New Century Resources
Annual Report 2019

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Annual Report 2019 Contents Corporate Directory ............................................................................................................................................................ ii Chairman’s Message ......................................................................................................................................................... iii Review of Operations ........................................................................................................................................................ v Corporate Governance ................................................................................................................................................... xv New Century in the Community .......................................................................................................................... xvi Mineral Resource Statement ................................................................................................................................xxiv Directors’ Report ................................................................................................................................................................... 4 Auditor’s Independence Declaration ................................................................................................................ 22 Consolidated Statement of Profit or Loss and Other Comprehensive Income .............. 23 Consolidated Statement of Financial Position .......................................................................................... 24 Consolidated Statement of Changes in Equity ........................................................................................ 25 Consolidated Statement of Cashflows ............................................................................................................ 27 Notes to the Financial Statements ..................................................................................................................... 28 Directors’ Declaration .................................................................................................................................................... 72 Independent Auditor’s Report ............................................................................................................................... 73 ASX Additional Information...................................................................................................................................... 78 i Corporate Directory Directors Registered and business address Robert McDonald (Chairman) Level 4, 360 Collins Street Patrick Walta (Managing Director) Melbourne, Victoria 3000 Nick Cernotta (Non-Executive Director) Australia Evan Cranston (Non-Executive Director) Telephone: +61 3 9070 3300 Bryn Hardcastle (Non-Executive Director) Email: info@newcenturyresources.com Peter Watson (Non-Executive Director) Website: www.newcenturyresources.com Company secretary Oonagh Malone Auditors Deloitte Touche Tohmatsu 550 Bourke Street Melbourne, Victoria 3000 Securities exchange Share registry Australian Securities Exchange (ASX) Automic Registry Services Code: NCZ Home office: Perth 126 Phillip Street Sydney, New South Wales 2000 Telephone: +61 2 9698 5414 Country of incorporation and domicile Solicitors Australia Bellanhouse Level 19, Alluvion 58 Mounts Bay Road Perth, Western Australia 6000 ii Chairman’s Message Dear Shareholders, I am pleased to present my first message as the new independent Chairman of New Century Resources. Our Century operations are starting to deliver strong and consistent zinc recoveries and continued record metal production rates, delivering on our strategy to become Australia’s premier sustainable mining company. I would like to acknowledge our partner, MMG Ltd, and its trust in us to profitably recover valuable metals from its previous workings while also delivering a solution for rehabilitation of the Century mine, which for some 16 years prior to its closure 3 years ago was one of the world’s major zinc mines. Of course it is people that make things happen. We have assembled an outstanding team, dedicated to making your company special. I commend the entire team on the focussed efforts during the ramp up process and for the quarter-on-quarter growth achieved and establishing New Century as a top 20 zinc producer. In addition to the operational milestones achieved at Century with commissioning of the plant, pipeline and port facility, major highlights for the Company this year have included: • 16 shipments of Century concentrate completed to date to 7 different smelters on 3 different continents; • A strengthened Board and Management team for the next phase of the Company’s growth; • Acknowledgement from the Queensland Government of our contribution to the development of the State’s North West region through a landmark royalty deferral which allows us to defer State royalties for 3 years while the Company is in the development phase; • Successful capital raising of $43.4 million by way of a placement to sophisticated and professional investors, together with a shareholder share placement plan and investment from Board and management. The Century Mine has a long history of engaging with the Gulf Communities and Traditional Owners of the region, and New Century Resources has continued this practice through transparent engagement and innovative delivery of community development initiatives. I am particularly pleased to report to shareholders on the outcomes of our Training and Development Program, delivered in accordance with our Native Title Obligations In a first for the Century Mine after almost 20-years of operation, the program has now been designed and is being delivered by community members, for community members. The outcomes delivered to date have been outstanding and address community-identified sustainable social development goals such as improving literacy outcomes for school children on Mornington Island, and creating employment pathways in the defence sector for young adults in Doomadgee. iii Safety also remains a paramount focus of our business. New Century’s safety motto, “Safety Starts With You”, which was created with ground up contribution from the entire team, demonstrates the strong commitment of each individual team member to continually improving the Company’s safety record. Shareholders will be acutely aware of the progressive reduction of our share price throughout the year. It is cold comfort to report that the same is true of other zinc producers on the back of a reduction in spot zinc prices and a significant increase in concentrate treatment charges, both of which have negatively impacted on the performance of the industry. Our relative performance throughout the year was also exacerbated by a slower than planned ramp-up. However, as completion of the ramp up to a 12mtpa operation at Century occurs during the coming financial year, a continued reduction in operating costs will occur. This continues to put the Company in a good position to weather the current dour zinc price environment. Longer term, based on the consensus view of mineral economists and analysts about commodity markets and treatment charges we expect our increased production to be complemented with significantly increased earnings streams from operations. We look forward to the future with confidence. Robert McDonald iv Review of Operations Over the course of FY19 New Century Resources made a successful transition from aspiring mine developer to significant zinc producer in its own right, restarting operations just 18 months from acquisition of the Century assets. The Company is now an established top 20 zinc producer based on current monthly production rates and continues to progress its ramp up strategy to become a top 10 zinc producer. The Directors of New Century are pleased to present a summary of operations to Shareholders. Ramp Up Progress to Date Since the start of operations in August 2018, operations at Century have continued to ramp up, with consistent increases in quarterly zinc production. The ramp up of operations is scheduled to continue throughout FY20. Ramp up Highlights Highlights to date from the operational ramp up include: • Consistent increase in quarterly metal production, with the Company achieving mid-range September 2019 production guidance of 26,171t zinc metal and on track to achieve current December 2019 quarter guidance on 27,000t to 33,000t zinc metal • Quarterly zinc production rates have increased on average 30% over the first 12 months of concentrate production ramp up • Consistent reduction in quarterly C1 costs, with the Company achieving mid- range September 2019 quarter C1 cost guidance of US$1.00/lb payable metal (including treatment charges) and on track to achieve current December 2019 quarter guidance of US$0.87/lb to US$0.98/lb. • Quarterly C1 costs have decreased on average 15% over the first 12 months of concentrate production ramp up • Metallurgical performance has increased since zinc recovery to a monthly average of 52% in September 2019 • Over 160,000t of zinc concentrate shipments (China, Europe & Australia) since the commencement of operations • Average impurity penalties and treatment charges continue to be maintained in line with standard market pricing and remain competitive with other miners • Hydraulic mining continues to ramp up, with a third mining cannon installed in Q4 FY19, and the operations now delivering an ~8Mtpa mining rate • Continued strong reconciliation of mining grade to the ore reserve model, with the ore grade mined during the June 2019 quarter averaging 2.92% Zn • Approximately 6% of the tailings Ore Reserve mined to the end of FY19 v Mining & Production Performance The figures below provided a detailed review of the operational performance data from the Century operations to date. Figure 1: Century’s quarterly metal production performance and annualised mining rate Q2 FY20 guidance based on scheduled ramp up process Figure 2: Century’s quarterly C1 cost trend (including TCs) against the zinc price C1 Costs defined as direct cash operating cost, net of any by-product credits. Direct cash operating costs include all mining and processing costs, mine site overheads and realisation costs (including transport costs, treatment and refining costs and smelter recovery deductions) through to refined metal. Payable metal basis. Q2 FY20 guidance based on scheduled ramp up process. Consensus Economics data used for zinc price projection (av. of 28 investment banks). vi Figure 3: Average monthly recovery and daily zinc metal production ramp up at Century Figure 4: Daily recovery (with a 7 day moving average line) & annualised mining rate performance since the start of operations at Century vii Figure 5: Overview of hydraulic mining progress at the Century Concentrate Product Quality & Treatment Charges Century operations have continued to improve overall product quality as part of the ramp up process, with various circuit upgrades allowing operations to now regularly achieve average zinc grades of 49 – 50% zinc. Century concentrate has to date also achieved relatively low impurity penalty rates. Spot treatment charges remain near 10 year highs and currently represent >30% of the New Century’s C1 costs (see Figure 2). Treatment charges received for Century concentrate remain in line with standard market pricing and are also competitive with other global zinc miners. Figure 6: 10 year spot zinc treatment charges viii In-situ Expansion Study Completed The Company released the In-situ Expansion Study in the last quarter of 2019, which investigated the incorporation of Century’s in-situ Mineral Resources into the current tailings only mine plan. Figure 7: Overview of existing Reserves & Resources at the Century Zinc Mine Summary technical and financial projections and overall project highlights are set out below. The Company confirms that all material assumptions underpinning the production targets and forecast financial information derived from those production targets in the Expansion Study announcement continue to apply and have not materially changed. While the Study has highlighted robust potential of the existing Mineral Resources at Century, the Company remains fully committed to the ramp up of its tailings operations during the course of FY20. Development of in-situ resources remains contingent on completion of a Bankable Feasibility Study (BFS) and Board consideration of a decision to mine. The BFS is targeted for completion in Q4 FY20. The Company does not anticipate any material capital costs associated with the development of in-situ operations being incurred during FY20. In-situ Resource Expansion Study Highlights • Strong production potential (10Mtpa tailings + 2Mtpa in-situ model):  Zinc production LOM average of 233ktpa zinc-in-concentrate including ramp up period (total production 1,630kt) from both tailings and in-situ deposits   Lead production LOM average of 29ktpa lead-in-concentrate including ramp up period (total production 159kt) from in-situ deposits Total silver production of up to 18.9Moz in zinc and lead concentrates ix • Excellent overall in-situ project economics (in addition to tailings operations):  A$422M in additional after tax free cashflow  A$268M in additional overall Century operations NPV (after tax)  Combined operations have the potential to generate over A$1,500M in after- tax free cash flow based on updated analyst consensus zinc pricing and TC projections • Strong estimated EBITDA profile from combined tailings and in-situ operations: 600 500 400 300 200 100 M $ A , A D T B E I 0 Financial Year 2020 2021 12Mtpa Tailings 2022 2023 10Mtpa Tailings + SB-EFB 2024 2025 2026 10Mtpa Tailings + SB-EFB + SK Figure 8: Average life-of-mine C1 cost projections for development of tailings and in-situ resources based on parameters used in the In-situ Expansion Study • Attractive overall operating costs (average life-of-mine C1 cost projections):  Case 1: Current tailings only operations (ramping up to 12Mtpa) LOM C1 costs of US$0.56/lb Zn including ramp up  Case 2: Combined tailings (10Mtpa) and South Block & East Fault Block operations (2Mtpa) LOM average C1 costs of US$0.55/lb Zn including ramp up, with in-situ mining and processing costs offset by lead & silver credits  Case 3: Combined tailings (10Mtpa) and all in-situ deposit operations (2Mtpa) LOM average C1 costs of US$0.50/lb including ramp up, with in-situ mining and processing costs offset by lead & silver credits n Z e l b a y a p b l / $ D S U , t s o C 1 C 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Financial Year 2020 2021 2022 2023 2024 2025 2026 12Mtpa Tailings 10Mtpa Tailings + SB/EFB 10Mtpa Tailings + SB/EFB + SK Figure 9: Estimated EBITDA projections for tailings only and combined tails/in-situ operations based on parameters used in the In-situ Expansion Study x • Improved capital expenditure profile:  Case 1: Current tailings only operations (ramping up to 12Mtpa): A$40M capex, to be incurred over FY20  Case 2: Capex estimate for South Block / East Fault Block deposits estimated at A$55M (in addition to Case 1 capital), spread over ~2 years from decision to mine  Case 3: Capital estimate for development of all in-situ deposits estimated at A$97M (in addition to Case 1 capital) • Mine life extension:  Development of Century in-situ operations in addition to existing tailings operations to provide an increase in mine life, now totalling 7 years to mid- 2026  Silver King extension potential, with the ore body remaining open along a structurally controlled strike with multiple drilling hits outside of the existing resource  Watson’s Lode resource potential, with the mineralisation at this target to be assessed for further drilling and resource definition xi Table 1: Expansion Study Technical Summary (see table notes below) Approximate Technical Parameters – Life-of-Mine Units 12 Mtpa Tailings 10Mtpa Tailings + South Block / East Fault Block 10Mtpa Tailings + South Block / East Fault Block + Silver King Mine Life (from 01 July 2019) Estimated Start Date Mining1 Tailings - Ore Mined Tailings - Waste Mined In-situ - Ore Mined In-situ - Waste Mined Open Pit Strip Ratio6 Processing Tailings - Av. Zinc Grade2 Tailings - Av. Lead Grade2 Tailings - Av. Silver Grade2 In-situ - Av. Zinc Grade2 In-situ - Av. Lead Grade2 In-situ - Av. Silver Grade2 Tailings - Zinc Recovery3 Tailings - Lead Recovery3 Tailings - Silver Recovery3 In-situ - Zinc Recovery3 In-situ - Lead Recovery3 In-situ - Silver Recovery3 Production1 Zinc Metal Recovered Lead Metal Recovered - - Mt Mt Mt Mt - % % g/t % % g/t % % % % % % kt kt Silver Metal Recovered kOz Zinc Concentrate Grade4 Silver in Zn Conc. Grade4 Lead Concentrate Grade5 Silver in Pb Conc. Grade5 Zinc Concentrate Production Lead Concentrate Production % g/t % g/t kt kt 7 years (through to mid-2026) In Operation 1H CY2021 72.3 0 - - - 3.0% 0.6% 12 - - - 62% - 43% - - - 1,293 - 11,876 49% 140 - - 2,639 - 72.3 0 7.7 62.2 8.1 3.0% 0.6% 12 4.8% 1.2% 39 62% - 43% 75% 68% 65% 1,563 63 17,488 50% 160 68% 350 3,126 93 72.3 0 9.3 62.8 8.1 3.0% 0.6% 12 5.0% 4.3% 54 62% - 43% 76% 71% 69% 1,630 159 18,909 50% 160 69% 510 3,261 230 Table 1 Notes: 1. For further details on projected annual production figures for all products see the In-situ Expansion Study Announcement 2. Average metal grades based on life of mine material reporting to the processing plant 3. Average recoveries based on steady state operations exclusive of ramp up 4. Zinc concentrate from all deposits to be combined (in-situ and tailings initially processed via separate existing zinc rougher circuits, followed by combined feed for the zinc scavenger and zinc cleaner circuits) 5. Lead concentrate from all in-situ deposits to be combined and processed through the existing individual lead rougher/scavenger and cleaning circuits), In-situ Expansion Study Announcement 6. Strip ratio for South Block / East Fault Block open pits only xii Table 2: Expansion Study Financial Summary (see table notes below) Financial Parameters (approximate) Metal Prices & Exchange Rate1 Zinc Lead Silver AUD/USD US$2,650/t (US$1.20/lb) US$2,165/t (US$0.98/lb) US$19/oz $0.707 Units 12 Mtpa Tailings2 10Mtpa Tailings + South Block / East Fault Block 10Mtpa Tailings + South Block / East Fault Block + Silver King Project Cash Flows Net Smelter Revenue C1 Operating Costs (payable Zn)4 C1 Operating Cost Differential5 EBITDA Capital Expenditure3 Sustaining Capital & Rehabilitation6 Valuation Free Cashflow (after tax) NPV8 IRR (incremental on 12Mtpa tailings) A$M USD/lb Zn USD/lb Zn A$M A$M A$M A$M A$M % 3,504 0.56 - 1,704 40 1,128 879 - 4,432 0.55 -0.01 2,102 95 127 1,365 1,024 46% 4,949 0.50 -0.05 2,404 137 1,549 1,146 80% Table 2 Notes: 1. Commodity pricing assumption represents average over life of mine based on Consensus Economics forecasts, June 2019. 