Annual Report 2016 Musgrave Minerals is an Australia focused gold and base metal exploration company Corporate Directory 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, WA 6005 Telephone: Facsimile: Email: Web: +61 (8) 9324 1061 +61 (8) 9324 1014 info@musgraveminerals.com.au www.musgraveminerals.com.au Auditors Grant Thornton Audit Pty Ltd Chartered Accountants Level 1, 10 Kings Park Road West Perth, WA 6005 Legal Advisors O’Loughlins Lawyers Level 2, 99 Frome Street Adelaide, SA 5000 Share Registry Computershare Investor Services Pty Ltd Level 11, 172 St. Georges Terrace Perth, WA 6000 Telephone: Facsimile: +61 (8) 9323 2000 +61 (8) 9323 2033 Securities Exchange Listing The Company is listed on the Australian Securities Exchange Ltd (“ASX”) Home Exchange: Perth, Western Australia ASX Code: MGV i Corporate Directory Contents Chairman’s Letter Review of Operations Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Additional Information Tenement Schedule 02 03 10 21 22 23 24 25 26 47 48 51 53 01 Contents 0101 Chairman’s Letter Dear Fellow Shareholders, opportunity to acquire further shares in the Company on the same terms as the Placement. The funds will be used to On behalf of the Board of Directors, it is my pleasure to accelerate our efforts at Cue in the year ahead. It was very present the 2016 Annual Report for Musgrave Minerals pleasing to see strong participation in the SPP from existing Limited (‘Musgrave’ or ‘Company’). shareholders and I take this opportunity, on behalf of the Board, to thank all of our shareholders for their ongoing During the year under review the Company significantly support. strengthened its project portfolio entering a Farm-In and Joint Venture Agreement to earn up to an 80% interest in the Cue The Company’s share price performance has improved Project. Cue is located in the highly prospective Murchison significantly over the past twelve months and this is a Province of Western Australia, a well-endowed producing reflection of the quality work and dedication of the Musgrave gold district and an emerging, under-explored base metal team and reflects on the solid exploration results they have province. The Project is host to numerous advanced gold delivered over the past twelve months. It is a trend that and copper prospects and is well positioned in regards to we intend to continue and I would like to thank the staff, infrastructure and existing gold operations. management, contractors and my fellow directors for their Our initial drilling programs at Cue have been very successful, identifying a new base metal discovery at the Mt Eelya We are committed to progressing the Company by advancing copper-gold Prospect and extending high grade gold targets towards development through high-quality exploration mineralisation at the Break of Day Prospect. Significant and technical studies for the benefit of all Musgrave ongoing efforts in this regard. upside remains for further discoveries in both gold and shareholders. copper at Cue where the Company will continue to advance targets through discovery and extensional drilling programs Once again I wish to thank all shareholders for your continued with the objective of identifying sufficient resources to support. underpin a profitable near-term development scenario. In this regard, the Company will continue its focus on Break of Day where drilling to date has confirmed a substantial, multi-vein, high grade gold system that remains untested at depth and along strike. Despite the continuing challenging times in the resources Chairman Graham Ascough sector and the unpredictable equity markets in Australia and overseas, Musgrave successfully completed a capital raising subsequent to the end of the year that attracted new investors to the Company. Concurrent with this raising, a Share Purchase Plan offered existing shareholders the 02 Chairman’s Letter Review of Operations Musgrave Minerals Ltd (“Musgrave” or “the Company”) Drilling at Cue has identified high grade gold mineralisation (ASX:MGV) is an Australian gold and base metal exploration at Break of Day and discovered massive copper-gold company focused on growth through the discovery and mineralisation at Mt Eelya. development of gold and base metal resources within Australia. Musgrave also has projects in the Fraser Range region of Western Australia and the Musgrave Geological Province and In November 2015, Musgrave entered into a Farm-In and Southern Gawler Craton regions of South Australia (Figure 1). Joint Venture Agreement with Silver Lake Resources Limited to earn up to an 80% interest in the Cue Project consisting of the Moyagee Gold and Hollandaire Copper Projects in the highly prospective Murchison Province of Western Australia (MGV ASX announcement 25 November 2015: “Musgrave Corporate During the past year, the Company spent $1.8 million on exploration activities and at June 30, 2016 had $2.1M cash at Secures Advanced Gold and Copper Project”). bank. The Company’s focus in the year under review was on gold and base metal exploration at the new Cue Project. Our aim is to advance targets through discovery and extensional drilling to define sufficient resources to underpin a profitable near-term development scenario. Figure 1: Musgrave Minerals’ project location map Subsequent to the end of the year Musgrave raised $750,000 through a Placement to sophisticated and professional investors and $1.98M through a heavily oversubscribed Share Purchase Plan (“SPP”) with an additional $500,000 Top-Up Placement. On completion the Company had approximately 180 million shares on issue and $4.7M cash at bank. During the year, Musgrave received $513,162 from the Australian Tax Office under the Federal Government’s Research and Development Tax Incentive Scheme for its research and development activities during the 2015 financial year. Musgrave continued its strong links with government and research organisations throughout 2016 in the regions in which it operates including the Geological Survey of South Australia, the Centre for Exploration Targeting at the University of Western Australia and the Commonwealth Scientific and Industrial Research Organisation (“CSIRO”). 03 Review of Operations 03 Figure 2: Cue prospect locations The Company successfully secured an Exploration Incentive Scheme (“EIS”) co-funded drilling grant of $150,000 for the Cue Project in 2016-17 to drill test new copper-gold targets. Under the Federal Government’s Exploration Development Incentive (“EDI”) Scheme exploration credits have been distributed to eligible shareholders at 0.08 cents per share. The EDI is intended to encourage shareholder investment in exploration companies undertaking greenfields mineral exploration in Australia by allowing junior exploration companies to distribute a portion their tax losses from greenfields minerals expenditure in Australia to eligible shareholders as tax credits. Eligible shareholders must be Australian tax residents and be recorded on the Company’s share register at the record date, being 31 May 2016. Break of Day - panned gold 04 Review of Operations Exploration Activities Significant results were achieved at the Cue Project during 2015-16 where exploration by the Company resulted in the discovery of high grade gold mineralisation at the Break of Day Prospect and copper-gold mineralisation at Mt Eelya. A considerable exploration program is planned for the coming year with the objective of expanding the high grade gold JORC resource at Break of Day and completing follow-up drilling on the Mt Eelya discovery along with the testing of other targets. Exploration programs were also undertaken on the Mamba Project in Western Australia and the Corunna Project in South Australia where anomalous lead, zinc and silver was identified in shallow aircore drilling over a strike extent of 300m. Cue Project Musgrave Minerals Ltd earning up to 80% During July 2016 Musgrave met its minimum expenditure commitments under the joint venture and has now moved to the Stage 1 Earn-In phase of the joint venture. Musgrave has focused exploration on the Cue Project since its acquisition in late 2015 undertaking an airborne Versatile Time-Domain Electromagnetic (“VTEM”) survey, surface soil and rock chip sampling, down hole electromagnetic (“DHEM”) surveys and three drilling campaigns. Figure 3: Musgrave RC drill hole locations at Break of Day on landsat image Break of Day The Break of Day Prospect (Figure 2) is part of the Moyagee Reverse circulation (“RC”) drilling has identified high grade Project area at Cue and hosts a combined JORC (2012) gold mineralisation at Break of Day including: • • • • 2m @ 25.2g/t Au 2m @ 22.0g/t Au 3m @ 24.3g/t Au 3m @ 36.8g/t Au Massive copper-gold sulphide was intersected at the new Mt Eelya discovery: • 8m @ 1.6% Cu, 0.6g/t Au, 4.5g/t Ag and JORC (2004) compliant Mineral Resource of 1.93Mt @ 2.0g/t Au for 126,900oz contained gold within four separate deposits; Lena, Leviticus, Numbers and Break of Day. Break of Day has a JORC 2004 compliant Inferred Mineral Resource of 335,700t @ 1.91g/t Au for 20,600oz of contained gold (MGV ASX announcement 25 November 2015, “Musgrave Secures Advanced Gold and Copper Project”). 05 Review of Operations 05 Drilling at Break of Day has identified twin, semi-parallel high • 1m @ 33.5g/t Au from 80m down hole in 16MORC007 – grade vein gold mineralisation. Drill intersections include: Hanging-wall vein • 2m @ 25.2g/t Au (including 1m @ 46.7g/t Au) from 96m • 4m @ 12.3g/t Au from 189m down hole in 16MORC012 – and 2m @ 22.0g/t Au from 135m down hole in MORC001 Footwall vein – Hanging-wall vein • 6m @ 12.8g/t Au from 158m down hole including 3m @ 24.3g/t Au from 158m in 16MORC004 - Footwall vein • 2m @ 10.8g/t Au from 66m down hole in 16MORC006 – Hanging-wall vein All assay details have been reported in ASX announcements: 13 April 2016, “High Grade Gold at Break of Day”, 6 June 2016, “More High Grade Gold at Break of Day”, 2 August 2016, “More High Grade Gold at Break of Day” and 11 August 2016, “Gold Mineralisation Extended at Break of • 2m @ 36.8g/t Au from 101m down hole in 16MORC006 – Day”. Footwall vein The drilling targeted the extension of high grade gold mineralisation and has extended the hanging-wall vein to a strike of 360 metres (Figure 3). Musgrave has discovered the new high grade footwall vein and the gold mineralisation in the footwall vein has been drilled over a strike of 100m and is open down dip and to the north (Figure 4). Break of Day is on a granted mining lease and drilling is ongoing with the aim of delineating a high grade gold resource. Figure 4: Cross section at Break of Day showing intersections, outcropping gossans, VTEM conductors semi-parallel footwall and hanging-wall gold veins and DHEM model targets Figure 5: Three dimensional image of Mt Eelya drill hole location plan showing drill holes, significant 06 Review of Operations Mt Eelya gossan at surface Figure 6: Mt Eelya cross section showing RC drill hole 16EHRC002 Mt Eelya At the Mt Eelya Prospect, 6km north-west of the Hollandaire volcanic massive sulphide deposit, Musgrave drilled two RC holes and intersected massive copper sulphide mineralisation. Assay results include: • 8m @ 1.6% Cu and 0.6g/t Au from 115m to 123m down hole (16EHRC001) including 1m @ 4.3% Cu and 1.6g/t Au from 115m with elevated silver and zinc (MGV ASX announcement 3 March 2016, “Copper-Gold Mineralisation Confirmed at Mt Eelya”) A strong off-hole late time conductor has been identified to the east of the drill hole suggesting a south easterly plunge to the mineralisation (Figure 5 and 6). Gossanous float, the weathered product of sulphide mineralisation, can be traced at surface, intermittently over a strike of approximately 300m at Mt Eelya. The gossan forms two intermittent but sub-parallel zones. Interpretation of the VTEM survey data has identified three potential conductors aligned parallel with the gossans. The conductors at Mt Eelya have a strong association with massive sulphide copper-gold mineralisation. To date the drilling has been focused on testing only one of these three potential zones of mineralisation. Ground Electromagnetic (“EM”) is planned to better define these potential new conductive targets. 