Musgrave Minerals Limited Annual Report 2019

Plain-text annual report

ABN 12 143 890 671 Gound Floor, 5 Ord 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 A N N U A L R E P O R T 2 0 1 9 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 Ground Floor, 5 Ord Street West Perth, WA 6005 Telephone: +61 (8) 9324 1061 Facsimile: +61 (8) 9324 1014 Email: info@musgraveminerals.com.au Web: www.musgraveminerals.com.au AUDITOR BDO Audit (WA) PTY LTD 38 Station Street Subiaco, WA 6008 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: +61 (8) 9323 2000 Facsimile: +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 Musgrave Minerals Ltd (“Musgrave” or “the Company”) (ASX: MGV) is an Australian resources company focused on gold exploration and development at the Cue Project in the Murchison Province of Western Australia. A description of the Company’s operations and principal activities is included in the Review of Operations and the Directors’ Report. CONTENTS CORPORATE DIRECTORY CHAIRMAN’S LETTER REVIEW OF OPERATIONS TENEMENT SCHEDULE DIRECTORS’ REPORT Cover photos: West Core diamond drilling, A Zone, Lake Austin North AUDITOR’S INDEPENDENCE DECLARATION FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT ADDITIONAL INFORMATION IFC 2 3 14 15 24 25 52 53 57 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 1 CHAIRMAN’S LETTER On behalf of the Board of Directors, it is my pleasure to present the 2019 Annual Report for Musgrave Minerals Limited (“Musgrave” or “Company”). The Company’s focus continues to be on the Cue Project (“Cue”) in the well-endowed, gold producing Murchison region of Western Australia where our main objective is to signiﬁcantly grow our gold resources through extensional and greenﬁeld exploration drilling. Exploration success continued through 2019, the main highlight being the discovery of extensive gold mineralisation under transported cover at Lake Austin North. The potential of Lake Austin North is highlighted by drill intersections received to date, such as 242m @ 1.0g/t Au, including 45m @ 3.3g/t Au (see ASX announcement 3 December 2018, “Diamond Drilling Conﬁrms Signiﬁcant Gold Discovery at Lake Austin North” ). There is still a lot of work to be completed at Lake Austin as our 2019 drilling campaign identiﬁed basement gold mineralisation over a strike extent of more than 500m and this large gold zone is still open along strike and at depth. Also, the Lake Austin North discovery is within a more than 3km long, regolith gold anomaly and regional aircore drilling has identiﬁed a broad zone of more than 8km in combined strike of basement gold targets that require follow-up basement drill testing. This large exploration program will require signiﬁcant long term funding but we remain conﬁdent that Lake Austin has the potential for further discoveries and is host to a signiﬁcant gold system. In March 2019, The Company entered an option agreement to acquire 100% of the non-alluvial gold rights to the Mainland Project in the Cue region. Mainland lies along strike, to the north of Lake Austin and produced signiﬁcant quantities of alluvial gold over the years but has only seen very limited basement drilling. At the Lena deposit to the south of Lake Austin, the team identiﬁed several high-grade shoots that have the potential to signiﬁcantly grow the gold resource beyond the current JORC estimate. Drilling at both Mainland and Lena commenced in the new ﬁnancial year and both prospects are delivering excellent, early results. Given the ongoing drilling success at Cue, the current resource ﬁgure of 440koz of gold is expected to grow. As stated above, Cue is located in the gold producing Murchison region of Western Australia, a region that is host to four operating gold plants including Westgold’s Tuckabianna plant. At the end of the last ﬁnancial year Musgrave and Westgold agreed to a non-binding Term Sheet that provided the scope on which a formal Mine Management and Proﬁt Sharing Agreement could be negotiated. Although these negotiations did not lead to a formal agreement, the Company continues to advance its internal optimisation and development studies to assist in forecasting production goals and potential development pathways for the project. In the meantime, Musgrave will continue to look at funding options to capitalise on the exploration upside and accelerate drilling programs across a range of high priority targets including Mainland, Lena and Lake Austin North, with the aim of making further high-grade gold discoveries that could support a stand-alone operation or alternatively be mined in partnership with an existing local producer. The Company completed a capital raising in December 2018 to raise $5.5M through a share placement to institutional and sophisticated investors. The Placement attracted several new investors to the Company and was supported by many existing shareholders. I would like to take this opportunity, on behalf of the Board, to thank all our Shareholders for their ongoing support. I would also like to thank the staff, management, contractors and my fellow directors for their ongoing efforts. We are committed to progressing the Company by advancing targets towards discovery and development through corporate deals, high- quality exploration and technical studies for the beneﬁt of all Musgrave shareholders. Graham Ascough Chairman Aircore Drilling - Lake Austin PAGE 2 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 REVIEW OF OPERATIONS Musgrave Minerals Ltd (“Musgrave” or “the Company”) (ASX:MGV) is an Australian resources company focused on gold exploration and development at the Cue Project in the Murchison Province of Western Australia. Exploration activities for the ﬁnancial year have been focused on gold exploration at Cue. The Company has had signiﬁcant exploration success during the year with the discovery of high grade gold under transported cover at Lake Austin North. Musgrave has an estimated 440koz of gold in resources on the Cue Project and completed more than 30,000m of drilling during the year. The total Indicated and Inferred JORC Mineral Resources on the project are; 4.83 Mt @ 2.84g/t Au for 440,000 ounces of gold (see ASX announcement 15 October 2018, “Annual Report”). The Break of Day and Lena Mineral Resource estimates are being used as the basis for in-house near term development studies. Musgrave’s intent is to secure exploration ﬁnance, grow the resource base and develop a low-cost operation to enable the Company to self-fund exploration and growth through continuous discovery. 2019 was a successful year for Musgrave, with a very positive and extensive lake drilling campaign, the discovery of gold mineralisation at Lake Austin North and the divestment of the base metal interests on our northern Cue tenements. Our focus continues to be on the Cue Project (“Cue”) which is located in the well-endowed, gold producing Murchison region of Western Australia. The Company will look to de-risk our funding requirements and expanding our gold resources through extensional and new greenﬁeld exploration drilling at Cue. Exceptional hits such as 242m @ 1.0g/t Au, including 45m @ 3.3g/t Au (see ASX announcement 3 December 2018, “Diamond Drilling Conﬁrms Signiﬁcant Gold Discovery at Lake Austin North”) have highlighted the potential of the Lake Austin North area with basement gold mineralisation now conﬁrmed over a strike extent of more than 500m where it is still open along strike and at depth. The Lake Austin North prospect is within a 3km long regolith gold anomaly which is still largely untested. Regional aircore drilling on Lake Austin has identiﬁed more than 8km of basement gold targets within multiple zones of strong regolith gold anomalism that require follow-up basement drill testing. Secure long term funding will be required to fully test the gold potential of these new under cover targets. At Lena, the team has identiﬁed a number of high- grade shoots that have the potential to signiﬁcantly grow the gold resource beyond the current resource estimate. An analysis of historical data has highlighted a number of intercepts below the existing resource including, 6.0m @ 31.1g/t Au (MGDD3) and 6.2m @ 18.6g/t Au (MGDD2) (see ASX announcement 12 July 2019, “Opportunity to Extend Lena High- Grade Resource at Cue”). A drilling program has commenced to test these new target zones with positive results returned in early drilling. Figure 1 Musgrave Minerals’ Project Location Map Musgrave also has tenement applications in the Musgrave Geological Province of South Australia (Figure 1). Corporate During the year, Musgrave spent $6.0 million on exploration activities. In March 2019, Musgrave entered into an option agreement to acquire 100% of the non-alluvial gold rights to the Mainland Project in the Cue region. The Mainland area has seen very limited basement drilling but produced signiﬁcant quantities of alluvial gold over the years. Drilling has commenced at Mainland with encouraging early drill results. Musgrave successfully completed a capital raising in December 2018 to raise $5.5M through a share placement to institutional and sophisticated investors. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 3 REVIEW OF OPERATIONS In February 2019 the Company executed a Binding Term Sheet with Cyprium Australia Pty Ltd (“Cyprium”) regarding an option, earn-in and joint venture on the non-gold rights over the northern tenements at the Cue Project in Western Australia’s Murchison region. Cyprium made an initial payment of $10,000 for an exclusive 90-day option period and on 31 May 2019 exercised the option to earn an 80% interest by the payment to the Company of $250,000 worth of shares in ARC Exploration Limited (subsequently renamed Cyprium Metals Limited ASX:CYM). Cyprium is required to spend $2 million on exploration within two years to complete the acquisition of the 80% interest. Musgrave will retain a 20% free-carried interest to the completion of a deﬁnitive feasibility study. In May 2018 Musgrave and Westgold agreed to a non-binding Term Sheet that provided the scope on which a formal Mine Management and Proﬁt Sharing Agreement could be negotiated. Although these negotiations did not lead to a formal agreement, the Company continues to advance its internal optimisation and development studies to assist in deﬁning a development pathway for the project. Musgrave will continue to maximise its exploration strengths and accelerate drilling across high priority targets including Mainland, Lena, Break of Day and Lake Austin North, with the aim of making further high-grade gold discoveries that could support a stand-alone operation or alternatively be mined in partnership with an existing producer. During the year the Company continued to reﬁne its exploration portfolio, applying for additional tenements in the Cue region and divesting the Corunna Project in South Australia. After the sale of its Fraser Range tenements in February 2017, Musgrave holds 10 million shares and 10 million unlisted options in Legend Mining Limited, currently valued at approximately $350,000. The Company successfully secured an Exploration Incentive Scheme (“EIS”) co-funded drilling grant of $150,000 for the Cue Project to drill test gold targets in 2019-20 on Lake Austin. Events since the end of the ﬁnancial year On 17 September 2019 Musgrave announced that it had entered into an Earn-In and Joint Venture Exploration Agreement with Evolution Mining Limited over a select area of Lake Austin and surrounds (JV Area) of the Cue Project in the Murchison District of Western Australia. The JV Area excludes all the known resources including Lena and Break of Day and the Mainland option area. Evolution can earn a 75% interest in the JV Area by sole funding A$18 million on exploration over a ﬁve year term with a minimum commitment of A$4 million in the ﬁrst two years. Musgrave will manage the JV during the initial period. As part of the Agreement, Evolution has agreed to subscribe for 18,587,361 ordinary shares in Musgrave through a share placement (“Placement”) at a price of $0.0807 per share. The placement was set at the 30-day VWAP for Musgrave shares and represents a holding of 4.59% (undiluted) in the Company. 