2. Tailings economics based on the Restart Feasibility Study (Nov 2017), up to date actual operating cost data, with revised commodity, exchange rate and treatment charge assumptions as well as considering current depletion of the Ore Reserve and existing tailings ramp up progress. 3. Capital Expenditure represents further capital requirements for tailings ramp-up and all capital requirements including appropriate contingency allowances for in-situ development 4. C1 is defined as direct cash operating costs produced, net of by-product credits, divided by the amount of payable zinc produced. Direct cash operating costs include all mining, processing, transport, treatment costs and smelter recovery deductions through to refined metal. 5. Calculated reduction (negative value) or increase (positive value) in LOM average operating costs due to incremental cost increase of respective in-situ operation Case 6. Net rehabilitation is expected to remain the same as increased disturbance for East Fault Block and Silver King are offset by savings through integrated mining and rehabilitation of the waste rock dumps. 7. USD:AUD of 0.73 used for FY20 and then 0.70 for every subsequent year. xiii Exploration Developments The Company completed an Induced Polarisation (IP) survey over a section of the Mining Lease considered prospective for further Century style mineralisation, with results forming the basis for drill planning of identified targets. In the June 2019 quarter, three drill holes were completed for a total of 1,600m, targeting a dislocated portion of the Century orebody hypothesized to have spalled into the adjacent crater structure following a meteorite impact ~470 million years ago. Termite Range Fault Nikkis Fault Orebody structure prior to mining operations Interpreted formation of original orebody Potential displaced portion of the original orebody Figures 10 & 11: Reconstruction of the original Big Zinc orebody (left) & orebody final form prior to mining operations (right), including a conceptual target slumping location of the missing section (denoted by a yellow star) Figures 12 & 13: Reconnaissance drill hole locations with crater floor contours (left) and topographic map (right) The programme was successful in confirming the conceptual model, and better defining the crater architecture. The presence of Century footwall sequence slump blocks in the target area, and identification of distinct crater features vastly improved the understanding of the mechanisms and vectors of mass movement on the crater margin. Detailed modelling and interpretation of the results over the next quarter is anticipated to generate further targets with potential for dislocated Century blocks. xiv Non-Core Assets Kodiak Coal Project (NCZ 70%) The Kodiak Coal Project is currently on care and maintenance. The Company continues to consider options with regard to the future of the Kodiak Coking Coal Project in Alabama, USA, including assessing options in relation to joint venture opportunities or a disposal of the asset. Lawn Hill & Riversleigh Pastoral Holding Company (NCZ 49%) The Lawn Hill & Riversleigh Pastoral Holding Company is an active cattle operation located adjected to the Company’s mining leases. The Company continues to assess options in relation to disposal of the asset. Corporate Governance New Century’s Corporate Governance Statement for FY2019 is available on the Company’s website www.newcenturyresources.com xv New Century in the Community As part of the Company’s acquisition of the Century Mine, the Company inherited a long history of community relationships and social development activities which have been built upon under the stewardship of New Century. Of particular note has been the reinvigoration of the Gulf Communities Agreement (GCA), a Native Title Agreement executed in 1997 which facilitates benefits to the Traditional Owners of the lands impacted by Century’s operations. The Company has engaged actively with the communities of the lower gulf to implement this agreement and the associated initiatives in a manner designed by the impacted communities to support the sustainable development of those communities. Figure 14: Members of the Century Environment Committee with New Century’s Port Manager, Greg O’Shea, prior to an inspection of the Karumba Port operations. xvi Active Community Engagement New Century engages with our stakeholder communities via a number of formal and informal mechanisms. Throughout the year, the Company facilitated or participated in the following formal engagements with stakeholders in the lower gulf communities: Forum Aboriginal Development Benefits Trust (ADBT) Century Environment Committee (CEC) Century Employment and Training Committee (CETC) Century Liaison and Advisory Committee (CLAC) Number of Meetings 6 4 4 2 Purpose New Century Role The ADBT is an independent Trust, established to administer funds from the Century Mine primarily for Indigenous business development, and Indigenous ownership / investment in business. The CEC is established for the sharing of information regarding operational and environmental management information with representatives of Traditional Owner Groups, and receiving and responding to feedback from those groups. The CETC is established to advise Century on the development and implementation of the Century Employment and Training Plan with a view to maximising benefits to Local Aboriginal People and Corporations. The Company appoints one director to the board of the ADBT Trustee. The Company appoints two members to the CEC and provides secretariat services to the committee. The Company appoints two members to the CETC and provides secretariat services to the committee. The CLAC is established to discuss the working of the GCA and provide a forum for discussion and exchange of information between parties. The Company appoints two members to the CLAC and provides secretariat services to the committee. Amongst these formal engagements, New Century maintains regular informal and semi-formal contact with other community stakeholder groups including the Burke and Carpentaria Shire Councils, landowners, State and Federal local Parliamentarians, the Queensland Government, and other interested stakeholders from the lower Gulf of Carpentaria. xvii Figure 15: Members of the Century Environment Committee prior to an inspection of the mining operations at Lawn Hill. Aboriginal Development Benefits Trust The Aboriginal Development Benefits Trust (ADBT) was established in 1997 following the execution of the Gulf Communities Agreement and continues to operate today. The purpose of the Trust is to administer annual funding contributions from the Century Mine with a view to enhancing Aboriginal business development and ownership within the Gulf Communities affected by the Century Mine’s activities. New Century has been represented on the Board of the Trustee of the ADBT since taking over stewardship of the Century Mine in 2017. During that time, the ADBT has continued to receive annual funding contributions from Century in line with the obligations outlined in the Gulf Communities Agreement. xviii The Board of the ADBT has been able to apply that funding in thoughtful and constructive ways that have already built upon the aim of enhancing Aboriginal business development and ownership in the Gulf Communities. Key activities have included: • Acquisition of the Daintree Discovery Centre, a profit-generating tourism endeavour that directs surplus funds back to the ADBT for the benefit of Local Aboriginal People; • Purchase of the Burketown Pub, a landmark enterprise in the Gulf Communities, under Aboriginal ownership for the first time in its history; • Establishment of the Ancient Journeys shopfront gallery in Cairns, which is already exposing Indigenous art and handcrafts to the significant tourism market in Cairns, with all profits going back to the artists from the Gulf Communities; • The ADBT has also provided a number of sporting and community sponsorships which contribute to the social development of young people throughout the Gulf Communities. New Century will continue its active participation with the ADBT and we remain encouraged by the excellent governance and administrative standards set by the ADBT Board which will ensure continuing positive outcomes for the Gulf Communities. Photo 3: Through funding from New Century, the ADBT has established an art gallery and shopfront in Cairns, brining art and business development opportunities from the Gulf Communities to the Cairns tourism market. xix Photo 4: New Century’s Head of Corporate Affairs and Social Responsibility, Shane Goodwin represents the company on the Board of the ADBT Training and Development Initiatives One of the most significant elements of the Gulf Communities Agreement are the provisions for training and development of Local Aboriginal People. These provisions were developed at a time when the Century Mine was expected to employ significantly higher numbers than today’s economic rehabilitation activities do, so New Century has had to engage actively with communities to develop innovative ways to fulfil of obligations under the changed circumstances of economic rehabilitation. Following community engagement and feedback regarding the delivery of training and development initiatives for local Aboriginal People, New Century engaged the Waanyi-Downer Joint Venture to deliver community-led training and development programs that were designed to enhance sustainable development of the Local Aboriginal Communities impacted by the Century Mine’s operations. The Waanyi-Downer Joint venture is a 50:50 joint venture established between the Waanyi Registered Native Title Body Corporate (which represents the Native Title interests of the Waanyi People whose Traditional lands are impacted by the Century Mine) and the well-established international mining-services firm, Downer. Through processes of genuine community-led engagement and design, key Training and Development initiatives have already been delivered in communities that have provided for sustainable development outcomes in those communities. xx Mornington Island Literacy Initiative Through engagement with the Principal of the Mornington Island State School, New Century has provided funding for the employment of two local Indigenous teachers’ aides at the school. The purpose of the initiative is to Increased literacy among students of all ages, which should lead to increased engagement at school, resulting in increased attendance in the short term, and increased employability prospects in the long term. Photo 5: New Century funded the appointment of a full-time teachers’ aide position at Mornington Island State School, an appointment which has resulted in a marked improvement in student literacy and participation at the school. xxi Cowboys House Mentorship Initiative Cowboys House is a boarding facility located in Townsville that ensures Aboriginal and Torres Strait Islander children from remote communities across North Queensland get access to a full secondary curriculum. New Century has funded the employment of former NRL player, Antonio Winterstein in a mentoring role for the students boarding at the house. Aside from Antonio’s day to day role around the house and in Townsville, the position description also includes allowances to travel to community as the need arises (e.g. school holidays) to facilitate and run activities for the local children. The initiative is designed to lead to increased engagement for students when they travel home for school holidays via community activity days, which will aid in increased retention of students at their respective schools. The mentor has also succeeded in securing a number of school-based traineeships for students from the Gulf Communities including: • Cert III in LV Mechanical Technology; • 2 x Cert III in Carpentry; and • 2 x Cert II in Civil Construction. Photo 6: Cowboys House Mentor, Antonio Winterstein with students from Mornington Island during a visit focussed on establishing connectivity between students, their families and their school-lives while boarding in Townsville. xxii Kapani Warrior Program – Doomadgee New Century funded the rollout of the Kapani Warrior Program in Doomadgee. The program works to restructure the thinking of Aboriginal people to see ‘the warrior’ as a provider and protector, rather than an aggressor. The ‘warrior’ protects themselves, their family and their community. The program has strong links to the Australian Defence Force. Participants undertake a variety of exercises as part of the program, including: • Bush skills / camp orientation activities • Personal development and problem solving; • Leadership and confidence training; • Group and individual team building and counselling sessions; • Local Lore and Custom frameworks; and • Specialist / custom skill activities: bush mechanics / driving skills / handyman skills. To date, 11 of the 30 participants in this program have completed applications for the 51st. One entered the Army Indigenous Development program in April. An additional six were accepted into the 51st during the Army’s May intake, with the remaining four listed for the recruit course. Photo 7: Young people from Doomadgee participated in exercises with the Kapani Warriors, leading to a high uptake into employment with the Australian Defence Forces. xxiii Mineral Resources and Ore Reserves Statement The following information is provided in accordance with Listing Rule 5.21 and as at 30 June 2019. Mineral Resource Estimation Governance Statement independent external consultants and 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 internal employees who are experienced in best practices in modelling and estimation methods. Where applicable, 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 tables below set out the Mineral Resources and Reserves for 2018 and 2019 for the Century Zinc Project in Queensland. The Company advises that the material decrease in 2019 arises from Mining Depletion at the Century Tailings Deposit. Century Mine Resources and Reserves 2019 (rounding errors apply) Mineral Resources Tonnes (Mt) Zn (%) Pb (%) Ag (g/t) 43 42 Zn (t) Pb (t) Ag (Oz) 322,000 90,000 8,550,000 63,000 7,300 872,000 1.5 1.1 12.5 120 186,000 337,500 10,500,000 4.6 65 571,000 434,800 19,922,000 6.1 5.3 0.6 9.8 2.7 9.4 6.9 6.1 Tonnes (Mt) ZnEq (%) Zn (%) Ag (g/t) Zn (t) Pb (t) Ag (Oz) 71.6 3.1 3.0 12 2,132,000 - 28,340,000 South Block (Indicated) East Fault Block (Indicated) Silver King (Inferred) TOTAL Ore Reserves Century Tails (Proved) Century Mine Resources and Reserves 2018 (rounding errors apply) Mineral Resources Tonnes (Mt) Zn (%) Pb (%) Ag (g/t) Zn (t) Pb (t) Ag (Oz) South Block (Indicated) Silver King (Inferred) East Fault Block (Inferred) TOTAL Ore Reserves Century Tails (Proved) 6.1 5.3 1.5 43 322,000 90,000 8,550,000 2.7 6.9 12.5 120 186,000 337,500 10,500,000 0.5 9.3 11.6 6.1 1.1 4.7 Tonnes (Mt) ZnEq (%) Zn (%) 48 66 Ag (g/t) 60,000 5,500 800,000 568,000 433,000 19,850,000 Zn (t) Pb (t) Ag (Oz) 77.3 3.1 3.0 12 2,287,662 - 29,734,819 xxiv The table below sets out Mineral Resources for 2017 and 2018 for the Kodiak Coking Coal Project in Alabama, USA. There was no change between the two periods. Kodiak Project Resources as at 30 June 2019 and at 30 June 2019 (rounding errors apply) Coal Seam Measured Resource Indicated Resource Inferred Resource Total Resource Coke Seam, Gurnee Property Atkins Seam, Gurnee Property TOTAL 34.0Mt 37.6Mt 71.6Mt 3.2Mt 1.6Mt 4.8Mt 2.0Mt - 2.0Mt 39.2Mt 39.2Mt 78.4Mt Zinc Equivalent Calculation ZnEq was calculated for each block of the Century Tailings Deposit from the estimated block grades. The ZnEq calculation takes into account, recoveries, payability (including transport and refining charges) and metal prices in generating a zinc equivalent value for each block grade for Ag and Zn. ZnEq = Zn%+ + Ag troy oz/t*0.002573. Metal prices used in the calculation are: Zn US$3,000/t, and Ag US$17.50/troy oz. Competent Persons’ Statements The information in this announcement that relates to Mineral Resources on the Silver King Deposit and the East Fault Block Deposit was first reported by the Company in its prospectus released to ASX on 20 June 2017, and the South Block Deposit was first reported by the Company to ASX on 15 January 2018. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements, and in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning that estimates in the relevant market announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement. The information in this announcement that relates to the Ore Reserve at the Century Tailings Deposit was first reported by the Company in its ASX announcement titled "New Century Reports Outstanding Feasibility Results that Confirm a Highly Profitable, Large Scale Production and Low Cost Operation for the Century Mine Restart" dated 28 November 2017. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement, and in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement. 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. xxv Financial Statements FY2019 1 New Century Resources Limited 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' or the ‘Consolidated Entity’) consisting of New Century Resources Limited (referred to hereafter as ‘New Century Resources Limited’ or the 'Company') and the entities it controlled for the financial year ended 30 June 2019. Directors The names of Directors who held office during or since the end of the financial year and until the date of this report are set out below. Directors were in office for the entire period unless otherwise stated. Robert McDonald (Chairman) Patrick Walta (Managing Director) Nick Cernotta Evan Cranston Tom Eadie Bryn Hardcastle Tolga Kumova Peter Watson Information on current directors appointed 17 July 2019 appointed 28 March 2019 resigned 28 March 2019 resigned 17 July 2019 Other current listed entity directorships Cobalt Blue Holdings Limited Former listed entity directorships in last three years Sedgman Limited (to 14 April 2016) New Century special responsibilities Chairman of New Century Limited Board Member of Remuneration & Nomination Committee Director Experience and expertise Robert McDonald Chairman Appointed 17 July 2019 B.Comm MBA (Honours) Member of the AusIMM Robert McDonald has more than 40 years of broad experience in the international mining sector. His early career within the Rio Tinto Group involved various operational business development, deal making and strategic planning roles for Hamersley Iron, RTZ Services and Rio Tinto Minera SA. This experience was followed by 20 years of investment banking, initially with BA Australia, then as director and principal of Resource Finance Corporation, and subsequently as a Managing Director of N.M. Rothschild & Sons. In these roles he was responsible for a wide range of advisory services including company formation, mergers and acquisitions, business origination, strategic advice on value creation/recognition, risk management, fairness opinions, debt and equity capital raisings and corporate restructurings. Over the most recent decade Mr McDonald has continued as a trusted investment banking advisor to a selected group of major international mining and investment companies. He has also maintained an active involvement in publicly listed and private mining and mining service companies through various board roles including as non- executive director and chairman. 4 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Director Experience and expertise Other current listed entity directorships New Century special responsibilities Managing Director Former listed entity directorships in last three years Matador Mining Limited (to 3 July 2018) Primary Gold Limited (to 31 May 2017) 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. None Mr Walta's experience within the mining industry includes public and private company management, mineral processing, mergers and acquisitions, initial public offerings, project management, feasibility studies, exploration activities, competitive intelligence and strategic planning. Mr Walta also has a broad level of resource industry experience through Rio Tinto, Citic Pacific Mining, Cradle Resources, Carbine Resources, Primary Gold and Clean TeQ. Nick Cernotta is a mining engineer who has held senior operational and executive roles in Australia and overseas over a 30 plus year period. Mr Cernotta has considerable experience in the management and operation of large resource projects, having served as Director of Operations at Fortescue Metals Group, Chief Operating Officer (Underground, International and Engineering) at MacMahon Holdings Limited and as Director of Operations for Barrick (Australia Pacific) Pty Ltd, a subsidiary of Barrick Gold Corporation. Mr Cernotta’s particular operational expertise is in managing safety, culture, production and cost efficiency, and organisational effectiveness. Evan Cranston is an experienced mining executive with a background in corporate and mining law. He is the principal of corporate advisory and administration firm Konkera Corporate and has extensive experience in the areas of equity capital markets, corporate finance, structuring, asset acquisition, corporate governance and external stakeholder relations. 5 ServTech Global Holdings Ltd (to 22 November 2017) Northern Star Resources Limited Panoramic Resources Limited Pilbara Minerals Limited African Gold Resources Limited Boss Resources Limited Carbine Resources Limited Primary Gold Limited (to 29 November 2017) Clancy Exploration Ltd (to 1 December 2017) Chair of Remuneration & Nomination Committee Member of Audit & Risk Committee Member of Environmental, Social & Governance Committee Member of Audit & Risk Committee Patrick Walta Managing Director Appointed 13 July 2017 Degrees in Chemical Engineering and Science MBA Masters of Science (Mineral Economics) Diploma of Project Management Nick Cernotta Non-Executive Director Appointed 28 March 2019 B.Eng (Mining) Evan Cranston Non-Executive Director Appointed 10 October 2012 B.Comm, LLB New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Former listed entity directorships in last three years Flamingo Ai Limited (formerly Cre8tek Limited) (to 27 August 2018) ServTech Global Holdings Ltd (to 22 November 2017) Vysarn Limited (formerly MHM Metals Limited) (to 27 October 2017) Resource Generation Limited (to 30 November 2018) Sedgman Limited (to 7 October 2016) New Century special responsibilities Chair of Environmental, Social & Governance Committee Member of Remuneration & Nomination Committee Chair of Audit & Risk Committee Member of Environmental, Social & Governance Committee Other current listed entity directorships Caprice Resources Limited Director Experience and expertise Bryn Hardcastle Non-Executive Director Appointed 8 December 2011 LLB 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. Strandline Resources Limited Peter Watson Non-Executive Director Appointed 22 January 2018 B.Eng (ChemEng) (Hons) Dip Acc & Fin Mgmt FIEAust GAICD Peter Watson is a chemical engineer with over 30 years’ experience in the resources sector, both in Australia and overseas. He has held technical and executive roles with a number of companies throughout his career, culminating in his appointment as the Managing Director & Chief Executive Officer of Sedgman Limited, a market leading engineering and mining services firm. Initially joining Sedgman as Chief Operating Officer Metals Division in 2010, Mr Watson successfully led and supported the development and execution of Engineering, Procurement and Construction as well as Operations Contracts in excess of $2 billion as he progressed through roles as Executive General Manager (2011 – 2012) and Global Executive Director (2012 – 2014), before being made Managing Director & Chief Executive Officer (2014 – 2016). During this time at Sedgman, Mr Watson provided leadership and guidance across a suite of over ten large scale mine operations contracts and over 30 EPC contracts across a broad spectrum of commodities. 6 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 None None None Syrah Resources Limited (to 5 October 2016) Former Directors (Ernest) Tom Eadie Non-Executive Director Appointed on 13 July 2017 and resigned on 28 March 2019 Tolga Kumova Non-Executive Director Appointed on 13 July 2017 and resigned on 17 July 2019 Tom 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 started production in late 2017. Strandline Resources Limited Alderan Resources Limited Hill End Gold Limited 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. African Gold Resources Limited European Cobalt Ltd 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. Oonagh Malone, Company Secretary Oonagh Malone is a principal of a corporate advisory firm which provides company secretarial and administrative services. She has over 10 years’ experience in administrative support roles for listed companies and is a member of the Governance Institute of Australia and Australian Institute of Company Directors. Ms Malone is a non-executive director of Hawkstone Mining Limited and Carbine Resources Limited. She is currently company secretary to ASX listed companies Bunji Corporation Limited, Carbine Resources Limited, Caprice Resources Limited, European Cobalt Ltd, Hawkstone Mining Limited and Sagon Resources Limited. 7 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Directors’ meetings During the financial year ended 30 June 2019, there were ten meetings of the Board of Directors. Attendances by each Director during the period were as follows: Director Robert McDonald Patrick Walta Nick Cernotta Evan Cranston Tom Eadie Bryn Hardcastle Tolga Kumova Peter Watson Number attended Number eligible to attend - 9 2 10 8 10 10 9 - 10 2 10 8 10 10 10 The Directors made and approved three circular resolutions during the financial year ended 30 June 2019. Principal activities The principal activities of the Group for the financial year were the review and development of mineral exploration projects. 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 (30 June 2018: Nil). Operating results The consolidated loss of the Group amounted to $21,502,018 (2018: Loss of $123,310,765) after providing for income tax. Review of operations and significant changes in the state of affairs During the year, the Group continued with the development of the Century Mine. Full details are set out in the Review of Operations section as well as the Company’s website. In February 2019, the Group secured a new financing facility with Varde Partners Inc (‘Varde’). This comprises a secured facility of US$42,900,000 which has been drawn down and an unsecured facility of US$28,600,000 which was subject to conditions precedent before draw down. Prior to the end of September 2019, Varde advised that the availability of this unsecured facility has expired. Discussion in relation to a US$28,600,000 facility are continuing with Varde. In February 2019, the Group repaid the National Australia Bank facility of $40,000,000 which had been obtained earlier in October 2018. Further details are set out in Note 14 to the Financial Statements. Subsequent to year end, the Company raised $42,500,000 (before transaction costs) via a placement to institutional and sophisticated investors which was completed over two tranches. Tranche one completed in August 2019 and tranche two was approved by shareholders at an extraordinary general meeting of the Company and completed in September 2019. Nick Cernotta joined the New Century Resources Limited Board as a Non-Executive Director in March 2019. Mark Chamberlain joined the Group as the Chief Financial Officer in June 2019. Robert McDonald joined the Group as the Chairman of the Company in July 2019. Tom Eadie and Tolga Kumova stepped down from the New Century Resources Limited Board in March 2019 and July 2019 respectively. During the year, the Company changed its external auditor from Bentleys Audit & Corporate (WA) Pty Ltd to Deloitte Touche Tohmatsu. 8 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Previously, a strategic decision was made by the Group to suspend work on the Kodiak Coking Coal Project, which is located in Alabama, USA. During the year the Group continued to maintain the Kodiak Coking Coal Project in care and maintenance mode, including environmental studies and monitoring. The Group is considering its options with regards to the future of the Kodiak Coking Coal Project. Matters subsequent to the end of the financial year Subsequent to year end, the Company raised $42,500,000 (before transaction costs) via a placement to institutional and sophisticated investors which was completed over two tranches. Tranche one completed in August 2019 and tranche two was approved by shareholders at an extraordinary general meeting of the Company and completed in September 2019. In February 2019, the Group secured a new financing facility with Varde Partners Inc. This comprises a secured facility of US$42,900,000 which has been drawn down and an unsecured facility of US$28,600,000 which was subject to conditions precedent before draw down. Prior to the end of September 2019, Varde advised that the availability of this unsecured facility has expired. Discussion in relation to a US$28,600,000 facility are continuing with Varde. Robert McDonald was appointed as the Chairman of New Century Resources Limited on 17 July 2019. Tolga Kumova resigned as a Director of New Century Resources Limited on 17 July 2019. Further details are set out above in the Directors’ Report. There have been no other events that have occurred subsequent to the reporting date which have significantly affected or may significantly affect the Group’s operations or results in future years. 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 are set out in the Company’s ASX announcements which are located at the Company’s website. 