New Century Resources
Annual Report 2017

Plain-text annual report

Annual Report 2017 Table of Contents Corporate Directory .............................................................................................................................. ii Review of Operations .......................................................................................................................... iii Mineral Resource Statement ............................................................................................................ xvii Directors’ Report ................................................................................................................................. 4 Auditor’s Independence Declaration ...................................................................................................14 Consolidated Statement of Profit or Loss and Other Comprehensive Income ....................................15 Consolidated Statement of Financial Position ....................................................................................16 Consolidated Statement of Changes in Equity ...................................................................................17 Consolidated Statement of Cashflows ................................................................................................18 Notes to the Financial Statements ......................................................................................................19 Directors’ Declaration .........................................................................................................................55 Independent Auditor’s Report .............................................................................................................56 Corporate Governance Statement ......................................................................................................62 Additional Information ........................................................................................................................71 i Corporate Directory Directors Mr Evan Cranston (Executive Chairman) Mr Patrick Walta (Managing Director) Mr Tolga Kumova (Corporate Director) Mr Tom Eadie (Non-Executive Director) Mr Bryn Hardcastle (Non-Executive Director) Company Secretary Ms Oonagh Malone Principal Place of Business and Registered Office Suite 23, 513 Hay Street Subiaco WA 6008 Australia Contact Details Telephone: +61 8 6142 0989 Email: info@newcenturyresources.com Web: www.newcenturyresources.com Stock Exchange ASX Code: NCZ Home Office: Perth Country of Incorporation and Domicile Australia Share Registry Security Transfer Australia Pty Ltd 770 Canning Highway Applecross WA 6153 Telephone: +61 8 9315 2333 Facsimile: +61 8 9315 2233 ii Review of Operations On 1 March 2017, the Company announced that it had entered into binding agreements for the progressive acquisition of the Century Zinc Mine and all associated infrastructure, including the Karumba Port Facility. The cessation of processing operations by MMG Limited (ASX: MMG) at Century in early 2016 following depletion of the Century ore reserves presented an opportunity for a focused junior to monetise valuable remaining mineral assets. These include over 2,500,000t of JORC compliant zinc metal equivalent resources located within mineralised tailings, the Silver King base metal deposit and other minor defined deposits. In addition, Century hosts several substantial phosphate deposits which are yet to be developed. Beyond the mineral assets, Century includes world-class processing and logistics infrastructure as well as investments in agricultural land holdings and an established cattle business: • at the mine site, a scalable and adaptable 7.0Mtpa mineral flotation processing plant, 700 man accommodation camp, offices, airport, full laboratory and grid power connectivity available; • at Karumba, a large scale port facility with concentrate dewatering and drying operations, an 80,000t mechanised storage shed, ship-loading facility, and a 5,000 tonne self-propelled, self- discharging maritime transhipment vessel; • a 304km underground slurry pipeline which connects the mine and the Karumba port; and • a 49% interest in the Lawn Hill & Riversleigh Pastoral Holding Company. On 20 July 2017, the Company recommenced trading on the ASX following the successful raising of $5,150,000 under the public offer and completion of the transaction to acquire an initial 70% interest in the Century Zinc Mine in North West Queensland (option to acquire 100%) as outlined in the Prospectus dated 20 June 2017. The Company changed its name to "New Century Resources Limited" and was re-instated under the new ASX code NCZ. iii Operations Highlights • Century Tailings Deposit infill drilling program completed & major Resource increase achieved:  Resource upgrade to 78.9Mt at 3.02% zinc, 0.47% lead & 12.4g/t silver for a total contained metal of 2,380,000t Zn, 370,000t Pb & 31,500,000oz Ag  Entire Century Tailings Deposit in the Measured Resource category  Deposit confirmed to have excellent vertical & lateral grade continuity  Deposit confirmed to have consistent silver & lead assays  High-grade zones provide potential increased production in early operations  Measured Resource to be used as production basis for Restart Study • Award of Restart Feasibility Study to Sedgman  Sedgman independently reviewing and confirming process recoveries and process plant throughput  Focus on rapid plant restart to take advantage of rising zinc price  Potential long term partnership via an Operations Service Contract  Restart Feasibility Study to be complete in late Q4 2017 • Metallurgical testwork demonstrates zinc recoveries of up to 64% into a premium 50-53% Zn concentrate from Century Tailings Deposit  Extensive metallurgical test work completed to date including a 10,000t bulk pilot processing trial through the existing Century Processing Plant  Expert metallurgical team appointed to oversee Century Plant restart  Optimisation testwork underway to examine by-product credits and additional throughput rates at Century Processing Plant  Identified potential significant opex savings in power & reagent consumption • Identification of high grade extensions to the original Century Deposit  South Block mineralisation: Multiple broad high-grade Zn-Pb-Ag intercepts  Identified as an extension of the original ‘Big Zinc’ Century ore body  Mineralisation defined over 1,000m strike length, 115m wide & up to 30m thick  Significant silver grades of up to 138g/t Ag in addition to zinc and lead  South Block to build on existing resources at Silver King & East Fault Block • Identification of significant high grade mineralisation at the Watsons Lode Prospect  High-grade Zn-Pb-Ag vein system over 4km strike iv Century Tailings Deposit Drilling Program & Resource Upgrade In July 2017, the Company commenced an infill drilling program over the Century Tailings Deposit targeting an upgrade in the confidence level of the existing resource base to an Indicated Resource level at a minimum. The previously reported estimate for the Century Tailings Deposit was an Indicated Resource of 12.8Mt at 2.97% zinc and an Inferred Resource of 58.2Mt at 2.68% zinc for a total 71Mt at 2.73% zinc (1,940,000t of contained zinc metal). The results of the drilling program are shown in Figure 1, which also includes previous drilling programs over the Deposit. Cross sections through the drilling (see Figures 2 to 5) demonstrate the vertical and lateral consistency of zinc grades across the tailings dam, in addition to the continued observation of higher grades compared with the previously reported Mineral Resource. These cross sections also demonstrate strong consistency between the results of the 2015 and 2017 drilling programs. A vertical exaggeration of 20:1 has been applied to all cross sections for purpose of grade interpretation at the metre scale. All holes drilled in 2017 were at 125m grid spacing. Based on the drilling program, on 12 September 2017, New Century announced the results of the new independently estimated Mineral Resource for the Century Tailings Deposit. The upgraded Mineral Resource was estimated by Optiro Pty Ltd which had also been responsible for the previous estimate for the Deposit. Table 1: Upgraded JORC Code 2012 compliant Mineral Resource estimate for the Century Tailings Deposit Resource Category Tonnes (Mt) Zinc (%) Lead (%) Silver (g/t) Metal Content Measured 78.9 3.02 0.47 12.4 2,380,000t zinc 370,000t lead 31,500,000oz silver The Mineral Resource has been classified as Measured in accordance with the JORC Code (2012) due to the low variability and high confidence in all of the variables estimated. Furthermore, the comparison of the new Century Tailings Deposit block model grades (per year and per estimation domain) against the tailings stream grades from historical operations, representing many thousands of individual shift composite assays taken over the life of the mine, shows an overall difference of only 6%, well within the margin of error normally expected for a Measured Resource. As shown in Figure 1, the entire Century Tailings Deposit is consistently mineralised, with a notable higher grade weighting toward the south-eastern corner of the Deposit. This is also the deepest part of the Deposit, with holes averaging ~20m depth, compared to a 13m Deposit average. This higher grade zone provides an opportunity for increased zinc production during the initial years of operations and is planned to be targeted in the mine schedule as part of the Restart Feasibility Study currently underway by Sedgman (due to be completed in Q4 2017). v Figure 1: Plan view of the Century Tailings Deposit showing drilling programs The Global Mineral Resource at Century now stands at over 2,600,000t zinc, 700,000t lead and 42,500,000oz silver (see Table 2). Table 2: JORC 2012 Compliant Resources of the Century Zinc Mine Deposit Tonnes (Mt) Grade Contained Metal Zinc (%) Lead (%) Silver (g/t) Zinc (t) Lead (t) Silver (oz) Century Tailings Measured Silver King Inferred East Fault Block Inferred 78.9 3.02 0.47 12.4 2,380,000 370,000 31,500,000 2.7 6.90 12.5 120 186,000 337,500 10,500,000 0.5 11.6 1.10 48.0 60,000 5,500 800,000 TOTAL 82.1 3.20 0.87 16.2 2,626,000 713,000 42,800,000 vi Figure 2: Cross section B-B’ of the Century Tailings Deposit Figure 3: Cross section C-C’ of the Century Tailings Deposit Figure 4: Cross section A-A’ of the Century Tailings Deposit (see Figure 5 for zoom in of the 2015 Century Tailings Deposit drilling program) vii Figure 5: Zoom in of the 2015 Century Tailings Deposit drilling program (from Figure 4) viii Restart Feasibility Study On 2 August 2017, the Company announced the award of the Century Tailings Restart Feasibility Study (FS) to Sedgman, a member of the CIMIC Group (ASX:CIM). The FS is focused on the rapid restart of operations at the Century Zinc Mine via the initial reprocessing of substantial tailings resources at the site. Sedgman has completed a process of reviewing the extensive tailings metallurgical testwork database in order to independently reconfirm the metallurgical recovery assumptions to be used as part of FS process. In addition, Sedgman is also reviewing the existing plant configuration and assessing bottlenecks associated with a tailings feed (as opposed to previous hard rock ore feed) in order to independently determine the plant throughput available for tailings operations. The FS is anticipated to be completed in Q4 2017. During this time the parties also plan to discuss the opportunity to enter into an Operations Services Contract for the restart of the existing plant at Century for the processing of tailings. Tailings Recovery Optimisation Optimisation testwork has been ongoing on samples from the historical Indicated Resource drilling and the New Century Measured Resource drilling. The results to date, which have shown zinc recoveries of up to 64% demonstrate substantial improvement on recoveries from previous independent testwork, which had already achieved excellent recoveries of 50% zinc into concentrate grading 52% Zn. New Century’s test work was carried out by independent metallurgical laboratory group Auralia Metallurgy under supervision of the Company’s Metallurgy Manager, Rod Smith. Rod is one of Australia’s preeminent flotation experts with over 30 years’ experience in metallurgical and flotation process development and operation. Prior to New Century, Rod worked at AMMTEC Ltd, including 13 years as Managing Director. AMMTEC was one of Australia’s largest mining metallurgical laboratories, purchased by ALS Ltd (ASX:ALS) in 2011. Significant testing and piloting of the tailings reprocessing flow sheet has been completed to date, with further optimisation work commenced. This optimisation work is a part of a broader metallurgical program for the FS currently underway and is using composite samples obtained from the Measured Resource drilling program. This testwork will also provide concentrate samples for offtake negotiations. ix Figure 6: Tailings reprocessing versus hard rock processing in the existing Century Processing Plant The following is a summary of the metallurgical test work completed to date on the recovery of zinc from the Century Tailings Deposit: 1999-2016: Production from the original Century ‘Big Zinc’ Deposit • • • • Operation involved progressive grinding to <10µm and sequential flotation Over 1Mtpa of zinc concentrate produced via the 7Mtpa processing plant for 16 years Focused on high throughput at the expense of maximizing recovery (2015: 74%) >70Mt of tailings generated at a zinc grade of ~3.0%% 2014-2015: MMG Tailings Reprocessing Trials - Low Grade Concentrate Production • • • 10,000t Bulk Pilot Trial: achieved over 70% recovery of Zn into a Rougher concentrate MMG focus was on direct metal production on site (as opposed to the historic concentrate only operations) via significant additional site processing infrastructure Independent testwork (ALS Laboratories) validated performance of the pilot trial 2016: MMG Tailings Reprocessing Trials - High Grade Concentrate Production • • • • • Focussed only on utilisation of existing equipment within the Century Processing Plant Commissioned testwork by Changsha Research Institute of Mining & Metallurgy (CRIMM) Built on Bulk Pilot Trial with additional Scavenger and Cleaner unit operations Successful zinc recovery of 52% into a concentrate grade of >48% Zn Independent testwork by ALS Laboratories validated performance of CRIMM testwork 2017: New Century - High Grade Concentrate Production: Flowsheet Optimisation Testwork • • • • • Built on success of MMG High Grade Concentrate Production testwork program All proposed modifications continue to use only the existing Century Processing Plant Initial New Century acquisition due diligence testwork program focused on replicating previous MMG work, successfully achieving a recovery of 50% zinc into a concentrate grade of 52% Zn. Following these results, optimisation testwork was completed on tailings deposit Indicated Resource samples New Century achieved further successful recovery improvements via testwork completed at ALS Laboratories and Auralia Laboratories, including: 1. Utilisation of one existing ball mill to reduce float feed grind size from a p80 of 75µm to ~40µm, liberating ~30% additional zinc for flotation from the coarser size fraction; x 2. Reduced copper sulphate addition by 65%, improving zinc flotation performance and reducing gangue material flotation; and 3. Included rougher concentrate in regrind allowing further liberation of zinc for flotation. • The total impact of improvements has achieved increased zinc recovery from 50% to up to 64% at zinc concentrate grade of 53%. The flow sheet proposed for tailings reprocessing has also highlighted potentially large operating cost savings compared to historical hard rock operations. This is principally from: - Tailings reprocessing in the Century Process Plant having a reduced power consumption compared to hard rock operations due to the removal of the bulk of upfront crushing and grinding process requirements; - Reduced copper sulphate consumption as highlighted in testwork optimisation process; and - Significant reduction in total site labour requirements due to hydraulic mining method of tails compared to hard rock mining operations. Each of these items will be further investigated in the current metallurgical testwork and FS. Historical Exploration Review: South Block & Watsons Lode Mineralisation The Company has also commenced a review of the extensive historical exploration database associated with the Century Zinc Mine. This review will focus on prioritising the currently identified targets (see Figure 7) as a precursor to drilling these and other targets. Figure 7: Identified drilling targets at the Century Zinc Mine xi South Block A preliminary review and verification of historical drilling information from the zone known as ‘South Block’ at the Century Zinc Mine has indicated that the remaining Century-style Zn-Pb-Ag mineralisation is tabular in geometry and measures approximately 1,000m in length, 115m in width and is up to 30m thick. South Block is located on the southernmost portion of the original Century ore body and directly adjacent to the existing processing plant. Forty four drill holes, totalling 7,877m of historical drilling, have been reviewed by the Company. Figure 8: South Block location Figure 9: Cross section A-A’ through the South Block mineralisation xii Figure 10: View facing West of the South Block mineralisation Figure 11: View facing NW of the South Block mineralisation As outlined in the Company’s Prospectus, the South Block area was identified in the Independent Geologist’s Report (IGR) as being an extension of the original Century open pit mining operations. The IGR recommended an evaluation be conducted with respect to the potential size and grade of the mineralisation within the South Block area and as a result the Company expedited its review and verification of the historical data. New Century will now undertake an assessment of the potential to define a JORC 2012 compliant Mineral Resource over the South Block mineralisation. xiii Watsons Lode A preliminary review and verification of historical drilling information from the prospect known as Watsons Lode at the Century Zinc Mine has been completed by the Company. As outlined in the Independent Geologist’s Report in the Company’s Prospectus, Watsons Lode represents a high priority prospect requiring follow up drilling. Watsons Lode is located on the exploration permit (EPM 10544) surrounding the Century mining leases and is approximately 10km from the existing Century Processing Plant. Watsons Lode is one of many prospects in the vicinity of the Century Zinc Mine, with 40 targets identified to date. Figure 12: Overview of historical drilling results at the Watsons Lode Prospect Numerous high-grade intersections have been reported from historical drilling at Watsons Lode as well as historical mining development and production. During previous small scale operations the Watsons Shaft was sunk to 100ft and combined with Lucky Dollar and Coughlans Lode produced 176t of lead and 1,100oz silver. A long section of the main part of Watsons Lode is shown in Figure 14. xiv Figure 13: Long section A-A’ through the Watsons Lode prospect. Zones with strong mineralisation within the overall envelope are highlighted. The Watsons Lode vein system occurs over a strike of close to 4000m and comprises a series of fault- filling epithermal, quartz-carbonate-sphalerite-galena veins containing high grade lead-zinc- silver within a broader mineralised envelope. The individual veins are up to 15m wide and form an array in a zone up to 50m wide. Within the larger vein system, multiple high-grade lead-zinc-silver intersections occur within a zone 1,700m long from Watsons Shaft to the south-west. This mineralised zone occurs largely within the Century host rock sequence. Drilling NE of Watsons Shaft has some moderate intersections (eg. WLQ012) but not in general the calibre of those in the area under discussion. Within this array, veins are usually steeply dipping, intersect other structures of different orientations, may be truncated by younger fault. It