Metals X Limited
Annual Report 2018

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2018 ANNUAL REPORT CONTENTS CORPORATE DIRECTORY ............................................................................... 1 COMPANY PROFILE ......................................................................................... 2 REVIEW OF OPERATIONS ............................................................................... 4 DIRECTORS’ REPORT ...................................................................................... 9 AUDITOR’S INDEPENDENCE DECLARATION ............................................. 29 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 ........................................................ 30 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 ....................................................................................... 31 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 ......................................................... 32 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 ........................................................ 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 ......................................................... 34 DIRECTORS’ DECLARATION ......................................................................... 88 INDEPENDENT AUDIT REPORT .................................................................... 89 TABLES OF MINERAL RESOURCES AND ORE RESERVES AS AT 30 JUNE 2018 ....................................................................................... 94 SECURITY HOLDER INFORMATION AS AT 27 AUGUST 2018 ................................................................................. 99 CORPORATE DIRECTORY Directors Peter Newton (Non-Executive Chairman) Warren Hallam (Managing Director) Stephen Robinson (Executive Director) Simon Heggen (Non-Executive Director) Milan Jerkovic (Non-Executive Director) Yimin Zhang (Non-Executive Director) Company Secretary & Chief Financial Officer Fiona Van Maanen Key Management Allan King (Chief Operating Officer) Mark Recklies (General Manager – Renison Tin Operations) Russell Cole (General Manager – Nifty Copper Operations) Registered Office Level 5, 197 St Georges Terrace Perth WA 6000 Telephone: +61 8 9220 5700 Email: reception@metalsx.com.au Web: www.metalsx.com.au Postal Address PO Box 7248 Cloisters Square PO WA 6850 Securities Exchange Australian Securities Exchange Limited Level 40, Central Park 152-158 St Georges Terrace Perth WA 6000 ASX Code: MLX Share Registry Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 GPO Box Melbourne VIC 3001 Phone: (within Australia) 1300 850 505 Phone: (outside Australia) +61 3 4915 4000 Facsimile: +61 3 9473 2500 Domicile and Country of Incorporation Australia 1 COMPANY PROFILE Metals X Limited (Metals X or the Company) is a diversified Australian miner with substantial base metals operations and development projects:     A globally significant tin miner through its 50% owned Tasmanian joint arrangement, producing approximately 7,000 tonnes per annum of tin in concentrate and expanding to approximately 8,000 tonnes per annum of tin in concentrate; A significant copper miner, targeting production of approximately 40,000 tonnes per annum of copper in concentrate; A development-ready, world class nickel-cobalt-scandium development project; A strong balance sheet with no debt. Operations and Projects Location Map Metals X currently has two producing assets; the Renison Tin Operations (50%-owned joint arrangement) in Tasmania and the Nifty Copper Operations in Western Australia. The Company also owns the Wingellina nickel-cobalt-scandium deposit (Central Musgrave Nickel Project), one of the world’s largest undeveloped nickel and cobalt resources. The Company is in a unique position as the only significant publicly listed tin producer on the ASX, and remains as one of few publicly listed tin producers in the western world. The Tin Division has aggregated Mineral Resources containing approximately 329,000 tonnes of tin and aggregated Ore Reserves containing approximately 167,700 tonnes of tin*. Renison is expanding its production by approximately 15-20% with the construction of a new crusher and ore sorting plant which is currently in commissioning. In addition, an updated feasibility study for the Rentails Project (tin tailings re-treatment project) was completed in mid-2017 which demonstrated a high margin project. The environmental approvals process is underway for the project, key suppliers have been sourced and discussions with the Tasmanian Government are in progress in regards to regional infrastructure upgrades. The Nifty Copper Operations produces a clean copper concentrate from an underground copper sulphide mine, with ore processed through a 2.5 million tonne-per-annum copper concentrator. Nifty has aggregated Mineral Resources containing approximately 606,000 tonnes of copper and aggregated Ore Reserves containing approximately 222,000 tonnes of copper**. Metals X has significantly extended the Nifty mine to the east, west and down-plunge and completed over 80,000 metres of underground drilling since acquisition. The Copper Division also includes the Maroochydore Copper Project located approximately 85 kilometres to the south-east of Nifty. Maroochydore already hosts aggregated Mineral Resources of approximately 486,000 tonnes of copper, mainly in oxides. Following an extensive review of geological information, further sulphide targets have been identified along strike of the defined Maroochydore resource with drilling to be undertaken during the current field season. 2 COMPANY PROFILE (continued) The Wingellina nickel–cobalt-scandium project, which forms part of the Company’s Central Musgrave Nickel Project, is a world-class deposit. Wingellina has aggregated Mineral Resources containing approximately 2.0 million tonnes of nickel and over 154,000 of cobalt***. A feasibility study was completed in 2008 based on a minimum 40 year project producing at an annual rate of 40,000 tonnes of nickel and 3,000 tonnes of cobalt. During 2017 the Company undertook a review of the high grade cobalt and nickel zones of the ore body and identified an initial 15 high grade pits within the existing reserve. Infill drilling of six of these high grade nickel-cobalt pits was undertaken to confirm the integrity of the geological models. The drilling results have demonstrated the potential for a high grade, potentially smaller scale and lower capital start-up. In addition, metallurgical testwork has successfully produced nickel sulphate and cobalt sulphate from Wingellina ore. Metals X has received the required approvals, including Native Title and Environmental, to proceed with the development of Wingellina. Development of the project is contingent mainly upon nickel price improvement and funding. * For further details on Total Mineral Resource and Reserve Estimates for the Renison Tin Operations refer to ASX announcement dated 23 August 2018. ** For further details on Total Mineral Resource and Reserve Estimates for the Nifty Copper Operations refer to ASX announcement dated 12 October 2017. *** For further details on Total Mineral Resource and Reserve Estimates for the Central Musgrave Nickel Project refer to ASX announcement dated 18 August 2016. Renison Tin Operations Ore Sorter 3 REVIEW OF OPERATIONS CORPORATE Westgold Demerger In the previous year the Company demerged its Gold Division to create a pure gold company Westgold Resources Limited (Westgold) and a base metals company (Metals X Limited). On 24 November 2016 at an Extraordinary General Meeting, Metals X shareholders approved the demerger of Metals X’s gold assets via a capital reduction and in specie distribution of all the shares in Westgold. The demerger was effective on 1 December 2016 and trading of Westgold commenced 6 December 2016 on the Australian Securities Exchange (ASX). Copper Hedging During the year the Company entered into hedges of 1,500 tonnes of copper per month from October 2017 to July 2018. The Company granted calls up to A$8,255 per tonne of LME copper and bought puts as low as A$7,600 per tonne of LME copper. COPPER DIVISION The Copper Division holds two key assets: 1. 2. Nifty Copper Operations; and Maroochydore Copper Project. Nifty Copper Operations The Nifty Copper Operations (“Nifty”) is an underground copper sulphide mine with an associated 2.5 million tonne per annum copper concentrator. Site infrastructure is extensive, including a power plant, camp and airfield. Processing of sulphide copper ore is by conventional comminution, grinding and flotation to produce a clean copper concentrate. A concentrate storage facility is located at Port Hedland where concentrate is accumulated before shipping for smelting and refining. The focus of the Company since acquisition of Nifty has been to increase the production rate, returning the process plant to continuous operation, and to extend the mine life. The objective is to transform Nifty into a large, long-life mine, with an annualised production rate in excess of 40,000 tonnes of contained copper in concentrate. Significant improvements have taken place during the period. In December 2017 the plant commenced production on a continuous basis after running on a campaign basis since acquisition. The mobile fleet was refurbished, new loaders were acquired and additional jumbo drill rigs were mobilized to site. The underground conveyor system and underground crusher were refurbished. There were additional refurbishment and replacement projects undertaken at the camp, power plant and structural steel works on the processing plant. During the period the ramp-up of mining rates and control of grade dilution were impacted by the predominance of production from within the historic ‘checkerboard’ mining area. With additional resources being applied to site, changes in senior management and significant mine planning, the foundation is now strong for the production ramp-up over the remainder of 2018. Currently over 60% of development is outside the historic ‘checkerboard’. 4 REVIEW OF OPERATIONS (continued) COPPER DIVISION (cont.) Metals X announced an updated Mineral Resource and Ore Reserve estimates at 31 August 2017, increasing Ore Reserves by 55% and extending the current mine life to 6 – 7 years. The Copper Division has excellent exploration upside potential, with a large land holding of over 3,200km2 including the Maroochydore Copper Project. There are a number of defined copper, cobalt and lead/zinc targets, with minimal expenditure having been incurred on these targets over the past 20 years. Metals X has conducted extensive geophysics programs and has prioritised targets and commenced a regional exploration program. Maroochydore Copper Project Nifty Copper Operations Core The Maroochydore Copper Project is located 85 km’s southeast of Nifty and manifests as a large copper oxide and secondary chalcocite blanket of mineralisation. Historic drilling has defined a copper oxide Mineral Resource estimate with contained copper and cobalt of approximately 0.5Mt and 19Kt respectively. In addition to the oxide resources, copper sulphide mineralisation has been identified at depth in historic drilling. However, the area is sparsely drilled and inadequately defined, with primary copper sulphide mineralisation remaining open along-strike and down-dip. Geophysical modelling of high resolution aeromagnetic data suggests that the Maroochydore deposit lies within a north-trending structural corridor with the possibility of a structural repetition of the mineralised horizon occurring to the east of the current resource area. A comprehensive review of historic exploration was conducted during the year with key exploration targets identified for the current drilling field season. A drill program and baseline environmental studies commenced at Maroochydore during the period focused on the sulphide mineralisation. In addition, further drilling on the oxide resource was completed to provide samples for ongoing mineralogical testwork for the design of an oxide processing flowsheet. Maroochydore Deposit 5 REVIEW OF OPERATIONS (continued) TIN DIVISION Metals X is a globally significant tin producer through its 50% ownership of the Renison joint venture which holds two key assets: 1. 2. The world class Renison Tin Operations; and The Renison Tailings Retreatment Project (“Rentails”). Renison Tin Operations (50%) (“Renison”) are The Renison Tin Operations located approximately 15km northeast of Zeehan on Tasmania’s west coast. The Renison resource includes over 20 million tonnes of historic tailings, which are planned to be retreated through the proposed Rentails Project, proximate to the current processing plant. During the period a new tailings dam was constructed and commissioned and a new crushing and ore sorting circuit were constructed. The ore sorter is currently in commissioning and is expected to increase annual tin production at Renison by 15-20% from 7,000tpa to 8,000 tonnes per annum of tin in concentrate. The strategy with the ore sorter is to increase underground ore production to approximately 920,000 tonnes per annum, while maintaining the processing plant at approximately 720,000 tonnes per annum. The ore sorter will reject an estimated 200,000 tonnes per annum of waste at the crushing stage, upgrading the ore prior to the processing plant. During the year, in preparation for the introduction of ore sorting, additional areas within the underground mine were developed and underground production rates increased, with a significant surface stockpile of ore being accumulated for the commissioning of the ore sorter. The operation is well setup for the long-term future with increased production capacity and additional flexibility. During the period Renison maintained three underground diamond drill rigs with the focus on further expanding the Renison resource definition program in the Area 5, Deep Federal, the Leatherwood and Central Federal Bassett lodes. Results from these campaigns are continuing to flow through with drilling demonstrating the continuance of strong mineralization. Renison Tailings Retreatment Project (“50%) The Renison Retreatment Project (“Rentails) provides the opportunity to expand production at the Renison Tin Operations through the re-processing and recovery of tin and copper from the historic tailings at Renison. An updated definitive feasibility study of Rentails was announced at the start of the year based upon an 11-year project with an integrated 2 million tonne per annum tin concentrator and tin fumer plant with annual production of approximately 5,400 tonnes of tin, in a high grade tin fume product, and 2,200 tonnes of copper in a high grade copper matte product. The updated study confirmed a robust, high margin project. During the year the environmental approvals process commenced and is well advanced. Further metallurgical testwork has been conducted and suppliers of key consumables sourced. Discussions with the Tasmanian Government is ongoing in regards to regional infrastructure upgrades. The combined Renison Tin Operations, following commissioning of the ore sorter and the commencement of Rentails, is expected to produce approximately 13,400 - 13,900 tonnes of tin per annum (approximately 3.75% of the global primary tin supply). The all-in sustaining cost for the combined operations is anticipated to be less than $17,000 per tonne of tin, comparing favourably to prevailing tin prices of approximately $26,500 per tonne of tin. Tailings Storage Facility 6 REVIEW OF OPERATIONS (continued) NICKEL DIVISION Metals X’s nickel strategy remains focused on the Central Musgrave Nickel Project that straddles the triple-point of the Western Australia/Northern Territory/South Australia borders. The project comprises the globally significant Wingellina nickel-cobalt-scandium limonite deposit (“Wingellina”), the similar Claude Hills deposit and the Mt Davies exploration prospects. The project includes a large tract of prospective exploration tenure encompassing the whole of the Wingellina layered intrusive sub-set of the Giles Complex rocks in Western and Southern Australia. Wingellina remains one of the largest undeveloped nickel–cobalt– scandium deposits in the world. Metals X has defined an Ore Reserve estimate of approximately 168 million tonnes containing 1.56 million tonnes of nickel, 123,000 tonnes of cobalt and a significant inventory of scandium and iron. Metals X has completed a feasibility study (+/-25%) and has signed an agreement with the Traditional Owners which provides consent to undertake mining activities. Metals X has also received Environmental Protection Authority (EPA) approval to develop the project. During the period, the Company undertook a review of the high grade cobalt and nickel zones and identified an initial 15 high grade pits. An infill drilling program was successfully completed on 6 of 15 identified high grade nickel-cobalt pit shells within the defined resource area. The drilling program demonstrated the potential for a high grade, smaller project start-up with a lower capital cost. Metals X also successfully completed metallurgical testwork for the production of high quality nickel sulphate and cobalt sulphate from Wingellina ore during the year. for potential The improved economics from a high grade start- up and demonstrated ability to produce nickel sulphate and cobalt sulphate provides further options for the development of the project in terms of scale, payback on capital and final product. Off the back of these expanded options for the project, Metals X has actively re- engaged in discussions with the partners potential development of Wingellina. This includes parties with which initial discussions have been held previously as well as other interested organisations including downstream end-users of product. for Wingellina Trench GOLD DIVISION - DISCONTINUED OPERATION The gold division was demerged from Metals X effective as of 1 December 2016 via an in-specie distribution and capital reduction and subsequent ASX listing of Westgold (refer to note 40). INVESTMENTS Metals X’s current investment holdings are:    Nelson Resources Limited 11.26% (2017: 21.77%); Brainchip Holdings Limited (ASX:BRN) 6.45% (2017: 6.69%); and Auris Minerals Limited (ASX:AUR) 0.74% (2017: 0.85%). 7 REVIEW OF OPERATIONS (continued) CORPORATE STRUCTURE 8 DIRECTORS’ REPORT The Directors submit their report together with the financial and annual report of Metals X Limited and of the Consolidated Entity, being the Company and its controlled entities, for the year ended 30 June 2018. DIRECTORS The names and details of the Company’s Directors in office during the financial period and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Names, qualifications, experience and special responsibilities Peter Newton – Independent Non-Executive Chairman Mr Newton was a stockbroker for 25 years until 1994. Since then he has been a significant participant in the Australian resource industry as an investor and a director of a number of listed companies. In past years, he has been the Chairman of both Hill 50 Limited and Abelle Limited. Mr Newton is also the Chairman of the Company’s Remuneration & Nomination Committee and serves on the Audit & Risk Committee. During the past three years he has served as a director of the following public listed companies:  Westgold Resources Limited *. Warren Hallam - Managing Director Mr Hallam is a Metallurgist (B. App Sci (Metallurgy)), a Mineral Economist (MSc (Min. Econ)), holds a Graduate Diploma in finance and has around 30 years of technical and commercial experience within the resources industry. During the past three years he has served as a director of the following public listed companies:  Westgold Resources Limited (Appointed 18 March 2010 – Resigned 2 February 2017). Stephen Robinson – Executive Director (Appointed 25 November 2016) Mr Robinson holds a BSc and is an experienced Australian mining executive and a Rhodes Scholar. Mr Robinson has extensive international experience at senior executive levels within the mining industry. Previously he has been the Director of Business Development & Strategy at Barrick (Australia Pacific) Limited, Group Manager Planning with Iluka Resources Ltd and a senior manager in the gold business unit at WMC Resources Ltd. During the past three years he has served as a director of the following public listed companies:  Sumatra Copper & Gold Plc (Appointed 8 July 2013 - Resigned 30 June 2017). Simon Heggen – Independent Non-Executive Director Mr Heggen holds a Bachelor of Economics and a Bachelor of Laws Degrees from the Australian National University and has around 30 years proven experience in strategic planning, corporate development, M&A and corporate finance within the Resources sector. Mr Heggen is Chairman of the Company’s Audit Committee and also serves on the Remuneration & Nomination Committee. During the past three years he has served as a director of the following public listed companies:  Auris Minerals Limited (Appointed 31 October 2015 – Resigned 25 November 2015). Yimin Zhang – Non-Executive Director Mr Zhang is the Chief Representative for Jinchuan Australia and is also an Executive Director of Sino Nickel Pty Limited. Mr Zhang has worked for Jinchuan since 1981 and has been posted to several overseas positions to which he has been involved in numerous Jinchuan co-operative ventures. Mr Zhang holds a Diploma from the Metallurgical and Architectural Institute of Chang Chun. Mr Zhang served as an Alternative Non-Executive Director for Mr Xie Penggen until 9 January 2017, at that time Mr Zhang was appointed a Non-Executive Director of the Company. Mr Zhang has held no public company directorships in the past three years. 9 DIRECTORS REPORT (Continued) Milan Jerkovic – Independent Non-Executive Director Mr Jerkovic has over 30 years of experience in the mining industry involving resource evaluation, operations, financing, acquisition, project development and general management. Mr Jerkovic is a Geologist with post graduate qualifications in Mineral Economics and Mining, is a Fellow of the Australian Institute of Mining and Metallurgy and a member of the Australasian Institute of Company Directors. He was previously the CEO of Straits Resources Limited and was the founding Chairman of Straits Asia Resources Limited which was listed on the Singapore Stock Exchange. Mr Jerkovic has also held positions with WMC, BHP, Nord Pacific, Hargraves, and Tritton. Mr Jerkovic is currently Chairman of both Geopacific Resources Limited and Blackham Resources Limited. Mr Jerkovic also serves on the Company’s Audit and Remuneration & Nomination Committees. During the past three years he has served as a director of the following public listed companies:   Blackham Resources Limited *; and Geopacific Resources Limited *. * Denotes current directorship INTERESTS IN THE SHARES OF THE COMPANY As at the date of this report, the interests of the Directors in the shares and options of Metals X Limited were: Director Fully Paid Ordinary Shares WS Hallam SD Heggen PJ Newton M Jerkovic SD Robinson Y Zhang Total 2,142,928 6,689 14,070,217 367,500 45,000 - Options 4,000,000 - - - 1,200,000 - 16,632,334 5,200,000 COMPANY SECRETARY Fiona Van Maanen – Chief Financial Officer and Company Secretary Mrs Van Maanen is a CPA, holds a Bachelor of Business (Accounting) degree and a Graduate Diploma in Company Secretarial Practice. Mrs Van Maanen has significant experience in accounting and financial management in the mining and resources industry. PRINCIPAL ACTIVITIES The principal activities during the year of the Consolidated Entity were:   operation of tin and copper mines in Australia; and exploration and development of base metals projects in Australia. EMPLOYEES The Consolidated Entity had 446 employees at 30 June 2018 (2017: 384). 10 DIRECTORS REPORT (Continued) DIVIDENDS Dividends paid during the period to members in respect to the 2017 financial year: Dividend Rate Record Date Payment Date Franking DRP Discount 1.00 cents per share 7 September 2017 19 September 2017 Nil 5% to 5 day VWAP Dividend Reinvestment Plan The Company operates a dividend reinvestment plan (DRP) which allows eligible shareholders to elect to invest dividends in ordinary shares. The DRP is based on a 5% discount to the 5 day volume weighed average price (VWAP) after the record date. During the year 2,096,529 shares (2017: nil) were issued at $0.7428 per share as part of the dividend reinvestment plan. The Directors do not propose to pay any dividend for the financial year ended 30 June 2018. Refer to note 10 for available franking credits. SHARE OPTIONS Unissued shares As at the date of this report, there were 13,350,000 ordinary shares under options, refer to note 30. Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate. Shares issued as a result of exercising options There were 700,000 options converted to shares during the financial year refer to note 27(f) for further details. RESULTS OF OPERATIONS  Consolidated total loss after income tax - $26,297,186 (2017: profit $134,012,244);         Total consolidated revenue of continuing operations - $209,901,427 (2017: $237,791,187); Total cost of sales of continuing operations - $217,533,046 (2017: $230,488,975); Profit from discontinued operations - Nil (2017: $237,764,988); Impairment losses - $1,988,131 (2017: $72,682,408); Exploration and evaluation expenditure write off - $115,718 (2017: $1,243,736) Cash flows from operating activities - $27,295,830 (2017: $26,836,655); Cash flows used in investing activities - $38,889,357 (2017: $122,637,730); and Cash flows used in financing activities - $7,296,798 (2017: $106,741,458). 11 DIRECTORS REPORT (Continued) Key results for the period are: Copper Division   Revenue from the Nifty Copper Operations was $127,972,186 (2017: $160,271,459). The revenue was lower than the previous year as a result of lower production. The cost of sales was $159,538,701 (2017: $176,729,918). Performance of the Copper Division is summarised below: Physical Summary UG Ore Mined UG Grade Mined Ore Processed Head Grade Recovery Copper Produced Copper Sold Copper Price Realised Copper Price (net of Tc/Rc charges) Copper Sales Revenue (net of Tc/Rc charges) Cost Summary Mining Processing Admin Stockpile Adj C1 Cash Cost (produced t) * Royalties Sustaining Capital Reclamation & other adj. All-in Sustaining Costs ** Project Startup Capital Exploration Holding Cost All-in Cost *** Units t % Cu t % Cu % t t A$/t A$/t A$ A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t 30 June 2018 30 June 2017 1,361,019 1,390,007 1.32 1.76 1,361,371 1,397,534 1.33 92.16 16,774 15,738 8,910 8,131 1.77 93.87 23,264 24,828 7,168 6,455 127,972,186 160,271,459 4,907 2,147 1,419 (2) 8,471 395 605 67 9,538 - 169 9,707 2,797 1,379 1,114 55 5,345 313 387 165 6,210 - 64 6,274 • • • • * C1 Cash Cost (C1): represents the cost for mining, processing and administration after accounting for movements in inventory (predominantly ore stockpiles). It includes net proceeds from by-product credits, but excludes the cost of royalties and capital costs for exploration, mine development and plant and equipment. ** All-in Sustaining Cost (AISC): is made up of the C1 cash cost plus royalty expense, sustaining capital expense and general corporate and administration expenses. *** All-in Cost (AIC): is made up of the AISC plus growth (major project) capital and discovery expenditure. C1, AISC and AIC are non-IFRS financial information and are not subject to audit. These are widely used “industry standard” terms that certain investors use to evaluate company performance. 