Musgrave Minerals Limited
Annual Report 2015

Plain-text annual report

ABN 12 143 890 671 ANNUAL REPORT 2015 Musgrave Minerals is an Australia focused gold and base metal exploration company. ASX: MGV Musgrave Minerals Limited is an Australia focused gold and base metal exploration company. Corporate Information Musgrave plans to grow through the exploration discovery and development of gold and base metal resources. A description of the Company’s operations and principal activities is included in the Review of Operations and the Directors’ Report. The Company’s functional and presentational currency is Australian Dollars. ASX Code: MGV Issued Shares: 121M Cash Balance: $3.7M (as of 30 June 2015) ABN: 12 143 890 671 Top Shareholders Mithril Resources Ltd Independence Group NL Barrick (Australia Pacific) Ltd Silver Lake Resources Ltd Cover photo: Reverse circulation drilling at the Mamba project in the Fraser Range of Western Australia. Directors Graham Ascough (Non-Executive Chairman) Robert Waugh (Managing Director) Kelly Ross (Non-Executive Director) John Percival (Non-Executive Director) Company Secretary Patricia (Trish) Farr Registered Office & Principal Place of Business 28 Richardson Street West Perth, 6005 Western Australia T: +61 (8) 9324 1061 F: +61 (8) 9324 1014 info@musgraveminerals.com.au www.musgraveminerals.com.au Share Registry Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth, 6000 Western Australia Auditor Grant Thornton Audit Pty Ltd Chartered Accountants Level 1, 10 Kings Park Road West Perth, 6005 Western Australia Legal Advisors O’Loughlins Lawyers Level 2, 99 Frome Street Adelaide, 5000 South Australia i Corporate Information Contents Chairman’s Letter Review of Operations Summary of Tenements Directors’ Report Corporate Governance Statement Auditor’s Independence Declaration Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information 2 3 11 12 20 28 29 30 31 32 33 50 51 54 Contents 1 Chairman’s Letter Dear Fellow Shareholder, agreed to pay Musgrave an amount equal to 1% of net smelter returns (“NSR”) in respect of all minerals It is my pleasure to welcome you to Musgrave Minerals produced from the Menninnie Dam and Nonning Limited’s (ASX: MGV) Annual Report for the year ending exploration licences, or buy back 50% of this NSR for 30 June 2015. $1.25M within 60 days of receiving sale proceeds from either of these tenements. Musgrave believes this was The past year has not been an easy one for our an excellent outcome for the Company. Company, similarly to many of our peers focused on early-stage mineral exploration. Market conditions Going forward, the Company will focus on existing remain difficult however we will continue to be an projects in our portfolio including our Mamba Project active explorer, developing and testing targets across in the Fraser Range region of Western Australia, which our projects and evaluating new opportunities on a continues to gain attention as a mineral province and is continuous basis to grow the Company. Our share price home to the world-class Nova-Bollinger nickel-copper has not reflected the hard work and dedication of our sulphide deposits, and the Corunna Project in the exploration team and I believe that this is largely due Gawler Craton of South Australia. We also progressed to the difficult market conditions. I assure you we are targets at our Mimili Project in the Musgrave region working as hard as possible to provide value to our Shareholders, and to ensure we maximise in-ground during the year, and will follow up the Roslin zinc target and Zarek nickel-copper gossan with drilling in the expenditure we have undertaken a number of measures coming months after securing financial support from in the past year to reduce overheads and increase the South Australian Government to do so. We are also efficiency. As a result the Company has reduced staff continuing to focus on obtaining a new gold or base and relocated our registered office and register of metal project within Australia to balance our current securities to Perth in recent months. project portfolio. As a result of the relocation of corporate activities In closing, I wish to thank our management and staff Donald Stephens retired as Company Secretary. We for their hard work and dedication over the past year, thank Mr Stephens for his contribution to the Company as well as our Shareholders for your support. I hope this since our listing and wish him well. Mrs Patricia Farr has will continue into the coming year, and I look forward to been appointed as Company Secretary and we welcome reporting more progress across our project portfolio. Mrs Farr to the Musgrave team. A strategic review of our projects and exploration activities led us to terminate our earn-in agreement with Menninnie Metals Pty Ltd (“MMPL”) in regards to the Graham Ascough Menninnie Dam Project in the Southern Gawler Craton Chairman of South Australia. As part of the termination, MMPL 2 Chairman’s Letter Review of Operations Musgrave Minerals Limited (ASX: MGV) is an Australia focused gold and base metal exploration company. Musgrave plans to grow through the exploration discovery and development of gold and base metal resources within Australia. We are currently focused on base metal, gold and silver exploration in the Fraser Range of Western Australia and the Musgrave Range was $468,772 (of which $95,447 occurred in the period 1 January 2014 to 30 June 2014). The irregularities are consistent with the fraudulent misappropriation of Company funds. An employee of the Company was suspended pending the investigation and terminated in September 2014. These irregularities were brought to the attention of the Major Fraud Squad, Western Australia Police for investigation and prosecution. As a result the matter is and Gawler Craton regions of South Australia (Figure 1). currently before the WA Courts. Corporate During the past year, Musgrave Minerals spent $2.29 million on exploration activities. The Directors of Musgrave are pursuing various avenues for recovery of the funds and to date $36,043 has been returned to the Company. During the second half of the year, the Company implemented a significant reduction in staffing, corporate and administration costs aligned with market conditions and a review of projects and exploration activities. As a function of this process Musgrave relocated its registered office and register of securities to Perth. Coinciding with this, Mr Donald Stephens retired as Company Secretary and Mrs Patricia (Trish) Farr, based in West Perth, was appointed as his replacement. On February 12, 2015 the Board informed the market that investigations into a number of irregular transactions previously reported in the financial statements for the year ended 30 June 2014, had been completed. The investigations identified that the amount of funds involved in the irregular transactions During the June quarter, Musgrave received $895,575 from the Australian Tax Office under the Federal Government’s Research and Development Tax Incentive Scheme for its research and development activities during the 2014 financial year. Musgrave has strong links with government and research organisations in the regions in which it operates including the Geological Survey of South Australia and the Commonwealth Scientific and Industrial research Organisation (“CSIRO”). Musgrave Minerals continues to assess a large range of gold and base metal projects for joint venture or acquisition within Australia. At the end of June 2015, the Company was well- resourced with $3.7 million in cash. There was no change to the number of ordinary shares on issue during the year which is currently 121M shares. Exploration Activities The Company’s exploration during the 2015 financial year focused on planning and implementation of field programs for the Mamba project in Western Australia and the Corunna project in South Australia. Diamond drilling was undertaken at the Pallatu targets on the Deering Hills project in the Musgrave province of South Australia along with diamond drilling and Figure 1: Musgrave Minerals’ Project Location Map ground electromagnetic (“EM”) surveys at Menninnie Review of Operations 3 Dam. Towards the end of the financial year drilling Musgrave was granted the tenement on 5 February commenced at the Mamba project in the Fraser Range 2015. of WA and at the Corunna project in SA. Fraser Range Mamba Project E28/2405 (100% Musgrave Minerals Ltd) • The project is located in the same belt as the world class Nova-Bollinger nickel-copper deposits • Late-time basement EM conductors identified • RC drilling on the M8 conductor identified chalcopyrite (copper sulphide) and low level Pt (platinum) and Pd (palladium) in RC chips The Mamba tenement covers 180km2 in the same belt as the world class Nova-Bollinger nickel-copper sulphide discoveries of Sirius Resources NL (ASX: SIR) in south- eastern WA. The tenement is along strike from Sirius’ Nova deposit and only 5km from the Trans Australian rail line (Figure 2). The project is on a significant regional gravity high, which is interpreted to represent a large accumulation of mafic rocks prospective for massive nickel-copper sulphide mineralisation. The Company commenced a detailed aeromagnetic survey over the Mamba project in late August that covered the entire tenement at 100m line spacing. The survey identified 11 high priority targets that showed magnetic characteristics consistent with mafic-ultramafic intrusive bodies, the prospective host for nickel-copper sulphide mineralisation in the district. These magnetic targets are comparable in size to Sirius’s Nova “Eye” feature. A heritage survey has been completed over the entire tenement area, and following a detailed interpretation of aeromagnetic survey data and integration with historical exploration data, 11 priority targets were identified and followed up with a combination of high powered fixed and moving loop EM surveys. This identified three late-time basement ground EM conductors. The strongest conductor, M8, was a high conductance late-time basement response in an area of no previous drilling and interpreted shallow sedimentary cover, making surface geochemistry ineffective. The relatively high conductance for the ground EM model (>10,000S) was consistent with the response expected for massive Ni-Cu sulphide mineralisation or semi- massive graphite + Fe-sulphide horizon. In June-July 2015 Musgrave completed a two-hole, 806m reverse circulation (“RC”) drilling program to test the M8 EM bedrock conductor. The drill holes intersected a combination of stringer pyrrhotite and pyrite with minor chalcopyrite and graphite within a sequence of mafic and intermediate granulite. A down hole electromagnetic (“DHEM”) survey was completed which confirmed the source of the surface EM conductor was intersected in the drill holes. Geological logging of RC chips was completed on site and samples collected for multi-element assay and petrological studies. Maximum values occurred in MAMRC001 from 360m to 364m. • 4m at 73.5ppb Au, 2.2g/t Ag, 705ppm Cu, 147ppm Ni, 19.8 ppb Pd and 18.3ppm Mo from 360m. • Including 1m at 214ppb Au, 2.4g/t Ag, 730ppm Cu, Figure 2: Location of Musgrave’s Mamba Project 159ppm Ni and 19ppm Mo from 363m. 4 Review of Operations Although the assay results were disappointing and The next stage of exploration is to complete a gravity the minor sulphides of low tenor, there is geochemical survey across the entire tenement and use this data evidence to suggest the sulphides may have links to in conjunction with existing detailed magnetics to magmatic processes. These magmatic processes are key generate aircore drill targets. It is then proposed in the formation of nickel-copper sulphide deposits. to drill these targets to test for both Ni-Cu and Au As such the tenement area is considered to remain mineralisation and confirm prospective near surface prospective for Ni-Cu-PGE sulphides, as well as gold lithologies. mineralisation. Geological logging - Mamba DHEM set up – Mamba RC drilling at Mamba Review of Operations 5 Musgrave Region Projects Deering Hills Project EL5172, EL5173 & EL5317 – (100% Musgrave Minerals Ltd) • Disseminated sulphide intersected at two targets at Pallatu • Same geological domain that hosts Nebo-Babel nickel-copper deposits The Deering Hills Project is in the centre of the Musgrave geological province; approximately 200km west of the Stuart Highway and Adelaide to Darwin rail line in the far north-west of South Australia (Figure 3). The targets are 1km from previously intersected massive and disseminated nickel sulphide mineralisation at Pallatu 3 and in the same geological domain that hosts the large Nebo-Babel nickel-copper sulphide deposits. Approximately 20km of untested contact prospective for massive nickel-copper sulphide at Pallatu and Deering Hills has been identified to date. Musgrave is currently seeking a joint venture partner to maximise the value in the Pallatu and Deering Hills targets. Mimili Project EL5175 (100% Musgrave Minerals Ltd) The Company completed two holes for 441m at • New zinc-copper target identified at Roslin prospect the Pallatu 6 & 7 ground EM targets and intersected • Nickel-copper gossan identified at Zarek prospect disseminated sulphide at both targets in July 2014. A down-hole EM survey was undertaken but did not identify any strong off-hole conductors. The Mimili Project consists of one wholly-owned exploration licence located in the eastern portion of the Figure 3: Location of MGV’s Musgrave Geological Province tenements, South Australia 6 Review of Operations Musgrave region (Figure 3) following the surrender of Other Musgrave Projects tenement EL5174 during the September quarter. EL5171 & EL4850 (100% Musgrave Minerals Ltd) A new nickel-copper gossan has been identified at the Zarek prospect. Follow-up surface geochemistry has identified a 200m long Ni, Cu, Co geochemical anomaly associated with the gossan on the margin of a discrete gabbroic intrusive. The gossan and geochemical response may reflect the surface expression of weathered nickel-copper sulphide mineralisation. Ground EM is required to test for a conductive response below the geochemical target. The Company undertook ground EM surveys within EL5175 on a number of co-incident magnetic, gravity and geochemical targets at Mimili. It identified a basement EM conductor at the Roslin target with co- No significant exploration was undertaken on EL5171 (Mt Woodroffe) and EL4850 (Eunyarinna Hill) during the year. Musgrave surrendered three low-priority tenements, EL4851, EL4852 and EL4853, during the June quarter as part of the Company’s strategic review. Southern Gawler Project Corunna Project EL5497 (100% Musgrave Minerals Ltd) • Anomalous lead, zinc and silver identified in aircore drilling at the Corunna project in South Australia incident anomalous Zn, Cu and Co in surface soil and • Anomalous silver-lead-zinc zone identified over gossanous rock chip samples. Roslin is only 10km east 300m strike and open to north and south of Zarek (Figure 4). Further work is required to refine the target prior to drilling. Musgrave was successful in securing funds to drill test Zarek and Roslin, with the Company eligible to receive $90,000 for drilling through the South Australian Government’s Plan for Accelerating Exploration (“PACE”) Frontiers Initiative. The grant is subject to Musgrave matching 50% of direct drilling costs and completing the drilling program before 1 May 2016. • Results include: o 11m @ 1.0% Pb, 0.5% Zn and 4.2g/t Ag from 19m o 22m @ 0.5% Pb, 0.2% Zn and 13.2g/t Ag from 17m The Corunna tenement covers an area of 260km2 located approximately 50km west of Port Augusta, well Figure 4: Location of Roslin and Zarek Targets, South Australia Figure 5: Location of Musgrave’s Southern Gawler Projects in South Australia Review of Operations 7 positioned in regards to infrastructure and proximity to Aircore drilling comprising 49 holes for a total of the coast (Figure 5). It is prospective for silver-lead-zinc 1,740m was completed over the targets with five and copper-gold mineralisation. Historical rock chip holes intersecting base metals greater than 0.5%, with samples on the project have been identified with up anomalous silver. Drill hole depths varied from 9m to 148g/t Ag and 0.5% Pb. The Corunna exploration to 58m, with all holes terminating at the fresh rock licence was granted in October 2014. interface. Recent exploration at Corunna by previous tenement Anomalous Ag, Pb and Zn was identified at target Area holders focused on uranium. Musgrave’s examination 1 on the western side of the tenement (Figure 6). The of historic open file data has identified low level best intersection include 11m @ 1.0% Pb, 0.5% Zn regional multi-element soil sampling results of and 4.2g/t Ag from 19m in drill hole COAC017; 13m @ interest. The historical survey assayed for a full suite 0.6% Pb, 0.4% Zn and 7.2g/t Ag from 32m in drill hole of elements including Ag, Au, base metals and path COAC019 and 22m @ 0.5% Pb, 0.2% Zn and 13.2g/t finder elements on a nominal 400m grid. From this, the Ag from 17m in drill hole COAC021. Company identified six high-priority silver-lead-zinc- copper geochemical targets and completed infill soil The anomalous zone is 300m long and open to the geochemistry. north and south. The results show there is potential for lead-zinc-silver mineralisation in this under- Musgrave established a Native Title Access Agreement explored region. All data is currently being reviewed with Barngarla Aboriginal Corporation in the December quarter to enable exploration access, and completed in preparation for further exploration to follow-up this encouraging result. a heritage survey in the June quarter. This allowed the Company to commence drilling. Musgrave is eligible to receive up to $55,000 for drilling at Corunna through the South Australian Government’s PACE Frontiers Initiative. The grant was subject to Musgrave matching 50% of direct drilling costs and completing the drilling program before 1 May 2016. Geological reconnaissance at Corunna Toondulya Bluff Project EL5403 (100% Musgrave Minerals Ltd) The Toondulya Bluff tenement, in the Southern Gawler Craton, covers 390km2 and is prospective for high- grade gold mineralisation. Historical exploration data is currently being compiled to identify targets and plan for further exploration. Figure 6: High Priority Epithermal Ag-Pb-Zn-Cu Targets Shown on Gridded Silver Soil Geochemical Image with Landsat Backdrop 8 Review of Operations Menninnie Dam Project EL5039, 4813, 5453 (formally 4285), 4669, 4865 Menninnie Dam comprises five Exploration Licences covering a contiguous area of 2,471km² in the Gawler Craton, about 100km west of Port Augusta (Figure 5). During the December quarter, Musgrave completed a terminate its Menninnie Dam Mining Farm-In and Joint Venture Agreement. As part of the termination, MMPL agreed to pay Musgrave an amount equal to 1% NSR in respect of all minerals produced from each of EL5039 (Menninnie Dam) and EL4813 (Nonning). MMPL has the right (but not the obligation) to buy back 50% of the NSR (being 0.5%) for $1,250,000 within 60 days of first receiving product sales proceeds from any of these six drill hole program to test three base metal targets at tenements. Menninnie. A combination of diamond and RC drilling was completed totalling 1,495m. No significant mineralisation was encountered in the drilling. Research and Development Musgrave has established a strong relationship with CSIRO, the Commonwealth Scientific and Industrial Research Organisation, Australia’s national science A ground EM survey was also completed over the Taal agency, with a research agreement focused on new target area but failed to define a significant bedrock understandings and data interpretations that can be conductor. applied to our exploration in the Musgrave Province. We have also instigated research into developing a new During the March quarter, Musgrave completed all drill, geological model and techniques to improve exploration site and track rehabilitation and undertook a review of efficiency and increase the probability of success for our all available data. exploration in the Southern Gawler Craton of South Australia. We look forward to continuing our research Following a strategic review of the Company’s project partnerships in the coming year and the exciting portfolio and subsequent to the end of the reporting developments that they may deliver on our current and period, Musgrave agreed with MMPL, a wholly-owned potential future project portfolio. subsidiary of Terramin Australia Ltd (ASX: TZN) to Corunna Project, South Australia Review of Operations 9 Competent Person’s Statement The information in this report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled and/or thoroughly reviewed by Mr Robert Waugh, a Competent Person who is a Fellow of the Australasian Institute of Mining and Metallurgy (“AusIMM”) and a Member of the Australian Institute of Geoscientists (“AIG”). Mr Waugh is Managing Director and a full-time employee of Musgrave Minerals Ltd. Mr Waugh has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration 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 Waugh consents to the inclusion in the report of the matters based on his information in the form. Forward Looking Statements This report has been prepared by Musgrave Minerals Ltd (“MGV”). The information contained in this report appropriate. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments. is a professional opinion only and is given in good faith. To the fullest extent permitted by law, MGV, its officers, Certain information in this document has been derived employees, related bodies corporate, agents and advisers from third parties and though Musgrave Minerals has do not make any representation or warranty, express no reason to believe that it is not accurate, reliable or or implied, as to the currency, accuracy, reliability or complete, it has not been independently audited or completeness of any information, statements, opinions, verified by MGV. This report is in summary form and does not purport to be all inclusive or complete. Recipients should conduct their own investigations and perform their own analysis in order estimates, forecasts or other representations contained in this report. No responsibility for any errors or omissions from this arising out of negligence or otherwise is accepted. to satisfy themselves as to the accuracy and completeness Any forward-looking statements included in this document of the information, statements and opinions contained. involve subjective judgment and analysis and are subject to This is for information purposes only. Neither this nor the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of MGV shares in any jurisdiction. This does not constitute investment advice and has been prepared without taking into account the recipient’s investment objectives, financial circumstances or particular needs and the opinions and recommendations in this presentation are not intended to represent recommendations of particular investments to particular persons. Recipients should seek professional advice when deciding if an investment is uncertainties, risks and contingencies, many of which are outside the control of, and may be unknown to, MGV. In particular, they speak only as of the date of this document, they assume the success of MGV’s strategies, and they are subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially from the forward-looking statements and the assumptions on which the forward- looking statements are based. Recipients of this document (Recipients) are cautioned to not place undue reliance on such forward-looking statements. 10 Review of Operations Summary of Tenements Tenement Previous Tenement ID Project Locality Status EL4850 EL5171 EL5172 EL5173 EL5175 EL5317 EL5205 EL5403 EL5497 E28/2405 EL1996/260 EL1996/262 EL1996/336 EL1996/337 EL1996/338 EL1996/339 EL1996/340 EL1996/341 EL1996/342 EL1996/534 EL1997/040 EL1997/053 EL1997/055 EL1997/056 EL1997/057 EL1997/058 EL1997/059 EL1997/060 EL1997/061 EL1997/062 EL1997/063 EL1997/143 EL1997/144 EL1997/186 EL1997/297 EL1997/321 EL1997/468 EL1997/605 EL1999/035 EL2001/031 EL2008/154 EL3941 EL3942 EL3953 EL3955 Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave EL4047 Musgrave PMC JV Toondulya Bluff Corunna Mamba Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave PMC JV Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave Musgrave SA SA SA SA SA SA SA SA SA WA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Application Area (km2) 2385 427 565 714 1908 12 MGV Interest 100% 100% 100% 100% 100% 100% 1535 0% (may earn up to 75%) 380 260 180 519 463 653 1854 620 1301 2198 1230 2136 1783 1507 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 1013 0% (may earn up to 75%) 595 0% (may earn up to 75%) 1241 0% (may earn up to 75%) 1656 0% (may earn up to 75%) 1721 0% (may earn up to 75%) 2308 0% (may earn up to 75%) 666 0% (may earn up to 75%) 2108 0% (may earn up to 75%) 1926 0% (may earn up to 75%) 1957 0% (may earn up to 75%) 1040 835 1815 2015 624 215 152 692 338 37 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Summary of Tenements 11 Directors’ Report Your Directors present their report on Musgrave Minerals Ltd and its subsidiary (“the Group”) for the financial year ended 30 June 2015. Directors The names of the Directors in office at any time during, or since the end of, the year are: Graham Ascough, Non-Executive Chairman Robert Waugh, Managing Director Kelly Ross, Non-Executive Director John Percival, Non-Executive Director Directors have been in office since the start of the financial year to the date of this report. Names, qualifications, experience and special responsibilities Mr Graham Ascough BSc, PGeo, MAusIMM (Non-Executive Chairman), Director since 26 May 2010 Graham Ascough is a senior resources executive with more than 25 years of industry experience evaluating mineral projects and resources in Australia and overseas. He has had broad industry involvement ranging from playing a leading role in setting the strategic direction for significant country-wide exploration programs to working directly with mining and exploration companies. Other directorships: Mithril Resources Ltd (Appointed 9 October 2006) Phoenix Copper Ltd (Appointed 10 December 2012) Avalon Minerals Ltd (Appointed 29 November 2013) Former directorships: Reproductive Health Science Ltd (Retired 2 April 2014) Aguia Resources Ltd (Resigned 15 November 2013) Mr Robert Waugh MSc, BSc, FAusIMM, MAIG (Managing Director), Director since 6 March 2011 Robert Waugh has over 24 years of experience in the resources sector including more than ten years in the Musgrave region. Mr Waugh was a critical member of the WMC Resources Ltd exploration team that discovered the Nebo-Babel nickel/copper/PGM deposit at West Musgrave in 2000. He was subsequently Project Manager of the team that defined the initial resource at Nebo-Babel. Mr Waugh has held senior exploration management roles in a number of companies including WMC Resources (“WMC”) and BHP Billiton Exploration Ltd (“BHP”). Mr Waugh has extensive exploration and mining experience in a range of commodities including nickel, copper, gold, uranium and PGMs. Mr Waugh holds a Bachelor of Science degree majoring in geology from the University of Western Australia and a Master of Science in Mineral Economics from Curtin University and the Western Australian School of Mines. Mr Waugh is a Fellow of the Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute of Geoscientists. Other directorships: Mr Ascough is a geophysicist by training and was the None Managing Director of ASX listed Mithril Resources Ltd from October 2006 until June 2012. Prior to joining Mithril in 2006, Mr Ascough was the Australian Manager of Nickel and PGM Exploration at the major Mrs Kelly Ross BBus, CPA, AGIA (Non-Executive Director), Director since Canadian resources house, Falconbridge Ltd (acquired 26 May 2010 by Xstrata Plc in 2006). He is a Member of the Australian Institute of Mining and Metallurgy, and is a Professional Geoscientist of Ontario, Canada. Mr Ascough is a member of the Company’s audit committee. Kelly Ross is a qualified accountant holding a Bachelor of Business (Accounting) and has the designation CPA from the Australian Society of Certified Practicing Accountants. Mrs Ross is a Chartered Secretary with over 25 years’ experience in accounting and 12 Directors’ Report administration in the mining industry and was the Holdings Ltd (resigned 14 December 2012), Papyrus Company Secretary of Independence Group NL (“IGO”) Australia Ltd (retired 24 August 2015) and Reproductive for 10 years from 2001 to 2011. Mrs Ross was also a Health Science Ltd (resigned 31 August 2015). senior accountant at Resolute Ltd from 1987 to 2000. Additionally, he is Company Secretary to Highfield Mrs Ross was a Non-Executive Director of ASX listed Resources Ltd, Minotaur Exploration Ltd, Mithril Independence Group NL for 12 years from 2002 to Resources Ltd and Petratherm Ltd. He holds other public 2014. Mrs Ross retired from IGO on 24 December 2014. company secretarial positions and directorships with Mrs Ross is the chair of the Company’s audit committee. private companies and provides corporate advisory services to a wide range of organisations. Former directorships: Independence Group NL (Retired 24 December 2014) Other directorships: None Mr John Percival (Non-Executive Director), Director since 26 May 2010 Mrs Patricia (Trish) Farr GradCertProfAcc, GradDipACG, AGIA, ACIS, GAICD (Company Secretary) – appointed 30 June 2015 Trish Farr is an experienced Chartered Secretary with over 17 years’ experience in the exploration and mining industry in the areas of corporate governance, compliance and administration. Mrs Farr was previously Mr Percival has been involved in investment and merchant banking for over 25 years including 15 the Company Secretary of uranium junior Energy Metals Limited from its listing in 2005 to 2010 and years as Investment Manager of Barclays Bank New Fox Resources Ltd from 2013 to 2014. Mrs Farr is also Zealand Ltd. In addition he has extensive experience a Director and the Company Secretary of Jindalee in stockbroking, corporate finance and investment Resources Limited. Mrs Farr is an associate member management. In 1995 Mr Percival was appointed to of Chartered Secretaries & Administrators and the the Board of Goldsearch Limited and in 2000 became Governance Institute of Australia (formerly Chartered an Executive Director. In May 2014 Goldsearch Secretaries Australia) and a graduate member of the changed direction and Mr Percival resigned his executive Australian Institute of Company Directors. position. In May 2015 Mr Percival was appointed as a Non-Executive Director of Verde Science Inc. a Pharmaceutical Cannabinoid based research company listed in the USA. Other directorships: Goldsearch Ltd (Appointed 11 October 1995) Interests in the shares, performance shares and options of the Company and related bodies corporate As at the date of this report, the interests of the Directors in the ordinary shares and options of Musgrave Company Secretary Minerals Ltd were: Mr Donald Stephens BAcc, FCA (Company Secretary) – retired 30 June 2015 Mr Stephens is a Chartered Accountant and corporate Graham Ascough adviser with over 25 years’ experience in the accounting industry, including 14 years as a partner of HLB Mann Judd (SA) Pty Ltd, a firm of Chartered