should be noted that, as the veins are steeply dipping, many of the intersection widths differ from the approximate true width. The Company is now progressing planning for a follow up drilling program which will be used to potentially generate a JORC compliant Mineral Resource at Watsons Lode, in addition to verifying the accuracy of the historical drilling data. xv Other Projects: Kodiak Coal Project (NCZ 70%) The Kodiak Coal Project is currently on care and maintenance. The Company continues to consider options with regards to the future of the Kodiak Coking Coal Project in Alabama, USA, in light of the recent rise in the coal price to over US$200/t and is assessing options in relation to financing, joint venture opportunities or a disposal of the asset. xvi Mineral Resource Statement The following information is provided in accordance with Listing Rule 5.21 and as at 30 June 2017. Mineral Resource Estimation Governance Statement New Century Resources Ltd ensures that the Mineral Resource estimates are subject to appropriate levels of governance and internal controls. The Mineral Resources have been generated by independent external consultants who are experienced in best practices in modelling and estimation methods. The consultants have also undertaken review of the quality and suitability of the underlying information used to generate the resource estimations. The Mineral Resource estimates follow standard industry methodology using geological interpretation and assay results from samples won through drilling. New Century Resources reports its Mineral Resources in accordance with the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (the JORC Code) (2004 Edition). Competent Persons named by the Company qualify as Competent Persons as defined in the JORC Code. The table below sets out Mineral Resources for 2016 and 2017 for the Kodiak Coking Coal Project in Alabama, USA. There was no change between the two periods. Coking Coal resources as at 30 June 2016 and at 30 June 2017 Coal Seam Measured Indicated Inferred Total Resource Resource Resource Resource Coke Seam, Gurnee Property Atkins Seam, Gurnee Property TOTAL 34.0Mt 37.6Mt 71.6Mt 3.2Mt 1.6Mt 4.8Mt 2.0Mt - 39.2Mt 39.2Mt 2.0Mt 78.4Mt Competent Persons’ Statements The information in this announcement that relates to Mineral Resources (as that term is defined in the JORC Code) in respect to the Century Tailings Deposit, Silver King Deposit and the East Fault Block Deposit was reported by the Company in its prospectus released to ASX on 20 June 2017 and ASX announcement released on 12 September 2017. The Company confirms that it is not aware of any new information or data that materially affects the Century Tailings Deposit, Silver King Deposit and the East Fault Block Deposit resource estimates, and that all material assumptions and technical parameters underpinning that estimate continue to apply and have not materially changed. The information in this report relating to Exploration Results and to JORC Compliant (Coal) Resources and Reserves for the Coke and Atkins Seams on the Gurnee Property at the Kodiak Coking Coal Project, Alabama, USA has been reviewed and is based on information compiled by Mr Alan Stagg of Stagg Resource Consultants Inc. Mr Stagg is a Registered Member of the Society of Mining, Metallurgy, and Exploration, Inc. (SME), registration number 3063550RM, and 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 2004 Edition of the “Australian Code for Reporting of Mineral Resources and Ore Reserves”. Mr Stagg consents to the inclusion in the report on the matters on this information in the form and context in which it appears. The information in this report was first disclosed under the JORC Code 2004 on 8 October 2012, 12 October 2012, 27 November 2012, 19 March 2013, 6 August 2013 and 14 November 2013. It has not been updated since to comply with the JORC 2012 on the basis that the information has not materially changed since first being reported. xvii New Century Resources and Controlled Entities - ABN 53 142 165 080 DIRECTORS' REPORT The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of New Century Resources Limited (referred to hereafter as the 'Company') and the entities it controlled for the year ended 30 June 2017. Directors The names of Directors who held office during or since the end of the year and until the date of this report are set out below. Directors were in office for the entire period unless otherwise stated. Evan Cranston Tom Eadie Bryn Hardcastle Tolga Kumova Oonagh Malone Patrick Walta (appointed 13 July 2017) (appointed 13 July 2017) (resigned 13 July 2017) (appointed 13 July 2017) Information on Current Directors Evan Cranston, Executive Chairman (age 35) Evan Cranston is a corporate advisor with a background in corporate law. He has extensive experience in the areas of capital raising, IPOs, joint ventures, mergers and acquisitions, corporate governance and liaison with market analysts and potential investors. He holds both a Bachelor of Commerce and Bachelor of Laws. Mr Cranston was appointed to the Board on 10 October 2012 as an Executive Director. In April 2015, Mr Cranston transitioned to a non-executive director role. On 13 July 2017, Mr Cranston was appointed as Executive Chairman. Other current listed directorships Former listed directorships in last 3 years Boss Resources Ltd (from 2 May 2012) Cradle Resources Ltd (to 8 May 2016) Carbine Resources Ltd (from 23 March 2010) Clancy Exploration Ltd (from 23 October 2014) Primary Gold Limited (from 8 March 2016) Patrick Walta, Managing Director (age 35) Patrick Walta is a qualified metallurgist, mineral economist and board executive with experience across both technical and commercial roles within the mining and water treatment industries. Graduating from Melbourne University with degrees in Chemical Engineering and Science, Mr Walta has gone on to complete postgraduate studies including an MBA, Masters of Science (Mineral Economics) and a Diploma of Project Management. Mr Walta's experience within the mining industry includes public & private company management, mineral processing, mergers and acquisitions, initial public offerings, project management, feasibility studies, exploration activities, competitive intelligence and strategic planning. Previously, Mr Walta was Executive Director of Carbine Resources Limited where his role involved the development of all facets of the Mount Morgan Gold & Copper Project, as well as general management and continued business development of the Company. Mr Walta also has a broad level of resource industry experience through Rio Tinto, Citic Pacific Mining, Cradle Resources, Primary Gold and Clean TeQ. Mr Walta was appointed to the Board on 13 July 2017. Other current listed directorships Former listed directorships in last 3 years Matador Mining Limited (from 28 June 2016) Carbine Resources Ltd (to 13 April 2016) Primary Gold Limited (to 31 May 2017) 4 New Century Resources and Controlled Entities - ABN 53 142 165 080 Tolga Kumova, Corporate Director (age 39) Mr Tolga Kumova has 15 years' experience in stockbroking, corporate finance and corporate restructuring, and has specialised in initial public offerings and capital requirements of mining focused companies. He has raised in excess of $500 million for mining ventures, varying from inception stage through to construction and development. Mr Kumova was a founding shareholder of Syrah Resources in 2010 and served as an Executive Director from May 2013 to October 2016, and as Managing Director from October 2014 to October 2016. During his tenure at Syrah Resources, Mr Kumova led the business from resource stage through to full funding through to development, gaining experience negotiating offtake agreements with numerous globally recognised counterparties. Mr Kumova is currently non-executive chairman of European Cobalt Limited. Mr Kumova was appointed to the Board on 13 July 2017. Other current listed directorships Former listed directorships in last 3 years European Cobalt Limited (from 29 May 2017) Syrah Resources Limited (to 5 October 2016) (Ernest) Tom Eadie, Non-Executive Director (age 63) Mr Eadie is a well-credentialed mineral industry leader and explorer with broad experience in both the big end and small end of town. He was the founding Chairman of Syrah Resources, Copper Strike and Discovery Nickel as well as a founding Director of Royalco Resources. At Syrah, he was at the helm during acquisition, discovery and early feasibility work of the huge Balama graphite deposit in Mozambique which is due to start production in late 2017. Copper Strike, where he was also Managing Director for 10 years, made several significant copper/gold and lead/zinc/silver discoveries in North Queensland, and while at Discovery Nickel (later to be renamed Discovery Metals), Tom assisted with gaining control of the Boseto copper deposit in Botswana. Prior to this, Mr Eadie was Executive General Manager of Exploration and Technology at Pasminco Limited, at the time the largest zinc producer in the world. This came after technical and later management responsibilities at Cominco and Aberfoyle in the 1980s. Mr Eadie has a Bachelor of Science (Hons) in Geology and Geophysics from the University of British Columbia, a Master of Science in Physics (Geophysics) from the University of Toronto and a Graduate Diploma in Applied Finance and Investment from the Security Institute of Australia. He is a Fellow (and past board member) of the AusIMM. Mr Eadie was appointed to the Board on 13 July 2017. Other current listed directorships Former listed directorships in last 3 years Alderan Resources Limited (from 23 January 2017) Copper Strike Limited (to 6 September 2016) Strandline Resources Limited (from 9 October 2015) Syrah Resources Limited (to 2 October 2014) Bryn Hardcastle, Non-Executive Director (age 39) Bryn Hardcastle is Managing Partner of Perth-based law firm, Bellanhouse, specialising in corporate, commercial and securities law. He advises on equity capital markets, takeovers & schemes and corporate acquisitions, reconstructions and disposals predominantly in the energy and resources sector. Mr Hardcastle has previously worked in London, Melbourne and Dubai at Freehills and Allen & Overy and is a former partner of Perth boutique law firm, Hardy Bowen Lawyers. Mr Hardcastle was appointed to the Board on 8 December 2011. Other current listed directorships Former listed directorships in last 3 years Cre8tek Limited (from 6 November 2015) Nil MHM Metals Limited (from 20 December 2016) ServTech Global Holdings Ltd (from 14 September 2016) 5 New Century Resources and Controlled Entities - ABN 53 142 165 080 Oonagh Malone, Company Secretary and former Non-Executive Director (age 42) Oonagh Malone was appointed as Company Secretary on 10 October 2012. Ms Malone is a principal of a corporate advisory firm which provides company secretarial and administrative services. She has over 8 years’ experience in administrative and company secretarial roles for listed companies and is a member of the Governance Institute of Australia. She currently acts as company secretary for ASX-listed Boss Resources Ltd, Carbine Resources Ltd, Hawkstone Mining Limited, Matador Mining Limited, Draig Resources Limited, Primary Gold Limited and ServTech Global Holdings Limited. Ms Malone was appointed as a Director on 4 June 2016 and resigned as a Director on 13 July 2017. Other current listed directorships Former listed directorships in last 3 years Hawkstone Mining Limited (from 19 February 2015) New Century Resources Limited (to 13 July 2017) Directors’ Meetings During the financial year ended 30 June 2017, there were 4 meetings of the Board of Directors. The Board acts as Audit and Remuneration Committees. Attendances by each Director during the period were as follows: Director Number Attended Number Eligible to Attend Board of Directors Evan Cranston Bryn Hardcastle Oonagh Malone 4 4 4 4 4 4 The Directors made and approved 3 circular resolutions during the financial period ended 30 June 2017. Principal Activities The principal activities of the Group are the review and development of mineral exploration projects. There were no significant changes in the nature of these activities during the year ended 30 June 2017. Dividends No dividend has been declared or paid by the Group during the financial year and the Directors do not at present recommend a dividend. Operating Results The consolidated comprehensive loss of the Group amounted to $4,365,082 (2016: Loss $3,172,076) after providing for income tax. Review of Operations During the period the Group continued to maintain the Kodiak Coking Coal Project (New Century: 70%) located in the Cahaba Basin, Alabama USA in care and maintenance mode. On 31 May 2017, Shareholders approved the acquisition of the Century Zinc Mine which completed in July 2017. 6 New Century Resources and Controlled Entities - ABN 53 142 165 080 Significant Changes in the State of Affairs The following significant changes in the state of affairs of the Group occurred during the year ended 30 June 2017: - The Company issued 3,333,333 shares following a placement at $0.15 each to raise $500,000 before costs; - 1,500,000 unlisted options in the Company expired unexercised during the year. Matters Subsequent to the End of the Financial Year On 13 July 2017, the Group completed the acquisition of the Century Zinc Mine with key actions occurring on completion as follows: - The Century Zinc Mine acquisition commitment, as detailed in note 22, was finalised. - - - - - 34,333,333 ordinary shares at a share price of $0.15 per share to raise $5,150,000 before costs were issued. 71,538,898 ordinary shares at a share price of $0.20 per share were issued on conversion of all outstanding convertible notes as detailed in note 13. This extinguished the $18,600,115 liability for consideration with a value of $14,307,781, as no redemption premium was payable. The consequent gain of $4,292,334 is recognisable in the year ended 30 June 2018. 30,000,000 unquoted share options exercisable at $0.25 each and expiring on 13 July 2022 were issued in partial consideration for the Century Zinc Mine. 42,000,000 unquoted share options exercisable at exercise prices ranging from $0.25 to $1.00 and expiring on 13 July 2021 or 13 July 2022 were issued to directors. 8,500,000 unquoted employee share options exercisable at $0.25 each and expiring on 13 July 2022 were issued. - Mr Patrick Walta, Mr (Ernest) Tom Eadie, and Mr Tolga Kumova were appointed directors of the Company while Ms Oonagh Malone resigned from the position as a director. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the result of these operations, or the state of the affairs of the Group in future financial year. Future Developments, Prospects and Business Strategies Disclosure of further information regarding likely developments in the operations of the Group in future financial periods and the expected results of those operations is likely to result in unreasonable prejudice of those operations, or the state of affairs of the Group in future financial periods. Share Options At the date of this report, the Group had the following options over ordinary shares on issue: Type of Options Number of Options Exercise Price Expiry Date Unquoted options issued under the ESOP Unquoted options issued to Directors Unquoted options issued to Directors Unquoted options issued to Directors Unquoted options issued to Directors Unquoted options issued to Directors Unquoted options issued to Directors Unquoted options issued to Vendors 8,500,000 6,000,000 6,000,000 7,500,000 7,500,000 7,500,000 7,500,000 30,000,000 $0.25 $0.25 $0.50 $0.25 $0.50 $0.75 $1.00 $0.25 13/07/2020 13/07/2020 13/07/2020 13/07/2021 13/07/2021 13/07/2021 13/07/2021 13/07/2022 At the date of this report, the total unissued ordinary shares of New Century Resources Limited under option are 80,500,000. 7 New Century Resources and Controlled Entities - ABN 53 142 165 080 Directors’ interests The relevant interest of each Director in the share capital of the Group shown in the Register of Directors’ shareholdings as at the date of this report is: DIRECTOR Evan Cranston (Ernest) Tom Eadie Bryn Hardcastle Tolga Kumova Patrick Walta Total Remuneration report ORDINARY SHARES FULLY PAID OPTIONS Direct Indirect Direct Indirect - - 180,000 - 500,000 680,000 - 2,000,000 933,334 16,666,666 - - - - 5,000,000 4,000,000 30,000,000 - 7,000,000 - 19,600,000 7,000,000 39,000,000 The Remuneration Report, which has been audited, outlines the Director and executive remuneration arrangements for the Group and the Company, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Compensation of Key Management Personnel Remuneration is referred to as compensation throughout this report. Key management personnel have authority and responsibility for planning, directing and controlling activities of the Group, directly or indirectly, including directors of the Company and other key executives. Key management personnel comprises the Directors of the Company and the senior executives for the Group that are named in this report. Compensation levels for key management personnel of the Group are competitively set to attract and retain appropriately qualified and experienced directors and executives, while at the same time being cognisant of the Company’s financial position and activities. The Remuneration Committee, which at the date of this report comprises the full Board, assesses the appropriateness of compensation packages of the Group given trends in comparative companies and the objectives of the Group’s compensation strategy. The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: - - - the capability and experience of key management personnel the key management personnel’s ability to control the relevant segments’ performance the Group’s performance including:    the Group’s earnings; the growth in share price and delivering constant returns of shareholder wealth; and the amount of incentives within each key management person’s compensation. Compensation packages can include a mix of fixed and variable compensation, and short and long term performance based incentives. Fixed compensation Fixed compensation consists of base compensation (which is calculated on a total cost basis), as well as non- monetary benefits, leave entitlements and employer contributions to defined contribution superannuation funds. 8 New Century Resources and Controlled Entities - ABN 53 142 165 080 Compensation levels are reviewed annually by the Board through a process that considers individual and overall performance of the Group. In addition, the Board may from time to time engage external consultants to provide analysis and advice to ensure the Directors’ and senior executives’ compensation is competitive in the market place. Performance linked compensation Performance linked compensation includes both short and long term incentives, and is designed to reward senior executives for meeting or exceeding their financial and personal objectives. Short term incentives (STIs) are an “at risk” bonus provided in the form of cash. The long term incentive (LTI) can be issued in the form of options or performance rights. Short term incentive bonus The Board sets key performance indicators (KPIs) for relevant senior executives. The KPIs generally includes measures relating to the Group, the relevant segment, and the individual, and can include financial, people, strategy and risk measures. The measures are chosen as they directly align the individual’s reward with the KPIs of the Group and with its strategy and performance. At the end of the financial year, the Board assesses performance against any KPIs set at the beginning of the financial year. A percentage of the pre-determined maximum amount is awarded depending on results. The Board recommends the cash incentive to be paid for approval by the Board. The Board retains the discretion to vary the final cash incentive if performance if considered to be deserving of either a greater or lesser amount. Long term incentive The Company issues options to key management personnel in accordance with the Company’s Employee Share Option Plan or in accordance with shareholder approval in the case of directors. Vesting conditions including length of service can be applied to these options. The Company views the exercise price being set at a premium to the share price at the time of issue as an incentive designed to drive Group performance. Performance rights may be issued in accordance with the Company’s Performance Rights Plan (subject to shareholder approval). Performance rights convert to ordinary shares of the Company on a one-to-one basis depending on the achievement of performance hurdles. The Board believes that the performance hurdle aligns the interests of the key management personnel with the interests of the Company’s shareholders. Rights that do not vest at the end of the five year period from issue will lapse, unless the Board in its discretion determines otherwise. Performance rights do not entitle holders to dividends that are declared during the vesting period. Long term incentives are used to ensure that remuneration of key management personnel reflects the Group’s financial performance, with particular emphasis on the Group’s earnings and the consequence of the Group’s performance on shareholder wealth. At the 2016 AGM, 99.1% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2016. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Additional information for consideration of shareholder wealth This table summarises the earnings of the consolidated entity and other factors that are considered to affect shareholder wealth for the five years to 30 June 2017. Comparative basic losses per share differ from those in previous financial reports because they have been updated to reflect the January 2016 rights issue and the March 2016 placements, in accordance with Australian Accounting Standards. 2017 2016 2015 2014 2013 Loss after income tax attributable to shareholders ($) (3,785,112) (3,722,417) (6,530,288) (6,752,119) (14,082,398) Share price at financial year end ($) 0.195 Movement in share price for the year ($) Total dividends declared (cents per share) Returns of capital (cents per share) - - - 0.195 0.035 0.16 (0.22) - - - - 0.38 (0.06) - - 0.44 (0.06) - - Basic loss per share (cents per share) (2.02) (2.27) (4.20) (5.57) (17.95) 9 New Century Resources and Controlled Entities - ABN 53 142 165 080 Compensation of Key Management Personnel 2017 Non-Executive Directors: Evan Cranston Bryn Hardcastle Subtotal Non- Executive Directors Short-Term Benefits Cash salary and fees $ Post Employment Benefits Superannuation $ Termination benefit Share-Based Payment 24,000 24,000 48,000 - - - - - - Company Secretary: Oonagh Malone (i) Total - - (i) Company Secretary for full year. No remuneration paid for Directorship. 30,000 78,000 - - 2016 Short-Term Benefits Cash salary and fees Post Employment Benefits Superannuation Terminatio n benefit Total $ 24,000 24,000 48,000 30,000 78,000 Total Proportion of remuneration performance related % - - - - - Proportion of remuneration performance related $ % $ - - - - - Share-Based Payment - Reversal of shares to be issued $ $ 24,000 24,000 48,000 22,267 22,267 $ - - - - - - - - - - - - - - - 24,000 24,000 48,000 22,267 22,267 28,327 6,352 20,000 (20,000) 34,679 30,000 128,594 - 6,352 - 20,000 - (20,000) 30,000 134,946 (i) Appointed a director on 4 June 2016 but Company Secretary for full year. No further remuneration paid for Directorship. (ii) Employment ceased 26 September 2015. $20,000 of previously recognised share based payment was replaced with a termination benefit of $20,000, as detailed on page 11. No expense was recognised for share based payments in 2017. No amounts have been recognised for long service leave. Other transactions with Key Management Personnel Evan Cranston is a director of Konkera Corporate. Konkera Corporate received $120,000 (2016: $120,000) during the year for administrative, bookkeeping and accounting services. The company secretarial fees of $30,000 (2016: $30,000) for Oonagh Malone and Director fees of $24,000 (2016: $24,000) for Evan Cranston were also payable to Konkera Corporate. $48,000 was outstanding to Konkera for director fees at 30 June 2017 (30 June 2016: $24,000 outstanding). Mr Bryn Hardcastle is a director of Bellanhouse which provided legal services totalling $179,049 (2016: $72,000) in the financial year ended 30 June 2017. $112,100 was outstanding to Bellanhouse at 30 June 2017 (2016: $165,000). 10 Non-Executive Directors: Evan Cranston Bryn Hardcastle Subtotal Non- Executive Directors Executive Directors: Max Brunsdon Subtotal Executive Directors Chief Executive Officer: Scott Sullivan (ii) Company Secretary: Oonagh Malone (i) Total - - - - - - - - New Century Resources and Controlled Entities - ABN 53 142 165 080 Compensation Options There were no (2016: nil) compensation options issued to Directors and Key Management Personnel during the year. 1,000,000 share options with an exercise price on $0.5251 and an expiry date of 15 April 2017, along with 500,000 share options with an exercise price of $0.6463 and an expiry date of 15 April 2017, granted to a previous Director expired during the year on the expiry date of the options. Share Based Payment Compensations Details of options over ordinary shares in the Company provided as remuneration to Directors and Key Management Personnel are set out below. When exercised, each option is convertible into one ordinary share of New Century Resources Limited. 2017 Numbers of options granted during the year Value of options at grant date* $ Numbers of options vested during the year % vested during the year Numbers of options lapsed during the year Non-Executive Directors Bryn Hardcastle Evan Cranston Oonagh Malone Total - - - - - - - - - - - - - - - - - - - - The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the option and the liquidity of the share market. Refer to note 28. Service Agreements There were no Executive Directors at 30 June 2017. All Director fees were reset to $24,000 per annum on 10 February 2016, with the effect backdated to 1 July 2015. Fees for Mr Cranston since 1 July 2015 remained unpaid during 2017 with $48,000 owed at 30 June 2017. On appointment to the Board, all Non-executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the office of director. The major provisions for 2017 relating to remuneration are set out below. The Company Secretary, Ms Malone, is paid fees of $30,000 per annum with no termination period required and no remuneration related to performance. She is not paid any additional fee for her directorship. Non-Executive Director Term of Agreement Termination Conditions Evan Cranston No specified term Bryn Hardcastle No specified term * Base salary quoted is the position as at 30 June 2017; salaries are reviewed at least annually. 1 month notice period No notice required to terminate Base salary per annum for 2017 including superannuation* (Non-performance based) $24,000 $24,000 Proportion of elements of remuneration related to performance - - 11 New Century Resources and Controlled Entities - ABN 53 142 165 080 Option holdings of Key Management Personnel The number of options over ordinary shares of New Century Resources Limited held by each KMP of the Group during the year is as follows: 2017 Key Management Personnel Evan Cranston Bryn Hardcastle Oonagh Malone Balance at beginning of year Granted as remuneration during the year Options exercised during the year Other changes during the year - - - - - - - - - - - - Balance at end of year Vested during the year Vested and exercisable - - - - - - - - - - - - - - - - Shareholdings of Key Management Personnel The number of shares in New Century Resources Limited held by each KMP of the Group and their related parties during the financial year is as follows: 2017 Key Management Personnel Evan Cranston Bryn Hardcastle Oonagh Malone Balance at beginning of year Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year - 180,000 203,336 383,336 - - - - - - - - Balance at end of year - - - - 180,000 203,336 383,336 End of audited remuneration report. Indemnifying Officers or Auditor The Company has paid premiums to insure all Directors and Officers against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity of director of the Company, other than conduct involving a wilful breach of duty in relation to the Company. Disclosure of the nature and the amount of the premium is prohibited by the confidentiality clause of the insurance contract. No indemnities have been given or agreed to be given or insurance premiums paid or agreed to be paid, during or since the year ended 30 June 2017, to any person who is or has been an auditor of the Company. Auditor Bentleys Audit & Corporate (WA) Pty Ltd has been appointed as auditor of the Group in accordance with section 327 of Corporations Act 2001. Non-audit Services There were no non-audit services provided by a related practice of the Group’s auditor during the year ended 30 June 2017. Proceedings on behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. 12 New Century Resources and Controlled Entities - ABN 53 142 165 080 Environmental Regulations The Group is required to carry out its activities in accordance with the Mining Laws and regulations in the areas in which it undertakes its exploration activities. The Group is not aware of any matter which requires disclosure with respect to any significant environmental regulation in respect of its operating activities. Auditor’s Independence Declaration The lead auditor’s independence declaration for the year ended 30 June 2017 has been received and can be found on page 14. Made and signed in accordance with a resolution of the Directors. Evan Cranston Executive Chairman Signed at Perth this 28th day of September 2017 13 To The Board of Directors Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit director for the audit of the financial statements of New Century Resources Limited for the financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours faithfully BENTLEYS Chartered Accountants CHRIS NICOLOFF CA Director Dated at Perth this 28th day of September 2017 New Century Resources and Controlled Entities - ABN 53 142 165 080 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017 Finance Income Depreciation and amortisation expense Exploration and evaluation expenditure Employee benefits Loss on disposal of property, plant and equipment Professional expenses Foreign exchange gain/(loss) Impairment of exploration interests Impairment of intangible assets Century project acquisition costs Finance costs Other expenses Loss before income tax expense Income tax expense Loss for the year Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange (loss)/ gain on translation of foreign controlled entities, net of tax Other comprehensive (loss)/ income for the year Total comprehensive loss for the year Loss for the year attributable to: Members of the parent entity Total comprehensive loss for the year attributable to: Members of the parent entity Note 4 11 4 4 4 5 4 4 6 Consolidated 2017 $ 2016 $ 16,232 21,446 (21,589) (435,386) (48,000) - (339,829) (872) - (3,395) (318,704) (2,401,314) (232,255) (3,785,112) - (3,785,112) (17,361) (815,106) (104,945) (15,080) (345,329) (1,155) (398,188) - - (1,868,409) (178,290) (3,722,417) - (3,722,417) (579,970) (579,970) 550,341 550,341 (4,365,082) (3,172,076) (3,785,112) (3,722,417) (3,785,112) (3,722,417) (4,365,082) (3,172,076) (4,365,082) (3,172,076) Earnings per share from continuing operations: Basic loss per share Diluted loss per share 27 27 (2.02) (2.02) Cents (2.27) (2.27) The accompanying notes form part of these financial statements. 15 New Century Resources and Controlled Entities - ABN 53 142 165 080 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 Note Consolidated 2017 $ 2016 $ 7 8 9 10 11 5 12 13 15 14 16 17 5,606,108 117,915 4,835 5,728,858 1,325,655 114,106 4,243 1,444,004 810,727 13,831,105 3,287,297 - 17,929,129 23,657,987 1,091,196 14,323,361 3,053,375 3,395 18,471,327 19,915,331 856,050 18,600,115 436,604 16,198,805 19,456,165 16,635,409 845,921 739,531 1,585,452 796,566 1,045,835 1,842,401 21,041,617 18,477,810 2,616,370 1,437,521 32,259,433 6,669,444 (36,312,507) 26,715,502 7,249,414 (32,527,395) 2,616,370 1,437,521 Current Assets Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets Non Current Assets Other financial assets Property, plant and equipment Deferred exploration, evaluation and development expenditure Intangible assets Total Non Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Borrowings Total Current Liabilities Non Current Liabilities Other payables Provisions Total Non Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Issued capital Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements. 16 New Century Resources and Controlled Entities - ABN 53 142 165 080 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR-ENDED 30 JUNE 2017 2017 Consolidated Balance at 1 July 2016 Comprehensive Income Loss for the year Other comprehensive income for the year Exchange differences on translation of controlled entities Total comprehensive income for the year Transactions with owners, in their capacity as owners, and other transfers Issue of shares/options Shares to be issued Costs arising from issues Balance at 30 June 2017 2016 Consolidated Balance at 1 July 2015 Comprehensive Income Loss for the year Other comprehensive income for the year Exchange differences on translation of controlled entities Total comprehensive income for the year Transactions with owners, in their capacity as owners, and other transfers Issue of shares/options Payment in cash for previously recognised shares to be issued Costs arising from issues Balance at 30 June 2016 Ordinary shares $ Accumulated Losses $ Foreign Currency Translation Reserve $ Option Reserve $ Total $ 26,715,502 (32,527,395) 4,052,878 3,196,536 1,437,521 - (3,785,112) - - (3,785,112) - - - (579,970) (3,785,112) (579,970) 500,000 5,089,834 (45,903) - - - - - - - - - - (579,970) (4,365,082) 500,000 5,089,834 (45,903) 32,259,433 (36,312,507) 3,472,908 3,196,536 2,616,370 Ordinary shares $ Accumulated Losses $ Foreign Currency Translation Reserve $ Option Reserve $ Total $ 24,315,800 (28,804,978) 3,502,537 3,180,536 2,193,895 - (3,722,417) - - (3,722,417) - - - 550,341 (3,722,417) 550,341 2,468,614 (36,000) (32,912) - - - - - - - - - 550,341 (3,172,076) 2,468,614 16,000 - (20,000) (32,912) 26,715,502 (32,527,395) 4,052,878 3,196,536 1,437,521 The accompanying notes form part of these financial statements. 17 New Century Resources and Controlled Entities - ABN 53 142 165 080 CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE YEAR-ENDED 30 JUNE 2017 CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees (inclusive of GST) Interest received Financing charges Net cash (outflow) from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for mining lease interests Refund of bonds Payments for bonds and investments Payments for property, plant and equipment Net cash (outflow) from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issues Share issue costs Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Exchange difference on cash and cash equivalents Cash and cash equivalents at the end of the financial year The accompanying notes form part of these financial statements. Note Consolidated 2017 $ 2016 $ (1,573,799) 12,913 (4) (1,497,449) 21,494 (66) 26 (1,560,890) (1,476,021) (267,727) 287,592 (33,105) (2,151) (15,391) (275,951) 4,495 - (2,197) (273,653) 5,872,173 (24,594) 1,938,696 (32,912) 5,847,579 1,905,784 4,271,298 1,325,655 9,155 156,110 1,169,552 (7) 7 5,606,108 1,325,655 18 New Century Resources and Controlled Entities - ABN 53 142 165 080 NOTES TO THE FINANCIAL STATEMENTS The consolidated financial statements and notes represent those of New Century Resources Limited (formerly called Attila Resources Limited) and Controlled Entities (the “Group”). The separate financial statements of the parent entity have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements for the Group were authorised for issue in accordance with a resolution by the Board of Directors on 28th September 2017. Note 1: Summary of Significant Accounting Policies Basis of preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. a. Going concern For the year ended 30 June 2017, the Group has incurred a loss of $3,785,112 (2016: $3,722,417) and generated net cash outflows of $1,560,890 (2016: $1,476,021) from operating activities, as disclosed in the consolidated statement of profit or loss and other comprehensive income and the consolidated statement of cash flows respectively. It also has a deficiency in working capital of $13,727,307 (2016: $15,191,405) as at 30 June 2017 as disclosed in the consolidated statement of financial position. The deficiency in working capital is primarily due to the convertible notes being due for repayment in cash by 26 June 2017 (refer to note 13). This liability has been extinguished by all noteholders converting all notes in July 2017. As disclosed in note 25, on 13 July 2017, the Group completed the acquisition of the Century Zinc Mine. The terms of the acquisition includes project funding from MMG Australia Limited, under a Funding Deed, which is to be paid on scheduled dates with the final payment to occur on 1 July 2019. The funding that will be paid in accordance with the Funding Deed over the next 12 months, from the date of the financial report, is sufficient to cover all commitments and budgeted project costs. Based on their assessment, the Directors believe it is appropriate to adopt the going concern basis of preparation for the financial statements and that the Group has the ability to discharge its debts as and when they fall due. This assessment that the Group has the ability to continue as a going concern is dependent on continued management of discretionary expenditure in line with the funds available to the Group. b. Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (New Century Resources Limited) and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 24. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. 19 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non- controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non- controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of profit or loss and other comprehensive income. c. Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. d. Foreign currency transactions and balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. 20 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. Group companies The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation currency, are translated as follows:  assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;   income and expenses are translated at average exchange rates for the period; and retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. These differences are recognised in profit or loss in the period in which the operation is disposed of. e. Cash and Cash Equivalents Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions which are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. f. Property, plant and equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Property, Plant and equipment Property, plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of property, plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised in profit or loss. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(j) for details of impairment). The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in the statement of profit or loss and other comprehensive income during the financial period in which they are incurred. 21 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) Depreciation Fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated commencing from the time the asset is ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. Mining plant that was acquired with the acquisition of the Kodiak project is depreciated on a units of production basis. Other plant & equipment and buildings are depreciated on a straight-line basis over the asset’s useful life. Land is not depreciated. Buildings 25 years Mining plant units of production Motor vehicles 5 years Other plant and equipment 3-8 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. g. Intangibles other than goodwill Trademarks, licences and logos are recognised at cost of acquisition. Trademark, licences and logos are carried at cost less any accumulated amortisation and any impairment losses. Amortisation is calculated and determined based on case by case basis. h. Exploration, Evaluation and Development Expenditure All exploration and evaluation expenditure is expensed to the statement of profit or loss and other comprehensive income. Expenditure in relation to the acquisition of a defined resource including an option to enter a mining lease is capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area of interest. 