12 DIRECTORS REPORT (Continued) RESULTS OF OPERATIONS (cont.) Tin Division   Revenue from the 50% owned Renison Tin Operations was $81,929,241 (2017: $77,519,728). The revenue was higher than the previous year as a result of higher tin sales and prices. The cost of sales was $57,994,348 (2017: $53,798,589). The costs were higher due to a ramp up in mining activities with additional ore being stockpiled in anticipation of completion of the new purpose-built three stage crushing, screening and ore sorting plant which commenced commissioning in June 2018. Performance of the Tin Division (50% share) is summarised below: 30 June 2018 30 June 2017 Physical Summary UG Ore Mined UG Grade Mined Ore Processed Head Grade Recovery Tin Produced Tin Sold Tin Price Realised Tin Price (net of Tc/Rc charges) Tin Sales Revenue (net of Tc/Rc charges) Cost Summary Mining Processing Admin Stockpile Adj C1 Cash Cost (produced t) Royalties Sustaining Capital Reclamation & other adj. Corporate Costs All-in Sustaining Costs Project Startup Capital Exploration Holding Cost All-in Cost Units t % Sn t % Sn % t t A$/t A$/t A$ A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t A$/t 401,174 1.19 366,242 1.25 73.31 3,370 3,434 26,595 23,862 376,276 1.28 368,843 1.29 73.24 3,486 3,218 26,581 24,089 81,929,241 77,519,728 6,850 4,879 1,080 (994) 11,815 1,300 3,258 12 31 16,416 4,475 - 20,891 6,385 4,620 1,052 (246) 11,811 1,297 3,228 5 21 16,362 815 - 17,177 Capital Investment Activities Cash flows used in investing activities was $38,889,357, which was lower than the previous period (2017: $122,637,730), mainly due to the demerger or the Gold Division. This was offset by the increase in capital expenditure at the Tin Division on the ore sorting plant and tailings dam and the property, plant and equipment refurbishment at the Copper Division. Other capital re-investment during the period:    Tin Division $21,361,744 (2017: $11,430,117); Copper Division $14,919,739 (2017: $9,756,875); and Nickel Division $1,308,239 (2017: $1,021,233). 13 DIRECTORS REPORT (Continued) REVIEW OF OPERATIONS A full review of the operations of the Consolidated Entity during the year ended 30 June 2018 is set out on page 4 of this report. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Total equity decreased by 14% ($28,295,975) to $170,450,179 (2017: $198,746,154). The movement was mainly due to operating losses incurred at the Copper Division. SIGNIFICANT EVENTS AFTER THE BALANCE DATE On 7 August 2018 the Company completed a capital raising of $50,000,000 by issuing 76,923,076 fully paid ordinary shares at an issue price of $0.65 per share to institutional and professional investors. LIKELY DEVELOPMENTS AND EXPECTED RESULTS It is expected that the Consolidated Entity will continue its exploration, mining, processing, production and marketing of tin and copper concentrates in Australia, and will continue the development of its nickel exploration projects. These are described in more detail in the Review of Operations on page 4. ENVIRONMENTAL REGULATION AND PERFORMANCE The Consolidated Entity's operations are subject to the relevant environmental protection legislation (Commonwealth and State legislation). The Consolidated Entity holds various environmental licenses issued under these laws, to regulate its mining and exploration activities in Australia. These licenses include conditions and regulations in relation to specifying limits on discharges into the air, surface water and groundwater, rehabilitation of areas disturbed during the course of mining and exploration activities and the storage of hazardous substances. All environmental performance obligations are monitored by the board of directors and subjected from time to time to Government agency audits and site inspections. There have been no material breaches of the Consolidated Entity’s licenses and all mining and exploration activities have been undertaken in compliance with the relevant environmental regulations. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the financial year, the Company paid a premium in respect of a contract of insurance to insure Directors and officers of the Company and related bodies corporate against those liabilities for which insurance is permitted under section 199B of the Corporations Act 2001. Disclosure of the nature of the liabilities and the amount of the premium is prohibited under the conditions of the contract of insurance. INDEMNIFICATION OF AUDITORS To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. 14 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) Contents 1. 2. 3. 4. 5. 6. 7. Remuneration report overview Remuneration governance Non-Executive Director remuneration Executive remuneration Performance and executive remuneration outcomes Executive employment arrangements Additional statutory disclosures 1. REMUNERATION REPORT OVERVIEW The Directors of Metals X present the Remuneration Report (“the Report”) for the Consolidated Entity for the year ended 30 June 2018 (FY2018). This Report forms part of the Director’s Report and has been audited in accordance with section 300A of the Corporations Act 2001 and its regulations. The Report details the remuneration arrangements for Metals X’s Key Management Personnel (“KMP”):   Non-Executive Directors (“NEDs”) Managing Director (“MD”), executive directors and senior executives (collectively “the executives”). KMP are those who directly or indirectly, have authority and responsibility for planning, directing and controlling the major activities of the Consolidated Entity and includes all directors of the parent entity. Details of KMP of the Consolidated Entity are set out below: Name Position Appointed Resigned (i) Non-Executive Directors PJ Newton SD Heggen M Jerkovic Y Zhang (ii) Executive Directors WS Hallam SD Robinson (iii) Senior Executives JR Croall AH King MR Poepjes M Recklies FJ Van Maanen Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Managing Director Executive Director General Manager - Nifty Chief Operating Officer Chief Mining Engineer * General Manager - Renison CFO & Company Secretary 14 Dec 2012 25 Oct 2012 1 May 2017 9 Jan 2017 1 Mar 2005 25 Nov 2016 2 Nov 2017 24 Feb 2014 8 Aug 2011 24 Mar 2017 1 Jul 2005 - - - - - - 6 Jul 2018 - - - - * MR Poepjes resigned as the General Manager of Nifty in August 2017. He subsequently resigned from Metals X in May 2018. 2. REMUNERATION GOVERNANCE Remuneration and Nomination Committee Responsibility The remuneration and nomination committee is a subcommittee of the Board. It is primarily responsible for making recommendations to the Board on:    Non-Executive Director fees; Executive remuneration (directors and senior executives); and The executive remuneration framework and incentive plan policies. The remuneration and nomination committee assesses the appropriateness of the nature and amount of remuneration of non-executive directors and executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high performing director and executive team. The composition of the remuneration and nomination committee is set out on page 27 of this annual report. 15 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 2. REMUNERATION GOVERNANCE (cont.) Use of remuneration advisors During the period the Remuneration and Nomination Committee approved the engagement of BDO Remuneration and Reward Pty Ltd (“BDO”) to review and provide recommendations on the Consolidated Entity’s executive remuneration framework and policies. Both BDO and the Committee are satisfied the advice received from BDO is free from undue influence from the KMP to whom the remuneration recommendations apply. The remuneration recommendations were provided to the Committee as an input into decision making only. The Committee considered the recommendations, along with other factors, in making its remuneration decisions. The fees paid to BDO for the remuneration recommendations were $27,250. Outcome of BDO Remuneration Review Following the BDO remuneration review the following changes to the remuneration structure were made during FY2018: The introduction of a formal short term incentive (“STI”) policy that has the objective of linking executive remuneration with the achievement of the Consolidated Entity’s key operational and financial targets. The STI will be an annual “at risk” component of remuneration for executives that is payable in cash based on performance against key performance indicators (refer to section 4). Following the BDO remuneration review the following changes to the remuneration structure will be made in FY2019: The long term incentive policy will be amended to focus the efforts of executives on long term value creation to further align management’s interests with those of the shareholders. The LTI will be an annual “at risk” component of remuneration for executives that is payable in zero exercise price options (“ZEPOs”) (being an option to acquire an ordinary share in Metals X for nil consideration). The MD will have a maximum LTI opportunity of 80% of fixed remuneration and other executives have a maximum LTI opportunity of 60% of fixed remuneration. The number of options to be granted will be determined by dividing the LTI remuneration dollar amount by the volume weighted average price of Metals X shares traded on the ASX during the 5 day trading period prior to the day of the grant. As a transitional arrangement, for the options to be granted in FY2019, the LTI performance period will be treated as two tranches:   50% of the options will be performance tested against the LTI performance measures for the period 1 July 2018 to 30 June 2020. 50% of the options will be performance tested against the LTI performance measures for the period 1 July 2018 to 30 June 2021. All subsequent grants of options will have a three year performance period. There will be no opportunity for re-testing. Any options that do not vest will lapse after testing. Executives are able to exercise any options that vest for up to two years after the vesting date before the vested options lapse. Options will be subject to the following performance conditions:   Relative Total Shareholder Return (“RTSR”) (50%); and Return on Capital Employed (“ROCE”) (50%). The Board considers that TSR is an appropriate performance hurdle because it ensures that a proportion of each participant’s remuneration is explicitly linked to shareholder value and ensures that participants only receive a benefit where there is a corresponding direct benefit to shareholders. The Board considers ROCE as an appropriate measure as it focuses executives on generating earnings that efficiently use shareholder capital as the reinvestment of earnings. Remuneration report at FY2017 AGM The FY2017 remuneration report received positive shareholder support at the FY2017 AGM with a vote of 79% in favour. 16 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 3. NON-EXECUTIVE DIRECTOR REMUNERATION NED Remuneration Policy Metals X’s NED fee policy is designed to attract and retain high calibre directors who can discharge the roles and responsibilities required in terms of good governance, strong oversight, independence and objectivity. The Company’s constitution and the ASX listing rules specify that the NED fee pool limit, shall be approved periodically by shareholders. The last determination was at the annual general meeting (“AGM”) held on 26 November 2014 when shareholders approved an aggregate fee pool of $600,000 per year. The amount of the aggregate remuneration sought to be approved by shareholders and the manner in which it is paid to NEDs is reviewed annually against comparable companies. The Board also considers advice from external advisors when undertaking the review. Non-executive directors have long been encouraged by the Board to hold shares in the Company and align their interests with the Company’s shareholders. The shares are purchased by the directors at the prevailing market share price. NED Remuneration Structure The remuneration of NEDs consists of director’s fees. There is no scheme to provide retirement benefits to NEDs other than statutory superannuation. NEDs do not participate in any performance related incentive programs. Fees paid to NEDs cover all activities associated with their role on the Board and any sub-committees. No additional fees are paid to NEDs for being a Chair or Member of a sub-committee. However, NEDs are entitled to fees or other amounts as the Board determines where they perform special duties or otherwise perform extra services on behalf of the Company. They may also be reimbursed for out of pocket expenses incurred as a result of their Directorships. 4. EXECUTIVE REMUNERATION Executive Remuneration Policy In determining executive remuneration, the Board aims to ensure that remuneration practices are:   competitive and reasonable, enabling the Company to attract and retain high calibre talent; aligned to the Company’s performance, strategic and business objectives and the creation of shareholder value; transparent and easily understood; and acceptable to shareholders.   The Company’s approach to remuneration ensures that remuneration is competitive, performance- focused, clearly links appropriate reward with desired business performance, and is simple to administer and understand by executives and shareholders. In line with the remuneration policy, remuneration levels are reviewed annually to ensure alignment to the market and the Company’s stated objectives. Executive Remuneration Structure The Company’s remuneration structure provides for a combination of fixed and variable pay with the following components:    fixed remuneration; short-term incentives (“STI”); and long-term incentives (“LTI”). In accordance with the Company’s objective to ensure that executive remuneration is aligned to Company performance, a portion of executives’ remuneration is placed “at risk”. The relative proportion of FY2018 total remuneration packages split between the fixed and variable remuneration is shown below: Executive Fixed remuneration Managing Director Other Executives 40% 46% STI 20% 18% LTI 40% 36% 17 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 4. EXECUTIVE REMUNERATION (cont.) Elements of remuneration Fixed remuneration Fixed remuneration consists of base salary, superannuation and other non-monetary benefits and is designed to reward for:    the scope of the executive’s role; the executive’s skills, experience and qualifications; and individual performance. Short Term Incentive (STI) arrangements Under the STI, all executives have the opportunity to earn an annual incentive award which is delivered in cash. The STI recognises and rewards annual performance. How is it paid? Any STI award is paid in cash after the assessment of annual performance. How much can executives earn? In FY2018, following the BDO remuneration review, the MD had a maximum STI opportunity of 50% of total fixed remuneration and other executives had a maximum STI opportunity of 40% of total fixed remuneration. How is performance measured? A combination of specific Company Key Performance Indicators (“KPIs”) are chosen to reflect the core drivers of short term performance and also to provide a framework for delivering sustainable value to the Consolidated Entity and its shareholders. When is it paid? What happens if an executive leaves? The following KPIs were chosen for the 2018 financial year:  KPI 1: AISC relative to budget (30%);  KPI 2: Production relative to budget (30%);  KPI 3: Safety performance targets (30%); and  KPI 4: Board discretion (10%). The STI award is determined after the end of the financial year following a review of performance over the year against the STI performance measures by the Remuneration and Nomination Committee. The Board approves the final STI award based on this assessment of performance and the award is paid in cash up to three months after the end of the performance period. Where an executive ceases to be an employee of the Consolidated Entity:  due to resignation or termination for cause, before the end of the financial year, no STI is awarded for that year; or  due to redundancy, ill health, death or other circumstances approved by the Board, the executive will be entitled to a pro-rata cash payment based on assessment of performance up to the date of ceasing employment for that year. unless the Board determines otherwise. What happens if there is a change of control In the event of a change of control, a pro-rata cash payment will be made based on assessment of performance up to the date of the change of control (subject to Board discretion). 18 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 4. EXECUTIVE REMUNERATION (cont.) Long Term Incentive (LTI) arrangements Under the LTI plan, annual grants of options are made to executives to align remuneration with the creation of shareholder value over the long-term. How is it paid? Executives are eligible to receive options. In FY2018 and FY2017 options issued were Premium Exercise Price Options (“PEPOs”), being an option to acquire an ordinary share in Metals X for a pre- determined exercise price. The exercise price is calculated as 125% of the volume weighted average price (“VWAP”) of Metals X shares traded on the ASX during the 5 day trading period prior to the day of the grant. How much can executives earn? The MD had a maximum LTI opportunity of 101% (2017: 75%) of total fixed remuneration and other executives had a maximum LTI opportunity of 55% - 83% (2017: 42% - 65%) of total fixed remuneration. The number of options granted were determined using the fair value at the date of grant using a Black and Scholes valuation model, taking into account the terms and conditions upon which the options were granted. How is performance measured? Options are subject to a one year service period performance measure. There are no other performance conditions as it is designated as a retention plan. The options have an exercise price of 125% of the 5 day VWAP of Metals X shares traded on the ASX prior to the day of the grant. When is performance measured? Options will vest when the executive continues to be employed by the Consolidated Entity on the first anniversary of the grant date or as determined by the Board of Directors. What happens if an executive leaves? Executives are able to exercise the options for up to two years after the vesting date before the options lapse. Where an executive ceases to be an employee of the Consolidated Entity:  due to resignation or termination for cause, then any unvested options will automatically lapse on the date of the cessation of employment; or  due to redundancy, ill health, death or other circumstances approved by the Board, the executive will generally be entitled to a pro-rata number of unvested options based on achievement of the performance measures over the performance period up to the date of cessation of employment; and  where an employee ceases employment after the vesting of their options, the options automatically lapse after three months of cessation of employment. unless the Board determines otherwise. What happens if there is a change of control In the event of a change of control, the performance period end date will be brought forward to the date of the change of control and wards will vest based on performance over the shortened period (subject to board discretion). Are executives eligible for dividends Executives are not eligible to receive dividends on unvested options. 19 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 5. PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES Remuneration earned by executives in 2018 The actual remuneration earned by executives in the year ended 30 June 2018 is set out in Table 1. This provides shareholders with a view of the remuneration paid to executives for performance in FY2018. STI performance and outcomes A combination of financial and non-financial measures were used to measure performance for STI rewards. Company performance against those measures is as follows for FY2018: Metric Weighting Actuals Achievement Weighted Achievement AISC relative to budget Production relative to budget Reduction in total injury recordable rate frequency (TRIFR) Copper – 15% Copper - below threshold Copper – 0% Tin – 15% Tin - stretch achieved Tin – 100% Copper – 15% Copper - below threshold Copper – 0% Tin – 15% Tin - between target and stretch Tin – 52% Copper – 15% Copper - stretch achieved Copper – 100% Tin – 15% Tin - between target and stretch Tin – 86% Board Discretion 10% Below threshold 0% Percentage of Maximum STI achieved 0% 15% 0% 8% 15% 13% 0% 51% Based on this assessment, the STI payments for FY2018 to executives were recommended as detailed in the following table: Name Position Achieved STI STI Awarded WS Hallam Managing Director SD Robinson Executive Director AH King Chief Operations Officer FJ Van Maanen Chief Financial Officer and Company Secretary % 51% 51% 51% 51% $ $127,716 $83,293 $77,740 $70,996 Maximum potential award $ $251,850 $164,250 $153,300 $140,000 MR Poepjes and JR Croall did not meet the key performance indicators and were not entitled to the STI for the year ended 30 June 2018. The STI payments, subject to Board approval, are expected to be paid in September 2018. LTI performance and outcomes LTI options granted in FY2017 vested in January 2018. LTI options granted in FY2018 will be subject to a one year vesting period ending in November 2018. In November 2017, after receiving approval from shareholders at the AGM, 8,100,000 options were granted in total to the Executive Directors, Warren Hallam and Stephen Robinson and to other executives. For further details of options granted and vested refer to Table 3 below. 20 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 5. PERFORMANCE AND REMUNERATION OUTCOMES (cont.) Clawback of remuneration In the event of serious misconduct or material misstatement in the Consolidated Entity’s financial statements, the Board has the discretion to reduce, cancel or clawback any unvested short term incentives or long term incentives. Share trading policy The Metals X trading policy applies to all non-executive directors and executives. The policy prohibits employees from dealing in Metals X securities while in possession of material non-public information relevant to the Consolidated Entity. Executives must not enter into any hedging arrangements over unvested long term incentives under the Consolidated Entity’s long term incentive plan. The Consolidated Entity would consider a breach of this policy as gross misconduct, which may lead to disciplinary action and potentially dismissal. Overview of company performance The table below sets out information about Metals X’s earnings and movements in shareholder wealth for the past five years up to and including the current financial year. 30 June 2014 * 30 June 2015 * 30 June 2016 * Closing share price Profit/(loss) per share (cents) Net tangible assets per share Total Shareholder Return $1.04 9.06 $0.75 165% $1.38 9.87 $0.72 35% Dividend paid per shares (cents) 2.715 2.950 * Pre demerger of Westgold Resources Limited. $1.40 (5.21) $0.82 4% - 6. EXECUTIVE EMPLOYMENT ARRANGEMENTS 30 June 2017 $0.67 (17.43) $0.27 12% 1.000 30 June 2018 $0.80 (4.30) $0.28 19% - A summary of the key terms of employment agreements for executives is set out below. There is no fixed term for executive service agreements and all executives are entitled to participate in the Company’s STI and LTI plans. The Company may terminate employment agreements immediately for cause, in which the executive is not entitled to any payment other than the value of fixed remuneration and accrued leave entitlements up to the termination date. Name Base Salary Superannuation Notice Period WS Hallam (Managing Director) $460,000 9.5% 3 months Termination Payment 6 months base salary 6 months base salary 3 months 1 month per NES * 3 months per NES * 1 month per NES * 3 months per NES * SD Robinson (Executive Director) $375,000 JR Croall (General Manager – Nifty Copper Operations) $310,000 AH King (Chief Operations Officer) $350,000 M Recklies (General Manager – Renison Tin Operations) ** FJ Van Maanen (Chief Financial Officer & Company Secretary) $280,000 100% $319,625 9.5% 9.5% 9.5% 9.5% 9.5% * NES are National Employment Standards as defined in the Fair Work Act 2009 (Cth). ** Mr Recklies is the General Manager of the 50% owned Renison Tin Operations Joint Venture. Metals X Limited is responsible for 50% of Mr Recklies remuneration arrangements. 21 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 6. EXECUTIVE EMPLOYMENT ARRANGEMENTS (cont.) Table 1: Remuneration for the year ended 30 June 2018 Remuneration of key management personnel of the Consolidated Entity Non-executive Directors PJ Newton SD Heggen M Jerkovic Y Zhang Executive Directors WS Hallam SD Robinson Other key management personnel JR Croall * AH King ** MR Poepjes M Recklies FJ Van Maanen Totals Short Term Post employment Salary and Fees Cash Bonus Non monetary benefits Superannuation Long term benefits Long service leave Share based Payment Options Total % Performance related 110,000 80,000 80,000 80,000 350,000 478,700 385,625 204,679 350,000 245,980 141,544 312,954 2,119,482 2,469,482 - - - - - 127,716 83,293 - 117,740 - 14,565 70,996 414,310 414,310 - - - - - 7,321 8,426 - 163 4,341 9,932 9,466 39,649 39,649 10,450 7,600 7,600 7,600 33,250 25,000 25,000 19,445 37,050 20,879 14,830 19,300 161,504 194,754 - - - - - 2,732 1,768 - 2,344 - - 1,766 8,610 8,610 - - - - - 120,450 87,600 87,600 87,600 383,250 498,225 185,544 1,139,694 689,656 - 290,007 56,695 - 290,007 224,124 797,304 327,895 180,871 704,489 1,320,478 4,064,033 1,320,478 4,447,283 - - - - 55 39 - 51 17 8 51 * JR Croall was appointed on 2 November 2017 and resigned on 6 July 2018. ** AH King received a $40,000 board discretionary cash bonus in addition to the FY2018 STI award of $77,740. 