07 Review of Operations 07 At Mt Eelya a regional soil geochemical survey using a portable x-ray fluorescence (“pXRF”) analyser has identified a zone of anomalous copper and zinc over a strike extent of About the Cue Project Musgrave Minerals Ltd entered into a Farm-In and Joint Venture Agreement with Silver Lake Resources Limited more than 700m. A ground EM survey to test for extensions to the massive copper-gold sulphide and zinc mineralisation is currently being planned with drilling to follow. (“Silver Lake”) (ASX: SLR) to earn up to an 80% interest in the Cue Project (previously part of SLR’s Murchison Operation) consisting of the Moyagee Gold and Hollandaire Copper Projects (“Project”) in the highly prospective Murchison Province of Western Australia (Figure 2). Hollandaire West At Hollandaire West the Company confirmed the down plunge The Project hosts the Moyagee and Hollandaire Mineral Resources and Reserves (MGV ASX announcement 25 extension of copper-gold mineralisation intersecting: November 2015, “Musgrave Secures Advanced Gold and • 5m @ 2.46% Cu, 0.3g/t Au and 10g/t Ag from 110 Copper Project”): metres down hole • 1.9Mt @ 2.0g/t Au (126,900oz contained Au) in Resources at Moyagee*, The intersection is approximately 45 metres down dip of historical drill hole 13HORC085 that intersected 9m @ 1.94% Cu and 0.2g/t Au. The mineralisation dips shallowly to the south (MGV ASX announcement 24 March 2016, “Further • 0.7Mt @ 1.6g/t Au (34,300oz contained Au) in Resources at Hollandaire and Rapier*, • 2.0Mt @ 1.9% Cu (38,800t contained Cu) in Resources at Strong Results from Initial Drilling at Cue”). The mineralisation Hollandaire*, and can be traced over a strike length of more than 160m. • 0.4Mt @ 3.3% Cu (14,700t contained Cu) in Reserves at Lady Stardust Two targets have been identified at Lady Stardust that *Note: Gold and Copper Resources and Reserves are estimated by Silver Lake and reported in SLR ASX require follow-up. The first is a 700m gold in soil geochemical Announcement 28 August 2015; “Mineral Resources and Hollandaire*. anomaly that is situated on a prospective lithological contact Reserves Update”. and favourable structural position and has not been drill tested. The second is a copper soil anomaly co-incident with the Lady Stardust VTEM target suggesting the source of the conductor may be related to base metal mineralisation. The VTEM target is modelled as a sub-vertical conductor with a strike extent of approximately 900m. Aircore and RC drilling is planned to test both the gold and copper anomalies at Lady Stardust. Fraser Range Mamba Project E28/2405 (100% Musgrave Minerals Ltd) The Mamba tenement covers 180km2 in the same belt as the world class Nova-Bollinger nickel-copper sulphide discoveries of Sirius Resources NL (now Independence Group NL) in south-eastern Western Australia. The tenement is along strike from the Nova deposit and only 5km from the Trans Australian rail line. 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. Musgrave has 08 Review of Operations undertaken two drilling programs at Mamba and identified mafic host lithologies prospective for nickel-copper sulphide mineralisation. The Company is seeking a joint venture partner to progress nickel-copper exploration on the project. Southern Gawler Range Corunna Project EL5497 (100% Musgrave Minerals Ltd) The Corunna Project is in the emerging epithermal porphyry province of the Southern Gawler Craton, South Australia which hosts the Menninnie Dam Zn-Pb-Ag deposit and the Figure 7: Aircore drill results for Area 1 target on 20Moz Paris epithermal silver deposit. The Corunna Project is gridded silver soil geochemical image located approximately 50km west of Port Augusta and is well positioned in regards to infrastructure and proximity to the coast. The recent aircore drilling program at Corunna intersected anomalous silver, lead, zinc and copper over a strike extent of more than 300m (Figure 7) and is open to both the north and south (MGV ASX announcement 27 August 2015, “MGV Exploration Update – Corunna”). Aircore drilling tested six surface geochemical targets with best results being returned from Area 1 including: Other Projects Musgrave currently holds tenements in the Musgrave region of South Australia. No field activity was completed on these projects during the period. As part of a strategic review Musgrave (with its wholly owned subsidiary Musgrave Exploration Pty Ltd) agreed with Menninnie Metals Pty Ltd (“MMPL”), a wholly owned subsidiary of Terramin Australia Ltd (ASX: TZN), to terminate the Menninnie Dam Mining Farm-In and Joint • 11m @ 1.0% Pb, 0.5% Zn and 4.2g/t Ag from 19m in drill Venture Agreement (MGV ASX announcement 21 July hole COAC017; • 6m @ 1.0% Pb, 0.2% Zn and 8.2g/t Ag from 14m in drill hole COAC018; 2015, “Termination of Menninnie Dam JV”). As part of the termination, MMPL agrees to pay Musgrave an amount equal to 1% of net smelter returns (“NSR”) in respect of all minerals produced from each of EL5039 (Menninnie Dam) and EL4813 • 13m @ 0.6% Pb, 0.4% Zn and 7.2g/t Ag from 32m in drill (Nonning). hole COAC019; and • 22m @ 0.5% Pb, 0.2% Zn and 13.2g/t Ag from 17m in drill hole COAC021. Musgrave withdrew from the Musgrave Block Farm-In and Joint Venture agreement with Pitjantjatjara Mining Company Pty Limited and Zeil No.1 Pty Limited (ASX announcement 7 Area 1 is located at a potentially significant intersection of two October 2015, “Withdrawal from PMC-Zeil JV”). major structures. Follow-up drilling is recommended. 09 Review of Operations 09 Directors’ Report Your Directors present their report on the consolidated entity consisting of Musgrave Minerals Limited (“the Company”) and its subsidiary (“the Group” or “the Consolidated Entity”) at the end of the year ended 30 June 2016. Dividends No dividends have been paid or declared since the start of the financial year. No recommendation for the payment of a dividend has been made by the Directors. Directors The following persons were Directors of the Company during the whole of the financial year and up to the date of this report unless noted otherwise: Graham Ascough, Non-Executive Chairman Robert Waugh, Managing Director Kelly Ross, Non-Executive Director John Percival, Non-Executive Director Principal activities During the year the principal continuing activities of the Group consisted of: Operations and financial review Information on the operations of the Group and its prospects is set out in the “Review of Operations” section of this Annual Report. Exploration and evaluation costs totalling $6,191,926 (2015: $7,649,239) were impaired during the year and recognised as an expense in accordance with the Group’s accounting policy. The exploration and evaluation costs impaired primarily comprise previously capitalised costs in relation to some Musgrave Project tenements in South Australia. a) exploration of mineral tenements both on a joint venture As at 30 June 2016 the Group had net assets of $7,891,589 basis and by the Group in its own right; (2015: $13,907,735) including cash and cash equivalents of b) to continue to seek extensions of areas held and to seek $2,075,224 (2015: $3,737,403). out new areas with mineral potential; and c) to evaluate results achieved through surface sampling, geophysical surveys and drilling activities carried out during the year. Financial results The consolidated loss of the Group after providing for income tax for the year ended 30 June 2016 was $6,105,944 (2015: $7,829,674). Significant changes in the state of affairs Significant changes in the state of affairs of the Group during the financial year were as follows: During the year the Company entered into a Farm-In and Joint Venture Agreement (“Agreement”) with Silver Lake Resources Limited (“Silver Lake”) (ASX: SLR) to earn up to an 80% interest in the Cue Project (previously part of Silver Lake’s Murchison Operation) consisting of the Moyagee 10 Directors’ Report Gold and Hollandaire Copper Projects (“Projects”) in the operations, the results of those operations, or the state of highly prospective Murchison Province of Western Australia. affairs of the Group in future financial years. Contributed equity increased by $75,000 (from $27,500,000 to $27,575,000) as a result of shares issued to Silver Lake as part of the Agreement. Details of the changes in equity are disclosed in note 14 to the financial statements. Likely developments and expected results of operations The Directors are not aware of any developments that might There were no other significant changes in the state of affairs have a significant effect on the operations of the Group in of the Group during the financial year. subsequent financial years not already disclosed in this report. Events since the end of the financial year On 4 July 2016, the Company announced that it had completed a placement to institutional and sophisticated investors of 12,711,864 shares at an issue price of 5.9 cents per share to raise $750,000. The issue price was at a 15.7% discount to the volume weighted average price of the Company’s shares traded on ASX for the last five trading days to 29 June 2016. The Company also announced a fully underwritten Share Purchase Plan (“SPP”). The SPP closed oversubscribed on 5 August 2016. The SPP was strongly supported by Shareholders and was heavily oversubscribed with the Company receiving applications totalling $1,984,000. In light of the strong demand from shareholders, the Board of Directors elected to increase the original SPP target which had been set at $1,250,000 and accepted all valid applications from eligible shareholders. A total of 33,627,084 new shares were issued under the SPP at a price of 5.9 cents per share. On 16 August 2016, the Company completed a placement to raise $500,000 via the issue of 8,474,576 shares to sophisticated and professional investors at an issue price of 5.9 cents per share. There has not arisen in the interval between the end of the financial year and the date of this report any other item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the Environmental regulation The Group is subject to significant environmental regulation in respect of its exploration activities. Tenements in Western Australia and South Australia are granted subject to adherence to environmental conditions with strict controls on clearing, including a prohibition on the use of mechanised equipment or development without the approval of the relevant government agencies, and with rehabilitation required on completion of exploration activities. These regulations are controlled by the Department of Mines and Petroleum (Western Australia) and the Department of State Development (South Australia). Musgrave Minerals Limited conducts its exploration activities in an environmentally sensitive manner and the Group is not aware of any breach of statutory conditions or obligations. Greenhouse gas and energy data reporting requirements The Directors have considered compliance with both the Energy Efficiency Opportunity Act 2006 and the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. The Directors have assessed that there are no current reporting requirements for the year ended 30 June 2016, however reporting requirements may change in the future. 