22 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) i. Goods and Services Tax (GST) and other indirect taxes Revenues, expenses and assets are recognised net of the amount of GST except:  where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and  receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows included in receipts from customers or payments to suppliers. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. j. Impairment of assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. k. Share based payments Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of a Black-Scholes model. The expected life used in the model is been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. 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 Company’s estimate of shares that will eventually vest. l. Trade and Other Payables These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. m. Contributed Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 23 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) n. Employee benefits A provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date. Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Employee benefits that are expected to be settled wholly within one year have been measured at the amounts expected to be paid when the liability is settled plus related on costs. Employee benefits not expected to be wholly settled within one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wages increases and the probability that the employee may satisfy vesting requirements. Those cash flows are discounted using market yields on high quality corporate bonds with terms to maturity that match the expected timing of cash flows. Equity-settled compensation Share-based payments to employees are measured at the fair value of the instruments on grant dates and amortised over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. o. Financial instruments Recognition The Group recognises financial assets and financial liabilities on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. Classification and Subsequent Measurement Financial instruments are subsequently valued at fair value, amortised cost using the effective interest method, or cost. Amortised Cost Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. The Effective Interest Method The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss. 24 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) Fair value The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share - based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. Valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability. The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: – – – Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. 25 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Level 2 Level 3 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or (ii) if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (ie transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. The Group has no assets or liabilities measured at fair value because, while assets acquired and liabilities assumed in business combinations have been measured at their acquisition date fair values, in accordance with paragraph 18 of AASB 3, these initial measurements have formed the costs of the assets acquired and liabilities assumed for the purpose of other accounting standards. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point. In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. 26 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. Financial Liabilities Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised. Derecognition Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. p. Revenue and Other Income Interest revenue is recognised using the effective interest method. q. Parent entity financial information The financial information for the parent entity, New Century Resources Limited, disclosed in note 29 has been prepared on the same basis as the consolidated financial statements, except as set out below. Investments in subsidiaries Investments in subsidiaries are accounted for at cost in the financial statements of New Century Resources Limited. Tax consolidation legislation New Century Resources Limited and its wholly-owned Australian controlled entity have implemented the tax consolidation legislation. The Group has applied to become consolidated tax entity. The head entity, New Century Resources Limited, and the controlled entity in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right. In addition to its own current and deferred tax amounts, New Century Resources Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from the controlled entity in the tax consolidated group. New Century Resources Limited will be responsible for any current tax payable, current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits of the wholly owned subsidiary, which are transferred to New Century Resources Limited under tax consolidation legislation. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising with the tax consolidated entity are recognised as current amounts receivable from or payable to other entity in the Group. Any difference between the amounts assumed and amounts receivable or payable are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entity. 27 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) Share-based payments The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. r. Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership are transferred to entities in the consolidated group, are classified as finance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of the lease term or estimated useful lives. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses on a straight line basis over the lease term. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term. s. Convertible notes Compound financial instruments issued by the Group comprise convertible notes denominated in Australian dollars that can be converted to ordinary shares at any time before maturity at the option of the holder, where the number of shares to be issued is fixed and does not vary with changes in fair value. The liability component of compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured. Interest related to the financial liability is recognised in profit or loss. On conversion, the financial liability is reclassified to equity and no gain or loss is recognised. t. New and Amended Accounting Policies adopted by the Group The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. u. New Accounting Standards for Application in Future Periods. Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below:  AASB 9: Financial Instruments and associated Amending Standards (applicable for annual reporting periods commencing on or after 1 January 2018). 28 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 1: Summary of Significant Accounting Policies (continued) The Standard will be applicable retrospectively (subject to the comment on hedge accounting below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. The key changes made to the Standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Should the entity elect to change its hedge policies in line with the new hedge accounting requirements of AASB 9, the application of such accounting would be largely prospective. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments, it is impracticable at this stage to provide a reasonable estimate of such impact.  AASB 15: Revenue from Contracts with Customers and associated Amending Standards (applicable for annual reporting periods commencing on or after 1 January 2017). The Standard establishes a comprehensive framework for determining whether, how much and when revenue is recognised. The potential financial impact of the adoption of AASB 15 on the Group is not yet possible to determine.  AASB 16 Leases (applicable for annual reporting periods commencing on or after 1 January 2019). This standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured as the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the consolidated entity. The Group has decided against early adoption of these standards and interpretations. v. Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. 29 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 2. Critical accounting judgements, estimates and assumptions The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Going concern basis For the reasons detailed in note 1(a), the financial report is prepared on a going concern basis. Impairment The Group assesses each asset or cash generating unit (CGU) (excluding goodwill, which is assessed annually regardless of indicators) at each reporting period to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, operating costs, future capital requirements, exploration potential, resources and reserves and operating performance. These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs. Given the change in focus towards the Century Zinc Project during the year ended 30 June 2017, the Directors considered whether an impairment of assets relating to the Kodiak project was required. After considering various factors including sensitivities, the Directors concluded that no impairment was required on the Kodiak assets as the recoverable amount exceeded the carrying value of US $13,153,212 or $AUD17,099,859 at 30 June 2017. Treatment of convertible notes The change in terms of the convertible notes (Notes) in 2015 detailed in note 13 were sufficient for the extended Notes to be treated as a new convertible note and not an extension of the previous convertible notes. This led to the face value of the Notes on issue at 26 June 2015 being increased to include the interest capitalised to that date. The new notes were valued and classified as a current liability based on the Directors’ best expectation that they would be repaid within one year with a 15% redemption premium payable. In 2016, when the Notes were extended to 26 June 2017, this was in accordance with the terms of the Notes, so the Notes were valued on the same basis with no additional amounts recognised in equity. Although Noteholders agreed during 2017 to convert all notes on completion of the Century Acquisition, with no redemption premia payable, these conversions without redemption premium were all conditional on completion of the Century Acquisition. As the Century Acquisition was not competed until July 2017, no adjustment has been made to the expected interest expense to 30 June 2017 to reflect this conversion. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. Where the equity instruments granted are performance rights that are convertible with no further consideration other than meeting non-market performance based vesting conditions, the fair value is equal to the value of the underlying share at the grant date. 30 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 3. Operating segments a. Description of Segments The Board of Directors, which is the chief operating decision maker, has determined the operating segments based on geographical location as it reviews internal reports based on this. The Group has two reportable segments; namely, Australia and the United States of America, which are the Group’s strategic business units. b. Basis of accounting for purposes of reporting by operating segments Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. Intersegment transactions Intersegment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction costs. If intersegment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates. Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. Segment liabilities Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Segment liabilities include trade and other payables and certain direct borrowings. Unallocated items There are no items of revenue, expenses, assets and liabilities that are not allocated to operating segments. 31 c. Segment information Finance Income Interest Income Total Finance Income Segment Result New Century Resources and Controlled Entities - ABN 53 142 165 080 Australia United States of America 2017 2016 2017 2016 Elimination 2017 Consolidated Group 2016 2017 2016 11,263 11,263 20,743 20,743 4,969 4,969 703 703 - - - - - 16,232 16,232 21,446 21,446 (201,125) (3,785,112) (3,722,417) Loss after Income Tax (3,373,976) (2,264,383) (411,136) (1,256,909) Assets Segment Assets 22,962,545 17,933,679 17,946,178 18,573,891 (17,250,736) (16,592,239) 23,657,987 19,915,331 Liabilities Segment Liabilities (19,321,251) (16,462,339) (26,785,911) (21,130,768) 25,065,545 19,115,297 (21,041,617) (18,477,810) Other Depreciation and amortisation expense Exploration and evaluation expenditure Employee benefits – other Professional expenses (5,810) (44,126) (48,000) (339,829) - - (104,945) (345,329) Finance costs Other expenses (2,401,314) (1,868,409) (232,255) (178,290) (15,779) (17,361) (391,260) (815,106) - - - - - - - - - - - - - - - - - - - - (21,589) (17,361) (435,386) (815,106) (48,000) (339,829) (104,945) (345,329) (2,401,314) (1,868,409) (232,255) (178,290) 32 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 4. Loss Before Income Tax Consolidated a. Finance Income Interest received Total b. Loss before income tax includes the following specific expenses: Employee benefit expenses Wages and salaries including director fees Other employment expenses Other expenses Listing fees Share registry expenses Rent expenses Travel expenses Insurance Other administrative expenses Exploration and evaluation expenditure Definitive feasibility study costs Other exploration and evaluation expenditure Finance costs Interest on convertible notes Other interest expense Professional expenses Legal fees Auditor's Remuneration - audit or review of financial report Other professional expenses Note 5. Deferred exploration and development expenditure Opening balance Tenement acquisition costs during the year Impairment of relinquished exploration interests Exchange differences Total 2017 $ 16,232 16,232 48,000 - 48,000 33,619 6,242 82,621 49,124 20,860 39,789 2016 $ 21,446 21,446 98,594 6,351 104,945 32,319 9,570 41,376 27,378 20,560 47,087 232,255 178,290 - 435,386 435,386 2,401,310 4 2,401,314 1,236 813,890 815,106 1,868,343 66 1,868,409 62,783 73,307 42,009 235,037 339,829 53,428 218,594 345,329 3,053,375 346,127 - (112,205) 3,287,297 2,291,577 1,095,022 (398,188) 64,964 3,053,375 The ultimate recoupment of the deferred exploration and development expenditure is dependent upon the successful development and commercial exploration or alternatively the sale of respective areas of interest. Capitalised acquisition costs are impaired on relinquishment of options or leases over the mineral exploration interest. 33 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 6. Income Tax Benefit a. Tax expense The components of tax (expense)/income comprise: Current tax Deferred tax Under/(over) provision in respect of prior years Consolidated 2017 $ - - - - 2016 $ - - - - b. Numerical reconciliation of income tax benefit to prima facie tax payable Loss from continuing operations before income tax expense Tax at the Australian tax rate of 30% (2016: 30%) 3,785,112 3,722,417 (1,135,534) (1,116,725) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Tax effect of different tax rate of overseas subsidiaries Share based payments expensed during the year Capital raising expenditure Interest on convertible notes expensed during the year Other non-assessable items Other non-deductible items Income tax benefits not recognised Income tax expense c. Unrecognised deferred tax assets – tax losses (41,113) (99,363) 720,393 261,534 (52,886) 346,969 - (145,803) - (77,925) 560,503 215,600 17,527 546,823 - Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at the Australian tax rate of 30% (2016: 30%) and U.S. tax rate of 40% (2016: 40%) 25,973,652 25,132,337 9,800,693 9,555,137 The Group has Australian related tax losses for which no deferred tax asset is recognised of $5,887,679 and U.S. related revenue tax losses of $20,085,974 for which no deferred tax asset is recognised. Other than $8,093 of US tax losses that expire in 2021, these US tax losses expire between 2027 and 2037. d. Unrecognised temporary differences 2017 Deferred tax assets Exchange differences Accrued expenses Capital raising costs Balance not recognised as at 30 June 2017 2016 Deferred tax assets Exchange differences Accrued expenses Capital raising costs Balance not recognised as at 30 June 2016 Opening balance $ Charged to Income $ Charged directly to equity $ (268,249) (51,166) (152,398) (471,813) - (25,791) - (25,791) (470,961) - (8,299) (479,260) Opening balance $ Charged to Income $ Charged directly to equity $ (356,955) (16,388) (150,260) (523,603) - (34,778) - (34,778) 88,706 - (2,138) 86,568 Closing balance $ (739,210) (76,957) (160,697) (976,864) Closing balance $ (268,249) (51,166) (152,398) (471,813) 34 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 6. Income Tax Benefit (continued) The temporary differences and tax losses have not been brought to account because the Directors do not believe it is appropriate to regard realisation of those deferred tax assets as being probable. The benefit of these deferred tax assets will only be obtained if: (1) the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the temporary differences to be realised; (2) the Group continues to comply with the conditions for deductibility imposed by tax legislation; and (3) no changes in tax legislation adversely affect the entity in realising the benefit from the deductions for the temporary differences. No franking credits are available. Note 7. Current assets - cash and cash equivalents Cash on hand Cash at bank Cash on deposit The effective interest rate on cash on deposit was not applicable (2016: 2.54%). An amount of $52,317 (2016: $140,619) was held in USD at balance date. Note 8. Current assets - trade and other receivables GST receivable Other current receivable Note 9. Other current assets Prepayments Note 10. Other financial assets Non-current Deposits held as security guarantees Consolidated 2017 $ 114 5,605,994 - 5,606,108 2016 $ 116 425,539 900,000 1,325,655 22,257 95,658 117,915 9,395 104,711 114,106 4,835 4,835 4,243 4,243 810,727 810,727 1,091,196 1,091,196 Term deposits held as security guarantees are term deposits held for the benefit of other parties in guarantee of liabilities. They are valued at the face values of the term deposits. 