22 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 6. EXECUTIVE EMPLOYMENT ARRANGEMENTS (cont.) Table 2: Remuneration for the year ended 30 June 2017 Remuneration of key management personnel of the Consolidated Entity Non-executive Directors PJ Newton PM Cmrlec * SD Heggen M Jerkovic X Penggen * Y Zhang ** Executive Directors PG Cook * WS Hallam SD Robinson *** Other key management personnel PD Hucker **** JG Brock **** AH King MR Poepjes M Recklies ** JW Russell **** FJ Van Maanen Totals Short Term Post employment Long term benefits Share based Payment Total Salary and Fees Cash Bonus Non monetary benefits Superannuation Long service leave Performance Rights Options % Performance related 110,000 21,087 80,000 13,333 - 38,485 262,905 265,751 469,967 97,372 133,181 178,794 250,257 288,000 71,286 93,750 348,560 2,196,918 2,459,823 - - - - - - - - - - - - 23,614 - - - - 23,614 23,614 - - - - - - - 3,588 5,656 2,828 4,422 - - 1,994 - 4,676 7,939 31,103 31,103 10,450 2,003 7,600 1,267 - 3,656 24,976 13,474 33,733 9,250 12,652 - 26,018 27,360 6,772 8,906 25,439 163,604 188,580 - - - - - - - - - - - - - - 120,064 13,730 - 9,833 - 819 826,935 592,268 - 341,421 - - 20,545 221,973 - 32,377 9,532 206,900 - 217,895 402,250 2,602,742 - - - - - - - - 188,984 - - - 113,390 56,695 - - 120,450 23,090 87,600 14,600 - 42,141 287,881 1,229,812 1,304,338 109,450 501,509 178,794 414,098 616,567 78,058 357,604 113,390 472,459 907,110 5,697,340 206,900 2,602,742 472,459 5,985,221 - - - - - - 67 60 - 68 - 33 45 - 61 57 * PM Cmrlec, X Penggen, PG Cook resigned on 5 October 2016, 9 January 2017 and 2 February 2017 respectively. ** Y Zhang, M Recklies and M Jerkovic were appointed on 9 January 2017, 24 March 2017 and 1 May 2017 respectively. *** SD Robinson was appointed as a Non-executive Director on 25 November 2016 and was subsequently employed as an Executive Director on 1 May 2017. **** PD Hucker, JD Brock and JW Russell were transferred to Westgold Resources Limited on 1 December 2016 as part of the demerger. 23 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 7. ADDITIONAL STATUTORY DISCLOSURES This section sets out the additional disclosures required under the Corporations Act 2001. Table 3: Options granted and vested during the year (Consolidated) Year Options granted during the year (No.) Grant date Fair value per option at grant date Value of options at grant date $ Vesting date Exercise price Expiry date Options vesting during the period Options lapsed during the year WS Hallam * 2018 2,000,000 22 Nov 2017 $0.25 508,630 22 Nov 2018 $1.32 30 Nov 2020 - WS Hallam ** 2017 2,000,000 24 Nov 2016 SD Robinson * 2018 1,200,000 22 Nov 2017 AH King 2018 1,200,000 23 Nov 2017 $0.19 $0.25 $0.24 377,968 20 Jan 2018 305,178 22 Nov 2018 291,808 23 Nov 2018 $0.76 $1.32 $1.32 20 Jan 2020 2,000,000 30 Nov 2020 30 Nov 2020 - - AH King 2017 1,200,000 20 Jan 2017 $0.19 226,780 20 Jan 2018 $0.76 20 Jan 2020 1,200,000 - - - - - MR Poepjes *** 2018 300,000 23 Nov 2017 $0.24 72,952 23 Nov 2018 $1.32 30 Nov 2020 - 300,000 MR Poepjes 2017 600,000 20 Jan 2017 $0.19 113,390 20 Jan 2018 $0.76 20 Jan 2020 600,000 FJ Van Maanen 2018 1,200,000 23 Nov 2017 $0.24 291,808 23 Nov 2018 $1.32 30 Nov 2020 - FJ Van Maanen 2017 1,200,000 20 Jan 2017 $0.19 226,780 20 Jan 2018 $0.76 20 Jan 2020 1,200,000 - - - * Grant of options was subject to shareholder approval at the Annual General Meeting, which occurred on 22 November 2017. ** Grant of options was subject to shareholder approval at the Annual General Meeting, which occurred on 24 November 2016. *** During the period 300,000 options issued to MR Poepjes lapsed upon his resignation as the options had not vested at that date and were subsequently forfeited. The value of the options at the date of forfeiture was nil as the options had not reached the first exercise date. For details on vesting conditions and valuation of the options, including models and assumptions used, please refer to note 30. The value of the share based payments granted during the period is recognised in compensation over the vesting period of the grant. 24 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 7. ADDITIONAL STATUTORY DISCLOSURES (cont.) Table 4: Shareholdings of key management personnel (including nominees) Shareholdings of Key Management Personnel Ordinary shares held in Metals X Limited (number) 30 June 2017 Directors PJ Newton WS Hallam SD Heggen M Jerkovic SD Robinson Y Zhang Executives JR Croall AH King MR Poepjes M Recklies FJ Van Maanen Total Balance held at 1 July 2017 On exercise of options Net change other ^ Balance held at 30 June 2018 13,883,311 2,121,209 6,689 - 13,500 - - 70,127 190,341 1,467 871,041 17,157,685 - - - - - - - - - - - - 186,906 21,719 - 367,500 31,500 - - 945 (190,341) - (350,000) 14,070,217 2,142,928 6,689 367,500 45,000 - - 71,072 - 1,467 521,041 68,229 17,225,914 ^ Represents acquisitions and disposals of shares on market and shares issued under the dividend reinvestment plan, as well as departures and appointments. 25 DIRECTORS REPORT (Continued) REMUNERATION REPORT (Audited) (cont.) 7. ADDITIONAL STATUTORY DISCLOSURES (cont.) Table 5: Performance right and option holdings of key management personnel (including nominees) 30 June 2017 Options balance at beginning of period 1 July 2017 Options granted as remuneration Options lapsed during the period and forfeited Options balance at end of period 30 June 2018 Options not vested and not exercisable Options vested and exercisable Directors PJ Newton WS Hallam SD Heggen M Jerkovic SD Robinson Y Zhang Executives JR Croall AH King MR Poepjes * M Recklies FJ Van Maanen Total - - 2,000,000 2,000,000 - - - - - - - 1,200,000 - - 1,200,000 600,000 - 1,200,000 300,000 - 1,200,000 1,200,000 - - - - - - - - (300,000) - - - - - 4,000,000 2,000,000 2,000,000 - - - - 1,200,000 1,200,000 - - - - - - - - - 2,400,000 600,000 - 1,200,000 - - 1,200,000 600,000 - 2,400,000 1,200,000 1,200,000 5,000,000 5,900,000 (300,000) 10,600,000 5,600,000 5,000,000 * The 600,000 options balance at 30 June 2018 for MR Poepjes lapsed subsequent to 30 June 2018. End of Audited Remuneration Report. 26 DIRECTORS REPORT (Continued) DIRECTORS’ MEETINGS The number of meetings of Directors’ (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director was as follows: Directors Meetings Audit Committee Remuneration & Nomination Committee No of meetings held: No of meetings attended: WS Hallam SD Heggen M Jerkovic PJ Newton SD Robinson Y Zhang 6 6 6 6 6 6 5 All Directors were eligible to attend all meetings held. Committee Membership 2 - 2 2 2 - - 2 - 2 2 2 - - As at the date of this report, the Company had an Audit Committee and a Remuneration and Nomination Committee of the Board of Directors. Members acting on the committees of the Board during the year were: Audit Committee Remuneration and Nomination Committee SD Heggen * PJ Newton M Jerkovic Notes: PJ Newton * SD Heggen M Jerkovic * Designates the Chairman of the Committee. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Company support and have adhered to the principles of Corporate Governance. The Company’s corporate governance statement is available at the Company’s website at http://metalsx.com.au/about us/corporate governance/. 27 DIRECTORS REPORT (Continued) AUDITOR’S INDEPENDENCE AND NON-AUDIT SERVICES AUDITOR INDEPENDENCE The Directors’ received the Independence Declaration, as set out on page 29, from Ernst & Young. NON-AUDIT SERVICES The following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amounts for the provision of non-audit services (refer to note 33): Tax and stamp duty compliance services $ 211,964 Signed in accordance with a resolution of the Directors. WS Hallam Managing Director Perth, 30 August 2018 28 AUDITOR’S INDEPENDENCE DECLARATION 29 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 Continuing operations Revenue Cost of sales Gross (loss)/profit Other income Other expenses Loss on derivative instruments Fair value change in financial assets Finance costs Impairment loss on available-for-sale financial assets Impairment loss on mine properties and development Exploration and evaluation expenditure written off Loss before income tax from continuing operations Income tax (expense)/benefit Loss for the period from continuing operations Discontinued operations Profit from discontinued operations (Loss)/profit for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss Reclassification of cumulative fair value changes in available-for- sale financial assets previously recognised in equity to the profit and loss on gaining control of the investee, net of tax Changes in the fair value of available-for-sale financial assets, net of tax Other comprehensive loss for the period, net of tax Total comprehensive (loss)/profit for the period (Loss)/profit attributable to: Members of the parent Total comprehensive (loss)/profit attributable to: Members of the parent (Loss)/profit per share for the (loss)/profit attributable to the ordinary equity holders of the parent (cents per share) Basic (loss)/profit per share Continuing operations Discontinued operations Total operations Diluted (loss)/profit per share Continuing operations Discontinued operations Total operations Notes 2018 2017 5 7(a) 6 7(b) 7(c) 7(d) 7(e) 17 19 20 8 40 209,901,427 (217,533,046) (7,631,619) 237,791,187 (230,488,975) 7,302,212 1,182,536 (5,863,468) (10,364,135) (47,300) (1,469,351) (1,748,370) (239,761) (115,718) (26,297,186) 4,868,795 (15,990,414) (1,612,408) 12,371,917 (686,933) (416,758) (72,250,650) (1,243,736) (67,657,975) - (26,297,186) (36,094,768) (103,752,743) - (26,297,186) 237,764,988 134,012,245 - (8,660,342) 29 - - (26,297,186) (546,195) (9,206,537) 124,805,708 (26,297,186) (26,297,186) 134,012,245 134,012,245 (26,297,186) (26,297,186) 124,805,708 124,805,708 9 9 9 9 (4.30) - (4.30) (4.30) - (4.30) (17.43) 39.94 22.51 (17.43) 39.94 22.51 30 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Prepayments Other financial assets Total current assets NON-CURRENT ASSETS Derivative financial instruments Available-for-sale financial assets Property, plant and equipment Mine properties and development costs Exploration and evaluation expenditure Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Derivative financial instruments Provisions Interest bearing loans and borrowings Total current liabilities NON-CURRENT LIABILITIES Provisions Interest bearing loans and borrowings Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Accumulated losses Share based payments reserve Fair value reserve TOTAL EQUITY Notes 2018 2017 11 12 13 14 15 16 17 18 19 20 21 22 23 25 24 26 27 28 29 29 31,234,845 13,676,176 55,278,112 1,421,373 10,311,569 50,125,170 45,046,603 43,638,521 1,250,872 10,858,049 111,922,075 150,919,215 82,950 9,170,714 48,585,729 80,287,603 11,242,392 99,000 9,300,778 40,466,982 77,370,210 4,892,164 149,369,388 132,129,134 261,291,463 283,048,349 31,686,792 1,078,251 6,752,654 4,848,201 44,365,898 29,306,601 - 5,723,077 3,187,557 38,217,235 40,953,035 5,522,351 46,475,386 90,841,284 40,776,282 5,308,678 46,084,960 84,302,195 170,450,179 198,746,154 (115,249,072) 27,350,340 3,762,167 254,586,744 252,511,413 (82,858,477) 25,331,051 3,762,167 170,450,179 198,746,154 31 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 Notes 2018 2017 OPERATING ACTIVITIES Receipts from customers Interest received Other income Payments to suppliers and employees Interest paid Net cash flows from operating activities 11 INVESTING ACTIVITIES Payments for property, plant and equipment Payments for mine properties and development Payments for exploration and evaluation Proceeds from sale of property, plant and equipment Payments for available-for-sale financial assets Payment for derivatives held for trading Advances in relation to interest bearing receivables Net cash inflow on acquisition of subsidiary Net cash outflow on disposal of subsidiary Net cash flows used in investing activities FINANCING ACTIVITIES Payment of finance lease liabilities Payments for dividends Proceeds from share issue Payments for share issue costs Payments for performance bond facility Net cash flows from financing activities 39 40 229,168,725 361,602,427 702,626 472,471 1,796,414 4,817,730 (202,568,449) (340,697,765) (479,543) 27,295,830 (682,151) 26,836,655 (21,011,277) (10,427,201) (18,561,268) (31,698,923) (6,465,944) (14,098,029) 664,621 270,862 (1,618,306) (804,999) (31,250) - - - (500,000) 39,078,178 - (38,889,357) (96,323,551) (122,637,730) (3,831,333) (4,530,084) 532,000 (13,861) 546,480 (7,296,798) (3,706,810) (1,588) 115,639,413 (5,256,827) 67,270 106,741,458 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the period 11 (18,890,325) 10,940,383 50,125,170 31,234,845 39,184,787 50,125,170 32 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 2017 At 1 July 2016 Profit for the year Other comprehensive income, net of tax Total comprehensive (loss)/profit for the year net of tax Transactions with owners in their capacity as owners Dividend on demerger of Westgold (refer to note 40) Share based payments Issue of share capital Share issue costs At 30 June 2017 2018 At 1 July 2017 Loss for the year Other comprehensive income, net of tax Total comprehensive (loss)/profit for the year net of tax Transactions with owners in their capacity as owners Dividend paid Share based payments Issue of share capital Share issue costs At 30 June 2018 Issued capital Accumulated losses Share based payments reserve Fair value reserves Total Equity 407,029,190 (45,666,070) 20,576,509 12,968,704 394,908,333 - - - 134,012,245 - 134,012,245 - - - - 134,012,245 (9,206,537) (9,206,537) (9,206,537) 124,805,708 - - (149,260,950) (5,256,827) (171,204,652) - - - - 4,754,542 - - - - - - (171,204,652) 4,754,542 (149,260,950) (5,256,827) 252,511,413 (82,858,477) 25,331,051 3,762,167 198,746,154 252,511,413 (82,858,477) 25,331,051 3,762,167 198,746,154 - - - (26,297,186) - (26,297,186) - - - - - 2,089,192 (13,861) (6,093,409) - - - - 2,019,289 - - - - - - - - - (26,297,186) - (26,297,186) (6,093,409) 2,019,289 2,089,192 (13,861) 254,586,744 (115,249,072) 27,350,340 3,762,167 170,450,179 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 1. CORPORATE INFORMATION The financial report of Metals X Limited for the year ended 30 June 2018 was authorised for issue in accordance with a resolution of the Directors on 22 August 2018. Metals X Limited (“the Company or the Parent”) is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Consolidated Entity are described in the Directors’ Report. The address of the registered office is Level 5, 197 St Georges Terrace, Perth WA 6000. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritive pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except for available-for-sale investments, derivatives and copper trade receivables, which have been measured at fair value. The accounting policies applied by the Consolidated Entity in these Consolidated Financial Statements are consistent with those applied by the Consolidated Entity in the previous year. In the Consolidated Statement of Comprehensive Income revenue and cost of sales in the comparative period have been restated as follows: i. Concentrate revenue has been adjusted to be presented net of treatment and refining charges, amounting to $26,670,670, which were previously included in cost of sales. The amended presentation is more consistent with the terms of the underlying concentrate sales agreement where treatment and refining changes are included as part of the pricing formula. The adjustment has no impact on gross profit or net profit for the year ended 30 June 2017. The financial report is presented in Australian dollars. (b) Statement of compliance The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board which include International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Adoption of new accounting standards In the current year, the Consolidated Entity has adopted all of the new and amended Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for annual reporting periods beginning on 1 July 2017. Adoption of these Standards and Interpretations, which included the following new and amended standards, did not have any effect on the financial position or the performance of the Consolidated Entity. Reference Title Application date for the Consolidated Entity* AASB 2016-1 AASB 2016-2 AASB 2017-2 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets For Unrealised Losses Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 Amendments to Australian Accounting Standards – Further Annual Improvements 2014- 2016 Cycle 1 July 2017 1 July 2017 1 July 2017 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Adoption of new accounting standards (Continued) Certain new and amended accounting standards and interpretations have been issued that are not mandatory for 30 June 2018 reporting periods. These standards and interpretations have not been early adopted. Application date of standard* Application date for Consolidated Entity* 1 January 2018 1 July 2018 Reference Title Summary Impact on Metals X AASB 9, and relevant amending standards Financial Instruments or an recognition instruments AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement. trade Except certain for receivables, an entity initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs. are Debt subsequently measured at FVTPL, amortised cost, or fair value other through comprehensive income (FVOCI), on the basis of their contractual cash flows (known as the ”SPPI” test) and the business model under which the debt instruments are held. There is a fair value option (FVO) that allows financial assets on be initial to if designated as FVTPL that significantly eliminates reduces accounting mismatch. Equity instruments are generally measured at FVTPL. However, irrevocable entities have an instrument-by- option on an instrument basis to present changes in the fair value of non- in other instruments trading (OCI) comprehensive without subsequent reclassification to profit or loss. For financial liabilities designated as FVTPL using the FVO, the amount of change in the fair value of such financial liabilities that is attributable to changes in credit risk must be presented in OCI. The the change in fair value is presented unless in presentation in OCI of the fair value change in respect of the liability’s credit risk would create or accounting an mismatch in profit or loss. All other AASB 139 classification and measurement requirements for financial liabilities have been carried forward into AASB 9, including embedded the derivative separation rules and the criteria for using the FVO. The incurred credit loss model in AASB 139 has been replaced with an expected credit loss model in AASB 9. The for hedge accounting have been amended to more closely align hedge accounting risk management, establish a more principle-based to hedge accounting and address the hedge inconsistencies accounting model in AASB 139. remainder of requirements approach enlarge income profit loss, with or in 35 The Company will adopt AASB 9 retrospectively from 1 July 2018 and has elected not to restate comparative information. Trade receivables Trade receivables relating to the sale of tin concentrate are currently classified as loans and receivables and measured at amortised cost. These sales are subject to a quotational period price adjustment. On adoption of AASB 9, the tin trade receivables will fail the SPPI test and will be classified as financial assets at fair value through profit and loss. This reclassification is not expected to result in a material measurement adjustment due to the short quotational period between the date of initial recognition of the receivable and the date of the final invoice. The classification of trade receivables relating to the sale of copper concentrate will not change as a result of the adoption of AASB 9 as these receivables are currently carried at fair value through profit and loss. financial Available-for-sale assets The Company holds equity investments that are not held for trading as management intends to hold them for the medium to long term. The Company has elected to classify their equity investments at fair value through profit and loss. On the adoption of AASB 9, the fair value reserve amounting to $3,762,167 at 30 June 2018 will be adjusted through opening retained earnings. Impairment The new impairment model requires the recognition of impairment of financial assets based on expected credit losses rather than incurred credit losses as is the case under AASB 139. Based on the assessments undertaken to date on financial assets carried at amortised cost, the Company does not expect an additional loss allowance to be recognised on adoption of AASB 9. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) Reference Title Summary Impact on Metals X Application date of standard* Application date for Consolidated Entity* 1 January 2018 1 July 2018 AASB 15, and relevant amending standards Revenue from Contracts with Customers AASB 2016-5 – Amendments to Australian Accounting Standards Classification and Measurement of Share- based Payment Transactions and unless customers, Transactions Interpretation AASB 15 replaces all existing revenue requirements in Australian Accounting Standards (AASB 111 Construction Contracts, AASB 118 Revenue, AASB Interpretation 13 Customer Loyalty Programmes, AASB 15 Agreements for the Construction of Real Estate, AASB Interpretation from 18 Transfers of Assets Customers AASB Interpretation 131 Revenue – Barter Involving Advertising Services) and applies to all revenue arising from contracts with the contracts are in the scope of other standards, such as AASB 117 Leases (or AASB 16 Leases, once applied). The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount the that consideration to which an entity expects to be entitled in exchange for those goods or services. An entity in accordance with the core principle by applying the following steps: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price performance the obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation. recognises revenue reflects to The Group plans to adopt AASB 15 using the modified retrospective approach. In this regard the Group will apply AASB 15 retrospectively at 1 July 2018 to those contracts that were not completed contracts at the date of initial application. Based on a review of current sales contracts, the Group has concluded that the only material impact on adoption of AASB the reclassification of the fair value movements on receivables concentrate from to other revenue income and expenses. 15 is and Group impact also The whether considered adjustments made for variations in assay and weight between delivery of product final settlement of concentrate sales would result in a material on revenue recognition. On the recognition initial Group the estimates amount of consideration the receivable expected value approach based on internal assays. As it is highly probable that a significant reversal in the amount of revenue initially recognised will not occur due to variations in assay and weight no adjustment to current practice is anticipated on adoption of AASB 15. using Shipping services provided to a customer after the customer obtains control of the product will represent separate a performance obligation as it represents a service that is distinct from the selling of The concentrate. Company recognises that on certain sales shipping will be treated as a performance separate obligation recognised over time, but the impact on revenue recognition is not material. There will be no material impact. 1 January 2018 1 July 2018 This Standard amends AASB 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The provide requirements on the accounting for: ► The effects of vesting and non- vesting conditions on the measurement of cash-settled share-based payments amendments ► Share-based transactions with settlement withholding tax obligations feature payment net a for 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) Reference Title Summary Impact on Metals X Application date of standard* Application date for Consolidated Entity* AASB 2017-1 – of Amendments to Australian Accounting Standards Transfers Investments Property, Annual Improvements 2014-2016 Cycle Other Amendments and AASB Interpretation 22 Foreign Currency Transactions and Consideration Advance AASB 16 Leases ► A modification to the terms and conditions of a share-based payment the classification of the transaction from cash-settled to equity- settled. that changes The amendments clarify certain requirements in: ► AASB 1 First-time Adoption of Accounting Australian Standards – deletion of exemptions first-time adopters and addition of an exemption arising from AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration for There will be no material impact. 1 January 2018 1 July 2018 ► AASB 12 Disclosure of Interests in Other Entities – clarification of scope Investments ► AASB 128 in Associates and Joint Ventures – measuring an associate or joint venture at fair value ► AASB 140 Investment Property – change in use. There will be no material impact. 1 January 2018 1 July 2018 liability relating The Interpretation clarifies that in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non- monetary to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary non- monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the entity must determine a date of the transaction for each payment or receipt of advance consideration. asset or then 1 January 2019 1 July 2019 (other leases AASB Leases 16 eliminates the distinction between operating and finance leases, and brings all than short term leases) onto the balance sheet. The standard does not apply 1 mandatorily January The Group has yet to fully assess the impact on the Group’s financial results when it is first adopted for the year ending 30 June 2020. before 2019. or At two less). lessees AASB 16 to requires account for all leases under a single on- balance sheet model in a similar way to finance leases under AASB 117 Leases. The standard recognition includes exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). to Lessees will be separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those lessee will The payments). generally recognise the amount of the remeasurement of the lease required required 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) Reference Title Summary Impact on Metals X Application date of standard* Application date for Consolidated Entity* from liability as an adjustment to the right-of-use asset. Lessor accounting is substantially unchanged today’s accounting under AASB 117. Lessors will continue to classify all leases same classification principle as in AASB 117 and distinguish between two types of leases: operating and finance leases. using the There will be no material impact. 