9 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Share options At the date of this report, the Group had the following options over ordinary shares on issue: Type of options 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 Unquoted options issued under the ESOP Unquoted consideration options Unquoted consideration options Unquoted consideration options Unquoted consideration options Unquoted options issued under the ESOP Unquoted options issued to Director Unquoted options issued to Director Unquoted options issued under the ESOP Unquoted options issued to Director Unquoted options issued to Director Total Directors’ interests Number of options Exercise price Expiry date 5,140,000 6,000,000 6,000,000 7,500,000 7,500,000 7,500,000 7,500,000 30,000,000 500,000 22,000,000 6,000,000 3,500,000 3,500,000 500,000 1,000,000 1,000,000 250,000 1,000,000 1,000,000 117,390,000 $0.25 $0.25 $0.50 $0.25 $0.50 $0.75 $1.00 $0.25 $1.60 $0.25 $0.50 $0.75 $1.00 $0.25 $1.20 $1.50 $0.95 $0.56 $0.70 13/07/2020 13/07/2020 13/07/2020 13/07/2021 13/07/2021 13/07/2021 13/07/2021 13/07/2022 02/10/2020 27/02/2021 27/02/2021 27/02/2021 27/02/2021 27/02/2021 28/03/2022 28/03/2022 06/06/2022 18/09/2022 18/09/2022 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: Directors Ordinary shares fully paid Options Direct Indirect Total Direct Indirect Total Robert McDonald - 303,031 303,031 - 2,000,000 2,000,000 Patrick Walta Nick Cernotta Evan Cranston Bryn Hardcastle Peter Watson Total 32,088,455 - 32,088,455 15,750,000 - 15,750,000 - - 87,080 87,080 31,645,455 31,645,455 180,000 1,078,789 1,258,789 - 138,775 138,775 - - - - 2,000,000 2,000,000 8,750,000 8,750,000 4,000,000 4,000,000 - - 32,268,455 33,253,130 65,521,585 15,750,000 16,750,000 32,500,000 10 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 REMUNERATION REPORT 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. Remuneration Governance The Board recognises that the success of the business depends on the quality and engagement of its people. To ensure the Company continues to succeed and grow, it must attract, motivate and retain skilled Directors, Executives and employees. The Board’s aim is to ensure that people and performance are a priority. Role of the Remuneration & Nomination Committee The Remuneration & Nomination Committee is responsible for the oversight of the remuneration system and policies. The Board, upon recommendation of the Remuneration & Nomination Committee, determines the remuneration of Executive Directors. The Remuneration & Nomination Committee reviews and approves the remuneration of the executive management team. The objective of the Remuneration & Nomination Committee is to ensure that the remuneration system and policies attract and retain employees, Executives and Directors who will create sustained value for shareholders. Remuneration Philosophy The remuneration policy of the Company has been designed to be simple and transparent, to promote the interests of the Company over the medium and long term, and encourage a ‘pay for performance’ culture. The following guiding principles direct our remuneration approach. The remuneration structure aims to: - Attract, retain and motivate the right calibre of people for the business; - Provide strong linkage between incentive rewards and creation of value for shareholders; - Reward the achievement of financial and strategic objectives; and - Comply with applicable legal requirements and appropriate standards of governance. Remuneration Positioning In order to reflect a ‘pay for performance’ culture, the Total Fixed Remuneration (“TFR”) package is positioned at the median of the market for a fully proficient and experienced performer, whilst the Total Remuneration package (fixed and variable pay), reflects a median to upper quartile pay position when superior levels of performance have been met. External Advice and Benchmarking The Remuneration & Nomination Committee engaged BDO Remuneration and Reward (“BDO”) to provide market data relating to the remuneration packages of the Group’s senior executives to assist the Committee in assessing the positioning and competitiveness of current remuneration packages. BDO were engaged by the Remuneration & Nomination Committee Chair, and reported to the Committee and the Board. Further, BDO has processes and procedures in place to minimise potential opportunities for undue influence from senior executives. The Board is satisfied that the interaction between BDO and Senior Executives is minimal, principally relating to provision of relevant Group information for consideration by the respective consultants. The Board is therefore satisfied that the advice received from BDO is free from undue influence from the Senior Executives to whom the remuneration recommendations apply. The information provided by BDO was provided to the Board as inputs into decision making only. The Committee and the Board considered the information, along with other factors, in making its ultimate remuneration decisions. Total fees paid to BDO for services during the year ended 30 June 2019 were $15,675. 11 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 The KMP of the Group are listed below: Name Current Position Period of KMP during the year Robert McDonald Chairman None, appointed on 17 July 2019 Patrick Walta Nick Cernotta Evan Cranston Bryn Hardcastle Peter Watson Managing Director All of financial year 2019 Director Director Director Director From 28 March 2019 All of financial year 2019 All of financial year 2019 All of financial year 2019 Mark Chamberlain Chief Financial Officer From 7 June 2019 Barry Harris Former Tom Eadie Tolga Kumova Chief Operating Officer All of financial year 2019 Director Director Until 28 March 2019 All of financial year 2019, resigned on 17 July 2019 Executive and KMP Remuneration Framework KMP 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. KMP comprises the Directors of the Company and the senior executives for the Group that are named above in this report. Executive and KMP remuneration is comprised of fixed and at risk components, the purpose of which is to align executive reward with shareholder outcomes, executive performance and the retention of key talent. TFR and at risk remuneration is benchmarked annually by the Board. The table below provides an overview of the different remuneration components within the Company framework. Component Vehicle Purpose Total Fixed Remuneration Base salary, superannuation and non- cash benefits. Incentive Plan (IP) Cash and equity based pay for delivering the plan and growth agenda for the Company which must translate into longer terms value for shareholders. It reflects ‘pay for outcome based shareholder results’. Total Fixed Remuneration Pay for meeting role requirements with reference to experience and skills, size and complexity of role and proficiency. Cash and equity based pay for creating value for shareholders over the ‘mid to long term’ shareholder returns. TFR is reviewed annually. Any adjustments to the TFR for the KMPs must be approved by the Board after recommendation by the Remuneration & Nomination Committee. The Executive Directors determine the TFR of other senior executives within specified guidelines approved by the Board, subject to final approval by the Remuneration & Nomination Committee. The Group seeks to position fixed remuneration around the 50th market percentile of salaries for comparable companies within the mining industry with which the Group competes for talent and equity investment, utilising datasets and specific advice provided by independent remuneration consultants. To reflect the ‘pay for performance’ culture, the Total Remuneration package (fixed and variable pay), reflects a median to upper quartile pay position when superior levels of performance have been met. 12 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Performance Based Remuneration As the Company was not in ‘commercial production’, and in order to limit its cash outgoings, the Board determined to minimise any short-term cash-based incentives. Whilst certain milestones were in place, the Company viewed that many of the activities undertaken in this financial year were more representative of ‘every day’ roles and adopted a cautious approach to any payments being made and therefore, no cash incentive payments were made to any executive in 2019. However, the Board is cognisant that the executive team could earn incentive based pay in the market and sought to provide equity instruments to those KMPs in order to offset the payment of incentives in cash. This was provided to the KMP who joined the Company in 2019 being Mark Chamberlain. Purpose of Equity Plan in 2019 The Company issues options to Executives 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 basis to align Executives and Directors with shareholder based performance metrics. Other than the criteria noted above, there are no performance requirements on the incentive options granted as given the speculative nature of the Company’s activities and the small management team responsible for its running, it is considered that the performance of the Directors and KMP is closely related to the performance and value of the Company and therefore appropriate for performance measurement purposes at this stage of the Company’s development. The Equity Plan for 2019 was structured as a combination of a short and mid to long term incentive plan as it contains a short and a mid to long term component: - Short term in that the instrument vests within 12 months; and - Mid to long term in that the the hurdle rate will likely take more than 12 months to achieve (based on the historical performance of the shares). It is noted that the aforementioned options do not reflect the standard definition of a short and/or mid to long term incentive plan but rather is a combined plan which aims at encouraging an ownership mentality which in addition to have a retentive benefit, also aligns management interests with that of shareholders at this stage of the Company’s development. Planned Amendments to Incentive Plans for 2020 Given the ongoing developing nature of the Company the Board has decided to appoint a firm of remuneration advisors to review the Company’s remuneration and incentive plans for senior executives and KMPs. The review is being undertaken to ensure appropriateness of performance conditions (over the short and long term), vesting scales, targets and gates to the circumstances that are anticipated to prevail over the measurement period and the expectations of shareholders and to also take into account the strategic objectives of the Company going forward. Further, the Company is seeking shareholder approval for the establishment of two new employee incentive schemes under which the Board may offer to eligible person the opportunity to subscribe for such number of equity securities in the Company as the Board may decide and on the terms set out in the rules of the relevant plan. Both of these plans provide eligible employees the opportunity to participate in the future growth of the Company. The General Employee Share Plan will allow for the eligible persons to subscribe for shares that may be subject to income tax exemptions or deferral, while the Employee Share Incentive Plan is a broader plan under which the Board may offer eligible persons to subscribe for shares and/or equity securities. Non-Executive Director Remuneration The Board's policy is for fees to Non-Executive Directors to be competitive to market for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Company, Incentive Options have been used to attract and retain Non-Executive Directors. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability and company specific requirements which include a competent and seasoned Board. Principally, fees for Non-Executive Directors are not linked to the performance of the Group, however, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares and/or options in the Company and Non- 13 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Executive Directors may in limited circumstances receive incentive options in order to secure their initial or ongoing services. 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. It is noted that the options issued to Nick Cernotta during the financial year and to Robert McDonald subsequent to the year end are subject to a price hurdle and, as such, could be viewed as a performance-based option. The purpose of issuing these options at the time was to: - Attract the right calibre of individual to ensure that the Company has a seasoned and respected Board; - Ensure that the Non-Executive Director is committed to the Company’s long term aspirations by virtue of accepting such options; and - Preserve cash holdings in the most effective way possible. Planned Amendments for 2020 Notwithstanding the aforementioned, and based on preliminary discussions with a firm of remuneration advisors, the remuneration structure for Non-Executive Directors will be reviewed to represent the following structure: - Annual board fees; - Committee fees; and - Equity based fees (in lieu of fixed fees). Additional information for consideration of shareholder wealth This table summarises the earnings of the Group and other factors that are considered to affect shareholder wealth for the five years to 30 June 2019. Comparative basic losses per share differ from those in previous financial reports because they have been updated to reflect the January 2016 rights issue for the year ended 30 June 2016 and the March 2016 placements, in accordance with Australian Accounting Standards. 2019 2018 2017 2016 2015 Loss after income tax attributable to shareholders - $ (21,502,018) (119,021,291) (3,785,112) (3,722,417) (6,530,288) Share price at financial year end - $ 0.485 1.31 0.195 0.195 0.16 Movement in share price for the year - $ Total dividends declared - cents Returns of capital - cents (0.825) 1.115 - - - - - - - 0.035 (0.22) - - - - Basic loss per share - cents (4.26) (32.32) (2.02) (2.27) (4.20) 14 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Service agreements A summary of service agreements with Executives and Key Management Personnel effective during the financial year is set out below. These details are in addition to the share options issued as share based payment compensation. Base salary or fee per annum for 2019 including any superannuation(i) (Non-performance based) $240,000 $180,000 Role Managing Director Executive Chairman Termination conditions 6 month notice period 6 month notice period Chief Financial Officer $383,250 6 month notice period Chief Operating Officer $350,000 3 month notice period Term of agreement To 28 February 2020 To 20 July 2020 No specified term No specified term To 20 July 2020 Executive director $50,000 3 month notice period KMP Patrick Walta Evan Cranston(ii) Mark Chamberlain Barry Harris Tolga Kumova (resigned during the year) Proportion of elements of remuneration related to performance % - - - 50 95 (i) (ii) Base salary quoted is the position as at 30 June 2019; salaries are reviewed at least annually. During the period, Mr Cranston transitioned to a Non-Executive Director role and the service agreement ceased. 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. 15 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Compensation of Key Management Personnel Short-term benefits cash salary and fees $ Post employment benefits superannuation $ Termination benefit $ Share based payments $ Proportion of remuneration performance related % Total $ 2019 Directors Patrick Walta Nick Cernotta Evan Cranston Bryn Hardcastle Peter Watson Tom Eadie Tolga Kumova Other KMPs Mark Chamberlain Barry Harris 240,000 12,903 180,000 53,135 50,000 37,500 54,750 628,288 19,445 416,190 435,635 Total 1,063,923 2018 Directors Patrick Walta Evan Cranston Tom Eadie Bryn Hardcastle Tolga Kumova Peter Watson Other KMPs John Carr Barry Harris Oonagh Malone Total 220,000 172,032 47,372 53,134 47,706 22,372 562,616 180,000 167,597 35,694 383,291 945,907 - 1,226 - - 4,750 3,562 - 9,538 1,847 20,532 22,379 31,917 - - 4,500 - - 2,125 6,625 - 14,250 - 14,250 20,875 - - - - - - - - - - - - - - - - - - - - - - - - - 450,900 - - - - - 240,000 465,029 180,000 53,135 54,750 41,062 54,750 450,900 1,088,726 3,247 - 24,539 436,722 3,247 461,261 454,147 1,549,987 - - 240,700 192,560 220,000 172,032 292,572 245,694 1,428,525 1,476,231 24,497 - 1,861,785 2,431,026 - 180,450 144,420 180,000 362,297 180,114 324,870 722,411 2,186,655 3,153,437 - - - - - - - - - - - - - - 82 78 97 - 77 - 50 80 45 69 Movements in annual leave and current long service leave provisions for KMP have been recognised as short-term cash benefits. Nick Cernotta became a KMP from 28 March 2019. Mark Chamberlain became a KMP from 7 June 2019. John Carr and Oonagh Malone were KMP during the prior financial year. 16 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Other transactions with Key Management Personnel A number of KMP, or their related parties, hold positions in other entities that may result in them having control or significant influence over the financial or operating policies of those entities. Where the Group transacts with the KMP and their related parties, the terms and conditions of these transactions are no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-KMP related entities on an arm’s length basis. Share based payment compensations No shares were issued to KMPs of the Group as part of their remuneration. Details of options over ordinary shares in the Company provided as remuneration to KMPs are set out below. When exercised, each option is convertible into one ordinary share of New Century Resources Limited. These options were granted with nil additional consideration. No options issued to current or previous KMPs expired or lapsed during the financial year. Grant date Number granted Exercise price $ Value per option $ Value of options granted $ Value of options recognised $ Issue date Expiry date 28/03/2019 1,000,000 1.20 0.2493 249,300 249,300 28/03/2019 28/03/2022 28/03/2019 1,000,000 1.50 0.2016 201,600 201,600 28/03/2019 28/03/2022 06/06/2019 250,000 0.95 0.2008 50,200 3,247 06/06/2019 06/06/2022 2,250,000 501,100 454,147 KMP Nick Cernotta Nick Cernotta Mark Chamberlain Total The vesting date for the options granted to Nick Cernotta is 28 March 2019 and the vesting date for options granted to Mark Chamberlain is 11 June 2020. The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from issue 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. Further details are set out in Note 23 to the Financial Statements. 