Accountants. He is a director of Mithril Resources Ltd, Lawson Gold Ltd, Petratherm Ltd, and was formerly a director of TW Robert Waugh John Percival Kelly Ross Number of Ordinary Shares Number of Options over Ordinary Shares 595,000 361,000 200,000 50,000 750,000 5,000,000 500,000 500,000 Directors’ Report 13 Dividends No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. Principal activities The principal activities of the Group during the financial year were: • to carry out exploration of mineral tenements both on a joint venture basis and by the Group in its own right; • to continue to seek extensions of areas held and to seek out new areas with mineral potential; and • to evaluate results achieved through surface sampling, geophysical surveys and drilling activities carried out during the year. Functional currency The functional and presentational currency for the Group is Australian dollars and unless otherwise stated, all amounts listed in this report refer to Australian dollars. Significant changes in the state of affairs No significant changes in the state of affairs occurred during the financial year. Significant events after the reporting date On 27 July 2015, the Group announced the termination first receiving product sales proceeds from any of these tenements. Likely developments and expected results The Group intends to continue to pursue the objectives outlined in the principal activities for the Group. The Group is still at the point of exploration on its exploration ground. No comment on the expected results from these efforts is included in this report. Environmental regulation and performance The Group is aware of its responsibility to impact as little as possible on the environment, and where there is any disturbance, to rehabilitate sites. During the year under review the work carried out was in South Australia and Western Australia and the Group followed procedures and pursued objectives in line with guidelines published by the South Australian and Western Australian Governments. These guidelines encompass not only the impact on the land and vegetation but cover such subjects as pollution, approvals from relevant parties including land owners and land users, heritage, health and safety and proper restoration practices. The Group supports this approach and is confident that it properly monitors and adheres to these objectives, and any local conditions applicable. The Group is committed to minimising environmental impacts during all phases of exploration, development and production through a best practice environmental approach. The Group shares responsibility for protecting the environment for the present and the future. It believes that carefully managed exploration programs of the Menninnie Dam Joint Venture with Menninnie should have little or no long-lasting impact on the Metals Pty Ltd (“MMPL”), a wholly owned subsidiary environment and the Group has formed a best practice of Terramin Australia Ltd. In conjunction with the policy for the management of its exploration programs. agreement, MMPL has agreed to pay Musgrave an The Group properly monitors and adheres to this amount equal to 1% of net smelter returns (“NSR”) in approach and there were no environmental incidents respect of all minerals produced from each of EL5039 to report for the year under review. Furthermore, (Menninnie Dam) and EL4813 (Nonning). MMPL has the Group is in compliance with the state and/or the right (but not the obligation) to buy back 50% of commonwealth environmental laws for the jurisdictions the NSR (being 0.5%) for $1,250,000 within 60 days of in which it operates. 14 Directors’ Report Occupational health, safety and welfare In running its business, the Company aims to protect the health, safety and welfare of employees, contractors and guests. For the reporting year ended 30 June 2015, the Company experienced one lost time injury. The Company reviews its Health and Safety policy at regular intervals to ensure a high standard of Health and Safety. Share options At the date of this report, the following options to acquire ordinary shares in the Company were on issue: Issue Date Expiry Date Exercise Price Balance at 1 Jul 2014 Options Lapsed Balance at 30 Jun 2015 17/02/2011 17/02/2011 19/04/2011 09/05/2011 24/01/2012 06/03/2013 24/03/2013 11/03/2014 17/02/2016 17/02/2016 19/04/2016 08/05/2016 23/01/2017 05/03/2018 24/03/2018 10/03/2019 $0.36 $0.50 $0.25 $0.36 $0.25 $0.25 $0.25 $0.12 4,750,000 2,500,000 7,750,000 500,000 375,000 500,000 75,000 575,000 17,025,000 - - - - - - - (25,000) (25,000) 4,750,000 2,500,000 7,750,000 500,000 375,000 500,000 75,000 550,000 17,000,000 No shares were issued during the year as a result of the exercise of options. No additional options were issued during the financial year. On 16 September 2015, 1,025,000 unlisted options which had been cancelled due to an administrative oversight were re-issued and are included in the table above. Indemnification and insurance of directors and officers The Company paid a premium during the year in respect Directors’ meetings The number of meetings of Directors (including meetings of committees of Directors) held during the year and the of directors’ and officers’ liability insurance policy, numbers of meetings attended by each Director were as insuring the Directors and officers of the Company follows: against a liability incurred whilst acting in the capacity of a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the policy as such disclosure is prohibited under the terms of the contract of insurance. Indemnification of auditors The Group has not entered into an agreement with its current auditors indemnifying them against claims by a third party arising from their position as auditor. Directors’ Meetings Audit Committee Eligible Attended Eligible Attended Graham Ascough Robert Waugh Kelly Ross John Percival 11 11 11 11 11 11 11 11 2 2 2 2 2 2 2 2 Directors’ Report 15 Audit and risk committee: Kelly Ross (Chairman) Graham Ascough Robert Waugh John Percival who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Company. i. Non-Executive Directors and Managing Director Proceedings on behalf of the Company No person has applied to the Court under section Mr Graham Ascough (Chairman), appointed 26 May 2010 Mr Robert Waugh 237 of the Corporations Act 2001 for leave to bring (Managing Director), appointed 6 March 2011 proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Auditor Grant Thornton Audit Pty Ltd is in office in accordance with section 327 of the Corporations Act 2001. Non-audit services Grant Thornton Audit Pty Ltd, in its capacity as auditor for Musgrave Minerals Ltd, has not provided any non-audit services during the financial year. The auditor’s independence declaration for the year ended 30 June 2015 as required under section 307C of the Corporations Act 2001 has been received and can be found on page 28. Remuneration report (audited) This Remuneration Report for the year ended 30 June 2015 outlines the remuneration arrangements of Mrs Kelly Ross (Non-Executive Director), appointed 26 May 2010 Mr John Percival (Non-Executive Director), appointed 26 May 2010 ii. Other KMPs Mr Donald Stephens (Company Secretary), retired 30 June 2015 Mrs Patricia Farr (Company Secretary), appointed 30 June 2015 Mr Justin Gum (Principal Geologist), ceased employment 11 March 2015 Mr Ian Warland (Exploration Manager), ceased employment 7 August 2015 Remuneration philosophy The Board is responsible for determining remuneration policies applicable to Directors and senior executives of the entity. The broad policy is to ensure that remuneration properly reflects the individual’s duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people with appropriate skills and experience. At the time of the Company and the Group in accordance with the determining remuneration, consideration is given by the requirements of the Corporations Act 2001 (the Act) Board to the Group’s financial position. and its regulations. This information has been audited as required by section 308(3C) of the Act. Use of Remuneration Consultants Independent external advice is sought from Introduction The remuneration report details the remuneration remuneration consultants when required, however no advice has been sought during the year ended 30 June arrangements for key management personnel (“KMP”) 2015. 16 Directors’ Report Voting and comments made at the Company’s 2014 Annual General Meeting (“AGM”) Musgrave Minerals Ltd’s motion in relation to the approval of the 2014 remuneration report passed with a vote total of more than 95% at the AGM held on 26 November 2014. The Company did not receive any specific feedback at the 2014 AGM on its remuneration report. Director remuneration arrangements The Board seeks to set aggregate remuneration at a the Company), based on the annual salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time. The employment conditions of the Exploration Manager, Mr Ian Warland, were formalised in a contract of employment. Mr Warland commenced employment on 6 March 2013 and his gross annual salary, inclusive of superannuation guarantee was $218,000. Either party could terminate the employment contract without cause by providing one (1) month’s written notice or making level that provides the Company with the ability to payment in lieu of notice (in the case of the Company) attract and retain directors of the highest calibre, whilst or forfeiture of one month’s salary (in the case of Mr incurring a cost that is acceptable to shareholders. Warland), based on the annual salary component. Termination payments are generally not payable on The Company’s constitution and the ASX listing rules resignation or dismissal for serious misconduct. In specify that the Non-Executive Director fee pool shall the instance of serious misconduct the Company can be determined from time to time by a general meeting. The last determination disclosed in the Company’s terminate employment at any time. replacement prospectus dated 8 March 2011 approved The employment conditions of the Principal Geologist, an aggregate fee pool of $250,000 per year. The Board Dr Justin Gum, were formalised in a contract of will not seek any increase for the Non-Executive Director employment. Dr Gum commenced employment on 1 pool at the Company’s 2015 Annual General Meeting. October 2010 and his gross annual salary, inclusive of Employment contracts The employment conditions of the Managing Director, Mr Robert Waugh, are formalised in an employment contract. Under this contract, the Company agrees to employ Mr Waugh as Managing Director of the Company with his current gross annual salary, inclusive of 9.5% superannuation guarantee, being $291,330. Either party may terminate the employment contract without cause by providing six (6) months written notice or by making payment in lieu of notice (in the case of superannuation guarantee, was $171,675. Either party could terminate the employment contract without cause by providing one (1) month’s written notice or making payment in lieu of notice (in the case of the Company) or forfeiture of one month’s salary (in the case of Dr Gum), based on the annual salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time. Directors’ Report 17 Table 1: Remuneration of key management personnel Financial Year Salary and fees $ Short term benefits $ Share based payments $ Post- employment/ Super- annuation $ Total $ Remuneration consisting of options % 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 G Ascough * R Waugh K Ross * J Percival J Gum I Warland D Stephens * FY 15 FY 14 65,000 65,000 256,985 256,414 45,000 45,000 49,388 49,163 148,160 157,500 194,697 201,180 39,525 49,050 798,755 823,307 - - - - - - - - - - - - - - - - - - - - - - - - - 5,220 - 10,440 - - - 15,660 - - 24,414 23,718 4,275 4,163 - - 14,042 14,569 18,496 18,500 - - 61,227 60,950 65,000 65,000 281,399 280,132 49,275 49,163 49,388 49,163 162,202 177,289 213,193 230,120 39,525 49,050 859,982 899,917 - - - - - - - - - 2.9% - 4.5% - - * Graham Ascough and Donald Stephens are Non-Executive Directors of Mithril Resources Ltd which is the beneficial holder of 7.67% of the issued capital of Musgrave Minerals Ltd. Kelly Ross was a Non-Executive Director of Independence Group NL (retired 24 December 2014) which is the beneficial holder of 7.46% of the issued capital of Musgrave Minerals Ltd. No element of remuneration of the key management personnel listed above was performance based. Whilst as discussed in the remuneration philosophy, consideration is given to financial performance, there is no direct relationship between KMP remuneration and the Company’s performance in the last 5 years. Table 2: Option holdings of key management personnel Opening Balance 1 July Granted as Remuneration Options Exercised Net change other Balance at 30 June G Ascough R Waugh J Percival K Ross D Stephens J Gum I Warland 750,000 5,000,000 500,000 500,000 500,000 600,000 700,000 8,550,000 - - - - - - - - - - - - - - - - - - - - - (600,000) - - 750,000 5,000,000 500,000 500,000 500,000 - 700,000 7,950,000 18 Directors’ Report Table 3: Shareholdings of key management personnel – ordinary fully paid shares Opening Balance 1 July Granted as Remuneration Options exercised Net change other Balance at 30 June G Ascough R Waugh J Percival K Ross J Gum 200,000 80,000 200,000 50,000 80,000 610,000 - - - - - - - - - - - - 395,000 281,000 - - - 595,000 361,000 200,000 50,000 80,000 676,000 1,286,000 Other transactions and balances with key management personnel and their related parties basis and in aggregate for the year ended 30 June 2015 totalled $12,898 excluding GST (2014: $Nil). No amounts were outstanding at 30 June 2015 (2014: $Nil). During the year, Musgrave Minerals Ltd was invoiced by Mithril Resources Ltd (“Mithril”) in relation to expenditure incurred by Mithril on Musgrave’s behalf. These transactions were undertaken on an arm’s length basis and in aggregate for the year ended 30 June 2015 totalled $96,039 excluding GST (2014: $90,351). A total of $4,476 including GST was outstanding at 30 June 2015 (2014: $6,862). During the year, Musgrave Minerals Ltd invoiced Mithril in relation to expenditure incurred by Musgrave on Mithril’s behalf. These transactions were undertaken on an arm’s length basis and in aggregate for the year ended 30 June 2015 totalled $11,513 excluding GST (2014: $7,133). No amounts were outstanding at 30 June 2015 (2014: $Nil). During the year, Musgrave Minerals Ltd invoiced Avalon Minerals Limited (“Avalon”) in relation to work performed for a geophysical review performed for Avalon. This work was undertaken on an arm’s length HLB Mann Judd (SA) Pty Ltd has received professional fees for accounting, taxation, secretarial and transactional services provided during the period amounting to $117,618 including GST, (2014: $97,690). A total of $8,250 including GST was outstanding at 30 June 2015 (2014: $13,489). Donald Stephens, the former Company Secretary, is a consultant with HLB Mann Judd (SA) Pty Ltd. End of Remuneration report. Signed in accordance with a resolution of the Directors. Mr Graham Ascough Chairman 25 September 2015 Directors’ Report 19 Corporate Governance Statement Musgrave Minerals Limited (“the Company”) and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Board continues to review the framework and practices to ensure they meet the interests of Shareholders. The Company and its controlled entities together are referred to as the Group in this statement. • reviewing and approving business plans, the annual budget and financial plans including available resources and major capital expenditure initiatives; • overseeing and monitoring the organisational performance and the achievement of the Group’s strategic goals and objectives; • monitoring financial performance including approval of the annual and half-year financial reports and liaison with the Company’s Auditors; • appointment and performance assessment of the Managing Director; • ratifying the appointment and/or removal and A description of the Group’s main corporate governance contributing to the performance assessment for the practices is set out below. All these practices, unless members of the senior management team, including otherwise stated, were in place for the entire year. the Company Secretary; On 27 March 2014, the ASX Corporate Governance Council released the 3rd Edition of its Corporate Governance Principles and Recommendations (Recommendations). The Group has reviewed its corporate governance and reporting practices against the Recommendations during the year ended 30 June 2015. The disclosures in this Corporate Governance Statement reflect this and, as at the date of this statement, the Group complies with the Recommendations (unless otherwise stated). Principle 1: Lay solid foundations for management and oversight The relationship between the Board and Senior • ensuring there are effective management processes in place and approving major corporate initiatives; • enhancing and protecting the reputation of the organisation; • overseeing the operation of the Group’s system for compliance and risk management reporting to Shareholders; and • ensuring appropriate resources are available to Senior Management. Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the Board to the Managing Director. This delegation is reviewed on an annual basis. Management is critical to the Group’s long-term A copy of the Board Charter outlining the respective success. The Directors are responsible to Shareholders roles and responsibilities of the Board and management for the performance of the Group in both the short is available from the Company’s website. and the longer term and seek to balance objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of Shareholders and other key stakeholders and to ensure the Group is properly managed. Roles and Responsibilities of the Board and Management The responsibilities of the Board include: • providing strategic guidance to the Group including contributing to the development of and approving the corporate strategy; 20 Corporate Governance Statement Director Checks The Company performs checks on all potential Directors which include checks on a person’s character, experience, education, criminal record and bankruptcy history. Potential Directors are required to provide their consent for the Company to conduct any background or other such checks and also acknowledge they will have sufficient time available to fulfill their responsibilities as Director of the Company. Newly appointed Directors must stand for number of employees, the Board does not consider reappointment at the next Annual General Meeting it appropriate at this time to formally set measurable (“AGM”) of the Company. The Notice of Meeting objectives for gender diversity. The total proportion of for the AGM provides shareholders with information men and women on the Board, in senior positions and about each Director standing for election or re-election across the whole organisation is listed below: including details regarding the length of their tenure, relevant skills and experience. Written Agreements with Directors The Company has entered into a Service Agreement with its Managing Director Mr Robert Waugh and all other senior executives are subject to employment agreements with standard commercial terms which are summarised in the Directors’ Report. Category Board Senior Management (excluding the managing director captured above) Whole Organisation Men Women 3 2 6 1 1 3 Non-Executive Directors have entered into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board’s policies and terms of appointment, including compensation relevant to the office of Director. Company Secretary The Company Secretary is accountable directly to the Assessment of Board Performance The Group has a policy of reviewing the performance of its Board, its Committees and individual Directors on an annual basis. The process is managed by an independent Non-Executive Director and feedback is received from the Chairman. This review involves the performance of the Board against agreed strategic goals. A review was underway but incomplete during Board, through the Chair, on all matters to do with the the reporting period due to a Company-wide review of proper functioning of the Board. All Directors have the Company’s policies and procedures. However the access to the Company Secretary. assessment was finalised in the subsequent reporting period with the results tabled and discussed at a Details of the qualifications and experience of the meeting of Directors. Company Secretary are provided in the Directors’ Report contained within the Annual Report. The decision to appoint or remove the Company Secretary is made and approved by the Board. Diversity The Company has a Diversity Policy, which documents the principles and commitment in relation to maintaining a diverse Group of employees within the Company. This policy is disclosed on the Company’s website. The Company however has not fully complied with recommendation 1.5 in that it has not set measureable objectives for achieving gender diversity. The Board continues to monitor diversity across the Group and is satisfied with the current level of gender Performance evaluation of Senior Executives A performance assessment for senior executives took place during the year in accordance with the Group’s agreed policy. Briefly, this involved the review of staff performance against agreed KPI’s and feedback was received from the Board where appropriate. Principle 2: Structure the Board to add value Nomination Committee The Board has not established a Nomination Committee diversity within the Company as disclosed below. Due in accordance with Recommendation 2.1. The Board to the size of the Company, its activity level and small takes ultimate responsibility for these matters and Corporate Governance Statement 21 continues to monitor its composition and the roles and resignation on 24 December 2014 of Mrs Kelly Ross responsibilities of its members. The Group however is as a Director of Independence Group NL who are a conscious of ensuring Board renewal and succession substantial shareholder of the Company, Mrs Ross is planning for the Group is dealt with at a Board level. also considered to be an Independent Director. Details The Board (in conjunction with its annual review of of the Directors’ qualifications and experience are set performance) reviews the size, composition and diversity out in the Directors’ Report of the Annual Report and of the Board and the mix of existing and desired also available on the Company’s website. competencies across its membership. Skills Matrix The Board aims in its membership to maintain a diverse mix of skills and experience that ensure the Board has the expertise to meet both its responsibilities to stakeholders and its strategic objectives. A Board Skills Matrix has been prepared and was reviewed by the Board in conjunction with the review of Board performance. The Board Skills Matrix sets out the mix of skills, experience and expertise the Board currently has across its membership. As well as general skills expected for Board membership, the matrix includes skills or professional qualifications in areas such as: geology, mining, commerce, risk & compliance, finance/ accounting, capital markets, leadership and strategy. Each of these areas is currently well represented on the Board. Independence The Board consists of the following Directors: • Mr Graham Ascough, Chairman (Appointed 26 May 2010) • Mr Robert Waugh, Managing Director (Appointed 6 March 2011) • Mr John Percival, Non-Executive Director (Appointed 26 May 2010) • Mrs Kelly Ross, Non-Executive Director (Appointed 26 May 2010) The Board has determined that subsequent to Goldsearch Limited ceasing to be a Shareholder of the Company on 4 July 2014, Mr John Percival who was a director of Goldsearch Limited, to be an independent Director of the Company. Furthermore, following the The Company has not complied with Recommendation 2.4 in that a majority of the Board are not independent Directors. In considering the Corporate Governance Council’s definition of independence and recommendation that a majority of Directors and the Chair be independent (bearing in mind that in determining independence the Company is required to take into account reasonable perceptions as well as actual facts and circumstances) each individual member of the Board is satisfied that whilst the Company may not comply with Recommendation 2.4, all Directors bring an independent judgment to bear on Board decisions. It is considered that in the present circumstances of the Company and its current size and stage of development, that the Board is of a sufficient size and comprises a diverse mix of persons with appropriate qualifications, commitment, skills and experience to govern the Company and that the costs involved in appointing additional Non-Executive Directors in order to comply with the recommendation would outweigh the benefit of making such appointment. The Board will consider the appointment of additional Non-Executive Directors where required by law, if an outstanding candidate is identified or if it is considered that additional expertise is required in specific areas as the Company develops. The Board is conscious of the need for independence and ensures that where a conflict of interest may arise, the relevant Director(s) leave the meeting to ensure a full and frank discussion of the matter(s) under consideration. Those Directors who have interests in specific transactions or potential transactions do not receive Board papers related to those transactions or potential transactions, do not participate in any part of a Directors’ meeting which considers those transactions 22 Corporate Governance Statement or potential transactions, are not involved in the the highest standards of behaviour and professionalism decision making process in respect of those transactions and the practices necessary to maintain confidence or potential transactions, and are asked not to discuss in the Group’s integrity and to take into account those transactions or potential transactions with other legal obligations and reasonable expectations of the Directors. Company’s stakeholders. Chairman should be an Independent Director The Company’s Chairman, Mr Graham Ascough is not an independent Director, however Mr Ascough does not fulfil the role of CEO. Although the Company has not complied fully with Recommendation 2.5, the Board believes its structure to be appropriate at this time given the size and nature of the Company’s operations. The Board will continue to review its leadership and governance structures in line with its policy on succession planning. Director Induction The Company has established a program for the induction of new Directors. The induction program covers all aspects of the Company’s activities, operations, policies and procedures. In order to develop and maintain the skills and In summary, the Code requires that all Company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Company policies. The Company has a Securities Trading Policy which outlines the restrictions, closed periods and processes required when Directors, Managing Director and Key Management Personnel trade Company securities. Broadly, it restricts the purchase and sale of Company securities by Directors and employees during the following time periods: I. the period between the end of the March, June, September and December quarters and the release of the Company’s quarterly report to ASX for so long as the Company is required by the Listing Rules to lodge quarterly reports; and II. 24 hours after the following events: a. Any major announcements; knowledge required to perform their role, all Directors b. The release of the Company’s quarterly, half are encouraged to undergo continual professional yearly and annual financial results to the ASX; development. Subject to approval, Directors are to and be provided with reasonable access to resources and training to address skill gaps where they are identified and to receive continuing education concerning key developments in the Company and the industry and environment within which the Company operates. Principle 3: Act ethically and responsibly Code of Conduct The Company has developed a Code of Conduct and Ethics (“the Code”) endorsed by the Board and applies to all Directors and Employees. The Code is regularly reviewed and updated as necessary to ensure it reflects c. The Annual General Meeting and all other General Meetings. Any transactions undertaken in the above mentioned periods must be notified to the Board in advance and include a statement the proposed dealing is not as a result of access to, nor the receipt of inside information. The Directors are satisfied that the Group has complied with its policies on ethical standards, including trading in securities. A copy of the Code and the Securities Trading Policy are available on the Company’s website. Corporate Governance Statement 23 Principle 4: Safeguard integrity in financial reporting Audit Committee The Audit Committee consists of the following Directors: • Mrs Kelly Ross (Chair) • Mr Graham Ascough • Mr John Percival The Company’s Audit Committee does not comply with all of the requirements of Recommendation 4.1 given it does not consist of a majority of independent Directors. Nevertheless the Board has determined the composition of the Audit Committee represents a mix of Directors who are financially literate and have an appropriate understanding of the business in which the Group operates. Details of the Directors’ qualifications and attendance at Audit Committee meetings are set out in the Directors’ Report included in the Annual Report. • consider the independence and competence of the external auditor on an ongoing basis; • review and approve the level of non-audit services provided by the external auditors and ensure it does not adversely impact on auditor independence; • review and monitor related party transactions and assess their propriety; and • report to the Board on matters relevant to the Committee’s role and responsibilities. In fulfilling its responsibilities, the Audit Committee: • receives regular reports from management and the external auditors; • meets with the external auditors at least twice a year, or more frequently if necessary; • reviews the processes the Managing Director and Company Secretary (acting as CFO) have in place to support their certifications to the Board; • reviews any significant disagreements between the auditors and management, irrespective of whether they have been resolved; • meets separately with the external auditors at least twice a year without the presence of management; The Audit Committee operates in accordance with a and Charter which is available on the Company’s website. The main responsibilities of the Committee are to: • review, assess and approve the annual reports, the • provides the external auditors with a clear line of direct communication at any time to either the Chair of the Audit Committee or the Chair of the Board. half-year financial report and all other financial The Audit Committee has authority, within the scope information published by the Company or released of its responsibilities, to seek any information it requires to the market; from any employee or external party. • assist the Board in reviewing the effectiveness of the organisation’s internal control environment covering: - effectiveness