Neometals Annual Report 2020

Plain-text annual report

2020 ANNUAL REPORT A MINERALS AND ADVANCED MATERIALS PROJECT DEVELOPMENT COMPANY ACN: 099 116 631 Annual Report 2020Our Business Neometals innovatively develops opportunities in minerals and advanced materials essential for a sustainable future with a focus on the energy storage megatrend. Neometals Ltd Table of Contents Chairman and Managing Director's Address Review of Operations Lithium-ion Battery Recycling Project Vanadium Recovery Project Lithium Refinery Project Barrambie Titanium and Vanadium Project Exploration Annual Mineral Resource Statement Sustainability Directors' Report Remuneration Report Audit Report Auditor’s Independence Declaration Directors' Declaration Consolidated Statement Of Profit Or Loss And Other Comprehensive Income Consolidated Statement Of Financial Position Consolidated Statement Of Changes In Equity Consolidated Statement Of Cash Flows Financial Statements Contents Notes To The Consolidated Financial Statements Additional Shareholder Information 1 1 02 06 08 11 14 16 19 22 26 38 44 54 58 59 60 61 62 63 64 65 101 Annual Report 2020 Annual Report 20202 2 Chairman and Managing Director's Address Dear Shareholders, Financial year 2020 has been challenging for reasons the global community could not anticipate. The COVID-19 pandemic has created significant commercial headwinds for all companies. Neometals however has taken actions to significantly reduce the impact of this disruption and your Company has made material progress during the year. Neometals has held a unique risk mitigation approach The Neometals drive to maximise the use of finite for some time. The prudence of this approach, now more resources complements our upstream minerals and than ever, is clearly evident. The strategy sees Neometals materials projects and will be outlined in our inaugural targeting globally relevant sectors early, building value in sustainability report. Importantly, environment, diversified opportunities and reducing risk with R&D and sustainability and governance (ESG) considerations have downstream integration before bringing on strong partners always been part of the Neometals modus operandi. We to expedite successful commercialisation. recognise that ESG strategies allow companies to better The Company’s focus, together with a strong desire to be address risk, build resilience and provide transparency. ahead of the curve on emergent opportunities, has seen a Despite the travel and logistics challenges posed by pivot towards responsible materials recovery and recycling the pandemic, Neometals has made significant project projects away from upstream mining. These efforts are progress during the year with all 4 core projects now evidenced by the Company’s recycling presence in Europe subject to partnering arrangements and all funded through where electric vehicle investment leads the World, and evaluation to financial investment decisions. the European Commission is making unprecedented moves to ensure domestic critical mineral resilience and a decarbonised circular economy. Neometals Ltd Neometals Ltd 3 3 Specific corporate highlights included: • Barrambie Titanium and Vanadium Project – entered Upstream Minerals: 1. 2. 3. 2cps partially franked dividend bringing total shareholder cash returns to c. $55 million over the past 5 years; Growth of the Neometals team to 20 professionals; and Prudent capital allocation to retain $81.3 million cash and investments after dividends and growth expenditure to fund projects and attract project partners. Project related highlights included: Recycling and Resource Recovery: • Lithium-ion Battery Recycling – successful completion of recycling pilot with all proof-of-scale into an agreement to co-evaluate and potentially develop commercial operations with IMUMR, China’s leading research institute for vanadiferous titanomagnetite deposits. Evaluation activities included pilot-scale production of gravity and magnetic concentrates, pyrometallurgical (smelting) test work in China and a hydrometallurgical pilot program in Australia. The value in use of the Barrambie ore is now well understood and the project is well positioned to enter into discussions with potential offtakers; • Mt Edwards – Exploration activities have improved the quality and quantity of its inventory of nickel sulphide resources. Evaluation activities have commenced on a number of deposits to identify a potential multi-deposit mineplan that could be developed over a 3-5 year time horizon, which aligns well with the strong market conditions for nickel forecast by leading analysts. objectives met and technical risk significantly Neometals has a clear strategy and purpose. The reduced. Binding agreement to establish a 50:50 JV Company innovatively develops opportunities in minerals (Primobius GmbH) with leading German engineers and advanced materials essential for a sustainable future. SMS group to commercialise Neometals proprietary Over the year, your Company’s Board and management lithium battery recycling process; and have worked hard, with success, to fulfil that purpose. • Vanadium Recovery – collaboration agreement With multiple exposures to the global megatrend that is signed to evaluate the formation of a 50:50 joint battery energy storage and electric vehicles, Neometals venture to recover vanadium from processing is well positioned to generate shareholder value through stockpiled residues from leading Scandinavian steel its socially and environmentally responsible development maker SSAB with Critical Metals Ltd. Scoping study strategies. outcomes confirm first quartile cash operating cost position. Downstream Advanced Materials: • Lithium Refinery Project – MoU advanced via commencement of jointly funded feasibility study with leading Indian power trader, Manikaran Power. Your Board is excited about the future, and together with the management team, remain committed to realising the Company’s success and delivering returns to the Company’s supportive shareholder base. Steven Cole CHAIRMAN 23 October 2020 Chris Reed MANAGING DIRECTOR Annual Report 2020 Annual Report 20204 4 2019-2020 Financial Highlights $81.3M cash ~A6.3M in investments 2 cent dividend paid during the year A$55M in dividends over last five financial years NO DEBT Neometals Ltd Neometals Ltd 5 5 2019-20 Operational Highlights Neometals’ Projects Vanadium Recovery Lulea Sweden LIB Recycling Hilchenbach Germany Lithium Refinery India Titanium & Vanadium Barrambie Australia Nickel & Lithium Mt Edwards Australia Lithium Refinery Project Commenced a jointly funded Feasibility study for proposed Indian lithium refinery JV. Work included plant vendor test-work, engineering layouts, site location study and completion of process design package; Indian Government advancing its ‘Made in India’ initiative to foster domestic production of lithium-ion batteries. Barrambie Titanium and Vanadium Project One of the world’s highest-grade hard-rock titanium-vanadium deposits, working towards a development decision for a staged operation in mid-2021. Annual Report 2020 Lithium-ion Battery (‘LIB’) Recycling Project Completion of the Neometals LIB recycling pilot with all proof-of-scale objectives met and technical risk significantly reduced. Extensive due diligence on pilot outcomes successfully completed. Vanadium Recovery Project Completion of Scoping Study which indicated potential for lowest quartile cash cost operation to recover vanadium chemicals from SSAB steel making by-products; and Completed metallurgical drilling program on stockpiles at Lulea and commenced metallurgical test work phase of the Pre-Feasibility Study in Perth. Annual Report 2020 6 6 Review of Operations u t s n C ir c u ti o o m m i n C The directors of Neometals Ltd (‘Company’ and ‘Neometals’) present the annual financial report for the Company and its controlled entities (‘Consolidated Entity’ and ‘Group’). Neometals innovatively develops opportunities in minerals and advanced materials essential for a sustainable future. With a focus on the energy storage megatrend, the strategy focuses on de-risking and developing long-life projects with strong partners and integrating down the value chain to increase margins and return value to shareholders. Neometals has four core projects with strong partners that span the battery value chain: Recycling and Resource Recovery • Lithium-ion Battery Recycling – a proprietary process for recovering cobalt and other valuable materials from spent and scrap lithium batteries. Pilot plant testing completed with plans well advanced to conduct demonstration scale trials with 50:50 JV partner SMS group. Working towards a development decision in 2021; and • Vanadium Recovery – a 27-month option to evaluate establishing a 50:50 joint venture to recover vanadium from processing by-products (‘Slag’) from leading Scandinavian steel maker SSAB. Underpinned by a ten-year Slag supply agreement, a decision to develop sustainable European production of high-purity vanadium pentoxide is targeted for December 2022. Downstream Advanced Materials • Lithium Refinery Project – evaluating the development of India’s first lithium refinery to supply the battery cathode industry with potential 50:50 JV partner Manikaran Power. Underpinned by a binding life-of-mine annual offtake option for 57,000 tonnes per annum of Mt Marion 6% spodumene concentrate. Working towards a development decision in 2023. Upstream Industrial Minerals • Barrambie Titanium and Vanadium Project - one of the world’s highest-grade hard-rock titanium-vanadium deposits, working towards a development decision for a staged operation in mid-2021. Neometals Ltd Neometals Ltd Review of Operations (continued) 7 7 Figure 1 – Location map of Neometals Projects. Lulea, Sweden VANADIUM RECOVERY Germany LIB RECYCLING India LITHIUM REFINERY Neometals Project Locations Australia BARRAMBIE TITANIUM & VANADIUM Australia MT EDWARDS NICKEL & LITHIUM Annual Report 2020 Annual Report 20208 8 Review of Operations (continued) CORE PROJECTS LITHIUM BATTERY RECYCLING PROJECT (50:50 Joint Venture with SMS group) Neometals has developed a sustainable process flowsheet targeting the recovery of battery materials contained in production scrap and end-of-life lithium-ion batteries (LIBs) that might otherwise be disposed of in land fill or processed in high-emission pyrometallurgical recovery circuits. Neometals’ process flowsheet targets the recovery of valuable materials from consumer electronic batteries (devices with lithium cobalt oxide (LCO) cathodes), and nickel‐ rich EV and stationary storage battery chemistries (lithium‐nickel-manganese‐cobalt (NMC) cathodes). The flowsheet is designed to recover cobalt, nickel, lithium, copper, iron, aluminium and manganese into saleable products with demonstration scale trials targeted at showcase facilities in Europe commencing in 2021. A 2019 scoping study, based on previous bench scale test-work, highlighted robust economics. Data from the recently concluded pilot trial will feed next stage engineering and feasibility studies. Neometals High-Level Flowsheet STAGE 1 SHREDDING LCO/NMC Battery Feed 2nd Life STAGE 2 REFINING Black Powder Plastics Metal Foil Cu, Al Cathode Materials Ni, Co, Mn Lithium Graphite The recycling flowsheet comprises two stages: Figure 2 - High level flowsheet showing the materials generated from Feed Preparation and Hydrometallurgical Processing stages. 1. Shredding and beneficiation to remove metal casings, electrode foils and plastics Pilot Plant (‘Feed Preparation’); and 2. Leaching, purification and precipitation to deliver chemical products via the hydrometallurgical processing facility (‘Hydrometallurgical Processing’). Neometals Ltd Neometals Ltd Review of Operations (continued) 9 Pilot Plant During the year, Neometals announced successful ‘Hydrometallurgical Processing’ stage from which cathode materials have been recovered and refined into completion of its lithium-ion battery recycling pilot in high-purity chemical products. Canada (‘Pilot’). The Pilot validated earlier bench scale assumptions with high recoveries of a targeted suite of cathode active elements that were refined into high purity chemicals for re-use in the battery supply chain. Successful completion of the Pilot, which commenced in February 2019, represented a significant commercial milestone for the Neometals recycling technology. Objectives were met and surpassed, no fatal technical The Pilot, undertaken by SGS Canada Inc., represents flaws arose, and the Company now has the data part of the pre-development activities for a proposed to commence feasibility-level studies ahead of commercial LIB recycling venture to recover LIB demonstration trials in Europe (‘Demonstration Trial’). materials from electric vehicle and consumer electronics With the Pilot significantly reducing the technical risk batteries. Neometals successfully shredded and of commercialising its proprietary process, Neometals processed 2.3 tonnes of spent commercial LIBs during can proceed confidently towards the SMS group the ‘Feed Preparation’ stage of the Pilot. A total of commercialisation JV and advance feed supply and 980 kg of shredded and upgraded cathode and anode product offtake activities (see JV with SMS section material (‘Black Mass’) was fed into the subsequent on next page for further information). Annual Report 2020 Annual Report 2020 Annual Report 202010 10 Review of Operations (continued) JV with SMS To accelerate commercial development of the recycling of a 50:50 joint venture (‘JV’), to design and construct project, Neometals announced during the December 2019 a demonstration plant at an SMS site in Germany. The quarter that it had entered a binding memorandum of formal agreements were executed subsequent to year end understanding (“MOU”) with leading global processing on 31 July 2020. plant manufacturer SMS group (“SMS”), following which A Class 3 Engineering Cost Study will be completed SMS successfully concluded its due diligence to evaluate concurrently and a final JV investment decision (‘FID’) the results of the Neometals Pilot. The parties finalised will follow feasibility evaluation to consider construction the definitive transaction documents for the formation of the first commercial-scale operation. Neometals Ltd Neometals Ltd 11 11 I M A G E N E E D E D Review of Operations (continued) CORE PROJECTS VANADIUM RECOVERY PROJECT (Option towards 50:50 Joint Venture) Recycling Agreement During the year, Neometals announced execution of a collaboration agreement with unlisted Scandinavian- focused explorer, Critical Metals Ltd (‘Critical’), to jointly evaluate the feasibility of recovering high-purity vanadium products from high-grade vanadium-bearing steel by-product (‘Slag’) in Scandinavia (for full details refer to ASX announcement entitled ‘High-Grade Vanadium Recycling Agreement’ released on 6 April 2020). The collaboration contemplates Neometals funding and managing the evaluation activities, up to consideration of an investment decision. A positive investment decision will lead to a 50:50 incorporated joint venture (‘JV’). Neometals is Critical’s largest shareholder and holds 15.4% of its Mini pilot plant issued capital. Critical has executed a conditional agreement (‘Slag Supply Agreement’) with SSAB EMEA AB and SSAB Europe Oy, subsidiaries of SSAB (‘SSAB’), a steel producer that operates steel mills in Scandinavia. diligence test-work completed by Neometals’ chosen Slag is a by-product of SSAB’s steel making operations. metallurgical contractor in Perth on multiple SSAB The Slag Supply Agreement provides a secure basis Slag samples has confirmed excellent recoveries from for the evaluation of an operation capable of leaching under mild conditions at atmospheric pressure. processing 200,000 tonnes of Slag per annum without the need to build a mine and concentrator like existing primary producers. Neometals’ hydrometallurgical process has significant operational, cost and risk advantages over the traditional pyro/hydro-metallurgical (salt-roast) Neometals has extensive experience in the process route. metallurgical processing of vanadium bearing concentrates from its Barrambie Titanium-Vanadium project and has, through a wholly owned subsidiary Avanti Materials Ltd (‘Avanti’), developed a proprietary hydrometallurgical flowsheet suitable for recovering Vanadium from the Slag. The flowsheet utilises The collaboration agreement is significant as it creates an option to secure critical materials without mining and processing risk and the opportunity to produce high-grade vanadium products with lowest quartile costs owing to the grade of vanadium sitting above surface in stockpiles. conventional equipment and is subject to provisional One of Neometals’ key strategies relates to identification patent applications, tailored to recover high-purity vanadium chemicals from Slag. Extensive due- and disciplined evaluation of mineral and materials projects that have direct exposure to the energy storage Annual Report 2020 Annual Report 2020 12 12 Review of Operations (continued) and electric vehicle mega-trend. As it relates to energy Neometals has proceeded to the next stage of evaluation storage, vanadium solutions are the storage medium in studies, comprising completion of continuous mini-pilot the Vanadium Redox Flow batteries (‘VRFBs’) which are scale metallurgical test-work to provide process data a leading stationary storage technology. Approximately for a Class 4 American Association of Cost Engineering 75% of global vanadium supply is produced in China and (‘AACE’) engineering cost study culminating in a Russia, and there exists a significant opportunity to supply Preliminary Feasibility Study (‘PFS’). Neometals has the European and American markets from recycling completed the metallurgical drilling program on the SSAB SSAB’s Scandinavian feedstocks. Lulea stockpiles. Evaluation During the year Neometals completed a scoping study which highlights a strong case for future development of a processing operation to recover vanadium chemicals from steel making by-products. The scoping indicated potential lowest quartile cash costs. Accordingly Critical will advance site selection studies, approvals and manage the SSAB relationship. Figure 3 - Key Highlights of the Scoping Study (all figures expressed on a 100% ownership basis). RECOVERY PLANT FEED RATE 200,000tpa HIGH-GRADE VANADIUM BEARING SLAG Products 12.12m lbs pa. high purity V2O5 OPEX US$3.92/lb CAPITAL COSTS US$159m PAYBACK $0/t on a diluted block by block basis from the parameters used in the pit optimisation. See ASX Release 22 May 2019 titled: DFS Results for Barrambie Vanadium Production and commencement of Titanium Pilot Program There has been no change in the Ore Reserve estimate since last year’s Annual Statement. Competent Persons Statement The information in this Annual Statement for Barrambie that relates to Mineral Resources is based on, and fairly represents, the ASX announcement dated 17 April 2018 (Updated Barrambie Mineral Resource Estimate) which was prepared by a Competent Person (Mr John Graindorge). The information in this Annual Statement for Barrambie that relates to Ore Reserves is based on, and fairly represents, the ASX announcement dated 22 May 2019 (DFS Results for Barrambie Vanadium Production and commencement of Titanium Pilot Program) which was prepared by Competent Persons (Mr Frank Blanchfield and Mr Gavin Beer). The Mineral Resource and Ore Reserve statements has been approved by Mr Frank Blanchfield, who consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. Mr Blanchfield is an employee of Snowden Mining Industry Consultants Pty Ltd and is a fellow of the Australasian Institute of Mining and Metallurgy. The information in this announcement that relates to Ore Reserves (Metallurgy and Metallurgical Factors and Assumptions) is based on, and fairly represents, information and supporting documents, compiled by Gavin Beer who is a full-time employee of Neometals Ltd and is a Chartered Professional (Metallurgy) and Member of The Australasian Institute of Mining and Metallurgy. Gavin Beer has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the JORC Code (2012). Gavin Beer consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. The estimated Ore Reserves underpinning the production targets in this announcement have been prepared by a competent person in accordance with the requirements of the JORC code (2012). Neometals Ltd 23 Annual Mineral Resource & Ore Reserve Statement (continued) 5 October 2020 Mt Edwards Nickel Project Mineral Resource Statement Mineral Resource Classification Deposit Widgie 3 (1) Gillett (5) Widgie Townsite (2) Munda (3) Mt Edwards 26N (2) 132N (6) Cooke (1) Armstrong (4) McEwen (1) McEwen Hangingwall (1) Zabel (1) TOTAL Indicated Inferred TOTAL Mineral Resources Tonne (kt) Nickel (%) Tonne (kt) Nickel (%) Tonne (kt) Nickel (%) 2,193 1.9 34 526 2.9 2.1 2,829 2.0 625 1,306 320 575 426 150 107 1,070 1,060 330 5,553 1.5 1.7 2.2 1.4 1.9 1.3 2 1.3 1.4 1.8 1.5 625 1,306 2,193 320 575 460 150 633 1,070 1,060 330 8,382 1.5 1.7 1.9 2.2 1.4 2.0 1.3 2.1 1.3 1.4 1.8 1.7 Nickel Tonnes 9,160 22,500 40,720 7,140 8,210 9,050 1,950 13,200 13,380 14,840 5,780 146,000 Mineral Resources quoted using a 1% Ni block cut-off grade, except Munda at 1.5% Ni. Small discrepancies may occur due to rounding (1) refer announcement on the ASX: NMT 19 April 2018 titled Mt Edwards JORC Code Mineral Resource 48,200 Nickel Tonnes (2) refer announcement on the ASX: NMT 25 June 2018 titled Mt Edwards Project Mineral Resource Over 120,000 Nickel Tonnes (3) refer announcement on the ASX: NMT 13 November 2019 titled Additional Nickel Mineral Resource at Mt Edwards (4) refer announcement on the ASX: NMT 16 April 2020 titled 60% Increase in Armstrong Mineral Resource (5) refer announcement on the ASX: NMT 26 May 2020 titled Increase in Mt Edwards Nickel Mineral Resource (6) refer announcement on the ASX: NMT 6 October 2020 titled 132N Nickel Mineral Resource and