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 operations, the results of those operations, or the state of affairs of the Group in future ﬁnancial years. Exploration Activities Musgrave continued its successful exploration at Cue with a new gold discovery at Lake Austin North (Figure 2) where encouraging basement gold mineralisation was intersected over a strike extent of more than 500m, below a regolith (weathered rock) gold halo that extends for a strike length of more than 3km. This broader target area remains untested with further basement drilling set to continue in early 2020. Managing Director, Rob Waugh viewing RC drill chips PAGE 4 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 REVIEW OF OPERATIONS Diamond Drilling – A Zone, Lake Austin North Signiﬁcant intercepts include thick moderate grade gold zones with higher grade cores:   242m @ 1.0g/t Au (18MODD008), incl o 45m @ 3.3g/t Au   94m @ 2.2g/t Au (18MORC057), incl o o 52m @ 3.8g/t Au, incl 29m @ 5.1g/t Au   84m @1.7g/t Au (18MORC039), incl o o 36m @ 3.6g/t Au, incl 20m @ 6.1g/t Au (see MGV ASX releases dated 31/08/2018, 8/10/2018, 29/10/2018, 31/10/2018 and 3/12/2018) Drilling results from the new Lake Austin North target continue to be encouraging with more than 8km of strike of basement targets now identiﬁed, supporting our belief that there is a large gold system buried beneath the salt lake. Options to fund this large scale ongoing salt lake exploration are currently being considered (see MGV ASX release dated 20/08/2019). An initial drill program has been completed at the newly acquired Mainland Project with high-grade gold intersected at Consols (3m @ 5.4g/t Au) where it remains open. At Lena, a reassessment of historical drilling data has highlighted a 500m long high-grade gold shoot with signiﬁcant down plunge potential. Follow-up drilling has commenced returning highly encouraging ﬁrst assay results including 4m @ 13.1g/t Au (see MGV ASX release 20 August 2019, “High-Grade Gold Intersected at Lena and Mainland, Cue Project”). Drilling is continuing. Figure 2: Southern Cue, Prospect Location Map with Targets “The broad drilling intercepts, geological context, shear zone and alteration support the Company’s view that the Lake Austin North prospect demonstrates the potential for a large gold system.” A signiﬁcant exploration program is planned for the coming year with the objective to grow the resource base and progress development studies to deﬁne a clear path to gold production. Murchison Gold Focus Musgrave continued to sharpen its focus on gold in the Murchison with the acquisition of the Mainland Project in February 2019 and the divestment of the non-gold rights to the northern Cue tenure (Figure 3) to Cyprium Australia Pty Ltd. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 5 REVIEW OF OPERATIONS Lake Austin North, with the aim of expanding the current resources and making further high-grade gold discoveries that could support a stand-alone operation or alternatively be mined in partnership with an existing producer. There are six gold plants within the district (Figure 4) and the Great Northern Highway runs within 3km of the existing Cue gold resources. Figure 3: Cue prospect locations and tenure Development Options Following the expiry of the non-binding Term Sheet with Westgold, the Company has focussed on internal studies to optimise and assist in forecasting production goals and potential development pathways for the Cue project. Musgrave has been granted a 5C water extraction licence, and is progressing mine permitting at Break of Day and Lena. Musgrave will continue to maximise its exploration strengths and accelerate drilling across high priority targets including Mainland, Lena, Break of Day and Regional Drilling - Lake Austin Figure 4: Cue Project location and local gold processing infrastructure (Gold plants not owned or operated by Musgrave) “Pursuing multiple development opportunities from partnering with an existing producer to defining a stand-alone operation will provide development flexibility for the Company.” Lena and Break of Day The Lena deposit has a JORC 2012 resource of 2,682kT @ 1.77g/t Au for 153koz Au (see MGV ASX release 15 October 2018, “Annual Report”) which is only estimated to a maximum vertical depth of 160m on Lena Main lode (Figure 5) and more shallowly on the peripheral lodes. PAGE 6 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 REVIEW OF OPERATIONS The Lena deposit consists of a number of gold lodes, with some having signiﬁcant high-grade depth potential. Interpretation of historical drill data has identiﬁed a 500m-long, high-grade southerly plunging shoot on the main Lena lode that remains open at depth below the current JORC resource. A number of historical high-grade diamond drill intercepts lie within this interpreted extension of the high-grade gold lode (Figure 6) including:       3.1m @ 16.9g/t Au from 304.5m down hole (MGDD1) including; o 1.0m @ 46.5g/t Au from 304.5m down hole 6.2m @ 18.6g/t Au from 372.2m down hole (MGDD2) 6.0m @ 31.1g/t Au from 354.8m down hole (MGDD3) including; o 0.6m @ 206.0g/t Au from 358.9m down hole 3.0m @ 25.2g/t Au from 364.9m down hole (MGDD9) 4.3m @ 14.1g/t Au from 367.9m down hole (MGDD12) 2.0m @ 82.0g/t Au from 220.0m down hole (MGDD21) (see MGV ASX release 12 July 2019, “Opportunity to Extend Lena High-Grade Resource at Cue”) The majority of this historical drilling was undertaken by Perilya in the 1990’s. These intercepts were not incorporated in the most recent resource estimate due to the broad nature of the drill hole spacing. An inﬁll drilling program has commenced at Lena with the goal of signiﬁcantly growing the resource. The current program will consist of a combination of RC (pre-collars) and diamond drilling to better deﬁne and inﬁll this high-grade gold shoot below the existing resource. The aim of the program is to improve the geological conﬁdence and demonstrate continuity of the mineralisation by reducing the drill spacing to enable an upgrade of the Lena resource estimate. “The upside at Lena is significant with drilling confirming high-grade gold mineralisation below the existing resource that remains open down plunge.” Initial Lena follow-up drill results have been encouraging with intercepts including:   1m @ 25.7g/t Au from 110m down hole which is approximately 50m vertically beneath the existing resource on the Eastern lode, and 24m @ 3.2g/t Au from 140m down hole including; o 4m @ 13.1g/t Au from 151m approximately 5m below the existing resource on the Main Lena lode (Figure 5 and 6) (see MGV ASX release 20 August 2019, “High-Grade Gold Intersected at Lena and Mainland, Cue Project”) Figure 5: Lena schematic long section showing combined lodes and planned holes. A long section is a vertical section along the plane of the strike of the deposit MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 7 REVIEW OF OPERATIONS The mineralisation is open at depth on all lodes. Mainland Following the execution of an Option Agreement to acquire the Mainland tenements near Cue (Figure 2) in March 2019, the Company completed an initial RC drilling program to test three high-priority targets (Figure 7) in late June 2019. The drilling was successful returning 3m @ 5.4g/t Au from 74m down hole (19MORC008) (see MGV ASX release 20 August 2019, “High-Grade Gold Intersected at Lena and Mainland, Cue Project”). The intercept is in the western most drill hole and is open to the west and at depth. The initial targets drill tested at Mainland relate to a series of historical workings with limited historical drill testing. The Mainland Prospect area covers the northern extension of the shear corridor that hosts Musgrave’s Break of Day and Lena gold deposits and the Lake Austin North prospect (Figure 2). Mainland has a long history of alluvial (historical and recent) and high-grade basement gold production Figure 6: Cross section 13675N at Lena showing drilling. A cross section is a vertical plane sliced perpendicular to the interpreted strike of the mineralisation Figure 7: Mainland Prospect showing targets, and maiden drilling results. PAGE 8 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 REVIEW OF OPERATIONS Signiﬁcant basement intercepts include:  242m @ 1.0g/t Au (18MODD008), incl; o 45m @ 3.3g/t Au  94m @ 2.2g/t Au (18MORC057), incl; o o 52m @ 3.8g/t Au, incl; 29m @ 5.1g/t Au  84m @1.7g/t Au (18MORC039), incl; o o 36m @ 3.6g/t Au, incl; 20m @ 6.1g/t Au  43.9m @ 2.0g/t Au (19MODD013) incl; o 18.0m @ 3.5g/t Au  93.0m @ 1.3g/t Au (19MODD008) incl; o o 8.9m @ 4.3g/t Au and 7.1m @ 4.3g/t Au (see MGV ASX releases dated 31/08/2018, 8/10/2018, 29/10/2018, 31/10/2018 and 3/12/2018, 29/03/2019 and 1/05/2019) Lake Austin - Regional As part of a signiﬁcant focus on Lake Austin during the year, Musgrave completed a regional aircore drilling program to obtain geological and geochemical information to integrate with new detailed geophysical data to provide vectors to focus basement drilling and make new gold discoveries. In addition to the extensive Lake Austin North A-Zone target, multiple zones of anomalous regolith gold have also been identiﬁed sub-parallel to the A-Zone, many of which have an individual strike of more than 1km (Figures 8 and 9) and are all yet to be tested with basement drilling. Some are still open and further drilling is required to deﬁne their limits. The combined basement strike potential of the Lake Austin North system is now over 8km with only ~500m of this potential tested with basement drilling to date. This equates to approximately 6% of the basement target zone tested to date, highlighting the signiﬁcant upside potential of this gold system, which will require signiﬁcant long term funding to properly test. Many of the aircore drill holes terminated in mineralisation highlighting the possible proximity to basement gold mineralisation and the necessity for further drill testing. A detailed regional aeromagnetic survey covering the entire package of southern Cue tenements has recently been completed and is currently being processed and integrated into the targeting model to prioritise zones for further drilling. View South through old circa 1900 building, Mainland area, Cue dating back to circa 1900, with signiﬁcant untested basement gold potential. Multiple new targets have been generated for drill testing during a larger phase two drilling program scheduled to commence in the December 2019 quarter. Historical records indicate that the main underground mines at Mainland produced 20,148oz gold from 1897-1901 and 1925-1930 at an average grade of 69.2g/t Au *. *Source: de la Hunty, L.E. (1970). Explanatory Notes on the Cue 1:250,000 Geological Sheet, Western Australia. Geological Survey of Western Australia, Record 1970/7, Table 1. Lake Austin North During the year the Company made the signiﬁcant discovery of broad intervals of basement gold mineralisation at Lake Austin North. Aircore drilling has extended the Lake Austin North A-Zone gold target, located approximately 3km north of Break of Day/Lena to a strike of over 3km where it is still open to the north and south (Figure 8). This extensive gold regolith ‘halo’ follows the tonalite-maﬁc contact along a major shear zone, the Lena-Break of Day shear corridor. Only ~500m of the A-Zone basement target has been drilled to date leaving a large, prospective 2.5km zone, as yet untested with basement drilling, below the transported cover. The geological model for A-Zone is continuing to develop with the mineralisation characterised by high-strain (typically higher grade gold) zones surrounded by crackle breccia zones (typically lower grade gold) (Figure 10). MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 9 REVIEW OF OPERATIONS Aircore drilling is a reconnaissance exploration technique used to better deﬁne basement geology below the lake cover and provides a direct detection geochemical tool to deﬁne areas of gold anomalism for follow-up basement drilling at depth. The aircore technique can only effectively drill to the top of fresh rock through the lake clays and oxidised rock that is the Archaean regolith. Low-grade aircore results can provide a geochemical indication of higher- grade mineralisation in the basement beneath as is commonly seen throughout the Western Australian Yilgarn region. Figure 8: Plan showing A-Zone target at Lake Austin North Signiﬁcant assay results from the aircore program include:   50m @ 1.1g/t Au from 114m down hole (19MOAC173)   28m @ 1.17g/t Au from 114m down hole (19MOAC172)   7m @ 1.06g/t Au from 129m down hole (19MOAC109)   5m @ 1.89g/t Au from 70m down hole (19MOAC094)   15m @ 0.52g/t Au from 72m down hole (19MOAC088) Figure 9: Regional drill location plan showing aircore gold anomalism   9m @ 0.54g/t Au from 105m down hole to EOH (19MOAC087) Other Projects   7m @ 0.47g/t Au from 124m down hole (19MOAC067) (see MGV ASX release 28 May 2019, “Scout Drilling Extends Gold Zone to >3km at Lake Austin North”) Musgrave currently holds tenement applications in the central Musgrave province of South Australia. No ﬁeld activity was completed by Musgrave on these tenements during the period. PAGE 10 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 REVIEW OF OPERATIONS Lake Austin North Drill Core, Cue - 19MODD004 Figure 10: Cross section 6939200mN at Lake Austin North, A Zone target with current drilling – Note: Drill holes 18MOAC075 and 18MOAC108 are projected onto the east-west cross section (a cross-section is a vertical section perpendicular to the line of mineralisation) Chief Geologist, Glenn Martin and Non-Executive Director John Percival inspecting core at Lake Austin North MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 