and efficiency of operations; - reliability of financial reporting; and - compliance with applicable laws and regulations. • oversee the effective operation of the risk management framework; • recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, the scope and quality of the audit and assess performance; CEO and CFO assurance The Board receives regular reports on the Group’s financial and operational results in conjunction with its Board meetings. Prior to approving the financial statements for the full year and half year the Company’s Managing Director and Chief Financial Officer have provided the Board with appropriate declarations including a section 295A 24 Corporate Governance Statement declaration. The Company however has not complied for communications with the Australian Securities fully with recommendation 4.2 as formal certification of Exchange (“ASX”). This role includes responsibility for the quarterly cashflow reports was implemented for the ensuring compliance with the continuous disclosure quarter ended 30 June 2015 and will be provided for requirements in the ASX Listing Rules and overseeing subsequent periods. External Auditors The Company’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. Grant Thornton Audit Pty Ltd (“Grant Thornton”) was appointed as the external auditor in 2011. It is Grant Thornton’s policy to rotate audit engagement partners on listed companies in accordance with the requirements of the Corporations Act 2001, which is generally after five years, subject to certain exceptions. The amount of fees paid to the external auditors is provided in a note to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit Committee. The Auditor is required to attend the Annual General Meeting of Shareholders. The Chairman will permit Shareholders to ask questions about the conduct of the audit and the preparation and content of the Audit report. Principles 5: Make timely and balanced disclosure Continuous Disclosure The Company has written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Company’s securities. The Managing Director and Company Secretary have been nominated as the persons responsible and co-ordinating information disclosure to the ASX, Shareholders, the media and the public. All information released to the ASX is available on the Company’s website. The Company’s website also enables users to provide feedback on Company matters and includes a “Corporate Governance” section that discloses all relevant corporate governance information, including policies and procedures. A copy of the Continuous Disclosure Policy is available on the Company’s website. Principle 6: Respect the rights of Security holders Information about the Company and its governance The Company has a website (www.musgraveminerals. com.au) where investors can locate information about the Company, Directors, senior executives and the Company’s governance. Information is conveyed to Shareholders via the annual report, quarterly reports and other announcements which are delivered to the Australian Securities Exchange and posted under the Investor Centre section of the Company’s website. Investor relations Due to the size of the Company and its current stage of development the Company does not have a formally appointed investor relations manager. The Company instead provides the opportunity for investors to engage with the Board and management at the Company’s AGM. Security holders and other financial market participants are also able to contact the Company directly to discuss any matters of concern or interest they may have from time to time. Corporate Governance Statement 25 The Board has adopted a policy to promote effective management’s actions in the evaluation, management, communication with Shareholders. A copy of the policy monitoring and reporting of material operational, is available from the Company’s website. financial, compliance and strategic risks. In providing this oversight, the Committee: Participation at meetings of Security holders Shareholders are encouraged to participate and engage with the Board and Management at Annual General Meetings and other specially convened General Meetings of the Company. The Board encourages the attendance and participation of Shareholders at these meetings by holding meetings in a location accessible to a large number of Shareholders. • reviews the framework and methodology for risk identification, the degree of risk the Company is willing to accept, the management of risk and the processes for auditing and evaluating the Company’s risk management system; • reviews Group-wide objectives in the context of the abovementioned categories of corporate risk; • reviews and, where necessary, approves guidelines and policies governing the identification, assessment The Company has policies and procedures that enable and management of the Company’s exposure to risk; Shareholders to receive reports and participate in meetings via attendance or by written communication. • reviews and approves the delegations of financial authorities and addresses any need to update these Electronic Communications The Company aims to promote effective communication with investors. Shareholders with access to the internet are encouraged to register on the Company’s website (www.musgraveminerals.com.au) to receive email notifications when an announcement is made by the Company to the ASX. Shareholders are also encouraged to register with the Company’s share authorities on an annual basis, and • reviews compliance with agreed policies. The Committee recommends any actions it deems appropriate to the Board for its consideration. Details pertaining to the Committee’s membership and attendance at meetings is disclosed in the Directors’ Report contained within the annual report. registry (Computershare) to communicate electronically. Management is responsible for designing, implementing Principle 7: Recognise and manage risk and reporting on the adequacy of the Company’s risk management and internal control system and has to report to the Audit Committee on the effectiveness of: The Board acknowledges recognising and managing during the year, and risk is a crucial part of the role of the Board and • the Group’s management of its material business • the risk management and internal control system Management. The Board is responsible for satisfying itself annually, or more frequently as required, that risks. Management has developed and implemented a The Group does not have a separate internal audit sound system of risk management and internal control. function. Detailed work on this task is delegated to the Audit Committee and is reviewed by the full Board. A review of the risk management framework commenced during the year in accordance with the The Audit Committee is responsible for ensuring there agreed process mentioned above and was completed are adequate policies in relation to risk management, subsequent to the end of the reporting period with compliance and internal control systems. They monitor results and recommendations of the review evaluated at the Company’s risk management by overseeing a subsequent Board meeting. A copy of the Company’s Risk Management Policy is available on the website. 26 Corporate Governance Statement Exposure to material economic, environmental and social sustainability risk The Group’s policy it to identify and manage potential or apparent business, economic, environmental and social sustainability risks (if appropriate). The Group at present has not identified specific material risk exposure in these categories. Principle 8: Remunerate fairly and responsibly Remuneration Committee The Board has not established a Remuneration Committee and therefore has not complied with recommendation 8.1. Due to the early stage and small size of the Company a separate Remuneration Committee was not considered to add any efficiency to the process of determining the levels of remuneration for Directors and key executives. The Board considers it is more appropriate to set aside time at a Board meeting each year to specifically address matters that would ordinarily fall to a remuneration committee such as reviewing remuneration, recruitment, retention and termination procedures to structure is reviewed by the Board on an on-going basis and, where necessary, is revised to accommodate changes in the Group’s needs and requirements. Further information on Directors’ and Executives’ remuneration, including principles used to determine remuneration, is set out in the Directors’ Report under the heading ‘Remuneration Report’. The Group has a policy to distinguish the remuneration of Executives and senior staff from that of the Non-Executive Directors. All Executives and senior staff are subject to annual reviews, where the remuneration arrangements are reviewed and benchmarked against industry averages. The Group additionally uses the Employee Share Option Plan to provide incentives to employees, which are reviewed annually in conjunction with the available option pool. The Non-Executive Directors’ remuneration is set from a pool that is approved by Shareholders, which presently is set at $250,000 per annum. The Group has a policy of obtaining Shareholder approval for any share based remuneration (such as options) to be granted to Directors in accordance with the ASX Listing Rules. Equity based remuneration scheme policy The Company has an Employee Share Option Plan ensure remuneration packages and incentives remain (“ESOP”) which was approved by Shareholders at the appropriate and in accordance with the Company’s 2013 AGM. A summary of the ESOP was included in commercial interests. Disclosure of remuneration policies and practices Every employee of the Group signs a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a specific formal job description. The Group’s human resources the Company’s 2013 Notice of General Meeting, a copy of which is available on the Company’s website. In accordance with the Plan and the Company’s Share Trading Policy, Directors, Officers and Employees are not permitted to enter into any transactions or financial arrangements that would limit the economic risk of options or other securities. Non-Executive Directors are excluded from the ESOP. Corporate Governance Statement 27 Auditor’s Independence Declaration 28 Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2015 Revenue from operating activities Impairment of exploration and evaluation assets Employee benefits expense Depreciation expense Finance expenses Funds misappropriated Other expenses Loss before income tax expense Income tax benefit/(expense) 4(a) 11 4(d) 4(b) 4(c) 4(f) 4(e) 5 30 June 2015 $ 30 June 2014 $ 177,436 (7,649,239) (360,119) (34,036) (96) (337,282) (521,913) 308,551 (4,373,984) (561,869) (66,923) (1,727) (95,447) (557,070) (8,725,249) (5,348,469) 895,575 488,608 Loss from continuing operations (7,829,674) (4,859,861) Loss attributable to members of the parent entity (7,829,674) (4,859,861) Other comprehensive income - - Total comprehensive loss for the year (7,829,674) (4,859,861) Loss per share: Basic earnings per share Diluted earnings per share 6 6 Cents (6.47) (6.47) Cents (4.02) (4.02) The accompanying notes form part of these financial statements. Statement of Comprehensive Income 29 Consolidated Statement of Financial Position As at 30 June 2015 Note 30 June 2015 $ 30 June 2014 $ CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Exploration and evaluation assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Short-term provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained losses TOTAL EQUITY 7 8 9 10 11 12 13 13 14 15 16 3,737,403 47,158 29,520 3,814,081 96,188 10,391,152 10,487,340 6,139,459 89,786 25,498 6,254,743 135,723 15,748,622 15,884,345 14,301,421 22,139,088 297,064 77,237 374,301 19,385 19,385 219,690 151,076 370,766 30,913 30,913 393,686 401,679 13,907,735 21,737,409 26,718,899 2,858,705 (15,669,869) 13,907,735 26,718,899 2,973,818 (7,955,308) 21,737,409 The accompanying notes form part of these financial statements. 30 Statement of Financial Position Consolidated Statement of Changes in Equity For the year ended 30 June 2015 Note Issued capital ordinary Share Option Reserve Accumulated losses Total equity Balance at 1 July 2013 26,718,899 2,958,083 (3,109,727) 26,567,255 Total comprehensive loss for the year Share based payments 17 Transfer from share option reserve due to lapse of options under employee share option plan - - - - (4,859,861) (4,859,861) 30,015 - 30,015 (14,280) 14,280 - Balance at 30 June 2014 26,718,899 2,973,818 (7,955,308) 21,737,409 Balance at 1 July 2014 26,718,899 2,973,818 (7,955,308) 21,737,409 Total comprehensive loss for the year Transfer from share option reserve due to lapse of options under employee share option plan - - - (7,829,674) (7,829,674) (115,113) 115,113 - Balance at 30 June 2015 26,718,899 2,858,705 (15,669,869) 13,907,735 The accompanying notes form part of these financial statements. Statement of Changes in Equity 31 Consolidated Statement of Cash Flows For the year ended 30 June 2015 Note 30 June 2015 $ 30 June 2014 $ CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Misappropriated funds Interest received Finance costs Receipt of Research and Development Tax Concession NET CASH USED IN OPERATING ACTIVITIES 7 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Payments for exploration activities NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings NET CASH USED IN FINANCING ACTIVITIES Net decrease in cash and cash equivalents Cash at the beginning of the year (926,233) (337,282) 153,920 (96) 895,575 (214,116) - (2,187,940) (2,187,940) - - (2,402,056) 6,139,459 (1,011,639) (95,447) 306,105 (1,274) 488,608 (313,647) (33,318) (3,032,829) (3,066,147) (46,453) (46,453) (3,426,247) 9,565,706 CASH AT THE END OF THE YEAR 7 3,737,403 6,139,459 The accompanying notes form part of these financial statements. 32 Statement of Cash Flows Notes to the Consolidated Financial Statements For the year ended 30 June 2015 2.2. Compliance with International Financial Reporting Standards The financial report also complies with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. 1. Corporate information The consolidated financial statements of Musgrave Minerals Limited (the “Company” or the “Parent”) and its subsidiaries (collectively, “the Group”) for the year ended 30 June 2015 were authorised for issue in accordance with a resolution of the Directors on 25 September 2015. The Company is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The Company’s principal activities are to carry out exploration of mineral tenements, to continue to seek extensions of areas held and to seek out new areas with mineral potential and to evaluate results achieved through surface sampling, geophysical surveys and 2.3. Changes in accounting policy, disclosures, standards and interpretations Changes in accounting policies (i) The accounting policies adopted in the preparation of this Annual Report are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 30 June 2014. (ii) New and amended Standards and Interpretations The Group applied, for the first time, certain standards and amendments which are effective for annual periods beginning on or after 1 July 2014. The nature and the impact of each new standard and/or amendment is drilling activities. described below: 2. Summary of significant accounting policies 2.1. 