1 January 2019 1 July 2019 AASB 2017-7 Amendments to Australian Accounting Standards Long-term Interests in Associates and Joint Ventures – This Standard amends AASB 128 Investments in Associates and Joint Ventures to clarify that an entity is required to account for long- term interests in an associate or joint venture, which in substance form part of the net investment in the associate or joint venture but to which the equity method is not applied, using AASB 9 Financial Instruments before applying the impairment loss allocation and requirements in AASB 128. AASB 2018-1 Annual Improvements to IFRS Standards 2015- 2017 Cycle AASB 2018-2 Amendments to Australian Accounting Standards Plan Amendment, Curtailment Settlement or – AASB Interpretation 23, and relevant amending standards Uncertainty over Income Tax Treatments The Company is still assessing whether there will be any material impact. 1 January 2019 1 July 2019 The Company is still assessing whether there will be any material impact. 1 January 2019 1 July 2019 is still The Company assessing whether there will be any material impact. 1 January 2019 1 July 2019 The amendments clarify certain requirements in: ► AASB Business Combinations and AASB 11 Joint - previously held interest in a joint operation Arrangements 3 ► AASB 112 Income Taxes - income tax consequences of financial on payments instruments as classified equity ► AASB 123 Borrowing Costs - borrowing costs eligible for capitalisation. during curtailment This Standards amends AASB 119 Employee Benefits to specific how an entity accounts for defined benefit plans when a plan or amendment, settlement a occurs reporting period. The amendments: ► Require entities to use the actuarial updated assumptions to determine current service cost and net interest for the remainder of the annual reporting period after such an event occurs ► Clarify that when such an event occurs, an entity recognises the past service cost or a gain or loss on settlement separately from its assessment of the asset ceiling. the Interpretation clarifies The application of the recognition and measurement criteria in AASB 112 is Income Taxes when income uncertainty tax over Interpretation treatments. The the specifically following: ► Whether an entity considers treatments addresses there tax uncertain separately ► The assumptions an entity makes about the examination of tax treatments by taxation authorities 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) Reference Title Summary Impact on Metals X Application date of standard* Application date for Consolidated Entity* Conceptual Framework for Conceptual Framework Financial Reporting ‡‡, and relevant amending ► How an entity determines taxable profit (tax loss), tax bases, unused losses, unused tax credits and tax rates tax ► How an entity considers changes and in circumstances. facts revised Conceptual The includes some new Framework concepts, updated provides definitions and recognition criteria for assets and liabilities and clarifies some important concepts. It is arranged in eight chapters, as follows: ► Chapter 1 – The objective of financial reporting ► Chapter 2 – Qualitative useful characteristics of financial information There will be no material impact. 1 March 2018 1 March 2018 ► Chapter 3 Financial statements and the reporting entity – ► Chapter 4 – The elements of financial statements ► Chapter 5 – Recognition and derecognition ► Chapter 6 – Measurement ► Chapter 7 – Presentation and disclosure ► Chapter 8 – Concepts of capital and capital maintenance to in order Framework. Amendments to References to the Conceptual Framework in IFRS Standards has also been issued, which sets out the amendments to affected standards to update references to the revised Conceptual The the Conceptual changes Framework may the affect application of IFRS in situations where no standard applies to a particular transaction or event. In addition, relief has been provided in applying IFRS 3 and developing accounting policies for regulatory account balances using IAS 8, such that entities must continue to apply the definitions of an asset and a liability (and supporting concepts) in the 2010 Conceptual Framework, and not the definitions in revised Conceptual the Framework. The Company is still assessing whether there will be any material impact. 1 January 2021 1 July 2021 AASB 17 Insurance Contracts Conceptual Framework for Financial Reporting ‡‡‡‡, relevant amending standards and 1038 for insurance and AASB 17 replaces AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and Life Insurance AASB for-profit entities. Contracts AASB 17 applies to all types of insurance contracts (i.e., life, non- life, direct re- insurance), regardless of the type of entities that issue them, as well to certain guarantees and as with instruments financial discretionary participation features. The core of AASB 17 is the General (building Model, block) supplemented by: ► A specific adaptation with contracts participation (Variable Fee Approach) for direct features 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) Reference Title Summary Impact on Metals X Application date of standard* Application date for Consolidated Entity* ► A simplified approach mainly for short-duration contracts (Premium Allocation Approach). for The main features of the new accounting model insurance contracts are: ► A measurement of the present value of future cash flows, incorporating an explicit risk remeasured adjustment, every reporting period (the fulfilment cash flows) of that ► A Contractual Service Margin (CSM) is equal and opposite to any day one gain in the fulfilment cash flows of a contracts, group representing the unearned profitability of the insurance contract to be recognised in profit or loss over the service period (i.e., coverage period) the changes expected present value of future cash flows are adjusted against the CSM and thereby recognised in profit or loss over the remaining contract service period ► Certain in The Company is still assessing whether there will be any material impact. 1 January 2022 1 July 2022 AASB 2014-10 Amendments to Australian Accounting – Standards Sale or Contribution of Assets between an Investor and its Associate or Joint Venture ► The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income, determined by an accounting policy choice. the sale from The amendments clarify that a full gain or loss is recognised when a transfer to an associate or joint venture involves a business as defined in AASB 3 Business Combinations. Any gain or loss resulting or contribution of assets that does not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the associate or joint venture. the AASB 2015-10 mandatory date (application date) of AASB 2014-10 the amendments were so required to be applied for annual reporting periods beginning on or after 1 January 2018 instead of 1 January 2016. AASB 2017-5 further defers the effective date of the amendments made in AASB 2014- 10 to periods beginning on or after 1 January 2022.* deferred effective that ‡ The IASB issued the revised conceptual framework on 29 March 2018. As at the date of this publication, the AASB are yet to issue the equivalent pronouncement. * In December 2015, the IASB postponed the effective date of the amendments indefinitely pending the outcome of its research project on the equity method of accounting. 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (c) Changes in accounting policy The accounting policies used in the preparation of these financial statements are consistent with those used in previous years, except as stated in note 2(b). (d) Basis of consolidation The consolidated financial statements comprise the financial statements of the parent entity and its subsidiaries ('the Consolidated Entity') as at 30 June each year. Control is achieved when the Consolidated Entity is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Consolidated Entity controls an investee if and only if the Consolidated Entity has:  Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)  Exposure, or rights, to variable returns from its involvement with the investee, and  The ability to use its power over the investee to affect its returns When the Consolidated Entity has less than a majority of the voting or similar rights of an investee, the Consolidated Entity considers all relevant facts and circumstances in assessing whether it has power over an investee, including:  The contractual arrangement with the other vote holders of the investee  Rights arising from other contractual arrangements  The Consolidated Entity’s voting rights and potential voting rights The Consolidated Entity re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Consolidated Entity obtains control over the subsidiary and ceases when the Consolidated Entity loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Consolidated Entity gains control until the date the Consolidated Entity ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Consolidated Entity and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Consolidated Entity’s accounting policies. All intra- Consolidated Entity assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Consolidated Entity are eliminated in full on consolidation. (e) Foreign currency translation (i) Functional and presentation currency Both the functional and presentation currency of the Company and its Australian subsidiaries is Australian dollars (A$). (ii) Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the reporting date. All exchange differences in the consolidated financial report are taken to the profit or loss. (f) Operating segments An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of directors. Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive management team. The Consolidated Entity aggregates two or more operating segments when they have similar economic characteristics. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category for “all other segments”. 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (g) Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short- term deposits that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest bearing loans and borrowings in the current liabilities on the statement of financial position. (h) Trade and other receivables On initial recognition copper trade receivables are designated as fair value through profit and loss (refer to note 2(y)), accordingly these trade receivables are measured at fair value as at reporting date. Credit balances are reclassified to trade and other payables. The majority of copper sales revenue is invoiced and received in US dollars. In the case of copper concentrate, on presentation of documents the customer settles 90% of the provisional invoice value within 3-5 days of receipt of consignment and the remaining 10% is settled within 3-5 days of presentation of the final invoice at the end of the quotational period. Tin trade receivables and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less an allowance for impairment. Collectability of tin trade receivables and other receivables carried at amortised cost is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An impairment allowance is recognised when there is objective evidence that the Consolidated Entity will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. (i) Inventories Inventories are valued at the lower of cost and net realisable value. Cost includes expenditure incurred in acquiring and bringing the inventories to their existing condition and location and is determined using the weighted average cost method. (j) Derivative financial instruments and hedging The Consolidated Entity uses derivative financial instruments to manage commodity price exposures. Such derivative financial instruments are initially recorded at fair value on the date on which the derivative contract is entered into and are subsequently remeasured to fair value. Certain derivative instruments are also held for trading for the purpose of making short term gains. None of the derivatives qualify for hedge accounting and changes in fair value are recognised immediately in profit or loss in other revenue and expenses. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. (k) Joint arrangements Joint arrangements are arrangements over which two or more parties have joint control. Joint Control is the contractual agreed sharing of control of the arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Joint arrangements are classified as ether a joint operation or a joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the arrangement. To the extent the joint arrangement provides the Consolidated Entity with rights to the individual assets and obligations arising from the joint arrangement, the arrangement is classified as a joint operation and as such, the Consolidated Entity recognises its: • Assets, including its share of any assets held jointly • Liabilities, including its share of liabilities incurred jointly; • Revenue from the sale of its share of the output arising from the joint operation; • Share of revenue from the sale of the output by the joint operation; and • Expenses, including its share of any expenses incurred jointly To the extent the joint arrangement provides the Consolidated Entity with rights to the net assets of the arrangement, the investment is classified as a joint venture and accounted for using the equity method. Under the equity method, the cost of the investment is adjusted by the post-acquisition changes in the Consolidated Entity’s share of the net assets of the joint venture. 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (l) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. (m) Rehabilitation costs The Consolidated Entity is required to decommission and rehabilitate mines and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities. The expected cost of any approved decommissioning or rehabilitation programme, discounted to its net present value, is provided when the related environmental disturbance occurs. The cost is capitalised when it gives rise to future benefits, whether the rehabilitation activity is expected to occur over the life of the operation or at the time of closure. The capitalised cost is amortised over the life of the operation and the increase in the net present value of the provision for the expected cost is included in financing expenses. Expected decommissioning and rehabilitation costs are based on the discounted value of the estimated future cost of detailed plans prepared for each site. Where there is a change in the expected decommissioning and restoration costs, the value of the provision and any related asset are adjusted and the effect is recognised in profit or loss on a prospective basis over the remaining life of the operation. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by potential proceeds from the sale of assets or from plant clean up at closure. (n) Available-for-sale investments All available-for-sale investments are initially recognised at fair value plus directly attributable transaction costs. Available-for-sale investments are those non-derivative financial assets, principally equity securities that are designated as available-for-sale. Investments are designated as available-for-sale if they do not have fixed maturities and fixed and determinable payments and management intends to hold them for the medium to long term. After initial recognition, available-for-sale investments are measured at fair value. Gains or losses are recognised in other comprehensive income and presented as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in profit or loss. The fair value of investments that are actively traded in organised markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair value is determined using valuation techniques. Such valuation techniques include using recent arm’s length transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. Where fair value cannot be reliably measured for certain unquoted investments, these investments are measured at cost. (o) Business combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition- date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the appropriate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. When the Consolidated Entity acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Consolidated Entity’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in the host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured and subsequent settlement is accounted for within equity. In instances, where the contingent consideration does not fall within the scope of AASB 139, it is measured in accordance with the appropriate AASB. 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the fair value of the identifiable net assets acquired and liabilities assumed. If this consideration is lower than the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Consolidated Entity’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained. (p) Property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value. Capital work-in-progress is stated at cost and comprises all costs directly attributable to bringing the assets under construction ready to their intended use. Capital work-in-progress is transferred to property, plant and equipment at cost on completion. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset, or where appropriate, over the estimated life of the mine. Major depreciation periods are: • Mine specific plant and equipment is depreciated using – the shorter of life of mine and useful life. Useful life ranges from 2 to 10 years. • • Buildings – the shorter of life of mine and useful life. Useful life ranges from 5 to 40 years. Office Plant and equipment is depreciated at 33% per annum for computers and office machines and 20% per annum for other office equipment and furniture. Impairment The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. Refer to note 2(t) for further discussion on impairment testing performed by the Consolidated Entity. Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the profit and loss in the period the item is derecognised. (q) Exploration and evaluation expenditure Expenditure on acquisition, exploration and evaluation relating to an area of interest is carried forward at cost where rights to tenure of the area of interest are current and; i) ii) it is expected that expenditure will be recouped through successful development and exploitation of the area of interest or alternatively by its sale and/or; exploration and evaluation activities are continuing in an area of interest but at reporting date have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Where uncertainty exists as to the future viability of certain areas, the value of the area of interest is written off to the profit and loss or provided against. Impairment The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment regularly and if after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely or that the Consolidated Entity no longer holds tenure, the relevant capitalised amount is written off to profit or loss in the period when the new information becomes available. 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (r) Mine properties and development Expenditure on the acquisition and development of mine properties within an area of interest are carried forward at cost separately for each area of interest. Accumulated expenditure is amortised over the life of the area of interest to which such costs relate on a production output basis. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Impairment The carrying value of capitalised mine properties and development expenditure is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Refer to note 2(t) for further discussion on impairment testing performed by the Consolidated Entity. (s) Non-current assets and disposal groups held for sale and discontinued operations Non-current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction. They are not depreciated or amortised. For an asset or disposal group to be classified as held for sale it must be available for immediate sale in its present condition and its sale must be highly probable. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but is not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised as the date of derecognition. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of comprehensive income and the assets and liabilities are presented separately on the face of the statement of financial position. (t) Impairment of non-financial assets The Consolidated Entity assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Consolidated Entity estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. The Consolidated Entity bases its impairment calculation on detailed budgets and forecasts, which are prepared separately for each of the Consolidated Entity’s CGUs to which the individual assets are allocated, based on the life-of-mine plans. The estimated cash flows are based on expected future production, metal selling prices, operating costs and forecast capital expenditure based on life-of-mine plans. Value in use does not reflect future cash flows associated with improving or enhancing an asset’s performance, whereas anticipated enhancements to assets are included in fair value less costs of disposal calculations. Impairment losses of continuing operations, including impairment on inventories, are recognised in the profit and loss. For such properties, the impairment is recognised in other comprehensive income up to the amount of any previous revaluation. For assets, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Consolidated Entity estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) (u) Trade and other payables Trade payables and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year that are unpaid and arise when the Consolidated Entity becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and usually paid within 30 days of recognition. (v) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Borrowings are classified as current liabilities unless the Consolidated Entity has the unconditional right to defer settlement of the liability for at least 12 months after the reporting date. (w) Provisions Provisions are recognised when the Consolidated Entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. (x) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. (i) Operating Leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense in profit and loss on a straight-line basis over the lease term. Contingent rentals are recognised as an expense in the financial year in which they are incurred. (ii) Finance Leases Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the Consolidated Entity are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit and loss. Capitalised leased assets are depreciated over the estimated useful life of the asset or where appropriate, over the estimated life of the mine. The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter. (y) Revenue Revenue is measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Copper sales Revenue from copper production is recognised when the significant risks and rewards of ownership have passed to the buyer. Sales revenue is subject to adjustment based on final assay results. In addition, the terms of the sales contracts for copper concentrate contain provisional pricing arrangements. Adjustments to the sales price are based on movements in metal prices up to the date of final pricing. Final settlement is between 2 and 4 months after the date of delivery (the “quotational period”) with pricing based on the average LME copper price for the month of settlement. The revenue adjustment mechanism embedded within the sales contract has the characteristics of a commodity derivative which significantly modifies the cash flows under the contract. The Consolidated Entity has decided to designate the trade receivables arising on initial recognition of these sales transaction as a financial asset at fair value through profit and loss and not separately account for the embedded derivative. Accordingly, the fair value of the receivable is re-estimated continuously and changes in fair value recognised as an adjustment to revenue in the consolidated statement of comprehensive income. 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Tin and Gold sales Revenue from tin and gold production is recognised when the significant risks and rewards of ownership have passed to the buyer. In addition, the terms of the sales contracts for tin concentrate contain provisional pricing arrangements. Adjustments to the sales price are based on movements in metal prices up to the date of final pricing. Final settlement is between 11 and 46 days after the date of delivery (the “quotational period”) with pricing based on the average LME or KLTM tin price for the month of settlement. The revenue adjustment mechanism embedded within the sales contract has the characteristics of a commodity derivative which is bifurcated from the trade receivable. The fair value movements in this embedded derivative are re-estimated continuously and changes in fair value recognised as an adjustment to revenue in the consolidated statement of comprehensive income. Interest income Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (z) Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent adjusted for: • • cost of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised; and other non-discriminatory changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; • divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (aa) Issued capital Issued and paid up capital is recognised at the fair value of the consideration received by the Consolidated Entity. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in the proceeds received. (ab) Share-based payment transactions The Consolidated Entity provides benefits to employees (including Directors) in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The Consolidated Entity has one plan in place that provides these benefits. It is the Long Term Incentive Plan (“LTIP”) which provides benefits to all employees including Directors. In valuing equity-settled transactions, no account is taken of any vesting conditions (such as service conditions), other than conditions linked to the price of the shares of Metals X Limited (market conditions) if applicable. The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using a Black & Scholes model. Further details of which are given in note 30. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period. The charge to profit and loss for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity. Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not the market condition is fulfilled, provided that all other conditions are satisfied. If a non-vesting condition is within the control of the Consolidated Entity, Company or the employee, the failure to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control of neither the Consolidated Entity, Company nor employee is not satisfied during the vesting period, any expense for the award not previously recognised is recognised over the remaining vesting period, unless the award is forfeited. 