11 REVIEW OF OPERATIONS Table 1: Summary of JORC Resources and Reserves for the Cue Project Mineral Resources Gold Mineral Resources as at 30 June 2019 Deposit Moyagee Break of Day Lena Leviticus Numbers SUBTOTAL Eelya Hollandaire Rapier South SUBTOTAL Tuckabianna Jasper Queen Gilt Edge SUBTOTAL Indicated Resources Inferred Resources Total Resources Tonnes ‘000s Au g/t oz. Au ‘000s Tonnes ‘000s Au g/t oz. Au ‘000s Tonnes ‘000s Au g/t oz. Au ‘000s 445 1,288 – – 1,733 473 473 – – – 7.73 1.69 – – 3.24 1.4 1.4 – – – 111 70 – – 181 21 21 – – – 423 1,394 42 278 2,137 45 171 216 175 96 271 6.54 1.85 6.0 2.5 2.94 1.1 2.2 1.9 2.6 3.1 2.8 89 83 8 22 202 2 12 13 15 9 24 868 2,682 42 278 3,870 518 171 689 175 96 271 7.15 1.77 6.00 2.46 3.07 1.35 2.15 1.55 2.60 3.06 2.8 2.84 199 153 8 22 382 22 12 34 15 9 24 441 TOTAL 2,206 2.84 202 2,623 2.84 239 4,830 Copper Mineral Resources as at 30 June 2019 (1) Deposit Hollandaire Copper Indicated Resources Grade % Tonnes ‘000s Tonnes Cu ‘000s Inferred Resources Grade % Tonnes ‘000s Tonnes Cu ‘000s Total Resources Grade % Tonnes ‘000s Tonnes Cu ‘000s 1,891 2.0 38 122 1.4 2 2,013 2.0 40 Silver Mineral Resources as at 30 June 2019 (1) Deposit Hollandaire Silver Ore Reserves Indicated Resources Grade g/t Tonnes ‘000s oz. Au ‘000s Inferred Resources Grade g/t Tonnes ‘000s oz. Au ‘000s Total Resources Grade g/t Tonnes ‘000s oz. Au ‘000s 1,925 6.3 390 728 4.7 110 2,653 5.9 500 Copper Ore Reserves as at 30 June 2019 (1) Deposit Hollandaire Copper Proven Reserves Grade % Tonnes ‘000s Tonnes Cu ‘000s Probable Reserves Grade % Tonnes ‘000s Tonnes Cu ‘000s Total Reserves Grade % Tonnes ‘000s Tonnes Cu ‘000s – – – 442 3.3 15 442 3.3 15 Silver Ore Reserves as at 30 June 2019 (1) Deposit Hollandaire Silver Proven Reserves Grade g/t Tonnes ‘000s oz. Au ‘000s Probable Reserves Grade g/t Tonnes ‘000s oz. Au ‘000s Total Reserves Grade g/t Tonnes ‘000s oz. Au ‘000s – – – 574 8.2 151 574 8.2 151 * Due to effects of rounding, the total may not represent the sum of all components. PAGE 12 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 REVIEW OF OPERATIONS (1) Notes to Table 1 The Break of Day and Lena Mineral Resources at Moyagee are reported in accordance with the 2012 Edition of the Australian Code of Reporting of Mineral Resources and Ore Reserves (JORC 2012). The remaining Mineral Resources and Ore Reserve estimates were ﬁrst prepared and disclosed in accordance with the 2004 Edition of the Australian Code of Reporting of Mineral Resources and Ore Reserves (JORC 2004) and have not been updated since to comply with JORC 2012 on the basis that the information has not materially changed since it was last reported. For further details refer to Musgrave Minerals Ltd (MGV) ASX announcement 14 July 2017, “Resource Estimate Exceeds 350koz Gold” and Silver Lake Resources Limited (SLR) ASX Announcement 26 August 2016, “Mineral Resources and Ore Reserves Update”. (1) On 19 February 2019, Musgrave entered into a binding Term Sheet with Cyprium Australia Pty Ltd regarding an option to earn-in and joint venture on the non-gold rights over the northern Cue tenure including Hollandaire. Mineral Resources and Ore Reserves The information in this report that relates to Mineral Resources at Break of Day and Lena is based on information compiled by Mr Aaron Meakin. Mr Meakin is a full-time employee of CSA Global Pty Ltd and is a Member of the Australasian Institute of Mining and Metallurgy. Mr Meakin has sufﬁcient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Persons as deﬁned in the 2012 edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). Mr Meakin consents to the disclosure of the information in this report in the form and context in which it appears. The information in this report that relates to the Hollandaire, Rapier South, Jasper Queen, Gilt Edge, Leviticus and Numbers Mineral Resource and Ore Reserve estimates is extracted from the report created by Silver Lake Resources Limited entitled “Mineral Resources and Ore Reserves Update”, 26 August 2016 and is available to view on Silver Lake’s website (www. silverlakeresources.com.au) and the ASX (www.asx.com.au). The Company conﬁrms that it is not aware of any new information or data that materially effects the information included in the original market announcement and, in the case of estimates of Minerals Resources and Ore Reserves that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company conﬁrms that the form and context in which the Competent Person’s ﬁndings are presented, have not been materially modiﬁed from the original market announcement. Exploration Results The information in this presentation that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled and thoroughly reviewed by Mr Robert Waugh. Mr Waugh is a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM) and a Member of the Australian Institute of Geoscientists (MAIG). Mr Waugh is Managing Director of Musgrave Minerals Ltd. Mr Waugh has sufﬁcient industry experience to qualify as a Competent Person as deﬁned in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Waugh consents to the inclusion in the report of the matters based on the information in the form and context in which it appears. Forward Looking Statements This document may contain certain forward-looking statements. Forward-looking statements include, but are not limited to statements concerning Musgrave Minerals Limited’s (Musgrave’s) current expectations, estimates and projections about the industry in which Musgrave operates, and beliefs and assumptions regarding Musgrave’s future performance. When used in this document, words such as “anticipate”, “could”, “plan”, “estimate”, “expects”, “seeks”, “intends”, “may”, “potential”, “should”, and similar expressions are forward-looking statements. Although Musgrave believes that its expectations reﬂected in these forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the control of Musgrave and no assurance can be given that actual results will be consistent with these forward-looking statements. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 13 TENEMENT SCHEDULE Tenement Schedule as at 19 September 2019 Project / Tenement Location Status Interest Cue Project Western Australia E20/606 E20/608 E20/616 E20/629 E20/630 E20/659 E20/698 E20/699 E20/700 E20/836 E21/129 E21/144 E21/177 E21/194 E21/200 E21/204 E21/207 E21/208 E58/335 E59/507 M20/225 M20/245 M20/277 M21/106 M21/107 M58/224 M58/225 P20/2279 P21/0757 P58/1709 P59/1710 L20/57 P21/731 P21/732 P21/735 P21/736 P21/737 P21/739 P21/741 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 Granted Granted Granted 100% (Cyprium Option) 100% (Cyprium Option) 100% (Cyprium Option) 100% (Cyprium Option) 100% (Cyprium Option) 90% (Cyprium Option) 100% (Cyprium Option) 100% (Cyprium Option) 100% (Cyprium Option) 100% (Cyprium Option) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (Cyprium Option) 100% (Cyprium Option) 100% (Cyprium Option) 100% 100% 100% 100% 100% (Cyprium Option) 100% 100% 100% 100% Earning 100% (Mainland Option) Earning 100% (Mainland Option) Earning 100% (Mainland Option) Earning 100% (Mainland Option) Earning 100% (Mainland Option) Earning 100% (Mainland Option) Earning 100% (Mainland Option) PAGE 14 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 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 2019. DIRECTORS The following persons were Directors of the Company during the whole of the ﬁnancial year and up to the date of this report:  Mr Graham Ascough, Non-Executive Chairman  Mr Robert Waugh, Managing Director  Ms Kelly Ross, Non-Executive Director  Mr John Percival, Non-Executive Director PRINCIPAL ACTIVITIES During the year, the principal continuing activities of the Group consisted of:     exploration of mineral tenements, both on a joint venture basis and by the Group in its own right, with the intent to progress to development in the near to mid-term; development studies on existing resources; continuing to seek extensions of areas held and to seek out new areas with mineral potential; and evaluating results received 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 2019 was $1,329,040 (2018: $189,475). 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. 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 Report. FINANCIAL Exploration and evaluation costs totalling $336,589 (2018: $41,108) were impaired during the year. The impaired exploration and evaluation costs primarily comprise previously capitalised costs in relation to the Company’s Corunna Project (EL5497) in South Australia. As at 30 June 2019, the Group had net assets of $20,092,444 (2018: $16,086,195) including cash and cash equivalents of $3,543,732 (2018: $5,230,122). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Signiﬁcant changes in the state of affairs of the Group during the ﬁnancial year were as follows: Exploration continues to be a major focus for the Company with exceptional drilling results at the Cue Project as discussed in the Review of Operations section of this report. On 19 December 2018, the Company completed a placement to corporate, institutional, professional and sophisticated investors of 59,782,609 ordinary shares at an issue price of 9.2 cents per share raising $5,500,000 before costs. In February 2019, the Company executed a Binding Term Sheet with Cyprium Australia Pty Ltd (“Cyprium”) regarding an option, earn-in and joint venture on the non-gold rights over the northern tenements at the Cue Project in Western Australia’s Murchison region. Cyprium made an initial payment of $10,000 for an exclusive 90-day option period and on 31 May 2019 exercised the option to earn an 80% interest by the payment to the Company of $250,000 worth of shares in ARC Exploration Limited (subsequently renamed Cyprium Metals Limited (ASX:CYM)). Cyprium is required to spend $2 million on exploration within two years to acquire the 80% interest. Musgrave will retain a 20% free-carried interest to the completion of a deﬁnitive feasibility study. In March 2019, the Company entered into an Option Agreement (“Agreement”) to acquire the non-alluvial gold rights to the Mainland Project which is located within the boundaries of the Company’s Cue Gold Project. Musgrave paid $125,000 for a 100% interest in the tenements (excluding the vendor’s interest in alluvial gold) with a further $100,000 due within 18 months and an additional $300,000 to be paid as milestone payments in Musgrave shares or cash (at the Company’s discretion) before the fourth anniversary of the Agreement. The vendor will be entitled to a 1% gross royalty on any gold produced by the Company from the tenements (excluding any alluvial gold). In March 2019, the non-binding Term Sheet with Westgold Resources Limited to explore the potential proﬁt sharing development of Lena and Break of Day expired. Westgold remains a substantial shareholder. There were no other signiﬁcant changes in the state of affairs of the Group during the ﬁnancial year. EVENTS SINCE THE END OF THE FINANCIAL YEAR On 17 September 2019 Musgrave announced that it had entered into an Earn-In and Joint Venture Exploration Agreement with Evolution Mining Limited over a select area of Lake Austin and MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 15 DIRECTORS’ REPORT surrounds (JV Area) of the Cue Project in the Murchison District of Western Australia. The JV Area excludes all the known resources including Lena and Break of Day and the Mainland option area. Evolution can earn a 75% interest in the JV Area by sole funding A$18 million on exploration over a ﬁve year term with a minimum commitment of A$4 million in the ﬁrst two years. Musgrave will manage the JV during the initial period. As part of the Agreement, Evolution has agreed to subscribe for 18,587,361 ordinary shares in Musgrave through a share placement (“Placement”) at a price of $0.0807 per share. The placement was set at the 30-day VWAP for Musgrave shares and represents a holding of 4.59% (undiluted) in the Company. 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 operations, the results of those operations, or the state of affairs of the Group in future ﬁnancial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Directors are not aware of any developments that might have a signiﬁcant effect on the operations of the Group in subsequent ﬁnancial years not already disclosed in this report. 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, Industry Regulation and Safety (Western Australia) and the Department of State Development (South Australia). 