11 Directors’ Report 11 Information on Directors Mr Graham Ascough BSc, PGeo, MAusIMM. (Non-Executive Chairman), Director since 26 May 2010 Experience and expertise 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. Mr Ascough is a geophysicist by training and was the 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 Canadian resources house, Falconbridge Ltd (acquired 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. Other current directorships Mithril Resources Ltd (Appointed 9 October 2006) PNX Metals Ltd (Appointed 10 December 2012) Avalon Minerals Ltd (Appointed 29 November 2013) Former directorships in last 3 years Reproductive Health Science Ltd (Retired 2 April 2014) Aguia Resources Ltd (Resigned 15 November 2013) Special responsibilities Chair of the Board Member of the Audit Committee Interests in shares and options Ordinary Shares – Musgrave Minerals Limited Unlisted Options – Musgrave Minerals Limited 849,237 Nil Mr Robert Waugh MSc, BSc, FAusIMM, MAIG. (Managing Director), Director since 6 March 2011 Experience and expertise Robert Waugh has over 25 years of experience in the resources sector and 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 current directorships None 12 Directors’ Report Former directorships in last 3 years None Special responsibilities Managing Director Interests in shares and options Ordinary Shares – Musgrave Minerals Limited Unlisted Options – Musgrave Minerals Limited 815,237 Nil Mrs Kelly Ross BBus, CPA, AGIA. (Non-Executive Director), Director since 26 May 2010 Experience and expertise 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 administration in the mining industry and was the Company Secretary of Independence Group NL for 10 years from 2001 to 2011. Mrs Ross was also a senior accountant at Resolute Ltd from 1987 to 2000. Mrs Ross was a Director of ASX listed Independence Group NL for 12 years from 2002 to 2014. Mrs Ross retired from the Company Other current directorships None on 24 December 2014. Former directorships in last 3 years Independence Group NL (Retired 24 December 2014) Special responsibilities Chair of the Audit Committee Interests in shares and options Ordinary Shares – Musgrave Minerals Limited Unlisted Options – Musgrave Minerals Limited 100,847 Nil Mr John Percival (Non-Executive Director), Director since 26 May 2010 Experience and expertise Mr Percival has been involved in investment and merchant banking for over 25 years including 15 years as Investment Manager of Barclays Bank New Zealand Ltd. In addition he has extensive experience in stockbroking, corporate finance and investment management. In 1995 Mr Percival was appointed to the Board of Goldsearch Limited and in 2000 he became an Executive Director, however in May 2014 Goldsearch changed direction and Mr Percival resumed his non-executive position. Other current directorships Goldsearch Ltd (Appointed 11 October 1995) Former directorships in last 3 years None Special responsibilities Member of the Audit Committee Interests in shares and options Ordinary Shares – Musgrave Minerals Limited Unlisted Options – Musgrave Minerals Limited 13 Directors’ Report 554,237 Nil 13 Company Secretary Mrs Patricia (Trish) Farr, GradCertProfAcc, GradDipACG, AGIA, ACIS, GAICD. – 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 the Company Secretary of uranium junior Energy Metals Limited from its listing in 2005 to 2010 and Fox Resources Ltd from 2013 to 2014. Mrs Farr is also a Director and the Company Secretary of Jindalee Resources Limited. Mrs Farr is an associate member of Chartered Secretaries & Administrators and the Governance Institute of Australia (formerly Chartered Secretaries Australia) and a graduate member of the Australian Institute of Company Directors. Meetings of Directors The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2016, and the numbers of meetings attended by each Director were: Board of Directors Audit Committee A 10 10 10 10 Graham Ascough Robert Waugh (1) Kelly Ross John Percival B 10 10 10 10 A 4 1 4 4 B 4 1 4 4 Retirement, election and continuation in office of Directors Mr Graham Ascough, being the Director retiring by rotation who, being eligible, will offer himself for re-election at the 2016 Annual General Meeting. Remuneration Report (Audited) The Directors present the Musgrave Minerals Limited 2016 Remuneration Report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year. The report contains the following sections: (a) Key management personnel (“KMP”) covered in this report (b) Remuneration governance and the use of remuneration consultants (c) Executive remuneration policy and framework (d) Relationship between remuneration and the Group’s performance (e) Non-executive director remuneration policy (f) Voting and comments made at the Company’s 2015 Annual General Meeting (g) Details of remuneration (h) Service agreements (i) Details of share-based compensation and bonuses (j) Equity instruments held by key management personnel (k) Loans to key management personnel (l) Other transactions with key management personnel (1) Mr Waugh resigned from the Audit Committee on 30 July (a) Key management personnel covered in 2015. this report A = Number of meetings attended B = Number of meetings held during the time the Director Non-Executive and Executive Directors (see pages 12 to 13) for details about each director) held office or was a member of the committee during the year Graham Ascough Non-Executive Chairman Robert Waugh Kelly Ross John Percival Managing Director Non-Executive Director Non-Executive Director 14 Directors’ Report Other key management personnel • aligned to the Company’s strategic and business Name Position objectives and the creation of shareholder value; Patricia (Trish) Farr Company Secretary (b) Remuneration governance and the use of remuneration consultants The Company does not have a Remuneration Committee. Remuneration matters are handled by the full Board of the Company. In this respect the Board is responsible for: • • transparent and easily understood; and acceptable to shareholders. All executives receive consulting fees or a salary, part of which may be taken as superannuation, and from time to time, options. The Board reviews executive packages annually by reference to the executive’s performance and the over-arching executive remuneration framework; comparable information from industry sectors and other listed • • • • the operation of the incentive plans which apply to executive directors and senior executives (the executive team), including key performance indicators and performance hurdles; remuneration levels of executives; and non-executive director fees. The objective of the Board is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the Company. In addition, all matters of remuneration are handled in accordance with the Corporations Act requirements, especially with regard to related party transactions. That is, none of the Directors participate in any deliberations regarding their own remuneration or related issues. Independent external advice is sought from remuneration consultants when required, however no advice has been sought during the period ended 30 June 2016. (c) Executive remuneration policy and framework companies in similar industries. All remuneration paid to specified executives is valued at the cost to the Group and expensed. Options are valued using a Black-Scholes option pricing model. (d) Relationship between remuneration and the group’s performance Emoluments of Directors are set by reference to payments made by other companies of similar size and industry, and by reference to the skills and experience of Directors. Fees paid to Directors are not linked to the performance of the Group. This policy may change once the exploration phase is complete and the Group is generating revenue. At present the existing remuneration policy is not impacted by the Group’s performance including earnings and changes in shareholder wealth (e.g. changes in share price). The Board has not set short term performance indicators, such as movements in the Company’s share price, for the determination of Director emoluments as the Board believes this may encourage performance which is not in the long term interests of the Company and its shareholders. The Board has structured its remuneration arrangements in such a way In determining executive remuneration, the Board aims to it believes is in the best interests of building shareholder ensure that remuneration practices are: • competitive and reasonable, enabling the Company to attract and retain key talent; wealth in the longer term. The Board believes participation in the Company’s Employee Share Option Plan aligns key management and executives with the long term interests of shareholders. 15 Directors’ Report 15 (e) Non-executive director remuneration policy On appointment to the Board, all Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including remuneration relevant to the office of Director. The maximum annual aggregate Non-Executive Directors’ fee pool limit is $250,000 as disclosed in the Company’s Replacement Prospectus dated 8 March 2011. Fees for Non-Executive Directors are not linked to the performance of the Group. Non-Executive Directors’ remuneration may also include an incentive portion consisting of options, subject to approval by shareholders. The Board policy is to remunerate Non-Executive Directors at commercial market rates for comparable companies for their time, commitment and responsibilities. Non- Executive Directors receive a Board fee but do not receive (f) Voting and comments made at the Company’s 2015 Annual General Meeting Musgrave Minerals Limited received more than 94% of “yes” fees for chairing or participating on Board committees. votes on its remuneration report for the 2015 financial year. Board members are allocated superannuation guarantee The Company did not receive any specific feedback at the contributions as required by law, and do not receive any other AGM on its remuneration practices. retirement benefits. From time to time, some individuals may choose to sacrifice their salary or consulting fees to increase payments towards superannuation. (g) Details of remuneration The following tables show details of the remuneration received by the Group’s key management personnel for the current and previous financial year. 2016 Short-term benefits Post- employment benefits Share-based payments Name Salary and fees $ Non-Monetary Benefit $ Super-annuation $ Options $ Total $ Options % Options % Directors G Ascough R Waugh K Ross J Percival Executives P Farr I Warland (1) Totals 65,000 264,999 45,000 45,000 35,250 48,145 503,394 - - - - - - - - 25,175 4,275 4,275 - 4,574 38,299 - - - - - - - 65,000 290,174 49,275 49,275 35,250 52,719 541,693 - - - - - - (1) Ceased employment 7 August 2015 16 Directors’ Report 2015 Short-term benefits Post- employment benefits Share-based payments Name Salary and fees $ Non-Monetary Benefit $ Super-annuation $ Options $ Total $ Options % Options % Directors G Ascough R Waugh K Ross J Percival Executives J Gum (1) I Warland D Stephens (2) Totals 65,000 256,985 45,000 49,388 148,160 194,697 39,525 798,755 - - - - - - - 24,414 4,275 - 14,042 18,496 - 61,227 - - - - - - 65,000 281,399 49,275 49,388 162,202 213,193 39,525 859,982 - - - - - - - (1) Ceased employment 11 March 2015 (2) Retired 30 June 2015. Replaced by P Farr on 30 June 2015. (h) Service agreements On appointment to the Board, all Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms of appointment, including 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. compensation relevant to the office of Director. Remuneration P Farr, Company Secretary and other terms of employment for other members of key management personnel are formalised in service agreements as summarised below. R Waugh, Managing Director Mr Waugh is remunerated pursuant to a formalised employment contract. Under this contract, the Company agrees to employ Mr Waugh as Managing Director of the Mrs Farr is remunerated pursuant to the terms of a consultancy agreement to fulfil the duties of the Company Secretary. Fees paid during the year totalled $35,250 and were charged at usual commercial rates on a daily basis. The agreement may be terminated by either party on three months’ written notice. (i) Details of share-based compensation and bonuses Company with his current gross annual salary, inclusive of Options 9.5% superannuation guarantee, being $290,174. Either Options over ordinary shares in the Company are granted party may terminate the employment contract without cause under the Employee Share Option Plan (“ESOP”). by providing six (6) months written notice or by making payment in lieu of notice (in the case of the Company), based Participation in the ESOP and any vesting criteria are at the Board’s discretion and no individual has a contractual right 17 Directors’ Report 17 to participate in the scheme or to receive any guaranteed expected price volatility of the underlying share, the expected benefits. Any options issued to Directors of the Company are dividend yield and the risk-free interest rate for the term of the subject to shareholder approval. option. No options were provided as remuneration to senior Further information on the fair value of share options and management during the current year. There are no assumptions is set out in note 23 to the financial statements. outstanding options in the Company previously provided as remuneration to senior management at the date of this report. Refer to the table below. The fair value of options at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and (j) Equity instruments held by key management personnel The following tables detail the number of fully paid ordinary shares and options over ordinary shares in the Company that were held during the financial year and the previous financial year by key management personnel of the Group, including their close family members and entities related to them. Options 2016 Directors G Ascough R Waugh K Ross J Percival Executives I Warland 2015 Directors G Ascough R Waugh K Ross J Percival Executives J Gum I Warland D Stephens Opening Balance 1 July 750,000 5,000,000 500,000 500,000 700,000 7,450,000 750,000 5,000,000 500,000 500,000 600,000 700,000 500,000 8,550,000 Granted as remuneration Options exercised Net change other Balance at 30 June Vested but not exercisable Vested and exercisable Vested during the year - - - - - - - - - - - - - - - - - - - - - - - - - - - - (750,000) (5,000,000) (500,000) (500,000) (700,000) (7,450,000) - - - - - - - - - - (600,000) - - 750,000 5,000,000 500,000 500,000 - 700,000 500,000 (600,000) 7,950,000 - - - - - - - - - - - - - - - - - - - - 750,000 5,000,000 500,000 500,000 - 700,000 500,000 7,950,000 - - - - - - - - - - - - - - 18 Directors’ Report During the year, no ordinary shares in the Company were provided as a result of the exercise of remuneration options. Subsequent to year end 200,000 options, previously issued to employees under the Company ESOP, were exercised and 200,000 new shares issued. 2016 Directors G Ascough R Waugh K Ross J Percival 2015 Directors G Ascough R Waugh K Ross J Percival Executives J Gum Opening Balance 1 July Granted as remuneration Options exercised Net change other Balance at 30 June 595,000 361,000 50,000 200,000 1,206,000 200,000 80,000 50,000 200,000 80,000 610,000 - - - - - - - - - - - - - - - - - - - - - - - 200,000 - - 595,000 561,000 50,000 200,000 200,000 1,406,000 395,000 281,000 - - - 676,000 595,000 361,000 50,000 200,000 80,000 1,286,000 Subsequent to year end the Directors shareholdings have changed as Directors participated in the Share Purchase Plan and Mr Percival’s spouse made an on-market purchase of the Company’s shares. See pages 12 to 13 for details of each Director’s current shareholdings. (l) Other transactions with key management personnel There were no other transactions with key management personnel during the financial year or the previous financial year. (k) Loans to key management personnel There were no loans to individuals or members of key management personal during the financial year or the previous financial year. End of Remuneration Report (Audited) 19 Directors’ Report 19 Shares under option Unissued ordinary shares of the Company under option at the date of this report are as follows: Date options granted Expiry Date Issue price of shares Number under option 24 January 2012 23 January 2017 $0.25 375,000 and 16 September 2015 6 March 2013 5 March 2018 16 September 2015 23 March 2018 11 March 2014 and 10 March 2019 $0.25 $0.25 $0.12 500,000 75,000 550,000 16 September 2015 22 April 2016 22 April 2021 $0.045 700,000 2,200,000 Indemnification and Insurance of Directors and Officers During the financial year, the Company paid a premium to insure the Directors and Officers of the consolidated entity against any liability incurred as a Director or Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits the disclosure of the nature of the liabilities covered or the amount of the premium paid. The Group has not entered into any agreement with its current auditors indemnifying them against claims by a third party arising from their position as auditor. Non-Audit Services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where No option holder has any right under the options to the auditor’s expertise and experience with the Company participate in any other share issue of the Company or and/or the Group are important. any other entity. Subsequent to year end 200,000 options, previously issued to employees under the Company ESOP, Details of the amounts paid or payable to the auditor (Grant were exercised and 200,000 new shares issued. Shares issued on the exercise of options There were no other shares issued on the exercise of options during the year and up to the date of this report. Corporate Governance Statement The Company’s 2016 Corporate Governance Statement has been released as a separate document and is located on the Company’s website at http://www.musgraveminerals.com.au/ operatingstandards.php Proceedings on Behalf of the Group No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the 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. Thornton Audit Pty Ltd) for audit and non-audit services provided during the year are set out in note 18. During the year ended 30 June 2016 no fees were paid or were payable for non-audit services provided by the auditor of the consolidated entity (2015: $Nil). Auditor’s Independence Declaration The copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. Signed in accordance with a resolution of the Directors. G Ascough Chairman Perth, 22 September 2016 20 Directors’ Report Auditor’s Independence Declaration to the Directors of Musgrave Minerals Limited 21 Auditor’s Independence Declaration 21 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2016 Revenue from operating activities Employee benefits expense Depreciation expense Finance expense Impairment expense Funds misappropriated Other expenses Notes 3 (a) 3 (b) 3(c) 9 3(d) 3(e) Consolidated 2016 $ 2015 $ 76,492 177,436 (277,958) (22,954) - (6,191,926) 100,000 (302,760) (360,119) (34,036) (96) (7,649,239) (337,282) (521,913) Loss from continuing operations before income tax (6,619,106) (8,725,249) Income tax benefit 5 513,162 895,575 Loss after income tax for the period attributable to the owners of Musgrave Minerals Limited Other comprehensive income Other comprehensive income for the period, net of tax Total comprehensive loss for the period attributable to the owners of Musgrave Minerals Limited (6,105,944) (7,829,674) - - - - (6,105,944) (7,829,674) Cents per share Cents per share Loss per share attributable to the owners of Musgrave Minerals Limited - basic loss per share - diluted loss per share 17 17 4.95 4.95 6.47 6.47 This Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes 22 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position As at 30 June 2016 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets Non-Current Assets Exploration and evaluation Property, plant and equipment Total Non-Current Assets TOTAL ASSETS LIABILITIES 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 Contributed equity Reserves Accumulated losses TOTAL EQUITY Notes 2016 $ 2015 $ Consolidated 6 7 8 9 10 12 13 13 14 15 16 2,075,224 43,512 12,588 2,131,324 6,020,245 63,440 6,083,685 8,215,009 243,536 47,525 291,061 32,359 32,359 323,420 7,891,589 26,793,899 64,503 (18,966,813) 7,891,589 3,737,403 47,158 29,520 3,814,081 10,391,152 96,188 10,487,340 14,301,421 297,064 77,237 374,301 19,385 19,385 393,686 13,907,735 26,718,899 2,858,705 (15,669,869) 13,907,735 This Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes 23 Consolidated Statement of Financial Position 23 Consolidated Statement of Changes in Equity For the year ended 30 June 2016 At 1 July 2014 Total comprehensive loss for the period Other comprehensive income Total comprehensive loss for the period net of tax Transactions with owners in their capacity as owners Transfer from share option reserve due to lapse of options under Employee Share Option Plan At 30 June 2015 At 1 July 2015 Total comprehensive loss for the period Other comprehensive income Total comprehensive loss for the period net of tax Transactions with owners in their capacity as owners Issue of shares to Silver Lake Resources Limited Issue of options to employees under the Employee Share Option Plan Transfer from share option reserve due to lapse of options under Employee Share Option Plan At 30 June 2016 Attributable to equity holders of the entity Issued Capital $ Option Reserves $ Accumulated Losses $ Total Equity $ 26,718,899 2,973,818 (7,955,308) 21,737,409 - - - - - - - (7,829,674) (7,829,674) - - (7,829,674) (7,829,674) (115,113) 115,113 - 26,718,899 2,858,705 (15,669,869) 13,907,735 26,718,899 2,858,705 (15,669,869) 13,907,735 - - - 75,000 - - - - - - 14,798 (6,105,944) (6,105,944) - - (6,105,944) (6,105,944) - - 75,000 14,798 (2,809,000) 2,809,000 - 26,793,899 64,503 (18,966,813) 7,891,589 This Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes 24 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows For the year ended 30 June 2016 Notes 2016 $ 2015 $ Consolidated Cash flows from operating activities Payments to suppliers and employees Misappropriated funds Interest received Finance costs Research and development tax rebate received Net cash flows from/(used in) operating activities 24 Cash flows from investing activities Payments for property, plant & equipment Proceeds from sale of property, plant & equipment Payments for exploration activities Net cash flows from/(used in) investing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (693,811) 100,000 82,483 - 513,162 1,834 (2,468) 7,000 (1,668,545) (1,664,013) (1,662,179) 3,737,403 2,075,224 (926,233) (337,282) 153,920 (96) 895,575 (214,116) - - (2,187,940) (2,187,940) (2,402,056) 6,139,459 3,737,403 This Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes 25 Consolidated Statement of Cash Flows 25 Notes to the Consolidated Financial Statements For the year ended 30 June 2016 Standards (IFRS) as issued by the International Accounting Standards Board (IASB). 1. Corporate Information The consolidated financial report of Musgrave Minerals Limited for the year ended 30 June 2016 was authorised for issue in accordance with a resolution of the Directors on 22 September 2016. Musgrave Minerals Limited is a for profit company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange. New and amended accounting standards and interpretations adopted by the group The following standards and interpretations relevant to the operations of the Group and effective from 1 July 2015 have been adopted. The adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. The nature of the operation and principal activities of the • AASB 2013-9: Amendments to Australian Accounting consolidated entity are described in the attached Directors’ Standards – Conceptual Framework, Materiality and Report. Financial Instruments The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below and have been applied consistently to all periods presented in the consolidated financial statements and by all entities in the consolidated entity. 