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of dilutive earnings per share. (ac) Onerous operating lease provision A provision for an onerous operating lease is recognised when the expected benefits to be derived from the lease are lower than the unavoidable cost of meeting the obligations under the lease. The provision is measured at the lesser of the present value of the expected net cost of continuing with the lease and any amount agreed between the lessor and the lessee to terminate the lease. (ad) Employee benefits (i) Wages, salaries, sick leave and other short-term benefits Liabilities for wages and salaries, including non-monetary benefits, accumulating sick leave and other short term benefits expected to be settled wholly within 12 months of the reporting date are recognised in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. (ii) Long service leave The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. (iii) Superannuation Contributions made by the Consolidated Entity to employee superannuation funds, which are defined contribution plans, are charged as an expense when incurred. (ae) Income tax The Consolidated Entity entered into a tax Consolidated Entity as of 1 July 2004. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised except: • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of the deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. 48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised income taxes are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the profit and loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation legislation Metals X Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2004. The head entity, Metals X Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Consolidated Entity has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. (af) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of amounts of GST recoverable from, or payable to, the taxation authority. 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identified the following critical accounting policies for which significant judgements have been made as well as the following key estimates and assumptions that have the most significant impact on the financial statements. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements. (i) Significant judgments made in applying accounting policies • Impairment of available-for-sale-investments In determining the amount of impairment of financial assets, the Consolidated Entity has made judgments in identifying financial assets whose decline in fair value below cost is considered “significant” or “prolonged”. A significant decline is assessed based on the historical volatility of the share price. The higher the historical volatility, the greater the decline in fair value required before it is likely to be regarded as significant. A prolonged decline is based on the length of time over which the share price has been depressed below cost. A sudden decline followed by immediate recovery is less likely to be considered prolonged compared to a sustained fall of the same magnitude over a longer period. 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (cont.) The Consolidated Entity considers a less than a 10% decline in fair value is unlikely to be considered significant for investments actively traded in a liquid market, whereas a decline in fair value of greater than 20% will often be considered significant. For less liquid investments that have historically been volatile (standard deviation greater than 25%), a decline of greater than 30% is usually considered significant. Generally, the Consolidated Entity does not consider a decline over a period of less than three months to be prolonged. However, where the decline in fair value is greater than six months for liquid investments and 12 months for illiquid investments, it is usually considered prolonged. (ii) Significant accounting estimates and assumptions • Determination of mineral resources and ore reserves The determination of reserves impacts the accounting for asset carrying values, depreciation and amortisation rates and provisions for mine rehabilitation. The Consolidated Entity estimates its mineral resource and reserves in accordance with the Australian code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (the “JORC code”). The information on mineral resources and ore reserves were prepared by or under the supervision of Competent Persons as defined in the JORC code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC code. There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated. (ii) Significant accounting estimates and assumptions (Continued) • Mine rehabilitation provision The Consolidated Entity assesses its mine rehabilitation provision on an annual basis in accordance with the accounting policy stated in note 2(m). In determining an appropriate level of provision, consideration is given to the expected future costs to be incurred, the timing of those future costs (largely dependent on the life of mine) and the estimated level of inflation. The ultimate rehabilitation costs are uncertain, and cost estimates can vary in response to many factors, including estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflation rates, and changes in discount rates. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. Therefore, significant estimates and assumptions are made in determining the provision for mine rehabilitation. As a result, there could be significant adjustments to the provisions established which would affect future financial result. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required. • Life of mine method of amortisation and depreciation The Consolidated Entity applies the life of mine method of amortisation and depreciation to its mine specific plant and to mine properties and development based on ore tonnes mined. These calculations require the use of estimates and assumptions. Significant judgement is required in assessing the available reserves and the production capacity of the plants to be depreciated under this method. Factors that are considered in determining reserves and production capacity are the Consolidated Entity’s history of converting resources to reserves and the relevant time frames, the complexity of metallurgy, markets and future developments. When these factors change or become known in the future, such differences will impact pre tax profit and carrying values of assets. Refer to note 19 for discussion on change in estimates in current year. • Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Consolidated Entity decides to exploit the related area interest itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made. 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (cont.) In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the period in which this determination is made. • Impairment of capitalised mine development expenditure The future recoverability of capitalised mine development expenditure is dependent on a number of factors, including the level of proved, probable and inferred mineral resources, future technological changes, which could impact the cost, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. The Consolidated Entity regularly reviews the carrying values of its mine development assets in the context of internal and external consensus forecasts for commodity prices and foreign exchange rates, with the application of appropriate discount rates for the assets concerned. To the extent that capitalised mine development expenditure is determined not to be recoverable in the future, this will reduce profit in the period in which this determination is made. Capitalised mine development expenditure is assessed for recoverability in a manner consistent with property, plant and equipment as described below. Refer to note 2(r) for further discussion on the impairment assessment process undertaken by the Consolidated Entity. (ii) Significant accounting estimates and assumptions (Continued) • Impairment of property, plant and equipment Property, plant and equipment is reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of “value in use” (being net present value of expected future cash flows of the relevant cash generating unit) and “fair value less costs to sell”. In determining the value in use, future cash flows for each cash generating unit (CGU) (i.e. each mine site) are prepared utilising managements latest estimates of; • the quantities of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction; • • • • • royalties and taxation; future production levels; future commodity prices; future cash costs of production; and other relevant cash inflows and outflows. Cash flow scenarios for a range of commodity prices and foreign exchange rates are assessed using internal and external market forecasts, and the present value of the forecast cash flows. The Consolidated Entity’s cash flows are most sensitive to movements in commodity price, expected quantities of ore reserves and mineral resources and key operating costs. In particular, the Renison Tin Project’s forecasted cash flows are most sensitive to variations in the commodity prices and the Higginsville and Central Murchison Gold Operations are most sensitive to expected quantities of ore reserves and mineral resources to be extracted and therefore the estimated future cash inflows resulting from the sale of product produced is dependent on these assumptions. Variations to the expected cash flows, and the timing thereof, could result in significant changes to any impairment losses recognised, if any, which in turn could impact future financial results. Refer to Note 2(t) for further discussion on the impairment assessment process undertaken by the Consolidated Entity. 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Consolidated Entity’s principal financial instruments comprise receivables, payables, finance lease and hire purchase contracts, cash and short-term deposits, and available-for-sale investments. Risk exposures and responses The Consolidated Entity manages its exposure to key financial risks in accordance with the Consolidated Entity’s financial risk management policy. The objective of the policy is to support the delivery of the Consolidated Entity’s financial targets while protecting future financial security. 51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.) The Consolidated Entity enters into derivative transactions, principally zero cost collar put and call options. The purpose is to manage the commodity price risks arising from the Consolidated Entity’s operations. These derivatives provide economic hedges, but do not qualify for hedge accounting and are based on limits set by the board. The main risks arising from the Consolidated Entity’s financial instruments are interest rate risk, foreign currency risk, commodity risk, credit risk, equity price risk and liquidity risk. The Consolidated Entity uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate, foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange and commodity prices. Ageing analysis of and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. The board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below, including for interest rate risk, credit allowances and cash flow forecast projections. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements. The accounting classification of each category of financial instruments as defined in note 2, and their carrying amounts, are set out below: (a) Interest rate risk The Consolidated Entity’s exposure to risks of changes in market interest rates relate primarily to the Consolidated Entity’s interest bearing liabilities and cash balances. The level of debt is disclosed in notes 25 and 26. The Consolidated Entity’s policy is to manage its interest cost using fixed rate debt. Therefore, the Consolidated Entity does not have any variable interest rate risk on its debt. The Consolidated Entity constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing positions and the mix of fixed and variable interest rates. The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. The sensitivity analysis is for variable rate cash balances. At 30 June 2018, if interest rates had moved by a reasonably possible 0.25%, as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Post tax profit higher/(lower) 2018 2017 Other Comprehensive Income higher/(lower) 2018 2017 Judgements of reasonably possible movements: + 0.25% (25 basis points) - 0.25% (25 basis points) 37,148 (37,148) 46,883 (46,883) - - - - A sensitivity of +0.25% or -0.25% has been selected as this is considered reasonable given the current level of short-term and long-term Australian dollar interest rates. The movements in profit are due to possible higher or lower interest income from variable rate cash balances. The sensitivity is lower in 2018 than 2017 due to a decrease in the balance of cash and cash equivalents held in variable interest rate accounts in 2018. At the reporting date the Consolidated Entity’s exposure to interest rate risk for classes of financial assets and financial liabilities is set out below. 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.) 2018 Financial Assets Cash and cash equivalents Trade and other receivables Other financial assets Floating interest rate Fixed interest Non-Interest bearing Total carrying amount 21,227,486 - - 15,000 - 10,311,569 9,992,359 6,873,420 - 31,234,845 6,873,420 10,311,569 21,227,486 10,326,569 16,865,779 48,419,834 Financial Liabilities Trade and other payables Interest bearing liabilities Net financial assets/(liabilities) 2017 Financial Assets Cash and cash equivalents Trade and other receivables Other financial assets Financial Liabilities Trade and other payables Interest bearing liabilities Net financial assets/(liabilities) (b) Credit risk - - - - (10,370,552) (31,686,792) - (31,686,792) (10,370,552) (10,370,552) (31,686,792) (42,057,344) 6,362,490 Total carrying amount Floating interest rate Fixed interest Non-Interest bearing 26,790,352 - - 65,000 - 10,858,049 23,269,818 35,892,316 - 50,125,170 35,892,316 10,858,049 26,790,352 10,923,049 59,162,134 96,875,535 - - - - (8,496,235) (29,306,601) - (29,306,601) (8,496,235) (8,496,235) (29,306,601) (37,802,836) 59,072,699 Credit risk arises from the financial assets of the Consolidated Entity, which comprises cash and cash equivalents, trade and other receivables, other financial assets held as security and loans. Cash and cash equivalents are held with National Australia Bank which is an Australian Bank with an AA- credit rating (Standard & Poor’s). The Consolidated Entity’s exposure to credit risk arises from potential default of the counter party, with the maximum exposure equal to the carrying amount of the financial assets (as outlined in each applicable note). The Consolidated Entity does not hold any credit derivatives to offset its credit exposure. The Consolidated Entity trades only with recognised, creditworthy third parties and as such collateral is not requested nor is it the Consolidated Entity’s policy to securitise its trade and other loans and receivables. Receivable balances are monitored on an ongoing basis with the result that the Consolidated Entity does not have a significant exposure to bad debts. Significant concentrations of credit risk are in relation to cash and cash equivalents with Australian banks. 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.) (c) Price risk Equity Security Price Risk The Consolidated Entity’s revenues are exposed to equity security price fluctuations arising from investments in equity securities. At 30 June 2018, if equity security prices had moved by a reasonably possible 20%, as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Post tax profit higher/(lower) Other Comprehensive Income higher/(lower) 2018 2017 2018 2017 Judgements of reasonably possible movements: Price + 20% Price - 20% * - (1,289,150) - (1,302,109) 1,289,150 - 1,302,109 - * Provided the decline is below cost and is significant or prolonged. A sensitivity of +20% or -20% has been selected as this is considered reasonable given recent fluctuations in equity prices and management’s expectations of future movements. The movements in other comprehensive income are due to possible higher or lower equity security prices from investments in equity securities that are classified as available-for-sale financial assets (refer to note 2(n)). The overall sensitivity for post-tax profits and equity in 2018 is similar to 2017 due to the market value of the underlying securities being the same for both financial years (refer to note 17). (d) Foreign currency risk As a result of tin and copper sales receipts being denominated in US dollars, the Consolidated Entity’s cash flows can be affected by movements in the US dollar/Australian dollar exchange rate. At the balance date the Consolidated Entity had the following exposure to US dollar foreign currency: Cash and cash equivalents Trade and other receivables 2018 2017 9,992,359 2,048,186 12,040,545 23,269,818 31,096,630 54,366,448 At 30 June 2018, if foreign currency rates had moved by a reasonably possible 10%, as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Post tax profit higher/(lower) 2018 2017 Other Comprehensive Income higher/(lower) 2018 2017 Judgements of reasonably possible movements: A$/US$ Price +10% A$/US$ Price -10% 1,204,055 (1,204,055) 5,436,645 (5,436,645) - - - - A sensitivity of +10% or -10% has been selected as this is considered reasonable given recent fluctuations in foreign currency rates and management’s expectations of future movements. The overall sensitivity for post-tax profits in 2018 is lower than 2017 due to a decrease in the value exposed to fluctuations in US dollar foreign currency. (e) Commodity price risk The Consolidated Entity’s revenues are exposed to commodity price fluctuations. Periodically the Consolidated Entity enters into contracts to manage commodity price risk. 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.) (e) Commodity price risk (continued) Gross value of open copper concentrate positions * Derivative financial instruments ** 2018 2017 30,601,768 (1,078,251) 29,523,517 58,584,329 - 58,584,329 * This relates to the provisional amount of copper tonnes remaining open to price adjustments (gross sales). Refer to note 12 for the open quantity. ** This relates to a forward commodity option over 1,500 tonnes of copper maturing in July 2018. The put has a strike price of $7,800 per tonne of LME copper and the call has a strike price of $8,255 per tonne of LME copper (refer to note 22). At 30 June 2018, if commodity prices had moved by a reasonably possible 10%, as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Post tax profit higher/(lower) Other Comprehensive Income higher/(lower) 2018 2017 2018 2017 Judgements of reasonably possible movements: Copper prices +10% Copper prices -10% 2,952,352 (2,952,352) 5,858,433 (5,858,433) - - - - A sensitivity of +10% or -10% has been selected as this is considered reasonable given recent fluctuations in commodity prices and management’s expectations of future movements. The overall sensitivity for post-tax profits in 2018 is lower than 2017 due to a decrease in the value exposed to fluctuations in commodity prices. (f) Liquidity risk Liquidity risk arises from the financial liabilities of the Consolidated Entity and the subsequent ability to meet the obligations to repay the financial liabilities as and when they fall due. The Consolidated Entity’s objective is to maintain a balance between continuity of funding and flexibility through the use of finance and hire purchase leases. The table below reflects all contractually fixed payables and receivables for settlement, repayment and interest resulting from recognised financial assets and liabilities, including derivative financial instruments as of 30 June 2018. For derivative financial instruments the market value is presented, whereas for the other obligations the respective undiscounted cash flows for the respective upcoming fiscal years are presented. Cash flows for financial assets and liabilities without fixed amount or timing are based on the conditions existing as 30 June. The remaining contractual maturities of the Consolidated Entity’s financial liabilities are: 6 months or less 6 - 12 months 1 - 5 years Over 5 years 2018 2017 (34,328,510) (2,422,226) (5,768,093) - (42,518,829) (30,958,079) (1,660,898) (5,516,557) - (38,135,534) Maturity analysis of financial assets and liabilities based on management’s expectation. The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as property, plant, equipment and investments of working capital e.g. inventories and trade receivables. To monitor existing financial assets and liabilities as well as to enable effective controlling of future risks, management monitors its Consolidated Entity’s expected settlement of financial assets and liabilities on an ongoing basis. 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.) 2018 <6 months 6-12 months 1-5 years >5 years Total Financial assets Cash and equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Interest bearing loans Net inflow/(outflow) 31,684,596 6,873,420 10,460,045 49,018,061 - - - - - - - - (31,686,792) (2,641,718) (34,328,510) 14,689,551 - (2,422,226) (2,422,226) (2,422,226) - (5,768,093) (5,768,093) (5,768,093) - - - - 31,684,596 6,873,420 10,460,045 49,018,061 - (31,686,792) - (10,832,037) - (42,518,829) 6,499,232 - 2017 <6 months 6-12 months 1-5 years >5 years Total Financial assets Cash and equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Interest bearing loans Net inflow/(outflow) (g) Fair values 51,087,338 35,892,316 11,066,473 98,046,127 - - - - - - - - (29,306,601) (1,651,478) (30,958,079) 67,088,048 - (1,660,898) (1,660,898) (1,660,898) - (5,516,557) (5,516,557) (5,516,557) - - - - 51,087,338 35,892,316 11,066,473 98,046,127 - (29,306,601) - (8,828,933) - (38,135,534) 59,910,593 - For all financial assets and liabilities recognised in the statement of financial position, carrying amount approximates fair value unless otherwise stated in the applicable notes. The methods for estimating fair value are outlined in the relevant notes to the financial statements. The Consolidated Entity uses various methods in estimating the fair value of a financial instrument. The methods comprise: 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.) (g) Fair values (cont.) Level 1 – Level 2 – Level 3 – the fair value is calculated using quoted prices in active markets. the fair value is estimated using inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from price). the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. 2018 Valuation technique market observable inputs (Level 2) Valuation technique non market observable inputs (Level 3) Quoted market price (Level 1) Financial Assets Available-for-sale financial assets Listed investments 1 9,170,714 - Derivatives Listed investments 1 Unlisted investments 2 Copper trade receivables 3 Financial Liabilities Derivatives Forward commodity options 4 - - - 9,170,714 37,500 45,450 2,048,186 2,131,136 - - 1,078,251 1,078,251 2017 - - - - - - - Total 9,170,714 37,500 45,450 2,048,186 11,301,850 1,078,251 1,078,251 Valuation technique market observable inputs (Level 2) Valuation technique non market observable inputs (Level 3) Total Quoted market price (Level 1) Financial Assets Available-for-sale financial assets Listed investments 1 9,300,778 - Derivatives Unlisted investments 2 Copper trade receivables 3 - - 9,300,778 99,000 31,096,630 31,195,630 - - - - 9,300,778 99,000 31,096,630 40,496,408 1. Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs. The fair value of the listed equity investments are based on quoted market prices. 2. The unlisted investments relate to 1,500,000 unlisted options in Brainchip Holdings Limited acquired for nil cost as part of a capital raising. The fair value is determined using a Black & Scholes model, which takes account of factors including the option exercise price, the volatility of the underlying share price, the risk free rate, the market price of the underlying share at grant date and the expected life of the option (refer to note 16). Below are the inputs used to value the derivative: Expected Volatility (%) Risk-free interest rate (%) Expected life of options (yrs) Options exercise price ($) Share price at grant date ($) 2018 2017 73% 1.99% 1.92 $0.23 $0.130 80% 1.90% 2.92 $0.23 $0.155 3. The fair value of trade receivables relates to copper provisionally sold at the reporting date. The fair value is based on the applicable LME prices. 4. The forward commodity options relate to a put and call granted over 1,500 tonnes of copper due for settlement in July 2018. The put has a strike price of $7,800 per tonne and the call has a strike price of $8,255 per tonne of LME copper. The fair value is based on the applicable LME prices. Transfer between categories There were no transfers between Level 1 and Level 2, and no transfers into and out of Level 3 fair value measurement. 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont.) (h) Changes in liabilities arising from financing activities 1 July 2017 Disposal of subsidiary Cash flows New leases Other 30 June 2018 Current obligations under finance leases Non-current obligations under finance leases Total liabilities from financing activities 3,187,557 5,308,678 8,496,235 - - - (3,831,333) - (3,831,333) 2,393,997 5,061,874 7,455,871 4,848,201 (4,848,201) 4,848,201 5,522,351 - 10,370,552 1 July 2016 Disposal of subsidiary Cash flows New leases Other 30 June 2017 Current obligations under finance leases Non-current obligations under finance leases Total liabilities from financing activities 5,680,774 10,361,940 16,042,714 (2,715,413) (4,554,295) (7,269,708) (3,706,810) - (3,706,810) 741,449 2,688,590 3,430,039 3,187,557 (3,187,557) - 3,187,557 5,308,678 8,496,235 The ‘Other’ column includes the effect of reclassification of non-current portion of interest-bearing loans and borrowings, including obligations under finance leases and hire purchase contracts to current due to the passage of time. The Consolidated Entity classifies interest paid as cash flows from operating activities. 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 5. REVENUE Tin concentrate sales Copper concentrate sales Total revenue 2018 2017 81,929,241 127,972,186 209,901,427 77,519,728 160,271,459 237,791,187 (a) Total copper sales for the period was 15,738 tonnes (2017: 24,828), out of which 3,990 tonnes (2017: 7,868) of copper, provisionally sold at the reporting date, has been revalued at a weighted average price of US$6,645 (2017: US$5,908). The net movement in the trade receivables due to fair value adjustments is an increase of $6,315,874 (2017: $10,806,776) which has been included in revenue from the sale of copper. 