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 2019. However, reporting requirements may change in the future. INFORMATION ON DIRECTORS 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 30 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 Australasian Institute of Mining and Metallurgy (“AusIMM”) and is a Professional Geoscientist of Ontario, Canada. Other current directorships PNX Metals Ltd (appointed 10 December 2012) Sunstone Metals Ltd (formerly Avalon Minerals Ltd) (appointed 29 November 2013) Former directorships in last three years Mithril Resources Ltd (appointed 9 October 2006 – ceased 15 May 2019) Special responsibilities Chair of the Board Member of the Audit Committee Interests in shares and options 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. Ordinary shares – Musgrave Minerals Limited Unlisted options – Musgrave Minerals Limited 1,091,172 3,000,000 Greenhouse gas and energy data reporting requirements The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 PAGE 16 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 DIRECTORS’ REPORT 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 (“WMC”) 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 and BHP Billiton Exploration Ltd. Mr Waugh has extensive exploration and mining experience in a range of commodities including gold, nickel, copper, 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 AusIMM and a Member of the Australian Institute of Geoscientists. 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. Mrs Ross was a senior accountant at Resolute Ltd from 1987 to 2000 during which time Resolute became a gold producer in Ghana, Tanzania and at several mines in Western Australia. Mrs Ross was the Company Secretary of Independence Group NL (“IGO”) for 10 years from 2001 to 2011. IGO listed on the ASX in 2002 and commenced mining at the Long Nickel Mine during that year. Mrs Ross was a Director of IGO for 12 years from 2002 to 2014. Mrs Ross retired from the Board of IGO on 24 December 2014. Mrs Ross was appointed a Director of Musgrave Minerals on 26 May 2010 and is the Chairman of the Audit Committee. Other current directorships Other current directorships None Yandal Resources Ltd (appointed 6 April 2018) Former directorships in last three years Former directorships in last three years None Special responsibilities Managing Director Interests in shares and options Ordinary shares – Musgrave Minerals Limited Unlisted options – Musgrave Minerals Limited None Special responsibilities Chair of the Audit Committee Interests in shares and options 1,717,172 6,100,000 Ordinary shares – Musgrave Minerals Limited Unlisted options – Musgrave Minerals Limited 181,492 2,000,000 Challenge Drilling (Mainland) MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 17 DIRECTORS’ REPORT Mr John Percival (Non-Executive Director), Director since 26 May 2010 Experience and expertise John 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 was an Executive Director from 2000 to 2014. In May 2014, Goldsearch changed direction and Mr Percival resigned his executive position. Other current directorships None Former directorships in last three years Zoono Group Limited (formerly Goldsearch Ltd) (resigned 26 April 2017) Special responsibilities Member of the Audit Committee Interests in shares and options Ordinary shares – Musgrave Minerals Limited Unlisted options – Musgrave Minerals Limited 694,559 2,000,000 COMPANY SECRETARY Mrs Patricia (Trish) Farr, GradCertProfAcc, GradDipACG, FGIA, FCIS, GAICD appointed 30 June 2015 Trish Farr is an experienced Chartered Secretary with over 20 years’ experience in the exploration and mining industry in the areas of corporate governance, compliance and administration. Mrs Farr has provided company secretarial services to several ASX listed and unlisted companies having previously been 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 a fellow 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 numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2019, and the numbers of meetings attended by each Director were: Board of Directors Audit Committee A 9 10 10 10 B 10 10 10 10 A 2 B 2 n/a n/a 2 2 2 2 Graham Ascough Robert Waugh Kelly Ross John Percival A Number of meetings attended. B Number of meetings held during the time the Director held ofﬁce or was a member of the committee during the year. 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 2019 Annual General Meeting. REMUNERATION REPORT (AUDITED) The Directors present the Musgrave Minerals Limited 2019 Remuneration Report, outlining key aspects of the Company’s remuneration policy and framework, and remuneration awarded this year. The report contains the following sections: a) Key management personnel 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 2018 Annual General Meeting g) Details of remuneration h) Service agreements i) j) Details of share-based compensation and bonuses Equity instruments held by key management personnel k) Loans to key management personnel l) Other transactions with key management personnel. PAGE 18 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 DIRECTORS’ REPORT a) Key management personnel covered in this   acceptable to shareholders. report Non-Executive and Executive Directors (see pages 16 to 18 for details about each director) Name Name Graham Ascough Non-Executive Chairman Robert Waugh Managing Director Kelly Ross Non-Executive Director John Percival Non-Executive Director 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:     the over-arching executive remuneration framework; 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 2001 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 was sought during the period ended 30 June 2019. c) Executive remuneration policy and framework In determining executive remuneration, the Board aims to ensure that remuneration practices are:     competitive and reasonable, enabling the Company to attract and retain key talent; aligned to the Company’s strategic and business objectives and the creation of shareholder value;   transparent and easily understood; and 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 comparable information from industry sectors and other listed 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 Non-Executive 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 Non-Executive 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 it believes is in the best interests of building shareholder wealth. The Board believes participation in the Company’s Employee Share Option Plan motivates and aligns key management and executives with the long-term interests of shareholders. 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 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 fees for chairing or participating on Board MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 19 DIRECTORS’ REPORT committees. Board members are allocated superannuation guarantee contributions as required by law, and do not receive any other retirement beneﬁts. From time to time, some individuals may choose to sacriﬁce their salary or consulting fees to increase payments towards superannuation. 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. f) Voting and comments made at the Company’s 2018 Annual General Meeting Musgrave Minerals Limited received more than 98% of “yes” votes on its remuneration report for the 2018 ﬁnancial year. The Company did not receive any speciﬁc feedback at the Annual General Meeting or throughout the year on its remuneration practices. g) Details of remuneration The following table shows details of the remuneration received by the Group’s key management personnel for the current and previous ﬁnancial year. Short-term employment beneﬁts Post- employment beneﬁts Share- based payments Salary & fees $ Bonus $ Non- monetary Beneﬁt $ Super- annuation $ Options $ Total $ Options % Perf Related % 2019 Directors G Ascough R Waugh K Ross J Percival TOTALS 2018 Directors G Ascough R Waugh K Ross J Percival TOTALS 65,000 – 275,433 54,415 (1) – – 54,415 45,000 45,000 430,433 65,000 268,716 45,000 45,000 423,716 – – – – – – – – – – – – – – – – 31,336 4,275 4,275 39,886 – 25,528 4,275 4,275 34,078 75,878 151,755 50,585 50,585 328,803 140,878 512,939 99,860 99,860 853,537 32,670 65,340 21,780 21,780 141,570 97,670 359,584 71,055 71,055 599,364 53.9 29.6 50.7 50.7 33.4 18.2 30.7 30.7 – 10.6 – – – – – – (1) Discovery bonus for Lake Austin North discovery. 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 compensation relevant to the ofﬁce of Director. Remuneration 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 an Executive Services Agreement. Under the agreement the Company agrees to employ Mr Waugh as Managing Director of the Company with a base salary of $275,433 plus statutory superannuation. Either party may terminate the employment contract without cause by providing six months written notice or by making payment in lieu of notice (in the case of the Company), based on the annual salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct, the Company can terminate employment at any time. PAGE 20 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 DIRECTORS’ REPORT i) Details of share-based compensation and bonuses Options Options over ordinary shares in Musgrave Minerals Limited are granted under the Employee Share Option Plan (“ESOP”). Participation in the ESOP and any vesting criteria are at the Board’s discretion and no individual has a contractual right to participate in the scheme or to receive any guaranteed beneﬁts. Any options issued to Directors of the Company are subject to shareholder approval. Options issued to Directors in the 2019 ﬁnancial year were approved by shareholders at the 2018 Annual General Meeting. The terms and conditions of each grant of options affecting remuneration in the current or future reporting periods are set out below. Option series Issue date Vesting and exercise date Expiry date S T 21 Nov 2018 21 Nov 2018 16 Nov 2021 30 Nov 2018 30 Nov 2018 16 Nov 2021 Exercise price $0.1275 $0.1275 Value per option at grant date $0.0506 $0.0506 % Vested 100% 100% 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 share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Further information on the fair value of share options and assumptions is set out in Note 23 to the ﬁnancial statements. Bonus During the year the Board awarded a Discovery Bonus to the Managing Director of 20% of base salary and to staff and contractors of 10% or 20% of base salary. The bonus was in recognition of the successful discovery of gold mineralisation at Lake Austin North. 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 by key management personnel of the Group, including their close family members and entities related to them. Options 2019 Directors Opening balance at 1 July Granted as remuneration Options exercised Balance at 30 June Net change (other) Vested but not exercisable Vested and exercisable Vested during the year G Ascough 1,500,000 R Waugh 3,100,000 K Ross 1,000,000 J Percival 1,000,000 TOTAL 6,600,000 1,500,000 3,000,000 1,000,000 1,000,000 6,500,000 – – – – – – 3,000,000 – 6,100,000 – 2,000,000 – 2,000,000 – 13,100,000 – – – – 3,000,000 1,500,000 6,100,000 3,000,000 2,000,000 1,000,000 2,000,000 1,000,000 – 13,100,000 6,500,000 During the year, no ordinary shares in the Company were provided as a result of the exercise of remuneration options. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 21 DIRECTORS’ REPORT Shareholdings 2019 Directors G Ascough R Waugh K Ross J Percival TOTAL Opening balance at 1 July 1,091,172 1,457,172 181,492 694,559 3,424,395 Granted as remuneration Options exercised Net change (other) Balance at 30 June – – – – – – – – – – – 260,000 – – 1,091,172 1,717,172 181,492 694,559 260,000 3,684,395 k) Loans to key management personnel There were no loans to individuals or any key management personnel during the ﬁnancial year or the previous ﬁnancial year. 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. END OF REMUNERATION REPORT (AUDITED) SHARES UNDER OPTION Unissued ordinary shares of the Company under option at the date of this report are as follows: Date options issued Expiry date Issue price of shares Number under option 22 April 2016 4 November 2016 4 November 2016 29 November 2017 7 December 2017 21 November 2018 30 November 2018 22 April 2021 3 November 2019 3 November 2021 29 November 2020 29 November 2020 16 November 2021 16 November 2021 $0.045 $0.167 $0.195 $0.097 $0.097 $0.1275 $0.1275 500,000 2,550,000 800,000 3,250,000 2,250,000 7,500,000 2,950,000 No option holder has any right under the options to participate in any other share issue of the Company or any other entity. 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. TOTAL: 19,800,000 CORPORATE GOVERNANCE STATEMENT The Company’s 2019 Corporate Governance Statement has been released as a separate document and is located on the Company’s website at http://www.musgraveminerals.com.au/corporate-governance. 