2. Statement of Compliance These general purpose financial statements have been • AASB 2015-3: Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031: Materiality New accounting standards and interpretations The following new and amended accounting standards and interpretations relevant to the operations of the Group have been published but are not mandatory for the current financial year. The Group has decided against early adoption prepared in accordance with Australian Accounting of these standards, and has not yet determined the potential Standards, other authoritative pronouncements of the impact on the financial statements from the adoption of these Australian Accounting Standards Board and the Corporations standards and interpretations. Act 2001. Compliance with IFRS The consolidated financial statements of Musgrave Minerals Limited also comply with International Financial Reporting The key new standards and interpretations which may impact the Group in future years are detailed right: 26 Notes to the Consolidated Financial Statements of financial assets and financial 1 Jan 2018 1 Jul 2018 New or revised requirement AASB 9: Financial Instruments AASB 9 replaces AASB 139: Financial Instruments: Recognition and Measurement. The objective of this Standard is to establish principles for the financial reporting liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. AASB 15: Revenue from Contracts with Customers The objective of this Standard is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. AASB 16: Leases This Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. This information gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of an entity. Application date of standard Application date for Group (a) Basis of measurement Historical Cost Convention These consolidated financial statements have been prepared under the historical cost convention, except where stated. Critical Accounting Estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed where appropriate. (b) Going Concern These consolidated financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. 1 Jan 2018 1 Jul 2018 (c) Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of the Company’s subsidiary at 30 June 2016 and the results of its subsidiary for the year then ended. The Company and its subsidiary together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its investment with the entity and has the 1 Jan 2019 1 Jul 2019 ability to affect those returns through its power to direct the activities of the entity. The acquisition method of accounting is used to account for business combinations by the Group. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. 27 Notes to the Consolidated Financial Statements 27 Intercompany transactions, balances and unrealised gains The estimates and underlying assumptions are reviewed on on transactions between Group companies are eliminated. an ongoing basis. Revisions are recognised in the period in Unrealised losses are also eliminated unless the transaction which the estimate is revised if it affects only that period, or provides evidence of an impairment of the transferred asset. in the period of the revision and future periods if the revision Accounting policies of subsidiaries have been changed where affects both current and future periods. necessary to ensure consistency with the policies adopted by the Group. Share-based payment transactions The Group measures the cost of equity-settled transactions Non-controlling interests in the results and equity of with employees by reference to the fair value of the equity subsidiaries are shown separately in the consolidated instruments at the date at which they are granted. The fair statement of profit or loss and other comprehensive value is determined using a Black-Scholes option pricing income, consolidated statement of financial position and the model. consolidated statement of changes in equity respectively. Joint arrangements Exploration and evaluation costs carried forward The Group’s accounting policy is detailed in Note 2(m). The Under AASB 11: Joint Arrangements investments in joint recoverability of the carrying amount of exploration and arrangements are classified as either joint operations or evaluation costs carried forward has been reviewed by the joint ventures. The classification depends on the contractual Directors at the reporting date. In conducting the review, the rights and obligations of each investor, rather than the legal Directors consider the requirements of AASB 6 and if any structure of the joint arrangement. impairment indicators are identified, the recoverable amount A joint operation is a joint arrangement whereby the parties less costs to sell”. Unrecoverable amounts are impaired and that have joint control of the arrangement have rights to recognised in profit or loss. is then assessed by reference to the higher of “fair value the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Those parties are called joint venturers. (d) Critical accounting judgements and key sources of estimation uncertainty The application of accounting policies requires the use of (e) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Musgrave Minerals Limited. judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions (f) Functional and presentation of currency The consolidated financial statements are presented in Australian dollars, which is the Group’s functional and are based on historical experience and other factors that are presentational currency. considered to be relevant. Actual results may differ from these estimates. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at 28 Notes to the Consolidated Financial Statements the dates of the transactions. Foreign exchange gains and which applicable tax regulation is subject to interpretation. losses resulting from the settlement of such transactions and It establishes provisions where appropriate on the basis of from the translation at year end exchange rates of monetary amounts expected to be paid to the tax authorities. assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred Deferred income tax is provided in full, using the liability in equity as qualifying cash flow hedges and qualifying net method, on temporary differences arising between the tax investment hedges or are attributable to part of the net bases of assets and liabilities and their carrying amounts in investment in a foreign operation. the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial Foreign exchange gains and losses that relate to borrowings recognition of goodwill. Deferred income tax is also not are presented in the statement of profit or loss and other accounted for if it arises from initial recognition of an asset comprehensive income, within finance costs. All other foreign or liability in a transaction other than a business combination exchange gains and losses are presented in the statement of that at the time of the transaction affects neither accounting profit or loss and other comprehensive income on a net basis nor taxable profit or loss. Deferred income tax is determined within other income or other expenses. using tax rates (and laws) that have been enacted or Non-monetary items that are measured at fair value in a are expected to apply when the related deferred income tax foreign currency are translated using the exchange rates at asset is realised or the deferred income tax liability is settled. substantially enacted by the end of the reporting period and the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are Deferred tax assets are recognised for deductible temporary reported as part of the fair value gain or loss. differences and unused tax losses only if it is probable that (g) Revenue recognition Revenue is measured at fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. Interest income is recognised as it accrues. (h) Income tax The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Musgrave Minerals Limited and its wholly-owned Australian controlled entity have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, 29 Notes to the Consolidated Financial Statements 29 the tax is also recognised in other comprehensive income or indicate that the carrying amount may not be recoverable. An directly in equity, respectively. impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Amounts receivable from the Australian Tax Office in respect to the research and development tax concession claims are The recoverable amount is the higher of an asset’s fair value recognised as an income tax benefit in the year in which the less costs to sell and value in use. For the purposes of claim is received from the Australian Tax Office. assessing impairment, assets are grouped at the lowest levels (i) Leases Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of are capitalised at the lease’s inception at the fair value of the each reporting period. leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long- term payables. (k) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of six months or Each lease payment is allocated between the liability and less that are readily convertible to known amounts of cash finance cost. The finance cost is charged to the profit or loss and which are subject to an insignificant risk of changes in over the lease period so as to produce a constant periodic value, and bank overdrafts. Bank overdrafts are shown within rate of interest on the remaining balance of the liability for borrowings in current liabilities on the statement of financial each period. The property, plant and equipment acquired position. under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. (l) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade Leases in which a significant portion of the risks and rewards receivables are due for settlement within 30 days. They are of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. Impairment of assets (j) Intangible assets that have an indefinite useful life are not presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts subject to amortisation and are tested annually for impairment due according to the original terms of the receivables. The or more frequently if events or changes in circumstances amount of the provision is the difference between the asset’s indicate that they might be impaired. Other assets are tested carrying amount and the present value of estimated future for impairment whenever events or changes in circumstances cash flows, discounted at the original effective interest rate. 30 Notes to the Consolidated Financial Statements Cash flows relating to short-term receivables are not When an area of interest is abandoned or the Directors decide discounted if the effect of discounting is immaterial. The that it is not commercial, any accumulated costs in respect of amount of the provision is recognised in the profit or loss. that area are written off in the financial period the decision is made. (m) Exploration and evaluation expenditure Exploration and evaluation expenditure, including the costs of acquiring licences and permits, are capitalised as exploration (n) Property, plant and equipment Property, plant and equipment is stated at historical cost and evaluation assets on an area of interest basis. Costs less accumulated depreciation. Historical cost