6. OTHER INCOME Interest received Other income Total other income 7. EXPENSES (a) Cost of sales 680,102 502,434 1,182,536 1,853,256 3,015,539 4,868,795 Salaries, wages expense and other employee benefits 40,357,418 40,750,875 Superannuation expense Other production costs Write down in value of inventories to estimated net realisable value Royalty expense 3,833,955 130,431,917 6,791,083 10,695,347 3,871,333 134,704,632 1,130,360 12,017,091 Depreciation and amortisation expense Depreciation of non-current assets Property, plant and equipment Buildings Amortisation of non-current assets Mine, properties and development costs Total cost of sales (b) Other expenses Administration expenses Employee benefits expense Salaries and wages expense Directors' fees and other benefits Superannuation expense Other employee benefits Share-based payments Other administration expenses Consulting expenses Travel and accommodation expenses Operating lease costs Stamp duty compliance costs Administration costs 59 9,115,574 624,394 12,315,552 502,271 15,683,358 217,533,046 25,196,861 230,488,975 1,566,453 350,000 172,182 29,033 2,019,289 4,136,957 537,880 242,906 202,709 24,481 1,129,538 2,137,514 1,112,770 350,000 153,551 200,411 4,754,542 6,571,274 3,530,555 319,721 918,168 3,403,642 1,155,028 9,327,114 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 7. EXPENSES (cont.) 2018 2017 Depreciation expense Depreciation of non-current assets Property plant and equipment Total Administration expenses Other expenses Net loss on sale of assets Other expenses Total other expenses 223,656 6,498,127 102,011 16,000,399 (634,659) (634,659) (9,985) (9,985) 5,863,468 15,990,414 (c) Fair value change in derivative financial instruments Commodity derivatives trading loss Total fair value change in derivative financial instruments 10,364,135 10,364,135 1,612,408 1,612,408 (d) Fair value change in financial assets Fair value change in financial assets (refer to note 17). Total fair value change in financial assets (e) Finance costs Interest Unwinding of rehabilitation provision discount Total finance costs 47,300 47,300 (12,371,917) (12,371,917) 621,763 847,588 1,469,351 423,375 263,558 686,933 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) INCOME TAX 8. (a) Major components of income tax expense: Income Statement 2018 2017 Current income tax expense Current income tax (benefit)/expense Adjustments in respect of current income tax of previous years (8,562,928) 8,839,298 6,424,248 (5,951,964) Deferred income tax Relating to origination and reversal of temporary differences in current year Derecognition of carry forward losses and other temporary differences Adjustments in respect of current income tax of previous years Income tax reported in the income statement (b) Amounts charged or credited directly to equity Deferred income tax related to items charged or credited directly to equity Unrealised gain on available-for-sale investments Income tax reported in equity 961,163 (22,821,036) 46,880 (1,284,413) - 49,714,897 8,728,624 36,094,769 - - (3,945,658) (3,945,658) (c) A reconciliation of income tax benefit and the product of accounting loss before income tax multiplied by the Consolidated Entity's applicable income tax rate is as follows: Accounting loss before tax from continuing operations Profit/(loss) before tax from a discontinued operation Total accounting profit/(loss) before income tax (26,297,186) - (26,297,186) (67,657,975) 237,764,988 170,107,013 At statutory income tax rate of 30% (2017: 30%) (7,889,156) 51,032,104 Non-assessable items Gain on acquisition of subsidiary Gain on disposal of subsidiary Non-deductible items Acquisition costs Share-based payments Sundry items Other non-deductible items Deductible items Adjustments in respect of current income tax of previous years Recognition of deferred tax balances on disposal of subsidiary Derecognition of tax losses - - (3,711,575) (68,551,175) - 605,787 5,690 - (324,086) 7,554,885 - 46,880 1,455,967 1,426,363 28,456 2,055,416 (455,718) 2,776,660 323,374 49,714,897 Income tax expense/(benefit) reported in income the statement of comprehensive income - 36,094,769 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) INCOME TAX (cont.) 8. (d) Deferred income tax at 30 June relates to the following: Deferred tax liabilities Exploration Deferred mining Mine site establishment and refurbishment Consumables Prepayments Diesel rebate Gross deferred tax liabilities Deferred tax assets Property, plant and equipment Available-for-sale financial assets Derivative held for trading Derivative Financial Instruments Inventories Legal costs Accrued expenses Provision for employee entitlements Provision for fringe benefits tax Provision for rehabilitation Recognised tax losses Gross deferred tax assets Net deferred tax liabilities Deferred tax income/(expense) Statement of financial position Statement of comprehensive income 2018 2017 2018 2017 (3,190,023) (20,081,130) (3,867,289) (8,834,912) (1,200,793) (21,771,175) (1,300,527) (8,976,426) - - (40,290) (100,275) (36,013,644) (33,349,196) 16,262,078 1,563,687 14,190 323,475 2,810,014 18,012 52,251 2,561,594 (31,621) 11,891,093 548,871 36,013,644 13,886,165 1,039,176 - - 3,195,725 131,760 64,530 2,515,579 (50,063) 11,694,202 872,122 33,349,196 1,989,231 (1,690,045) 2,566,762 (141,514) - (59,985) 12,016,357 (2,669,400) (6,843,839) 510,684 6,414 (203,104) (2,375,913) (15,275,580) (524,511) (14,190) (323,475) 385,711 113,748 12,279 (46,015) (18,442) (196,891) (125,028) - - (3,419,386) (114,931) (3,693) 2,263,463 74,832 (309,201) - - (323,250) (14,092,412) 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 8. INCOME TAX (cont.) (e) Tax Consolidation and the tax sharing arrangement The Company and its 100% owned subsidiaries are a tax consolidated group with effect from 1 July 2004. Metals X Limited is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payments obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote. (f) Tax effect accounting by members of the tax consolidated group Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group. Deferred taxes are allocated to members of the tax consolidated group in accordance with a group allocation approach which is consistent with the principles of AASB 112 ‘Income Taxes’. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the controlled entities intercompany accounts with the tax consolidated group head company, Metals X Limited. The nature of the tax funding agreement is such that no tax consolidation contributions by or distributions to equity participants are required. (g) Unrecognised losses At 30 June 2018, there are unrecognised losses of $200,187,893 (2017: $200,166,304) for the Consolidated Entity of which $156,479,138 (2017: $156,479,138) are subject to a restricted value of utilisation 9. EARNINGS PER SHARE The following reflects the data used in the basic and diluted earnings per share computations. (a) Earnings used in calculating earnings per share For basic earnings per share: Loss attributable to continuing operations Profit attributable to discontinued operations (Loss)/profit attributable to ordinary equity holders of the parent Basic (loss)/earnings per share (cents) For diluted earnings per share: Loss attributable to continuing operations Profit attributable to discontinued operations (Loss)/profit attributable to ordinary equity holders of the parent Fully diluted (loss)/earnings per share (cents) (b) Weighted average number of shares 2018 2017 (26,297,186) - (103,752,743) 237,764,988 (26,297,186) 134,012,245 (4.30) 22.51 (26,297,186) - (103,752,743) 237,764,988 (26,297,186) 134,012,245 (4.30) 22.51 Weighted average number of ordinary shares for basic earnings per share Effect of Dilution: Share Options Weighted average number of ordinary shares adjusted for the effect of dilution 611,157,234 595,353,059 - - 611,157,234 595,353,059 Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The Company had 13,350,000 (2017: 7,250,000) share options on issue that are excluded from the calculation of diluted earnings per share for the current financial period because they are considered non-dilutive. On 7 August 2018 the Company completed an institutional placement of $50,000,000 and issued 76,923,076 new fully paid ordinary shares in the Company at an issue price of $0.65 per share. 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 9. EARNINGS PER SHARE (cont.) There have been no transactions involving ordinary shares or potential ordinary shares since that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and before the completion of these financial statements. 10. DIVIDENDS PAID AND PROPOSED 2018 2017 Dividends declared and paid during the financial year Nil dividends were declared for 2018 (2017: $0.01unfranked) Dividends on Demerger of Westgold (refer to note 40) Total dividends Dividends proposed but not recognised as a liability Final dividend for 2018: nil (2017: $0.01 unfranked) - - - - - (171,204,652) (171,204,652) 6,093,409 The amount of franking credits available for the subsequent financial year are: Franking account balance as at the end of the financial year at 30% (2017: 30%) The amount of franking credits available for future reporting years 1,842 1,842 1,842 1,842 The Company operates a dividend reinvestment plan which allows eligible shareholders to elect to invest dividends in ordinary shares. All holders of Metals X ordinary shares with addresses in Australia or New Zealand are eligible to participate in the plan. The allocation price for shares is based on the average of the daily volume weighted average price of Metals X ordinary shares sold on the Australian Securities Exchange less a discount, calculated with reference to a period of not less than five consecutive trading days as determined by the directors. An issue of shares under the dividend reinvestment plan results in an increase in issued capital unless the Company elects to purchase the required number of shares on-market. 11. CASH AND CASH EQUIVALENTS Cash at bank and in hand - denominated in AUD Cash at bank and in hand - denominated in USD Short-term deposits Total 2018 21,227,486 9,992,359 15,000 31,234,845 2017 26,790,352 23,269,818 65,000 50,125,170 CASH FLOW RECONCILIATION For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 30 June: Cash at bank and in hand Short-term deposits 21,227,486 15,000 21,242,486 26,790,352 65,000 26,855,352 Reconciliation of net profit after income tax to net cash flows from operating activities Profit after income tax Amortisation and depreciation Gold prepayment physical deliveries Gain on demerger Impairment loss on available-for-sale financial assets Impairment loss on mine properties and development Income tax expense Share based payments Unwinding of rehabilitation provision discount Fair value change in financial instruments Exploration and evaluation expenditure written off Loss/(gain) on derivatives Loss on disposal of property, plant and equipment (26,297,186) 25,646,982 - - 1,748,370 239,761 - 2,019,289 847,588 47,300 115,718 1,078,251 (634,659) 4,811,414 134,012,245 75,138,830 (8,930,625) (228,503,915) 416,758 72,250,650 36,094,768 4,754,542 420,475 (12,371,917) 1,243,736 - 10,491 74,536,038 Changes in assets and liabilities Increase in inventories Decrease/(increase) prepayments Increase/(decrease) in trade and other creditors Increase in provisions Net cash flows from operating activities in trade and other receivables and (11,639,588) (12,298,152) 31,199,922 2,709,850 214,232 27,295,830 (19,272,577) (16,327,636) 198,982 26,836,655 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 12. TRADE AND OTHER RECEIVABLES (current) Trade receivables at fair value (a) Trade receivables at amortised cost (b) Other debtors and cash call advances(c) Provision for doubtful debt (d) 2018 2,048,186 4,528,645 7,099,345 - 13,676,176 2017 31,096,630 4,033,382 9,916,591 - 45,046,603 (a) (b) (c) (d) As at 30 June 2018 copper sales of 3,990 tonnes (2017: 7,868) remained open to price adjustments. Trade receivables at amortised cost are non-interest bearing and are generally on 30 - 90 day terms. These primarily relate to cash calls advanced to the Bluestone Mines Tasmania Joint Venture Pty Ltd. Credit quality of a customer is assessed based on individual credit limits. Outstanding customer receivables are regularly monitored. At 30 June 2018, there are no trade receivables past due or impaired. The carrying amounts disclosed above approximate the fair value. Refer to note 4(b) on credit risk of trade receivables to understand how the Consolidated Entity manages and measures credit quality of trade receivables that are neither past due or impaired. 13. INVENTORIES (current) Ore stocks at net realisable value Tin in circuit at cost Tin concentrate at cost Copper concentrate at cost Stores and spares at cost Provision for obsolete stores and spares Total inventories at lower of cost and net realisable value 2,425,768 62,642 19,146,839 13,559,867 29,449,708 (9,366,712) 55,278,112 1,228,402 85,480 17,613,704 5,441,932 29,921,421 (10,652,418) 43,638,521 During the year there were write-downs of $6,791,083 (2017: write-downs $1,130,360) for the Consolidated Entity. This is included in cost of sales refer to note 7(a). 14. PREPAYMENTS (current) Prepayments 15. OTHER FINANCIAL ASSETS (current) Cash on deposit - performance bond facility (a) Total other financial assets 1,421,373 1,250,872 10,311,569 10,311,569 10,858,049 10,858,049 (a) The cash on deposit is interest bearing and is used as security for government performance bonds. 16. DERIVATIVE FINANCIAL INSTRUMENTS (non-current) Derivatives held for trading 82,950 99,000 The Consolidated Entity holds 1,500,000 unlisted options in Brainchip Holdings Limited (Brainchip). The options were acquired for nil cost as part of a capital raising. The fair value $45,450 (2017: $99,000) of the options at 30 June 2018 have been valued using a Black & Scholes model, which takes account of factors including the option exercise price, the volatility of the underlying share price, the risk free rate, the market price of the underlying share at grant date and the expected life of the option (refer to note 4(g)). At the end of the period the market value of the investment was lower than the cost, the Company recognised an impairment of $53,550 (2017: nil). The Consolidated Entity holds 1,250,000 listed options in Nelson Resources Limited (Nelson). The options were acquired for nil cost as part of a capital raising. The fair value $37,500 (2017: nil) of the options at 30 June 2018 are based on quoted market prices. 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 17. AVAILABLE-FOR-SALE FINANCIAL ASSETS (non-current) Shares - Australian listed 2018 9,170,714 2017 9,300,778 Available-for-sale investments consist of investments in ordinary shares. (a) (b) (c) Listed shares The fair value of listed available-for-sale investments has been determined directly by reference to published price quotations in an active market. The Company has a 11.26% (2017: 21.77%) interest in Nelson, which is involved in the exploration of base metals in Australia. During the period Nelson was relisted on the Australian Securities Exchange (ASX). At 30 June 2017 Nelson was not listed on the ASX and the Company recognised an impairment of $392,758. At the end of the period the fair value of the Company’s investment was $718,534 (2017: nil) which is based on Nelson's quoted share price. The Company does not have significant influence over Nelson as it does not have any board representation or the ability to influence the decision making of Nelson. The Company has a 6.45% (2017: 6.69%) interest in Brainchip, which is involved in the development of artificial intelligence. Brainchip is listed on the ASX. At the end of the period the fair value of the Company’s investment was $8,248,179 (2017: $9,129,778) which is based on Brainchip's quoted share price. At the end of the period the market value of the investment was lower than the cost, the Company recognised an impairment of $2,031,194 (2017: nil). The Company has a 0.74% (2017: 0.85%) interest in Auris Minerals Limited (Auris), which is involved in the mining and exploration of base metals in Australia. Auris is listed on the ASX. At the end of the period the fair value of the Company’s investment was $204,000 (2017: $171,000) which is based on Auris' quoted share price. At the end of the period the market value of the investment was lower than the cost, the Company recognised an impairment of $33,000 (2017: $24,000). 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 18. PROPERTY, PLANT & EQUIPMENT (non-current) 2018 2017 Plant and equipment At cost Accumulated depreciation Net carrying amount Land and buildings At cost Accumulated depreciation Net carrying amount Capital work in progress at cost Total property, plant and equipment Movement in property, plant and equipment Plant and equipment At 1 July net of accumulated depreciation Transfer from capital in progress Disposals Disposal of subsidiary (refer to note 39) Acquisition of subsidiary (refer to note 40) Depreciation charge for the year At 30 June net of accumulated depreciation Land and buildings At 1 July net of accumulated depreciation Transfer from capital in progress Disposals Disposal of subsidiary (refer to note 39) Acquisition of subsidiary (refer to note 40) Depreciation charge for the year At 30 June net of accumulated depreciation Capital work in progress At 1 July net of accumulated depreciation Additions Disposal of subsidiary (refer to note 39) Acquisition of subsidiary (refer to note 40) Transfer to mine properties & development Transfer to plant and equipment Transfer to land and buildings At 30 June 66,499,298 (33,792,571) 32,706,727 57,984,194 (26,749,146) 31,235,048 7,952,369 (3,132,720) 4,819,649 7,452,991 (2,508,328) 4,944,663 11,059,353 48,585,729 4,287,271 40,466,982 31,235,048 10,840,874 (29,962) - - (9,339,233) 32,706,727 4,944,663 499,379 - - - (624,393) 4,819,649 4,287,271 26,716,929 - - (8,604,595) (10,840,874) (499,378) 11,059,353 60,062,422 8,369,170 (281,353) (40,167,538) 19,208,791 (15,956,444) 31,235,048 12,699,098 66,462 - (11,632,352) 4,604,471 (793,016) 4,944,663 6,581,682 21,991,311 (14,158,562) 661,677 (2,353,208) (8,369,167) (66,462) 4,287,271 The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June 2018 is $9,801,093 (2017: $7,877,498). Value of plant and equipment leased under finance leases and acquired through hire purchase contracts is $5,705,651 (2017: $3,430,039). Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase lease liabilities (refer to notes 25 and 26). 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 19. MINE PROPERTY AND DEVELOPMENT (non-current) 2018 2017 Development areas at cost Mine site establishment Impairment Net carrying amount Mine properties Mine site establishment Accumulated amortisation Net carrying amount Mine capital development Accumulated amortisation Net carrying amount Total mine properties and development Movement in mine properties and development Development areas at cost At 1 July Additions Disposal of subsidiary (refer to note 39) Impairment Transfer to mine site establishment At 30 June Mine site establishment At 1 July net of accumulated amortisation Additions Disposal of subsidiary (refer to note 39) Transfer from capital work in progress (refer to note 18) Transfer from development areas (Decrease)/increase in rehabilitation provision Amortisation charge for the year At 30 June net of accumulated amortisation Mine capital development At 1 July net of accumulated amortisation Additions Disposal of subsidiary (refer to note 39) Acquisition of subsidiary (refer to note 40) Transfer from capital work in progress (refer to note 18) Adjustment to rehabilitation liability (refer to note 24) Amortisation charge for the year At 30 June net of accumulated amortisation 72,505,411 (72,490,411) 15,000 72,265,650 (72,250,650) 15,000 39,812,550 (26,820,392) 12,992,158 29,642,684 (25,205,215) 4,437,469 154,333,943 (87,053,498) 67,280,445 145,903,058 (72,985,317) 72,917,741 80,287,603 77,370,210 15,000 239,761 - (239,761) - 15,000 72,639,349 1,357,575 (1,731,274) (72,250,650) - 15,000 4,437,469 458,871 - 8,604,595 - 1,106,400 (1,615,177) 12,992,158 72,917,741 9,728,568 - - - (1,297,683) (14,068,181) 67,280,445 19,442,634 - (14,973,486) 2,353,208 - 14,600 (2,399,487) 4,437,469 105,750,393 30,341,348 (61,290,833) 53,509,721 - 596,996 (55,989,884) 72,917,741 During the period was an update to the Mineral Resource and Ore Reserve estimates of the Nifty copper operations. This resulted in an increase in Ore Reserves to 237,500 tonnes of contained copper and an extension of the mine life to seven years. This resulted in a decrease in amortisation expense by $2,008,659. In the previous period the Company completed a recoverable amounts assessment of the CMNP. The value of the CMNP was written down to nil and an impairment loss of $72,250,650 was recognised in profit or loss. 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 20. EXPLORATION EXPENDITURE (non-current) 2018 2017 Exploration and evaluation costs carried forward in respect of mining areas of interest Pre-production areas At Cost Accumulated impairment Net carrying amount Movement in deferred exploration and evaluation expenditure At 1 July net of accumulated impairment Additions Acquisition of subsidiary Disposal of subsidiary (refer to note 39) Adjustment to rehabilitation liability (refer to note 24) Expenditure written off At 30 June net of accumulated impairment 11,242,392 - 11,242,392 4,892,164 - 4,892,164 4,892,164 6,465,945 - - - (115,717) 11,242,392 165,083,986 14,098,029 3,137,060 (176,183,175) - (1,243,736) 4,892,164 The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mining areas. Amortisation of the costs carried forward for the development phase is not recognised pending the commencement of production. During the year a review was undertaken for each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. In assessing the carrying value of all of the Consolidated Entity’s projects certain expenditure on exploration and evaluation of mineral resources has not led to the discovery of commercially viable quantities of mineral resources. As a result exploration and evaluation expenditure of $115,717 (2017: $1,243,736) was written off to the profit and loss. In the current period the amount relates to mainly tenements in the nickel division which were written down to nil as the expenditure did not result in the discovery of commercially viable quantities of mineral resources and as a result there is no future benefits expected. In the previous period the amount predominantly relates to tenements within the nickel division which were impaired to nil. 21. TRADE AND OTHER PAYABLES (current) Trade creditors (a) Sundry creditors and accruals (b) 16,391,970 15,294,822 31,686,792 16,319,500 12,987,101 29,306,601 (a) Trade creditors are non-interest bearing and generally on 30 day terms. (b) Sundry creditors and accruals are non-interest bearing and generally on 30 day terms. Due to the short term nature of these payables, their carrying value approximates their fair value. 22. DERIVATIVE FINANCIAL INSTRUMENTS (current) Forward commodity options 1,078,251 1,078,251 - - The forward commodity options relate to a put and call granted over 1,500 tonnes of copper due for settlement in July 2018. The put has a strike price of $7,800 per tonne and the call has a strike price as of $8,255 per tonne of LME copper. The fair value is based on the applicable LME prices. 23. PROVISIONS (current) Provision for annual leave Provision for sick leave Provision for long service leave Provision for fringe benefits tax payable (a) The nature of the provisions are described in note 2(w) and 2(ad). 4,640,632 76,853 2,035,169 - 6,752,654 3,991,142 113,193 1,618,742 - 5,723,077 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 24. PROVISIONS (non-current) Provision for long service leave (a) Provision for rehabilitation (b) 2018 2017 1,316,057 39,636,978 40,953,035 1,795,608 38,980,674 40,776,282 (a) Provision for long service leave The nature of the provisions are described in note 2(w) and 2(ad). (b) Provision for rehabilitation Environmental obligations associated with the retirement or disposal of mining properties and/or of exploration activities are recognised when the disturbance occurs and are based on the extent of the damage incurred. The provision is measured as the present value of the future expenditure. The rehabilitation liability is remeasured at each reporting period in line with the change in the time value of money (recognised as an interest expense in the statement of comprehensive income and an increase in the provision), and additional disturbances/change in the rehabilitation cost are recognised as additions/changes to the corresponding asset and rehabilitation liability. (c) Current and non-current movements in provisions At 1 July 2016 Utilised Acquisition of subsidiary (refer to note 39) Disposal of subsidiary (refer to note 40) Adjustment due to revised conditions Rehabilitation expenditure Unwind of discount At 30 June 2017 Onerous operating lease 599,370 (242,242) - (399,580) - - 42,452.00 - At 1 July 2017 Adjustment due to revised conditions Rehabilitation expenditure Unwind of discount At 30 June 2018 - - - - - Rehabilitation 83,973,871 - 35,911,504 (81,935,372) 611,596 (1,400) 420,475 38,980,674 38,980,674 (191,284) - 847,588 39,636,978 Total 84,573,241 (242,242) 35,911,504 (82,334,952) 611,596 (1,400) 462,927 38,980,674 38,980,674 (191,284) - 847,588 39,636,978 25. INTEREST BEARING LOANS AND BORROWINGS (current) Lease liability 2018 2017 4,848,201 3,187,557 Represents current portion of finance leases which have repayment terms of 36 months. 26. INTEREST BEARING LOANS AND BORROWINGS (non-current) Lease liability 5,522,351 5,308,678 Represents non-current portion of finance leases which have repayment terms of 36 months from inception. The carrying amount of the Consolidated Entity's non-current loans and borrowings approximate their fair value. The weighted average interest rate is 4.45% (2017: 3.92%) per annum. Financing facilities available At reporting date, the following financing facilities were available: Total facilities - finance lease facility Facilities used at reporting date - finance lease facility 10,370,552 10,370,552 8,496,235 8,496,235 10,370,552 8,496,235 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 26. INTEREST BEARING LOANS AND BORROWINGS (non-current) (cont.) Assets pledged as security: The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are: Non-current Finance lease Plant and equipment Total non-current assets pledged as security 9,801,093 9,801,093 7,877,498 7,877,498 Plant and equipment assets are pledged against lease liabilities for the term of the lease period. 