35 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 11. Non-current assets – property, plant and equipment Consolidated Land $ Buildings $ Mining Plant $ 305,122 - 305,122 149,246 - 149,246 13,365,469 (11,751) 13,353,718 Motor Vehicle $ 51,183 (47,274) 3,909 Other Plant & Equipment $ Total $ 30,483 (11,373) 19,110 13,901,503 (70,398) 13,831,105 316,052 - - (10,930) - 305,122 154,592 - - (5,346) 13,835,833 - - (478,391) 15,538 2,197 - (2,518) 1,346 24,353 - (32) 14,323,361 26,550 - (497,217) - 149,246 (3,724) 13,353,718 (11,308) 3,909 (6,557) 19,110 (21,589) 13,831,105 Land $ Buildings $ Mining Plant $ 316,052 - 316,052 154,592 - 154,592 13,844,221 (8,388) 13,835,833 Motor Vehicle $ 53,017 (37,479) 15,538 Other Plant & Equipment $ Total $ 6,349 (5,003) 1,346 14,374,231 (50,870) 14,323,361 305,599 - - 10,453 - 316,052 149,479 - - 5,113 13,383,364 - - 457,871 22,951 2,197 - 945 20,189 - (18,972) 1,533 13,881,582 2,197 (18,972) 475,915 - 154,592 (5,402) 13,835,833 (10,555) 15,538 (1,404) 1,346 (17,361) 14,323,361 At 30 June 2017 At cost Accumulated depreciation Movements in carrying value Year ended 30 June 2017 Balance 1 July 2015 Additions Disposals Exchange differences Depreciation expense for the year Balance at 30 June 2017 At 30 June 2016 At cost Accumulated depreciation Movements in carrying value Year ended 30 June 2016 Balance 1 July 2015 Additions Disposals Exchange differences Depreciation expense for the year Balance at 30 June 2016 Note 12. Current liabilities – trade and other payables Unsecured liabilities: Trade payables Amounts payable to related party Fund received for shares to be refunded Other payables and accrued expenses Total 36 Consolidated 2017 $ 201,868 191,450 282,339 180,393 856,050 2016 $ 217,604 189,000 - 30,000 436,604 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 13. Borrowings – convertible notes The Convertible Notes (Notes) are presented in the Consolidated Statement of Financial Position as follows: Secured liabilities: Face value of Notes on issue Accrued interest expense Total carrying value of liability at 30 June This liability is presented as: Current liability Total carrying value of liability at 30 June Issue of notes Consolidated 2017 $ 2016 $ 14,307,781 4,292,334 18,600,115 14,307,781 1,891,024 16,198,805 18,600,115 18,600,115 16,198,805 16,198,805 On 27 June 2012, 52 12% Notes, including 15 issued to Kingslane Pty Ltd (“Kingslane”), were issued with a face value of $250,000 each, for a total face value of $13,000,000 including $3,750,000 issued to Kingslane, with convertibility subject to shareholder approval. As these Notes had not contained any conversion features at 30 June 2012, these were treated as secured debt with no equity component at 30 June 2012. Since 30 June 2012, an additional $500,000 was issued to Kingslane. Security The Notes are secured by a security interest over all assets of the Group’s US subsidiaries. Each shareholder of Attila US LLC has pledged their interest in that company which owns 100% of Kodiak as security to the noteholders. The security is held by Kingslane Pty Ltd as agent and security Trustee under the Convertible Note Agreement. Approval of convertibility On 9 October 2012, shareholders approved the convertibility of 37 Convertible Notes which excluded those issued to Kingslane. On 30 October 2012, 2 further Notes were issued to Kingslane with a face value of $250,000 each, with convertibility subject to shareholder approval. On 30 November 2012, shareholders approved the convertibility of the 17 Convertible Notes issued to Kingslane. A total of $715,000 of capitalised borrowing costs recognised for the year ended 30 June 2012 were expensed over the term of the initial convertible notes. On 19 December 2012, 2 Notes for a total of $500,000 were issued and convertible from the date of 19 December 2012. On 18 January 2013, 1 additional Note was issued for $250,000 and convertible from 18 January 2013. On 25 June 2013, 1 Note was converted to 500,000 ordinary shares. Initial recognition The Notes were valued at initial recognition based on the difference between the face value of the Notes and the present value of the liability component at a market yield of 14% - the rate that could be earned on a similar debt instrument without the conversion feature. The value of the equity component is the residual difference between the liability component calculated without the conversion feature and the face value of the Notes. (note 16(c)) Extension of term On 26 June 2015, remaining noteholders agreed to extend the term of the Notes for up to two years with the expiry date now 26 June 2016, or 26 June 2017 at the election of the Company. Payment of interest on the notes is deferred until redemption. Interest expense to 26 June 2015 of $837,699 was capitalised and included in the face value of the notes. 37 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 13. Borrowings – convertible notes (continued) In place of interest, a "Redemption Premium" is payable as follows: (a) (b) during the period from 26 June 2015 to 26 June 2016: 15% of the total amount owing under each note; or during the period from 26 June 2016 to 26 June 2017 (if the Company elects to extend the Maturity Date): 30% of the total amount owing under each note. If the notes are not converted into shares on or before the Maturity Date, the Redemption Premium must be paid by the Company: 50% in cash and 50% in shares (at a share price of 85% of the volume weighted average price of shares in the Company on ASX over the 20 trading days immediately preceding the payment date). If the Notes are converted on or before the Maturity Date, at the noteholders’ option, the Redemption Premium will convert into shares at the Conversion Price. The conversion price was adjusted to $0.20 per share following shareholder approval on 30 November 2015. The change in terms of the Notes on 26 June 2015 was sufficient to constitute new Notes, for accounting purposes, with the terms detailed. The face value of the new Notes of $14,837,699 is the original $14,000,000 subscription amount for the previous Notes plus $837,699 of capitalised interest that would have been payable on 26 June 2015 on the previous Notes. The new Notes were valued and classified as a current liability based on the Directors’ best expectation that they would be repaid within one year with a 15% redemption premium payable. Unamortised capitalised transaction costs of $229,682 were expensed at 26 June 2015. The new Notes were valued at initial recognition based on the difference between the face value of the Notes and the present value of the liability component at a market yield of 15% - the rate that could be earned on a similar debt instrument without the conversion feature. The nil value of the equity component was calculated as the residual difference between the liability component calculated without the conversion feature and the face value of the Notes. During 2016, 2 Notes with a total face value of $529,918 were converted to a total 2,649,590 shares at the conversion price of $0.20 per share. In 2016, the Company elected to extend the Maturity Date of remaining notes to 26 June 2017. To reflect this extension in maturity date, the notes are valued at 30 June 2017 as the $18,600,115 that would have been payable on redemption of the remaining notes on 26 June 2017, including the 30% redemption premium. Although all Notes were converted on 13 July 2017 following completion of the Century Acquisition, with no redemption premium paid, this conversion was subject to completion of the Century Acquisition that was not certain as at 30 June 2017. Consequently, the carrying value of the Notes at 30 June 2017 has not been adjusted to reflect the conversion without the redemption premium being paid. Notes and future interest coupon payments are classified as current when the liabilities are due to be settled within 12 months of the balance date. Note 14. Provisions Current provision for annual leave Balance at 1 July Movement for the year Balance at 30 June Non-current provision for mine site restoration: Balance at 1 July Movement for the year Exchange differences Balance at 30 June Consolidated 2017 $ - - - 2016 $ 18,531 (18,531) - 1,045,835 (287,592) (18,712) 739,531 1,011,246 - 34,589 1,045,835 A provision has been recognised for the costs to be incurred for the restoration of the mining site at Kodiak Coking Coal Project, Alabama. 38 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 15. Other payables Present value of expected amount payable for Gurnee lease Consolidated 2017 $ 845,921 845,921 2016 $ 796,566 796,566 As detailed in note 22, the Group has agreed to pay $US750,000 (AUD$1,009,965) on 26 December 2018 or earlier in the event of: - Sale of coal mined from the area of the Gurnee lease; - Sale, transfer or assignment of the lease; or - Sale, transfer or assignment of Kodiak Mining Company LLC, the subsidiary of the Group that is the party to the lease. This has been recognised as a non-current liability of the group and valued at the future amount payable of $US750,000 (AUD$975,039), discounted at a market interest rate of 10%pa from the expected payment date of 26 December 2018 back to the year end date of 30 June 2017. Note 16. Issued capital 189,852,519 (2016: 186,519,186) fully paid ordinary shares Funds received for shares to be issued Nil (2016: nil) fully paid ordinary shares to be issued Shares to be issued recognised as a share based payment Other equity securities (note 16(b)) Consolidated 2017 $ 26,765,051 26,765,051 5,089,834 5,089,834 - - 404,548 2016 $ 26,310,954 26,310,954 - - - - 404,548 32,259,433 26,715,502 Holders of ordinary shares have the right to receive dividends as declared and in the event of winding up the parent entity, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares held and the amount paid up. At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. 39 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 16. Issued capital (continued) Issue of ordinary shares and other equity instruments during the year Opening balance Shares expected to be issued due to short term bonus payment that was committed to on 25 June 2015, but reversed in 2016 Shares issued 7 January 2016 @ $0.02 per share following a rights issue Shares issued 3 February 2016 @ $0.20 per share on conversion of convertible note Shares issued 24 February 2016 @ $0.20 per share on conversion of convertible note Shares issued 1 March 2016 @ $0.02 for shortfall of rights issue Shares issued 1 March 2016 @ $0.02 in placement Shares issued 2 May 2017 @ $0.15 in placement Funds received for shares to be issued Costs arising of issue Consolidated 2017 2016 Number of shares 186,519,186 $ 26,715,502 Number of shares 86,934,798 $ 24,315,800 - - - - - - - - - - - - - (36,000) 41,455,622 829,112 1,324,795 264,959 1,324,795 264,959 45,479,176 909,584 10,000,000 200,000 3,333,333 - - 189,852,519 500,000 5,089,834 (45,903) 32,259,433 - - - 186,519,186 - - (32,912) 26,715,502 On 25 June 2015 the Group committed to pay a short term bonus payment to the previous Chief Executive Officer (CEO) of $36,000. This amount was payable by the Company at the CEO’s election as either: (a) cash, subject to the Company completing a fundraising of no less than $2,000,000; or (b) shares, with the deemed issue price being equal to the issue price of the most recent capital raising undertaken by the Company. The Group expected to settle this liability through the issue of shares. Subsequent to 30 June 2015, the former CEO agreed to receive a cash payment of $20,000 in lieu of the previously agreed $36,000 in shares. Consequently, the previously recognised $36,000 of shares to be issued was reversed at 30 June 2016. Options over ordinary shares As at 30 June 2017, there were nil (2016: 1,500,000) unlisted options over ordinary shares in the Company. The fair value of unlisted options granted for nil consideration during the year ended 30 June 2017 was nil (2016: nil). 1,500,000 unlisted share options expired on 11 March 2017 without being exercised. As at 30 June 2017, there were nil (2016: nil) listed options over ordinary shares in the Company. Each option entitled the holder to subscribe for one share upon exercise of each option. Total options on issue by the Company as at 30 June 2017 are nil (2016: 1,500,000). The weighted average contractual life is nil years (2016: 0.70 years). The weighted average exercise price is nil (2016: $0.63). 40 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 16. Issued capital (continued) a. Capital management The Company’s debt and capital includes ordinary share capital, and financial liabilities, supported by financial assets. There are no externally imposed capital requirements. The Board effectively manages the Company’s capital by assessing the Company’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels and share issues. The Board frequently review budgets and budget variance analyses that include cash flow projections and working capital projections, to ensure prudent management of capital budgeting requirements. There has been no change in the strategy adopted by the Board to control the capital of the Group since the prior year. b. Other equity securities Opening balance (value of equity component of convertible notes – refer to note 13) Total Note 17. Reserves Options reserve Foreign currency translation Movements Options reserve Opening balance Share based payment reclassified from shares to be issued on renegotiation of bonus payment for CEO from $36,000 in shares to be issued, to $20,000 in cash. Balance as at 30 June Consolidated 2017 $ 404,548 2016 $ 404,548 404,548 404,548 Consolidated 2017 $ 2016 $ 3,196,536 3,472,908 6,669,444 3,196,536 4,052,878 7,249,414 3,196,536 3,180,536 - 16,000 3,196,536 3,196,536 The Options reserve records items recognised as expenses on valuation of employee share options and options issued to external parties. Exchange differences on translation of foreign controlled entities Opening balance Foreign currency translation Balance as at 30 June 4,052,878 (579,970) 3,472,908 3,502,537 550,341 4,052,878 The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries. 41 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 17. Reserves (continued) All US subsidiaries have a functional currency of $US. At 30 June 2017, the US subsidiaries had net assets, exclusive of intragroup balances, of $US12,510,732 or $AUD16,264,602 (2016: $US12,296,283 or $AUD16,558,420) at the 2017 year end AUD:USD foreign exchange rate of 0.7692 (2016: 0.7426). In 2017, the net assets of US subsidiaries excluding intragroup balances decreased by $AUD293,818 (2016: increased by $AUD445,605) after functional currency translation. Without functional currency translation, this would have been an increase of $US214,650 or $AUD284,493 at the average AUD:USD foreign exchange rate for the year of 0.7545 (2016: decrease of $US78,359 or $AUD107,592 at the average AUD:USD foreign exchange rate for the year of 0.7283). Other movements in the foreign currency translation reserve are due to revenue and expense balances being translated at the average exchange rate for the year while equity items are never revalued after initial recognition. Note 18. Financial instruments Financial Risk Management The Group’s principal financial instruments are cash, receivables, deposits held as security guarantees, and payables (including convertible notes). Overview The Group has exposure to the following financial risks from their use of financial instruments: - - - - liquidity risk credit risk Interest rate risk Foreign exchange risk This note presents information about the Group’s exposure to each of the above risks. Financial Risk Management Policies The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management policies are established by the Board of Directors to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Financial Assets Cash and cash equivalents Trade and other receivables Non current other financial assets Financial Liabilities Trade and other payables Current convertible notes Other payables Consolidated 2017 $ 2016 $ 5,606,108 117,915 810,727 6,534,750 1,325,655 114,106 1,091,196 2,530,957 856,050 18,600,115 845,921 436,604 16,198,805 796,566 20,302,086 17,431,975 Non current other financial assets of $810,727 (2016: $1,091,196) consist of security deposits of $73,105 (2016: $40,000) plus an environmental bond of USD$563,630 or AUD$737,622 (2016: $1,051,196). 42 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 18. Financial instruments (continued) Liquidity Risk and Liquidity Risk Management Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure that it will have sufficient cash to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of credit facilities or other fund raising initiatives. The Board frequently reviews budget variance analyses that include working capital projections to monitor working capital requirements and optimise cash utilisation. The Group had funding through convertible notes of $18,600,115 (2016: $16,198,805) at balance date which were all converted in July 2017. The completion of the Century Mine transaction in July 2017 and completion of the associated capital raising, both detailed in note 25, provided ongoing funding liquidity following conversion of the convertible notes. The Group continuously monitors forecast and actual cash flows and the maturity profiles of financial assets and financial liabilities to manage its liquidity risk. Refer to note 1(a) Going concern for further details of liquidity risk management. The Group has access to a credit card facility totalling $40,000 (2016: $40,000). The credit card facility may be drawn at any time and may be terminated by the bank without notice. The following are the contractual maturities of financial liabilities: At 30 June 2017 Non derivative financial liabilities: Trade and other payables (note 12) Convertible notes (note 13) Other payables (note 15) Carrying Amount 856,050 18,600,115 845,921 Under 6 Months 751,649 18,600,115 - Consolidated 6 – 12 Months - - - 1 - 2 years - - 845,921 2 – 5 years - - - 20,302,086 19,351,764 - 845,921 - At 30 June 2016 Non derivative financial liabilities: Trade and other payables (note 12) Convertible notes (note 13) Other payables (note 15) Carrying Amount 436,604 16,198,805 796,566 17,431,975 Under 6 Months 436,604 - - Consolidated 6 – 12 Months - 18,600,115 - 1 - 2 years - - 1,009,965 2 – 5 years - - - 436,604 18,600,115 1,009,965 - The conversion and conversion period of the Notes into ordinary shares of the parent entity were approved by the Company’s shareholders at a General Meeting held on 9 October 2012. The convertible notes on issue at 30 June 2017 were all converted by shareholders in July 2017. Credit Risk Credit risk refers to the risk that counterparties will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted the policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. Banks and financial institutions are chosen only if they are independently rated parties with a minimum rating of ‘A’. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics other than the security provided to the convertible noteholders whereby each shareholder of Attila US LLC has pledged their interest in that company which owns 100% of Kodiak as security to the noteholders. 43 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 18. Financial instruments (continued) The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral or other security obtained. Interest Rate Risk Interest rate risk is managed with a mixture of fixed and floating rate debt. The Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out in the following table: 2017 Financial Asset Cash and cash equivalents Trade and other receivables Non current other financial assets Financial Liabilities Trade and other payables Convertible Notes Other payables Net Financial Assets 2016 Financial Asset Cash and cash equivalents Trade and other receivables Non current other financial assets Financial Liabilities Trade and other payables Convertible Notes Other payables Net Financial Assets Weighted Average Interest Rate % Floating Interest Rate $ Fixed Interest Maturing in 1 Year or Less $ Fixed Interest Maturing in over 1 Year $ Non- Interest Bearing $ Total $ 0.43 4,037,690 - 0.27 - 15 10 - - - - - - - 73,105 - - - 1,568,418 5,606,108 117,915 117,915 737,622 810,727 - (18,600,115) - - - (845,921) (856,050) - - (856,050) (18,600,115) (845,921) 4,037,690 (18,527,010) (845,921) 1,567,905 (13,767,336) Weighted Average Interest Rate % Floating Interest Rate $ Fixed Interest Maturing in 1 Year or Less $ Fixed Interest Maturing in over 1 Year $ Non- Interest Bearing $ Total $ 1.93 281,086 900,000 - - - 144,569 1,325,655 114,106 114,106 - 0.17 - 15.00 10.00 - - - - - 40,000 1,051,196 - 1,091,196 - (16,198,805) - - - (796,566) (436,604) - - (436,604) (16,198,805) (796,566) 281,086 (15,258,805) 254,630 (177,929) (14,901,018) 44 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 18. Financial instruments (continued) The following tables summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk: 2017 Cash and cash equivalents Trade and other receivables Non-current other financial assets Trade and other payables Convertible Notes Other payables Total increase/(decrease) 2016 Cash and cash equivalents Trade and other receivables Non-current other financial assets Trade and other payables Convertible Notes Other payables Total increase/(decrease) Foreign exchange risk Carrying Amount $ 5,606,108 117,915 810,727 (856,050) (18,600,115) (845,921) (13,767,336) Carrying Amount $ 1,325,655 114,106 1,091,196 (436,604) (16,198,805) (796,566) (14,901,018) -1% +1% Profit Equity Profit Equity $ (40,377) - (731) - - - $ (40,377) - (731) - - - $ 40,377 - 731 - - - $ 40,377 - 731 - - - (41,108) (41,108) 41,108 41,108 -1% +1% Profit Equity Profit Equity $ (11,811) - (400) - - - $ (11,811) - (400) - - - $ 11,811 - 400 - - - $ 11,811 - 400 - - - (12,211) (12,211) 12,211 12,211 Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. With instruments being held by overseas operations, fluctuations in the US dollar may impact on the Group’s financial results unless those exposures are appropriately hedged. The Group does not currently have any foreign currency hedging facility in place. 