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. PAGE 22 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 DIRECTORS’ REPORT 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 the auditor’s expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditors BDO Audit (WA) Pty Ltd and Grant 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 2019 no fees were paid or were payable for non-audit services provided by the auditors of the consolidated entity (2018: $Nil). AUDITOR’S INDEPENDENCE DECLARATION A 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. Graham Ascough Chairman Perth, 19 September 2019 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 23 AUDITOR’S INDEPENDENCE DECLARATION Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF MUSGRAVE MINERALS LIMITED As lead auditor of Musgrave Minerals Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Musgrave Minerals Limited and the entity it controlled during the period. Glyn O'Brien Director BDO Audit (WA) Pty Ltd Perth, 19 September 2019 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. PAGE 24 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 Revenue from continuing operations Other income Employee beneﬁts expense Depreciation expense Impairment expense Other expenses Change in fair value of derivate ﬁnancial instruments CONSOLIDATED Notes 3(a) 3(a) 3(b) 10 3(c) 9(a) 2019 $ 108,996 260,000 (676,034) (25,747) (336,589) (335,666) (324,000) 2018 $ 66,077 15,493 (370,660) (13,080) (41,108) (390,323) 418,000 Loss from continuing operations before income tax Income tax beneﬁt (1,329,040) 5 – (315,601) 126,126 Loss after income tax for the period attributable to the owners of Musgrave Minerals Limited (1,329,040) (189,475) Other comprehensive income/(loss) Items that will not be reclassiﬁed to proﬁt or loss Change in fair value of ﬁnancial assets at fair value through OCI 9(b) (354,425) 470,000 Other comprehensive income/(loss) for the period (net of tax) (354,425) 470,000 Total comprehensive proﬁt/(loss) for the period attributable to the owners of Musgrave Minerals Limited Proﬁt/(loss) per share attributable to the owners of Musgrave Minerals Limited Basic loss per share Diluted loss per share (1,683,465) Cents per share 280,525 Cents per share 17 17 0.37 0.37 0.07 0.07 The Consolidated Statement of Proﬁt or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 MUSMUMUSGRAGRAGRAVE VE VV MIMMINERNERALALSLSSAL LLTLTLTLTLTD D DD ANNANNNNUALUALUALU RERERERER PORPORPORPORPO TTTTT T 20120120122012 9 9 99 PAGE 25 PAGE 25 E EE 252525 PAGPAGPAGP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other current assets Derivate ﬁnancial instruments Total Current Assets Non-Current Assets Financial assets at fair value through other comprehensive income Property, plant and equipment Exploration and evaluation Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Provisions Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY CONSOLIDATED Notes 2019 $ 2018 $ 6 7 8 9(a) 9(b) 10 12 13 14 15 16 3,543,732 5,230,122 133,758 21,211 131,000 114,650 14,611 455,000 3,829,701 5,814,383 505,575 74,948 15,976,794 16,557,317 610,000 45,493 10,256,138 10,911,631 20,387,018 16,726,014 177,614 116,960 294,574 530,869 108,950 639,819 294,574 639,819 20,092,444 16,086,195 44,592,770 1,128,652 39,436,729 971,276 (25,628,978) (24,321,810) 20,092,444 16,086,195 The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. PAGE 26 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 ATTRIBUTABLE TO EQUITY HOLDERS OF THE ENTITY Issued Capital $ Options Reserve $ Financial Asset Reserve $ Accumulated Losses $ Total Equity $ At 1 July 2017 32,646,322 303,494 16,789 (24,190,900) 8,775,705 Total comprehensive loss for the period Other comprehensive income Proﬁt/(loss) after income tax for the period (net of tax) Transactions with owners in their capacity as owners: – – – Issue of shares 7,010,050 Transaction costs of issuing shares Transfer from share option reserve: - Due to exercise of options - Due to expiry of options - Issue of options (219,643) – – – (36,938) (21,627) 239,558 – (189,475) (189,475) 470,000 – 470,000 470,000 (189,475) 280,525 – – – – – – – 7,010,050 (219,643) 36,938 21,627 – – – 239,558 At 30 June 2018 39,436,729 484,487 486,789 (24,321,810) 16,086,195 At 1 July 2018 39,436,729 484,487 486,789 (24,321,810) 16,086,195 Total comprehensive loss for the period Other comprehensive loss Loss after income tax for the period (net of tax) Transactions with owners in their capacity as owners: – – – Issue of shares 5,500,000 Transaction costs of issuing shares Transfer from share option reserve: - Due to expiry of options - Issue of options (343,959) – – (21,872) 533,673 – (1,329,040) (1,329,040) (354,425) – (354,425) (354,425) (1,329,040) (1,683,465) – – – – – – 5,500,000 (343,959) 21,872 – – 533,673 – – – – – – – – – – At 30 June 2019 44,592,770 996,288 132,364 (25,628,978) 20,092,444 The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 27 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Interest received Research and development tax rebate received CONSOLIDATED Notes 2019 $ (743,881) 102,396 – 2018 $ (539,570) 61,773 362,491 NET CASH FLOWS USED IN OPERATING ACTIVITIES 24 (641,485) (115,306) NET CASH FLOWS USED IN INVESTING ACTIVITIES Payments for property, plant and equipment Payments for tenements Proceeds from sale of non-gold rights Payments for exploration activities 10 3(a) (55,202) (125,000) 10,000 (9,763) (1,500,000) – (6,030,744) (3,480,531) NET CASH FLOWS USED IN INVESTING ACTIVITIES (6,200,946) (4,990,294) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from exercise of options Share issue costs NET CASH FLOWS FROM FINANCING ACTIVITIES Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period 14(b) 5,500,000 – 14(b) (343,959) 5,156,041 (1,686,390) 5,230,122 6,977,000 18,000 (219,643) 6,775,357 1,669,757 3,560,365 CASH AND CASH EQUIVALENTS AT END OF PERIOD 6 3,543,732 5,230,122 The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. PAGE 28 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1 CORPORATE INFORMATION The consolidated ﬁnancial report of Musgrave Minerals Limited for the year ended 30 June 2019 was authorised for issue in accordance with a resolution of the Directors on 19 September 2019. Musgrave Minerals Limited is a for proﬁt company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange. The nature of the operation and principal activities of the consolidated entity are described in the attached Directors’ Report. 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 prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Compliance with IFRS The consolidated ﬁnancial statements of Musgrave Minerals Limited also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). New and amended accounting standards and interpretations adopted by the Group The following standards relevant to the operations of the Group and effective from 1 July 2018 have been adopted.    AASB 9: Financial Instruments; AASB 15: Revenue from Contracts with Customers; and AASB 2016-5: Amendments to Australian Accounting Standards - Classiﬁcation and Measurement of Share-based Payment Transactions. The adoption of these Accounting Standards and Interpretations did not have any signiﬁcant impact on the ﬁnancial performance or position of the Group. Details of each standards’ impact, and the new accounting policies adopted are set out below. Impact of adoption of AASB 9: Financial Instruments (“AASB 9”) AASB 9 replaces the provisions of AASB 139: Financial Instruments: Measurement and Recognition, that relate to the recognition, classiﬁcation and measurement of ﬁnancial assets and ﬁnancial liabilities, derecognition of ﬁnancial instruments, impairment of ﬁnancial assets and hedge accounting. The adoption of AASB 9 resulted in minimal changes in accounting policies. The new accounting policies are set out in Notes 7 and 9. There was no signiﬁcant impact on the ﬁnancial performance or position of the Group on the date of initial application, 1 July 2018, or at the reporting date, 30 June 2019. Details are below. Classiﬁcation and measurement of ﬁnancial assets On the date of initial application, 1 July 2018, the ﬁnancial instruments of the Group were as follows, with any reclassiﬁcations noted. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 2 STATEMENT OF COMPLIANCE CONTINUED Measurement category Carrying amount Original (AASB 139) New (AASB 9) Original $ New $ Difference $ Current ﬁnancial assets Trade and other receivables Derivative ﬁnancial instruments Amortised cost Amortised cost 114,650 114,650 Fair value through proﬁt or loss (“FVPL”) Fair value through proﬁt or loss (“FVPL”) 455,000 455,000 Non-current ﬁnancial assets Listed equities Available–for–sale 610,000 610,000 Fair value through other comprehensive income (“FVOCI”) – – – The Group elected to present in other comprehensive income changes in the fair value of all its listed equities previously classiﬁed as available-for-sale. As a result, listed equities with a fair value of $610,000 were reclassiﬁed from available-for-sale recognised under non-current available-for-sale ﬁnancial assets to ﬁnancial assets at FVOCI on 1 July 2018. Impairment of trade and other receivables Prior to the adoption of AASB 9, in accordance with AASB 139 Financial Instruments: Measurement and Recognition, the Group applied an incurred credit loss model. Upon adoption of AASB 9, the Group has elected to apply the simpliﬁed approach to measuring expected credit losses, which uses the lifetime expected loss allowance for all trade and other receivables. Due to the nature of the Group’s trade and other receivables, there was no impact of the expected loss allowance under AASB 9 against the loss incurred under AASB 139 to the Group. Impact of adoption of AASB 15: Revenue from Contracts with Customers (“AASB 15”) AASB 15 replaces AASB 118 Revenue. AASB 15 provides a single, principles based ﬁve step model to be applied to all contracts with customers. The adoption of AASB 15 resulted in minimal changes in accounting policies. The new accounting policies are set out in Note 3. There was no impact on the ﬁnancial performance or position of the Group on the date of initial application, 1 July 2018, or at reporting date, 30 June 2019. 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 of these standards and has not yet determined the potential impact on the ﬁnancial statements from the adoption of these standards and interpretations. PAGE 30 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 2 STATEMENT OF COMPLIANCE CONTINUED The key new standards which may impact the Group in future years are detailed below: New or revised requirement AASB 16: Leases Application date of standard Application date for Group 1 Jan 2019 1 Jul 2019 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. The entity is yet to undertake a detailed assessment of the impact of AASB 16. However, based on the entity’s preliminary assessment, the Standard is expected to have an impact on the transactions and balances recognised in the ﬁnancial statements when it is ﬁrst adopted for the year ending 30 June 2020. 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. c) Principles of consolidation Subsidiaries The consolidated ﬁnancial statements incorporate the assets and liabilities of the Company’s subsidiary at 30 June 2019 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 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. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 2 STATEMENT OF COMPLIANCE CONTINUED Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated Statement of Proﬁt or Loss and Other Comprehensive Income, consolidated statement of ﬁnancial position and the consolidated statement of changes in equity respectively. d) Critical accounting judgements and key sources of estimation uncertainty The application of accounting policies requires the use of judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. e) Functional and presentation currency The consolidated ﬁnancial statements are presented in Australian dollars, which is the Group’s functional and presentational currency. f) 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 are capitalised at the lease’s inception at the fair value of the 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. Each lease payment is allocated between the liability and ﬁnance cost. The ﬁnance cost is charged to the proﬁt or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired 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. Leases in which a signiﬁcant portion of the risks and rewards 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. g) 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 recognised as part of the cost of acquisition of the asset or as part of the expense. 