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, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis. The consolidated financial statements provide comparative information in respect of the previous period. The financial report is presented in Australian dollars, being the functional and presentational currency for the Group. Remove Individual Key Management Personnel Disclosure Requirements – Amendments to AASB 124 This amendment deletes from AASB 124 individual key management personnel disclosure requirements for disclosing entities that are not companies. It has resulted in individual KMP disclosures being removed from the notes and have been relocated to the remuneration report. It also removes the individual KMP disclosure requirements for all disclosing entities in relation to equity holdings, loans and other related party transactions. This amendment has resulted in reduced disclosures in the Group’s financial statements. Recoverable Amount Disclosures for Non-Financial Assets – Amendments to AASB 136 The amendments include the requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. This amendment has resulted in increased disclosures in the Group’s financial statements. Notes to the Financial Statements 33 Offsetting Financial Assets and Financial Liabilities - a management entity. Payments made to a Amendments to AASB 132 management entity in respect of KMP services These amendments clarify the meaning of ’currently should be separately disclosed. has a legally enforceable right to set-off’ and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting and is applied retrospectively. These amendments have no impact on the Group, since none of the entities in the Group has any offsetting arrangements. AASB 2014-1 Amendments to Australian Accounting Standards - Part A Annual Improvements to IFRSs This standard sets out amendments to Australian Accounting Standards arising from the issuance by the International Accounting Standards Board (“IASB”) of International Financial Reporting Standards (“IFRSs”) Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle. Annual Improvements to IFRSs Cycle addresses the following items: • AASB 2 - Clarifies the definition of ‘vesting • AASB 13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all contracts within the scope of AASB 139 or AASB 9, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in AASB 132. • AASB 140 - Clarifies that judgment is needed to determine whether an acquisition of investment property is solely the acquisition of an investment property or whether it is the acquisition of a group of assets or a business combination in the scope of AASB 3 that includes an investment property. That judgment is based on guidance in AASB 3. AASB 2014-2 Amendments to AASB 1053 – Transition To and Between Tiers, and Related Tier 2 Disclosure Requirements (applicable to the Group from 1 January 2015) This Standard makes amendments to AASB 1053 Application of Tiers of Australian Accounting Standards conditions’ and ‘market condition’ and introduces to: the definition of ‘performance condition’ and ‘service condition’. • AASB 3 - Clarifies the classification requirements for contingent consideration in a business combination by removing all references to AASB 137. • AASB 8 - Requires entities to disclose factors used to identify the entity’s reportable segments when operating segments have been aggregated. An entity is also required to provide a reconciliation of total reportable segments’ assets to the entity’s total assets. • AASB 116 & AASB 138 - Clarifies that the determination of accumulated depreciation does not depend on the selection of the valuation technique and that it is calculated as the difference between the gross and net carrying amounts. • clarify that AASB 1053 relates only to general purpose financial statements; • make AASB 1053 consistent with the availability of the AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors option in AASB 1 First-time Adoption of Australian Accounting Standards; • clarify certain circumstances in which an entity applying Tier 2 reporting requirements can apply the AASB 108 option in AASB 1; permit an entity applying Tier 2 reporting requirements for the first time to do so directly using the requirements in AASB 108 (rather that applying AASB 1) when, and only when, the entity had not applied, or only selectively applied, applicable recognition and measurement requirements in its most recent • AASB 124 - Defines a management entity providing previous annual special purpose financial statements; KMP services as a related party of the reporting and entity. The amendments added an exemption from the detailed disclosure requirements in paragraph 17 of AASB 124 for KMP services provided by • specify certain disclosure requirements when an entity resumes the application of Tier 2 reporting requirements. 34 Notes to the Financial Statements (iii) Accounting Standards and Interpretations that companies should use professional judgment in issued but not yet effective determining where and in what order information is Australian Accounting Standards and Interpretations presented in the financial disclosures. that have recently been issued or amended that potentially impact the Group but are not yet effective The Group has assessed that this Standard is unlikely to and have not been adopted by the Group for the annual have any material effect for the Group at this point in reporting period ended 30 June 2015 are outlined time. below. The Group has assessed that these amendments are unlikely to have any material effect for the Group. AASB 2014-4 Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to AASB 116 and AASB 138) (applicable to the Group from 1 July 2015) AASB 116 and AASB 138 both establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset. The IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The amendment also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. 2.4. Significant accounting policies (a) Basis of consolidation The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2015. Control is achieved when the Group 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 Group controls an investee if and only if the Group 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 Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it The Group has assessed that these amendments are has power over an investee, including: unlikely to have any material effect for the Group. • The contractual arrangement with the other vote Amendments to IAS 1 (applicable to the Group from 1 • Rights arising from other contractual arrangements; holders of the investee; January 2016) As part of the IASB’s Disclosure Initiative projects, the IASB issued Amendments to IAS 1 in December 2014. The amendments are designed to further encourage companies to apply professional judgment in determining what information to disclose in the financial statements. For example, the amendments make clear that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. The amendments also clarify and • The Group’s voting rights and potential voting rights. The Group 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 Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired Notes to the Financial Statements 35 or disposed of during the year are included in the All other assets are classified as non-current. A liability is statement of comprehensive income from the date the current when: Group gains control until the date the Group ceases to • It is expected to be settled in the normal operating control the subsidiary. cycle; When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: • De-recognises the assets (including goodwill) and liabilities of the subsidiary; • De-recognises the carrying amount of any non- controlling interests; • De-recognises the cumulative translation differences recorded in equity; • Recognises the fair value of the consideration received; • • It is held primarily for the purpose of trading; It is due to be settled within twelve months after the reporting period; or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current. (c) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group has concluded that it is acting as a principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements, has pricing latitude and is also exposed to inventory and credit risks. • Recognises the fair value of any investment retained; The specific recognition criteria described below must • Recognises any surplus or deficit in profit or loss; and also be met before revenue is recognised. • Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities. (b) Current versus non-current classification The Group presents assets and liabilities in the Statement of Financial Position based on current/non- current classification. An asset is current when it is: • Expected to be realised or intended to be sold or consumed in the normal operating cycle; • Held primarily for the purpose of trading; • Expected to be realised within twelve months after the reporting period; or • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. Interest income For all financial instruments measured at amortised cost and interest-bearing financial assets classified as available-for-sale, interest income is recorded using the effective interest rate (“EIR”). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in interest revenue in the statement of comprehensive income. (d) Taxes Current income tax Current income 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 36 Notes to the Financial Statements or substantively enacted at the reporting date in the at the time of the transaction, affects neither the countries where the Group operates and generates accounting profit nor taxable profit or loss; or taxable income. Included in the income tax benefits are research and development claims. • when the deductible temporary difference is associated with investments in subsidiaries, Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance 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 deferred income tax assets are reassessed at each balance 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. the initial recognition of goodwill or of an asset Deferred income tax assets and liabilities are measured or liability in a transaction that is not a business at the tax rates that are expected to apply to the year combination and that, at the time of the transaction, when the asset is realised or the liability is settled, based affects neither the accounting profit nor taxable on tax rates (and tax laws) that have been enacted or profit or loss; or substantively enacted at the reporting date. • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference 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 credits 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, Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or 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. Leases (e) The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. Notes to the Financial Statements 37 Group as a lessee Classification and subsequent measurement Finance leases that transfer substantially all the risks Financial instruments are subsequently measured at and benefits incidental to ownership of the leased item fair value, amortised cost using the effective interest to the Group, are capitalised at the commencement method, or cost. of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease Amortised cost is the amount at which the financial payments. Lease payments are apportioned between asset or financial liability is measured at initial finance charges and reduction of the lease liability so as recognition less principal repayments and any reduction to achieve a constant rate of interest on the remaining for impairment, and adjusted for any cumulative balance of the liability. Finance charges are recognised amortisation of the difference between that initial in finance costs in the statement of comprehensive amount and the maturity amount calculated using the income. effective interest method. A leased asset is depreciated over the useful life of the Fair value is determined based on current bid prices for asset. However, if there is no reasonable certainty that all quoted investments. Valuation techniques are applied the Group will obtain ownership by the end of the lease to determine the fair value for all unlisted securities, term, the asset is depreciated over the shorter of the including recent arm’s length transactions, reference to estimated useful life of the asset and the lease term. similar instruments and option pricing models. Operating lease payments are recognised as an operating expense in the statement of comprehensive The effective interest method is used to allocate interest income or interest expense over the relevant period and income on a straight-line basis over the lease term. is equivalent to the rate that discounts estimated future (f) Borrowing costs Borrowing costs directly attributable to the acquisition, cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, construction or production of an asset that necessarily the contractual term) of the financial instrument to the takes a substantial period of time to get ready for its net carrying amount of the financial asset or financial intended use or sale are capitalised as part of the cost liability. Revisions to expected future net cash flows will of the asset. All other borrowing costs are expensed in necessitate an adjustment to the carrying value with a the period in which they occur. Borrowing costs consist consequential recognition of an income or expense item of interest and other costs that an entity incurs in in profit or loss. connection with the borrowing of funds. (g) Financial Instruments Recognition and initial measurement The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards Financial assets and financial liabilities are recognised specifically applicable to financial instruments. when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is (i) Loans and receivables equivalent to the date that the Group commits itself to Loans and receivables are non-derivative financial either the purchase or sale of the asset (i.e. trade date assets with fixed or determinable payments that are accounting is adopted). not quoted in an active market and are subsequently measured at amortised cost. Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is Loans and receivables are included in current assets, classified “at fair value through profit or loss,” in which where they are expected to mature within 12 months case transaction costs are expensed to profit or loss after the end of the reporting period. immediately. 