 25. Parent entity information Statement of financial position As at 30 June 2019 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 Profit/(Loss) of the parent entity Total comprehensive (loss) of the parent entity Parent 2019 $ 1,168,492 5,373,010 6,541,502 220,597 - 220,597 6,320,905 46,955,647 2,043,397 (42,678,139) 6,320,905 1,643,517 1,643,517 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) The parent entity has not provided any guarantees, or become responsible for contingent liabilities or contractual commitments of its subsidiaries, other than those disclosed in this financial report. 59 Notes to Financial Statements for the financial year ended 30 June 2019 26. 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: On 27 August 2019, the Company announced a placement to raise $123,000 and a rights issue to raise up to $936,634 , proposed to close on 26 September 2019. On 16 September 2019, the Company announced and extension of Closing Date of the rights issue to 2 October 2019. 60 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 16 September 2019. (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 309,542 817,602 1,099,741 38,236,959 603,925,299 644,389,143 % Issued Capital 0.05 0.13 0.17 5.93 93.72 100.00 There were 30,163,844 unmarketable parcel of ordinary shares. 61 ASX Additional Information (d) Equity Security Holders The names of the twenty largest holders of quoted equity securities are listed below: Name 1. 2. E C DAWSON SUPER PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED 3. MR ZHANGHE CHEN 4. KAGARA LTD 5. FMG PILBARA PTY LTD 5. MR CHEYNE MICHAEL DUNFORD 6. SOTIS SUPERANNUATION PTY LTD CITICORP NOMINEES PTY LIMITED 7. 8. MR RICHARD GORDON WHITE 9. HISHENK PTY LTD ELLIOT HOLDINGS PTY LTD 10 11. MR HUGH WARNER & MRS DIANNE WARNER 12. BNP PARIBAS NOMINEES PTY LTD 13. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 14. VIREYA PTY LTD 15. MACROCON PTY LTD 16. RANCHLAND HOLDINGS PTY LTD 17. VIMINALE PTY LTD 18. MR SYED MUSHLEH UDDIN 19. TR6 AUSTRALIA PTY LTD 20. HOLLOWAY COVE 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 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 2.5 cents before 10 April 2022 Options exercisable at 3.5 cents before 10 April 2022 Number Held 23,000,000 20,961,573 16,544,409 15,806,711 15,000,000 15,000,000 14,583,336 13,191,042 12,755,000 12,000,000 11,800,000 11,145,000 10,640,424 7,738,808 7,000,000 6,539,330 6,492,477 6,388,889 6,000,000 5,990,647 5,698,156 244,275,802 Percentage of Issued Shares 3.57 3.25 2.57 2.45 2.33 2.33 2.26 2.05 1.98 1.86 1.83 1.73 1.65 1.20 1.09 1.01 1.01 0.99 0.93 0.93 0.88 37.91 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 13,000,000 13,000,000 13,000,000 2,000,000 12,766,670 26,265,023 3,000,000 3,000,000 2,000,000 2,000,000 62 ASX Additional Information (e) Tenement List: As at 17 September 2019 Project TEN ID Admiral Bay(1) ML04/244 Admiral Bay(1) ML04/249 Admiral Bay(1) EL04/1610 Munglinup Pilbara East(1) Napier(1) Napier Range(1) Napier Range(1) EL74/550 E04/2453 G04/0020 M04/0161 M04/0162 Holder Kimberley Mining Australia Pty Ltd 100% Kimberley Mining Australia Pty Ltd 100% Kimberley Mining Australia Pty Ltd 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% Granted Expires 21/03/1991 20/03/2033 21/03/1991 20/03/2033 04/09/2007 03/09/2019 22/01/2015 13/09/2017 03/03/1989 31/12/1987 31/12/1987 21/01/2020 12/09/2022 02/03/2031 30/12/2029 30/12/2029 63
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