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. Cash ﬂows are presented on a gross basis. The GST 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. PAGE 32 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 3 REVENUE AND EXPENSES a) Revenue and other income Revenue from continuing operations Interest revenue Other Income Option fee and shares - Cyprium Metals Limited (i) Other Total revenue and other income CONSOLIDATED 2019 $ 2018 $ 108,996 66,077 260,000 – 260,000 368,996 – 15,493 15,493 81,570 (i) In February 2019, the Company executed a Binding Term Sheet with Cyprium Australia Pty Ltd (“Cyprium”) regarding an option, earn-in and joint venture on the non-gold rights over the northern tenements at the Cue Project in Western Australia’s Murchison region. Cyprium made an initial payment of $10,000 for an exclusive 90-day option period and on 31 May 2019 exercised the option to earn an 80% interest by the payment to the Company of $250,000 worth of shares in ARC Exploration Limited (subsequently renamed Cyprium Metals Limited ASX:CYM). Revenue is recognised at an amount that reﬂects the consideration to which the Group expects to be entitled to in exchange for transferring services to a customer. Revenue and expenses are recognised on an accruals basis. Interest income is recognised on a time proportion basis using the effective interest method. b) Employee beneﬁts expense Wages, salaries, directors’ fees and other remuneration expenses Superannuation contributions Transfer to/(from) annual leave provision Transfer to/(from) long service leave provision Share-based payments expense (Note 23) Transfer to capitalised exploration expenditure Total employee beneﬁts expense c) Other expenses Secretarial, professional and consultancy costs Occupancy costs Share register maintenance ASX / ASIC Promotion, advertising and sponsorship Employer related on-costs Other expenses Transfer to capitalised exploration expenditure Total other expenses CONSOLIDATED 2019 $ 1,382,360 125,149 (10,290) 18,300 533,673 (1,373,158) 676,034 2018 $ 993,426 88,848 5,025 14,694 239,558 (970,891) 370,660 CONSOLIDATED 2019 $ 113,335 97,831 18,030 50,789 56,843 53,748 177,356 (232,266) 335,666 2018 $ 116,685 48,912 15,489 38,596 73,104 25,820 147,688 (75,971) 390,323 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 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. 5 INCOME TAX Statement of Proﬁt or Loss and Other Comprehensive Income Current income tax: - Current income tax beneﬁt at a rate of 27.5% (2018: 27.5%) - R&D tax concession Deferred income tax: CONSOLIDATED 2019 $ 2018 $ – – – (126,126) - Relating to origination and reversal of temporary differences - Deferred tax liability offset by deferred tax asset losses - Temporary difference not recognised in the current period (1,336,722) 1,746,832 (410,110) (1,278,715) 1,221,996 56,719 Income tax expense/(beneﬁt) reported in the Consolidated Statement of Proﬁt or Loss and Other Comprehensive Income 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 At the statutory income tax rate of 27.5% (2018: 27.5%) Add: – (126,126) (1,329,040) (365,486) (315,601) (86,790) - Immediate write-off of capital expenditure (1,631,367) (1,038,184) - Expenditures not allowable / income assessable - Other deductible items 390,477 (140,456) - Tax losses not recognised due to not meeting recognition criteria 1,746,832 – 125,436 (222,458) 1,221,996 – 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, 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 which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. PAGE 34 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 5 INCOME TAX (CONTINUED) CONSOLIDATED CONSOLIDATED 2019 2019 $ 20182018 $ Deferred income tax Recognised on the Statement of Financial Position, deferred income tax at the end of the reporting period relates to the following: (2019: 27.5%, 2018: 27.5%) Deferred income tax liabilities: - Capitalised expenditure deductible for tax purposes 4,001,553 2,433,147 - Trade and other receivables - Derivative ﬁnancial instruments - Available for sale ﬁnancial instruments Deferred income tax assets: - Trade and other payables - Employee beneﬁts - Capital raising costs - Provisions - Tax losses available to offset DTL Net deferred tax asset/(liability) 13,750 24,750 36,400 12,691 113,850 133,867 4,076,453 2,693,555 (4,895) (32,164) (155,445) – (7,013) (29,961) (108,861) (493) (3,883,949) (2,547,227) – – 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 $30,775,748 (2018: $24,423,633). 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 Cash at bank and on hand Short-term deposits CONSOLIDATED CONSOLIDATED 2019 2019 $ 417,407 3,126,325 3,543,732 20182018 $ 353,797 4,876,325 5,230,122 Cash and cash equivalents includes cash on hand, deposits held at call with ﬁnancial institutions, and other short-term, highly liquid investments with maturities of three months or less. The weighted average interest rate for the year was 2.18% (2018: 2.05%). The Group’s exposure to interest rate risk is set out in Note 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. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 7 TRADE AND OTHER RECEIVABLES Current GST receivable Other CONSOLIDATED CONSOLIDATED 2019 2019 $ 65,989 67,769 133,758 20182018 $ 86,329 28,321 114,650 Trade and other receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Trade and other receivables are recognised at amortised cost using the effective interest rate method, less any allowance for expected credit losses. The Group assesses at each balance date whether there is objective evidence that a ﬁnancial asset or group of ﬁnancial assets is impaired. For trade and other receivables, the Group applies the simpliﬁed approach permitted by AASB 9 to determine any allowances for expected credit losses, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The expected credit losses on these ﬁnancial assets are estimated using a provision matrix based on the Group’s historical credit loss experience. 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 the 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 Accrued interest 9 FINANCIAL ASSETS a) Derivative ﬁnancial instruments Current Opening balance Change in fair value Closing balance CONSOLIDATED CONSOLIDATED 2019 2019 $ 21,211 21,211 20182018 $ 14,611 14,611 CONSOLIDATED CONSOLIDATED 2019 2019 $ 455,000 (324,000) 131,000 20182018 $ 37,000 418,000 455,000 PAGE 36 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 9 FINANCIAL ASSETS (CONTINUED) b) Financial assets at fair value through other comprehensive income Non-Current Opening balance Acquisition (Note 3(a)) Change in fair value Closing balance CONSOLIDATED CONSOLIDATED 2019 2019 $ 610,000 250,000 (354,425) 505,575 20182018 $ 140,000 – 470,000 610,000 Financial assets are recognised and derecognised on settlement date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time-frame established by the market concerned. They are initially measured at fair value, net of transaction costs, except for those ﬁnancial assets classiﬁed as fair value through proﬁt or loss, which are initially measured at fair value. Transaction costs of ﬁnancial assets carried at fair value through proﬁt or loss are expensed in proﬁt or loss. The Group classiﬁes its ﬁnancial assets as either ﬁnancial assets at fair value though proﬁt or loss (“FVPL”), fair value though other comprehensive income (“FVOCI”) or at amortised cost. The classiﬁcation depends on the entity’s business model for managing the ﬁnancial assets and the contractual terms of the cash ﬂows. For investments in equity instruments, the classiﬁcation depends on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at FVPL or FVOCI. Financial assets at FVPL For assets measured at FVPL, gains and losses will be recorded in proﬁt or loss. The Group’s derivative ﬁnancial instruments are recognised at FVPL. Assets in this category are subsequently measured at fair value. The fair values of ﬁnancial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Refer to Note 22 for additional details. Financial assets at OCI For assets measured at FVOCI, gains and losses will be recorded in other comprehensive income. There is no subsequent reclassiﬁcation of fair value gains and losses to proﬁt or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in proﬁt or loss as other income when the Group’s right to receive payments is established. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. The Group has elected to measure its listed equities at FVOCI. Assets in this category are subsequently measured at fair value. The fair values of quoted investments are based on current bid prices in an active market. Refer to Note 22 for additional details. 10 EXPLORATION AND EVALUATION Opening balance Exploration expenditure incurred during the year Acquisition of remaining Cue joint venture interest (i) Mainland option fee (ii) Impairment expense (iii) Closing balance CONSOLIDATED CONSOLIDATED 2019 2019 $ 10,256,138 5,932,245 – 125,000 (336,589) 20182018 $ 5,022,031 3,775,215 1,500,000 – (41,108) 15,976,794 10,256,138 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 10 EXPLORATION AND EVALUATION (CONTINUED) i) ii) In August 2017, the Company completed the acquisition of Silver Lake Resources Limited’s remaining interest in the Cue Project JV by exercising its pre-emptive right. The consideration for the JV interest was $1.5 million in cash. In March 2019 the Company entered into an Option Agreement (“Agreement”) to acquire the non- alluvial gold rights to the Mainland Project for an initial payment of $125,000. iii) The impairment expense for the year relates primarily to the write down of capitalised exploration expenditure for the Company’s Corunna Project. Exploration and evaluation expenditure, including the costs of acquiring licences and permits, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the Company has obtained the legal rights to explore an area are recognised in the Statement of Proﬁt or Loss and Other Comprehensive Income. Exploration and evaluation assets are only recognised if the rights to the area of interest are current and either: a) b) the expenditures are expected to be recouped through successful development and exploitation or from sale of the area of interest; or activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and signiﬁcant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are assessed for impairment if sufﬁcient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest. 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. When an area of interest is abandoned or the Directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the ﬁnancial period the decision is made. Signiﬁcant estimate and judgement There is some subjectivity involved in the carry forward of capitalised exploration and evaluation expenditure or, where appropriate, the write off to the Statement of Proﬁt or Loss and Other Comprehensive Income, however management give due consideration to areas of interest on a regular basis and are conﬁdent that decisions to either write off or carry forward such expenditure fairly reﬂect the prevailing situation. 11 SUBSIDIARIES Details of the Company’s subsidiary are as follows: Subsidiary Principal activity Country of incorporation Musgrave Exploration Pty Ltd Exploration Australia Proportion of ownership 2019 100% 2018 100% PAGE 38 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 12 TRADE AND OTHER PAYABLES Trade creditors Other payables CONSOLIDATED CONSOLIDATED 2019 2019 $ 63,508 114,106 177,614 20182018 $ 455,422 75,447 530,869 These amounts represent liabilities for goods and services provided to the Group prior to the end of the ﬁnancial year and which are unpaid. Trade creditors are unsecured, non-interest bearing and are normally settled on 30-day terms. The Group’s ﬁnancial risk management objectives and policies are set out in Note 22. Due to the short-term nature of these payables their carrying value is assumed to approximate their fair value. 13 PROVISIONS Short-term Annual leave Long service leave Short–term obligations CONSOLIDATED CONSOLIDATED 2019 2019 $ 36,240 80,720 116,960 20182018 $ 46,530 62,420 108,950 Liabilities for wages and salaries, including non-monetary beneﬁts and annual leave expected to be settled within 12 months, 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 is recognised in the provision for employee beneﬁts. All other short-term employee beneﬁt obligations are presented as payables. The obligations are presented as current liabilities in the Statement of Financial Position of the Group. Other long-term obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised as a non-current provision for employee beneﬁts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. 