17 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Details of all options held by KMP, at the date of this report, are shown below. Issue date Number granted Value of options granted $ Vesting date Expiry date Vested % KMP Directors Patrick Walta Patrick Walta Patrick Walta Patrick Walta Patrick Walta Nick Cernotta Nick Cernotta Evan Cranston Evan Cranston Evan Cranston Evan Cranston 13/07/2017 27/02/2018 27/02/2018 27/02/2018 27/02/2018 28/03/2019 28/03/2019 27/02/2018 27/02/2018 27/02/2018 27/02/2018 Bryn Hardcastle 13/07/2017 Bryn Hardcastle 13/07/2017 Robert McDonald 18/09/2019 Robert McDonald 18/09/2019 Other KMPs Mark Chamberlain 06/06/2019 Barry Harris 13/07/2017 7,000,000 5,500,000 1,500,000 875,000 875,000 1,000,000 1,000,000 5,500,000 1,500,000 875,000 875,000 2,000,000 2,000,000 1,000,000 576,730 13/07/2017 13/07/2022 6,501,000 27/02/2018 27/02/2021 1,545,000 27/02/2018 27/02/2021 799,750 27/02/2018 27/02/2021 718,375 27/02/2018 27/02/2021 249,300 28/03/2019 28/03/2022 201,600 28/03/2019 28/03/2022 6,501,000 27/02/2018 27/02/2021 1,545,000 27/02/2018 27/02/2021 799,750 27/02/2018 27/02/2021 718,375 27/02/2018 27/02/2021 119,660 13/07/2017 13/07/2020 72,900 13/07/2017 13/07/2020 126,700 18/09/2019 18/09/2019 1,000,000 32,500,000 109,200 20,584,300 18/09/2019 18/09/2019 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 250,000 3,000,000 3,250,000 50,200 11/06/2020 06/06/2022 180,450 13/07/2017 13/07/2020 - 100 230,650 Total 35,750,000 20,814,990 18 New Century Resources Limited 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 financial year is as follows: Balance at beginning of year or appointment 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 KMP Current Directors Patrick Walta 15,750,000 - Nick Cernotta 2,000,000 2,000,000 Evan Cranston 8,750,000 Bryn Hardcastle 4,000,000 Peter Watson - - - 30,500,000 2,000,000 Other KMPs Mark Chamberlain 250,000 250,000 Barry Harris 3,000,000 - 3,250,000 250,000 Former Tom Eadie 5,000,000 Tolga Kumova 30,000,000 35,000,000 - - - Total 68,750,000 2,250,000 - - - - - - - - - - - - - - 15,750,000 - 15,750,000 - - - - 2,000,000 2,000,000 2,000,000 8,750,000 4,000,000 - - - - 8,750,000 4,000,000 - - 30,500,000 2,000,000 30,500,000 - - - 250,000 3,000,000 3,250,000 - - - - 3,000,000 3,000,000 - 5,000,000 - 5,000,000 - 30,000,000 - 30,000,000 - 35,000,000 - 35,000,000 - 68,750,000 2,000,000 68,500,000 19 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 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: Balance at beginning of year or appointment Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at end of year or resignation KMP Current Directors Patrick Walta Nick Cernotta Evan Cranston Bryn Hardcastle Peter Watson Other KMPs Mark Chamberlain Barry Harris Former Tom Eadie Tolga Kumova Total 32,000,000 - 31,500,000 1,113,334 39,370 64,652,704 - 1,235,000 1,235,000 2,000,000 17,916,666 19,916,666 85,804,370 End of audited remuneration report - - - - - - - - - - - - - 43,000 41,625 100,000 100,000 53,950 338,575 - - - - - - 338,575 32,043,000 41,625 31,600,000 1,213,334 93,320 64,991,279 - 1,235,000 1,235,000 2,000,000 17,916,666 19,916,666 86,142,945 - - - - - - - - - - - - - 20 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 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 financial year ended 30 June 2019, to any person who is or has been an auditor of the Company. Auditor Deloitte Touche Tohmatsu has been appointed as auditor of the Group in accordance with section 327 of Corporations Act 2001. Non-audit services Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 26 to the Financial Statements. The directors are of the opinion that the services as disclosed in Note 26 to the Financial Statements do not compromise the external auditor’s independence. 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 financial year. 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 and development 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 financial year ended 30 June 2019 has been received and can be found on the following page. Made and signed in accordance with a resolution of the Directors. Robert McDonald Chairman 30 September 2019 21 Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 Australia Tel: +61 3 9671 7000 www.deloitte.com.au The Board of Directors New Century Resources Limited Level 4 360 Collins Street Melbourne, VIC, 3000 30 September 2019 Dear Board Members New Century Resources Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of New Century Resources Limited. As lead audit partner for the audit of the financial statements of New Century Resources Limited for the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU Suzana Vlahovic Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 22 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2019 Other income Depreciation and amortisation expense Exploration and evaluation expenditure Employee benefits – share based payments Employee benefits – other Professional expenses Foreign exchange losses Increase in rehabilitation provision Finance income Finance costs Loss on acquisition classified as exploration expenditure Impairment loss 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 Note 2019 $ 2018 $ 4 11 4 4 4 16 4 4 31 30 4 5 837,527 1,854,976 (261,604) (1,901,570) (454,147) (2,317,374) (3,561,154) (1,045,910) - 374,297 (9,817,294) - - (3,354,789) (25,701) (12,041,913) (3,224,270) (1,980,801) (1,527,631) (1,868) (21,763,731) 7,366,665 (2,622,646) (70,092,066) (18,153,406) (1,098,373) (21,502,018) (123,310,765) - - (21,502,018) (123,310,765) (49,239) (49,239) 673,009 673,009 Total comprehensive loss for the year (21,551,257) (122,637,756) Loss for the year attributable to: Members of the parent entity Non-controlling interests Total comprehensive loss for the year attributable to: Members of the parent entity Non-controlling interests (21,502,018) - (119,021,291) (4,289,474) (21,502,018) (123,310,765) (21,551,257) - (118,348,282) (4,289,474) (21,551,257) (122,637,756) Loss per share Cents Cents Basic and diluted loss per share 24 (4.26) (32.32) The accompanying notes form part of these financial statements. 23 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2019 Note Current assets Cash and cash equivalents Trade and other receivables Inventories Financial assets Other current assets Total current assets Non-current assets Property, plant and equipment Deferred exploration, evaluation and development expenditure – Kodiak Project Other financial assets Total non-current assets TOTAL ASSETS Current liabilities Trade and other payables Employee provisions Borrowings Financial liability at fair value through profit or loss Total current liabilities Non-current liabilities Mine restoration provisions Borrowings Financial liability at fair value through profit or loss Total non-current liabilities TOTAL LIABILITIES NET LIABILITIES Equity Issued capital Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements. 24 6 7 8 9 10 11 12 9 13 16 14 15 16 14 15 17 18 2019 $ 2018 $ 34,282,769 8,668,896 7,903,782 5,750,000 7,945,067 46,249,135 2,881,331 - 17,250,000 1,327,400 64,550,514 67,707,866 233,133,258 60,412,157 - - 13,166,698 3,167,752 246,299,956 63,579,909 310,850,470 131,287,775 77,879,468 1,269,054 14,076,069 1,233,331 23,013,820 678,548 - - 94,457,922 23,692,368 200,828,797 40,024,281 5,903,918 117,297,685 - - 246,756,996 117,297,685 341,214,918 140,990,053 (30,364,448) (9,702,278) 312,052,963 4,096,678 (346,514,089) 311,618,023 4,145,917 (325,466,218) (30,364,448) (9,702,278) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Ordinary shares $ Accumulated losses $ Foreign currency translation reserve $ Share based payments reserve $ Non-controlling interest $ 2019 Balance at 1 July 2018 Comprehensive income Loss for the year Other comprehensive income for the year Exchange differences on translation of controlled entities Total comprehensive loss for the year Transactions with owners, in their capacity as owners, and other transfers Issue of shares Share based payment – Note 23 Costs arising from issues 311,618,023 (325,466,218) 4,145,917 - - - (21,502,018) - - (21,502,018) (49,239) (49,239) 440,000 - (5,060) - 454,147 - - - - Balance at 30 June 2019 312,052,963 (346,514,089) 4,096,678 The accompanying notes form part of these financial statements. 25 Total $ (9,702,278) (21,502,018) (49,239) (21,551,257) 440,000 454,147 (5,060) (30,364,448) - - - - - - - - - - - - - - - New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Ordinary shares $ Accumulated losses $ Foreign currency translation reserve $ Share based payments reserve $ Non-controlling interest $ Total $ 32,259,433 (36,312,507) 3,472,908 3,196,536 - 2,616,370 (119,021,291) - - (119,021,291) 673,009 673,009 - - - (4,289,474) (123,310,765) - 673,009 (4,289,474) (122,637,756) 2018 Balance at 1 July 2017 Comprehensive income Loss for the year Other comprehensive income for the year Exchange differences on translation of controlled entities Total comprehensive loss for the year Transactions with owners, in their capacity as owners, and other transfers Transfer of opening option reserve to accumulated losses Transfer of equity component of convertible notes to accumulated losses Issue of shares Share based payment Issue of options for acquisition - - - - (404,548) 114,505,108 - - Shares to be issued from prior year (5,089,834) Acquisition of non-controlling interest 175,140,000 (179,429,474) Costs arising from issues (4,792,136) - Balance at 30 June 2018 311,618,023 (325,466,218) 4,145,917 3,196,536 404,548 - 3,224,270 2,471,700 - - - - - - - - - (3,196,536) - - - - - - - - - - - - - - 4,289,474 - - - - 114,505,108 3,224,270 2,471,700 (5,089,834) - (4,792,136) (9,702,278) With effect from 1 July 2018, a change in presentation was adopted to recognise adjustments for share-based payment transactions in the accumulated losses section of equity, rather than in the share based payments reserve. Accordingly, the balance in the share based reserve was transferred to accumulated losses, a component of equity. The accompanying notes form part of these financial statements. 26 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 CONSOLIDATED STATEMENT OF CASHFLOWS For the year ended 30 June 2019 Note CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Interest received Financing expenses paid Payments for exploration and evaluation expenditure Other income 2019 $ 2018 $ (5,894,155) 374,297 (595,504) (1,901,570) - (7,446,561) 569,188 (1,950,203) (12,041,913) 345,128 Net cash (outflow) from operating activities 25 (8,016,932) (20,524,361) CASH FLOWS FROM INVESTING ACTIVITIES Receipts during development phase classified as investing activity Payments for property, plant and equipment Payments for borrowing costs capitalised Payments for security guarantees Payments for mining lease interests Refund of bonds Cash acquired on acquisition of subsidiaries Proceeds on disposal of property, plant and equipment 146,918,916 (209,404,649) (4,525,914) (9,998,946) - - - 729,204 - (36,505,249) (2,586,715) (1,818,091) (263,124) 33,105 4,732,628 1,555,817 Net cash (outflow) from investing activities (76,281,389) (34,851,629) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Varde borrowings Proceeds from NAB borrowings Repayment of NAB borrowings Proceeds from share issues Payments for share issue costs Proceeds from MMG funding support 60,397,015 11,438,424 (11,438,424) 440,000 (5,060) 11,500,000 - - - 95,062,493 (4,792,136) 5,750,000 Net cash inflow from financing activities 72,331,955 96,020,357 Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Exchange difference on cash and cash equivalents (11,966,366) 46,249,135 - 40,644,367 5,606,108 (1,340) Cash and cash equivalents at the end of the financial year 6 34,282,769 46,249,135 The accompanying notes form part of these financial statements. 27 New Century Resources Limited 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 (the ”Company”) and its 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 30 September 2019. 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 This report has been prepared on the going concern basis which assumes the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The primary activity of the Group during the year has been the continuation of the development and commissioning of the Century Project. Given the Century Project is currently in development and commissioning phase, no revenue is being recognised in the consolidated statement of profit or loss and other comprehensive income. The Group incurred a net loss of $21,502,018 (2018: $123,310,765) during the year. As at 30 June 2019, the Group had a net current assets deficiency of $29,907,408 (30 June 2018: net current assets of $44,015,498) and net assets deficiency of $30,364,448 (30 June 2018: $9,702,278). The Directors of the Company note the following considerations relevant to the Group’s ability to continue as a going concern: • as at 30 June 2019, total available cash and cash equivalents of $34,282,769 are held by the Group. • equity raising subsequent to year end in September 2019 as set out in Note 33 to the Financial Statements. • cash flow forecasts show that the Group will generate sufficient cash flows to meet all commitments and working capital requirements for the 12 month period from the date of signing this financial report. As a result, the Directors are of the view that the Group will be able to meet its debts as and when they fall due and accordingly the Directors have prepared the consolidated financial statements on a going concern basis. 28 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 (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 20. 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. 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 benefit for the financial 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 financial 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. 29 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 (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. 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 financial 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 include 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 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(i) 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 Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Any proceeds during the development phase is offset against property, plant and equipment. 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 30 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 can be measured reliably. All other costs including 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. Depreciation Depreciation of assets commences when the assets are ready for their intended use. Capital Work in Progress, which relates mainly to Century Mine, is not depreciated. Depreciation on this will commence when the Century Mine starts commercial production, which will be on the units of production basis over the life of the mine. All other assets are depreciated on a straight-line basis. Mining Plant and Equipment relates mainly to the Kodiak Mine. This mine was fully impaired in previous financial year and is currently under care and maintenance and therefore no depreciation applies. Items of property, plant and equipment initially recognised are derecognised upon disposal or when no future economic benefits are expected from their continued use. Any gain or loss arising on the disposal of an asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised as other income or other expenses in the statement of profit or loss and other comprehensive income. (g) Exploration and evaluation expenditure Exploration and evaluation expenditure is recognised in the statement of profit or loss as incurred, unless the expenditure is expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale, in which case it is recognised as an asset on an area of interest basis. When exploration and evaluation assets are capitalised they are classified as tangible (as part of property, plant and equipment) or intangible according to the nature of the assets. As the assets are not yet ready for use they are not depreciated. Exploration and evaluation assets are assessed for impairment if: • sufficient data exists to determine technical feasibility and commercial viability; or • other facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of the impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating units (CGU) are not larger than the area of interest. Once the technical feasibility and commercial viability of the extraction of mineral reserves in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to relevant categories within property, plant and equipment. (h) 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. 