includes incurred before the Group has obtained the legal rights to expenditure that is directly attributable to the acquisition of explore an area are recognised in the statement of profit or the items. The cost of self-constructed assets includes the loss and other comprehensive income. cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items Exploration and evaluation assets are only recognised if the and restoring the site on which they are located, and an rights of the area of interest are current and either: appropriate proportion of production overheads. (i) the expenditures are expected to be recouped through Where parts of an item of property, plant and equipment have successful development and exploitation or from sale of different useful lives, they are accounted for as separate items the area of interest; or of property, plant and equipment. (ii) activities in the area of interest have not at the reporting Subsequent costs are included in the asset’s carrying amount date reached a stage which permits a reasonable or recognised as a separate asset, as appropriate, only when assessment of the existence or otherwise of economically it is probable that future economic benefits associated with recoverable reserves, and active and significant operations the item will flow to the Group and the cost of the item can in, or in relation to, the area of interest are continuing. be measured reliably. The carrying amount of any component Exploration and evaluation assets are assessed for replaced. All other repairs and maintenance are charged to impairment if sufficient data exists to determine technical profit or loss during the reporting period in which they are accounted for as a separate asset is derecognised when feasibility and commercial viability, and facts and incurred. circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment Depreciation is calculated using the diminishing value and testing, exploration and evaluation assets are allocated to prime cost methods to allocate their cost, net of their residual cash-generating units to which the exploration activity relates. values, over their estimated useful lives, or in the case of The cash generating unit shall not be larger than the area of certain leased plant and equipment, the shorter lease term as interest. follows: Once the technical feasibility and commercial viability of the extraction of minerals in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mineral property and development assets within property, plant and equipment. • Motor vehicles 8 years • Office and computer equipment 1 – 10 years • Furniture, fittings and equipment 1 – 10 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. 31 Notes to the Consolidated Financial Statements 31 An asset’s carrying amount is written down immediately to its Other Long-term Obligations recoverable amount if the asset’s carrying amount is greater The liability for long service leave and annual leave which is than its estimated recoverable amount. not expected to be settled within 12 months after the end of Gains and losses on disposals are determined by comparing is, recognised in the provision for employee benefits and proceeds with the carrying amount. These are included in measured as the present value of expected future payments profit or loss. When re-valued assets are sold, it is Group to be made in respect of services provided by employees up policy to transfer any amounts included in other reserves in to the end of the reporting period using the projected unit respect of those assets to retained earnings. credit method. Consideration is given to expected future the period in which the employees render the related service (o) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and which are unpaid. The amounts are unsecured and are and currency that match, as closely as possible, the usually paid within 30 days of recognition. Trade and other estimated future cash outflows. payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. Share-Based Payments (p) Employee benefits Short–term Obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months after the end of the period in which the employees render the related service, are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee benefits. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. All other short-term employee benefit obligations are presented as payables. The obligations are presented as current liabilities in the statement of financial position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. The Group provides benefits to employees of the Company in the form of share options. The fair value of options granted is recognised as an employee benefits expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using a Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, on a straight line basis over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number that vest. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. Termination Benefits Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for 32 Notes to the Consolidated Financial Statements these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing (s) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is termination benefits as a result of an offer made to encourage recognised as part of the cost of acquisition of the asset or as voluntary redundancy. Benefits falling due more than 12 part of the expense. months after the end of the reporting period are discounted to present value. No termination benefits, other than accrued benefits and entitlements, were paid during the period. (q) Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. shown in equity as a deduction, net of tax, from the proceeds. Cash flows are presented on a gross basis. The GST (r) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing: • the profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares • by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and • the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (t) Financial assets Financial assets are classified as either financial assets at fair value through profit or loss, loans and receivables, held- to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace. 33 Notes to the Consolidated Financial Statements 33 3. Revenue and Expenses Consolidated 2016 $ 2015 $ (a) Revenue from operating activities (e) Other expenses Interest revenue Other Total revenue from operating activities (b) Employee benefits expense Wages, salaries, directors 73,972 2,520 149,521 27,915 76,492 177,436 Secretarial, professional and consultancy costs Forensic accounting costs Occupancy costs Share register maintenance Insurance costs fees and other remuneration 795,276 1,196,465 Promotion, advertising and expenses Superannuation contributions 72,118 87,104 Transfer to/(from) annual leave provision Transfer to/(from) long service leave provision (853) (90,698) 12,974 (11,528) sponsorship Audit fees Computer expense and software licencing Employer related on-costs Other expenses Consolidated 2016 $ 2015 $ 99,369 146,668 - 48,070 12,966 20,391 34,296 121,007 20,432 33,783 13,903 7,732 26,464 33,625 13,471 29,249 14,649 53,477 29,316 65,805 Share-based payments expense 14,798 - Total other expenses 302,760 521,913 Transfer to capitalised tenements (616,355) (821,224) Total employee benefits expense (c) Finance expense Finance costs Interest applied to hire purchase Total finance expense (d) Funds misappropriated 277,958 360,119 - - - 10 86 96 Reported in the Company’s 2015 Annual Report and disclosed in the Company’s announcement released to the ASX on 12 February 2015, investigations into a number of irregular transactions were undertaken by the Company in the previous financial year. The investigations concluded that the amount of funds involved in the irregular transactions was $468,772. $337,250 of these funds were misappropriated during the previous financial year. On 16 November 2015, the ex-employee was found guilty of stealing as a servant and received a custodial sentence. To date, the Company has managed to recover $136,043, with $100,000 being recovered this year. 4. Segment information The Group operates in one geographical segment, being Australia and in one operating category, being mineral exploration. Therefore, information reported to the chief operating decision maker (the Board of Musgrave Minerals Limited) for the purposes of resource allocation and performance assessment is focused on mineral exploration within Australia. The Board has considered the requirements of AASB 8: Operating Segments and the internal reports that are reviewed by the chief operation decision maker in allocating resources and have concluded at this time that there are no separately identifiable segments. 34 Notes to the Consolidated Financial Statements 5. Income Tax Major components of income tax expense are as follows: Consolidated 2016 $ 2015 $ Consolidated Statement of Profit or Loss and Other Comprehensive Income Current income tax - Current income tax charge - - - R&D tax concession (513,162) (895,575) Income tax expense / (benefit) reported in the Consolidated Statement of Profit or Loss and Other Comprehensive Income (513,162) (895,575) A reconciliation of income tax expense / (benefit) applicable to accounting profit / (loss) before income tax at the statutory income tax rate to income tax expense / (benefit) at the Company’s effective income tax is as follows: Accounting loss from continuing operations before income tax (6,619,106) (7,829,674) The Company and its 100% owned controlled entity have formed a tax consolidated group. The head entity of the tax consolidated group is Musgrave Minerals Limited. The tax consolidated group has potential revenue tax losses of $16,864,803 (2015: $15,674,230) and capital losses of $245,265. The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise benefits. The utilisation of tax losses is dependent on the Group satisfying the continuity of ownership test or the same business test at the time the tax losses are applied against taxable income. 6. Cash and cash equivalents Consolidated 2016 $ 2015 $ At the statutory income tax rate of 28.5% (2015: 30%) Add Immediate write off of capital expenditure (1,886,445) (2,348,902) Short-term deposits 1,950,000 2,272,000 2,075,224 3,737,403 Cash at bank and on hand 125,224 1,465,403 (518,990) (687,531) The weighted average interest rate for the year was 2.55% Expenditures not allowable for income tax purposes 1,815,879 2,294,772 (2015: 3.18%). Other deductible items (170,309) (65,811) The Group’s exposure to interest rate risk is set out in note Tax losses not recognised due to not meeting recognition criteria 759,865 (807,472) 22. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. In 2016, the government enacted a change in the income tax rate for small business entities from 30% to 28.5%. Musgrave Minerals Limited satisfies the criteria to be a small business entity. 35 Notes to the Consolidated Financial Statements 35 7. Trade and other receivables Current GST receivable Other Consolidated 2016 $ 2015 $ 31,512 12,000 43,512 45,098 2,060 47,158 The amounts held in trade and other receivables do not contain impaired assets and are not past due. Based on the credit history of these trade and other receivables, it is expected that these amounts will be received when due. The Group’s financial risk management objectives and policies are set out in note 22. Due to the short term nature of these receivables their carrying value is assumed to approximate their fair value. 