27. ISSUED CAPITAL (a) Ordinary Shares Issued and fully paid (b) Movements in ordinary shares on issue At 1 July 2016 Capital reduction via demerger (refer to note 40) Issue share capital Share issue costs At 30 June 2017 Capital reduction via demerger (refer to note 40) Issue share capital Issue share capital under dividend reinvestment plan Share issue costs At 30 June 2018 254,586,744 252,511,413 Number $ 479,685,300 - 129,655,603 - 609,340,903 - 700,000 2,096,529 - 612,137,432 407,029,190 (341,913,378) 192,652,428 (5,256,827) 252,511,413 - 532,000 1,557,192 (13,861) 254,586,744 Dividend Reinvestment Plan The Company operates a dividend reinvestment plan (DRP) which allows eligible shareholders to elect to invest dividends in ordinary shares. 2017 There were no shares issued under the DRP in the 2017 financial year. 2018 The Company paid an unfranked dividend of 1.00 cent per share with a record date of 7 September 2017 and paid on 19 September 2017. The Company offered a DRP at a 5% discount to the 5 day VWAP. Under the offer 2,096,529 shares were issued at $0.7428 per share on 19 September 2017. (c) Terms and conditions of contributed equity Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholder meetings. In the event of winding up the Company the holders are entitled to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par share values. Accordingly, the Parent does not have authorised capital nor par value in respect of its issued shares. (d) Escrow restrictions There are no current escrow restrictions on the issued capital of the Company. 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 27. ISSUED CAPITAL (cont.) (e) Options on issue Unissued ordinary shares of the company under option at the date of this report are as follows: Type Unlisted* Unlisted* Total Expiry Date 20 Jan 2020 30 Nov 2020 Exercise Price $0.76 $1.32 Number of options 5,950,000 7,400,000 13,350,000 * These options were issued pursuant to the Metals X Limited Employee Option Scheme and can only be exercised pursuant to the scheme rules. Share options carry no right to dividends and no voting rights. (f) Option conversions Date of option Conversion 5 Mar 2018 19 Mar 2018 21 May 2018 Total Number of Options 150,000 400,000 150,000 700,000 Price per option 76 cents 76 cents 76 cents Expiry date Increase in contributed equity $ 20 Jan 2020 20 Jan 2020 20 Jan 2020 114,000 304,000 114,000 532,000 28. ACCUMULATED LOSSES At 1 July Net profit in current period attributable to members of the parent entity Dividends paid Dividend on Demerger of Westgold (refer to note 40) At 30 June 2018 (82,858,477) 2017 (45,666,070) (26,297,186) (6,093,409) - (115,249,072) 134,012,245 - (171,204,652) (82,858,477) 29. RESERVES Share based payments reserve Fair value reserve $ $ Total $ At 30 June 2016 Share based payments Fair value change in available-for-sale financial assets At 30 June 2017 Share based payments Fair value change in available-for-sale financial assets At 30 June 2018 20,576,509 4,754,542 - 25,331,051 2,019,289 - 27,350,340 12,968,704 - (9,206,537) 3,762,167 - - 3,762,167 33,545,213 4,754,542 (9,206,537) 29,093,218 2,019,289 - 31,112,507 Nature and purpose of reserves Fair value reserve This reserve records the movements in the fair value of available-for-sale investments. Share based payments reserve This reserve is used to recognise the fair value of rights and options issued to employees in relation to equity- settled share based payments. 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 30. SHARE-BASED PAYMENTS 2018 2017 (a) Recognised share-based payment expense The expense recognised for services received during the year is shown in the table below: Expense arising from equity-settled share-based payments 2,019,289 4,754,542 The share-based payment plan is described below. There have been no cancellations or modifications to the plan during 2018 and 2017. (b) Long Term Incentive Plan Under the Long Term Incentive Plan (LTIP), grants are made to senior executives and other staff members who have made an impact on the Consolidated Entity’s performance. LTIP grants for FY2017 and FY2018 were delivered in the form of share options which vest over a period of one year with no other performance conditions. In years prior to FY2017, LTIP grants were delivered in the form of performance rights which vested over a period of three years subject to meeting performance measures, with no opportunity to retest. For FY2019 onwards following an independent remuneration review LTIP grants will be issued in the form of share options which will vest over a period of two to three years subject to meeting performance measures, with no opportunity to retest. (i) Performance Rights Performance rights are issued for nil consideration. Performance rights vest over a period of three years subject to meeting performance measures. The Company uses absolute total shareholder return and relative shareholder return as the performance measures for the performance rights. Any performance rights that do not vest on the third anniversary of their grant date will lapse. Upon vesting, these performance rights will be settled in ordinary fully paid shares of the Company. In previous period pursuant to the demerger of Westgold the Board determined that the 3,388,155 performance rights on issue would vest and be exercisable prior to the Demerger. The performance rights vested and were converted into shares in the Company on 25 November 2016. The Metals X share price on the date of vesting was $1.51 per share. The cost of accelerating the vesting of the Performance Rights of $3,744,376 was recognised in the consolidated statement of comprehensive income. Summary of performance rights granted under the Long Term Incentive Plan The following table illustrates the number and movements in, performance rights issued under the LTIP. Outstanding at the beginning of the year Granted during the year Exercised during the year Lapsed/cancelled during the year Outstanding at the year end Exercise price of performance rights 2018 Number 2017 Number - - - - - 3,388,155 - (3,388,155) - - Performance rights on issue as part of LTIP have a nil exercise price. Performance conditions The performance rights have the following performance hurdles which will be measured over the vesting period of three years from grant date: • • The Absolute Total Shareholder Return (TSR) performance rights (50% of total performance rights) will vest subject to the compound annual growth rate of the Company’s TSR being not less than 15% over the three year service period. The Relative TSR performance rights (50% of total performance rights) are measured against a defined peer group of companies which the Board considers compete with the Company for the same investment capital, both in Australia and overseas, and which by the nature of their business are influenced by commodity prices and other external factors similar to those that impact on the TSR performance of the Company. Weighted average fair value of performance rights The weighted average fair value of performance rights granted during the year was nil (2017: nil). 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 30. SHARE-BASED PAYMENTS (cont.) Performance rights valuation The fair value of the performance rights granted are estimated using a Hoadley employee share option pricing model (Monte Carlo Simulation), taking into account the terms and conditions upon which the performance rights were granted. (ii) Share options Share options are issued for nil consideration. The exercise price of the share options is equal to 125% of the weighted average closing sale price of the Company’s fully paid ordinary shares on ASX over the 5 trading days immediately preceding the day on which the options are awarded. Any options that are not exercised by the third anniversary of their grant date will lapse. Upon exercise, these options will be settled in ordinary fully paid shares of the Company. The options will vest when the senior executive or other staff member continues to be employed by the Consolidated Entity on the first anniversary of the grant date or as determined by the Board of Directors. Summary of options granted under the Long Term Incentive Plan The following table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options issued under the LTIP. 2018 Number 2018 WAEP 2017 Number 2017 WAEP Outstanding at the beginning of the year Granted during the year Exercised during the year Lapsed/cancelled during the year Outstanding at the year end 7,250,000 8,100,000 (700,000) (1,300,000) 13,350,000 0.76 1.32 0.76 1.06 1.07 - 7,250,000 - - 7,250,000 - 0.76 - - 0.76 Exercisable at the year end 5,950,000 0.76 7,250,000 0.76 The outstanding balance as at 30 June 2018 is represented by the following table: Grant Date Vesting date Expiry date Exercise Price Options granted Options lapsed / cancelled 24 Nov 2016 20 Jan 2017 22 Nov 2017 23 Nov 2017 20 Jan 2018 20 Jan 2018 30 Nov 2018 30 Nov 2018 20 Jan 2020 20 Jan 2020 30 Nov 2020 30 Nov 2020 $0.76 2,000,000 $0.76 5,250,000 $1.32 3,200,000 $1.32 4,900,000 - (600,000) - (700,000) Options exercised Number of options at end of period On issue Vested - 2,000,000 (700,000) 3,950,000 2,000,000 3,950,000 - 3,200,000 - 4,200,000 - - Total 15,350,000 (1,300,000) (700,000) 13,350,000 5,950,000 Weighted average remaining contractual life of share options The weighted average remaining contractual life for the share options outstanding as at 30 June 2018 is 2.04 (2017: 2.56). Range of exercise price of share options The range of exercise prices for options outstanding at the end of the year $0.76 - $1.32 (2017: $0.76). Weighted average fair value of share options The weighted average fair value of options granted during the year was $0.22 (2017: $0.19). Share option valuation The fair value of the equity-settled share options granted under the LTIP is estimated at the date of grant using a Black & Scholes model, which takes into account factors including the options exercise price, the volatility of the underlying share price, the risk-free interest rate, the market price of the underlying share at grant date, historical and expected dividends and the expected life of the option. 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 30. SHARE-BASED PAYMENTS (cont.) The following table gives the assumptions made in determining the fair value of the options granted: Grant date Expected volatility (%) Risk-free interest rate (%) Expected life of options (yrs) Options exercise price ($) Share price at grant date ($) Fair value at grant date ($) Grant date Expected volatility (%) Risk-free interest rate (%) Expected life of options (yrs) Options exercise price ($) Share price at grant date ($) Fair value at grant date ($) 2018 - Options 22 November 2017 23 November 2017 50% 1.90% 2.5 $1.32 $1.05 $0.25 50% 1.90% 2.5 $1.32 $1.03 $0.24 2017 - Options 24 November 2016 20 January 2017 60% 2.00% 2.5 $0.76 $0.61 $0.19 60% 2.00% 2.5 $0.76 $0.61 $0.19 The effects of early exercise have been incorporated into the calculations by using an expected life for the option that is shorter than the contractual life based on historical exercise behaviour, which is not necessarily indicative of exercise patterns that may occur in the future. The expected volatility was determined using a historical sample of the Company’s share price over a 12 month period. The resulting expected volatility therefore reflects the assumptions that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. 31. CONTINGENT ASSETS AND LIABILITIES Bank guarantees The Consolidated Entity has a number of bank guarantees in favour of various government authorities and service providers. The bank guarantees primarily relate to environmental and rehabilitation bonds at the various projects. The total amount of these guarantees at the reporting date is $10,311,569 (2017: $10,858,049). These bank guarantees are fully secured by performance bonds (refer to note 15). 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 32. COMMITMENTS Capital commitments (a) Commitments relating to joint arrangements At 30 June 2018 the Consolidated Entity has capital commitments that relate principally to the purchase and maintenance of plant and equipment for its mining operations. Capital expenditure commitments Estimated capital expenditure contracted for at reporting date, but not recognised as liabilities for the Consolidated Entity: - Within one year 2018 2017 5,145,233 1,537,473 (b) Operating lease commitments - Company as lessee The Company has entered into commercial property leases on office rental and remote area residential accommodation. The Company has entered into commercial leases on office equipment. These operating leases have an average life of between one month and four years with renewal options included in the contracts. The Company also has commercial leases over the tenements in which the mining operations are located. These tenement leases have a life of up to twenty one years. In order to maintain current rights to explore and mine the tenements the Consolidated Entity is required to perform minimum exploration work to meet the expenditure requirements specified by the relevant state governing body. There are no restrictions placed on the lessee by entering into these contracts. The operating lease commitments include Joint Operation commitments as disclosed in note 35. Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows: (i) Property leases as lessee: - Within one year - After one year but not more than five years (ii) Equipment leases: - Within one year - After one year but not more than five years - After more than five years (iii) Mineral tenement leases: - Within one year - After one year but not more than five years - After more than five years 109,360 453,767 563,127 3,499,269 2,210,241 155,279 5,864,789 203,612 453,608 657,220 37,053 51,022 - 88,075 782,819 2,876,954 7,020,966 10,680,739 405,652 671,957 1,119,505 2,197,114 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 32. COMMITMENTS (cont.) (c) Finance lease and hire purchase commitments The Company has finance leases and hire purchase contracts for various items of plant and machinery. The leases do have terms of renewal but no escalation clauses. Renewals are at the option of the specific entity that holds the lease. The finance and hire purchase contracts have an average term of 36 months with the right to purchase the asset at the completion of the lease term for a pre-agreed amount. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the minimum lease payments are as follows: Within one year After one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Within one year After one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Included in the financial statements as: 2018 Minimum lease payments Present value of lease payments 5,205,554 5,721,986 10,927,540 (556,988) 10,370,552 4,848,201 5,522,351 10,370,552 - 10,370,552 2017 Minimum lease payments Present value of lease payments 3,495,056 5,550,511 9,045,567 (549,332) 8,496,235 3,187,557 5,308,678 8,496,235 - 8,496,235 2018 2017 Current interest-bearing loans and borrowings (note 25) Non-current interest-bearing loans and borrowings (note 26) Total included in interest-bearing loans and borrowings 4,848,201 5,522,351 10,370,552 3,187,557 5,308,678 8,496,235 The weighted average interest rate of leases for the Company is 4.45% (2017: 3.92%). (d) Other commitments The Consolidated Entity has obligations for various expenditures such as state government royalties, production based payments and exploration expenditure. Such expenditures are predominantly related to the earning of revenue in the ordinary course of business. 33. AUDITOR'S REMUNERATION 2018 2017 Amounts received or due and receivable by Ernst & Young (Australia) for: An audit or review of financial reports of the entity and any other entity within the Consolidated Entity 225,730 335,097 Other services in relation to the entity and any other entity in the Consolidated Entity: - tax compliance - stamp duty compliance - investigating accountant's report Westgold demerger Total auditor remuneration 187,483 24,481 - 300,918 26,300 100,940 437,694 763,255 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 34. INTERESTS IN JOINT OPERATIONS The Consolidated Entity's interest in the assets and liabilities of joint operations are included in the consolidated statement of financial position. RENISON TIN PROJECT Subsidiary Bluestone Mines Tasmania Pty Ltd has a 50% interest and participating share in the Renison Tin Project which is operated and managed by Bluestone Mines Tasmania Joint Venture Pty Ltd. The Consolidated Entity is entitled to 50% of the production. The Renison Tin Project is located in Tasmania. Commitments relating to the joint operation: 2018 2017 Share of capital commitments (refer to note 32(a)) 1,477,690 666,774 Share of operating lease commitments (refer to note 32(b)) Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows: (i) Property leases as lessee: - Within one year (ii) Equipment leases: - Within one year - After one year but not more than five years (iii) Mineral tenement leases: - Within one year - After one year but not more than five years - After more than five years 2,979 2,979 4,938 3,654 8,592 53,738 214,951 429,902 698,591 932 932 3,477 2,202 5,679 57,417 - - 57,417 Impairment During the year reversal of write-downs of inventory of $4,358 (2017: $3,358) were recognised in the joint operation. 35. SEGMENTS For management purposes, the Consolidated entity is organised into operating segments determined by the similarity of the mineral being mined or explored, as these are the sources of the Consolidated Entity’s major risks and have the most effect on rates of return The Consolidated Entity comprises the following reportable segments:     Tin Project: Wingellina Nickel Project: Nifty Copper Project: Maroochydore Copper Project: Mining, treatment and marketing of tin concentrate. Exploration and development of nickel assets. Mining, treatment and marketing of copper concentrate. Exploration and development of copper assets. Executive management monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Inter-segment revenues are eliminated upon consolidation. All other adjustments and eliminations are part of the detailed reconciliations presented further below. The following table presents revenue and profit information for reportable segments for the years ended 30 June 2018 and 30 June 2017. 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 35. SEGMENTS (cont.) Renison Tin Operations Nifty Copper Operations Maroochydore Copper Project Wingellina Nickel Project Adjustments and eliminations Total 81,929,241 81,929,241 127,972,186 127,972,186 (12,535,023) (12,888,303) - - - (81,439) - - - - 209,901,427 209,901,427 Year ended 30 June 2018 Revenue External customers * Total revenue Results Depreciation and amortisation Exploration and evaluation expenditure written off Other disclosures Capital expenditure Year ended 30 June 2017 Revenue External customers * Total revenue Results Depreciation and amortisation Exploration and evaluation expenditure written off - - - - - - - (25,504,765) (115,718) (239,761) (7,987,098) 209,720,634 (86,464,519) (37,589,722) Total - - - - - - - (38,014,684) (1,243,736) (72,250,650) (66,192,174) 211,964,340 (82,554,375) (22,262,147) (4,538) - (7,996) (103,184) Impairment of assets - (239,761) Segment profit 23,930,358 (31,566,515) (7,996) (342,945) Total assets 102,494,118 101,021,499 5,042,672 1,162,345 Total liabilities (19,113,945) (67,293,691) - (56,883) (21,361,744) (12,290,970) (2,628,769) (1,308,239) Renison Tin Operations Nifty Copper Operations Maroochydore Copper Project Wingellina Nickel Project Adjustments and eliminations 77,519,728 77,519,728 160,271,459 160,271,459 (11,585,569) (26,353,908) - - - (75,207) - - - - 237,791,187 237,791,187 (4,228) (112,447) 649 (1,127,710) Impairment of assets - - - (72,250,650) Segment profit 23,970,412 (16,707,715) 128 (73,454,999) Total assets 90,503,213 118,723,860 2,419,749 317,518 Total liabilities (18,542,140) (63,830,223) - (182,012) Other disclosures Capital expenditure (11,484,039) (9,378,225) (378,650) (1,021,233) * Revenue has been adjusted to be presented net of treatment and refining charges, which were previously included in cost of sales. Refer to note (2a) for details. Reconciliation of segment results to consolidated results Finance income and costs, fair value gains and losses on financial assets are not allocated to individual segments as the underlying instruments are managed on a Consolidated Entity basis. Current taxes, deferred taxes, cash and certain financial assets and liabilities are not allocated to those segments as they are also managed on a Consolidated Entity basis. Capital expenditure consists of additions of property, plant and equipment, mine properties and development and exploration and evaluation expenditure including assets from the acquisition of subsidiaries. Corporate charges comprise non-segmental expenses such as head office expenses and interest. Corporate charges are not allocated to operating segments. 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 35. SEGMENTS (cont.) (a) Reconciliation of profit/(loss) Segment profit Corporate administration expenses Corporate interest income Corporate other income Finance costs Fair value change in financial instruments Loss on derivative instruments Net loss on disposal of assets Total consolidated profit before income tax from continuing operations (b) Reconciliation of assets Segment operating assets Unallocated corporate assets Cash and cash equivalents Trade and other receivables Prepayments Other financial assets Derivative financial instruments Available-for-sale financial assets Property, plant and equipment Total consolidated assets (c) Reconciliation of liabilities Segment operating liabilities Unallocated corporate liabilities Trade and other payables Derivative financial instruments Provision for employee benefits Interest bearing loans and borrowings Total consolidated liabilities (d) Segment revenue from external customers Segment revenue Total revenue 2018 2017 (7,987,098) (6,498,127) 680,102 502,434 (1,469,351) (1,795,670) (10,364,135) 634,659 (66,192,174) (16,000,399) 1,853,256 3,015,539 (686,933) 11,955,159 (1,612,408) 9,985 (26,297,186) (67,657,975) 209,720,634 211,964,340 30,971,488 167,408 158,770 10,311,569 82,950 9,170,713 707,931 261,291,463 49,866,983 306,839 102,093 10,858,049 99,000 9,300,778 550,267 283,048,349 86,464,519 82,554,375 2,238,622 1,078,251 1,036,936 22,956 90,841,284 614,990 - 1,118,618 14,212 84,302,195 209,901,427 209,901,427 237,791,187 237,791,187 Revenue from external customers by geographical locations is detailed below. Revenue is attributable to geographical location based on the location of the customers. The Company does not have external revenues from external customers that are attributable to any foreign country other than as shown. South East Asia Total revenue 209,901,427 209,901,427 237,791,187 237,791,187 In the current period the Consolidated Entity had three customers to which it provides tin and copper. The Consolidated Entity sends its tin and copper concentrates to three South East Asian customers that accounts for 100% of total external revenue (2017: 38%). The Renison Tin Operations, Customer 1 and Customer 2 provided 8% and 33% respectively of total external revenue (2017: 6% and 14%). The Nifty Copper Operations, Customer 1 provided 59% of total external revenue (2017: 42%). (e) Segment non-current assets, excluding financial assets, are all located in Australia. 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 36. KEY MANAGEMENT PERSONNEL Details of Key Management Personnel (a) (i) Non-Executive Directors (NEDs) PJ Newton SD Heggen M Jerkovic Y Zhang Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director (ii) Executive Directors WS Hallam SD Robinson Managing Director Executive Director (iii) Other Executives (KMPs) JR Croall AH King MP Poepjes M Recklies FJ Van Maanen General Manager - Nifty Chief Operating Officer Chief Mining Engineer General Manager - Renison CFO & Company Secretary Appointed Resigned 14 Dec 2012 25 Oct 2012 1 May 2017 9 Jan 2017 1 Mar 2005 25 Nov 2016 - - - - - - 2 Nov 2017 24 Feb 2014 8 Aug 2011 24 Mar 2017 1 Jul 2005 6 Jul 2018 - 11 May 2018 - - There are no other changes of the key management personnel after the reporting date and before the date the financial report was authorised for issue. (b) Compensation of Key Management Personnel Short-term employee benefits Post employment benefits Other long-term benefits Share-based payment 2018 2017 2,923,441 194,754 8,610 1,320,478 4,447,283 2,770,701 207,133 90,741 391,136 3,459,711 The amounts disclosed in the table are the amounts recognised as an expense during the period related to key management personnel. (c) Loans to Key Management Personnel There were no loans to key management personnel during the current or previous financial year. (d) Interest held by Key Management Personnel under the Long Term Incentive Plan Share options held by key management personnel under the long term incentive plan to purchase ordinary shares: Grant date Expiry date Exercise price $ 2018 24 Nov 2016 20 Jan 2017 22 Nov 2017 23 Nov 2017 20 Jan 2020 20 Jan 2020 30 Nov 2020 30 Nov 2020 0.76 0.76 1.32 1.32 Total - - 3,200,000 2,700,000 5,900,000 2017 2,000,000 3,000,000 - - 5,000,000 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 37. RELATED PARTY DISCLOSURES (a) Subsidiaries The consolidated financial statements of the Consolidated Entity include Metals X Limited and the subsidiaries listed in the following table: Name Bluestone Australia Pty Ltd Metals Exploration Pty Ltd Cupric Pty Ltd Subsidiary companies of Bluestone Australia Pty Ltd Bluestone Mines Tasmania Pty Ltd Subsidiary companies of Metals Exploration Pty Ltd Austral Nickel Pty Ltd Hinckley Range Pty Ltd Metex Nickel Pty Ltd Subsidiary companies of Cupric Pty Ltd Nifty Copper Pty Ltd Maroochydore Copper Pty Ltd Ultimate parent Metals X Limited is the ultimate parent entity. Country of incorporation Australia Australia Australia Ownership interest 2018 2017 100% 100% 100% 100% 100% 100% Australia 100% 100% Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Key management personnel Details relating to key management personnel, including remuneration paid, are included in note 36. (b) (c) (d) Transactions with related parties 2018 2017 (i) Jointly controlled operations Amounts charged by Bluestone Australia Pty Ltd to Bluestone Mines Tasmania Joint Venture Pty Ltd for services provided * (ii) Related parties Amounts charged by Bluestone Australia Pty Ltd to Pantoro for services provided ** 276,741 339,513 - 95,287 * ** Subsidiary Bluestone Mines Tasmania Pty Ltd has a 50% interest in the Renison Tin Project accounted for as a joint operation. PG Cook and PM Cmrlec were directors of Pantoro during the previous financial period. Pantoro is no longer a related party of Metals X. 