38 Notes to the Financial Statements (ii) Classification and subsequent measurement of are reported within short-term borrowings in current financial liabilities liabilities in the statement of financial position. The Group’s financial liabilities consist of trade and other payables. (j) Goods and Services Tax (“GST”) Revenues, expenses and assets are recognised net of Financial liabilities are measured at amortised cost using the amount of GST, except where the amount of GST the effective interest method. incurred is not recoverable from the Australian Taxation All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or Receivables and payables are stated exclusive of the loss are included within finance costs or finance income. amount of GST receivable or payable. The net amount Office (“ATO”). (h) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. for which it is probable that an outflow of economic Cash flows are presented on a gross basis. The GST benefits will result and that outflow can be reliably components of cash flows arising from investing or measured. financing activities which are recoverable from, or payable to, the ATO are presented as operating cash Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of flows included in receipts from customers or payments to suppliers. the reporting period. Long service leave and annual leave Impairment of assets (k) The Group assesses, at each reporting date, whether The Group does not expect its long service leave to there is an indication that an asset may be impaired. be settled wholly within 12 months of each reporting If any indication exists, or when annual impairment date. The Group recognises a liability for long service testing for an asset is required, the Group estimates leave measured as the present value of expected future the asset’s recoverable amount. An asset’s recoverable payments to be made in respect of services provided by amount is the higher of an asset’s or cash-generating employees up to the reporting date using the projected unit’s (“CGU’s”) fair value less costs of disposal and its unit credit method. Consideration is given to expected value in use. Recoverable amount is determined for an future wage and salary levels, experience of employee individual asset, unless the asset does not generate cash departures, and periods of service. Expected future inflows that are largely independent of those from other payments are discounted using market yields at the assets or groups of assets. When the carrying amount reporting date on national government bonds with of an asset or CGU exceeds its recoverable amount, the terms to maturity and currencies that match, as closely asset is considered impaired and is written down to its as possible, the estimated future cash outflows. Annual recoverable amount. leave benefits are expected to be wholly settled within 12 months and are recorded at the nominal amount of In assessing value in use, the estimated future cash leave outstanding at each reporting date. flows are discounted to their present value using a Cash and Cash Equivalents (i) Cash and cash equivalents include cash on hand, pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs deposits available on demand with banks, other short- of disposal, recent market transactions are taken into term highly liquid investments with original maturities of account. If no such transactions can be identified, an 3 months or less, and bank overdrafts. Bank overdrafts appropriate valuation model is used. These calculations Notes to the Financial Statements 39 are corroborated by valuation multiples, quoted share the successful development of the area or where prices for publicly traded companies or other available activities in the area have not yet reached a stage that fair value indicators. permits reasonable assessment of the existence of economically recoverable reserves. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared Accumulated costs in relation to an abandoned area are separately for each of the Group’s CGUs to which the written off in full against profit in the year in which the individual assets are allocated. These budgets and decision to abandon the area is made. forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is When production commences, the accumulated costs calculated and applied to project future cash flows after for the relevant area of interest are amortised over the the fifth year. life of the area according to the rate of depletion of the economically recoverable reserves. Impairment losses of continuing operations, including impairment on inventories, are recognised in the A regular review is undertaken of each area of interest statement of profit or loss in expense categories to determine the appropriateness of continuing to consistent with the function of the impaired asset, capitalise costs in relation to that area of interest. except for properties previously revalued with the revaluation taken to other comprehensive income. Costs of site restoration are provided over the life of For such properties, the impairment is recognised in other comprehensive income up to the amount of any the project from when exploration commences and are included in the costs of that stage. Site restoration costs previous revaluation. include the dismantling and removal of mining plant, equipment and building structures, waste removal, For assets excluding goodwill, an assessment is made and rehabilitation of the site in accordance with local at each reporting date to determine whether there is laws and regulations and clauses of the permits. Such an indication that previously recognised impairment costs have been determined using estimates of future losses no longer exist or have decreased. If such costs, current legal requirements and technology on an indication exists, the Group estimates the asset’s or undiscounted basis. CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a Any changes in the estimates for the costs are change in the assumptions used to determine the asset’s accounted for on a prospective basis. In determining recoverable amount since the last impairment loss was the costs of site restoration, there is uncertainty recognised. The reversal is limited so that the carrying regarding the nature and extent of the restoration amount of the asset does not exceed its recoverable due to community expectations and future legislation. amount, nor exceed the carrying amount that would Accordingly the costs have been determined on the have been determined, net of depreciation, had no basis that the restoration will be completed within one impairment loss been recognised for the asset in prior year of abandoning the site. years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. (m) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, Exploration and development expenditure (l) Exploration, evaluation and development expenditures from the proceeds. incurred are capitalised in respect of each identifiable area of interest. These costs are only capitalised to the (n) Earnings per share Basic earnings per share is calculated as net profit extent that they are expected to be recovered through attributable to members of the parent, adjusted to 40 Notes to the Financial Statements exclude any costs of servicing equity (other than Black-Scholes model to determine the fair value of dividends), divided by the weighted average number of the liability incurred. The Group initially measures the ordinary shares, adjusted for any bonus element. cost of equity-settled transactions with employees or contractors by reference to the fair value of the Diluted earnings per share adjusts the figures used in equity instruments at the date at which they are the determination of basic earnings per share to take granted. Estimating fair value for share-based payment into account the weighted average number of shares transactions requires determination of the most assumed to have been issued for no consideration in appropriate valuation model, which is dependent on the relation to dilutive potential ordinary shares. terms and conditions of the grant. This estimate also (o) Comparative Figures When required by Accounting Standards, comparative requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making figures have been adjusted to conform to changes in assumptions about them. The assumptions and models presentation for the current financial year. used for estimating fair value for share-based payment transactions are disclosed in Note 17. (p) Critical Accounting Estimates and Judgments The Directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key estimates Impairment The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Company that may be indicative of impairment triggers. Exploration and evaluation expenditure The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage that permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the Directors are of the continued belief that such expenditure should not be written off since the evaluation of such areas have not yet concluded. Such capitalised expenditure is carried at the end of the 3. Operating Segments The Board has considered the requirements of AASB 8 Operating Segments and the internal reports that are reviewed by the chief operation decision maker (the Managing Director) in allocating resources and have concluded at this time that there are no separately identifiable segments. 4. Revenue and expenses (a) Revenue from operating activities Interest revenue Other revenue (b) Depreciation of non- current assets Plant and equipment Consolidated 2015 $ 2014 $ 149,521 295,150 27,915 13,401 177,436 308,551 17,345 16,691 34,036 44,379 22,544 66,923 reporting period at $10,391,152 (2014: $15,748,622). Motor vehicles Share-based payments The Group initially measures the cost of cash-settled transactions with employees or contractors using a Notes to the Financial Statements 41 Consolidated (f) Funds misappropriation 2015 $ 2014 $ 10 86 96 - 1,727 1,727 (c) Finance expenses Finance costs Interest applied to hire purchase (d) Employees benefits expense Wages, salaries, directors fees and other remuneration 1,196,465 1,406,121 expenses Contributions to defined contribution superannuation 87,104 130,872 As reported in the Company’s 2014 Annual Report and disclosed in the Company’s announcement released to the ASX on 12 February 2015, investigations into a number of irregular transactions have been undertaken by the Company. The investigations concluded that the amount of funds involved in the irregular transactions is $468,772. $373,325 of these funds were misappropriated during the current reporting period with the remaining balance misappropriated in the comparative reporting period. The irregularities are consistent with fraudulent misappropriation of Company funds. An employee of the Company was suspended on 19 September 2014 pending the abovementioned investigations, and their employment has been subsequently terminated. To date, $36,043 has been returned to the Company. The Board is vigorously pursuing a number of avenues for the recovery of the remaining funds. The expenses involved in the irregularities have been declared on the face of the Consolidated Statement of Profit and Loss in the financial years in which they were incurred, net of any amounts funds Transfer to/(from) annual leave provision Transfer to/(from) long service leave provision Share-based payments expense Transfer to capitalised tenements (90,698) 48,559 refunded. (11,528) 17,294 - 30,015 (821,224) (1,070,992) 360,119 561,869 5. Income tax Current Income Tax Current income tax charge/ (benefit) Research and Development Tax offset Income tax expense/ (benefit) reported in the consolidated statement of profit or loss Consolidated 2015 $ 2014 $ - - (895,575) (448,608) (895,575) (448,608) (e) Other expenses Secretarial, professional and consultancy 146,668 126,984 Forensic accounting costs 34,296 - Occupancy costs 121,007 112,703 20,432 33,783 22,140 47,958 Share register maintenance Insurance costs Promotion, advertising and sponsorship Audit fees Computer expense and software licensing Employer related on-costs Other expenses 7,732 34,135 A reconciliation between tax expense and the product of accounting loss before income tax multiplied by the Group’s 33,625 29,548 applicable income tax rate is as follows: 29,249 18,853 29,316 65,805 521,913 35,108 129,641 557,070 Accounting profit/(loss) before income tax At Australia’s statutory (7,829,674) (4,859,861) income tax rate of 30% (2,348,902) (1,457,958) (2014: 30%) 42 Notes to the Financial Statements Immediate write off of capital expenditure Expenditures not allowable for income tax purposes Consolidated 2015 $ 2014 $ (687,531) (920,002) Effect of dilution Share options 2,294,772 1,312,195 Weighted average number of ordinary shares Other deductible items (65,811) (64,905) adjusted for the effect of Consolidated 2015 $ 2014 $ N/A N/A 121,000,000 121,000,000 Tax losses not recognized due to not meeting recognition 807,472 1,130,670 criteria dilution 7. Cash and cash equivalents The Company has tax losses arising in Australia of $15,674,230 (2014: $13,781,828). Earnings per share 6. Basic earnings per share amounts are calculated by dividing net 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 earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent 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 the conversion of all the dilutive potential ordinary shares into ordinary shares. The following reflects the income and share data used in the basic and diluted earnings per share computations: Consolidated 2015 $ 2014 $ (7,829,674) (4,859,861) Net profit/(loss) attributable to ordinary equity holders of the parent entity Weighted average number of ordinary shares for basic 121,000,000 121,000,000 earnings per share Consolidated 2015 $ 2014 $ Cash at bank 1,465,403 829,459 Short-term deposits 2,272,000 5,310,000 3,737,403 6,139,459 Reconciliation of total comprehensive loss for the year to cash flows from operating activities Consolidated 2015 $ 2014 $ Net loss (7,829,674) (4,859,861) Adjustments for non-cash items: Depreciation Share based payments 34,036 - 66,923 30,015 Impairment expense 7,649,239 4,373,984 Changes in assets and liabilities: Decrease/(Increase) in trade and other receivables Decrease/(Increase) in prepayments Decrease/(Increase) interest receivable Increase/(Decrease) in trade and other payables Increase/(Decrease) in employee entitlements Net Cash (used in) operating activities 42,628 33,895 (8,420) 3,117 4,399 25,544 (20,957) (65,117) (85,367) 77,853 (214,116) (313,647) Notes to the Financial Statements 43 Consolidated 2015 $ 2014 $ Disposals (5,500) - Balance at 30 June 243,076 248,576 Accumulated depreciation Balance at 1 July 196,198 151,819 Depreciation for the year 17,345 44,379 Balance at 30 June 213,543 196,198 Net book value 29,533 52,378 Total Cost Opening balance 415,121 388,913 Additions Disposals - 26,208 (5,500) - Balance at 30 June 409,621 415,121 Accumulated depreciation Opening balance 279,397 212,475 Depreciation for the year Balance at 30 June Net book value 34,036 313,433 96,188 66,923 279,398 135,723 11. Exploration and evaluation Exploration and evaluation phases Consolidated 2015 $ 2014 $ 10,391,152 15,748,622 10,391,152 15,748,622 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. 8. Trade and other receivables GST Receivable Other Receivables Consolidated 2015 $ 2014 $ 45,098 2,060 47,158 54,343 35,443 89,786 Other receivables are non-interest bearing and are generally received within 30 days. There were no amounts past due but not impaired. 9. Other current assets Prepayments Accrued Income Consolidated 2015 $ 2014 $ 8,420 21,100 29,520 - 25,498 25,498 10. Plant and equipment Consolidated 2015 $ 2014 $ 166,545 166,545 166,545 166,545 83,199 16,691 99,890 66,655 60,655 22,544 83,199 83,346 Motor Vehicles Cost Balance at 1 July Balance at 30 June Accumulated depreciation Balance at 1 July Depreciation for the year Balance at 30 June Net book value Plant and equipment Cost Balance at 1 July 248,576 222,368 Additions - 26,208 44 Notes to the Financial Statements Consolidated Group 13. Provisions Total $ Balance at 1 July 2014 15,748,622 Additions through expenditure capitalised 2,291,769 Impairment of tenements * Balance at 30 June 2015 (7,649,239) 10,391,152 Short-term Annual leave Consolidated 2015 $ 2014 $ Exploration and evaluation expenditure has been carried Balance at 1 July 151,076 90,517 forward to the extent that it is expected to be recouped Net increase/(decrease in through the successful development of the area or provision) (73,839) 60,559 where activities in the area have not yet reached a stage Closing balance 30 June 77,237 151,076 that permits reasonable assessment of the existence of economically recoverable reserves. * During the year ended 30 June 2015, a total of $7,649,239 (2014: $4,373,984) has been taken as an impairment of the consolidated Group’s exploration and evaluation assets. Of this amount, $4,295,475 relates to the impairment of Exploration Licence Applications within the South Australian Musgrave Region and project generation expenditures. The remaining Long-term Long service leave Balance at 1 July Net increase/(decrease in provision) 30,913 13,619 (11,528) 17,294 Closing balance 30 June 19,385 30,913 $3,353,764 relates to the termination of the Menninnie 14. Issued capital Dam Joint Venture. 