45 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 18. Financial instruments (continued) The following table shows the foreign currency risk on the financial assets and liabilities of the Group’s operations denominated in currencies other than the presentation currency. 2017 Net Financial Assets/(Liabilities) in $AUD Consolidated Group USD 66,955 Total 66,955 2016 Net Financial Assets/(Liabilities) in $AUD Consolidated Group USD 320,599 Total 320,599 In respect of the above USD foreign currency risk exposure in existence at the balance sheet date a sensitivity of -10% lower and 10% higher has been applied. With all other variables held constant, post tax loss and equity would have been affected as follows: AUD $6,695 loss; AUD $6,695 gain (2016: AUD $32,060 loss; AUD $32,060 gain). Financial risk management objectives The Group's and parent entity's activities expose them to a variety of financial risks: market risk (including price risk and interest rate risk), credit risk and liquidity risk. The Group's and parent entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group and parent entity use different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out by the Board of Directors. These policies include identification and analysis of the risk exposure of the Group and parent entity and appropriate procedures, controls and risk limits. Fair Value Estimation The net fair value of cash and non interest bearing monetary assets and financial liabilities of the Group approximates their carrying amount. The convertible notes are valued using an income approach using level 3 inputs. Note 19. Interests of Key Management Personnel Refer to the remuneration report contained in the Directors’ Report for additional details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 30 June 2017. The totals of remuneration paid to KMP of the Company and the Group during the year are as follows: Short-Term Benefits Post Employment Benefits Termination Payments Share-Based Payments Total KMP Compensation $ 78,000 $ - $ - $ - $ 78,000 128,594 6,352 20,000 (20,000) 134,946 2017 Total 2016 Total Other KMP Transactions For details of other transactions with KMP, refer to Note 23 Related Party Transactions and Balances. 46 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 20. Remuneration of auditors Remuneration of the auditors for: - Audit or review of the financial report Remuneration of previous auditors for: - Audit or review of the financial report Total Consolidated 2017 $ 36,018 2016 $ - 5,991 53,428 42,009 53,428 Note 21. Contingent Liabilities and Contingent Assets The Group has no outstanding contingent assets or contingent liabilities at 30 June 2017, other than: • A statement of claim received by the Group during 2013 filed at the Circuit Court of Shelby County, Alabama relating to an alleged unfair dismissal claim by Mr Don Brown. The claim is for approximately US$1,000,000. The Company intends to defend this matter and the Directors are of the opinion that the claim can be successfully defended. Accordingly, no liability has been recorded in relation to this matter. • The Company agreed to guarantee the obligations of Century Mine Rehabilitation Pty Ltd under various agreements, pending the completion of the Century Zinc Mine acquisition that occurred on 13 July 2017. Note 22. Commitments Milestone Agreements In December 2012, New Century Resources Limited entered into formal consultancy agreements with its project partner, TBL Metallurgical Resources, and its key personnel in relation to the Kodiak Coking Coal Project. In addition to the provision of key services to ensure the success of the Kodiak Coking Coal Project, the agreements provide for milestone payments of up to US$1 million each upon the achievement of key milestones linked to the Kodiak Coking Coal Project. The maximum outstanding amount payable for these milestones is US$3 million. The outstanding milestones include the Group releasing a definitive feasibility study, the commencement of mining and washing of coal from the Kodiak Project and also annualised production of 250,000 saleable tonnes of hard coking coal from the Seymour or Gurnee Properties. Gurnee Property In the year ended 30 June 2012, the Group acquired, through its 70% owned subsidiary, Kodiak Mining Company LLC, an option over a coal lease for the Atkins and Coke coal beds at the Gurnee Property. This option was exercised on 27 December 2012. The resulting agreement to lease the underground mining rights to Atkins and Coke coal beds created the following outstanding commitments: - Term of the lease: 3 year rolling terms until exhaustion of any discovered coal reserves subject to certain minimum production milestones per 3 year term; and - Royalty of 8% on net coal sales with a minimum monthly payment of US$15,000 (AUD$19,501) per month commencing in December 2014. The minimum royalty payments will be offset against future actual production royalty payments. 47 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 22. Commitments (continued) This lease was extended to 26 December 2018 in consideration for the Group agreeing to pay $US750,000 (AUD$975,039) on 26 December 2018 or earlier in the event of: - Sale of coal mined from the leased area; - Sale, transfer or assignment of the lease; or - Sale, transfer or assignment of Kodiak Mining Company LLC, the subsidiary of the Group that is the party to the lease. This agreement to pay $US750,000 (AUD$975,039) has been recognised as a noncurrent liability of the group as detailed in note 15. Project X – Gholson and Clark Coal Seams Lease On 23 September 2013, the Group announced that its 70% owned subsidiary, Kodiak Mining Company, had entered into a lease agreement with RGGS to mine the Gholson and Clark coal seams at an area known as Project X, which is also located on the Company’s Gurnee Property. The key terms for the acquisition of Project X, which incorporates the Gholson and Clarke seams are as follows: - Upfront leasing fee of US$25,000 paid in 2014; - Term of the lease has been revised to be until 22 August 2019; and - Royalty of 8% on net coal sales at mine gate with a minimum monthly royalty of $US3,000 (AUD$3,900) from August 2014 to January 2016. This Minimum royalty payment reduced to $US1,000 (AUD$1,300) from February 2016 to August 2016, before increasing to $US2,000 (AUD$2,600) per month from September 2016 until expiry on 22 August 2019. Minimum royalty payments cannot be offset against future actual production royalty payments. Century Zinc Mine Acquisition During the year, the Company executed a binding earn-in agreement to earn 100% of Century Mine Rehabilitation Project Pty Ltd (CMRP), a wholly owned subsidiary of Century Bull Pty Ltd (Century Bull), via: - Initial 70% of CMRP (transferred up front) in consideration for: - the issue of 30M unquoted options in New Century Resources Limited with an exercise price of $0.25 each and expiring 5 years from the date of issue to Century Bull or its nominees; - a 2% net smelter royalty from operations; and - a commitment to sole fund project expenditure of $10M for first three years. - Following expenditure of the $10M, an option to acquire the remaining 30% based on an agreed New Century Resources Limited enterprise value formula, being 30% of the fully diluted enterprise value of New Century Resources Limited, to be paid at New Century Resources Limited’s sole election in any combination of cash (if permitted by the Listing Rules applicable at the time) and New Century Resources Limited shares subject to requisite shareholder approval. Completion of this acquisition was subject to New Century Resources Limited shareholder approval, which was given on 31 May 2017, and regulatory approvals, which were finalised on 13 July 2017. Mr Evan Cranston, a director of New Century Resources Limited, is a 25% shareholder in Century Bull. CMRP owns 100% of the Century Zinc Mine and associated infrastructure, following agreements with MMG Limited (MMG) for the acquisition of the relevant MMG Australian subsidiaries which hold the Century assets. The Century assets include: - All MLs and the EPM associated with the Century mine site; - All site infrastructure including processing plant, mining camp and airport; - The slurry pipeline, Karumba Port Facility and M.V. Wunma Transhipment Vessel; and - A 49% interest in the Lawn Hill & Riversleigh Pastoral Holding Company. 48 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 22. Commitments (continued) As part of the transaction with MMG, CMRP also acquired: - - $34.5M in progressive cash payments to assist with ongoing rehabilitation and care and maintenance activities for the site; $12.1M in cash, administered by an independent trust, to assist with remaining obligations contained in the Gulf Communities Agreement and agreed community projects for the benefit of Lower Gulf communities; and - An agreement with MMG to procure and stand behind the existing provision of bank guarantees of $193.7M for the benefit of Century to meet its financial assurance obligation with the Queensland Government for a period of 10 years through to 31 December 2026, which is to be progressively replaced via profits from operations. Other commitments due within 1 year Operating lease of serviced office premises Professional fees Executive fees US Consultants Total Note 23. Related party transactions and balances Consolidated 2017 $ 71,492 37,500 120,000 19,028 248,020 2016 $ 30,000 37,500 2,000 11,166 80,666 The Group’s main related entities are key management personnel and Kingslane Pty Ltd (and its associated entities). Key management personnel are any people having authority and responsibility for planning, controlling and directing the activities of the entity, directly or indirectly, including any director (whether executive or otherwise). For further disclosures relating to key management personnel see note 19. Kingslane Pty Ltd and associated entities (Kingslane) is a substantial shareholder in the Company and held 22,090,028 (2016: 22,090,028) ordinary shares in the Company at 30 June 2017. Entities controlled by Kingslane also:  Held a 10% non-controlling interest in the Kodiak project and Kodiak Mining Company LLC through a non- controlling shareholding in 70% owned Attila Resources US LLC;  held Notes with face values of $4,504,301 (2016: $4,504,301) convertible into 22,521,506 (2016: 22,521,506) shares, that were recognised as a current liability of $5,855,592 (2016: current liability of $5,099,624) at 30 June 2017. Interest of nil (2016: $nil) was paid on these Notes during the year through the issue of nil (2016: nil) ordinary shares.  Received $60,000 (2016: $39,000) during the year for office rent. Evan Cranston is a director of Konkera Corporate. Konkera Corporate received $120,000 (2016: $120,000) during the year for administrative, bookkeeping and accounting services. The company secretarial fees of $30,000 (2016: $30,000) for Oonagh Malone and Director fees of $24,000 (2016: $24,000) for Evan Cranston were also payable to Konkera Corporate. $48,000 was outstanding to Konkera for director fees at 30 June 2017. Mr Bryn Hardcastle is a director of Bellanhouse which provided legal services totalling $179,049 (2016: $72,000) in the financial year ended 30 June 2017. $112,100 was outstanding to Bellanhouse at 30 June 2017 (2016: $165,000). All related party transactions are on normal arms’ length terms. 49 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 24. Controlled entities a. Information about Principal Subsidiaries The information presented in this note is presented here in accordance with AASB 12. Set out below are the Group’s subsidiaries at 30 June 2017. The subsidiaries listed below have share capital consisting solely of ordinary shares, which are held directly by the Group, and the proportions of ownership interests held equals the voting rights held by the Group. Each subsidiary’s country of incorporation or registration is also its principal place of business. Name of Subsidiary Principal Place of Business Ownership Interest Held by the Group Proportion of Non-controlling Interests Attila Resources US Pty Ltd Australia Attila Resources Holding US Ltd Attila Resources US LLC Kodiak Mining Company LLC United States of America United States of America United States of America *Indirect Holdings 2017 100% 2016 100% 100%* 100%* 70%* 70%* 70%* 70%* 2017 - - 30% 30% 2016 - - 30% 30% Summarised Financial Information of Subsidiaries with Material Non-controlling Interests The 30% non-controlling interests in Attila Resources US LLC and Kodiak Mining Company LLC (Kodiak) had nil value at the date of acquisition because the value at the date of acquisition of the business combination was calculated by deducting New Century Resources Limited’s convertible note liability from the fair value of the Kodiak minority shareholders’ proportionate interests in the net assets of Kodiak. This is because the convertible note is secured by the members of Kodiak in proportion with each members’ interest in the shares of Kodiak. In accordance with the agreements with the Kodiak minority shareholders, subsequent to acquisition, all funding towards the feasibility study and operations of Kodiak is to be funded and borne by New Century Resources Limited resulting in a free carry for the non-controlling interests until a decision to mine is made. Once a decision to mine is made capital contributions made by New Century Resources Limited will be refunded in priority to normal equity distributions to Kodiak equity holders. New Century Resources Limited considers that this is an arrangement to share profits (losses) in a manner other than in proportion to their ownership interests. Accordingly, New Century Resources Limited has reflected this profit-sharing arrangement when attributing the profit or loss and OCI of Kodiak, resulting in the non-controlling interest being carried at nil value. Set out below is the summarised financial information for each subsidiary that has non-controlling interests that are material to the Group. Summarised Financial Position before intra-group eliminations Current assets Non-current assets Current liabilities Non-current liabilities Net Assets Carrying amount of non-controlling interests Kodiak 2017 $ 166,407 2016 $ 145,161 17,837,482 18,443,639 (23,394,654) (23,260,907) (1,487,016) (1,842,400) (6,877,781) (6,514,507) - - The non-current assets and non-current liabilities of Kodiak include a secured deposit of $737,622 (30 June 2016: $1,051,196) that is security against a non-current reclamation liability of $739,531 (30 June 2016: $1,045,835). The nature of this non-current reclamation liability significantly restricts the Group’s ability to access the secured deposit for the purpose of meeting other liabilities of the Group. 50 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 24. Controlled entities (continued) The current liabilities of Kodiak also include intra-group loan balances totaling $23,142,491 (30 June 2016: $23,072,129). These intra-group loan balances are unsecured and at call, so consequently considered current. Although the functional currency of Kodiak is United States dollars and the presentation currency of the Group is Australian dollars, there are no foreign currency translation reserve movements recognised in other comprehensive income of Kodiak as foreign currency translation reserve movements only arise on consolidation. Summarised Financial Performance before intra-group eliminations Revenue Loss before income tax Income tax expense/income Post-tax loss from continuing operations Post-tax loss from discontinued operations Other comprehensive income Total comprehensive income Profit/(loss) attributable to non-controlling interests Distributions paid to non-controlling interests Summarised Cash Flow Information before intra-group eliminations Net cash from/(used in) operating activities Net cash from/(used in) investing activities Net cash from/(used in) financing activities Cash and Cash Equivalents at End of Year Kodiak 2017 $ - 2016 $ - (402,069) (1,245,034) - (402,069) (1,245,034) - - - - (402,069) (1,245,034) - - 2017 $ (699,458) 19,865 885,144 52,317 - - 2016 $ (848,599) (280,518) 1,136,846 46,457 Kodiak’s net cash from financing activities for both 2017 and 2016 solely comprised movements in intra-group loan account balances. Note 25. Events occurring after reporting period On 13 July 2017, the Group completed the acquisition of the Century Zinc Mine with key actions occurring on completion as follows: - The Century Zinc Mine acquisition commitment, as detailed in note 22, was finalised. - - - - - 34,333,333 ordinary shares at a share price of $0.15 per share to raise $5,150,000 before costs were issued. 71,538,898 ordinary shares at a share price of $0.20 per share were issued on conversion of all outstanding convertible notes as detailed in note 13. This extinguished the $18,600,115 liability for consideration with a value of $14,307,781, as no redemption premium was payable. The consequent gain of $4,292,334 is recognisable in the year ended 30 June 2018. 30,000,000 unquoted share options exercisable at $0.25 each and expiring on 13 July 2022 were issued in partial consideration for the Century Zinc Mine. 42,000,000 unquoted share options exercisable at exercise prices ranging from $0.25 to $1.00 and expiring on 13 July 2021 or 13 July 2022 were issued to directors. 8,500,000 unquoted employee share options exercisable at $0.25 each and expiring on 13 July 2022 were issued. - Mr Patrick Walta, Mr (Ernest) Tom Eadie, and Mr Tolga Kumova were appointed directors of the Company while Ms Oonagh Malone resigned from the position as a director. 51 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 25. Events occurring after reporting period (continued) No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the result of these operations, or the state of the affairs of the Group in future financial year. Note 26. Cash-flow information a. Reconciliation of cashflow from operations with loss after income tax Loss after income tax Non-cashflows in loss: Depreciation and amortisation Impairment of intangibles Impairment of exploration interests Loss on disposal of property, plant and equipment Changes in assets and liabilities net of effects of purchase of subsidiaries: (Increase) in trade and other receivables (Increase)/ decrease in prepayments Increase in trade and other payables Increase in borrowings due to accrued interest payable and expensing of capitalised borrowing costs Decrease in provisions Exchange differences Consolidated 2017 $ (3,785,112) 2016 $ (3,722,417) 21,589 3,395 - - (3,809) (592) 93,597 2,401,310 (287,592) (3,676) 17,361 - 398,188 15,080 (78,232) 4,475 69,931 1,868,343 (18,531) (30,219) Net cash used in operating activities (1,560,890) (1,476,021) b. Acquisition of subsidiaries No subsidiary or business combination was acquired in 2017 or 2016. c. Non cash financing and investing activities The Group did not have any non-cash financing and investing activities during the year ended 30 June 2017 (2016:nil) except as disclosed in note 16 related to the issue of ordinary shares as a result of conversion of notes. Note 27. Earnings per share The following reflects the income used in the basic and diluted earnings per share computations: Consolidated 2017 $ 2016 $ Basic / dilutive earnings per share Basic loss per share (cents per share) Weighted average number of ordinary shares outstanding during the year used in calculation of basic earnings per share Net loss used in the calculation of basic earnings per share (2.02) (2.27) 187,057,999 164,033,002 (3,785,112) (3,722,417) Share options are not considered dilutive as the conversion of options will result in a decrease in the net loss per share. The weighted average number of shares has no dilutive effect to the diluted earnings per share. 