31 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 (i) 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. (j) 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 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. (k) Trade and other payables These amounts represent liabilities for goods, services and deferred proceeds 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. (l) 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. (m) 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 accumulated losses. 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. The Group measures fair value for share based payments using the Black-Scholes model with the assumptions detailed in Note 23 to the Financial Statements. 32 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 (n) 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 initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets or financial liabilities (other than financial assets and liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or liabilities. Transaction costs directly attributable to the acquisition of financial assets or liabilities at fair value through profit or loss are recognised immediately in profit or loss. All recognised financial instruments are subsequently measured at fair value or amortised cost using the effective interest method. 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. 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. 33 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 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. 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, except for financial liabilities at fair value through profit or loss. 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. 34 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Impairment of financial assets The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are measured at amortised cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses (ECL) is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises lifetime ECL for trade receivables, contract assets and lease receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12‑month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12‑month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. Financial liabilities All financial liabilities are measured subsequently at amortised cost using the effective interest method or at fair value through profit or loss. A financial liability is designated as at fair value through profit or loss upon initial recognition if it forms part of a contract containing one or more embedded derivatives, and AASB 9 permits the entire combined contract to be designated as at fair value. 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. (o) Parent entity financial information The financial information for the parent entity, New Century Resources Limited, disclosed in Note 19 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 the lower of cost and recoverable amount in the financial statements of New Century Resources Limited. Tax consolidation legislation New Century Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The Group is now treated as a consolidated tax entity. The head entity, New Century Resources Limited, and the controlled entities 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. 35 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 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. (p) 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. (q) New and amended accounting policies adopted by the Group The accounting policies applied by the Group in the consolidated financial statements are consistent with those applied by the Group in the previous financial year, except for the adoption of new standards and interpretations effective as of 1 July 2018. • AASB 9: Financial Instruments and associated Amending Standards AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement. The Group has applied the AASB 9 changes prospectively from the date of initial application. AASB 9 includes a single approach for the classification and measurement of financial assets, based on cash flow characteristics and the business model used for the management of the financial instruments. The standard introduces changes to three key areas: • New requirements for the classification and measurement of financial instruments. There were no material changes to the classification and measurement of the Group’s financial instruments. • A new impairment model based on expected credit losses for recognising provisions, which has replaced the incurred loss model used in AASB 139. The expected credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. Given the Century Mine has not been commissioned, credit risk has no material impact on the Group. • Simplified hedge accounting through closer alignment with an entity’s risk management methodology, to align the accounting treatment with the risk management objective and strategy of the business. There are no hedge accounting transactions for the Group and therefore this change has had no impact on the Group. The adoption of AASB 9 has not had a material impact on the Group’s financial statements. • AASB 15: Revenue from Contracts with Customers and associated Amending Standards AASB 15 Revenue from Contracts with Customers supersedes AASB 118 Revenue and related Interpretations. AASB 15 applies to all revenue arising from contracts with customers unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15 the revenue recognition model changed from one based on the transfer of risk and reward of ownership to the transfer of control of ownership. Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The Group adopted AASB 15 from 1 July 2018 and elected to apply the modified retrospective method of adoption. This transition method requires the cumulative effect of initially applying AASB 15 as an adjustment to the opening balance 36 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 of accumulated losses from the date of initial application. In accordance with the modified retrospective method, comparative figures are not restated and continue to be presented under AASB 118. Given the Century Mine has not been commissioned, the adoption of the new standard did not have any financial impact on the Group during the financial year. (r) 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 16 Leases (applicable from 1 July 2019 for the Group) AASB 16 Leases supersedes the existing accounting standard, AASB 117 Leases. It has an effective date for the Group of 1 July 2019. The Group will adopt the new standard on the required effective date. AASB 16 introduces a single lessee accounting model, requiring the recognition of assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligations to make lease payments. The Group is party to contracts for leases of property, plant and equipment; including but not limited to office premises and contractor-provided equipment. Adoption of the new lease standard will result in lower operating costs and higher finance and depreciation costs as the accounting profile of the lease payments changes under the new model. The statement of financial position will also be impacted, with an increase to both non-current assets (right-of-use assets) and liabilities (lease liabilities). Cash flows from operating activities will increase as affected lease payments will be now be classified as financing cashflows. Conversely, cash flows from financing activities will decrease for the same reason. The Group has progressed its implementation of the new lease standard. During the year it conducted ongoing reviews of its lease population for the application of AASB 16 and developed systems to manage lease data capture and reporting. Implementation of the project will continue into the first half of the 2020 financial year. The Group will use the modified retrospective method of adoption on transition. It expects to utilise the practical expedient available under the standard for short-term leases, low value leases and leases expiring within 12 months of transition date. The Group will use a single discount rate to a portfolio of leases with reasonably similar characteristics. Based on the analysis performed to date, the Group expects the impact of AASB 16 on the date of adoption (1 July 2019) will result in the recognition of additional right of use assets and lease liabilities of approximately $45,000,000. The cumulative effect on accumulated losses will be immaterial. • Other mandatory Accounting Standards and Interpretations Other mandatory Accounting Standards and Interpretations issued and available for early adoption but not applied by the Group or not available for early adoption which will become mandatory in subsequent years have not been included above as they are not expected to have a material impact on the consolidated financial statements. (s) 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. (t) Inventories Inventories are made up of spare parts and consumables. They are valued at the lower of cost and net realisable value. 37 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 (u) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds. (v) Derivatives Derivatives financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. Changes in the fair value of any derivative instrument are recognised in the income statement. Fair values for derivative instruments are determined using valuation techniques, using assumptions based on market conditions existing at the reporting date. Derivatives embedded in non- derivative contracts are recognised separately unless they are closely related to the host contract, in which case they are accounted together with the host contract. (w) Dividends The Company recognises a liability to pay a dividend when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws of Australia, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. (x) Mine rehabilitation, restoration and dismantling obligations Provisions relating to mine rehabilitation, restoration and dismantling obligations are recognised at the commencement of the mining project and/or construction of the assets where a legal or constructive obligation exists at that time. Provisions are made for the estimated cost of rehabilitation, decommissioning and restoration relating to areas disturbed during mining and exploration operations up to the reporting date but not yet rehabilitated. Provision has been made in full for all the disturbed areas at the reporting date based on current estimates of costs to rehabilitate such areas, discounted to their present value based on expected future cash flows. The estimated costs include the current cost of rehabilitation necessary to meet legislative requirements. Changes in estimates are dealt with on a prospective basis as they arise. These costs are based on judgements and assumptions regarding removal dates, technologies and industry practice. The capitalised cost of this asset is recognised in property, plant and equipment and is amortised over the life of the mine. A corresponding asset is included in mine property and development assets, only to the extent that it is probable that future economic benefits associated with the restoration expenditure will flow to the Group. Changes in the liability relating to mine rehabilitation, restoration and dismantling obligations are added to or deducted from the related asset (where it is probable that future economic benefits will flow to the Group). Over time the liability is increased for the present value based on the risk adjusted pre-tax discount rate appropriate to the risk inherent in the liability. The unwinding of the discount is recorded as an accretion charge within finance costs. The costs of the restoration are brought to account in the statement of comprehensive income through depreciation of the associated assets over the economic life of the mine which these costs are associated. The provisions referred to above do not include any amounts related to remediation costs associated with unforeseen circumstances. (y) Reclassification Some amounts in the comparative year have been reclassified to conform to the current year disclosure. 38 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 2. Critical accounting judgements, estimates and assumptions Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates may differ from the actual results. The critical estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Going concern For the reasons detailed in Note 1(a), the financial report is prepared on a going concern basis. Mine rehabilitation, restoration and dismantling obligations Provision is made for the anticipated costs of future restoration and rehabilitation of mining areas from which natural resources have been extracted in accordance with the accounting policy. These provisions which include future cost estimates associated with reclamation, plant closures, waste site closures, monitoring, demolition of equipment, decontamination, water purification and permanent storage of historical residues, are discounted to their present value. At each reporting date the rehabilitation liability is remeasured in line with changes in discount rates, and timing or amounts of the costs to be incurred. Rehabilitation, restoration and dismantling provisions are adjusted for changes in estimates. Adjustments to the estimated amount and timing of future rehabilitation and restoration cash flows are a normal occurrence in light of the significant judgements and estimates involved. Uncertainty exists as to the amount of rehabilitation obligations which will be incurred due to the impact of changes in environmental legislation, and many other factors, including future developments, changes in technology, price increases and changes in interest rates. The calculation of these provision estimates requires assumptions such as application of environmental legislation, plant closure dates, available technologies, engineering cost estimates and discount rates. A change in any of the assumptions used may have a material impact on the carrying value of mine rehabilitation, restoration and dismantling provisions. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required. Recoverability of assets The recoverable amount of each cash-generating unit (CGU) is determined as the higher of the asset’s fair value less costs to sell and its value in use. The recoverable amount assessments require the use of estimates and assumptions including discount rates, exchange rates, commodity prices, future capital requirements and future operating performance, as well as the value that a market participant would place on any resources which have yet to be proven as reserves associated with the CGU. A change in any of the critical assumptions listed will alter the value as initially determined and may therefore impact the carrying value of assets in the future. 39 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Status of asset commissioning The Group assesses the stage of the mine under construction to determine when a mine moves into the production phase, this being when the mine is substantially complete and ready for its intended use. The criteria used to assess the status of commissioning are based on the unique characteristics of each project. Some of the criteria used to identify the status of commissioning include, but are not limited to completion of a reasonable period of testing of the mine plant and equipment, the ability to produce metal in saleable form (within specifications) and the ability to sustain ongoing production of metal. When a mine development/construction project moves into the production phase, the capitalisation of certain mine development/construction costs ceases. At this point all related amounts are reclassified from capital work in progress to relevant categories within Property, Plant and Equipment and depreciation/amortisation commences. Subsequent costs are either regarded as forming part of the cost of inventory or expensed, except for costs that qualify for capitalisation relating to mining asset additions or improvements. Development expenditure is capitalised, provided commercial viability conditions continue to be satisfied. Proceeds from the sale of the product extracted during the development phase are netted against development expenditure. Upon completion of development and commencement of production capitalised development costs are further transferred as required, to the appropriate plant and equipment asset category and depreciated using the unit of production method (UOP) basis. Income tax and deferred tax assets and liabilities The Group is subject to income taxes of Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the group provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain for which provisions are based on estimated amounts. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provision in the period in which the determination is made. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable profits will be available to utilise those temporary differences and losses, and the tax losses continue to be available having regard to the nature and timing of their origination and compliance with the relevant tax legislation associated with their recoupment. Assumptions about the generation of future taxable profits depend on estimates of future cash flows. These estimates are based on future production and sales volumes, operating costs, restoration costs, capital expenditure and other capital transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, which may impact the amount of deferred tax assets and liabilities recognised and the amount of other tax losses and temporary differences not yet recognised. 40 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 3. Operating segments Description of segments The Group has determined the operating segments based on the reports reviewed by the Board of Directors in order to make strategic decisions. The Board considers how resources are allocated and performance is assessed and has identified two reportable segments being Australia (which constitutes the Century Mine) and United States of America (which constitutes the Kodiak Project). 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 Segment assets and liabilities are presented net of any intersegment borrowings. 41 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Segment information Australia 2019 $ United States of America 2019 $ Total 2019 $ Australia 2018 $ United States of America 2018 $ Total 2018 $ (19,917,902) (1,584,116) (21,502,018) (104,550,872) (18,759,893) (123,310,765) 245,471,586 828,370 246,299,956 62,801,036 778,873 63,579,909 310,006,568 843,902 310,850,470 130,328,026 959,749 131,287,775 Segment result Loss after income tax Assets Segment non- current assets Segment total assets Liabilities Segment liabilities (339,679,855) (1,535,063) (341,214,918) (139,124,401) (1,865,652) (140,990,053) Other Depreciation and amortisation expense Exploration and evaluation expenditure Employee benefits – other Professional expenses (261,604) - (261,604) (19,125) (6,576) (25,701) (695,618) (1,205,952) (1,901,570) (11,451,665) (590,248) (12,041,913) (2,317,374) - (2,317,374) (1,980,801) - (1,980,801) (3,182,555) (378,599) (3,561,154) (1,523,413) (4,218) (1,527,631) Finance income 367,838 6,459 374,297 7,366,665 - 7,366,665 Finance costs (9,817,274) Impairment loss - - - (9,817,294) (2,622,505) (141) (2,622,646) - - (18,153,406) (18,153,406) Other expenses (3,348,764) (6,025) (3,354,789) (1,093,068) (5,305) (1,098,373) 42 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 4. Loss before income tax Other income Gain on sale of property, plant and equipment Other income Total Loss before income tax includes the following expenses Exploration and evaluation expenditure Kodiak Project costs Century Project costs 2019 $ 2018 $ 729,204 108,323 1,410,837 444,139 837,527 1,854,976 (1,205,952) (695,618) (590,248) (11,451,665) (1,901,570) (12,041,913) Exploration and evaluation costs for the Century Project have been expensed until the technical and commercial viability of the project was finalised. All eligible expenditure during the construction phase has been capitalised as Property, Plant and Equipment. Employee benefit expenses Wages and salaries including director fees Other employment expenses Professional expenses Legal fees Other professional expenses Finance income Interest received Interest reversed on convertible notes Discount unwind relating to MMG support fee Finance costs Unwind of discount relating to mine restoration provisions – Note 16 Borrowing costs (2,317,374) - (1,954,457) (26,344) (2,317,374) (1,980,801) (1,659,214) (1,901,940) (1,232,963) (294,668) (3,561,154) (1,527,631) 374,297 - - 569,188 4,292,334 2,505,143 374,297 7,366,665 (9,221,790) (595,504) - (2,622,646) (9,817,294) (2,622,646) 43 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Other expenses Century Project acquisition costs Share registry expenses Rent expenses Travel expenses Administrative expenses Note 5. Income tax benefit 2019 $ 2018 $ - (13,156) (311,598) (150,129) (2,879,906) (149,600) (63,440) (155,649) (230,558) (499,126) (3,354,789) (1,098,373) Numerical reconciliation of income tax benefit to prima facie tax payable Loss from operations before income tax expense Tax at the Australian tax rate of 30% (2018: 30%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Tax effect of different tax rate of overseas subsidiaries Share based payments Interest on convertible notes Write off of receivable Loss on acquisition classified as exploration expenditure Accretion in rehabilitation provision Impairment loss Income tax benefits not recognised Other Income tax benefit 21,502,018 123,310,765 (6,450,605) (36,993,230) 39,517 136,244 - - - - - 6,248,432 26,412 (60,649) 967,281 (1,287,700) 2,677,170 21,027,620 6,529,119 5,446,022 1,688,469 5,898 - - Unrecognised deferred tax assets – tax losses Gross tax losses Australia and USA 102,890,501 33,050,743 Tax benefit not recognised Australia Tax benefit not recognised USA Total tax benefit not recognised Unrecognised temporary differences Total timing differences not recognised 23,990,891 6,802,175 3,509,597 8,540,835 30,793,066 12,050,432 75,642,349 96,868,764 44 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 The above temporary differences and tax losses have not been brought to account as they do not meet the recognition criteria as per the Group’s accounting policy. 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 (30 June 2018: Nil). Note 6. Cash and cash equivalents Cash on hand Cash at bank Cash on deposit 2019 $ 2018 $ 15 34,282,754 - 15 16,749,120 29,500,000 34,282,769 46,249,135 The effective interest rate on cash on deposit is disclosed in note 29. Amount of cash and cash equivalents held as USD was US$4,844,886 (2018: US$82,574) at balance date. Note 7. Trade and other receivables GST receivable Other receivables 1,344,308 7,324,588 2,539,424 341,907 8,668,896 2,881,331 Other receivables comprise mainly outstanding invoice amounts of shipment during the development phase. The credit loss is not significant on the other receivables Note 8. Inventories Consumables and spare parts – at cost 7,903,782 - Consumables inventory were acquired during the year. 45 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 9. Financial assets Current 2019 $ 2018 $ MMG funding support payment receivable 5,750,000 17,250,000 MMG agreed to pay a series of funding support payments for a total of $34,500,000 to support rehabilitation of the Century Project. The balance at 30 June 2019 represents the remaining payment which has been valued at the amount receivable. Subsequent to financial year end, the final payment of $5,750,000 was received in July 2019. Non-current Deposits held as security guarantees 13,166,698 3,167,752 Term deposits held as security guarantees are for the benefit of other parties in guarantee of liabilities. They are interest bearing with the interest rate dependent on the term of the deposits. They are valued at the face value of the term deposits. Note 10. Other current assets Prepayments Other Total 7,945,067 - 840,405 486,995 7,945,067 1,327,400 46 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 11. Property, plant and equipment At 30 June 2019 At cost Accumulated depreciation Movements in carrying value Year ended 30 June 2019 Balance 1 July 2018 Additions Disposals Exchange differences Depreciation expense for the year Proceeds from sale in development phase Balance at 30 June 2019 At 30 June 2018 At cost Accumulated depreciation Movements in carrying value Year ended 30 June 2018 Balance 1 July 2017 Acquisition of subsidiaries Additions Disposals Exchange differences Depreciation expense for the year Impairment loss – refer Note 30 Balance at 30 June 2018 Land and buildings $ Mining plant and equipment $ Capital work in progress $ Total $ 2,171,694 - 15,050,038 (14,580,907) 230,492,433 - 247,714,165 (14,580,907) 2,171,694 469,131 230,492,433 233,133,258 2,171,694 - - - - - 2,171,694 2,171,694 - 2,171,694 454,368 1,800,000 - (82,674) - - - 2,171,694 384,073 346,662 - - (261,604) - 57,856,390 287,850,870 - - - (115,214,827) 60,412,157 288,197,532 - - (261,604) (115,214,827) 469,131 230,492,433 233,133,258 14,848,356 (14,464,283) 57,856,390 - 74,876,440 (14,464,283) 384,073 57,856,390 60,412,157 13,376,737 - 970,291 - 430,930 (25,701) (14,368,184) - - 57,856,390 - - - - 13,831,105 1,800,000 58,826,681 (82,674) 430,930 (25,701) (14,368,184) 384,073 57,856,390 60,412,157 The depreciation expense relates mainly to the property, plant and equipment at the Group corporate office. Any proceeds during development phase has been offset against the property, plant and equipment in accordance with the Group’s accounting policy. Proceeds against which shipment had not been made by 30 June 2019 has been treated as deferred proceeds as described in Note 13 to the financial statements. Borrowing costs capitalised during the year was $4,525,914 (30 June 2018: $2,586,715). 47 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 12. Deferred exploration and development expenditure – Kodiak Project Opening balance Additions during the year Exchange differences Impairment loss Total 2019 $ - - - - - 2018 $ 3,287,297 347,051 150,874 (3,785,222) - The deferred exploration and development expenditure relates to the Kodiak Project. 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. An impairment loss was recognised in the previous financial year – refer to Note 30 to the Financial Statements. Note 13. Trade and other payables Current unsecured liabilities Trade payables Amounts payable to director related party Other payables and accrued expenses Deferred proceeds Total 29,773,346 441,721 15,960,312 31,704,089 20,738,060 137,303 2,138,457 - 77,879,468 23,013,820 At reporting date, it was not yet certain when commissioning will take place and therefore proceeds against which shipment had not been made by 30 June 2019 has been treated as deferred proceeds. Refer to Note 11 to the Financial Statements. 48 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 14. Borrowings Secured - current Borrowings Secured – non-current Borrowings Total borrowings at 30 June 2019 $ 2018 $ 14,076,069 40,024,281 54,100,350 - - - On 18 February 2019, the Group secured a new financing facility with Varde. This comprises a secured Senior facility of US$42,900,000 (A$61,237,599 at 30 June 2019 exchange rate) which has been drawn down and an unsecured Junior facility of US$28,600,000 (A$40,825,066 at 30 June 2019 exchange rate) which was subject to conditions precedent before draw down. Prior to the end of September 2019, Varde advised that the availability of this unsecured facility has expired. Discussion in relation to a US$28,600,000 facility are continuing with Varde. The borrowings attract interest at 8 percent per annum and are repayable by scheduled payments over a period of 12 to 30 months after the utilisation date. The Varde facility also includes payments based on silver production which is capped at US$5,000,000 (A$7,137,249 at 30 June 2019 exchange rate). This has been recognised as a financial liability at fair through profit or loss as disclosed Note 15 to the Financial Statements. On 31 October 2018, the Group obtained a financing facility from the National Australia Bank of $20,000,000 which constituted cash advances of $11,438,424 and $8,561,576 utilised as bank guarantees. On 22 February 2019, the Group settled the National Australia Bank facility. Note 15. Financial liability at fair value through profit or loss Current Non-current Balance at 30 June 1,233,331 5,903,918 7,137,249 - - - The financial liability at fair value through profit or loss represent the fair value of payments to be made under the Varde Senior loan facility which is dependent on forecast silver production. The payment is capped at US$5,000,000 which equates to A$7,137,249 at the 30 June 2019 exchange rate. 49 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 16. Provisions (a) Provision for employee entitlements - current Balance at 1 July Movement for the year Balance at 30 June (b) Provision for mine site restoration – non-current Balance at 1 July Provision for mine site restoration on acquisition of subsidiaries Increase in provision Impact of change in discount rate Interest unwind Exchange differences Balance at 30 June 2019 $ 2018 $ 678,548 590,506 1,269,054 - 678,548 678,548 117,297,685 - - 74,266,969 9,221,790 42,353 739,531 94,764,306 21,763,731 - - 30,117 200,828,797 117,297,685 The Group has provisions for mine site restoration associated with the Century Mine in Queensland and the Kodiak Project in Alabama. Movements in balances for the separate areas are as follows: Century Mine Balance at 1 July Provision for mine site restoration on acquisition of subsidiaries Increase in provision Impact of change in discount rate Interest unwind Balance at 30 June Kodiak Project Balance at 1 July Exchange differences Balance at 30 June 116,528,037 - - 74,266,969 9,221,790 - 94,764,306 21,763,731 - - 200,016,796 116,528,037 769,648 42,353 812,001 739,531 30,117 769,648 The impact of change in discount rate of $74,266,969 relates to a change in estimate of the discount rate as at 30 June 2019, with the corresponding amount recognised in Property plant and equipment in accordance with the Group’s accounting policy. The provision for the mine site restoration on acquisition of subsidiaries of $94,764,306 in the prior year was measured at its fair value. The increase in provision of $21,763,731 in the prior year includes interest unwind for the prior year. All rehabilitation will be carried out at the end of life of the Group’s mining operations. The provision for mine site restoration constitutes a critical accounting judgement – refer to Note 2 to the Financial Statements. 50 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 17. Issued capital 2019 $ 2018 $ 505,732,048 (2018: 503,972,048) fully paid ordinary shares 312,052,963 311,618,023 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. Issue of ordinary shares and other equity instruments during the year Opening balance 503,972,048 311,618,023 189,852,519 32,259,433 2019 Number of shares 2018 Number of shares $ $ Funds received to 30 June 2017 for shares issued in July 2017 Shares issued 13 July 2017 @ $0.15 from public offer Shares issued 13 July 2017 at $0.20 on conversion of convertible notes Shares issued 13 November 2017 at $1.20 under sophisticated investor placement Shares issued 13 November 2017 at $0.25 on conversion of share options Shares issued 13 November 2017 at agreed value of $0.15 in payment for services Shares issued 14 November 2017 at $1.20 under cleansing prospectus Shares issued 27 February 2018 at market value of $1.39 for non-controlling interest acquisition Shares issued 12 April 2018 at $0.25 on conversion of share options Shares issued 8 May 2018 at $1.15 under sophisticated investor placement Transfer of equity component of convertible notes to accumulated losses on conversion of notes Shares issued 21 February 2019 at $0.25 on conversion of share options Shares issued 22 May 2019 at $0.25 on conversion of share options Costs arising from issue of shares - - - - - - - - - - - - - - - - - - - - - - 1,260,000 315,000 500,000 125,000 - (5,060) - (5,089,834) 34,333,333 5,150,000 71,538,898 14,307,780 44,058,703 52,870,444 1,100,000 275,000 300,000 45,000 10 12 126,000,000 175,140,000 500,000 125,000 36,288,585 41,731,872 - - - - (404,548) - - (4,792,136) 505,732,048 312,052,963 503,972,048 311,618,023 51 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Options over ordinary shares As at 30 June 2019, there were 115,390,000 (2018: 114,900,000) unquoted options over ordinary shares in the Company. The fair value of unquoted options granted for nil cash consideration during the financial year ended 30 June 2019 was $501,100 (2018: $43,952,470). 1,760,000 (2018: 1,600,000) unquoted employee options with an exercise price of $0.25 (2018: $0.25) each were converted during the financial year as disclosed above. As at 30 June 2019, there were no (2018: nil) quoted options over ordinary shares in the Company. Each option entitled the holder to subscribe for one share upon exercise of each option. Further details of the total options on issue by the Company are disclosed in Note 23. 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. Note 18. Reserves Historically, the Group has recognised accounting adjustments for share-based payment transactions in a Share Based Payments reserve. From 1 January 2018, a change in presentation was adopted to recognise adjustments in the accumulated losses section of equity, rather than in the Share Based Payments reserve. Accordingly, the balance in the Share Based Payments reserve was transferred to accumulated losses, a component of equity on 1 July 2017. 