8. Other current assets Prepayments Accrued income Consolidated 2016 $ - 12,588 12,588 2015 $ 8,420 21,100 29,520 9. Exploration and evaluation Opening balance Impairment expense Exploration expenditure incurred during the year Closing balance Consolidated 2016 $ 2015 $ 10,391,152 15,748,622 (6,191,926) (7,649,239) 1,821,019 2,291,769 6,020,245 10,391,152 The recoverability of the carrying amount of deferred exploration and evaluation expenditure is dependent on the successful development and commercial exploitation, or alternatively the sale, of the respective areas of interest. 10. Property, plant and equipment Plant and equipment - At cost - Acquisitions - Disposals Consolidated 2016 $ 2015 $ 224,344 248,576 2,468 - (12,262) (5,500) - Accumulated depreciation (203,684) (213,543) Total plant and equipment 10,866 29,533 Motor vehicles - At cost - Accumulated depreciation Total motor vehicles Total property, plant and equipment 166,545 (113,971) 52,574 63,440 166,545 (99,890) 66,655 96,188 Movement in carrying amounts Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the year: Plant and equipment Motor Vehicles Total $ $ $ 29,533 66,655 96,188 2016 Consolidated: Balance at the beginning of the year Acquisitions 2,468 - Depreciation expense (8,873) (14,081) Disposals (12,262) - 2,468 (22,954) (12,262) Carrying amount at the end of the year 10,866 52,574 63,440 36 Notes to the Consolidated Financial Statements Plant and equipment Motor Vehicles Total 14. Contributed equity 2015 Consolidated: Balance at the beginning of the year 52,378 83,346 135,724 Depreciation expense (17,345) (16,691) (34,036) Disposals (5,500) - (5,500) Carrying amount at the end of the year 29,533 66,655 96,188 11. Subsidiaries Details of the Company’s subsidiary are as follows: Principal Activity Country of Incorporation Proportion of Ownership 2016 2015 Exploration Australia 100% 100% Subsidiary Musgrave Exploration Pty Ltd 12. Trade and other payables Consolidated 2016 $ 2015 $ a) Share capital Ordinary shares fully paid 26,793,899 26,718,899 Consolidated Number $ b) Movements in ordinary shares on issue Balance at 1 July 2014 121,000,000 26,718,899 Balance at 30 June 2015 121,000,000 26,718,899 Issue of shares to Silver Lake Resources Limited 4,032,258 75,000 Balance at 30 June 2016 125,032,258 26,793,899 Ordinary shares have the right to receive dividends as declared, and in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid upon on shares held. Trade creditors Other payables 13. Provisions Consolidated Ordinary shares entitle their holder to one vote, either in 2016 $ 176,082 67,454 243,536 2015 $ 115,268 181,796 297,064 person or by proxy, at a meeting of the Company. c) Movements in options on issue Balance at beginning of the financial year Options granted Consolidated 2016 Number 2015 Number 15,975,000 17,025,000 1,725,000 - Consolidated 2016 $ 2015 $ Options expired / lapsed (15,500,000) (1,050,000) Balance at end of the financial year 2,200,000 15,975,000 Short-term Annual leave Long-term Long service leave 47,525 47,525 32,359 32,359 77,237 77,237 19,385 19,385 37 Notes to the Consolidated Financial Statements 37 15. Reserves Share option reserve Opening balance Issue of options to employees Consolidated 2016 $ 2015 $ 2,858,705 2,973,818 under the Employee Share Option 14,798 - Plan Transfer to accumulated losses from share option reserve due to lapse of options under Employee Share Option Plan Balance at the end of the financial year (2,809,000) (115,113) 64,503 2,858,705 The options reserve is used to recognise the fair value of options issued to employees and contractors. 16. Accumulated losses Balance at the beginning of the financial year (15,669,869) (7,955,308) Net loss attributable to members (6,105,944) (7,829,674) Consolidated 2016 $ 2015 $ Profits / (losses) used in calculating basic and diluted earnings per (6,105,944) (7,829,674) share 2016 Number 2015 Number Weighted average number of ordinary shares used in calculating 123,302,574 121,000,000 basic and diluted loss per share 18. Auditor’s remuneration Audit services Grant Thornton Audit Pty Ltd - Audit and review of the financial reports Consolidated 2016 $ 2015 $ 30,600 33,625 Total remuneration 30,600 33,625 19. Contingent assets and Transfer from share option reserve upon lapse of options Balance at the end of the financial year 2,809,000 115,113 liabilities (18,966,813) (15,669,869) The Group had contingent liabilities at 30 June 2016 in respect of : 17. Earnings per share - basic loss per share - diluted loss per share 2016 cents 2015 cents 4.95 4.95 6.47 6.47 The following reflects the income and share data used in the calculations of basic and diluted loss per share: Future royalty payments In November 2015, Musgrave entered into a Farm-In and Joint Venture Agreement (“Agreement”) with Silver Lake Resources Limited (“Silver Lake”) to earn up to an 80% interest in the Cue Project (previously part of Silver Lake’s Murchison Operation) consisting of the Moyagee Gold and 38 Notes to the Consolidated Financial Statements Hollandaire Copper Projects in the Murchison Province On 16 August 2016, the Company completed a placement of Western Australia. Should Musgrave ultimately earn an to raise $500,000 via the issue of 8,474,576 shares to interest in some of the tenements covered by this Agreement sophisticated and professional investors at an issue price of it may be subject to royalty payments on future gold 5.9 cents per share. production. The Group had contingent assets at 30 June 2016 in respect date which are sufficiently material to warrant disclosure. There have been no other events subsequent to reporting of: Future royalty payments In January 2014 the Group entered in to a Mining Farm-in 21. Commitments In order to maintain an interest in the exploration tenements in and Joint Venture Agreement (“Agreement”) with Menninnie which the Group is involved, the Group is committed to meet Metals Pty Ltd. In August 2015 the parties agreed to the conditions under which the tenements were granted. The terminate the Agreement (“Termination Agreement”). As timing and amount of exploration expenditure commitments part of the Termination Agreement the Group retains a 1% and obligations of the Group are subject to the minimum Net Smelter Return Royalty on all ores, concentrates or expenditure commitments required as per the Mining Act other primary, intermediate or final product of any minerals 1978 (Western Australia) and the Mining Act 1971 (South produced from two of the tenements. Australia), and may vary significantly from the forecast based There are no other material contingent assets or liabilities as the prospectivity of the relevant area of interest. Currently, upon the results of the work performed which will determine at 30 June 2016. 20. Events occurring after the reporting period On 4 July 2016, the Company announced that it had completed a placement to institutional and sophisticated investors of 12,711,864 shares at an issue price of 5.9 cents the minimum expenditure commitments for the granted tenements is $1,208,020 (2015: $461,000) per annum. Commitments in relation to the lease of office premises are payable as follows: per share to raise $750,000. The Company also announced a Within 1 year fully underwritten Share Purchase Plan (“SPP”). Later than one year but not later The SPP closed oversubscribed on 5 August 2016 with the Later than five years than five years Company receiving applications totalling $1,984,000. The Board of Directors elected to increase the original SPP target which had been set at $1,250,000 and accepted all valid applications from eligible shareholders. A total of 33,627,084 new shares were issued under the SPP at a price of 5.9 cents per share. Consolidated 2016 $ 2015 $ 12,000 12,000 - - - - 12,000 12,000 39 Notes to the Consolidated Financial Statements 39 22. Financial risk management objectives and policies Financial Risk Management Overview The Group has exposure to the following risks from their use of financial instruments: • Interest rate risk • Credit risk • Liquidity risk • Commodity risk This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group’s principal financial instruments are cash, short- term deposits, receivables and payables. Interest rate risk Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from fluctuations in interest bearing financial assets and liabilities that the Group uses. Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. It is the Group’s policy to settle trade payables within the credit terms allowed and therefore not incur interest on overdue balances. The following table set out the carrying amount, by maturity, of the financial instruments that are exposed to interest rate risk: Fixed interest rate maturing in Consolidated – 2016 Financial assets Floating Interest rate $ 1 Year or Less $ Over 1 to 5 years $ More than 5 years $ Non interest bearing $ Total $ Cash and cash equivalents 124,924 1,950,000 Trade and other receivables Weighted average interest rate Financial liabilities Trade and other payables Weighted average interest rate - 124,924 1.98% - 1,950,000 2.79% - - - - - - - - - - - - - - - - - - - - 300 43,512 43,812 - 243,536 243,536 - 2,075,224 43,512 2,118,736 - 243,536 243,536 - 40 Notes to the Consolidated Financial Statements Consolidated – 2015 Financial assets Fixed interest rate maturing in Floating Interest rate $ 1 Year or Less $ Over 1 to 5 years $ More than 5 years $ Non interest bearing $ Total $ Cash and cash equivalents 1,557,403 2,180,000 Trade and other receivables - - Weighted average interest rate 0.97% 3.14% 1,465,393 2,272,000 Financial liabilities Trade and other payables Weighted average interest rate - - - - - - - - - - - - - - - - - - - - - 3,737,403 47,158 47,158 - 297,064 297,064 - 47,158 3,784,561 - 297,064 297,064 - Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets or liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below: Consolidated - 2016 Financial assets Cash and cash equivalents Cash flow sensitivity (net) Consolidated - 2015 Financial assets Cash and cash equivalents Cash flow sensitivity (net) Carrying value at period end $ 2,075,224 Carrying value at period end $ 3,737,403 Profit or loss Equity 100 bp increase $ 100 bp decrease $ 100 bp increase $ 100 bp decrease $ 29,059 29,059 (29,059) (29,059) 29,059 29,059 (29,059) (29,059) Profit or loss Equity 100 bp increase $ 100 bp decrease $ 100 bp increase $ 100 bp decrease $ 65,320 65,320 (65,320) (65,320) 65,320 65,320 (65,320) (65,320) 41 Notes to the Consolidated Financial Statements 41 Credit risk Credit risk is the risk of financial loss to the Group if a Commodity price risk The Group’s exposure to commodity price risk is minimal at customer or counterparty to a financial instrument fails to this stage of its operations. meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. The Group trades only with recognised, creditworthy third parties. It is the Group policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when balances are monitored on an ongoing basis with the result due, under both normal and stressed conditions, without that the Group’s exposure to bad debts is not significant. The incurring unacceptable losses or risking damage to the maximum exposure to credit risk is the carrying value of the Group’s reputation. receivable, net of any provision for doubtful debts. The Group’s objective is to maintain a balance between continuity of funding and flexibility. The following are the contractual maturities of financial liabilities: With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. This risk is Consolidated - 2016 minimised by reviewing term deposit accounts from time to time with approved banks of a sufficient credit rating which is AA and above. Exposure to credit risk The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was: Consolidated 2016 $ 2015 $ Cash and cash equivalents 2,075,224 3,737,403 Trade & other receivables 43,512 47,158 2,118,736 3,784,561 Foreign currency risk The Group’s exposure to foreign currency risk is minimal at this stage of its operations. Trade and other payables Receivables Consolidated - 2015 Trade and other payables Receivables Carrying amount $ Contractual cash flows $ 6 months or less $ 243,536 243,536 43,512 43,512 - - - - 243,536 243,536 43,512 43,512 Carrying amount $ Contractual cash flows $ 6 months or less $ 297,064 297,064 47,158 47,158 - - - - 297,064 297,064 47,158 47,158 42 Notes to the Consolidated Financial Statements Fair value of financial assets and liabilities The fair value of cash and cash equivalents and non-interest bearing financial assets and financial liabilities of the Group is equal to their carrying value. Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The management of the Group’s capital is performed by the Board. The capital structure of the Group consists of net debt (trade payables and provisions detailed in notes 12 & 13 offset by cash and bank balances) and equity of the Group (comprising contributed equity and reserves, offset by accumulated losses detailed in notes 14, 15 & 16). 23. Share based payments Employee Share Option Plan The Group has an Employee Share Option Plan (“ESOP”) for executives and employees of the Group. In accordance with the provisions of the ESOP, as approved by shareholders at a previous Annual General Meeting, executives and employees may be granted options at the discretion of the Directors. Each share option converts into one ordinary share of Musgrave Minerals Limited on exercise. No amounts are paid or are payable by the recipient on receipt of the option. The options carry neither rights of dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Options issued to Directors are subject to approval by shareholders. The Group is not subject to any externally imposed capital requirements. None of the Group’s entities are subject to externally imposed capital requirements. The following share-based payment arrangements were in existence during the reporting period: Option series Number Grant date Expiry date Vesting date Exercise price B (1) C (1) E F H I J K (2) L M 4,750,000 2,500,000 175,000 500,000 300,000 200,000 250,000 500,000 75,000 700,000 17 Feb 2011 17 Feb 2016 17 Feb 2011 17 Feb 2016 24 Jan 2012 23 Jan 2017 6 Mar 2013 5 Mar 2018 11 Mar 2014 10 Mar 2019 16 Sep 2015 23 Jan 2017 16 Sep 2015 10 Mar 2019 16 Sep 2015 8 May 2016 16 Sep 2015 23 Mar 2018 22 Apr 2016 22 Apr 2021 Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate Immediate $0.36 $0.50 $0.50 $0.50 $0.12 $ 0.250 $ 0.120 $ 0.360 $ 0.250 $ 0.045 Fair value at grant date $0.1860 $0.1750 $0.0714 $0.0431 $0.0522 $0.0001 $0.0046 - $ 0.0010 $ 0.0194 (1) (2) These options expired during the financial year These options were issued and expired during the financial year 43 Notes to the Consolidated Financial Statements 43 Fair Value of Share Options Granted During the Year The fair value of share options at grant date are determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share and the risk free rate for the term of the option. The fair value of share options issued during the year was $14,798 (2015: $Nil). The model inputs for options granted during the year ended 30 June 2016 are as follows: Inputs Exercise Price Grant date Expiry date Share price at grant date Expected price volatility Expected dividend yield Risk-free interest rate Issue I $0.25 Issue J $0.12 Issue K $0.36 Issue L $0.25 Issue M $0.045 16 Sep 2015 16 Sep 2015 16 Sep 2015 16 Sep 2015 22 Apr 2016 23 Jan 2017 10 Mar 2019 8 May 2016 23 Mar 2018 22 Apr 2021 $0.022 81.63% 0% 1.92% $0.022 81.63% 0% 1.93% $0.022 81.63% 0% 1.92% $0.022 81.63% 0% 1.93% $0.025 119.96% 0% 2.21% Movements in share options during the year Movement in the number of share options held by Directors and employees: 2016 2015 No. of options Weighted average exercise price $ No. of options Weighted average exercise price $ Outstanding at the beginning of the year Granted and vested during the year Expired during the year Outstanding at the end of the year Exercisable at the end of the year 15,975,000 1,725,000 (15,500,000) 2,200,000 2,200,000 0.32 0.18 0.33 0.15 0.15 17,025,000 - (1,050,000) 15,975,000 15,975,000 0.32 - 0.27 0.32 0.32 The weighted average remaining contractual life of share options outstanding at the end of the year was 2.74 years (2015: 0.85 years). Share options outstanding at the end of the year Share options issued and outstanding at the end of the year have the following exercise prices: Expiry Date 17 February 2016 17 February 2016 19 April 2016 23 January 2017 5 March 2018 23 March 2018 10 March 2019 22 April 2021 44 Exercise price $ 2016 No. 2015 No. 0.36 0.50 0.25 0.25 0.25 0.25 0.12 0.045 - - - 375,000 500,000 75,000 550,000 700,000 2,200,000 4,750,000 2,500,000 7,750,000 175,000 500,000 - 300,000 - 15,975,000 Notes to the Consolidated Financial Statements 24. Reconciliation of cash flows from operating activities Cash flows from operating activities Loss for the period Non-cash flows in profit/(loss): - Depreciation - Impairment expense - Field related internal charges -Share based remuneration -(Gain) / Loss on sale of assets Changes in assets and liabilities -Decrease/(increase) in trade and other receivables -Decrease/(increase) in other current assets -Decrease/(increase) in interest receivable -Increase/(decrease) in trade and other payables -Increase/(decrease) in employee entitlements Net cash from/(used in)operating activities Non-cash investing and financing activities There were no non-cash investing and financing activities during the year. Consolidated 2016 $ 2015 $ (6,105,944) (7,829,674) 22,954 6,191,926 (66,289) 14,798 5,262 Consolidated 2016 $ 2015 $ 3,647 16,932 - (64,714) (16,738) 1,834 34,036 7,649,239 - - - 42,628 (8,420) 4,399 (20,957) (85,367) (214,116) 45 Notes to the Consolidated Financial Statements 45 25. Related party disclosure Class Country of incorporation Investment at cost 2016 $ Investment at cost 2015 $ a) Parent entity Musgrave Minerals Limited b) Subsidiaries Musgrave Exploration Pty Ltd c) Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments Ord Ord Australia Australia - 100 503,394 38,299 - 541,693 - 100 798,755 61,227 - 859,982 Detailed remuneration disclosures are provided in the Remuneration Report on pages 16 to 20. 26. Parent entity disclosure 2016 $ 2015 $ Financial Performance Profit / (loss) for the year (6,105,944) (7,829,674) Other comprehensive income - - Total comprehensive profit / (loss) ASSETS Current assets Non-current assets TOTAL ASSETS (6,105,944) (7,829,674) 2,131,324 3,814,081 6,083,685 10,487,340 8,215,009 14,301,421 LIABILITIES Current liabilities Non-current liabilities TOTAL LIABILITIES 2016 $ 2015 $ 291,061 32,359 323,420 374,301 19,385 393,686 NET ASSETS 7,891,589 13,907,735 EQUITY Contributed equity 26,793,899 26,718,899 Reserves 64,503 2,858,705 Accumulated losses (18,966,813) (15,669,869) TOTAL EQUITY 7,891,589 13,907,735 No guarantees have been entered into by Musgrave Minerals Limited in relation to the debts of its subsidiary. Musgrave Minerals Limited had no expenditure commitments as at 30 June 2016 other than the commitment in relation to the lease of office premises as disclosed in note 21. 46 Notes to the Consolidated Financial Statements Directors’ Declaration The Directors of Musgrave Minerals Limited declare that: (a) in the Directors’ opinion the financial statements and notes set out on pages 22 to 46 and the Remuneration Report in the Directors’ Report are in accordance with the Corporations Act 2001, including : (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance, for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), Corporations Regulations 2001 and mandatory professional reporting requirements. (b) the financial statements also comply with International Financial Reporting Standards as disclosed in note 2; and (c) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2016. Signed in accordance with a resolution of the Directors. Graham Ascough Chairman Perth, Western Australia 22 September 2016 47 Directors’ Declaration 47 Auditor’s Report 48 Auditor’s Report 49 Auditor’s Report 49 50 Auditor’s Report Additional Information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. This information is current as at 13 September 2016. 1. Quoted Securities on Issue ASX Code MGV Number of Holders Security Description 1,249 Ordinary Fully Paid Total Securities 180,045,782 2. Distribution Schedule Spread of Holdings - Ordinary Shares Shares Held 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Holders 21 29 184 688 327 1,249 Units 5,384 116,744 1,584,945 30,569,060 147,769,649 180,045,782 % of Issued Capital 0.003 0.065 0.880 16.978 82.074 100.000 3. Unmarketable Parcel There are 59 shareholders holding less than a marketable parcel of fully paid ordinary shares based on a price of $0.079 per share. 4. Substantial Shareholders Substantial shareholders (i.e. shareholders who hold 5% or more of the issued capital): Silver Lake Resources Limited Independence Group NL 5. Voting Rights (a) Ordinary Shares Number of shares Percentage held 9,548,387 9,027,000 5.30 5.01 Each shareholder is entitled to receive notice of and attend and vote at general meetings of the Company. At a general meeting, every shareholder present in person or by proxy, representative of attorney will have one vote on a show of hands and on a poll, one vote for each share held. (b) Options No voting rights. 51 Additional Information 51 6. On-Market Buy Back There is no current on-market buy back. 7. Unquoted Equity Securities Options exercisable at $0.25 on or before 23 January 2017 Options exercisable at $0.25 on or before 5 March 2018 Options exercisable at $0.25 on or before 23 March 2018 Options exercisable at $0.12 on or before 10 March 2019 Options exercisable at $0.045 on or before 22 April 2021 Number on issue Number of holders 375,000 500,000 75,000 550,000 500,000 3 1 1 6 2 8. Twenty Largest Holders of Quoted Ordinary Shares Shareholder SILVER LAKE RESOURCES LIMITED / INTEGRA MINING LIMITED INDEPENDENCE GROUP NL ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD BARRICK (AUSTRALIA PACIFIC) LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED ALLISE PTY LTD FORSYTH BARR CUSTODIANS LTDACN 609 249 194 PTY LTD CAZNA (OXFORD 1) LIMITED + CAZNA (OXFORD 2) LIMITED RISHON HOLDINGS PTY LTD MS SHAN KUANG MR JACOBUS GERARDUS DE JONG COMO INVESTMENTS PTY LTD PERSHING AUSTRALIA NOMINEES PTY LTD AMALGAMATED DAIRIES LIMITED HIPETE PTY LIMITED MR MATTHEW ANTHONY JOHNSON MR VINCENT YONG SENG LIO + MRS PATRICE ANNE LIO PAMPLONA NOMINEES PTY LTD Number of shares Percentage held 9,548,387 9,027,000 7,064,887 6,000,000 3,366,245 3,043,972 2,854,237 2,539,587 2,500,000 1,540,000 1,489,883 1,329,729 1,279,237 1,131,246 1,018,154 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 5.30 5.01 3.92 3.33 1.87 1.69 1.59 1.41 1.39 0.86 0.83 0.74 0.71 0.63 0.57 0.56 0.56 0.56 0.56 0.56 58,732,564 32.62 52 Additional Information 9. Tenement Schedule Project / Tenement Musgrave Project EL4850 EL5175 (formerly EL3955) Corunna Project EL5497 Mamba Project E28/2405 Cue Project E20/606 E20/608 E20/616 E20/630 E20/659 E20/836 E21/144 E20/629 E20/698 E20/699 E20/700 E20/779 E21/129 E21/163 E21/177 E58/335 M20/225 M20/245 M20/277 M21/106 M21/107 M58/224 M58/225 P20/2038 P20/2039 P20/2040 P20/2041 P20/2042 P20/2094 P20/2219 L20/57 E58/507 Location Status Interest South Australia South Australia Western Australia Western Australia Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted 100% 100% 100% 100% 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 0% (MGV earning up to 80%) 100% MGV 53 Tenement Schedule 53 28 Richardson Street, West Perth, WA 6005 Telephone: +61 (8) 9324 1061 Facsimile: +61 (8) 9324 1014 Email: Web: info@musgraveminerals.com.au www.musgraveminerals.com.au ABN 12 143 890 671