52 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 27. Earnings per share (continued) Due to the Group being in a loss position, it is considered counter dilutive and therefore earnings per share are not diluted. Note 28. Share Based Payments Options No options were granted in 2017 or 2016. No amounts were recognised over the vesting periods for previously granted share based payments in 2017 or 2016. The total share based payment expense for options during the year ended 30 June 2017 was $nil (2016: $nil). The Company established an Employee Share Option Plan on 6 December 2010 as a long-term incentive to recognise talent and motivate employees and consultant to strive for Group performance. The options are granted at the sole discretion of the Board for no consideration and carry no entitlements to voting rights or dividends of the Group. The Board, in its discretion, determine the strike price of the options and may apply vesting conditions. On resignation from the Group, the optionholder has 30 days to exercise or forfeit the options. On termination without cause, the optionholder has six months to exercise or forfeit the options. A summary of the movements of options issued as share-based payments is as follows: Options outstanding as at 30 June 2015 Granted Forfeited Exercised Expired Options outstanding as at 30 June 2016 Granted Forfeited Exercised Expired Options outstanding as at 30 June 2017 Options exercisable as at 30 June 2017 Options exercisable as at 30 June 2016 Number 11,250,000 - (1,500,000) - (8,250,000) 1,500,000 - - - (1,500,000) - - 1,500,000 Weighted Average Exercise Price 1.0899 - 0.5655 - 1.2682 0.6341 - - - 0.6341 - - 0.6341 The weighted average remaining contractual life of options outstanding at year end was 0.70 years. The fair value of options granted to employees is deemed to represent the value of the employee services received over the vesting period. The weighted average fair value of options granted during the year was nil (2016: nil). Performance Rights There were no performance rights on issue in 2017 or 2016. 53 New Century Resources and Controlled Entities - ABN 53 142 165 080 Note 29. Parent entity The following information has been extracted from the books and records of the parent entity and has been prepared in accordance with Accounting Standards. Statement of Financial Position Assets Current assets Non current assets Total Assets Liabilities Current liabilities Non current liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Statement of Profit or Loss and Comprehensive Income Total loss Total comprehensive loss Guarantees Parent entity 2017 $ 2016 $ 5,581,371 17,381,174 1,298,315 16,635,364 22,962,545 17,933,679 19,321,251 - 16,462,339 - 19,321,251 16,462,339 3,641,294 1,471,340 32,259,433 3,196,536 (31,814,675) 26,715,502 3,196,536 (28,440,699) 3,641,294 1,471,339 (3,373,976) (2,264,383) (3,373,976) (2,264,383) There are no guarantees entered into by the parent entity in the financial year ended 30 June 2017 in relation to the debt of a subsidiary. Contingent Liabilities The Company has been named as a part of a group that received a statement of claim filed at the Circuit Court of Shelby County, Alabama relating to an alleged unfair dismissal claim by Mr Don Brown. As detailed in Note 21, the Company intends to defend this matter. As detailed in note 21, the Company agreed to guarantee the obligations of Century Mine Rehabilitation Pty Ltd under various agreements, pending the completion of the Century Zinc Mine acquisition that occurred on 13 July 2017. Contractual commitments At 30 June 2017, New Century Resources Limited had not entered into any contractual commitments for the acquisition of property, plant and equipment except as described in note 22 for the Century Zinc Mine acquisition (2016: nil). 54 New Century Resources and Controlled Entities - ABN 53 142 165 080 DIRECTORS' DECLARATION The Directors of the Company declare that: 1. the financial statements and notes, as set out on pages 15 to 54 are in accordance with the Corporations Act 2001 and: a. comply with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b. give a true and fair view of the financial position as at 30 June 2017 and of the performance for the year ended on that date of the company and consolidated group; 2. 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. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2017. This declaration is made in accordance with a resolution of the Board of Directors. Evan Cranston Executive Chairman Dated this 28th day of September 2017 55 Independent Auditor's Report To the Members of New Century Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of New Century Resources Limited (“the Company”) and its subsidiaries (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2017, 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 the directors’ declaration. In our opinion: a. the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. 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 and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independent Auditor’s Report To the Members of New Century Resources Limited (Continued) Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed the key audit matter Exploration and evaluation expenditure As disclosed in note 5 to the financial statements, as at 30 June 2017, the Group’s capitalised exploration and evaluation expenditure was carried at $3,287,297. The recognition and recoverability of the exploration and evaluation expenditure was considered a key audit matter due to: The carrying value represents a significant asset of the Group, we considered it necessary to assess whether facts and circumstances existed to suggest the carrying amount of this asset may exceed the recoverable amount; and Determining whether impairment indicators exist involves significant judgement by management Our audit procedures included but were not limited to: Assessing management’s determination of its areas of interest for consistency with the definition in AASB 6 Exploration and Evaluation of Mineral Resources (“AASB 6”); Assessing the Group’s rights to tenure for a sample of tenements; Testing the Group’s additions to capitalised exploration costs for the year by evaluating a sample of recorded expenditure for consistency to underlying records, the capitalisation requirements of the Group’s accounting policy and the requirements of AASB 6; By testing the status of the Group’s tenure and planned future activities, reading board minutes and enquiries with management we assessed each area of interest for one or more of the following circumstances that may indicate impairment of the capitalised exploration costs: The licenses for the rights to explore expiring in the near future or are not expected to be renewed; Substantive expenditure for further exploration in the area of interest is not budgeted or planned; Decision or intent by the Group to discontinue activities in the specific area of interest due to lack of commercially viable quantities of resources; and Independent Auditor’s Report To the Members of New Century Resources Limited (Continued) Key Audit Matter How our audit addressed the key audit matter Recoverability of Property, Plant and Equipment The Company has property, plant and equipment with aggregate carrying values of $13,831,105 as at 30 June 2017. Property, plant and equipment are considered to be a key audit matter due to the carrying value represents a significant asset of the Group. Accounting for convertible notes As disclosed in note 13 to the financial statements, the Company has significant amount of outstanding convertible note as at 30 June 2017 was $18,600,115. Convertible notes are considered to be a key audit matter due to the complexities involved in the recognition and measurement of these instruments. Data indicating that, although a development in the specific area is likely to proceed, the carrying amount of the exploration asset is unlikely to be recorded in full from successful development or sale. We also assessed the appropriateness of the related disclosures in note 5 to the financial statements. Our procedures amongst others included: Assessing the Group’s method for determining the carrying amount of Property, Plant and Equipment; Evaluating management’s assessment as to whether indicators of impairment had occurred; and Assessing the adequacy of the disclosures included in Note 11 to the financial statements Our procedures amongst others included: Verifying amounts, interest rate and maturity date to the debt agreement and examined terms and conditions of the notes; Assessing the accuracy of historical financial information, examined the mathematical accuracy of calculations, evaluated the valuation technique applied and approach used and evaluated the assumptions used to calculate discount rate; Verifying the outstanding monies to be converted into shares subsequent to year end to signed conversion notice; and Assessing the adequacy of the disclosures included in Note 13 to the financial statements. Independent Auditor’s Report To the Members of New Century Resources Limited (Continued) Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 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 Note 1, the directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the directors are responsible for assessing the Group’s ability 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 responsibility is to express an opinion on the financial report based on our audit. 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 fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Independent Auditor’s Report To the Members of New Century Resources Limited (Continued) 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. 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. 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, related safeguards. 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 We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2017. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with s 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. Independent Auditor’s Report To the Members of New Century Resources Limited (Continued) Auditor’s Opinion In our opinion, the Remuneration Report of New Century Resources Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. BENTLEYS Chartered Accountants CHRIS NICOLOFF CA Director Dated at Perth this 28th day of September 2017 Corporate Governance The Company is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve the Company has turned to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd Edition). The Company is pleased to advise that the Company’s practices are largely consistent with those ASX guidelines. Unless disclosed below, all the principles and recommendations of the ASX Corporate Governance Council have been applied for the entire financial year ended 30 June 2017. Board of Directors The skills, expertise and experience relevant to the position of each Director who is in office at the date of the Financial Report and their term of office are detailed in the Directors’ Report. The Directors are responsible for overseeing the Company’s business operations and its management for the benefit of Shareholders, employees and other stakeholders and to enhance Shareholder value. The Board is responsible for the overall corporate governance of the Company and its subsidiaries. Responsibilities and Functions of the Board Under the Board charter, the Board's responsibilities include: • • • • • • • • setting the strategic direction of the Company and monitoring management's performance within that framework; ensuring there are adequate resources available to meet the Company’s objectives; appointing and removing Executive Directors and overseeing succession plans for the senior executive team; evaluating the performance of the Board and its Directors on an annual basis and determining remuneration levels of Directors; approving and monitoring financial reporting, capital management and the progress of business objectives; ensuring that adequate risk management procedures exist and are being used; ensuring that the Company has appropriate corporate governance structures in place, including standards of ethical behaviour and a culture of corporate and social responsibility; and ensuring that the Board is and remains appropriately skilled to meet the changing needs of the Company. Responsibilities of Executive Management The role of senior executives within the organisation is to: • • • • • • • • • • • • develop with the Board, implement and monitor the strategic and financial plans for the Company; plan, develop and implement the annual budgets and business plans and continuously monitor all capital expenditure, capital management and all major corporate transactions, including the issue of any securities of the Company; develop all financial reports, and all other material reporting and external communications by the Company, including material announcements and disclosures, in accordance with the Company’s external communications policy; manage the appointment of the chief financial officer, the general counsel and company secretary and any other specific senior management positions; develop, implement and monitor the Company’s risk management framework; keep the Board fully informed of all material matters which may be relevant to the Board, in their capacity as directors of the Company; provide effective management of the Company in order to: encourage cooperation and teamwork; build and maintain staff morale at a high level; build and maintain a strong sense of staff identity with, and a sense of allegiance to the Company; ensure a safe workplace for all personnel; ensure that the Company has regard to the interests of employees and customers of the company and the community and environment in which the company operates; and 62 • otherwise carry out the day-to-day management of the Company. Corporate governance policies The Board has adopted the following corporate governance policies: Continuous Disclosure The Board places a high priority on communication with Shareholders and is aware of the obligations it has under the Corporations Act and ASX Listing Rules to keep the market fully informed of information which is not generally available and which may have a material effect on the price or value of the Company’s securities. Communication to Shareholders The Board recognises the importance of communicating regularly with Shareholders and aims to have transparent and effective communications. The Company will post all reports, ASX and media releases and copies of significant business presentations and speeches on the Company’s website at www.newcenturyresources.com. Shareholders will be encouraged to attend and participate in General Meetings. Share Trading The Company has in place a share trading policy which restricts all Directors, employees or consultants of the Company from dealing in shares of the Company whilst in possession of price sensitive information or similarly passing information to other parties to buy or sell the Company’s Shares. In addition to insider trading prohibitions arising from the Corporations Act, Directors, executive officers and senior management are prohibited from trading as follows: • • • • No Director or executive officer should buy or sell Shares without the prior approval of the Board; No senior manager should buy or sell Shares without the prior approval of the Board; Unless there are unusual circumstances, trades in Shares by Directors and members of senior management are limited to stipulated periods; Directors and senior management are generally prohibited from trading Shares for a short term gain. Before trading in the Company’s Shares, Directors, employees and consultants must request in writing authorisation to trade in the Company’s securities from their relevant authorising officer. Confidentiality In addition to obligations under the Corporations Act in relation to inside information, all Directors, employees and consultants also have a duty of confidentiality to the Company in relation to confidential information they possess. Matters for Approval by the Board of Directors The Board has adopted a list of matters required to be brought before the Board of Directors for approval. This provides an important means of dividing responsibility between the Board and management, assisting those affected by corporate decisions to better understand the respective accountabilities and contributions of the Board and the Senior Executives. Evaluation of Board and Senior Executives The Board of New Century Resources considers the evaluation of its own and senior executive performance as fundamental to establishing a culture of performance and accountability. The Board also considers the ongoing development and improvement of its own performance as critical input to effective governance. The Board undertakes an annual evaluation of its effectiveness as a whole. The basis of the review is on goals that have been set for the Company based on corporate requirements and any areas for improvement identified in previous reviews. The Board does not endorse the reappointment of a director who is not satisfactorily performing the role. All senior executives of the Company are subject to an annual performance evaluation. Each year, senior executives establish a set of performance targets with her or his superior. These targets are aligned to overall business goals and requirements of the position. An informal assessment of progress is carried out each half year. A full evaluation of the executive’s performance against the agreed targets takes place once a year. This will normally occur in conjunction with goal setting for 63 the coming year. Since the Company is committed to continuous improvement and the development of its people, the results of the evaluation form the basis of the executive’s development plan. The Company is also committed to continuing development of its directors and executives. Any director wishing to undertake either specific directional training or personal development courses is expected to approach the Board for approval of the proposed course. External Auditor Selection Process Should there be a vacancy for the position of external auditor, New Century Resources conducts a formal tendering process, either a general or selective tender. Tenders are evaluated in accordance with the criteria, as appropriate from time to time, provided to tenderers. Tenders are not assessed solely on the basis of price, but on a number of issues such as: • • • • • • • skills and knowledge of the team proposed to do the work; quality of work; independence of the audit firm; lead signing partner and independent review partner rotation and succession planning; value for money; ethical behaviour and fair dealing; and independence from New Century Resources. The Board identifies and recommends an appropriate external auditor for appointment, in conjunction with senior management and/or New Century Resources in general meeting. The appointment is made in writing. The external auditor is required to rotate its audit partners so that no partner of the external auditor is in a position of responsibility in relation to New Century Resources’ accounts for a period of more than five consecutive years. Further, once rotated off New Century Resources’ accounts no partner of the external auditor may assume any responsibility in relation to New Century Resources’ accounts for a period of five consecutive years. This requires succession planning on the part of the external auditor, a process in which New Century Resources is involved. Risk Management Policy Risk recognition and management are viewed by New Century Resources as integral to the Company’s objectives of creating and maintaining shareholder value, and the successful execution of the Company’s mineral exploration and development. The Board as a whole is responsible for oversight of the processes by which risk is considered for both ongoing operations and prospective actions. Management is responsible for establishing procedures which provide assurance that major business risks are identified, consistently assessed and appropriately addressed. Not all aspects of risk management can be formalised and New Century Resources places considerable reliance on the skill, experience and judgement of its people to take risk managed decisions within the policy framework, and to communicate openly on all risk related matters. There are a range of specific risks that have the potential to have an adverse impact on New Century Resources’ business. The Company has developed a framework for a risk management policy and internal compliance and control system which covers organisational, financial and operational aspects of the Company's affairs. Key elements of the framework for the management of risk by New Century Resources are: • • • • • • • • oversight of the Company’s financial affairs by the Directors; the formulation of programmes for exploration and development; regular reporting against established targets; approval guidelines for exploration and capital expenditure; regulatory compliance programmes and reporting in key areas such as safety and environment; management of capital and financial risk; an annual insurance program; oversight of the conduct of contractors. In assessing and managing identified risks: • • • risks are assessed in terms of potential consequences and likelihood; risks are ranked in accordance with their likely impact; the acceptability of each identified risk is assessed; 64 • • proposed actions to eliminate, reduce or manage each material risk are considered and agreed; responsibilities for the management of each risk are assigned. Diversity Policy The Company recognises that a diverse and talented workforce is a competitive advantage and that the Company’s success is the result of the quality and skills of our people. Our policy is to recruit and manage on the basis of qualification for the position and performance, regardless of gender, age, nationality, race, religious beliefs, cultural background, sexuality or physical ability. It is essential that the Company employs the appropriate person for each job and that each person strives for a high level of performance. The Company’s strategies are to: 1. 