Exploration Update at Mt Edwards Annual Report 2020 24 Annual Mineral Resource & Ore Reserve Statement (continued) 5 October 2020 Mt Edwards Nickel Project – Change in Mineral Resource from 2019 to 2020 As per listing rule 5.21.4 a comparison Is made with last year’s Mineral Resource statement as there have been material differences due to the acquisition of Munda and the re-estimation of Armstrong, Gillett and 132N Mineral Resources following additional drilling by Neometals. An additional 22,660 Nickel Tonnes have been added to the Total Mineral Resource. The table below summarises these material changes. Total Mineral Resources 2019 Total Mineral Resources 2020 Variation from 2019 to 2020 Deposit Widgie (3) Tonne (kt) Nickel (%) Nickel Tonnes Tonne (kt) Nickel (%) Nickel Tonnes Tonne (kt) Nickel (%) Nickel Tonnes comments 625 1.5 9,160 625 1.5 9,160 0 0 0 no change Gillett (5) 955 1.8 17,050 1,306 1.7 22,500 351 1.6 5,450 re-estimation of Mineral Resource with additional drilling Widgie Townsite Munda (3) Mt Edwards 26N 2,193 1.9 40,720 2,193 1.9 40,720 0 320 575 1.4 8,210 575 2.2 1.4 7,140 320 8,210 0 0.0 2.2 0.0 0 no change 7,140 acquisition and estimation during 2019/20 0 no change 132N (6) 120 3.4 4,070 460 2.0 9,050 340 1.5 4,980 re-estimation of Mineral Resource with additional drilling Cooke 150 1.3 1,950 150 1.3 1,950 0 0.0 0 no change Armstrong (4) 320 2.5 8,180 633 2.1 13,200 313 1.6 5,020 re-estimation of Mineral Resource with additional drilling. Measured material is now classified as Indicated McEwen McEwen Hangingwall Zabel TOTAL 1,070 1,060 330 7,398 1.3 1.4 1.8 1.7 13,380 1,070 14,840 1,060 5,780 330 123,340 8,722 1.3 1.4 1.8 1.7 13,380 14,840 5,780 0 0 0 146,000 1,324 0.0 0.0 0.0 1.7 0 0 0 no change no change no change 22,660 All Mineral Resources are reported at a 1% Ni cut-off grade, except for Munda which Is reported at 1.5% Ni. Small discrepancies may occur due to rounding (1) (2) (3) (4) (5) (6) refer announcement on the ASX: NMT 19 April 2018 titled Mt Edwards JORC Code Mineral Resource 48,200 Nickel Tonnes refer announcement on the ASX: NMT 25 June 2018 titled Mt Edwards Project Mineral Resource Over 120,000 Nickel Tonnes refer announcement on the ASX: NMT 13 November 2019 titled Additional Nickel Mineral Resource at Mt Edwards refer announcement on the ASX: NMT 16 April 2020 titled 60% Increase in Armstrong Mineral Resource refer announcement on the ASX: NMT 26 May 2020 titled Increase in Mt Edwards Nickel Mineral Resource refer announcement on the ASX: NMT 6 October 2020 titled 132N Nickel Mineral Resource and Exploration Update at Mt Edwards Neometals Ltd 25 Annual Mineral Resource & Ore Reserve Statement (continued) 5 October 2020 The information in this Annual Statement for Mt Edwards that relates to Munda, Armstrong, Gillett and 132N Mineral Resources is based on, and fairly represents, information and supporting documentation compiled and prepared by Mr Richard Maddocks. Mr Maddocks is a consultant to Auralia Mining Consulting and is a Fellow of the Australasian Institute of Mining and Metallurgy (member no. 111714) with over 30 years of experience and is a sole trader and an independent contractor to Neometals Ltd. Mr Maddocks has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the JORC Code. Mr Maddocks consents to the inclusion in this report of the matters based on his information in the form and content in which it appears. The information in this Annual Statement for Mt Edwards that relates to Widgie Townsite, Widgie 3 and McEwen, McEwen Hangingwall, and Zabel Mineral Resources is based on, and fairly represents, information and supporting documentation compiled and prepared by Mr Luke Marshall. Mr Marshall is a sole trader and independent contractor to Neometals Ltd. The information in this Annual Statement for Mt Edwards that relates to the Mt Edwards 26N Mineral Resource is based on, and fairly represents, information and supporting documentation compiled and prepared by Mr Andrew Bewsher. Mr Bewsher is an employee of BM Geological Services who provides consulting services to Neometals Ltd. Both Messrs Marshall and Mr Bewsher are Members of The Australasian Institute of Geoscientists have sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the JORC Code. Messrs Maddocks, Marshall and Bewsher have provided prior written consent as to the form and context in which the Mineral Resources and the supporting information are presented in this market announcement. The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements and, in the case of estimates of Mineral Resources or 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 Persons’ findings are presented have not been materially modified from the original market announcement. Annual Report 202026 Sustainability Benefiting society and the environment for a sustainable future. This section is a summary of Neometals’ sustainability activities from FY20. For more detailed information on material topics, management approaches and data performance, please see the full FY20 Neometals’ Sustainability Report available on the Neometals’ website. Neometals Ltd Neometals Ltd Sustainability (continued) ESG and Sustainability at Neometals Sustainability Objective “Neometals is committed to optimising finite resources with circular practices to benefit society and the environment for a sustainable future.” Sustainability Pillars Ethics and Accountability • Ethical values • Transparent and accountable governance • Stakeholder respect and engagement • Supply chain integrity Community Benefit • Shared economic and social outcomes • Employment opportunity • Products for a sustainable future • Taxes and royalties contribution People • Human rights and dignity • Health, safety and wellbeing • Diversity and equal opportunity • Training and education Environmental Care • Resource optimisation and rehabilitation • Emissions and waste control • Energy efficiency • Water management 27 27 Annual Report 2020 Annual Report 2020 28 28 Sustainability (continued) FY20 Highlights / Achievements Ethics and Accountability Ethical Values Added sustainability as new Neometals’ core value Transparent and Accountable Governance Risk management framework aligns to ISO 31000 including sustainability risks Stakeholder Respect and Engagement New stakeholder engagement for Vanadium recovery project Supply Chain Integrity Strengthened strategic emphasis across transparent EV and ESS supply chains Community Benefit Shared Economic and Social Outcomes A$36.73M contribution to the Australian economy in FY20 Employment Opportunity 31.25%% growth in employee numbers FY20 Products for a Sustainable Future Core projects directly and indirectly support decarbonisation of EV & ESS supply chains Taxes and Royalties Contribution Transparent tax reporting Positive contribution FY20 Neometals Ltd Neometals Ltd 29 Sustainability (continued) People Human Rights and Dignity Signatory of United Nations Global Compact Health, Safety and Wellbeing All staff completed first aid training Diversity and Equal Opportunity 33% female employees 28% female board members Training and Education Ongoing professional development and training for each staff member Environmental Care Resource Optimisation and Rehabilitation Resource-saving production methods and energy-efficient materials Emissions and Waste Control Measured GHG emissions for the first time Energy Efficiency All 17 R&D projects investing in innovative energy efficiency opportunities Water Management Zero water discharge design on the battery recycling plant Annual Report 2020 Annual Report 202030 30 Sustainability (continued) Ethics and Accountability Ethical Values Unethical corporate behaviour is a key inhibitor of sustainable business and is linked to negative impacts including preventing social progress, environmental damage and abuse of human rights. This behaviour includes corruption, bribery, facilitation payments, fraud, extortion, collusion and money laundering. Neometals assesses the risk of corruption when doing business and ensures alignment of ethical values in this area with business partners. Neometals commits to integrity and responsible business practices with internal procedures supporting the company’s anti-corruption commitment. Neometals’ Core Values “Act ethically with honesty, transparency and openness in all that we do”. Case Study: Lithium-Ion Battery Recycling Project Together with its recycling JV partner, SMS group of Germany, Neometals aims to utilise its proprietary sustainable process to commercially recover valuable constituents from scrap and end of life lithium ion batteries. The project will sit within the electric vehicle supply chain to supply battery chain participants with recycling services as well as high purity chemicals ahead of battery manufacture. The project will add transparency and assurance to value chains that can be associated with high risk, low standard production methods that have negative environmental and community impacts. Neometals Ltd Stakeholder respect and engagement Neometals strives to be a respected corporate citizen and to communicate and operate in a manner that encourages a lasting, beneficial and constructive relationships with all of its stakeholders. This is guided by the Board Policy concerning communications with shareholders, security holders and other stakeholders. The Board seeks to ensure that the Group communicates openly with its relevant stakeholders in a timely and effective manner including via the Company’s website. Neometals Ltd Sustainability (continued) Neometals also sees the benefits of engaging with stakeholders at preliminary stages of development. An example opposite illustrates the steps being prepared on the Company’s vanadium recovery project in Scandinavia. This level of preparation is now inherent in all projects and pervades corporate thinking. Transparent and accountable governance Neometals is committed to implementing high standards of corporate governance and risk management. In determining what those high standards should be, amongst other relevant governance guidelines and principles, Neometals ensures that its practices are consistent with the ASX Corporate Governance Principles and Recommendations 4th Edition - 2019. Supported by the managers of sustainability-related functions, the Board oversees policies, management systems, performance, reporting and compliance related to risk, health, safety, environment, community and HR. Neometals’ risk management framework aligns to AS/NZS ISO 31000 and is regularly reviewed to ensure its effectiveness and continuing relevance to operations. Neometals discloses any material exposure it may have to economic, environmental, social or other sustainability risks. Supply chain integrity Neometals is a project development business with diversified projects that intersect across the electric vehicle and energy storage supply chains. Neometals’ strategic focus revolves around de-risking and developing long life projects, concerning minerals and advanced materials, relevant to the global energy storage megatrend. Neometals targets doing this with strong partners and integrating along the value chain to deliver improved productivity and margins, greater sustainability and enhanced value return to stakeholders. Neometals has integrated opportunities to participate in these supply chains, from upstream minerals extraction, midstream value-adding to generate advanced materials and end-of-product-life recycling. Despite each core project sharing some supply chain similarities, each is nuanced with a variety of specialist partners required. 31 31 Case Study: Stakeholder engagement in Sweden Neometals’ Vanadium recovery project team has engaged with a range of stakeholders from service providers, government agencies and landowners and have been communicating updates via the ASX and Neometals website. When exploring options for the potential site to process waste material from SSAB’s Lulea steel works, a public consultation process was initiated to consider the views of local stakeholders. “Regimented procedure is actually welcomed by Neometals as it supports our desire to gather feedback, listen and optimise as required. We look forward to engaging with more and more stakeholders in Sweden as project feasibility considerations mature.” Darren Townsend Neometals Chief Development Officer Neometals’ Board has ultimate responsibility for sustainability strategy, performance and management of sustainability risks and opportunities. Annual Report 2020 Annual Report 202032 32 Sustainability (continued) Employment opportunity Neometals can only contribute to a sustainable future with the help of its valued employees. Neometals firmly believes that engaged employees are productive employees and recognises the essential role they play in achievement of strategic objectives. Neometals also seeks to attract and retain talent through its strong ESG-centric corporate purpose. This means offering meaningful training and professional development, competitive remuneration and flexible working arrangements to promote work- life balance. Neometals has adopted a flexible staff review process with ongoing monitoring, feedback and communication throughout the year. 100% of employees receive regular performance and career development reviews. Neometals strives to ensure proactive, agile maintenance of a committed, engaged and productive workforce. Neometals Ltd Community Benefit Shared economic and social outcomes Neometals’ economic and financial contributions to society aim to benefit its stakeholders, society and the environment for a sustainable future. This is measured as much by the superior returns it delivers to its shareholders as by the positive legacies it leaves in its communities. Neometals makes significant contribution to local, regional and national economies directly through the payment of taxes and royalties to governments, as well as direct contribution to its workforce and suppliers. Neometals continues to invest in partnerships in the communities in which it operates. This includes investments in R&D and charitable/community organisations. As projects are intended to be long-term developments, the Company will facilitate long-term, positive economic and social impact through trusting partnerships with local and national stakeholders. Neometals supports a range of social initiatives with over $250,000 of financial support in FY20. Products for a sustainable future Neometals’ diversified portfolio encompasses minerals and materials across the value chain with a focus on electric vehicle and energy storage industries. Each of its opportunities is globally-relevant and directly and indirectly supports a sustainable future. Neometals’ recycling projects generate valuable materials without upstream mining and extraction risks, are a strategic source of green and ethical non-mine battery materials and align with the global drive to reduce greenhouse emissions and contribute to circular and closed-loop economies. In addition to the $68,000 in donations, including staff salary sacrifice, the Neometals team visited Foodbank to deepen its partnership and future support opportunities with the charity. 33 33 Over $6.5m of tax contributions since FY15 Sustainability (continued) Taxes and royalties contribution Taxes are important sources of government revenue and are also a key mechanism by which organisations contribute to the economies of the countries in which they operate. Organisations have an obligation to comply with tax legislation, and a responsibility to their stakeholders to meet expectations of good tax practices. Tax avoidance can lead to reduced investment in public infrastructure and services. Neometals publicly reports tax contributions to increase transparency and promote trust and credibility in corporate tax practices and in tax systems. Public transparency enables stakeholders to make informed judgments about an organisation’s tax positions. Tax transparency also informs public debate and supports the development of socially-desirable tax policy. Neometals’ Socioeconomic Contributions Salaries/ Wages $5 million Taxes $0.28 million Goods/ Services $18.7 million Dividends $10.9 million Community Investment $0.25 million State Rent and Shire Rates $0.26 million TOTAL CONTRIBUTION $35 million Raw Material CO2 Savings - Traditional Mining vs Battery Recycling ) e n n o t ( q E - 2 O C 8.1 4.3 0 Primary Raw Minerals Extraction Incumbent Pyromet Recycling Method Leading Hydromet Recycling Method Neometals’ hydromet technology significantly reduces CO2 emissions, generating low-carbon materials from used batteries. Annual Report 2020 Annual Report 2020 34 34 Sustainability (continued) People Human rights and dignity Neometals is guided by its Code of Conduct in ensuring Human Rights of its stakeholders. Despite the Company’s modest size and early stage of project development, Neometals commits to: Neometals acknowledges that many indigenous peoples have historically suffered injustice. The Company consciously promotes and respects the customs and cultures of Australia’s first nation people and commits to working collaboratively and respectfully to achieve mutually-beneficial outcomes. • Identifying, preventing and mitigating COVID-19 response negative human rights impacts through impact assessments of our operations. • Implementing training that enables employees to address human rights in the course of their work. • Integrating human rights criteria into screening processes and including human rights criteria in performance requirements when making contracts with other parties. Neometals acknowledges that many indigenous peoples have historically suffered injustice. The Company consciously promotes and respects the customs and cultures of Australia’s first nation people and commits to working collaboratively and respectfully to achieve mutually-beneficial outcomes. Neometals recognises that COVID‐19 is rapidly evolving and seriously impacting global community. Whilst acknowledging the disruption to global societies and commerce, Neometals has managed operations and affairs with minor disruption and no material impacts to the business or employees have been felt. The safety and wellbeing of staff, partners and community are paramount at this time and Neometals continues to actively monitor any updates and continues to follow the advice of Government health experts. Case Study: UN Global Compact Neometals is pleased to confirm its participation in the Ten Principles of the United Nations Global Compact in the areas of human rights, labour, environment and anti-corruption. Neometals Ltd Neometals Ltd Sustainability (continued) Health, safety and well-being Neometals believes that workforce injuries can be prevented and will use its resources to seek to ensure its people get home safely to their families. This means always providing safe, suitable and sanitary work facilities. Neometals also believes that its peoples mental wellbeing is equally as important as their physical wellbeing. In addition to its Workplace Health and Safety Policy, Neometals has put in place a comprehensive safety, health and wellbeing program: • Aiming to prevent our employees suffering physical and mental harm on the job while promoting wellbeing and respecting privacy. • Engaging employees in the development, implementation and performance evaluation of health and safety policies and related management systems. • Ensuring hazard identification and risk assessment are central to all elements of health and safety systems and programs. Diversity and equal opportunity The Neometals Diversity Policy actively promotes diversity and equality among its workforce. This benefits the organisation by enabling access to a larger and more diverse workforce with a wider range of experience and perspectives. Neometals believes the benefits of diversity and equality also benefit its employees and flow through to society in general, promoting social stability and supporting further economic development. Neometals’ Diversity Policy and Code of Conduct prohibit discrimination against any person including employees, customers, suppliers or any other stakeholders, including its business partners, on any grounds. Neometals commits to providing protection from any type of workplace harassment, including physical, verbal, sexual or psychological harassment, abuse or threats. Training and education Neometals promotes continued education, training and upgrading employee skills. These are vital components that enables Neometals to achieve its strategic objectives. This includes transition assistance programs to facilitate continued employability, retirement or termination. Neometals actively encourages and financially supports it staff taking on further learning. The Company knows that building staff capacity will only be productive for the business and is proud to have support four staff members in learning development this year. 35 33% Female employees and 28% (2 of 7) female board members Over 6 hours training for each employee in FY20 Annual Report 2020 35 Annual Report 202036 36 Sustainability (continued) Environmental Resource optimisation and rehabilitation The planet’s resources are limited. If we are to sustain the long-term future of society, we must extract the maximum value from limited resources as efficiently as possible. Neometals strives to consume as few raw materials as possible consistent with its strategic objectives including making use of spent or waste material. Neometals aims to efficiently use input materials, which are converted to value-added products from which customer value and ultimately commercial value are generated. Neometals’ projects aim to have a high sustainability profile in terms of raw material consumption, production, marketing, use, disposal and recycling. Through its recycled products, Neometals strives to reduce virgin resource consumption in downstream industries, such as batteries and EVs and to reduce the greenhouse gas (GHG) footprint of its customers. First stage alignment with the Taskforce on Climate-related Financial Disclosures (TCFD) Governance The Board, with contributions from the senior leaders across the business, has oversight on climate-related risk. Strategy Our business strategy is based on opportunities in a low-carbon future. Risk management We will implement sound risk management practices to identify, assess and manage climate-related physical risks, transitional risks and opportunities. Metric and targets This Report serves to set a baseline, enabling measuring and eventually target-setting to occur. Emissions and waste control The conservation of natural resources and climate change are two of the biggest challenges now facing the global community. Despite Neometals not currently operating any emission-intensive projects, emissions are a material topic and the Company wishes to play its part in limiting global warming. Company emissions are generated from the use of electricity, heat and power for production processes and facilities, transportation and travel. Neometals aims to tread lightly with respect to energy consumption. It is committed to combating climate change and reducing climate emissions through both global and local efforts, and aims to mitigate climate risk in two ways: • • Reducing the carbon footprint of its own production and projects. Reducing its customers’ GHG emissions via Neometals’ renewable and circular solutions, like its hydromet battery recycling process. Full report viewable at: https://www.neometals.com.au/esg/ Neometals Ltd Neometals Ltd Sustainability (continued) Case Study: Metallurgy innovation “Neometals has designed a proprietary new, and eco-friendly, hydrometallurgical recovery and refining process that is based on the sustainability principles of maximum recovery, minimum energy consumption and minimum use of reagents and resources. A key part of the design and engineering strategy was to minimise fluid and air emissions. Most water used in the process is captured and re-circulated, while waste heat is capture and re-used where possible.” Gavin Beer Neometals General Manager, Processes & Metallurgy Energy efficiency Neometals aims to minimise energy consumption across its operations. By supplying materials for the EV and ESS sectors, it also focuses on helping reduce energy consumption in other sectors. Company energy consumption in FY20 will serve as a benchmark going forward. Neometals is contributing to global efforts to use energy more efficiently by promoting recycling and circular use of materials. The Group currently has 17 R&D projects underway, all of which are investing in innovation related to climate change risks and energy efficiency opportunities. Key projects are listed below: Water Management Efficient use of water is an important aspect of project management for all of the Company’s projects. Water is a crucial input factor for Neometals’ operating future, and water quality and scarcity could be important issues in water-stressed locations like Australia and India where droughts can occur. Increasing water scarcity in many countries is a long-term risk to growth and companies may be exposed to shortages, quality problems, price volatility and reputational issues. The impact of Neometals’ operations on water is currently limited as it has no production operations currently running. Therefore, use of water is limited to trial production processes and consumption in buildings. 37 37 Case Study: Battery recycling water innovation “Having a water balance with as close to zero discharge was one of the key design metrics on the recycling plant. Further, we can draw industrial water to a specification rather than rely on potable water” Mike Tamlin Neometals Chief Operating Officer Annual Report 2020 Annual Report 202038 Directors’ Report The directors of Neometals Ltd submit their report for the financial year ended 30 June 2020. The names and particulars of the directors of the Company during or since the end of the financial year are as follows: Current Directors Mr Steven Cole Non-executive Chairman Steven Cole has over 40 years of professional, corporate and business experience through senior legal consultancy, as well as a range of executive management and non-executive appointments. His extensive boardroom and board sub-committee experience includes ASX listed, statutory, proprietary and NFP organisations covering the industrial, financial, educational, professional services, agribusiness, health and resources sectors. Steven’s professional qualifications include: • Llb (hons)– University of Western Australia • AICD Company Directors Diploma and Fellow • Wharton Business School – University of Pennsylvania – Corporate Governance Program 2010 • Harvard – Corporate Governance Program 2015 Appointed: 24 July 2008 Special responsibilities: Chairman of each of the Nomination and Remuneration Committees and Member of each of the Audit and Risk Committees. Directorships of other listed companies: Non-executive Director Matrix Composites and Engineering Ltd Mr David J. Reed OAM Non-executive Director David Reed is a Fellow of CPA Australia with over 45 years’ experience in stock broking and corporate management. From 1985 to 1997 Mr. Reed was Chairman of stock-broking firm Eyres Reed Ltd until its sale to CIBC World Markets in 1997 at which time he became Chairman of CIBC Australia, a position he held until 2003. Mr. Reed has served as Chairman of several ASX listed mineral exploration companies and served as Chairman of Neometals Ltd since inception in 2001 to 27 November 2015 when he was succeeded by Steven Cole. Mr. Reed is a former Chairman of the Fundraising Committee for the Australian Prospectors and Miners Hall of Fame and secretary of the Amalgamated Prospectors and Leaseholders Association and was a co-founder of the Diggers and Dealers Forum in Kalgoorlie. Mr. Reed received an Order of Australia Medal in 2002 for his service to the community. Appointed: 20 December 2001 Special responsibilities: Deputy Chairman and Member of the Nomination and Remuneration Committees Directorships of other listed companies: Nil Mr Christopher J. Reed Managing Director & CEO Christopher Reed is an accountant with over 25 years’ experience in the resource industry including more than 15 years in corporate administration and management. Christopher served as Managing Director of Reed Resources Ltd (now Neometals Ltd) from September 2007 until May 2012 at which time he assumed the role Executive Director. Christopher resumed the role as Managing Director from 1 October 2013. Mr. Reed holds a Bachelor of Commerce from the University of Notre Dame and a Graduate Certificate in Mineral Economics from the WA School of Mines. He is a member of the AusIMM. Appointed: 20 December 2001 Special responsibilities: CEO Neometals Ltd 39 Directors’ Report (continued) Current Directors (continued) Dr Natalia Streltsova Non-executive Director Natalia Streltsova is a PhD qualified chemical engineer with over 25 years’ experience in the minerals industry, including over ten years in senior technical and corporate roles with mining majors - WMC, BHP and Vale. Dr Streltsova has considerable international experience covering project development and acquisitions in South America, Africa and the Former Soviet Union. In the last 7 years, since finishing full-time executive roles, her focus has been on non-executive board memberships and consulting. She is a council member of Association of Mining and Exploration Companies and a graduate of the Australian Institute of Company Directors. Appointed: 14 April 2016 Special responsibilities: Chair of the Risk Committee and Member of each of the Remuneration and Audit Committees. Directorships of other listed companies: Western Areas Ltd & Ramelius Resources Limited Mr Douglas Ritchie Non-executive Director Doug has four decades experience working in the mining industry, including as a member of Rio Tinto’s Executive Committee, and the Group Executive responsible for China, Doug’s expertise across the industry is extensive. He has previously been a Director of Jinchuan Group International Resources (HKSE), Rossing Uranium Limited, Coal & Allied Limited (ASX 50), and various other ASX listed companies. He was also formerly Chairman of the Coal Industry Advisory Board to the International Energy Agency, a Director of the World Coal Association and a Director of the Queensland Resources Council. Between 2013 and April 2016, Doug was Chairman of UniQuest, the main commercialisation vehicle of the University of Queensland. Doug is a Fellow of the Australian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Company Directors. Appointed: 14 April 2016 Special responsibilities: Chairman of the Audit Committee and Member of each of the Nomination and Risk Committees. Directorships of other listed companies: Nil Dr Jenny Purdie Non-executive Director Dr Purdie’s extensive career has seen her hold roles in engineering, senior technology, strategy and operations for leading international mining companies. Dr. Purdie is currently a senior executive of Jemena Management Holdings – Executive General Manager Gas Distribution - which follows her role as CEO of Adani Renewables Australia from 2017 to 2018. Dr. Purdie previously served as Executive Vice President - Enterprise Services at Aurizon, Global Practice Leader for Rio Tinto’s Technology and Innovation team (leading a global network of in-house technologists and suppliers to deploy innovative technologies across Rio Tinto operations) and she filled engineering and management roles with Rio Tinto, Alcoa and Altona Petrochemical. Dr Purdie has worked in a number of senior management and operational roles and has been deeply immersed in technology development. She has a PhD and Bachelor of Engineering (Chemical and Materials, Hons 1) from Auckland University and an Executive MBA from the University of Queensland. She is a committee member of Women in Mining and Resources Queensland, a fellow of the Institution of Chemical Engineers and a graduate of the Australian Institute of Company Directors. Appointed: 27 September 2018 Special Responsibilities: Member of each of the Audit and Nomination Committees. Directorships of other listed companies: Nil Annual Report 202040 Directors’ Report (continued) Current Directors (continued) Mr Les Guthrie Non-executive Director Mr Guthrie has over 40 years’ experience in the project delivery space. He has held corporate executive and project management roles, across the UK, Australia, North America and Asia. It is a background steeped in the strategy, development and delivery of major capital programs spanning mining, infrastructure and oil and gas. He is currently Managing Director of Bedford Road Associates, where he has provided advice and delivery support to clients in Mongolia, S.Korea, New Zealand as well as in Australia. He was recently invited to be the sole international guest speaker at a conference jointly hosted by Seoul National University and the Korean Ministry of Trade & Industry. Prior to establishing Bedford Road Mr Guthrie was Vice President Projects for BHP Billiton. Previously he held roles as Group Head of Capital Projects and President LNG for BG Group in the UK, President of Aker Kvaerner Inc. in the US, and Managing Director of Aker Kvaerner Australia. Mr Guthrie was a founding contributor to the John Grill Centre for Project Leadership at Sydney University and he is a member of the Australian Institute of Company Directors and serves on the boards of Australian Mines Ltd (ASX:AUZ) and DRA Global. Appointed: 27 September 2018 Special responsibilities: Member of the Risk Committee and Remuneration Committee. Directorships of other listed companies: Australian Mines Ltd (ASX:AUZ) and DRA Global Company Secretary Mr Jason Carone Chief Financial Officer and Company Secretary Mr Carone is a Chartered Accountant with over 20 years’ experience in accounting and company administration in Australia and South East Asia. Mr Carone holds a Bachelor of Commerce in Accounting and Business Law from Curtin University and is a member of the Chartered Accountants Australia & New Zealand, and Chartered Secretaries Australia. Appointed: 4 March 2009 Review of Operations The consolidated loss after income tax for the year attributable to members of Neometals Ltd was $14.6 million (2019: Profit of $76.1 million). A detailed review of the Company’s operations during the financial year can be found on pages 6 to 21 of this Annual Financial Report. Changes in State of Affairs During the financial year, the Consolidated Entity’s primary focus centered on advancing its advanced minerals projects. There have not been any other significant changes in the affairs of the Consolidated Entity from the previous year other than as disclosed in the Directors’ Report. Principal Activities The Consolidated Entity’s principal activities during the year centred on advancing its advanced minerals projects and developing its technology business unit. Neometals Ltd 41 Directors’ Report (continued) Events after the Reporting Period Further to the Company’s announcement during the December 2019 quarter that it had entered a binding memorandum of understanding with leading global processing plant manufacturer SMS, SMS successfully concluded its due diligence in the last half of the financial year. Subsequently, on 31 July 2020 Neometals announced the execution of formal agreements governing the formation and operation of an incorporated 50:50 joint venture (“JV”) with SMS, called Primobius GmbH (“Primobius”). Primobius aim is to commercialise Neometals’ proprietary lithium-ion battery (“LiB”) recycling technology (for further details see Neometals ASX announcement dated 31 July 2020). No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect the operations, results of operations or state of affairs of the Group in subsequent financial years. COVID-19 Neometals recognises that COVID-19 is a rapidly evolving situation impacting us all. Whilst acknowledging the disruption to global commerce, Neometals finds itself well placed to continue to progress its projects and will continue to monitor any impacts the pandemic may have on its projects. The COVID-19 outbreak and disruption during the latter part of the financial year has not had an impact on Neometals financially. Financial assistance received by the Group included $87,618 in payroll tax relief for the months of March through to June. At this point in time the Company is experiencing minor delays in project timelines as a result of the pandemic. These delays are not expected to be significant. Future Developments The Consolidated Entity intends to continue its focus on disciplined evaluation and development of its four core assets, Lithium-ion Battery Recycling, Vanadium Recovery, Lithium Refinery Project and the Barrambie Titanium and Vanadium Project. These core projects are characterised by a combination of proven and innovative process flow sheets, successful mining operations and large JORC – compliant Resources. Environmental Regulations As required by section 299(1)(f) of the Corporations Act the Company confirms that it has performed all of its environmental obligations in accordance with applicable environmental regulations. Dividends In respect of the financial year ended 30 June 2020, a special dividend of two cents per share, of which 7% was franked, was paid to the holders of fully paid ordinary shares on 3 April 2020. Indemnification of Officers and Auditors During the financial year the Company paid a premium in respect of a contract insuring the directors and officers of the Company and of any related body corporate against a liability incurred as a director or officer, to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Group or of any related body corporate against a liability incurred as such an officer or auditor. Unissued Shares under Option There were no unissued ordinary shares of the company, Neometals Ltd, under option at the date of this report. No shares of the Company were issued during or since the end of the financial year as a result of the exercise of an option over the unissued shares of the Company. Please refer to the Remuneration Report on page 52 for details of Performance rights issued as part of KMP remuneration. Annual Report 202042 Directors’ Report (continued) Directors’ Security Holdings The following table sets out each director’s relevant interest in shares, debentures, and rights or options in shares or debentures of the Company or a related body corporate as at the date of this report: Directors S. Cole C. Reed D. Reed D. Ritchie N. Streltsova J. Purdie L. Guthrie Directors’ Meetings Fully Paid Ordinary Shares Share Options Performance Rights Number 1,682,198 10,528,170 46,188,900 134,908 134,908 215,187 133,280 Number - - - - - - - Number - 3,020,834 - - - - - The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year, eight Board meetings, three Nomination Committee meetings, two Remuneration Committee meetings, two Risk Committee meetings and two Audit Committee meetings were held. Board of Directors Nomination Committee Remuneration Committee Risk Committee Audit Committee Held Attended Held (1) Attended Held (1) Attended Held (2) Attended Held Attended 8 8 8 8 8 8 8 7 8 8 8 8 8 8 3 n/a 3 n/a 3 n/a n/a 3 n/a 3 n/a 3 n/a n/a 2 n/a 2 2 n/a n/a n/a 2 n/a 2 2 n/a n/a n/a n/a n/a 2 2 2 n/a 2 n/a n/a 2 2 2 n/a 2 2 n/a n/a 2 2 2 n/a 1 n/a n/a 2 2 2 n/a Directors S. Cole C. Reed D. Reed D. Ritchie N. Streltsova J. Purdie L. Guthrie Meeting numbers in the ‘Held’ column are the number of meetings held whilst the relevant director was a member of the board or committee. (1) (2) Excludes several informal meetings of the members of the Nomination and Remuneration Committee to discuss matters including the establishment of executive KPIs for incentive based remuneration and the TSR comparator group, board evaluation and board succession planning. Excludes several informal meetings of the members of the Risk Committee and management to discuss matters including the Company’s strategic direction and resultant changes in risk exposure. Proceedings on Behalf of the Company No person has applied for leave of the court to bring proceedings on behalf of the Company or 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. The Company was not a party to any such proceedings during the year. Neometals Ltd 43 Directors’ Report (continued) Corporate Governance Statement The Company is committed to high standards of corporate governance designed to enable the Company to meet its performance objectives and better manage its risks. The Company has adopted a comprehensive governance framework in the form of a formal corporate governance charter together with associated policies, protocols and related instruments (together ‘Charter’). The Company’s Charter is based on a template which has been professionally verified to be complementary to and in alignment with the ASX Corporate Governance Council Principles and Recommendations 4th Edition 2019 (‘ASX CGC P&R’) in all material respects. The Charter also substantially addresses the suggestions of good corporate governance mentioned in the ‘Commentary’ sections of the ASX CGC P&R. The Charter was formally adopted by the board on 19 December 2019. Prior to that date the Company’s corporate governance charter was substantially reflective of the ASX Corporate Governance Council Principles and Recommendations 3rd Edition. The Board of Neometals is responsible for the corporate governance of the company and its subsidiaries. The Board has governance oversight of all matters relating to the strategic direction, corporate governance, policies, practices, management and operations of Neometals with the aim of delivering value to its Shareholders and respecting the legitimate interest of its other valued stakeholders, including employees, suppliers and joint venture partners. Under ASX Listing Rule 4.10.3, Neometals is required to provide in its annual report details of where shareholders can obtain a copy of its corporate governance statement, disclosing the extent to which the Company has followed the ASX Corporate Governance Council Principles and Recommendations in the reporting period. Neometals has published its corporate governance statement on the Corporate section of its website: www.neometals.com.au/reports/corporate-governance-statement.pdf Annual Report 202044 Remuneration Report (audited) Key Management Personnel The following persons were deemed to be Key Management Personnel (“KMP”) during or since the end of the financial year for the purpose of Section 300A of the Corporations Act 2001 and unless otherwise stated were KMP for the entire reporting period. Non-executive Directors • Steven Cole Non-executive Director/Chairman • David Reed Non-executive Director/Deputy Chairman • Natalia Streltsova Non-executive Director • Douglas Ritchie Non-executive Director • Jenny Purdie Non-executive Director • Les Guthrie Non-executive Director Executive Directors • Christopher Reed Managing Director and CEO Other executives • Jason Carone Chief Financial Officer and Company Secretary • Michael Tamlin Chief Operating Officer • Darren Townsend Chief Development Officer Remuneration Policy for Key Management Personnel Non-executive Directors The board’s policy is to remunerate Non-executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Remuneration Committee on behalf of the board determines payments to the Non-executive Directors and reviews their remuneration annually, based on market practice, shareholder sentiment, board workload, company cashflow capacity and corporate performance generally. Independent external advice and/ or benchmark comparisons are sought when required. The maximum aggregate amount of fees that can be paid to Non-executive Directors is $600,000 as approved by shareholders at the Annual General Meeting on 27 November 2015. Fees for Non-executive Directors are not linked to the performance of the economic entity. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and invited to salary sacrifice fees for performance rights pursuant to the company’s Performance Rights Plan (‘PRP’). General The remuneration policy for employees is developed by the Remuneration Committee taking into account market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. The Company adopted a revised PRP for its staff, executive KMP and Non-executive Directors in November 2017 and shareholders reapproved the issue of securities under the plan in November 2017. The board believes that the PRP will assist the Consolidated Entity in remunerating and providing ongoing incentives to employees of the Group. The rules of the PRP enable the Company to issue performance rights to eligible personnel subject to performance and vesting conditions determined by the Company. Each performance right entitles the holder, for nil cash consideration, to one fully paid ordinary share in the Company for every performance right offered, if the applicable performance and vesting conditions set for that holder are satisfied. Neometals Ltd 45 Remuneration Report (audited) (continued) During the financial year a total of 3,408,604 (2019: 2,137,056) performance rights were offered to and accepted by KMP. Of this amount 2,824,251 performance rights are subject to relative and absolute Total Shareholder Return (‘TSR’) and other strategic hurdles, details of which can be found in the ‘Service agreements - performance based remuneration’ section below. Testing undertaken for the period ended 31 December 2019 and 30 June 2020 resulted in no performance rights subject to the TSR criteria vesting. The Group’s remuneration policy for executive KMP seeks to balance its desire to attract, retain and motivate high quality personnel with the need to ensure that remuneration incentivises them to pursue growth and success of the Company without taking undue risks and without it being excessive remuneration. To align the interests of the executive with that of the company remuneration packages for executive KMPs contain the following key elements: a) Fixed Base Salary – salary, superannuation and non-monetary benefits. b) Short-Term Incentives – cash bonus incentives applied to a maximum percentage of Fixed Base Salary and structured against relative satisfaction (at the reasonable discretion of the board) of certain corporate and personally related key performance indicators of the executive. c) Long-Term Incentives – the grant of performance rights in the Company, with value capped to a maximum percentage of Fixed Base Salary, vesting progressively while the executive remains employed, with the degree of vesting structured against the Company’s relative and absolute TSR performance against a comparator group of companies as well as other strategic hurdles. The Company’s remuneration is specifically designed to encourage loyalty and longevity of employment as well as aligning the employee’s interests with those of the Company and the creation of genuine long-term sustainable value for security holders. All remuneration provided to KMP in the form of share based payments are valued pursuant to AASB 2 Share-based Payment at fair value on grant date and are expensed on a pro rata basis over the vesting period of the relevant security. Relationship between the Remuneration Policy and Company Performance The table below sets out summary information about the Consolidated Entity’s earnings and movements in shareholder wealth for the five years to June 2020. Revenue (i) Net profit / (loss) before tax (ii) Net profit / (loss) after tax (iii) Share price at start of year Share price at end of year Market capitalisation at year end (undiluted) Basic profit / (loss) per share Diluted profit / (loss) per share Dividends paid 30 June 2020 30 June 2019 30 June 2018 30 June 2017 30 June 2016 $ $ - (19,837,973) (14,553,693) 0.21 0.16 - (19,242,733) 76,178,556 0.30 0.21 $ Restated - 4,009,985 15,679,541 0.27 0.30 $ - 4,745,744 4,963,444 0.450 0.270 $ - 83,832,380 84,606,280 0.091 0.450 87,122,706 114,234,596 163,059,742 147,447,206 251,590,166 (2.67) (2.67) 10,890,338 0.1400 0.1401 10,879,485 0.0290 0.0288 5,435,325 0.0085 0.0084 11,260,217 0.1568 0.1562 11,181,785 (i) (ii) (iii) Although three financial years have returned a net profit before tax there has been no revenues from ordinary activities. The group has been profitable in those financial years from the sell down of the investment held in RIM in 2016 and 2019, and respective associate profits booked from the project in 2017 and 2018 and an impairment reversal in 2018 relating to the Barrambie project. Exclusive of profits resulting from discontinued operations. Inclusive of profits resulting from discontinued operations. Annual Report 202046 Remuneration Report (audited) (continued) Key Management Personnel Remuneration The KMP received the following amounts during the year as compensation for their services as directors and executives of the Company and/or the Group. Short-Term Employee Benefits Post- Employment Benefits Share Based Payments Salary and Fees Bonus FY 19’20 Non- Monetary (1) 2020 $ $ $ Super- annuation Shares Perfor- mance Rights $ $ $ Other $ Non-executive Directors S. Cole D. Reed N. Streltsova D. Ritchie J. Purdie L. Guthrie 73,059 73,059 62,100 62,100 54,795 63,927 389,040 Executive Directors C. Reed 515,000 515,000 - - - - - - - - - - - - - - 90,000 90,000 41,109 41,109 Other Executives M. Tamlin J. Carone D. Townsend Total 349,400 305,000 335,000 989,400 1,893,440 61,776 41,250 59,400 162,426 252,426 50,776 11,795 - 62,571 103,680 - - - - - - - - - - - - - 6,941 6,941 5,900 5,900 5,205 6,073 36,960 25,000 25,000 25,000 25,000 25,000 75,000 136,960 - - - - - - - - - - - - - Short-Term Employee Benefits Post- Employment Benefits Share Based payments Salary and Fees Bonus FY 18’19 Non- Monetary (1) 2019 $ $ $ Other $ Super- annuation Shares Options and Rights $ $ $ Non-executive Directors S. Cole D. Reed N. Streltsova D. Ritchie J. Purdie L. Guthrie 73,059 73,059 62,100 62,100 54,795 54,795 379,908 Executive Directors C. Reed 515,000 515,000 Other Executives M. Tamlin J. Carone D. Townsend Total 349,400 305,000 335,000 989,400 1,884,308 - - - - - - - 90,000 90,000 60,000 60,000 40,000 160,000 250,000 - - - - - - - 50,351 50,351 9,218 17,528 - 26,746 77,097 (1) Relates to fringe benefits received by key management personnel - - - - - - - - - - - - - 6,941 6,941 5,900 5,900 5,205 5,205 36,092 25,000 25,000 25,000 25,000 25,000 75,000 136,092 - - - - - - - - - - - - - Total $ 130,000 80,000 80,000 80,000 80,000 80,000 530,000 50,000 - 12,000 12,000 20,000 10,000 104,000 240,140 240,140 911,249 911,249 93,060 77,388 108,904 279,352 623,492 580,012 460,433 528,304 1,568,749 3,009,998 Total $ 130,000 80,000 80,000 80,000 60,000 60,000 490,000 50,000 - 12,000 12,000 - - 74,000 189,970 189,970 870,321 870,321 513,908 70,290 465,157 57,629 486,957 86,957 214,876 1,466,022 478,846 2,826,343 Remuneration Linked to Performance % - - - - - - - 36 - 27 26 32 - - Remuneration Linked to Performance % - - - - - - - 32 - 25 25 26 - - Neometals Ltd 47 Remuneration Report (audited) (continued) Service Agreements - Performance based Remuneration The KMP of the Company, other than non-executive directors, are employed under service agreements. A summary of performance conditions for relevant KMP are detailed below: Mr. J. Carone Chief Financial Officer / Company Secretary Mr. C. Reed Managing Director Term No defined term Termination Three months’ notice period and three months’ termination payment Incentive based remuneration Short-Term Incentive Each financial year during the term of his service agreement the board, at its sole discretion, may award the KMP a cash bonus up to 25% of the KMP’s annual salary package ($330,000 inclusive of superannuation for 2019-20). The basis for calculating the STI will be a range of criteria including both the KMP’s personal performance and the Company’s financial performance/position and share price. The STI for 2019-20 was set at a maximum of $82,500 of which 50% or $41,250 was agreed to be paid by management. Long-Term Incentive Each financial year during the term of his service agreement the KMP is entitled to receive performance rights granted under the Company’s Performance Rights Plan. The number of performance rights to which the KMP may be granted is based on the following calculation and vesting of the performance rights are subject to further criteria which are also set out below. Calculation of potential entitlement to performance rights P = 33 100 X S VWAP Where P is the potential performance rights entitlement. S is the KMP’s annual salary package for the applicable period. VWAP is the 30 day volume weighted average price of ordinary shares in Neometals Ltd for the period ended 30 June of the preceding financial year. Term Expiry date of 30 June 2022 Termination notice period 12 months by employee Termination notice period Six months by executive Incentive based remuneration Short-Term Incentive Each financial year during the term of his service agreement the board, at its sole discretion, may award the KMP a cash bonus of up to one third of the KMP’s annual salary package ($540,000 inclusive of superannuation for 2019-20). The STI for 2019-20 was set at a maximum of $180,000 representing approximately 33% of the annual base salary package of which 50% or $90,000 was acknowledged and agreed by the Board and Mr C Reed. The basis for calculating the STI will be a range of criteria including both the KMP’s personal performance and the Company’s financial performance/position and share price. Long-Term Incentive Each financial year during the term of his service agreement the KMP is entitled to receive performance rights granted under the Company’s Performance Rights Plan. The maximum number of performance rights to which the KMP may be granted is based on the following calculation and vesting of the performance rights are subject to further criteria which are also set out below, as approved by shareholders. Calculation of potential entitlement to performance rights P = 50 100 X S VWAP Where P is the potential performance rights entitlement. S is the KMP’s annual salary package for the applicable period. VWAP is the 60 day volume weighted average price of ordinary shares in Neometals Ltd for the period ended 30 June of the preceding financial year. Annual Report 2020 48 48 Remuneration Report (audited) (continued) Service Agreements - Performance Based Remuneration (continued) Mr. M. Tamlin Chief Operating Officer Mr. D. Townsend Chief Development Officer Term No defined term Termination Six months Term No defined term Termination Six months Incentive based remuneration Incentive based remuneration Short-Term Incentive Each financial year during the term of his service agreement the board, at its sole discretion, may award the KMP a cash bonus of up to 33% of the KMP’s annual salary package ($374,400 inclusive of superannuation for 2019- 20). The STI for 2019-20 was set at a maximum of $123,552 representing approximately 33% of the annual base salary package of which 50% or $61,776 was acknowledged and agreed by the board and Mr M Tamlin. The basis for calculating the STI will be a range of criteria including both the KMP’s personal performance and the Company’s financial performance/position and share price. Long-Term Incentive Each financial year during the term of his service agreement the KMP is entitled to receive performance rights granted under the Company’s Performance Rights Plan. The maximum number of performance rights to which the KMP may be granted is based on the following calculation and vesting of the performance rights are subject to further criteria which are also set out below, as approved by shareholders. Calculation of potential entitlement to performance rights P = 33 100 X S VWAP Where P is the potential performance rights entitlement. S is the KMP’s annual salary package for the applicable period. VWAP is the 30 day volume weighted average price of ordinary shares in Neometals Ltd for the period ended 30 June of the preceding financial year. Short-Term Incentive Each financial year during the term of his service agreement the board, at its sole discretion, may award the KMP a cash bonus of up to 33% of the KMP’s annual salary package ($360,000 inclusive of superannuation for 2019-20). The STI for 2019-20 was set at a maximum of $118,800 representing approximately 33% of the annual base salary package of which 50% or $59,400 was acknowledged and agreed by the CEO and Mr D Townsend. The basis for calculating the STI will be a range of criteria including both the KMP’s personal performance and the Company’s financial performance/ position and share price. Long-Term Incentive Each financial year during the term of his service agreement the KMP is entitled to receive performance rights granted under the Company’s Performance Rights Plan. The maximum number of performance rights to which the KMP may be granted is based on the following calculation and vesting of the performance rights are subject to further criteria which are also set out below, as approved by shareholders. Calculation of potential entitlement to performance rights P = 33 100 X S VWAP Where P is the potential performance rights entitlement. S is the KMP’s annual salary package for the applicable period. VWAP is the 30 day volume weighted average price of ordinary shares in Neometals Ltd for the period ended 30 June of the preceding financial year. Neometals Ltd Neometals Ltd Remuneration Report (audited) (continued) 49 49 Criteria The grant of Performance Rights is designed to reward long-term sustainable business performance measured over a three year period with an opportunity for the performance conditions to be re-measured six months later should they not vest at the first vesting date. The KMP’s entitlement to the performance rights is dependent on three criteria: (a) Tranche 1 – Relative TSR The performance conditions of 40% of Performance Rights will be measured as at each vesting date by comparing the Company’s total shareholder return (TSR) with that of a comparator group of resource companies over the relevant period. The Performance Rights will vest depending on the Company’s percentile ranking within the comparator group on the relevant Vesting Date as follows: • If the Company ranks below the 50th percentile, none of the Performance Rights will vest. • • If the Company ranks at the 50th percentile, 50% of the Performance Rights will vest. For each 1% ranking at or above the 51st percentile, an additional 2% of the Performance Rights will vest, with 100% vesting where the Company ranks at or above the 75th percentile. (b) Tranche 2 – Absolute TSR The performance conditions of 40% of Performance Rights will be measured as at each vesting date by calculating the Company’s TSR calculated over the period commencing on the Comparator Start Date and ending on the relevant Vesting Date (Absolute TSR). The Performance Rights will vest depending on the Company’s Absolute TSR on the relevant Vesting Date as follows: • • • If the Company’s Absolute TSR is less than 15%, none of the Performance Rights will vest. If the Company’s Absolute TSR is 15%, 50% of the Performance Rights will vest. For each additional 1% TSR above 15% Absolute TSR, an additional 10% of the Performance Rights will vest, with 100% vesting where the Company’s Absolute TSR is at or above 20%. (c) Tranche 3 – Business plan The performance conditions of 20% of Performance Rights will be measured as at each Vesting Date as follows: 10% will vest if the combined market capitalisation of Neometals and any entity demerged from the Neometals Group and separately listed on the ASX would meet the threshold for entry into the ASX/S&P 200 Index. 10% will vest if any two of the following are at least under construction via direct investment or joint venture involvement (as assessed by the Board): • a LiOH plant; • a Li-Battery recycling; • a Titanium / Vanadium mine or process. Performance rights granted to the KMP have a vesting period of three years from grant date and will lapse on the KMP ceasing to be an employee of the Group prior to the vesting date. Annual Report 2020 Annual Report 2020 50 Remuneration Report (audited) (continued) The Company provides the KMP with performance based incentives in order to incentivise KMP to pursue strategies that are aligned with the overall business strategy and the interests of the shareholders. Where deemed appropriate the Company has set specific Key Performance Indicators as performance criteria for staff that have a direct role/ responsibility in achieving a specific outcome. To ensure that KMP are also incentivised to pursue longer term strategies that increase shareholder wealth a portion of the KMP’s remuneration is linked to a ‘comparative TSR model’ which links the level of the KMP remuneration to the Company’s performance against a group of comparable ASX listed entities, using Total Shareholder Return as the basis of comparison. KMP are also issued with performance rights with service conditions as vesting criteria which assist the company retain staff as well as aligning the interests of the KMP with shareholders. The Company has deemed the issue of service based performance rights as an appropriate form of remuneration due to the uncertain nature of the Group’s business, that is, mineral exploration, mining and developing new mineral processing technologies. The comparator group adopted by the company for LTI granted in 2018 (vest 2020) is as follows: • Galaxy Resources Limited (ASX: GXY) • Global X Lithium ETF (NYSE Arca: LIT) • • TNG Ltd (ASX: TNG) S&P ASX Small Resources Index (ASXR: ASX) • Nemaska Lithium Inc. (TSX: NMX) • • S&P ASX 300 (XKO: ASX) Iluka Resources Limited (ASX: ILU) • Orocobre Limited (ORE.ASX) • • • Argex Titanium Inc. (TSX: RGX) Pilbara Minerals Limited (ASX: PLS) Umicore Belgium (BSE: UMI) The comparator group adopted by the company for LTI granted in 2019 (vest 2021) is as follows: • Galaxy Resources Limited (ASX: GXY) • Global X Lithium ETF (NYSE Arca: LIT) • • TNG Ltd (ASX: TNG) S&P ASX Small Resources Index (ASXR: ASX) • Nemaska Lithium Inc. (TSX: NMX) • • S&P ASX 300 (XKO: ASX) Iluka Resources Limited (ASX: ILU) • Orocobre Limited (ORE.ASX) • • • • Argex Titanium Inc. (TSX: RGX) Pilbara Minerals Limited (ASX: PLS) Umicore Belgium (BSE:UMI) AVZ Minerals Limited (ASX:AVZ) Neometals Ltd Remuneration Report (audited) (continued) The comparator group adopted by the company for LTI granted in 2020 (vest 2022) is as follows: 51 • Galaxy Resources Limited (ASX: GXY) • Global X Lithium ETF (NYSE Arca: LIT) • • TNG Ltd (ASX: TNG) S&P ASX Small Resources Index (ASXR: ASX) • Nemaska Lithium Inc. (TSX: NMX) • • S&P ASX 300 (XKO: ASX) Iluka Resources Limited (ASX: ILU) • Orocobre Limited (ORE.ASX) • • • • Argex Titanium Inc. (TSX: RGX) Pilbara Minerals Limited (ASX: PLS) Umicore Belgium (BSE:UMI) AVZ Minerals Limited (ASX:AVZ) The Company has selected the above group of companies as the comparator group for the following reasons: 1. It represents a reasonable cross section of resource companies with reasonably comparable market capitalisation, resource base and stage of development to that of the Company The group is primarily focused on developing industrial minerals projects. 2. The Company’s performance rights plan was approved by shareholders at the 2017 AGM. Annual Report 2020 52 Remuneration Report (audited) (continued) Performance Rights Issued as Part of KMP Remuneration Performance Rights Granted to Key Management Personnel The following tables summarises information relevant to the current financial year in relation to the grant of performance rights to KMP as part of their remuneration. Performance rights are issued by Neometals Ltd. During the Financial Year Grant Date No. Granted No. Vested Fair Value at Grant Date (3) Earliest Exercise Date Consideration Payable on Exercise 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 24/10/2019 1,233,021 493,335 559,711 538,184 68,512 68,512 285,467 114,187 47,675 3,408,604 - - - - 68,512 68,512 285,467 114,187 47,675 584,353 141,797 56,734 64,367 61,891 12,000 12,000 50,000 20,000 10,000 428,789 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2020 30/06/2020 30/06/2020 30/06/2020 30/06/2020 - - - - - - - - - - Name KMP C. Reed (1) J. Carone (1) M. Tamlin (1) D. Townsend (1) N. Streltsova (2) D. Ritchie (2) S. Cole (2) J. Purdie (2) L. Guthrie (2) Total (1) The number of performance rights that will actually vest, if any, is determined by the Company’s performance based on Neometals relative and absolute TSR compared to the comparative group of companies over a three year period and Business Plan strategic objectives. (2) These Non-executive Directors have forgone Directors Fees for performance rights pursuant to the company’s PRP. (3) These values have been calculated using the monte carlo valuation method. Details of performance rights held by KMP and of shares issued during the financial year as a result of the vesting of performance rights: Fair Value of Rights at Grant Date Vested During the Financial Year Forfeited/ Lapsed During the Financial Year Ordinary Shares Issued on Exercise of Rights Balance at 30/06/2020 Grant Date Granted No. $ No. No. No. No. Balance at 01/07/19 No. 2020 KMP C. Reed (1) J. Carone (1) M. Tamlin (1) D. Townsend (1) N. Streltsova (2) D. Ritchie (2) S. Cole (2) J. Purdie (2) L. Guthrie (2) 1,787,813 02/09/2019 677,168 02/09/2019 827,345 02/09/2019 812,602 02/09/2019 39,348 02/09/2019 39,348 02/09/2019 163,948 02/09/2019 - 02/09/2019 - 24/10/2019 1,233,021 493,335 559,711 538,184 68,512 68,512 285,467 114,187 47,675 141,797 56,734 64,367 61,891 12,000 12,000 50,000 20,000 10,000 - - - - 68,512 68,512 285,467 114,187 47,675 - - - - - - - - - - 3,020,834 1,170,503 1,387,056 1,350,786 68,512 68,512 285,467 114,187 47,675 7,513,532 - - - - 39,348 39,348 163,948 - - 242,644 Total 4,347,572 3,408,604 428,789 584,353 (1) The number of performance rights that will actually vest, if any, is determined by the Company’s performance based on Neometals relative and absolute TSR compared to the comparative group of companies over a three year period and Business Plan strategic objectives. (2) Under the Performance Rights Plan, Non-executive Directors were invited to forgo part of their fees for their services in exchange for performance rights. Neometals Ltd 53 Remuneration Report (audited) (continued) Performance Rights Issued as Part of KMP Remuneration (continued) Performance Rights Granted to Key Management Personnel (continued) 2019 KMP C. Reed (1) J. Carone (1) M. Tamlin (1) D. Townsend (1) N. Streltsova (2) D. Ritchie (2) S. Cole (2) Total Balance at 01/07/18 No. 1,573,735 586,075 703,290 444,015 - - - 3,307,115 Fair Value of Rights at Grant Date Vested During the Financial Year Forfeited/ Lapsed During the Financial Year Ordinary Shares Issued on Exercise of Rights Balance at 30/06/2019 Grant Date Granted No. $ No. No. No. No. 10/08/2018 10/08/2018 10/08/2018 10/08/2018 10/08/2018 10/08/2018 10/08/2018 835,339 307,156 383,330 368,587 39,348 39,348 163,948 209,252 76,943 96,024 92,331 12,000 12,000 50,000 - - - - 39,348 39,348 163,948 621,261 216,063 259,275 - - - - 1,787,813 677,168 827,345 812,602 39,348 39,348 163,948 2,137,056 548,550 242,644 1,096,599 4,347,572 - - - - - - - - (1) The number of performance rights that will actually vest, if any, is determined by the Company’s performance based on Neometals relative and absolute TSR compared to the comparative group of companies over a three year period and Business Plan strategic objectives. (2) Under the Performance Rights Plan, Non-executive Directors were invited to sacrifice part of their fees for their services in exchange for performance rights. The performance rights granted entitle the grantee to one fully paid ordinary share in Neometals Ltd for nil cash consideration on satisfaction of the vesting criteria. Use of Remuneration Consultants During the year no remuneration consultants were used in relation to the company’s Performance Rights Plan. This is the end of the audited remuneration report. Auditor’s Independence Declaration The auditor’s independence declaration is included on page 58 of the Annual Financial Report. Signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the directors of Neometals Ltd. Mr. Christopher Reed Managing Director West Perth, WA 23 September 2020 Annual Report 2020 54 Independent Auditor’s Report Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2 Brookfield Place 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au Independent Auditor’s Report to the Members of Neometals Ltd Report on the Audit of the Financial Report Opinion We have audited the financial report of Neometals (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2020, 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 statements, including a summary of significant accounting policies and other explanatory information, 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 2020 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. Neometals Ltd Independent Auditor’s Report (continued) 55 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 for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How the scope of our audit responded to the Key Audit Matter Exploration and Evaluation Assets and Expenditure As at 30 June 2020 the carrying value of exploration and evaluation assets totalled $44,058,921 as disclosed in Note 13. The Group’s accounting policy in respect of exploration and evaluation expenditure is disclosed in Note 2. • Significant judgement is required: • in determining whether facts and circumstances indicate that the exploration and evaluation assets should be tested for impairment in accordance with the relevant accounting standard; and in determining the treatment of exploration and evaluation expenditure: o whether the particular areas of interest meet the recognition conditions for an asset; and o which elements of exploration and evaluation expenditures qualify for capitalisation for each area of interest. Our procedures associated with exploration and evaluation expenditure incurred during the year included, but were not limited to: • • obtaining an understanding of the relevant controls associated with the capitalisation or expensing of exploration and evaluation expenditure; and testing the appropriateness and value of costs capitalised during the period, including whether they were consistent with the Group’s accounting policy. Our procedures associated with assessing the carrying value of exploration and evaluation assets included, but were not limited to: • • assessing the relevant controls associated with the identification of indicators of impairment; impairment evaluating management’s indicator assessment, including whether any of the following events exist at the reporting date which may indicate that exploration and evaluation assets may not be recoverable: o o o obtaining a schedule of the areas of interest held by the Group and confirming whether the rights to tenure of those areas of interest remained current at balance date; inquiring of management as to the status of ongoing exploration programmes the respective areas of interest; and assessing whether any facts or circumstances existed to suggest impairment testing was required. in • We also assessed the appropriateness of the disclosures in Notes 2(i) and 13 to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the Directors’ Report and Review of Operations, which we obtained prior to the date of this auditor’s report, and also includes the following information which will be included in the Group’s annual report (but does not include the financial report and our auditor’s report thereon): letter from the Chairman, and additional stock exchange information, which is expected to be made available to us after that date. Annual Report 202056 Independent Auditor’s Report (continued) Our opinion on the financial report does not cover the other information and we do not and will 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 identified above 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 on the other information that we obtained prior to the date of this auditor’s report, 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. When we read the letter from the Chairman, and additional stock exchange information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as intentional omissions, involve collusion, fraud may misrepresentations, or the override of internal control. forgery, • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Neometals Ltd Independent Auditor’s Report (continued) 57 • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 44 to 53 of the Directors’ Report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Neometals Ltd, for the year ended 30 June 2020, 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. DELOITTE TOUCHE TOHMATSU Ian Skelton Partner Chartered Accountants Perth, 23 September 2020 Annual Report 202058 Auditor’s Independence Declaration (continued) Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2, Brookfield Place 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 2 9322 7000 Fax: +61 8407 7001 www.deloitte.com.au The Board of Directors Neometals Ltd Level 1, 1292 Hay Street West Perth WA 6005 23 September 2020 Dear Board Members Neometals Ltd In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Neometals Ltd. As lead audit partner for the audit of the financial report of Neometals Ltd for the year ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU Ian Skelton Partner Chartered Accountants Limited liability by a scheme approved under Professional Standards Legislation. Member of Deloitte Australia Pacific Limited and the Deloitte Network. Neometals Ltd 59 Directors’ Declaration The directors declare that: (a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; (b) the attached financial statements are in compliance with International Financial Reporting Standards as stated in note 2 to the financial statements; (c) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and (d) the directors have been given the declarations required by s.295A of the Corporations Act 2001. Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the directors of Neometals Ltd, Mr. Christopher Reed Managing Director West Perth, WA 23 September 2020 Annual Report 202060 Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2020 Continuing operations Other income Interest income Employee expenses Occupancy expenses Administration expenses Finance costs Other expenses Marketing expenses Foreign exchange loss Impairment expense Share of loss of associate Loss before income tax Income tax benefit/(expense) Loss for the year from continuing operations Discontinued operations (Loss)/profit for the year from discontinuing operations (Loss)/profit for the year from continuing and discontinuing operations Other comprehensive income Total comprehensive (loss)/income for the year Earnings per share From continuing and discontinued operations: Basic (cents per share) Diluted (cents per share) Note 2020 $ 2019 $ 5 5 5 5 5 23 7 6 19 19 431,554 1,630,841 (6,623,940) (501,823) (3,461,528) (63,185) (6,262,439) (304,080) (86,438) (4,596,935) 512,147 1,140,353 (5,524,273) (879,782) (4,654,003) (60,649) (3,675,525) (405,217) (334) (5,226,805) - (468,645) (19,837,973) 5,284,280 (19,242,733) (3,263,494) (14,553,693) (22,506,227) - 98,684,783 (14,553,693) 76,178,556 - - (14,553,693) 76,178,556 (2.67) (2.67) 14.00 14.01 The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Neometals Ltd Consolidated statement of financial position 61 As at 30 June 2020 Current assets Cash and cash equivalents Trade and other receivables Other financial assets Total current assets Non-current assets Exploration and evaluation expenditure Intangibles Investments in joint venture Investment in associate Other financial assets Right of Use asset Other assets Property, plant and equipment Total non-current assets Total assets Current liabilities Trade and other payables Provisions Lease liability Total current liabilities Non-current liabilities Provisions Lease liability Deferred tax liability Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Note 28 (a) 11 12 13 22 23 12 21 14 15 16 21 16 21 7 17 18 2020 $ 2019 $ 77,043,016 385,213 1,192,757 78,620,986 44,058,921 793,053 1 3,531,048 5,396,000 1,044,969 - 2,011,931 56,835,923 109,462,006 627,599 782,927 110,872,532 36,983,106 662,888 1 7,062,095 4,787,118 - 345,016 1,774,520 51,614,744 135,456,909 162,487,276 2,182,786 1,170,935 500,878 3,854,599 1,326,359 721,854 - 2,048,213 5,902,812 2,089,652 1,154,882 - 3,244,534 1,378,062 - 3,786,582 5,164,644 8,409,178 129,554,097 154,078,098 154,437,267 8,368,130 (33,251,300) 154,264,634 7,620,733 (7,807,269) 129,554,097 154,078,098 This consolidated statement of financial position should be read in conjunction with the accompanying notes. Annual Report 202062 Consolidated statement of changes in equity For the year ended 30 June 2020 Investment Revaluation Reserve Other Equity Reserve Share Based Payments Reserve Accumu- lated Losses $ $ $ $ Issued Capital $ Total $ Balance at 01/07/18 154,101,518 1,019,637 300,349 5,774,546 (73,106,340) 88,089,710 Profit for the period Total comprehensive income for the period Recognition of share-based payments (see note 18) Recognition of shares issued under performance rights plan Issue of dividends Share issue costs, net of tax - - - 165,000 - (1,884) - - - - - - - - - - - - - - 76,178,556 76,178,556 76,178,556 76,178,556 691,201 (165,000) - - 691,201 - - - (10,879,485) - (10,879,485) (1,884) Balance at 30/06/19 154,264,634 1,019,637 300,349 6,300,747 (7,807,269) 154,078,098 Loss for the period Total comprehensive income for the period Recognition of share-based payments (see note 18) Recognition of shares issued under performance rights plan Issue of dividends Share issue costs, net of tax - - - 176,750 - (4,117) - - - - - - - - - - - - - - (14,553,693) (14,553,693) (14,553,693) (14,553,693) 924,147 (176,750) - - 924,147 - - - (10,890,338) - (10,890,338) (4,117) Balance at 30/06/20 154,437,267 1,019,637 300,349 7,048,144 (33,251,300) 129,554,097 This consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Neometals Ltd Consolidated statement of cash flows 63 For the year ended 30 June 2020 Cash flows from operating activities Research and development refund Payments to suppliers and employees Net cash used in operating activities Cash flows from investing activities Payments for property, plant & equipment Payments for intellectual property Payments for exploration and evaluation costs Payments for tenements acquired Interest received Investment in equity instruments acquired, net of disposals Loans repaid from associate Dividends received from RIM - Mt Marion Project Sale of Mt Marion Project Net cash generated by / (used in) investing activities Cash flows from financing activities Share issue costs Amounts deposited for security deposits Dividends paid Lease payments Interest and other finance costs paid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effect of exchange rates on cash balances Note 2020 $ 2019 $ 1,497,829 (14,812,599) (13,314,770) 523,088 (15,126,952) (14,603,864) 28 (c) (1,023,959) (312,192) (6,796,133) (550,000) 1,879,620 (697,367) - - - (7,500,031) (896,520) (217,896) (4,959,848) - 1,049,099 (154,348) 4,104,458 6,210,000 103,800,000 108,934,945 (4,117) (1,884) - (10,890,338) (645,884) (63,185) (11,603,524) (200,000) (10,879,485) - (60,649) (11,142,018) (32,418,325) 83,189,063 109,462,006 26,342,414 (665) (69,471) 6 10 Cash and cash equivalents at the end of the financial year 28 (a) 77,043,016 109,462,006 This consolidated statement of cash flows should be read in conjunction with the accompanying notes. Annual Report 2020 64 64 Index to Notes to the consolidated financial statements Note Contents 1 General Information 2 3 4 5 6 7 8 9 Significant Accounting Policies Critical Accounting Judgments and Key Sources of Estimation Uncertainty Parent Entity Disclosure Profit / Loss for the Year Continuing Operations Discontinued Operations Income Taxes Key Management Personnel Compensation Share Based Payments 10 Dividends on Equity Instruments Trade and Other Receivables 11 12 Other Financial Assets 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Exploration and Evaluation Expenditure Property, Plant and Equipment Trade and Other Payables Provisions Issued Capital Reserves Earnings Per Share Commitments for Expenditure Leases Joint Arrangements Investment in Associates Subsidiaries Segment Information Related Party Disclosures Auditors Remuneration 27 28 Notes to the Statement of Cash Flows 29 30 Financial Instruments Events After the Reporting Period Neometals Ltd Neometals Ltd 65 65 Notes to the consolidated financial statements 1. General Information Neometals Ltd is a limited public company incorporated in Australia and listed on the Australian Securities Exchange. The principal activities of the Consolidated Entity are mineral exploration. Neometals Ltd is the ultimate parent. Registered Office and Principal Place of Business Level 1, 1292 Hay St, West Perth WA 6005 2. Significant Accounting Policies Statement of Compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The financial statements comprise the consolidated financial statements of the Consolidated Entity, comprising Neometals Ltd and its controlled entities. For the purpose of preparing the financial statements the consolidated entity is a for-profit entity. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’). The financial statements were authorised for issue by the directors of Neometals Ltd on 23 September 2020. Basis of Preparation The financial report has been prepared on a going concern basis. The accounting policies adopted are consistent with those adopted and disclosed in the Consolidated Entity’s 2019 Annual Financial Report for the financial year ended 30 June 2019, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with IRFS. The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Boards (‘AASB’) that are relevant to its operations and effective for the current reporting period beginning 1 July 2019. The financial report has been prepared on the basis of historical cost except for the revaluation of certain non-financial assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. Going Concern The Directors believe that Neometals Ltd will continue as a going concern, and as a result the financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. As at 30 June 2020, Neometals Ltd had cash and cash equivalents of $77,043,016 and net current assets of $74,766,387 compared to 30 June 2019, when it had cash and cash equivalents of $109,462,006 and net current assets of $107,627,998. For the year ended on 30 June 2020, Neometals Ltd recorded a loss of $14,553,693 and experienced net operating cash outflows of $13,314,770. For the period ended 30 June 2019, Neometals Ltd recorded a profit of $76,178,556 and experienced net operating cash outflows of $14,603,864. The Directors believe that, based on current conditions and performance assumptions, that Neometals Ltd is sufficiently funded to meet its anticipated near-term funding needs, including required expenditure related to operations over the next 12 months. Standards and Interpretations adopted in the Current Year The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and effective for an accounting period that begins on or after 1 July 2019. New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Group include: • • • • AASB 16 Leases AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015–2017 Cycle AASB 2018-3 Amendments to Australian Accounting Standards – Reduced Disclosure Requirements Interpretation 23 Uncertainty over Income Tax Treatments and AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income Tax Treatments Annual Report 2020 Annual Report 2020 66 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) AASB 16 Leases In the current year, the Group has applied AASB 16 Leases, which is effective for annual periods that begin on or after 1 January 2019. The date of initial application of AASB 16 for the Group is 1 July 2019. AASB 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The impact of the adoption of AASB 16 on the Group’s consolidated financial statements is described below. The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The Group has applied an incremental borrowing rate of 3.5%. Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed payments), less any lease incentives receivable. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group has implemented the modified retrospective approach B, which has resulted in the Group’s assets and liabilities increasing by $1,631,224 as at 1 July 2019. There has been no impact on the comparative information or opening retained earnings as a result of the adoption. Standards and Interpretations Issued But Not Yet Effective At the date of authorisation of the financial statements, the following Australian Accounting Standards and Interpretations have been issued or amended but are not yet effective and have not been adopted by the Group for the year ended 30 June 2020. Standard AASB 17 Insurance Contracts AASB 2014-10 ‘Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and AASB 2015-10 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128’ Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January 2021 30 June 2021 1 January 2022 30 June 2023 Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Company for the annual reporting period ended 30 June 2020. The Company is assessing the impact of the new standards, however does not expect to have a material impact on the Company in the current of future reporting periods and on foreseeable future transactions. Critical Accounting Judgments and Key Sources of Estimation Uncertainty In the application of the Group’s accounting policies, management is required to make 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. Neometals Ltd 67 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Refer to note 3 for a discussion of critical judgments in applying the entity’s accounting policies, and key sources of estimation uncertainty. Significant Accounting Policies The following significant accounting policies have been adopted in the preparation and presentation of the financial report: (a) Cash and Cash Equivalents Cash comprises cash on hand and term deposits with a 30 day cancellation policy. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (b) Employee Benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. (c) Foreign Currency Translation Functional and Presentation Currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollar ($), which is Neometals Ltd’s functional and presentation currency. Transactions and Balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other income or other expenses. (d) Financial Instruments Issued by the Company Debt and Equity Instruments Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. Financial Assets Financial instruments are initially measured at fair value plus transaction costs except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed immediately. Financial instruments are subsequently measured at fair value, amortised cost using the effective interest rate method or at cost. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Quoted prices in an active market are used to determine fair value where possible. The group does not designate any interest in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. Amortised cost instruments are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. By default, all other debt investments and equity investments are measured subsequently at fair value through profit or loss (FVTPL). Annual Report 2020 68 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) The Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other comprehensive income ‘FVOCI’ or through the income statement ‘FVTPL’) and those to be held at amortised cost. The classification depends on the Group’s business model for managing its financial assets and the contractual terms of the cash flows. Impairment of Financial Assets The Group recognises a loss allowance for expected credit losses on investments in debt and equity instruments that are measured at amortised cost, FVTPL or at FVTOCI. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group recognises lifetime ECL (expected credit loss) when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. There has been no change in the estimation techniques or significant assumptions made during the current reporting period in assessing the loss allowance for these financial assets. Financial Liabilities Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial Liabilities at Fair Value Through Profit or Loss Financial liabilities are classified as at fair value through profit or loss where the financial liability is either held for trading or it is designated as at fair value through profit or loss. A financial liability is held for trading if: • It has been incurred principally for the purpose of repurchasing in the near future; or • It is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or • It is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading is designated as at fair value through profit or loss upon initial recognition if: • such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or • the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or • it forms part of a contract containing one or more embedded derivatives, and AASB 9 ‘Financial Instruments’ permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss. Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Other Financial Liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Transaction Costs on the Issue of Equity Instruments Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. Neometals Ltd 69 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) Interest and Dividends Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments. (e) Goods and Service Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (‘GST’), except: i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii) for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (f) Non-Current Assets Held for Sale Non-current assets and their disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less cost to sell. (g) Impairment of Non-Financial Assets At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately. (h) Income Tax Current Tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Annual Report 2020 70 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) Deferred Tax Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/Consolidated Entity intends to settle its current tax assets and liabilities on a net basis. Current and Deferred Tax for the Period Current and deferred tax is recognised as an expense or income in the profit and loss statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or gain on a bargain purchase. Tax Consolidation The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Neometals Ltd is the head entity in the tax-consolidated group. Income tax expense/benefit, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using a ‘group allocation’ approach based on the allocation specified in the tax funding arrangement. The tax funding arrangement requires a notional current and deferred tax calculation for each entity as if it were a taxpayer in its own right, except that unrealised profits, distributions made and received and capital gains and losses and similar items arising on transactions within the tax consolidated group are treated as having no consequence. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax consolidated group are recognised by the Company (as head entity in the tax consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable between the parent and the other members of the tax consolidated group in accordance with the arrangement. Where the tax contribution amount recognised by each member of the tax consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from the unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from, or distribution to, equity participants. Research & Development Tax offset In respect of Research and Development tax offsets, the Income tax approach (AASB 112) of accounting has been utilised, where the tax benefit is presented within the tax line in the Statement of Comprehensive Income. Neometals Ltd 71 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) (i) Exploration and Evaluation Expenditure Exploration and evaluation expenditures in relation to separate areas of interest are capitalised in the year in which they are incurred and are carried at cost less accumulated impairment losses where the following conditions are satisfied; i) the rights to tenure of the area of interest are current; and ii) at least one of the following conditions is also met: • the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or • exploration and evaluation 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. Capitalised exploration costs for each area of interest (considered to be the cash generating unit) are reviewed each reporting date to test whether an indication of impairment exists. If any such indication exists, the recoverable amount of the capitalised exploration costs is estimated to determine the extent of the impairment loss (if any). The recoverable amount for capitalised exploration costs has been determined as the fair value less costs to sell by reference to an active market. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision is made to proceed with development, accumulated expenditure is tested for impairment and transferred to capitalised development and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced. Development Expenditure Development expenditure is recognised at cost less any impairment losses. Where commercial production in an area of interest has commenced, the associated costs are amortised over the life of the reserves associated with the area of interest. Changes in factors such as estimates of proved and probable reserves that effect unit-of-production calculations are dealt with on a prospective basis. (j) Payables Trade payables and other accounts payable are recognised when the Consolidated Entity becomes obliged to make future payments resulting from the purchase of goods and services. (k) Principles of Consolidation The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the Consolidated Entity, being the Company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 10 ‘Consolidated Financial Statements’. A list of subsidiaries appears in note 24 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair value of the identifiable net assets acquired exceeds the cost of acquisition, the excess is credited to profit and loss in the period of acquisition. The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control and until such time as the Company ceases to control such entity. In preparing the consolidated financial statements, all inter-company balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full. (l) Property, Plant and Equipment Plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, costs are determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Annual Report 2020 72 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) Depreciation is calculated on a diminishing value basis so as to write off the net cost or other re-valued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period with the effect of any changes recognised on a prospective basis. The following estimated useful lives are used in the calculation of depreciation: Furniture & Fittings 5-20 years Plant and Equipment 2-10 years Buildings 10-20 years An item of property, plant and equipment is derecognised upon disposal when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit and loss. (m) Intangibles Trademarks, Licences and Customer Contracts Separately acquired trademarks and licences are shown at historical cost. Trademarks, licenses and customer contracts acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses. Research and Development Research expenditure is recognised as an expense as incurred. Development expenditure is recognised as an asset as incurred. Research and development costs previously recognised as an expense are not recognised as an asset in a subsequent period. (n) Provisions Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. Provision for Onerous Contract Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. (o) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Dividend and interest revenue Dividend revenue from investments is recognised when the shareholder’s right to receive the payment has been established. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. (p) Interests in Joint Operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Neometals Ltd 73 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation: • its assets, including its share of any assets held jointly; • its liabilities, including its share of any liabilities incurred jointly; • its revenue from the sale of its share of the output arising from the joint operation; • its share of the revenue from the sale of the output by the joint operation; and • its expenses, including its share of any expenses incurred jointly. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the AASBs applicable to the particular assets, liabilities, revenues and expenses. When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of other parties’ interests in the joint operation. When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party. (q) Share-Based Payments Equity-settled share-based payments to employees and others providing services to the Group are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Consolidated Entity’s estimate of shares that will eventually vest, with a corresponding increase in equity. Equity-settled share-based payments transactions with parties other than employees are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counter party renders the service. The fair value of performance rights are measured using a Monte Carlo Simulation. (r) Leased Assets The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of- use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed payments), less any lease incentives receivable. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the consolidated statement of financial position. (s) Investments in Associates and Joint Ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Annual Report 2020 74 Notes to the consolidated financial statements 2. Significant Accounting Policies (continued) A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The requirements of AASB 9 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with AASB 136 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with AASB 9. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no re-measurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. Neometals Ltd 75 Notes to the consolidated financial statements 3. Critical Accounting Judgments and Key Sources of Estimation Uncertainty In the application of the Group’s accounting policies, which are described in note 2, management is required to make 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 various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 3.1 Critical Judgments in Applying the Entity’s Accounting Policies The following are the critical judgments that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. (a) Recovery of Capitalised Exploration Evaluation and Development Expenditure The Group capitalises exploration, evaluation and development expenditure incurred on ongoing projects. The recoverability of this capitalised exploration expenditure is entirely dependent upon returns from the successful development of mining operations or from surpluses from the sale of the projects or the subsidiary companies that control the projects. At the point that it is determined that any capitalised exploration expenditure is definitely not recoverable, it is written off. (b) Share-Based Payments Equity-settled share-based payments granted are measured at fair value at the date of grant. The fair value of share options is measured by use of the Monte Carlo model and requires substantial judgement. Management has made its best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. The fair value of performance rights issued during the period was made with reference to the parent entity’s closing share price on the date of grant. Management has been required to estimate the probability that the employee will meet the performance criteria determined by the board and that the employee employed by the Group. 3.2 Key areas of Estimation Uncertainty The following are key assumptions concerning the future, or other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. (a) Capitalised Development and Evaluation Assets Certain assumptions are required to be made in order to assess whether there is an indicator of impairment of long-lived assets. Key assumptions include future commodity prices, future cash flows, estimated discount rate and estimates of Ore Reserves. Estimates of Ore Reserves are dependent on various assumptions. Changes in these estimates could materially impact on actual ore recovered, and could therefore affect estimates of future cash flows used in the assessment of recoverable amounts. The carrying amount of exploration evaluation and development assets which is included in the consolidated statement of financial position at 30 June 2020 is $44.1 million (2019: $37.0 million). The Group estimates its Mineral Resources and Reserves based on information assessed by Competent Persons (as defined in the JORC code). In estimating the remaining life of the mine for the purpose of amortisation and depreciation calculations, due regard is given, not only to the amount of remaining Ore Reserves, but also to limitations which could arise from the potential for changes in technology, demand, and other issues which are inherently difficult to estimate over an extended timeframe. (b) Onerous Contract The Company has an onerous contract which relates to a contract entered into by Neometals Energy Pty Ltd, a wholly owned subsidiary of the Company, for the Company’s Barrambie Project. The contract with DBNGP (WA) Transmission Pty Ltd for gas transmission, commenced on 1 July 2010. The provision in the accounts represents the present value of the gas transmission obligations under the contract for gas transmission not expected to be utilised or on sold. The estimates for the remaining term is subject to Management’s judgement and could change in future periods. Annual Report 2020 76 Notes to the consolidated financial statements 4. Parent Entity Disclosure Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Retained earnings Reserves Share based payments Total equity Financial Performance Profit for the year Other comprehensive income Total comprehensive income Guarantees entered into on behalf of subsidiaries (i) 2020 $ 2019 $ 76,700,157 29,512,286 109,893,836 28,171,182 106,212,443 138,065,018 (2,670,853) (1,001,430) (2,101,075) (3,786,582) (3,672,283) (5,887,657) 102,540,160 132,177,361 154,437,267 154,264,362 (59,245,600) (28,688,370) 7,348,493 6,601,369 102,540,160 132,177,361 (19,666,892) 81,273,621 - - (7,220,061) 81,273,621 4,000,000 4,000,000 (i) Neometals Energy Pty Ltd, a wholly owned subsidiary of the Company, is party to a gas transmission agreement with DBNGP (WA) Transmission Pty Ltd. The parent entity has provided security for a bank guarantee required under the contract for $4.0 million. Refer to note 12 for details. Neometals Ltd 77 Notes to the consolidated financial statements 5. Profit / (Loss) for the Year Continuing Operations (a) Income Income from operations consisted of the following items: Other Income: Interest revenue Other (b) Profit / (Loss) Before Income Tax Profit / (loss) before income tax has been arrived at after charging the following expenses: Employee benefits expense: Equity settled share-based payments Superannuation expense Employee salaries Finance costs: Facility fees Interest expense c) Impairment Expense Impairment of associate Impairment of property, plant, and equipment Impairment of intangibles Impairment of other assets (d) Other Expenses Research and development expenditure Consultancy costs Depreciation of non-current assets Other expenses Re-measurement of onerous contract Note 2020 $ 2019 $ 1,630,841 431,554 2,062,395 1,140,353 512,147 1,652,500 (924,147) (382,778) (5,317,015) (691,201) (291,080) (4,541,992) (6,623,940) (5,524,273) (60,000) (3,185) (63,185) (3,531,047) (501,963) (549,282) (14,643) (60,000) (649) (60,649) (5,226,805) - - - (4,596,935) (5,226,805) (3,572,177) (866,759) (754,970) (1,039,692) (28,841) (3,930,962) (241,952) (117,364) (361,264) 976,017 (6,262,439) (3,675,525) 23 14 16 Annual Report 202078 Notes to the consolidated financial statements 6. Discontinued Operations At 30 June 2018, Neometals investment in RIM was equity accounted for as an investment in associate. On 30 November 2018, the Board endorsed the decision to complete the sale of RIM to co-shareholders (Mineral Resources & Ganfeng), and a sales agreement was executed in December 2018 to dispose of the remaining interest of 13.8% in Reed Industrial Minerals Pty Ltd. Accordingly, the classification of the investment was required to be reassessed for the current period end under AASB 5 Non- current Asset Held for Sale and Discontinued Operations. The disposal was completed in March 2019 for a cash consideration of $103.8M, on which date the equity interest passed to the acquirer. Details of the investment disposed of and the calculation of the profit or loss on disposal are disclosed below. Profit on sale of associate Opening carrying value of investment in the associate Share of profit / (loss) of associate recognised in profit or loss Fully franked dividends received from associate Investment balance classified as held for sale Proceeds from sale of associate Profit on sale of associate Note 23 2020 $ 2019 $ - - - - - - 11,325,197 11,561,336 (6,210,000) 16,676,533 (103,800,000) (87,123,467) The results of the discontinued operation which have been included in the financial statements for the year were as follows: Results of discontinued operations Profit / (loss) from discontinued operations Cash flows from discontinued operations Cashflows from investing activities Effect of disposal on the financial position of the group investment in associate 2020 $ 2019 $ - - - 98,684,783 114,114,458 (16,676,533) Neometals Ltd Notes to the consolidated financial statements 7. Income Taxes (a) Income Tax Benefit Recognised in Profit or Loss Tax Benefit Comprises: Deferred tax expense relating to temporary differences Under / over Total tax (benefit) / expense The prima facie income tax expense on pre-tax accounting profit from continuing operations reconciles to the income tax benefit in the financial statements as follows: (Loss) / Profit from operations Income tax calculated at 30% Effect of income and expenses that are not deductible in determining taxable profit Tax losses not recognised Recognition of previously unrecognised tax losses Tax effect on disposal of capital assets (i) Income tax (benefit) / expense recognised Refund of prior year R&D claim Income tax (benefit) / expense recognised inclusive of R&D claim (i) Tax effect on disposal of capital assets was higher than the accounting gain on disposal. 79 2020 $ 2019 $ (4,097,614) 311,031 (3,786,583) 3,786,582 - 3,786,582 (19,837,973) (5,951,392) 78,918,962 23,675,689 1,341,490 823,319 - - (3,150,651) - (23,031,010) 6,292,554 (3,786,583) 3,786,582 (1,497,697) (5,284,280) (523,088) 3,263,494 The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable income under Australian tax law. There has been no change in the corporate tax rate during the reporting period. (b) Deferred Tax Balances Deferred tax balances are presented in the statement of financial position as follows: Deferred tax liabilities Deferred tax assets Net deferred tax balance 2020 $ (13,559,164) 13,559,164 - 2019 $ (12,697,822) 8,911,240 (3,786,582) (c) Deferred tax assets not brought to account At 30 June 2020 the amount of tax losses not recognised was (gross) $2,744,397 (June 2019: $nil). Deferred tax assets have not been recognised in this reporting period as it is too early to estimate future taxable profits being available against which the Group can use the benefits. Annual Report 2020 80 Notes to the consolidated financial statements 7. Income Taxes (continued) Tax Consolidation Relevance of Tax Consolidation to the Consolidated Entity The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax-consolidated group is Neometals Ltd. The members of the tax-consolidated group are identified at note 24. Nature of Tax Funding Arrangements and Tax Sharing Agreements Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, Neometals Ltd and each of the entities in the tax consolidation group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax assets of the entity. Such amounts are reflected in amounts receivable from or payable to each entity in the tax consolidated group, and are eliminated on consolidation. The tax sharing agreement entered into between the members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member’s tax liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the tax funding arrangement. 