14 CONTRIBUTED EQUITY a) Share capital Ordinary shares fully paid 44,592,770 39,436,729 CONSOLIDATED CONSOLIDATED 2019 2019 $ 20182018 $ MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 14 CONTRIBUTED EQUITY (CONTINUED) b) Movements in ordinary shares on issue Balance at 1 July 2017 Placement – 17 October 2017 Share Purchase Plan – 31 October 2016 Shares issued in lieu of services – 14 December 2017 Exercise of options – 29 December 2017 Placement – 28 May 2018 Share issue costs Balance at 30 June 2018 Placement – 19 December 2018 Share issue costs Balance at 30 June 2019 CONSOLIDATED CONSOLIDATED Number Number $ 220,045,782 32,646,322 46,000,000 12,338,675 215,000 400,000 48,000,000 – 326,999,457 59,782,609 – 2,852,000 765,000 15,050 18,000 3,360,000 (219,643) 39,436,729 5,500,000 (343,959) 386,782,066 44,592,770 Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 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 up on shares held. Ordinary shares entitle their holder to one vote, either in 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 Options exercised Options expired/lapsed Balance at end of the ﬁnancial year 15 RESERVES Share option reserve Opening balance Issue of director and employee options (Note 23) Exercise of employee options Expiry of options Balance at the end of the ﬁnancial year CONSOLIDATED CONSOLIDATED 2019 2019 $ 9,900,000 10,550,000 – (650,000) 19,800,000 20182018 $ 5,375,000 5,500,000 (400,000) (575,000) 9,900,000 CONSOLIDATED CONSOLIDATED 2019 2019 $ 484,487 533,673 – (21,872) 996,288 20182018 $ 303,494 239,558 (36,938) (21,627) 484,487 The options reserve is used to recognise the fair value of options issued to Directors, employees and contractors. PAGE 40 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 15 RESERVES (CONTINUED) Financial asset reserve Opening balance Financial assets at fair value through other comprehensive income (Note 9(b)) Balance at the end of the ﬁnancial year Total Reserves CONSOLIDATED CONSOLIDATED 2019 2019 $ 20182018 $ 486,789 16,789 (354,425) 132,364 1,128,652 470,000 486,789 971,276 The ﬁnancial asset reserve is used to recognise the fair value movement on ﬁnancial assets at fair value through other comprehensive income. 16 ACCUMULATED LOSSES Balance at the beginning of the ﬁnancial year Net loss attributable to members Transfer from share option reserve Balance at the end of the ﬁnancial year 17 EARNINGS PER SHARE Basic loss per share Diluted loss per share CONSOLIDATED CONSOLIDATED 2019 2019 $ 20182018 $ (24,321,810) (24,190,900) (1,329,040) 21,872 (189,475) 58,565 (25,628,978) (24,321,810) 2019 2019 Cents Cents 0.37 0.37 20182018 Cents Cents 0.07 0.07 The following reﬂects the income and share data used in the calculations of basic and diluted loss per share: Proﬁts/(losses) used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic and diluted loss per share 2019 2019 $ 20182018 $ (1,329,040) (189,475) 2019 2019 Number Number 20182018 Number Number 358,610,535 265,146,411 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. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 17 EARNINGS PER SHARE (CONTINUED) 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. 18 AUDITOR’S REMUNERATION CONSOLIDATED CONSOLIDATED 2019 2019 $ 15,000 11,670 26,670 20182018 $ – 32,300 32,300 Audit services BDO Audit (WA) Pty Ltd - Audit of the ﬁnancial reports Grant Thornton Audit Pty Ltd - Audit and review of the ﬁnancial reports Total remuneration 19 CONTINGENT ASSETS AND LIABILITIES Contingent liabilities The Group had contingent liabilities in respect of: Future royalty payments Musgrave holds a 100% interest in the key tenure at Cue including the Break of Day and Lena deposits and other prospects. Some of the Cue tenements are subject to third party royalty payments on future gold production including the mining licence hosting the Break of Day and Lena gold deposits. Future consideration and royalty payments In March 2019, the Company entered into an Option Agreement (“Agreement”) to acquire the non-alluvial gold rights to the Mainland Project which is located within the boundaries of the Company’s Cue Gold Project. Musgrave paid $125,000 to execute the option to acquire 100% interest in the tenements (excluding the vendors’ interest in alluvial gold). A further $100,000 is due within 18 months and an additional $300,000 is to be paid as milestone payments in Musgrave shares or cash (at the Company’s discretion) before the fourth anniversary of the Agreement. The vendor will be entitled to a 1% gross royalty on any gold produced by the Company from the tenements (excluding any alluvial gold). Contingent assets The Group had contingent assets in respect of: Future royalty payments In January 2014, the Group entered into a Mining Farm-in and Joint Venture Agreement (“Agreement”) with Menninnie Metals Pty Ltd. In August 2015, the parties agreed to terminate the Agreement (“Termination Agreement”). As part of the Termination Agreement the Group retains a 1% Net Smelter Return Royalty on all ores, concentrates or other primary, intermediate or ﬁnal product of any minerals produced from two of the tenements. Deferred consideration In May 2019, Cyprium Australia Pty Ltd (“Cyprium”) exercised an option to earn an 80% interest in the non- gold rights over the northern tenements (“Tenements”) of the Company’s Cue Project. Cyprium is required to spend $2 million on exploration within two years to acquire the 80% interest upon which the Company will retain 20% and be free carried to a deﬁnitive feasibility study. Should Cyprium delineate 80,000 tonnes of contained copper over the Tenements, $200,000 in cash or the equivalent value of Cyprium shares (at Cyprium’s election) will be due to the Company. Upon a Decision to Mine, $300,000 in cash or the equivalent value of Cyprium shares (at Cyprium’s election) will be due to the Company. There are no other material contingent assets or liabilities as at 30 June 2019. PAGE 42 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 20 EVENTS OCCURRING AFTER THE REPORTING PERIOD On 17 September 2019 Musgrave announced that it had entered into an Earn-In and Joint Venture Exploration Agreement with Evolution Mining Limited over a select area of Lake Austin and surrounds (JV Area) of the Cue Project in the Murchison District of Western Australia. The JV Area excludes all the known resources including Lena and Break of Day and the Mainland option area. Evolution can earn a 75% interest in the JV Area by sole funding A$18 million on exploration over a ﬁve year term with a minimum commitment of A$4 million in the ﬁrst two years. Musgrave will manage the JV during the initial period. As part of the Agreement, Evolution has agreed to subscribe for 18,587,361 ordinary shares in Musgrave through a share placement (“Placement”) at a price of $0.0807 per share. The placement was set at the 30- day VWAP for Musgrave shares and represents a holding of 4.59% (undiluted) in the Company. There have been no other events subsequent to reporting date which are sufﬁciently material to warrant disclosure. 21 COMMITMENTS In order to maintain an interest in the exploration tenements in which the Group is involved, the Group is committed to meeting the conditions under which the tenements were granted. The timing and amount of exploration expenditure commitments and obligations of the Group are subject to the minimum expenditure commitments required as per the Mining Act 1978 (Western Australia) and the Mining Act 1971 (South Australia), and may vary signiﬁcantly from the forecast based upon the results of the work performed which will determine the prospectivity of the relevant area of interest. Currently, the minimum expenditure commitments for the granted tenements is $992,300 (2018: $901,940) per annum. Of this amount $488,000 will be met by the Group’s joint venture partners as part of their earn-in obligations. Commitments in relation to the lease of ofﬁce premises are payable as follows: Within one year Later than one year but not later than ﬁve years Later than ﬁve years CONSOLIDATED CONSOLIDATED 2019 2019 $ 64,736 38,523 – 103,259 20182018 $ 62,547 103,259 – 165,806 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 Foreign currency risk Commodity risk Liquidity risk  Market 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. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 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 tabled below. Financial assets Current Cash and cash equivalents Trade and other receivables Derivative ﬁnancial instruments Non-Current Financial assets at fair value through other comprehensive income (“FVOCI”) Financial liabilities Current Trade and other payables Interest rate risk CONSOLIDATED CONSOLIDATED 2019 2019 $ 2018 2018 $ 3,543,732 5,230,122 133,758 131,000 114,650 455,000 3,808,490 5,799,772 505,575 505,575 177,614 177,614 610,000 610,000 530,869 530,869 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. PAGE 44 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) The following table set out the carrying amount, by maturity, of the ﬁnancial instruments that are exposed to interest rate risk: Floating interest rate $ Fixed interest rate maturing in 1 year or less $ Over 1 to 5 years $ More than 5 years $ Non- interest bearing $ Total $ Consolidated – 2019 Financial assets Cash and cash equivalents 417,107 3,126,325 Trade and other receivables – – 417,107 3,126,325 – – – – – – 300 3,543,732 133,758 133,758 134,058 3,677,490 Weighted average interest rate Financial liabilities Trade and other payables Weighted average interest rate Consolidated – 2018 Financial assets 1.25% 2.32% N/A N/A N/A N/A – – – – – – – – 177,614 177,614 177,614 177,614 N/A N/A N/A N/A N/A N/A Cash and cash equivalents 353,497 4,876,325 Trade and other receivables – – Weighted average interest rate Financial liabilities Trade and other payables Weighted average interest rate 353,497 4,876,325 1.32% 2.36% – – – – – – – – – – – – – – – – – – – – 300 5,230,122 114,650 114,650 114,950 5,344,772 – – 530,869 530,869 – 530,869 530,869 – Sensitivity analysis for interest rate exposure 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: Impact on proﬁt/(loss) and equity Increase of 100 basis points Decrease of 100 basis points Credit risk 2019 2019 $ 50,055 (50,055) 20182018 $ 32,186 (32,186) Credit risk is the risk of ﬁnancial loss to the Group if a customer or counterparty to a ﬁnancial instrument fails to 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 balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not signiﬁcant. The maximum exposure to credit risk is the carrying value of the receivable, net of any provision for expected credit loss. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 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 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 is tabled below. Cash and cash equivalents Trade and other receivables Foreign currency risk CONSOLIDATED CONSOLIDATED 2019 2019 $ 3,543,732 133,758 3,677,490 20182018 $ 5,230,122 114,650 5,344,772 The Group’s exposure to foreign currency risk is minimal at this stage of its operations. Commodity price risk The Group’s exposure to commodity price risk is minimal at this stage of its operations. 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 due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s objective is to maintain a balance between continuity of funding and ﬂexibility. The following are the contractual maturities of ﬁnancial liabilities: Less than 6 months $ 177,614 177,614 530,869 530,869 Total Contractual cash ﬂows $ 177,614 177,614 530,869 530,869 Carrying amount $ 177,614 177,614 530,869 530,869 Consolidated – 2019 Trade and other payables Consolidated – 2018 Trade and other payables Market risk Price risk The Group’s exposure to equity securities price risk arises from investments held by the Group and classiﬁed in the Statement of Financial Position as either derivative ﬁnancial instruments, or ﬁnancial assets at FVOCI. Sensitivity analysis for price risk A change of 10% in the price of securities held at reporting date on the Group’s equity and/or proﬁt or loss by is shown below: PAGE 46 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Impact on proﬁt/(loss) and equity Increase of 10% Decrease of 10% Fair value of ﬁnancial assets and liabilities 2019 2019 $ 63,657 (63,657) 20182018 $ 106,500 (106,500) 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. Fair value measurement of ﬁnancial instruments Financial assets and ﬁnancial liabilities measured at fair value in the Consolidated Statement of Financial Position are grouped into three levels of a fair value hierarchy. The three levels are deﬁned based on the observability of signiﬁcant inputs to the measurement, as follows: (cid:129) (cid:129) (cid:129) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: unobservable inputs for the asset or liability. The following table shows the levels within the hierarchy of ﬁnancial assets and liabilities measured at fair value on a recurring basis at 30 June 2019 and 30 June 2018: 30 June 2019 Derivative ﬁnancial instruments Financial assets at FVOCI 30 June 2018 Derivative ﬁnancial instruments Financial assets at FVOCI Capital risk management Level 1 $ Level 2 $ Level 3 $ – 131,000 505,575 505,575 – 131,000 – 455,000 610,000 610,000 – 455,000 – – – – – – Total $ 131,000 505,575 636,575 455,000 610,000 1,065,000 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 and other payables and provisions detailed in Notes 12 and 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 and 16). The Group is not subject to any externally imposed capital requirements. None of the Group’s entities are subject to externally imposed capital requirements. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 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 following share-based payment arrangements were in existence during the reporting period: Option series Number Issue date Expiry date Vesting date Exercise price Fair value at grant date H (1) J (1) M O P Q R S 300,000 11 Mar 2014 10 Mar 2019 Immediate 250,000 16 Sep 2015 10 Mar 2019 Immediate 500,000 22 Apr 2016 22 Apr 2021 Immediate 2,550,000 4 Nov 2016 3 Nov 2019 Immediate 800,000 4 Nov 2016 3 Nov 2021 Immediate 3,250,000 29 Nov 2017 29 Nov 2020 Immediate 2,250,000 29 Nov 2017 29 Nov 2020 Immediate 7,500,000 21 Nov 2018 16 Nov 2021 Immediate T (2) 3,050,000 30 Nov 2018 16 Nov 2021 Immediate (1) These options expired during the ﬁnancial year. $0.12 $0.120 $0.045 $0.167 $0.195 $0.097 $0.097 $0.1275 $0.1275 $0.0522 $0.0046 $0.0194 $0.0659 $0.0628 $0.0436 $0.0436 $0.0506 $0.0506 (2) During the ﬁnancial year 100,000 of these options lapsed under the terms of the Company’s ESOP. Fair value of share options granted during the year The fair value of share options at grant date is 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 $533,673 of which $328,803 relate to key management personnel (2018: $239,558 and $141,570 respectively). The model inputs for options granted during the year ended 30 June 2019 are as follows: Inputs Number Exercise price Issue date Expiry date Share price at grant date Expected price volatility Risk-free interest rate Expected dividend yield Issue S 7,500,000 $0.1275 21 Nov 2018 16 Nov 2021 $0.090 101% 2.16% 0% Issue T 3,050,000 $0.1275 30 Nov 2018 16 Nov 2021 $0.092 101% 2.16% 0% PAGE 48 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 23 SHARE-BASED PAYMENTS (CONTINUED) Movements in share options during the year Movement in the number of share options held by Directors, employees and consultants: 2019 2018 Number of options Number of options Weighted average exercise price $ Weighted average exercise price $ 9,900,000 0.122 5,375,000 0.155 Outstanding at the beginning of the year Granted and vested during the year 10,550,000 Exercised during the year Expired/lapsed during the year Outstanding at the end of the year Exercisable at the end of the year – (650,000) 19,800,000 19,800,000 0.128 – 0.121 0.125 0.125 5,500,000 (400,000) (575,000) 9,900,000 9,900,000 0.097 0.045 0.250 0.122 0.122 The weighted average remaining contractual life of share options outstanding at the end of the year was 1.84 years (2018: 2.14 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 10 March 2019 22 April 2021 3 November 2019 3 November 2021 16 November 2021 16 November 2021 Totals Exercise price $ 0.12 0.045 0.1671 0.195 0.097 0.1275 2019 Number – 500,000 2,550,000 800,000 5,500,000 10,450,000 19,800,000 2018 Number 550,000 500,000 2,550,000 800,000 5,500,000 – 9,900,000 Signiﬁcant estimates and judgement The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black- Scholes option pricing model. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 24 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Cash ﬂows from operating activities Loss for the period Non-cash ﬂows in proﬁt/(loss): - Other income – Cyprium shares (Note 3) - Depreciation - Impairment expense - Share based remuneration - Change in fair value of derivative ﬁnancial instruments - Research and development tax concession Changes in assets and liabilities - Decrease/(Increase) in trade and other receivables - Decrease/(Increase) in other current assets - Increase/(Decrease) in trade and other payables - Increase/(Decrease) in employee entitlements Net cash used in operating activities Non-cash investing and ﬁnancing activities CONSOLIDATED CONSOLIDATED 2019 2019 $ 20182018 $ (1,329,040) (189,475) (250,000) 25,747 336,589 533,673 324,000 – (7,251) (6,600) (276,613) 8,010 (641,485) – 13,080 41,108 239,558 (418,000) 236,366 (30,070) (4,304) (23,288) 19,719 (115,306) There were no non-cash investing and ﬁnancing activities during the year. 25 RELATED PARTY DISCLOSURE a) Parent entity Class Country of incorporation Musgrave Minerals Limited Ordinary Australia b) Subsidiaries Musgrave Exploration Pty Ltd Ordinary Australia Class Country of incorporation c) Key management personnel compensation Short-term employee beneﬁts Post-employment beneﬁts Bonus payments Share-based payments Investment at cost 2019 $ – 2018 $ – Investment at cost 2019 $ 100 2018 $ 100 2019 2019 $ 430,433 39,886 54,415 328,803 853,537 20182018 $ 423,716 34,078 – 141,570 599,364 Detailed remuneration disclosures are provided in the Remuneration Report. PAGE 50 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 26 PARENT ENTITY DISCLOSURE Financial Performance Proﬁt/(loss) for the year Other comprehensive income Total comprehensive proﬁt/(loss) Financial Position ASSETS Current assets Non-current assets TOTAL ASSETS LIABILITIES Current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY 2019 2019 $ 2018 2018 $ (1,329,040) (354,425) (1,683,465) (189,475) 470,000 280,525 3,829,701 16,557,317 5,814,383 10,911,631 20,387,018 16,726,014 294,574 639,819 294,574 639,819 20,092,444 16,086,195 44,592,770 1,128,652 39,436,729 971,276 (25,628,978) (24,321,810) 20,092,444 16,086,195 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 2019 other than the commitment in relation to the lease of ofﬁce premises as disclosed in Note 21. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 51 DIRECTORS’ DECLARATION The Directors of Musgrave Minerals Limited declare that: 1) in the Directors’ opinion, the ﬁnancial statements and notes set out on pages 25 to 51 and the Remuneration Report in the Director’s Report are in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s ﬁnancial position as at 30 June 2019 and of its performance, for the ﬁnancial year ended on that date; and b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), Corporations Regulations 2001 and mandatory professional reporting requirements. the ﬁnancial statements also comply with International Financial Reporting Standards as disclosed in Note 2; and there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. 2) 3) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the Managing Director and Chief Financial Ofﬁcer for the ﬁnancial year ended 30 June 2019. Signed in accordance with a resolution of the Directors. Mr Graham Ascough Chairman Perth, Western Australia 19 September 2019 PAGE 52 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 INDEPENDENT AUDITOR’S REPORT Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of Musgrave Minerals Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Musgrave Minerals Limited (the Company) and its subsidiary (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 53 INDEPENDENT AUDITOR’S REPORT Recoverability of exploration and evaluation expenditure Key audit matter How the matter was addressed in our audit As disclosed in Note 10 to the Financial Report, the carrying value of capitalised exploration and evaluation expenditure represents a significant asset of the Group. Refer to Note 10 of the Financial Report for a description of the accounting policy and significant judgements applied to capitalised exploration and evaluation expenditure. In accordance with AASB 6 Exploration for and Evaluation of Mineral Resources (AASB 6), the recoverability of exploration and evaluation expenditure requires significant judgment by management in determining whether there are any facts or circumstances that exist to suggest that the carrying amount of this asset may exceed its recoverable amount. As a result, this is considered a key audit matter. Our procedures included, but were not limited to: (cid:120) Obtaining a schedule of the areas of interest held by the Group and assessing whether the rights to tenure of those areas of interest remained current at balance date; (cid:120) (cid:120) (cid:120) (cid:120) Considering the status of the ongoing exploration programmes in the respective areas of interest by holding discussions with management, and reviewing the Group’s exploration budgets, ASX announcements and directors’ minutes; Considering whether any such areas of interest had reached a stage where a reasonable assessment of economically recoverable reserves existed; Considering whether any facts or circumstances existed to suggest impairment testing was required; and Assessing the adequacy of the related disclosures in Note 10 to the Financial Report. PAGE 54 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 INDEPENDENT AUDITOR’S REPORT Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Other matter The financial report of Musgrave Minerals Limited, for the year ended 30 June 2018 was audited by another auditor who expressed an unmodified opinion on that report on 19 September 2018. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 55 INDEPENDENT AUDITOR’S REPORT Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages (cid:20)(cid:27) to (cid:21)(cid:21) of the directors’ report for the(cid:3)year ended 30 June 2019. In our opinion, the Remuneration Report of Musgrave Minerals Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Glyn O’Brien Director Perth, 19 September 2019 PAGE 56 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 ADDITIONAL INFORMATION The following additional information not shown elsewhere in this report is required by the ASX Listing Rules and is current as at 19 September 2019. Securities Quotation has been granted for 386,782,066 ordinary shares of the Company on the Australian Securities Exchange. Quoted Securities ASX Code MGV Unquoted Securities ASX Code MGVAB MGVAB MGVAB MGVAB MGVAB Number of Holders 1,501 Number of Holders 2 4 1 11 11 Security Description Ordinary Fully Paid Security Description Options expiring 24/04/2021 Exercisable at $0.045 Total Securities 386,782,066 Total Securities 500,000 Options expiring 03/11/2019 2,550,000 Exercisable at $0.1671 Options expiring 03/11/2021 800,000 Exercisable at $0.195 Options expiring 29/11/2020 5,500,000 Exercisable at $0.195 Options expiring 16/11/2021 10,450,000 Exercisable at $0.1275 One holder Mr Robert Waugh and Mrs Sara Waugh hold 6,100,000 unlisted options (equivalent to 30.8% of total unlisted options) Voting Rights The voting rights attached to each class of security are as follows: (cid:129) (cid:129) Ordinary Fully Paid shares – one vote per share held. Options – no voting rights are attached to unexercised options. Distribution schedule Spread of Holdings - Ordinary Shares (ASX Code: MGV) 1 1,001 5,001 10,001 - - - - 1,000 5,000 10,000 100,000 100,001 - and over TOTAL Holders 102 29 199 736 435 1,501 Units 7,812 112,681 1,701,697 34,815,764 350,144,112 326,999,457 Percentage 0.00 0.03 0.44 9.00 90.53 100% Substantial Shareholding The Company has received the following notices of substantial holding: (cid:129) Westgold Resources Limited in relation to 64,887,779 ordinary shares MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 PAGE 57 ADDITIONAL INFORMATION Unmarketable Parcel There are 147 Shareholders holding less than a marketable parcel of fully paid ordinary shares (a minimum parcel $500 shares, being 6,250 shares using a market value of $0.08). Buyback No on-market share buy-back is current. Top Holders The names of the twenty largest shareholders (ASX Code: MGV) are listed below: Rank Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Westgold Resources Limited HSBC Custody Nominees (Australia) Limited Jetosea Pty Ltd Riggy & Boo Pty Limited Equity Trustees Limited Mr Stacey Radford Independence Group NL BNP Paribas Nominees Pty Ltd Thirty Sixth Vilmar Pty Ltd Sacrosanct Pty Ltd Cue Petroleum Allise Pty Ltd Soudure S/F Pty Ltd Citicorp Nominees Pty Ltd Great Australia Corporation Pty Ltd Scintilla Strategic Investments Limited Mr Peter Piotr Mackow RAM Platinum Pty Ltd Cape Bouvard Equities Pty Ltd Mrs Marisa Mackow Units held 64,887,779 % of Units 16.78 19,702,225 5.09 16,106,292 4.16 14,000,000 3.62 9,358,559 9,309,139 9,027,000 7,193,465 6,564,481 6,250,000 4,500,000 4,096,172 4,000,000 3,508,953 3,000,000 3,000,000 2,809,647 2,405,000 2,197,765 2,145,000 2.42 2.41 2.33 1.86 1.70 1.62 1.16 1.06 1.03 0.91 0.78 0.78 0.73 0.62 0.57 0.55 PAGE 58 MUSGRAVE MINERALS LTD ANNUAL REPORT 2019 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 Ground Floor, 5 Ord Street West Perth, WA 6005 Telephone: +61 (8) 9324 1061 Facsimile: +61 (8) 9324 1014 Email: info@musgraveminerals.com.au Web: www.musgraveminerals.com.au AUDITOR BDO Audit (WA) PTY LTD 38 Station Street Subiaco, WA 6008 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: +61 (8) 9323 2000 Facsimile: +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 ABN 12 143 890 671 Gound Floor, 5 Ord 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 A N N U A L R E P O R T 2 0 1 9

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