2. 3. 4. 5. 6. 7. recruit and manage on the basis of an individual’s competence, qualification and performance; create a culture that embraces diversity and that rewards people to act in accordance with this policy; appreciate and respect the unique aspects that individual brings to the workplace; foster an inclusive and supportive culture to enable people to develop to their full potential; identify factors to be taken into account in the employee selection process to ensure we have the right person for the right job; take action to prevent and stop discrimination, bullying and harassment; and recognise that employees at all levels of the Company may have domestic responsibilities. The Board is accountable for ensuring this policy is effectively implemented. Each employee has a responsibility to ensure that these objectives are achieved. 65 Compliance with ASX Recommendations Recommendation New Century Resources Limited 1.1 A listed entity should disclose: (a) The respective roles and responsibilities of its board and management; and (b) Those matters expressly reserved to the board and those delegated to management. 1.2 A listed entity should: (a) Undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and (b) Provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. The Company’s Board Charter sets out the roles and responsibilities of the Board and Management. A summary is provided above and the full Charter is available for review at www.newcenturyresources.com The Company has implemented a policy of undertaking police and bankruptcy checks on all senior employees and directors before appointment or putting to shareholders for election. The Company provides all relevant information on all directors in its annual report and on its website. 1.3 1.4 A listed entity should have a written agreement with each director and senior executive setting out the terms of their employment. The Company requires that a detailed letter of appointment or employment contract is agreed with each director and employee prior to the commencement of duties. The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. The Company’s organisation chart reflects the position of the Company Secretary within the Company structure as reporting directly to the Board. During the reporting period there was no formal chair appointed. The Company has adopted a formal Gender Diversity Policy, a summary of which is provided above. As at 30 June 2017: • • • The Board comprised three members, two of whom were male and one female. The senior executives comprised three people (defined by the Board as the directors and key management personnel), two of whom were male and one female. The whole organisation comprised four people, three of whom were male and one female. 1.5 A listed entity should: (a) Have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; (b) Disclose that policy or a summary of it; and (c) Disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them, and either: i. The respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or ii. if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under that Act. 1.6 A listed entity should: (a) Have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) Disclose, in relation to each reporting period, whether a performance evaluation was undertaken The Board Performance Evaluation Policy is summarised above and is available at www.newcenturyresources.com During the reporting period, the Board collectively assessed their respective roles and contributions. 66 in the reporting period in accordance with that process. The Company considers the mix of corporate, financial, and commercial experience to be appropriate for the current time. As there were no senior executives in the Company during the reporting period, no review was undertaken. The Board consider that given the current size of the Board and the Company, this function is efficiently achieved with full Board participation. Accordingly, the Board has not established a nomination committee. 1.7 A listed entity should: (a) Have and disclose a process for periodically evaluating the performance of its senior executives; and (b) Disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. 2.1 The board of a listed entity should: (a) Have a nomination committee which: i. has at least three members, a majority of whom are independent directors; and ii. is chaired by an independent director; and disclose: iii. the charter of the committee; iv. the members of the committee; and v. as at the end of each reporting period, the number of times the committee met throughout the period, and the individual attendances of the members at those meetings; or (b) If it does not have a nomination committee, disclose the fact and the processes it employs to address board succession issues and to ensure the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. 2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. The Board Charter which is summarised above and is available at www.newcenturyresources.com incorporates a set of skills and abilities that are desirable for the composition of the Board. During the reporting period, the Board collectively assessed their respective roles and contributions. The Company considered the mix of corporate, financial, and commercial experience to be appropriate for the operations of the Company during the reporting period. The Company considers that Oonagh Malone and Bryn Hardcastle are the independent directors on the Board as at 30 June 2017. Although Mr Hardcastle is a principal of the legal firm that provides advice to the Company, the Board does not consider that this interferes with Mr Hardcastle’s independence in his role as non-executive director. Mr Cranston is not considered an independent director due to his previous employment as an executive director of the Company. 2.3 A listed entity should disclose: (a) The names of the directors considered by the board to be independent directors; (b) If a director has an interest, position, association or relationship of the type described in Box 2.3 but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and (c) The length of service of each director. 67 A majority of the board of a listed entity should be independent directors. The Company complies with this recommendation. The Company discloses the length of service for each director in the Director’s Report of its annual report. 2.4 2.5 2.6 The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their roles as directors effectively. 3.1 A listed entity should: (a) Have a code of conduct for its directors, senior executives and employees; and (b) Disclose that code or a summary of it. 4.1 The board of a listed entity should: (a) Have an audit committee which: i. has at least three members, all of whom are non- executive directors and a majority of whom are independent directors; and ii. is chaired by an independent director, who is not the chair of the board; and disclose: iii. the charter of the committee; iv. the relevant qualifications and experience of the members of the committee; and v. as at the end of each reporting period, the number of times the committee met throughout the period, and the individual attendances of the members at those meetings; or (b) If it does not have an audit committee, disclose the fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. 4.2 The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal controls which is operating effectively. 68 The Company does not comply fully with this recommendation as it does not currently have a chair. The Board will seek to appoint a chair with the appropriate experience at a time that is appropriate for the situation of the Company. The Company has a formal induction program for all new directors to appropriately familiarise them with the policies and procedures of the Company. The Company encourages and facilitates all Directors to develop their skills, including with the provision of in- house seminars to maintain compliance in areas such as risk and disclosure. The Company’s Code of Conduct is available at www.newcenturyresources.com The Company does not have an audit committee due the current size of the Board and Company. The Company has adopted a policy whereby the full Board fulfils the duties of the audit committee and abides by the adopted Audit Committee Charter (available at www.newcenturyresources.com). The Directors require that management report regularly on all financial and commercial aspects of the Company to ensure that they are familiar with all aspects of corporate reporting and believe this to mitigate the risk of not having an independent committee. The Board has adopted a formal policy regarding the appointment, removal and rotation of the Company’s external auditor and audit partner which is summarised above. The Board receives a section 295A declaration from the equivalent of the CEO and CFO for each quarterly, half yearly and full year report in advance of approval of these reports. 4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. The Company’s auditor is required to attend the Company’s AGM and is available to answer questions relevant to the audit. 5.1 A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it. The Board has adopted a formal Continuous Disclosure Policy to ensure compliance with the ASX Listing Rules. The Policy is summarised above and is available at www.newcenturyresources.com 6.1 A listed entity should provide information about itself and its governance to investors via its website. The Company complies with this recommendation and all relevant information can be found at www.newcenturyresources.com A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors. The Company has developed a Shareholder Communications Strategy to ensure all relevant information is identified and reported accordingly which is summarised above. 6.2 6.3 A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. The Company encourages all shareholders to attend General Meetings of the Company via its notices of meeting, and in the event they cannot attend, to participate by recording their votes by proxy. The Company has implemented an online voting system to further encourage participation by shareholders. The Company and its share registry actively encourage electronic communication. All new shareholders are issued with a letter encouraging the registration of electronic contact methods. The Company does not have a risk committee due the current size of the Board and Company. The Company has adopted a policy whereby the full Board fulfils the duties of the risk committee and abides by the adopted Risk Management Policy (available at www.newcenturyresources.com). The Directors require that management report regularly on all financial and commercial aspects of the Company to ensure that they are familiar with all aspects of corporate reporting and believe this to mitigate the risk of not having an independent committee. 6.4 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. 7.1 The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: i. has at least three members, a majority of whom are independent directors; and ii. is chaired by an independent director; and disclose: iii. the charter of the committee; iv. the members of the committee; and v. as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings: or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework. 7.2 The board or a committee of the board should: (a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and The Board reviews its risk management strategy annually. 69 (b) disclose, in relation to each reporting period, whether such a review has taken place. 7.3 A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. The Company is not of the size or scale to warrant the cost of an internal audit function. This function is undertaken by the Board as a whole via the regular and consistent reporting in all risk areas. 7.4 A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. The Company does not currently have any material exposure to any economic, environmental and social sustainability risks. The Board consider that given the current size of the Board, this function is efficiently achieved with full Board participation. Accordingly, the Board has not established a remuneration committee. The Board considers industry peers when evaluating the remuneration for all directors and executives. The Board is cognisant of the fact that it wishes to attract and retain the best people, and considers strategies other than monetary to balance the need for the best people and the financial position of the Company. 8.1 The board of a listed entity should: (a) have a remuneration committee which: i. has at least three members, a majority of whom are independent directors; and ii. is chaired by an independent director; and disclose: iii. the charter of the committee; iv. the members of the committee; and v. as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. 8.2 A listed entity should separately disclose its policies and practises regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. 8.3 A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it. The Company discloses is policies on remuneration in the Remuneration Report set out in its annual report. The Company recognises that directors, executives and employees may hold securities in the Company and that most investors are encouraged by these holdings. The Company’s Securities Trading Policy (available at www.newcenturyresources.com) explains and reinforces the Corporations Act 2001 requirements relating to insider trading. The Policy applies to all Directors, executives, employees and consultants and their associates and closely related parties. 70 Additional Information Shareholder Information The following information is based on share registry information processed up to 30 October 2017. Distribution of Fully Paid Ordinary Shares The number of holders, by size of holding, for fully paid ordinary shares in the Company is: Spread of Holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Number of Holders 241 545 368 805 311 2,270 There are 50 holders of unmarketable parcels comprising a total of 3,102 ordinary shares. Twenty Largest Holders of Shares in New Century Resources Ltd (unmerged) Shareholder Kingslane Pty Ltd Kitara Investments Pty Ltd Kingslane Pty Ltd Dr Stuart Lloyd Phillips & Mrs Fiona Phillips Kingslane Pty Ltd Pershing Australia Nominees Pty Ltd Westyle Pty Ltd National Nominees Limited UBS Nominees Pty Ltd Redmont Resources Pty Ltd Ablett Pty Ltd J P Morgan Nominees Australia Ltd Brunsdon Super Pty Ltd Kitara Investments Pty Ltd Yarramar Nominees Pty Ltd Sandhurst Trustees Ltd Blackjack Holdings Pty Ltd N L Tucker & Associates C G Heath Pty Ltd BNP Paribas Nominees Pty Ltd 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Total Number Held 21,000,000 13,333,333 13,004,178 11,412,500 10,598,356 10,287,500 7,614,820 6,961,349 5,808,551 4,571,147 4,149,589 3,972,225 3,705,639 3,333,333 3,136,193 3,018,207 2,900,000 2,649,589 2,568,708 2,480,406 136,505,623 % of Issued Shares 7.10 4.51 4.40 3.86 3.58 3.48 2.57 2.35 1.96 1.55 1.40 1.34 1.25 1.13 1.06 1.02 0.98 0.90 0.87 0.84 46.15% There are 295,724,750 ordinary fully paid shares currently listed and trading on the Australian Securities Exchange. There are currently no shares subject to escrow. There is no current on-market buy back taking place. Voting Rights - Fully Paid Ordinary Shares Every shareholder present in person or by proxy, attorney or representative has one vote on a show of hands, and on a poll, one vote for each fully paid share. 71 Unquoted Equity Securities Quantity 14,500,000 6,000,000 7,500,000 7,500,000 7,500,000 7,500,000 30,000,000 500,000 Class Options exercisable at $0.25 each on or before 13 July 2020 Options exercisable at $0.50 each on or before 13 July 2020 Options exercisable at $0.25 each on or before 13 July 2021 Options exercisable at $0.50 each on or before 13 July 2021 Options exercisable at $0.75 each on or before 13 July 2021 Options exercisable at $1.00 each on or before 13 July 2021 Options exercisable at $0.25 each on or before 13 July 2022 Options exercisable at $1.60 each on or before 2 October 2020 Holders of Unquoted Securities (holding more than 20% of each equity security class) Class Options exercisable at $0.25 each on or before 13 July 2021 Options exercisable at $0.50 each on or before 13 July 2021 Options exercisable at $0.75 each on or before 13 July 2021 Options exercisable at $1.00 each on or before 13 July 2021 Options exercisable at $0.25 each on or before 13 July 2022 Options exercisable at $0.25 each on or before 13 July 2022 Options exercisable at $0.25 each on or before 13 July 2022 Options exercisable at $1.60 each on or before 2 October 2020 Holder Kitara Investments Pty Ltd Kitara Investments Pty Ltd Kitara Investments Pty Ltd Kitara Investments Pty Ltd Mr John Carr Longreach Capital Pty Ltd Mr Patrick Walta Mr William Wise Number 7,500,000 7,500,000 7,500,000 7,500,000 7,000,000 7,000,000 7,000,000 500,000 Schedule of Mining Tenements Project Location Status Interest Century Zinc Mine Queensland, Australia ML 90058 ML 90045 EPM 10544 Lawn Hill Lawn Hill Lawn Hill Granted Granted 70% 70% Granted 70%** Kodiak Coking Coal Project Alabama, USA Coke Seam, Gurnee Property Shelby & Bibb Counties Atkins Seam, Gurnee Property Shelby & Bibb Counties Gholson Seam, Gurnee Property Shelby & Bibb Counties Clark Seam, Gurnee Property Shelby & Bibb Counties Lease Lease Lease Lease 70% 70% 70% 70% Company Secretary Ms Oonagh Malone Registered Office Suite 23 513 Hay Street Subiaco WA 6008 Telephone: +61 8 6142 0989 Share Registry Security Transfer Australia 770 Canning Highway Applecross WA 6153 Telephone: 1300 992 916 72 

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