12. Trade and other payables Trade Payables Other Payables Consolidated 2015 $ 2014 $ 115,268 181,796 297,064 100,501 119,189 219,690 121,000,000 fully paid ordinary shares (2014: 121,000,000) Consolidated 2015 $ 2014 $ 26,718,899 26,718,899 26,718,899 26,718,899 There were no movements in issued capital either in the current year or for the year ended 30 June 2014. Fully paid ordinary shares carry one vote per share and Trade and other payables are non-interest bearing carry the right to dividends (in the event such a dividend and are normally settled on 30-day terms. Information was declared). Refer to note 17 for details of share regarding the credit risk of current payables is set out in options. note 22. Notes to the Financial Statements 45 15. Reserves Consolidated 2015 $ 2014 $ Reserves Share option reserve (a) 2,858,705 2,973,818 2,858,705 2,973,818 months’ employment by a member of the Group, although the Board may waive this requirement. • Options are granted under the Plan at the discretion of the Board and if permitted by the Board, may be issued to an employee’s nominee. • Each option is to subscribe for one fully paid ordinary share in the Company and will expire 5 years from its date of issue. An option is exercisable at any time from its date of issue. Options will be issued without cost to the employee. The exercise price of options will be determined by the Board, subject to a minimum price equal to the market value of the Company’s shares at the time the Board resolves to offer those options. The total number of shares 2,973,818 2,958,083 - 30,015 the subject of options issued under the Plan, when (115,113) (14,280) aggregated with issues during the previous 5 years pursuant to the Plan and any other employee share plan, must not exceed 5% of the Company’s issued 2,858,705 2,973,818 share capital. • If, prior to the expiry date of options, a person ceases to be an employee of a Group company for any reason other than retirement at age 60 or more (or such earlier age as the Board permits), permanent disability, redundancy or death, the options held by that person (or that person’s nominee) automatically lapse on the first to occur of a) the expiry of the period of 6 months from the date of such occurrence, and b) the expiry date. If a person dies, Consolidated 2015 $ 2014 $ (7,955,308) (3,109,727) the options held by that person will be exercisable by that person’s legal personal representative. Options (7,829,674) (4,859,861) cannot be transferred other than to the legal 115,113 14,280 • The Company will not apply for official quotation of personal representative of a deceased option holder. (15,669,869) (7,955,308) any options. • Shares issued as a result of the exercise of options will rank equally with the Company’s previously issued shares. • Option holders may only participate in new issues of securities by first exercising their options. (a) Share option reserve Balance at beginning of financial year Issue of options to employees under the Employee Share Option Plan Transfer to retained earnings upon lapse of options Balance at end of financial year 16. Retained losses Balance at beginning of financial year Net loss attributable to members of the parent entity Transfer from share option reserve Balance at end of financial year 17. Share based payments Employee Share Option Plan The Company has established the Musgrave Minerals The Board may amend the Plan Rules subject to Ltd Employee Share Option Plan and a summary of the the requirements of the Listing Rules. The expense Rules of the Plan are set out below: • All employees (full and part time) will be eligible to participate in the Plan after a qualifying period of 12 recognised in the Statement of Profit or Loss and Other Comprehensive Income in relation to share-based payments is disclosed in note 4(d). The following table 46 Notes to the Financial Statements illustrates the number (“No.”) and weighted average exercise prices (“WAEP”) and movements in share options under the Company’s Employee Share Option Plan issued during the year: 18. Related party disclosures Remuneration of Key Management Personnel 2015 2015 2014 2014 No. WAEP No. WAEP 17,025,000 0.32 16,450,000 0.32 Short-term employee benefits Share based payments Post-employment benefits Total - - 575,000 0.12 compensation Outstanding at the beginning of the year Granted during the year Expired/ 2015 $ 2014 $ 798,755 823,307 - 15,660 61,227 60,950 859,982 899,917 lapsed during (1,050,000) 0.27 - - the year The range of exercise prices for options outstanding at the end of the year was $0.12 – $0.50 (2014: $0.12 – $0.50). The fair value of the equity-settled share options granted under the option plan is estimated as at the date of grant using a Black-Scholes model taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for the year ended 30 June 2014 (with no disclosure listed for the current financial year due to no options having been issued during the period): Exercise price Grant date Expiry date Share price at grant date Historical volatility (%) Risk-free interest rate (%) Expected dividend yield 2014 $0.12 11 Mar 14 10 Mar 19 $0.077 96% 3.43% 0% During the year, Musgrave Minerals Ltd was invoiced by Mithril Resources Ltd (“Mithril”) in relation to expenditure incurred by Mithril on Musgrave’s behalf. These transactions were undertaken on an arm’s length basis and in aggregate for the year ended 30 June 2015 totalled $96,039 excluding GST (2014: $90,351). A total of $4,476 including GST was outstanding at 30 June 2015 (2014: $6,862). During the year, Musgrave Minerals Ltd invoiced Mithril in relation to expenditure incurred by Musgrave on Mithril’s behalf. These transactions were undertaken on an arm’s length basis and in aggregate for the year ended 30 June 2015 totalled $11,513 excluding GST (2014: $7,133). No amounts were outstanding at 30 June 2015 (2014: $Nil). During the year, Musgrave Minerals Ltd invoiced Avalon Minerals Limited (“Avalon”) in relation to work performed for a geophysical review performed for Avalon. This work was undertaken on an arm’s length basis and in aggregate for the year ended 30 June 2015 totalled $12,898 excluding GST (2014: $Nil). No amounts were outstanding at 30 June 2015 (2014: $Nil). HLB Mann Judd (SA) Pty Ltd has received professional fees for accounting, taxation, secretarial and transactional services provided during the period amounting to $126,079 including GST (2014: $97,690). A total of $8,250 including GST was outstanding at Notes to the Financial Statements 47 30 June 2015 (2014: $13,489). Donald Stephens, the 21. Auditors remuneration former Company Secretary, is a consultant with HLB Mann Judd (SA) Pty Ltd. 19. Commitments for expenditure An audit or review of the financial report Consolidated 2015 $ 2014 $ 2015 $ 2014 $ 33,625 29,548 33,625 29,548 Operating leases Not longer than 1 year 12,000 30,063 Longer than 1 year and not longer than 5 years Balance at end of financial year - - 12,000 30,063 22. Financial risk management 22.1 Capital risk management The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders. Exploration Leases In order to maintain current rights of tenure to exploration tenements, the Company will be required The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves to spend in the year ending 30 June 2015 net amounts and retained losses as disclosed in notes 14, 15 and 16 of approximately $461,000 (2014: $1,907,500) in respect of tenement lease rentals and to meet respectively. minimum expenditure requirements. These obligations are expected to be fulfilled in the normal course of Proceeds from share issues are used to maintain and expand the Group’s exploration activities and fund operations. operating costs. 20. Contingent liabilities and contingent assets At the date of this report, the Company is not aware of any contingent asset or liability that should be disclosed in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets. The Company has various bank guarantees totalling $122,000 at 30 June 2015 (2014: 110,000) which act as collateral over the lease of office at 28 Richardson Street, West Perth and the Company’s business credit cards. 2015 $ 2014 $ 3,737,403 6,139,459 FINANCIAL ASSETS Cash and cash equivalents Trade receivables 47,158 89,786 FINANCIAL LIABILITIES Payables 297,064 219,690 22.2 Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a 48 Notes to the Financial Statements policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from activities. 22.4 Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity risk management framework for the The Group does not have any significant credit risk management of the Group’s short, medium and long exposure to any single counterparty or any group of term funding and liquidity management requirements. counterparties having similar characteristics. The credit The Group manages liquidity risk by maintaining risk on liquid funds is limited because the counterparties adequate reserves. are banks with high credit-ratings assigned by international credit-rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk. 23. Parent entity information Consolidated 2015 $ 2014 $ 22.3 Interest rate risk The table below details the Group’s interest bearing Assets assets, consisting solely of cash on hand and short Current assets 3,814,081 6,254,743 term deposit (with all maturities less than one year in duration) Non-current assets 10,487,340 15,884,345 Total assets 14,301,421 22,139,088 Weighted average effective interest rate Less than one year % $ 3.14 3.61 0.97 1.19 2,180,000 5,310,000 1,557,403 829,459 Fixed interest rate 2015 2014 Variable interest rate 2015 2014 Liabilities Current liabilities 374,301 370,766 Non-current liabilities 19,385 30,913 Total liabilities 393,686 401,679 Equity Issued capital Reserves 26,718,899 26,718,899 2,858,705 2,973,818 Accumulated losses (15,669,869) (7,955,308) Total shareholders’ equity 13,907,735 21,737,409 Financial Performance At reporting date, if interest rates had been 50 basis Loss for the year (7,829,674) (4,859,861) points higher or lower and all other variables were held Other comprehensive income - - constant, the Group’s: • Net loss would increase or decrease by $32,660 (2014: $38,863) which is mainly attributable to the Groups exposure to interest rates on its variable interest rate bank deposits. Total comprehensive loss (7,829,674) (4,859,861) Notes to the Financial Statements 49 Directors’ Declaration The Directors of Musgrave Minerals Limited state that: In the opinion of the Directors: 1. The consolidated financial statements and notes, as set out on pages 29 to 49, are in accordance with the Corporations Act 2001, and: a. comply with Australian Accounting Standards, which, as stated in accounting policy Note 2 to the financial statements, constitutes compliance with International Financial Reporting Standards (“IFRS”); and b. give a true and fair view of the financial position as at 30 June 2015 and of the performance for the year ended on that date of the consolidated Group; 2. In the Directors’ opinion there are reasonable grounds to believe that the Company will be able pay its debts as and when they become due and payable; and 3. The Managing Director and Chief Financial Officer have each declared that: a. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; b. c. the financial statements and notes for the financial year comply with Accounting Standards; and the financial statements and notes for the financial year give a true and fair view. Signed in accordance with a resolution of the Directors. Mr Graham Ascough Chairman 25 September 2015 50 Directors’ Declaration Independent Auditor’s Report Independent Auditor’s Report 51 52 Independent Auditor’s Report Independent Auditor’s Report 53 ASX Additional Information The following additional information not shown elsewhere in this report is required by the Australian Securities Exchange in respect of listed public companies only. This information is current as at 17 September 2015. Securities Quotation has been granted for 121,000,000 ordinary shares of the Company on the Australian Securities Exchange. Quoted Securities ASX Code Number of Holders Security Description Total Securities MGV 1,059 Ordinary Fully Paid 121,000,000 Unquoted Securities ASX Code Number of Holders Security Description Total Securities MGVAM MGVAO MGVAQ MGVAU MGVAI MGVAA MGVAS MGVAY 5 1 4 3 1 6 1 1 Options expiring 17/02/2016 Exercisable at $0.36 Options expiring 17/02/2016 Exercisable at $0.50 Options expiring 19/04/2016 Exercisable at $0.25 Options expiring 23/01/2017 Exercisable at $0.25 Options expiring 05/03/2018 Exercisable at $0.25 Options expiring 10/03/2019 Exercisable at $0.12 Options expiring 08/05/2016 Exercisable at $0.36 Options expiring 23/03/2018 Exercisable at $0.25 4,750,000 2,500,000 7,750,000 375,000 500,000 550,000 500,000 75,000 One holder Mr Robert Waugh and Mrs Sara Waugh hold 5,000,000 unlisted options (equivalent to 29.41% of total unlisted options) Voting Rights The voting rights attached to each class of security are as follows: • Ordinary Fully Paid shares – one vote per share held. • Options – no voting rights are attached to unexercised options. 54 ASX Additional Information Distribution schedule Spread of Holdings - Ordinary Shares (ASX: MGV) 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - 99,999,999 TOTAL Holders Units Percentage 13 40 218 613 175 1,059 1,771 161,254 1,904,483 25,285,186 93,647,306 121,000,000 0.001 0.133 1.574 20.898 77.394 100% Unmarketable Parcel There are 515 Shareholders holding less than a marketable parcel of fully paid ordinary shares (a minimum parcel $500 shares, being 22,728 shares using a market value of $0.022). Substantial Shareholding The Company has received the following notices of substantial holding: • Mithril Resources Investments Pty Ltd in relation to 9,283,871 ordinary shares • Independence Group NL in relation to 9,027,000 ordinary shares Register of Securities The Register of securities is held at Computershare Investor Services Pty Ltd at Level 11, 172 St Georges Terrace, Perth, Western Australia. Telephone: (Australia) 1300 555 159 (overseas) + 61 3 9415 4062. Buyback No on-market share buy-back is current. ASX Additional Information 55 Top Holders The names of the twenty largest shareholders (ASX: MGV) are listed below: Rank Name Units held % of Units 1. 2. 3. 4. 5. 6. 7. 8. 9. Mithril Resources Investments Pty Ltd Independence Group NL ABN Amro Clearing Sydney Nominees Pty Ltd Barrick (Australia Pacific) Limited Integra Mining Limited Allise Pty Ltd 9,283,871 9,027,000 7,512,067 6,000,000 5,516,129 2,600,000 Cazna (Oxford 1) Limited + Cazna (Oxford 2) Limited 1,540,000 Forsyth Barr Custodians Ltd Kimbriki Nominees Pty Ltd 10. J P Morgan Nominees Australia Limited 11. Mr Chor Leng Tan 12. Citicorp Nominees Pty Limited 13. Amalgamated Dairies Limited 14. Hipete Pty Limited 15. Como Investments Pty Ltd 16. Mr Stephen Simunovic + Mr Dragan Simunovic 810,000 17. Octifil Pty Ltd 18. Cahami Pty Ltd 19. Kavalex Pty Limited 20. Mr Lindsay Heaven 800,000 725,000 680,000 677,558 56 ASX Additional Information 7.67 7.46 6.21 4.96 4.56 2.15 1.27 1.20 1.20 0.98 0.94 0.84 0.83 0.83 0.79 0.67 0.66 0.60 0.56 0.56 1,454,900 1,452,000 1,189,579 1,142,000 1,011,200 1,000,000 1,000,000 950,000 57 www.musgraveminerals.com.au 28 Richardson Street, West Perth, Western Australia 6005 Phone: +61 8 9324 1061 - Fax: +61 8 9324 1014 

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