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 38. INFORMATION RELATING TO METALS X LIMITED ("THE PARENT ENTITY") Current assets Total assets Current Liabilities Total Liabilities Issued capital Accumulated losses Option premium reserve Other reserves Total Equity 2018 41,361,344 147,111,691 3,308,420 3,308,420 2017 59,657,737 158,126,546 438,525 438,525 263,866,743 (151,175,979) 27,350,340 3,762,167 143,803,271 261,791,412 (133,196,610) 25,331,051 3,762,167 157,688,020 Profit of the parent entity Total comprehensive profit of the parent entity (11,885,961) (11,885,961) 214,596,595 205,390,059 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries. Pursuant to ASIC Instrument 2016/785, Metals X and its wholly owned subsidiaries (refer to note 37(a) entered into a deed of cross guarantee on 11 November 2013. The effect of the deed is that Metals X has guaranteed to pay any deficiency in the event of winding up of any controlled entity or if they do not meet their obligations under the terms of any debt subject to the guarantee. The controlled entities have given a similar guarantee in the event that Metals X is wound up or if it does not meet its obligations under the terms of any debt subject to the guarantee. The statement of financial position and statement of comprehensive income for the closed group is not different to the Consolidated Entity's statement of financial position and statement of comprehensive income. Contingent liabilities of the parent entity. Contractual commitments by the parent entity for the acquisition of property, plant or equipment. Nil Nil 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 39. BUSINESS COMBINATION Acquisition in 2017 Acquisition of Aditya Birla Minerals Limited On 15 October 2015 the Company announced an off-market takeover offer to acquire 100% of the ordinary shares in Aditya Birla Minerals Limited (Aditya Birla), a publicly listed Australian company which owns copper projects in Western Australia. The original offer of 1 Metals X shares for every 5 Aditya Birla share was increased on 7 December 2015 to 1 Metals X shares for every 4.75 Aditya Birla share. At 30 June 2016 the Company held 32.6% of Aditya Birla that was valued at $35,751,390. Metals X acquired Aditya Birla to significantly enlarge the base metals division of the Company. On 18 July 2016 the unconditional offer was increased to 1 Metals X share for every 4.5 Aditya Birla share, plus $0.08 in cash for every Aditya Birla share. On 20 July the Company gained control of Aditya Birla. On 22 July 2016 the Company obtained over 90% acceptances under the offer and proceeded to compulsory acquire the remaining interests in Aditya Birla. The Company completed the 100% acquisition on 28 August 2016. There were additional costs of $8,171,746 and 1,194,757 Metals X shares with a fair value of $1,911,611 paid to the Aditya Birla shareholders who accepted the offer prior to the increase in consideration on 22 July 2016 that has been expensed in the profit and loss along with a gain of $22,455,274 relating to the 32.6% previously held interest in Aditya Birla. The acquisition has been accounted for using the acquisition method. Assets acquired and liabilities assumed The fair values of the identifiable assets and liabilities as at the date of acquisition are: Assets Cash and cash equivalents Trade and other receivables Other assets Other financial assets Inventories Property, plant and equipment Mine properties and development costs Exploration and evaluation expenditure Liabilities Trade and other payables Provisions Total identifiable net assets as fair value Fair value of previously held investment in Aditya Birla at date of control of 32.6%* Fair value of Metals X shares (46,938,925 ordinary shares) ** Cash paid Purchase consideration transferred Analysis of cash flows on acquisition: Cash paid Cash acquired with the subsidiary Net cash flow Fair value recognised on acquisition 64,147,982 12,481,931 1,444,469 7,620,000 28,338,961 24,474,940 53,509,723 3,137,063 195,155,069 17,576,870 41,655,605 59,232,475 135,922,594 43,923,135 75,101,401 16,898,058 135,922,594 (16,898,058) 64,147,982 47,249,924 In the prior period, from the date of acquisition, Aditya Birla contributed $180,382,325 of revenue and $16,619,145 to the loss before tax from continuing operations for the Consolidated Entity. If the combination had occurred on 1 July 2016, revenue from continuing operations would have been $210,826,518 and loss before tax from continuing operations for the Consolidated Entity would have been $18,071,510. The fair value of the trade receivables amounts to $12,481,931 which is the gross amount of trade receivables. None of the receivables have been impaired and it is expected that the full contractual amount can be collected. Transaction costs relating to external legal fees, consultants fees, technical fees and due diligence costs of $4,151,562 have been expensed and are included in the profit and loss. * Fair value was based on Aditya Birla share price on the date control was gained. ** Fair value was based on Metals X share price on the date control was gained. 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 40. DISCONTINUED OPERATION Disposal in 2017 On 1 December 2016, Westgold was demerged from the Metals X Consolidated Group, following approval by Metals X Shareholders at an Extraordinary General Meeting held on 24 November 2016. Existing Metals X shareholders received shares in Westgold on a 1 Westgold share for every 2 Metals X shares held (in specie distribution). The fair value of Westgold at demerger was $513,118,030, which was determined by multiplying the number of Westgold shares on issue (304,671,487) by the VWAP ($1.684) over the first five days of trading on the ASX. The results of the discontinued operation included in the statement of profit or loss and other comprehensive income are set out below. 2018 2017 Results of the discontinued operations: Revenue Expenses Gross profit/(loss) Other income Other expenses Finance costs Exploration and evaluation expenditure written off Gain on distribution of controlled entities Profit/(loss) before tax Income tax Profit/(loss) for the period from discontinued operations Cash flow information from discontinued operations: Operating activities Investing activities Financing activities Net cash inflow/(outflow) Carrying value of net assets of discontinued operations: Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Property, plant and equipment Mine properties and development costs Exploration and evaluation expenditure Liabilities Trade and other payables Unearned income Interest bearing liabilities Provisions Deferred tax asset Net assets and liabilities disposed of Reduction in share capital Demerger dividend Gain on distribution of controlled entities - - - - - - - - - - - - - - - 163,126,231 (155,480,427) 7,645,804 2,257,169 (160,823) (481,057) - 228,503,915 237,765,008 (20) 237,764,988 6,984,139 (44,370,328) 133,231,424 95,845,235 96,323,551 5,228,674 49,172,005 605,398 65,958,451 77,995,594 176,183,175 471,466,848 (8,789,270) (19,375,000) (7,269,709) (119,269,645) (32,149,109) (186,852,733) 284,614,115 (341,913,378) (171,204,652) (228,503,915) Entities disposed were: Westgold Resources Limited, Aragon Resources Pty Ltd, Big Bell Gold Operations Pty Ltd, Castile Resources Pty Ltd, Hill 51 Pty Ltd, Avoca Resources Pty Ltd, Avoca Mining Pty Ltd, Dioro Exploration Pty Ltd, HBJ Minerals Pty Ltd and Hampton Gold Mining Areas Limited. 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 41. IMPAIRMENT OF ASSETS In accordance with the Consolidated Entity’s accounting policies and processes, non financial assets are reviewed each reporting period to determine whether there is an indication of impairment. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made. In assessing whether an impairment is required for the carrying value of an asset, its carrying value is compared to its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs of disposal and value in use. ‐ Methodology The future recoverability of assets is dependent on a number of key factors including; commodity price, discount rates used in determining the estimated discounted cash flow, foreign exchange rates, the level of proved and probable reserves and measured, indicated and inferred mineral resources, future technological changes which could impact the cost of mining, and future legal changes (including changes to environmental restoration obligations). Impairment is recognised when the carrying amount of the assets exceeds its recoverable amount. Recoverable amount is estimated based on discounted cash flows using market based commodity price and exchange assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements. Consideration is also given to analysts’ valuations, and the market value of the Company’s securities. The fair value methodology adopted is categorised as Level 3 in the fair value hierarchy. 30 June 2018 Assessment As a result of the Consolidated Entity’s 30 June 2018 impairment indicator review, an assessment of the recoverable amount for all of its cash generating units (CGUs) with impairment indicators was performed. Underperformance against budget at the Nifty Copper Project (Nifty) CGU represented an indicator of potential impairment. The Consolidated Entity utilised a discounted cash flow (DCF) model to determine the recoverable amount of Nifty based upon the Nifty life of mine plan. The assessment of the recoverable amount of Nifty has determined that no impairment is required as at 30 June 2018. There are no indicators of impairment of other Metals X assets or CGUs as at 30 June 2018. Key Assumptions underpinning the Nifty Impairment Assessment The table below summarises the key assumptions used in the carrying value assessment: Details 30 June 2018 Copper price (US$ per tonne) Exchange rate (AUD/USD) Discount rate % (post tax) $6,775 0.77 8.0% Commodity prices and exchange rates Commodity price and foreign exchange rates are estimated with reference to external market forecasts. The rates applied to the valuation have regard to observable market data. Discount rate In determining the recoverable amount of assets, the future cash flows were discounted using rates based on the Consolidated Entity’s estimated real weighted average cost of capital, with an additional premium applied having regard to the project’s stage of development. Production activity and operating and capital costs Life of Mine (“LOM”) production activity and operating and capital cost assumptions are based on the Consolidated Entity’s latest forecasts and longer term LOM plans. 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Continued) 41. IMPAIRMENT OF ASSETS (cont.) Sensitivity Analysis Any variation in the key assumptions used to determine the recoverable amount of CGUs would result in a change of the estimated recoverable amount. If the variation in assumption had a negative impact on recoverable amount, it could indicate a requirement for impairment of assets or CGUs. It is estimated that changes in key assumptions, in isolation, would have the following approximate impact (increase or (decrease)) on the recoverable amount of the Nifty CGU as at 30 June 2018: Details Increase in key assumption Decrease in key assumption 5% change in copper price (US$ per tonne) $43,768,881 ($47,695,547) 5% change in exchange rate (AUD/USD) ($39,437,271) 5% change in cost of production 1% change in recovery factor 1% change in discount rate 30 June 2017 Assessment ($26,493,359) $8,732,434 ($4,466,134) $43,390,620 $26,396,468 ($8,740,498) $4,684,839 As a result of the Consolidated Entity’s 30 June 2017 impairment indicator review, an assessment of the recoverable amount for all of its cash generating units (CGUs) with impairment indicators was performed. An indicator for the Central Musgraves Nickel Project (CMNP or Wingellina) CGU was identified, with factors considered including a lower USD nickel price, increase in market interest rates and other changes to nickel market conditions, which have impacted the return expected by a market participant. This has resulted in impairment charge for the CMNP based on FVLCD. Due to the early development stage and the capital investment required to develop this project, the Consolidated Entity determined that the value in use method was not appropriate to determine the recoverable amount and therefore utilised the fair value less cost of disposal method. The Consolidated Entity utilised a discounted cash flow (DCF) model to determine the fair value of CMNP due to the absence of market prices and recent transactions for an asset of a similar nature. The Consolidated Entity developed a DCF model based upon the existing CMNP feasibility study. The DCF was updated to incorporate current commodity prices, exchange rates, interest rates, debt to equity ratio assumptions and discount rates based upon the weighted average cost of capital for CMNP. The DCF model indicated a negative cash flow over the life of the project. An impairment loss of $73,378,360 was therefore recognised to reduce the carrying amount of the CMNP to nil. 42. EVENTS AFTER THE BALANCE SHEET DATE On 7 August 2018 the Company completed a capital raising of $50,000,000 by issuing 76,923,076 fully paid ordinary shares at an issue price of $0.65 per share to institutional and professional investors. 87 DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of Metals X Limited, I state that: In the opinion of the Directors: (a) the financial statements and notes of the Company and of the Consolidated Entity are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Company's and the Consolidated Entity's financial position as at 30 June 2018 and of their performance for the year ended on that date; and complying with Interpretations) and Corporations Regulations 2001; and the Australian Accounting Standards (including the Australian Accounting the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(b) and; there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2018. (b) (c) (d) As at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note 37 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee. On behalf of the Board. WS Hallam Managing Director Perth, 30 August 2018 88 INDEPENDENT AUDIT REPORT 89 INDEPENDENT AUDIT REPORT (Continued) 90 INDEPENDENT AUDIT REPORT (Continued) 91 INDEPENDENT AUDIT REPORT (Continued) 92 INDEPENDENT AUDIT REPORT (Continued) 93 TABLES OF MINERAL RESOURCES AND ORE RESERVES AS AT 30 JUNE 2018 TIN DIVISION Mineral Resource Estimates – Consolidated Summary & Annual Comparison Project 30 June 2017 Renison Bell Mt Bischoff Rentails Mining Depletion Renison Bell Mt Bischoff Rentails Resource Adjustments Renison Bell Mt Bischoff Rentails 30 June 2018 Renison Bell Mt Bischoff Rentails Tonnes Kt 14,974 1,667 23,220 39,861 (741) - - (741) 2,204 - 666 2,870 16,437 1,667 23,886 41,990 Tin Grade % Sn Metal Kt Sn Tonnes kt Copper Grade % Cu Metal Kt Cu 1.35 0.54 0.44 0.79 1.28 - - 1.28 1.01 - 0.21 0.82 1.31 0.54 0.44 0.78 203 9 103 315 (9) - - (9) 22 - 1 23 216 9 104 329 14,772 - 23,220 37,992 (741) - - (741) 2,204 - 666 2,870 16,235 - 23,886 40,121 0.23 - 0.23 0.23 0.27 - - 0.27 0.06 - - 0.06 0.21 - 0.22 0.22 35 - 53 88 (2) - - (2) 1 - - 1 34 - 53 87 Ore Reserve Estimates – Consolidated Summary & Annual Comparison The Ore Reserve estimates are a subset of the Mineral Resource estimates Project 30 June 2017 Renison Bell Rentails Mining Depletion Renison Bell Rentails Reserve Adjustments Renison Bell Rentails 30 June 2018 Renison Bell Rentails Ore Kt 6,821 22,313 29,134 (741) - (741) 742 - 742 6,822 22,313 29,135 Tin Grade % Sn Metal Kt Sn 1.06 0.44 0.59 1.28 - 1.28 0.78 - 0.78 1.01 0.44 0.58 72 99 171 (9) - (9) 6 - 6 69 99 168 Ore Kt 6,499 22,313 28,812 (741) - (741) 1,064 - 1,064 6,822 22,313 29,135 Copper Grade % Cu Metal Kt Cu 0.27 0.23 0.24 0.27 - 0.27 (0.02) - (0.02) 0.22 0.23 0.23 17 51 68 (2) - (2) - - - 15 51 66 Notes: Renison Bell, Mount Bischoff and Rentails Resources and Reserves are 50% owned by Metals X. The geographic region for Tin Mineral Resources and Ore Reserves is Australia. 94 TABLES OF MINERAL RESOURCES AND ORE RESERVES AS AT 30 JUNE 2018 (Continued) COPPER DIVISION Mineral Resource Estimates – Consolidated Summary & Annual Comparison Project 30 June 2017 Nifty Sulphide * Nifty Oxide Nifty Heap Leach Mining Depletion Nifty Sulphide Nifty Oxide Nifty Heap Leach Resource Adjustments Nifty Sulphide Nifty Oxide Nifty Heap Leach 30 June 2018 Nifty Sulphide Nifty Oxide Nifty Heap Leach Kt 47,200 4,330 3,310 54,840 (1,717) - - (1,717) (5,113) - - (5,113) 40,374 4,330 3,310 48,014 Copper Grade % Metal Kt 1.51 0.86 0.74 1.41 1.39 - - 1.39 1.62 - - 1.62 1.50 0.86 0.74 1.39 713 37 23 773 (24) - - (24) (83) - - (83) 606 37 23 666 Maroochydore Project 30 June 2017 Maroochydore Oxide Maroochydore Sulphide Mining Depletion Maroochydore Oxide Maroochydore Sulphide Resource Adjustments Maroochydore Oxide Maroochydore Sulphide 30 June 2018 Maroochydore Oxide Maroochydore Sulphide Copper Grade % Cu 0.91 1.66 1.00 Metal Kt Cu 394 90 486 Kt 43,200 5,430 48,630 Cobalt Grade ppm Co 391 292 380 Kt 43,200 5,430 48,630 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Metal kt Co 16.9 1.6 18.5 - - - - - - 43,200 5,430 48,630 0.91 1.66 1.00 394 90 486 43,200 5,430 48,630 391 292 380 16.9 1.6 18.5 95 TABLES OF MINERAL RESOURCES AND ORE RESERVES AS AT 30 JUNE 2018 (Continued) COPPER DIVISION (cont.) Ore Reserve Estimates – Consolidated Summary & Annual Comparison The Ore Reserve estimates are a subset of the Mineral Resource estimates Project 30 June 2017 Nifty Sulphide Mining Depletion Nifty Sulphide Resource Adjustments Nifty Sulphide 30 June 2018 Nifty Sulphide Ore Kt Copper Grade % Cu Metal Kt Cu 9,750 1.58 153 (1,717) 1.39 (24) 4,659 1.99 93 12,692 1.75 222 Notes: The geographic region for Copper Mineral Resources and Ore Reserves is Australia. 96 TABLES OF MINERAL RESOURCES AND ORE RESERVES AS AT 30 JUNE 2018 (Continued) NICKEL DIVISION Mineral Resource Estimates – Consolidated Summary & Annual Comparison Project 30 June 2017 Wingellina Claude Hills Mining Depletion Wingellina Claude Hills Resource Adjustments Wingellina Claude Hills 30 June 2018 Wingellina Claude Hills Nickel Grade % Ni 0.92 0.81 0.91 - - - - - 17.9 0.92 0.81 0.91 Cobalt Grade % Co Kt 182,560 33,277 215,837 0.07 0.07 0.07 - - - - - (637) 182,560 33,277 215,837 - - - - - 1.06 0.07 0.07 0.07 Metal Kt Ni 1,684 269 1,953 - - - - - (114) 1,684 269 1,953 Fe2O3 Metal Kt Co Grade % Fe2O3 Metal Kt Kt 132 22 154 - - - - - (7) 132 22 154 182,560 33,277 215,837 45.30 38.73 44.29 82,701 12,889 95,590 - - - - - - - - - - - (637) - - 519.23 182,560 33,277 215,837 45.30 38.73 44.29 - - (3,306) 82,701 12,889 95,590 Kt 182,560 33,277 215,837 - - - - - (637) 182,560 33,277 215,837 Ore Reserve Estimates – Consolidated Summary & Annual Comparison The Ore Reserve estimates are a subset of the Mineral Resource estimates Project 30 June 2017 Wingellina Claude Hills Mining Depletion Wingellina Claude Hills Resource Adjustments Wingellina Claude Hills 30 June 2018 Wingellina Claude Hills Nickel Grade % Ni Ore Kt 168,422 - 168,422 0.93 - 0.93 Metal Kt Ni 1,561 - 1,561 Cobalt Grade % Co Ore Kt Fe2O3 Metal Kt Co Ore Kt Grade % Fe2O3 Metal Kt 168,422 - 168,422 0.07 - 0.07 123 - 123 168,422 - 168,422 45.64 - 45.64 76,870 - 76,870 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 168,422 - 168,422 0.93 - 0.93 1,561 - 1,561 168,422 - 168,422 0.07 - 0.07 123 - 123 168,422 - 168,422 45.64 - 45.64 76,870 - 76,870 Notes: The geographic region for Nickel Mineral Resources and Ore Reserves is Australia. 97 COMPETENT PERSONS’ STATEMENTS The information in this report that relates to nickel Mineral Resources was compiled by Metals X technical employees and contractors under the supervision of Mr. Jake Russell B.Sc. (Hons), who is a member of the Australian Institute of Geoscientists. Mr Russell, at the date of the Mineral Resource estimate, was a full time employee of the Company, and has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Russell consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. The information in this report that relates to tin Mineral Resources has been compiled by Metals X technical employees and contractors under the supervision of Mr. Colin Carter B.Sc., who is a member of the Australian Institute of Geoscientists. Mr. Carter is a full-time employee of the Company, and has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Carter consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Mr. Carter is eligible to participate in short and long term incentive plans. The information in this report that relates to copper Mineral Resources has been compiled by Metals X technical employees and contractors under the supervision of Mr. Kim Kremer B.Sc., who is a member of the Australian Institute of Geoscientists. Mr Kremer is a full-time employee of the Company, and has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Kremer consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Mr Kremer is eligible to participate in short and long term incentive plans. The information in this report that relates to nickel Ore Reserves was compiled by Metals X technical employees under the supervision of Mr Michael Poepjes BEng (Mining Engineering), MSc (Min. Econ) MAusIMM. Mr Poepjes, at the date of the Ore Reserve estimate, was a full-time employee of the Company. Mr Poepjes has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Poepjes consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. The information in this report that relates to copper and tin Ore Reserves has been compiled by Metals X technical employees under the supervision of Mr. Allan King B App Sc. (Mining Engineering) Member AusIMM. Mr. King is a full-time employee of the Company. Mr King has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. King consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Mr. King is eligible to participate in short and long term incentive plans and holds options over shares in the Company. Statement of Governance Arrangements and Internal Controls Governance of Metals X’s Mineral Resources and Ore Reserves development and management activities is a key responsibility of the Executive Management of the Company. Senior geological and mining engineering staff of the Company oversee reviews and technical evaluations of the estimates and evaluate these with reference to actual physical and cost and performance measures. The evaluation process also draws upon internal skill sets in operational and project management, ore processing and commercial/financial areas of the business. 
 The Chief Operating Officer (in consultation with senior staff) is responsible for monitoring the planning, prioritization and progress of exploratory and resource definition drilling programs across the Company and the estimation and reporting of resources and reserves. These definition activities are conducted within a framework of quality assurance and quality control protocols covering aspects including drill hole siting, sample collection, sample preparation and analysis as well as sample and data security. A four-level compliance process guides the control and assurance activities: 1. 2. 3. 4. Provision of internal policies, standards, procedures and guidelines; Mineral Resources and Ore Reserves reporting based on well-founded assumptions and compliance with external standards such as the Australasian Joint Ore Reserves Committee (JORC) Codes; Internal review of process conformance and compliance; and Internal assessment of compliance and data veracity. The objectives of the estimation process are to promote the maximum conversion of identified mineralisation into JORC 2012 compliant Mineral Resources and Ore Reserves.

 Metals X reports its Mineral Resources and Ore Reserves on an annual basis, in accordance with ASX Listing Rule 5.21 and clause 14 of Appendix 5A (the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC code) 2012 Edition). The has been no material changes to the Mineral Resources and Ore Reserves estimates since the last annual reporting date. Mineral Resources are quoted inclusive of Ore Reserves. Competent Persons named by Metals X are members of the Australasian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists, and qualify as Competent Persons as defined in the JORC Code. 98 SECURITY HOLDER INFORMATION AS AT 27 AUGUST 2018 (a) Top 20 quoted Shareholders Shareholder HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED SUN HUNG KAI INVESTMENT SERVICES LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED JINCHUAN GROUP LTD CS THIRD NOMINEES PTY LIMITED ALL-STATES FINANCE PTY LIMITED BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMINEES PTY LTD NERO RESOURCE FUND PTY LTD FARJOY PTY LTD CITICORP NOMINEES PTY LIMITED MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED DEBORTOLI WINES PTY LIMITED AJAVA HOLDINGS PTY LTD AUST EXECUTOR TRUSTEES LTD AJAVA HOLDINGS PTY LTD SAFARI CAPITAL PTY LTD MRS LEONIE MARY HALLAM Total (b) Distribution of quoted ordinary shares % 20.00% 18.57% 8.77% 7.48% 7.07% 6.39% 5.04% 2.04% 1.62% 0.86% 0.69% 0.61% 0.51% 0.37% 0.34% 0.30% 0.29% 0.26% 0.24% 0.22% 81.67% Number of Shares 137,824,587 127,924,637 60,407,571 51,516,331 48,721,656 44,000,000 34,718,156 14,070,217 11,152,505 5,913,501 4,733,416 4,200,000 3,497,678 2,519,029 2,317,262 2,089,571 2,000,000 1,800,000 1,626,000 1,502,000 562,534,117 Size of Parcel 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 Over 100,000 Total Number of Shareholders Number of Shares 1,077 2,580 1,238 1,953 212 7,060 540,777 6,950,976 9,389,136 57,663,579 614,516,041 689,060,509 (c) Number of holders with less than a marketable parcel of ordinary shares 1 – 1,000 (d) Substantial Shareholders Shareholder Apac Resources Limited Blackrock Group Jinchuan Group Limited Industry Super Holdings Pty Ltd IOOF Holdings Limited (e) Voting Rights Number of Shareholders Number of Shares 924 389,051 % 9.18 7.11 6.39 5.01 5.00 Number of shares 55,907,571 49,042,651 44,000,000 34,538,835 34,470,302 The voting rights for each class of security on issue are: Ordinary fully paid shares Each ordinary shareholder is entitled to one vote for each share held. Options The holders of options have no rights to vote at a general meeting of the company. (f) Unquoted Equity Securities Number of Options 5,350,000 7,400,000 Exercise Price $0.76 $1.32 Expiry Date 20/01/2020 30/11/2020 Number holders 6 13 99 www.metalsx.com.au

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