8. Key Management Personnel Compensation Details of key management personnel compensation are provided on pages 46-53 of the Directors’ Report. The aggregate compensation made to key management personnel of the Group is set out below. Short-term employee benefits Post-employment benefits Share-based payments Note 2020 $ 2,249,546 136,960 623,492 3,009,998 2019 $ 2,211,405 136,092 478,846 2,826,343 9. Share Based Payments Neometals Ltd has an ownership based remuneration scheme for executives and employees. Performance Rights Plan (‘PRP’) In accordance with the provisions of the PRP, as approved by shareholders at the Company’s AGM on 24 November 2017, employees, Non-executive Directors and consultants may be offered performance rights at such times and on such terms as the board considers appropriate. General terms of performance rights granted under the PRP: • • • • • • The performance rights will not be quoted on the ASX. Performance rights can only be granted to employees, Non-executive Directors and consultants of the Company. Performance rights are transferable to eligible nominees. Performance rights not exercised on or before the vesting date will lapse. All shares allotted upon the vesting of performance rights rank equally in all respects to all previously issued shares. Performance rights confer no right to vote, attend meetings, participate in a distribution of profit or a return of capital or another participating rights or entitlements on the grantee unless and until the performance rights vest. Neometals Ltd 81 Notes to the consolidated financial statements 9. Share Based Payments (continued) The following share-based payment arrangements in relation to performance rights were in existence during the period. 2020 Grant Date Number Vesting Date/ Expiry Date Grant Date Share Price Probability Factor Fair Value at Grant Date J. Carone M. Tamlin C. Reed D. Townsend Staff and consultants Staff and consultants C. Reed J. Carone M. Tamlin D. Townsend Staff and consultants Staff and consultants C. Reed J. Carone M. Tamlin D. Townsend Staff and consultants S. Cole D. Ritchie N. Streltsova J. Purdie L. Guthrie Total 03/10/2017 03/10/2017 11/12/2017 11/12/2017 11/12/2017 11/12/2017 10/08/2018 10/08/2018 10/08/2018 10/08/2018 10/08/2018 25/01/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 24/10/2019 370,012 444,015 952,474 444,015 280,312 250,000 835,339 307,156 383,330 368,587 739,501 356,797 1,233,021 493,335 559,711 538,184 1,957,910 285,467 68,512 68,512 114,187 47,675 11,098,052 31/12/2020 31/12/2020 31/12/2020 31/12/2020 31/12/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2021 30/06/2021 30/06/2021 30/06/2021 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2020 30/06/2020 30/06/2020 30/06/2020 30/06/2020 0.30 0.30 0.385 0.385 0.385 0.385 0.32 0.32 0.32 0.32 0.32 0.22 0.154 0.154 0.154 0.154 0.154 0.154 0.154 0.154 0.154 0.154 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 0.25 0.25 0.34 0.34 0.77 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 The valuation of the Non-executive Directors performance rights has been based on the amount of their fees that have been forgone. The fair value of other KMP performance rights issued have been independently valued by a third party using a Monte Carlo simulation to determine fair value. The total expense recognised for the period arising from share-based payment transactions and accounted for as equity-settled share-based payment transactions is $924,147 (2019: $691,201). The following reconciles the outstanding performance rights granted at the beginning and end of the financial year. Balance at beginning of the financial year Granted during the financial year as compensation Vested during the financial year (i) Lapsed during the financial year (ii) Balance at the end of the financial year (iii) 2020 Performance Rights No. 2019 Performance Rights No. 6,274,181 5,366,515 (542,644) - 11,098,052 4,654,223 3,233,353 (441,796) (1,171,599) 6,274,181 542,644 shares in the Company were issued on vesting of performance rights (2019:441,796). (i) (ii) No performance rights lapsed during the financial year (2019: 1,171,599). (iii) Subject to the satisfaction of certain retention and performance conditions 584,353 performance rights vest at the end of the year (2019: 542,643) Annual Report 202082 Notes to the consolidated financial statements 10. Dividends on Equity Instruments Declared and paid during the year Dividends paid on ordinary shares: On 20 March 2020, the directors declared a partially franked dividend of two cents per share, .0014 cent franked and 0.0186 cent unfranked to the holders of fully paid ordinary shares, paid to shareholders on 3 April 2020. (2019: 2.0 cents) 2020 $ 2019 $ 10,890,338 10,879,485 The dividend franking account has a balance of $3,710 as at 30 June 2020 (2019: $330,110). 11. Trade and Other Receivables Current Other receivables Prepayments Total 12. Other Financial Assets Current Financial assets measured at FVTPL (i) Rental bond term deposit Total Current Non-current Financial assets measured at FVTPL Barrambie Gas term deposit (ii) Rental bond term deposit Total Non-current Total 2020 $ 170,803 214,410 385,213 2019 $ 428,903 198,696 627,599 2020 $ 1,149,757 43,000 1,192,757 1,196,000 4,000,000 200,000 5,396,000 6,588,757 2019 $ 782,927 - 782,927 543,000 4,000,000 244,118 4,787,118 5,570,045 (i) (ii) The Group has invested in a portfolio of listed shares which are held for trading. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The valuation technique and key inputs used to determine the fair value are quoted bid prices in an active market. Neometals Energy Pty Ltd, a wholly owned subsidiary of the Company, is a party to a gas transmission agreement with DBNGP (WA) Transmission Pty Ltd (DBP) in relation to the Barrambie Project. As part of the agreement the Group was required to provide security by way of a $4.0 million bank guarantee. Neometals Ltd 83 Notes to the consolidated financial statements 13. Exploration and Evaluation Expenditure Gross carrying amount Balance at 1 July 2018 Additions Balance at 1 July 2019 Additions Balance at 30 June 2020 Accumulated amortisation and impairment Balance at 1 July 2018 Amortisation expense Impairment expense Expenditure written off Balance at 1 July 2019 Amortisation expense Impairment expense Expenditure written off Balance at 30 June 2020 Net book value As at 30 June 2019 As at 30 June 2020 Consolidated Capitalised Exploration and Evaluation Expenditure $ 37,267,573 5,476,253 42,743,826 7,075,815 49,819,641 5,760,720 - - - 5,760,720 - - - 5,760,720 36,983,106 44,058,921 The recovery of exploration expenditure carried forward is dependent upon the discovery of commercially viable mineral and other natural resource deposits, their development and exploration, or alternatively their sale. Annual Report 202084 Notes to the consolidated financial statements 14. Property, Plant and Equipment Gross carrying amount Balance at 1 July 2018 Additions Disposals Transfers to property, plant and equipment Written off Balance at 1 July 2019 Additions Disposals Transfers to property, plant and equipment Impairments (i) Balance at 30 June 2020 Accumulated depreciation Balance at 1 July 2018 Disposals Depreciation expense Balance at 1 July 2019 Disposals and write offs Depreciation expense Balance at 30 June 2020 Net book value As at 30 June 2019 As at 30 June 2020 Consolidated Plant and Equipment at Cost $ 1,214,252 943,403 - - (131,331) 2,026,324 890,293 (33,908) - (501,963) 2,380,746 258,563 (116,188) 109,429 251,804 (51,705) 168,716 368,815 1,774,520 2,011,931 (i) During the year, following the cessation of research and development activities at the Group’s leased premises in Canada, the Group carried out a review of the recoverable amount of the laboratory equipment and related premise upgrades. The review led to the recognition of an impairment loss of $501,963 which has been recognised in profit or loss. These assets are classified in the Group’s Vanadium / Titanium operating segment. 15. Trade and Other Payables Trade payables Accrued expenses Other 2020 $ 856,396 1,291,929 34,461 2,182,786 2019 $ 738,530 1,306,976 44,146 2,089,652 The average credit period on purchases is 30 days. No interest is charged on the trade payables. The Group has financial risk management policies in place to help ensure that all payables are paid within the settlement terms. Neometals Ltd Notes to the consolidated financial statements 16. Provisions Current Annual leave Long service leave Other (a) Non-current Rehabilitation provision Other (a) (a) Detail of movement in other provisions 2020 Balance at 1 July 2019 Additional provisions recognised Reductions arising from payments Increase resulting from remeasurement Balance at 30 June 2020 Comprised of: Current provision Non-current provision 85 2020 $ 2019 $ 478,202 224,036 468,697 1,170,935 398,000 928,359 1,326,359 2,497,294 433,762 161,980 559,140 1,154,882 - 1,378,062 1,378,062 2,532,944 Onerous Contracts (i) $ 1,937,202 - (568,987) 28,841 1,397,056 468,697 928,359 1,397,056 (i) The onerous contract relates to a contract entered into by Neometals Energy Pty Ltd, a wholly owned subsidiary of the Company, for the Company’s Barrambie Project. The contract with DBNGP (WA) Transmission Pty Ltd for gas transmission, commenced on 1 July 2010. The provision in the accounts represents the present value of the remaining gas transmission obligations under the contract for gas transmission not expected to be utilised or on sold. 2019 Balance at 1 July 2018 Reductions arising from payments Reductions resulting from re-measurement or settlement without cost Balance at 30 June 2019 Comprised of: Current provision Non-current provision Onerous Contracts (i) $ 3,567,051 (653,832) (976,017) 1,937,202 559,140 1,378,062 1,937,202 (i) The onerous contract relates to a contract entered into by Neometals Energy Pty Ltd, a wholly owned subsidiary of the Company, for the Company’s Barrambie Project. The contract with DBNGP (WA) Transmission Pty Ltd for gas transmission, commenced on 1 July 2010. The provision in the accounts represents the present value of the remaining gas transmission obligations under the contract for gas transmission not expected to be utilised or on sold. Annual Report 202086 Notes to the consolidated financial statements 17. Issued Capital 544,516,913 fully paid ordinary shares (2019: 543,974,269) 154,437,267 154,264,634 2020 $ 2019 $ 2020 2019 No. $ No. $ Fully paid ordinary shares Balance at beginning of financial year Share issue costs Other share based payments 543,974,269 - 542,644 154,264,634 (4,117) 176,750 543,532,473 - 441,796 154,101,518 (1,884) 165,000 Balance at the end of the financial year 544,516,913 154,437,267 543,974,269 154,264,634 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Share options At balance date there were no share options in existence over ordinary shares (2019: nil). 18. Reserves The share-benefits reserve arises on the grant of share options and performance rights for the provision of services by consultants and to executives and employees under the employee share option plan, performance rights plan, employment contracts or as approved by shareholders. Amounts are transferred out of the reserve and into issued capital when the options are exercised or when shares are issued pursuant to the terms of the performance rights. Further information about share-based payments to employees is provided in note 9 to the financial statements. Share based payments reserve: Balance at the beginning of the financial year Increase in share based payments Amounts transferred to share capital on exercise Balance at the end of the financial year Other reserve: Balance at the beginning of the financial year Balance at the end of the financial year Investment revaluation reserve: Balance at the beginning of the financial year Balance at the end of the financial year Total Reserves 2020 $ 2019 $ 6,300,747 924,147 (176,750) 7,048,144 300,349 300,349 1,019,637 1,019,637 8,368,130 5,774,546 691,201 (165,000) 6,300,747 300,349 300,349 1,019,637 1,019,637 7,620,733 Neometals Ltd Notes to the consolidated financial statements 19. Earnings Per Share Basic earnings per share: Continuing and discontinued operations Diluted earnings per share: Continuing and discontinued operations Basic and diluted profit / (loss) per share 87 2020 Cents per Share 2019 Cents per Share (2.67) (2.67) 14.00 14.01 The profit / (loss) and weighted average number of ordinary shares used in the calculation of basic and diluted profit / (loss) per share are as follows. Profit / (loss) (a) Continuing and discontinued operations Weighted average number of ordinary shares for the purpose of basic profit / (loss) per share Weighted average number of ordinary shares for the purpose of diluted profit / (loss) per share 2020 $ 2019 $ (14,553,693) 76,178,556 2020 No. 2019 No. 544,516,913 543,974,269 544,516,913 543,911,970 (a) Profit / (loss) used in the calculation of profit / (loss) per share reconciles to net loss in the consolidated statement of comprehensive income. 20. Commitments for Expenditure (a) Exploration and Evaluation Expenditure Commitments The Consolidated Entity holds mineral exploration licences in order for it to undertake its exploration and evaluation activities. To continue to hold tenure over these areas the Group is required to undertake a minimum level of expenditure on or in relation to the leases. Minimum expenditure commitments for the exploration and mining leases for the 2020 financial year are outlined in the table below. Exploration expenditure commitments Not longer than one year (i) 30 June 30 June 2020 $ 2019 $ 2,110,369 2,570,503 (i) Due to the nature of this expenditure, in that the expenditure commitments may be reduced by the relinquishment of tenements, estimates for the commitment have not been forecast beyond June 2021. However, should the Group continue to hold the tenements beyond this date additional expenditure commitments would arise. (b) Other As referred to in note 16 (i) to the accounts, Neometals Energy Pty Ltd, a wholly owned subsidiary of the Company, previously entered into a gas transmission agreement with DBNGP (WA) Transmission Pty Ltd for the Barrambie Project. As part of the agreement the Group was required to procure a ‘blocked’ term deposit for $4.0 million (30 June 2019: $4.0 million) as security a bank guarantee, which approximates the present value of the Group’s commitment under the agreement. The obligations under the gas transmission agreement commenced on 1 July 2010. Annual Report 2020 88 Notes to the consolidated financial statements 21. Leases Leasing arrangements Leases relate to the lease of commercial premises in West Perth, Welshpool, Canada and a photocopier. The lease agreement for the Company’s West Perth premises was entered into on 1 July 2019 for a 48 month period expiring on 30 June 2023. The lease of the Canadian branch premises was entered into on 1 May 2016 for a 60 month period expiring on 30 April 2021. The lease of a photocopier is for a period of 48 months expiring in June 2022. The commitments are based on the fixed monthly lease payment. Right-of-Use Assets Cost Accumulated Depreciation Carrying Amount Lease Liability Current Non-current Total Amounts recognised in profit and loss Depreciation expense on right-of-use asset Interest expense on lease liabilities Buildings $ 1,605,014 (577,518) 1,027,496 Buildings $ 492,145 712,810 1,204,955 30 June 2020 Equipment $ 26,210 (8,737) 17,473 30 June 2020 Equipment $ 8,733 9,044 17,777 2020 $ 586,255 50,570 636,825 Total $ 1,631,224 (586,255) 1,044,969 Total $ 500,878 721,854 1,222,732 2019 $ - - - Neometals Ltd 89 Notes to the consolidated financial statements 22. Joint Arrangements Name of Operation Principal Activity Interest 2020 % 2019 % Reed Advanced Materials Pty Ltd (i) Evaluation of lithium hydroxide process 70 70 The Consolidated Entity’s interest in assets employed in the above joint ventures is detailed below. (i) Reed Advanced Materials Pty Ltd On 6 October 2015 Neometals and Process Minerals International Pty Ltd entered into a shareholders agreement for the purposes of establishing and operating a joint venture arrangement through RAM to operate a business of researching, designing and developing the capabilities and technology relating to the processing of lithium hydroxide. Following the execution of the shareholders agreement RAM was held 70:30 between Neometals and Process Minerals International. Summarised financial information for the joint venture. Carrying value of investment in the joint venture 2020 $ 1 2019 $ 1 Share of loss of joint venture not recognised in profit or loss 21,413 33,159 Current assets Non-current assets Current liabilities Non-current liabilities 177,801 444,967 (2,709) (2,176,568) 79,847 362,536 - (1,968,678) Annual Report 2020 90 Notes to the consolidated financial statements 23. Investment in Associate (i) Hannans Limited Name of Operation Principal Activity Interest 2020 % 2019 % Hannans Limited Exploration of nickel and lithium 35.5 35.5 The above associate is accounted for using the equity method in this consolidated financial report. Summarised information for the associate. Opening carrying value of investment in associate Share of profit/(loss) of associate recognised in profit or loss (i) Impairment expense (ii) Closing carrying value of investment in associate 2020 $ 7,062,095 - (3,531,047) 3,531,048 2019 $ 12,757,545 (468,645) (5,226,805) 7,062,095 (i) (ii) The equity accounted share of the associate’s loss as adjusted as if applying the same accounting policies as Neometals is credited against the carrying value of the investment in the associate. In the current financial year, the carrying value of the investment in associate has been impaired down to its carrying value on a per share basis. Shares held in Hannans Limited 24. Subsidiaries Name of Entity Parent entity Neometals Ltd Subsidiaries Australian Titanium Pty Ltd (formerly Australian Vanadium Corporation (Holdings) Pty Ltd) Alphamet Management Pty Ltd (formerly Australian Vanadium Corporation (Investments) Pty Ltd) Inneovation Pty Ltd (formerly Australian Vanadium Exploration Pty Ltd) Neometals Energy Pty Ltd (formerly Barrambie Gas Pty Ltd) Neomaterials Pty Ltd (formerly GMK Administration Pty Ltd) Neometals Investments Pty Ltd (formerly Gold Mines of Kalgoorlie Pty Ltd) Urban Mining Pty Ltd (formerly Mount Finnerty Pty Ltd) Adamant Technologies Pty Ltd Mt Edwards Lithium Pty Ltd Avanti Materials Ltd ACN 630 589 507 Pty Ltd 2020 $ 2019 $ 706,209,483 706,209,483 Interest Country of Incorporation 2020 % 2019 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 All of these companies are members of a tax consolidated group. Neometals Ltd is the head entity of the tax consolidated group. Neometals Ltd 91 Notes to the consolidated financial statements 25. Segment Information Basis for Segmentation AASB 8 Operating Segments requires the presentation of information based on the components of the entity that management regularly reviews for its operational decision making. This review process is carried out by the Chief Operating Decision Maker (‘CODM’) for the purpose of allocating resources and assessing the performance of each segment. The amounts reported for each operating segment is the same measure reviewed by the CODM in allocating resources and assessing performance of that segment. For management purposes, the Group operates under three operating segments comprised of the Group’s lithium, titanium/ vanadium and ‘other segments’ which comprises other minor exploration projects and mineral process technology businesses. The titanium/vanadium operating segment is separately identified given it possess different competitive and operating risks and meets the quantitative criteria as set out in the AASB 8. Previously the Group operated under two reportable operating segments comprised of the Group’s titanium/vanadium and ‘other segments’ which comprises the Mount Marion lithium project and other minor exploration projects. The ‘other segments’ category is the aggregation of all remaining operating segments given sufficient reportable operating segments have been identified. During the 2019 financial year an investment in associate was classified as held for sale and the sale was completed in March 2019. The segment information reported on the next page does not include any amounts for this discontinued operation, which is described in more detail in note 6. For the year ended 30 June 2020 Reportable Operating Segments Revenue from external customers Cost of sales Gross profit / (loss) Other income Expenditure written off / impairments Depreciation and amortisation Total expense Profit/(loss) before tax Income tax benefit Consolidated profit / (loss) after tax As at 30 June 2020 Reportable Operating Segments Increase / (decrease) in segment assets Impairment Consolidated increase / (decrease) in segment assets Total segment assets Total assets Lithium $ - - - 348,641 (184,024) - (3,767,128) Vanadium / Titanium Other Corporate Total $ $ $ $ - - - 3,433 (521,456) (285,443) (2,766,043) - - - 72,300 (3,531,047) - (12,316) - - - 1,638,021 (360,408) (469,527) (10,002,976) - - - 2,062,395 (4,596,935) (754,970) (16,548,463) (3,602,511) (3,569,509) (3,471,063) (9,194,890) (19,837,973) - (3,602,511) - (3,569,509) - (3,471,063) 5,284,280 (3,910,610) 5,284,280 (14,553,693) Lithium $ Vanadium / Titanium Other Corporate Total $ $ $ $ 5,096,269 (184,024) 2,942,632 (521,456) 1,019,831 (3,531,047) (31,492,164) (360,408) (22,433,432) (4,596,935) 4,912,245 2,421,176 (2,511,216) (31,852,572) (27,030,367) 10,517,522 10,517,522 36,708,688 36,708,688 5,876,877 5,876,877 82,353,822 82,353,822 135,456,909 135,456,909 Annual Report 202092 Notes to the consolidated financial statements 25. Segment Information (continued) For the year ended 30 June 2019 Reportable Operating Segments Revenue from external customers Cost of sales Gross profit / (loss) Other income Depreciation and amortisation Total expense Lithium $ - - - 299,886 (41,583) (2,285,531) Vanadium / Titanium Other Corporate Total $ $ $ $ - - - 1,270 (75,781) (2,106,863) - - - 162,450 - (5,697,277) - - - 1,188,894 - (10,805,562) - - - 1,652,500 (117,364) (20,895,233) Profit / (loss) before tax (1,985,645) (2,105,593) (5,534,827) (9,616,668) (19,242,733) Profit for the year from discontinued operations Income tax expense - - - - - - 98,684,783 98,684,783 (3,263,494) (3,263,494) Consolidated profit / (loss) after tax (1,985,645) (2,105,593) (5,534,827) 85,804,621 76,178,556 As at 30 June 2019 Lithium Vanadium / Titanium Other Corporate Total Reportable Operating Segments $ $ $ $ $ Increase/(decrease) in segment assets Deconsolidation Consolidated increase/ (decrease) in segment assets Total segment assets Total assets (17,676,310) - 4,540,378 - (5,411,673) - 103,164,273 19,960,655 84,616,668 19,960,655 (17,676,310) 4,540,378 (5,411,673) 123,124,928 104,577,323 5,605,277 5,605,277 34,287,512 8,388,092 114,206,395 162,487,276 34,287,512 8,388,092 114,206,395 162,487,276 Geographical information The Group operates in a single geographical area being Australia (country of domicile). Neometals Ltd 93 Notes to the consolidated financial statements 26. Related Party Disclosures (a) Equity interests in related parties Equity interests in subsidiaries. Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 24 to the financial statements. (b) Key management personnel remuneration Details of Key Management Personnel remuneration are disclosed on pages 46-53 of the Directors’ Report. (c) Key management personnel equity holdings Fully paid ordinary shares of Neometals Ltd Balance at 01/07/2019 Balance on Appointment Received on Exercise of Perf. Rights Net Other Change Balance at 30/06/2020 Balance Held Nominally 2020 No. No. No. No. No. No. Non-executive Directors S. Cole D. Ritchie N. Streltsova D. Reed J. Purdie L. Guthrie Executive Directors C. Reed Other executives M. Tamlin J. Carone D. Townsend Total 1,232,783 27,048 27,048 49,188,900 44,248 25,000 10,228,170 979,189 1,450,000 130,272 63,332,658 - - - - - - - - - - - 163,948 39,348 39,348 - 56,752 60,605 - - - (3,000,000) - - 1,396,731 66,396 66,396 46,188,900 101,000 85,605 - - - - 200,000 10,428,170 (750,000) (350,000) 33,333 229,189 1,100,000 163,605 360,001 (3,866,667) 59,825,992 - - - - - - - - - - - Balance at 01/07/2018 Balance on Appointment Received on Exercise of Perf. Rights Net Other Change Balance at 30/06/2019 Balance Held Nominally 2019 No. No. No. No. No. No. Non-executive Directors S. Cole D. Ritchie N. Streltsova D. Reed J. Purdie L. Guthrie Executive Directors C. Reed Other executives M. Tamlin J. Carone D. Townsend Total 1,120,083 - - 49,188,900 - - 9,978,170 979,189 1,650,000 - 62,916,342 - - - - - - - - - - - 112,700 27,048 27,048 - - - - - - - - - - - 44,248 25,000 1,232,783 27,048 27,048 49,188,900 44,248 25,000 250,000 10,228,170 - (200,000) 130,272 979,189 1,450,000 130,272 166,796 249,520 63,332,658 - - - - - - - - - - - Annual Report 2020 94 Notes to the consolidated financial statements 26. Related Party Disclosures (continued) Share Options of Neometals Ltd No options were issued to related parties during the current period (2019: nil). Performance Rights of Neometals Ltd In the current reporting period the Company granted 3,408,604 (2019: 2,137,056) performance rights to executives and KMP pursuant to the Company’s Performance Rights Plan. Further details of the employee share option plan and of share options and performance rights granted are contained in note 8 to the financial statements. Performance Rights Granted to Related Parties The following tables summarises information relevant to the current financial year in relation to the grant of performance rights to KMP as part of their remuneration. Performance rights are issued by Neometals Ltd. Name KMP N. Streltsova D. Ritchie (1) S. Cole (1) J. Purdie L. Guthrie C. Reed (2) J. Carone (2) M. Tamlin (2) D. Townsend (2) Total During the Financial Year Grant date No. Granted No. Vested Fair Value at Grant Date Earliest Exercise Date Consideration Payable on Exercise 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 68,512 68,512 285,467 114,187 47,675 1,233,021 493,335 559,711 538,184 68,512 68,512 285,467 114,187 47,675 - - - - 12,000 12,000 50,000 20,000 10,000 141,797 56,734 64,367 61,891 30/06/2020 30/06/2020 30/06/2020 30/06/2020 30/06/2020 30/06/2022 30/06/2022 30/06/2022 30/06/2022 3,408,604 584,353 428,789 - - - - - - - - - - (1) At 30 June 2020 Non-executive Directors became entitled to securities whose vesting conditions were the subject to the rules of the Performance Rights Plan. (2) The number of performance rights that will actually vest, if any, is determined by the Company’s performance based on Neometals relative and absolute TSR compared to the comparative group of companies over a three year period and Business Plan strategic objectives. Neometals Ltd 95 Notes to the consolidated financial statements 26. Related Party Disclosures (continued) Details of performance rights held by KMP and of shares issued during the financial year as a result of the vesting of performance rights. Fair Value of Rights at Grant Date Granted Vested During the Financial Year Forfeited/ Lapsed During the Financial Year Ordinary Shares Issued on Exercise of Rights Grant Date $ No. No. No. No. 03/10/2017 03/10/2017 11/12/2017 11/12/2017 10/08/2018 10/08/2018 10/08/2018 10/08/2018 10/08/2018 10/08/2018 10/08/2018 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 02/09/2019 93,243 111,892 320,984 149,633 12,000 12,000 50,000 209,252 76,943 96,024 92,331 12,000 12,000 50,000 20,000 10,000 141,797 56,734 64,367 61,891 1,653,091 370,012 444,015 952,474 444,015 39,348 39,348 163,948 835,339 307,156 383,330 368,587 68,512 68,512 285,467 114,187 47,675 1,233,021 493,335 559,711 538,184 7,756,176 - - - - - - - - - - - 68,512 68,512 285,467 114,187 47,675 - - - - 584,353 - - - - - - - - - - - - - - - - - - - - - - - - - 39,348 39,348 163,948 - - - - - - - - - - - - - 242,644 KMP J. Carone (1) M. Tamlin (1) C. Reed (1) D. Townsend (1) N. Streltsova (2) D. Ritchie (2) S. Cole (2) C. Reed (1) J. Carone (1) M. Tamlin (1) D. Townsend (1) N. Streltsova (3) D. Ritchie (3) S. Cole (3) J. Purdie (3) L. Guthrie (3) C. Reed (1) J. Carone (1) M. Tamlin (1) D. Townsend (1) Total (1) (2) (3) The number of performance rights that will actually vest, if any, is determined by the Company’s performance based on Neometals TSR compared to the comparative group of companies over the three year period as set out in the employee’s employment contract. As a result of the testing of the Company’s performance over this period no rights vested and thus no shares were issued (2019: nil). Under the Performance Rights Plan, Non-executive Directors were invited to forgo part of their fees for their services in exchange for performance rights. At 30 June 2019 all performance rights have vested. As a result of the testing of the Company’s performance over this period 242,644 rights vested and shares were issued (2019: 166,796). Under the Performance Rights Plan, Non-executive Directors were invited to sacrifice part of their fees for their services in exchange for performance rights. At 30 June 2020 all performance rights have vested. The performance rights granted entitle the grantee to one fully paid ordinary share in Neometals Ltd for nil cash consideration on satisfaction of the vesting criteria. (d) Transactions with Other Related Parties Other related parties include: The parent entity; • Associates; • Joint ventures in which the entity is a venturer; • Subsidiaries; • Key Management Personnel of the Group; and • Other related parties. • Transactions Involving the Parent Entity The directors elected for wholly-owned Australian entities within the Group to be taxed as a single entity from 1 July 2003. No other transactions occurred during the financial year between entities in the wholly owned Group. (e) Controlling Entities The ultimate parent entity of the Group is Neometals Ltd, a company incorporated and domiciled in Australia. Annual Report 2020 96 Notes to the consolidated financial statements 27. Auditors Remuneration Details of the amounts paid or payable to the auditor for the audit and other assurance services during the year are as follows. Audit services - Deloitte Touche Tohmatsu Fees to the group auditor for the audit or review of the statutory financial reports of the Company, subsidiaries and joint operations Fees for other assurance and agreed-upon procedures under other legislation or contractual arrangements 2020 $ 53,340 - 2019 $ 95,650 37,800 Total remuneration of Deloitte Touche Tohmatsu 53,340 133,450 28. Notes to the Statement of Cash Flows (a) Reconciliation of Cash and Cash Equivalents For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the Cash Flow Statement is reconciled to the related items in the statement of financial position as follows: Cash and cash equivalents (b) Funds Not Available for Use 2020 $ 2019 $ 77,043,016 109,462,006 77,043,016 109,462,006 Restrictions exist on bank deposits with a total value of $4,243,000. Deposits are classified as financial assets (see note 12). Of the $4,243,000 held in restricted bank deposits $4,000,000 is held as security in relation to an unconditional performance bond issued by the National Australia Bank in favour of the Minister for State Development and DBNGP (WA) Transmission Pty Ltd. In addition, the Group has $243,000 on deposit as security for a rental bond relating to its leased business premises. Neometals Ltd 97 Notes to the consolidated financial statements 28. Notes to the Statement of Cash Flows (continued) (c) Reconciliation of profit / (loss) for the period to net cash flows from operating activities (Loss) / Profit for the year Impairment Profit on disposal of financial assets Profit on the sale of associate Loss / (profit) on financial assets measured at FVTPL Interest received on term deposits Finance costs Share issue costs Depreciation and amortisation of non-current assets Equity settled share-based payment Net foreign exchange loss / (gain) (Increase) / decrease in assets: Current receivables Other Increase / (decrease) in liabilities: Current payables Deferred tax liability Provisions Net Cash used in operating activities 2020 $ 2019 $ (14,553,693) 76,178,556 4,596,935 (249,835) - 177,535 (1,630,841) 63,185 - 754,970 924,147 665 5,226,805 (71,441) (98,216,158) (29,505) (1,140,353) 60,649 1,884 117,364 691,201 (334) 242,386 (107,835) (178,640) (29,652) 238,140 (3,786,582) 16,053 451,047 3,786,582 (1,451,869) (13,314,770) (14,603,864) Annual Report 202098 Notes to the consolidated financial statements 29. Financial Instruments (a) Financial Risk Management Objectives The Consolidated Entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. (b) Significant Accounting Policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements. (c) Interest Rate Risk The following tables detail the Group’s exposure to interest rate risk. Weighted Average Effective Interest Rate Variable Interest Rate Less than 1 Year 2020 % % $ Maturity Dates 1-5 Years $ Financial assets: Cash and cash equivalents AUD Cash and cash equivalents CAD Cash and cash equivalents USD Barrambie Gas term deposit (i) Bond term deposits (i) Cash deposits trust Trade and other receivables Financial liabilities: Trade payables Lease liability 0.92% 0.00% 0.00% 1.00% 1.14% 1.57% 0.00% - 3.50% - - - - - - - - - 74,640,987 46,563 297,277 4,000,000 243,000 2,058,189 - - - - - - - - - 500,878 - 721,854 More than 5 Years $ - - - - - - - - - Non Interest Bearing $ Total $ - - - - - - 385,213 74,640,987 46,563 297,277 4,000,000 243,000 2,058,189 385,213 856,396 - 856,396 1,222,732 (i) The balances represent two term deposits that are restricted in their use and are classified in the current reporting period other financial assets. Additional information on all other term deposits is provided at notes 12 and 28(b). The financial assets have contractual maturities of less than one year, however they are classified as non-current in the statement of financial position as they are not accessible to the Group due to restrictions placed on accessing the funds. Weighted Average Effective Interest Rate Variable Interest Rate Less than 1 Year 2019 % % $ Maturity Dates 1-5 Years $ Financial assets: Cash and cash equivalents AUD Cash and cash equivalents CAD Cash and cash equivalents USD Barrambie Gas term deposit (i) Bond term deposits (i) Cash deposits trust Trade and other receivables Financial liabilities: Trade payables 2.00% 0.00% 0.00% 2.35% 2.13% 2.64% 0.00% - - - - - - - - - 107,140,847 284,108 14,725 4,000,000 244,118 2,022,326 - - - - - - - - - - More than 5 Years $ - - - - - - - - Non Interest Bearing $ Total $ - - - - - - 627,599 107,140,847 284,108 14,725 4,000,000 244,118 2,022,326 627,599 738,530 738,530 (i) The balances represent two term deposits that are restricted in their use and are classified in the current reporting period other financial assets. Additional information on all other term deposits is provided at notes 12 and 28(b). The financial assets have contractual maturities of less than one year, however they are classified as non-current in the statement of financial position as they are not accessible to the Group due to restrictions placed on accessing the funds. Neometals Ltd 99 Notes to the consolidated financial statements 29. Financial Instruments (continued) (d) Credit Risk Management Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted a policy of only dealing with credit-worthy counterparties and obtaining sufficient collateral where appropriate as a means of mitigating the risk of financial loss from defaults. The consolidated entity exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. The consolidated entity does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics other than the Joint Venture. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. (e) Liquidity Risk Management Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and banking facilities, and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. In addition to financial liabilities in note 15, the Company is required to meet minimum spend commitments to maintain the tenure over the Company’s mineral exploration areas as described in note 20. (f) Fair Value The carrying amount of financial assets measured at amortised cost recorded in the financial statements approximates their respective fair values. Financial assets carried at fair value through profit or loss comprise investments in largely Australian listed equities. Their fair value is determined using key inputs of quoted bid prices in an active market multiplied by the number of shares held. The sensitivity analysis below has been calculated based on the exposure to equity price risk at the end of the reporting period for financial assets carried at fair value through profit or loss. A 25 percent increase and decrease has been used to assess the sensitivity of the equity price risk and represents management’s assessment of a reasonably possible change in equity pricing. If equity prices had been 25 percentage higher/lower and all other variables were held constant, the Group’s profit for the year ended 30 June 2020 would decrease/increase by $287,439. (g) Capital Management The board’s policy is to endeavour to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group sources any additional funding requirements from either debt or equity markets depending on the market conditions at the time the funds are sourced and the purpose for which the funds are to be used. The Group is not subject to externally imposed capital requirements. (h) Interest rate risk management The Group is exposed to interest rate risk as the Group has funds on deposit as security for the head office lease and the Neometals Energy Pty Ltd onerous contract outlined at note 16. The sensitivity analysis below has been calculated based on the exposure to interest rates at the end of the reporting period. A 50 basis point increase and decrease has been used when reporting the interest rate risk and represents management’s assessment of the potential change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 30 June 2020 would decrease/increase by $406,430 (2019: decrease/increase $568,530). This is mainly attributable to the Group’s exposure to interest rates on the maturity of its term deposits. Annual Report 2020100 Notes to the consolidated financial statements 30. Events After the Reporting Period Further to the Company’s announcement during the December 2019 quarter that it had entered a binding memorandum of understanding with leading global processing plant manufacturer SMS, SMS successfully concluded its due diligence in the last half of the financial year. Subsequently, on 31 July 2020 Neometals announced the execution of formal agreements governing the formation and operation of an incorporated 50:50 joint venture (‘JV’) with SMS, called Primobius GmbH (‘Primobius’). Primobius aim is to commercialise Neometals’ proprietary lithium-ion battery (‘LiB’) recycling technology (for further details see Neometals ASX announcement dated 31 July 2020 for further details). No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect the operations, results of operations or state of affairs of the Group in subsequent financial years. Neometals Ltd Additional shareholder information AS AT 30 SEPTEMBER 2020 Ordinary Fully Paid Shares Top Holders Snapshot Rank Name 1 2 3 4 5 6 7 88 9 1010 11 12 13 1414 15 16 17 17 19 20 MR DAVID JOHN REED CITICORP NOMINEES PTY LIMITED ZERO NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED FARJOY PTY LTD TRUCKING NOMINEES PTY LTD MR KENNETH JOSEPH HALL DELPHI UNTERNEHMENSBERATUNG AKTIENGESELLSCHAFT WESTERN MINING CORPORATION PTY LIMITED BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR FRANCIS JAMES ROBINSON MR RICHARD ARTHUR LOCKWOOD BOND STREET CUSTODIANS LIMITED FANO PTY LTD TRUCKING NOMINEES PTY LTD PESYAN PTY LTD LINFOOT ONE SUPER PTY LTD Totals: Top 20 holders of fully paid ordinary shares 101 Units % of Units 31,801,674 20,161,797 18,150,000 12,594,039 12,160,587 10,196,647 9,540,999 8,900,000 8,648,914 7,154,998 6,758,862 6,543,307 6,106,691 6,000,000 5,600,000 5,370,000 5,000,000 5,000,000 4,297,040 4,025,000 194,010,555 5.83 3.70 3.33 2.31 2.23 1.87 1.75 1.63 1.59 1.31 1.24 1.20 1.12 1.10 1.03 0.98 0.92 0.92 0.79 0.74 35.58% Annual Report 2020102 Additional shareholder information AS AT 30 SEPTEMBER 2020 Distribution of Equity Securities Analysis of number of equity security holders by size of holding: Range Total holders 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - 9,999,999,999 Rounding Total Unmarketable Parcels 481 2,447 1,415 3,017 632 7,992 Minimum $ 500.00 parcel at $ 0.1950 per unit 2565 Minimum Parcel Size Substantial Shareholder No of shares held 46,188,900 David Reed Voting Rights Units 124,445 7,179,775 11,604,795 105,830,564 420,611,687 545,351,266 Holders 1672 % 8.47% % of Issued Capital 0.02 1.32 2.13 19.41 77.13 -0.01 100.00 Units 2310877 On a show of hands every member present at a meeting in person or by proxy shall one vote and upon a poll each share shall have one vote. Other Registers of Securities are held at the following addresses: Level 1 1292 Hay street West Perth, WA 6005 Neometals Ltd Additional shareholder information Tenements As at 30 September 2020 the Company has an interest in the following projects and tenements in Western Australia. 103 Project Name Barrambie Barrambie Barrambie Barrambie Barrambie Barrambie Barrambie Barrambie Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards Mt Edwards ^Nickel Mineral rights only **Lithium and Nickel Mineral rights only # No gold interest Licence Name E57/769 E57/770 E57/1041 L57/30 L20/55 M57/173 L20/80 L20/81 M15/45 M15/46 M15/48 M15/74 M15/75 M15/87 M15/77 M15/78 M15/79 M15/80 M15/94 M15/96 M15/97 M15/99 M15/100 M15/101 M15/102 M15/103 M15/105 L15/102 M15/478 M15/633 M15/653 M15/693 M15/698 M15/699 M15/1271 L15/254 E15/989 L15/397 L15/280 P15/5905 P15/5906 E15/1505 E15/1507 E77/2397 E15/1576 E15/1583 E77/2427 E15/1679 P15/6362 P15/6387 E15/1665 E15/1711 P15/6408 P15/6539 P15/6092 E15/1553 E15/1749 P15/6570 Beneficial Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% (^) 100% (^) 100% (^) 100% 100% 100% (**) 100% (^) 100% (^) 100% (^) 100% (^) 100% (^) 100% (#) 100% (#) 100% (#) 100% (#) 100% (#) 100% (#) 100% (^) 100% (^) 100% 100% (^) 100% (^) 100% (#) 100% (^) 100% 100% 100% (#) 100% 100% (^) 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Status Live Live Live Live Live Live Pending Pending Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Pending Live Live Live Live Live Pending Live Live Pending Pending Pending Pending Pending Pending Pending Pending Live Live Pending Pending Annual Report 2020104 THIS PAGE WAS INTENTIONALLY LEFT BLANK Neometals Ltd Corporate Directory DIRECTORS Steven Cole Non-Executive Chairman Christopher Reed Managing Director David Reed Non-Executive Director Dr Natalia Streltsova Non-Executive Director Douglas Ritchie Non-Executive Director Dr Jenny Purdie Non-Executive Director Les Guthrie Non-Executive Director COMPANY SECRETARY Jason Carone REGISTERED OFFICE Level 1, 1292 Hay Street West Perth WA 6005 CONTACT DETAILS Telephone (+618) 9322 1182 Facsimile (+618) 9321 0556 www.neometals.com.au AUDITORS Deloitte Touche Tohmatsu Brookfield Place, Tower 2 123 St Georges Terrace Perth WA 6000 SHARE REGISTRY Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace Perth WA 6000 STOCK EXCHANGE LISTING Neometals Ltd are listed on the Australian Stock Exchange (Home Branch – Perth) ASX Code: NMT ACN: 099 116 631 ABN: 89 099 116 631 North American OTC Market (DR Symbol: RDRUY) ANNUAL GENERAL MEETING The 2020 Annual General Meeting of Neometals Ltd ABN 89 099 116 631 (Company) will be held at 3:00pm (AWST) on Wednesday, 25 November 2020 at the Exchange Tower Function Centre, Exchange Tower, Level 8, 2 The Esplanade, Perth, Western Australia Annual Report 2020106 ACN: 099 116 631 ABN: 89 099 116 631 REGISTERED OFFICE Level 1, 1292 Hay Street West Perth WA 6005 CONTACT DETAILS Telephone (+618) 9322 1182 Facsimile (+618) 9321 0556 neometals.com.au Neometals Ltd

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