52 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 19. 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 2019 $ 2018 $ 1,225,141 40,422,137 46,111,855 262,719 41,647,278 46,374,574 1,176,041 - 1,176,041 304,249 - 304,249 40,471,237 46,070,325 312,406,511 - (271,935,274) 311,971,571 - (265,901,246) 40,471,237 46,070,325 (6,488,175) (281,286,577) (6,488,175) (281,286,577) The non-current assets of the Company mainly represent its receivable from its subsidiary, Century Mining Limited. The receivable is unsecured with no fixed repayment terms. This receivable was deemed recoverable at 30 June 2019 based on the expected positive cash flows of Century Mining Limited. Guarantees There are no guarantees entered into by the parent entity in the financial years ended 30 June 2019 and 30 June 2018 in relation to the debt of a subsidiary. Contingent liabilities and Commitments Refer to Note 27 for Contingent liabilities and Note 28 for Commitments. 53 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 20. Controlled entities Information about principal subsidiaries Set out below are the Group’s subsidiaries at 30 June 2019. 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 United States of America Attila Resources US LLC Kodiak Mining Company LLC United States of America United States of America Century Bull Pty Ltd Century Mining Rehabilitation Pty Ltd (CMRP) Australia Australia Century Mining Limited (CML) Australia PCML SPC Pty Ltd (PCML) Australia SPC1 Pty Ltd SPC2 Pty Ltd Investment Co Pty Ltd Australia Australia Australia 2019 100% 2018 100% 100%* 100%* 2019 2018 - - - - 70%* 70%* 30%* 30%* 70%* 100% 100% 100%* 100%* 100%* 100%* 100%* 70%* 100% 100% 100%* 100%* 100%* 100%* 100%* 30%* 30%* - - - - - - - - - - - - - - *Indirect Holdings. The 30 percent non-controlling interest in Attila Resources US LLC and Kodiak Mining Company LLC (Kodiak) has nil value since acquisition. Since acquisition on 13 July 2017, the Group now also own: • 49 percent interest in Lawn Hill & Riversleigh Pastoral Holding Company Pty Ltd through a 49 percent shareholding and 1 special share held by PCML. Pursuant to the Gulf Communities Agreement (GCA), CML and the Gulf Aboriginal Development Company (GADC) established PCML as a special purpose vehicle to hold shares in Lawn Hill and Riversleigh Pastoral Holding Company Pty Ltd (Pastoral Company), which holds leases for the adjacent Lawn Hill and Riversleigh cattle stations. The GADC incorporated Waanyi SPC Pty Ltd to hold the other 51 percent of shares in the Pastoral Company. No assets or liabilities of PCML or Pastoral Company are recognised as assets, liabilities or equity interests by the Group. • 1 Class C share in ABDT Pty Ltd, the trustee of the Aboriginal Development Benefits Trust (ADBT), which is a charitable trust established pursuant to the GCA for the delivery of economic benefits to the Native Title Groups and other Aboriginal peoples living in communities across the Lower Gulf Region. 54 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Summarised financial information of subsidiaries with material non-controlling interests 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/(liabilities) 2019 $ 15,161 828,370 2018 $ 179,837 778,873 (29,280,105) (26,129,695) (812,001) (769,648) (29,248,575) (25,940,633) Carrying amount of non-controlling interests - - The non-current assets and non-current liabilities of Kodiak include a secured deposit of $828,370 (30 June 2018: $778,873) that is security against a non-current reclamation liability of $722,919 (30 June 2018: $769,648). The nature of this non-current reclamation liability restricts the Group’s ability to access the secured deposit for the purpose of meeting other liabilities of the Group. The current liabilities of Kodiak also include intra-group loan balances totaling $27,990,534 (30 June 2018: $25,033,960). 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 Post-tax loss 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 2019 $ - 2018 $ - (1,580,693) (18,750,370) - (1,580,693) - (18,750,370) - - (1,580,693) (18,750,370) - - 2019 $ (856,725) (520,400) 1,387,926 - - 2018 $ (866,230) (10,828) 901,678 Cash and cash equivalents at end of year 10,801 80,274 Kodiak’s net cash from financing activities for both 2019 and 2018 solely comprised movements in intra-group loan account balances. 55 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 21. Significant related party transactions and balances The Group’s main related entities are KMPs and Kingslane Pty Ltd (and its associated entities). KMPs 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 KMPs see Note 22. Kingslane Pty Ltd and associated entities (Kingslane) is a substantial shareholder in the Company and held 36,757,534 (2018: 42,177,536) ordinary shares in the Company at 30 June 2019. Entities controlled by Kingslane also hold a 10 percent (2018: 10 percent) non-controlling interest in the Kodiak Project and Kodiak Mining Company LLC through a non-controlling shareholding in 70 percent owned Attila Resources US LLC. In the previous financial year, Patrick Walta, Evan Cranston and a former KMP John Carr received ordinary shares and share options pursuant to the Century Mining Rehabilitation Project, details of which are disclosed in Note 31. Evan Cranston is a director of Konkera Corporate. Konkera Corporate received $120,000 (2018: $120,000) during the financial year for administrative, bookkeeping and accounting services. The company secretarial fees of $36,000 (2018: $35,694) for Oonagh Malone and Director fees of $180,000 (2018: $172,032) for Evan Cranston were also payable to Konkera Corporate. Bryn Hardcastle is a director of Bellanhouse which provided legal services totalling $1,181,174 (2018: $1,067,814) during the financial year ended 30 June 2019. A number of KMP, or their related parties, hold positions in other entities that may result in them having control or significant influence over the financial or operating policies of those entities. Where the Group transacts with the KMP and their related parties, the terms and conditions of these transactions are no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-KMP related entities on an arm’s length basis. Note 22. Interests of KMP 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 KMP for the financial year ended 30 June 2019. The totals of remuneration paid to KMP of the Company and the Group during the financial year are as follows: Short-Term Benefits Post Employment Benefits Termination Payments Share-Based Payments Total KMP Compensation $ $ 454,147 1,549,987 2,186,655 3,153,437 $ 2019 Total 1,063,923 2018 Total 945,907 Other KMP Transactions $ 31,917 20,875 $ - - For details of other transactions with KMP, refer to Note 21 Related party transactions and balances. 56 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 23. Share based payments Options The following table summarises the share options outstanding as at 30 June 2019: 2019 2018 Weighted average fair value $ Number of options 114,900,000 2,250,000 (1,760,000) - 0.424 0.223 (0.378) - Weighted average remaining contractual term (Year) Weighted average fair value $ Number of options Weighted average remaining contractual term (Year) - - - - 116,500,000 0.038 - - (1,600,000) - (0.424) - - - - - - 115,390,000 0.269 - 114,900,000 0.386 Outstanding at the beginning of the year Granted during the year Exercised during the year Forfeited Outstanding at end of the year Details of options recognised during the year are as follows: 2019 Number of options Exercise price $ Issue date Expiry date Value of options $ Amount recognised in period $ $1.20 3 year director options 1,000,000 1.20 28/03/2019 28/03/2022 249,300 $1.50 3 year director options 1,000,000 1.50 28/03/2019 28/03/2022 201,600 95c 3 year employee options 250,000 0.95 06/06/2019 11/06/2022 50,200 249,300 201,600 3,247 Total 2,250,000 501,100 454,147 57 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 2018 Number of options Exercise price $ Issue date Expiry date Value of options $ Amount recognised in period $ Century Project Consideration options 30,000,000 0.25 13/07/2017 13/07/2022 2,471,700 2,471,700 25c 3 year director options 6,000,000 0.25 13/07/2017 13/07/2020 50c 3 year director options 6,000,000 0.50 13/07/2017 13/07/2020 25c 4 year director options 7,500,000 0.25 13/07/2017 13/07/2021 50c 4 year director options 7,500,000 0.50 13/07/2017 13/07/2021 75c 4 year director options 7,500,000 0.75 13/07/2017 13/07/2021 $1 4 year director options 7,500,000 1.00 13/07/2017 13/07/2021 25c 3 year employee options 8,500,000 0.25 13/07/2017 13/07/2020 October employee options February employee options 500,000 500,000 1.60 2/10/2017 2/10/2020 1.99 27/02/2018 27/02/2021 358,980 218,700 540,525 373,425 285,150 229,425 511,275 330,130 376,660 358,980 218,700 540,525 373,425 285,150 229,425 511,275 330,130 376,660 Tranche 1 non-controlling interest options Tranche 2 non-controlling interest options Tranche 3 non-controlling interest options Tranche 4 non-controlling interest options 22,000,000 0.25 27/02/2018 27/02/2021 26,004,000 26,004,000 6,000,000 0.50 27/02/2018 27/02/2021 6,180,000 6,180,000 3,500,000 0.75 27/02/2018 27/02/2021 3,199,000 3,199,000 3,500,000 1.00 27/02/2018 27/02/2021 2,873,500 2,873,500 Total 116,500,000 43,952,470 43,952,470 Amounts recognised for director, KMP and employee options are summarised as follows: Share based payment expense - Directors and KMP - Others Total share based payment expense Century Project consideration options recognised as loss on acquisition Non-controlling interest options recognised in accumulated losses (Note 31) Total 2019 $ 2018 $ 454,147 - 2,186,655 1,037,615 454,147 3,224,270 - - 2,471,700 38,256,500 454,147 43,952,470 58 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 These options have been valued using the Black-Scholes model with the following additional parameters. 2019 Tranche Number of options $1.20 3 year director options 1,000,000 $1.50 3 year director options 1,000,000 Share price grant date $ 0.81 0.81 95c 3 year employee options 250,000 0.65 Total 2,250,000 Term years Volatility % Interest rate % Grant date Value per option $ Value of options $ 3 3 3 62 62 62 1.375 28/03/2019 0.24930 249,300 1.375 28/03/2019 0.20160 201,600 1.055 06/06/2019 0.20080 50,200 501,100 2018 Tranche Number of options Share price grant date $ Term years Volatility % Interest rate % Value per option $ Grant date Value of options $ Century Project Consideration options 30,000,000 0.15 25c 3 year director options 50c 3 year director options 25c 4 year director options 50c 4 year director options 75c 4 year director options $1 4 year director options 25c 3 year employee options October employee options February employee options Tranche 1 non- controlling interest options Tranche 2 non- controlling interest options Tranche 3 non- controlling interest options Tranche 4 non- controlling interest options 6,000,000 0.15 6,000,000 0.15 7,500,000 0.15 7,500,000 0.15 7,500,000 0.15 7,500,000 0.15 8,500,000 0.15 500,000 1.115 500,000 1.115 22,000,000 1.39 6,000,000 1.39 3,500,000 1.39 3,500,000 1.39 5 3 3 4 4 4 4 3 3 4 3 3 3 3 80 80 80 80 80 80 80 80 1.9 13/07/2017 0.08239 2,471,700 1.65 31/05/2017 0.05983 358,980 1.65 31/05/2017 0.03645 218,700 1.69 31/05/2017 0.07207 540,525 1.69 31/05/2017 0.04979 373,425 1.69 31/05/2017 0.03802 285,150 1.69 31/05/2017 0.03059 229,425 1.94 13/07/2017 0.06015 511,275 107 2.15 2/10/2017 0.66026 330,130 107 2.24 2/10/2017 0.75332 376,660 76.63 2.06 27/02/2018 1.18230 26,004,000 76.63 2.06 27/02/2018 1.03006 6,180,000 76.63 2.06 27/02/2018 0.91353 3,199,000 76.63 2.06 27/02/2018 0.82065 2,873,500 Total 116,500,000 43,952,470 59 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 The following options were issued to Directors as part of their remuneration in the previous financial year. Although these options have been escrowed for two years from the issue date, they vested at the issue date for financial accounting purposes. Number of Options Exercise Price $ Term years Total value $ 2,000,000 2,000,000 7,500,000 7,500,000 7,500,000 7,500,000 2,500,000 2,500,000 1,500,000 1,500,000 42,000,000 0.25 0.50 0.25 0.50 0.75 1.00 0.25 0.50 0.25 0.50 3 3 4 4 4 4 3 3 3 3 Value for Director $ 192,560 119,660 72,900 540,525 373,425 285,150 229,425 1,428,525 149,575 91,125 89,745 54,675 240,700 144,420 2,006,205 2,006,205 Director Current Bryn Hardcastle Former Tolga Kumova Ernest Thomas Eadie Oonagh Malone Total Performance rights There were no performance rights on issue or recognised in 2019 or 2018. Note 24. Earnings per share The following reflects the income used in the basic and diluted earnings per share computations: 2019 2018 Basic / dilutive earnings per share Basic loss per share - cents Weighted average number of ordinary shares outstanding during the year used in calculation of basic earnings per share – number of ordinary shares Net loss used in the calculation of basic earnings per share - $ (4.26) (32.32) 504,470,788 368,312,425 (21,502,018) (119,021,291) 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. Due to the Group being in a loss position, it is considered anti-dilutive and therefore earnings per share are not diluted. 60 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 25. Cash-flow information Reconciliation of cashflow from operations with loss after income tax Loss after income tax Non-cashflows in loss Depreciation and amortisation Interest unwind on rehabilitation provision Share based payments Loss on acquisition classified as exploration expenditure Impairment loss Gain on disposal of property, plant and equipment Equity settled expenses Reversal of interest expense on convertible notes Other Changes in assets and liabilities net of effects of purchase of subsidiaries Increase in other receivables Increase in inventories Increase in other assets Increase/(decrease) in trade and other payables Increase in employee benefits provision Increase in provisions 2019 $ 2018 $ (21,502,018) (123,310,765) 261,604 9,221,790 454,147 - - - - - 104,494 25,701 - 3,224,270 70,092,066 18,153,406 (1,410,837) 45,000 (4,292,334) (269,344) (5,787,565) (7,903,782) (6,617,667) 23,161,559 590,506 - (99,011) - (3,630,963) (1,493,829) 678,548 21,763,731 Net cash used in operating activities (8,016,932) (20,524,361) Acquisition of subsidiaries Refer to Note 31 regarding the acquisition of the Century Project in previous financial year. Non cash financing and investing activities The Group did not have any non-cash financing and investing activities during the financial year ended 30 June 2019 except as disclosed in Note 17 related to the issue of ordinary shares, and as disclosed in Note 31 for the acquisition of the Century Project for the financial year ended 30 June 2018. 61 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 26. Remuneration of auditors Remuneration of the auditors for: - Audit or review of the financial report - Taxation services - Other non-audit services Remuneration of previous auditors for: - Audit or review of the financial report Note 27. Contingent liabilities Bank guarantees 2019 $ 95,000 40,000 5,000 2018 $ - - - - 140,000 106,663 106,663 The Group has provided certain bank guarantees to third parties, primarily associated with the terms of mining financial assurance, exploration licences, provision of electricity and office leases, in respect of which the relevant entity is obliged to indemnify the bank if the guarantee is called upon. At the end of the financial year, no claims have been made under any of these guarantees. The amount of some of these guarantees may vary from time to time depending upon the requirements of the recipient. These guarantees are backed by deposits which amounted to $13,166,698 as at 30 June 2019 (30 June 2018: $3,167,752). Deeds of indemnity The Group has granted indemnities under Deeds of Indemnity with current and former Executive and Non-executive Directors and officers. Each Deed of Indemnity indemnifies the relevant director or officer to the fullest extent permitted by law for liabilities incurred while acting as an officer of the Group, its related bodies corporate and any associated entity, where such an office is or was held at the request of the Company. Under these indemnities, the Company meets the legal costs incurred by Company officers in responding to investigations by regulators and may advance funds to meet defence costs in litigation, to the extent permitted by the Corporations Act 2001. Other The Company and its controlled entities are defendants from time to time in other legal proceedings or disputes, arising from the conduct of their business. The Group does not consider that the outcome of any of these proceedings or disputes is likely to have a material effect on the Company’s or the Group’s financial position. Note 28. Commitments Century Mine As part of the acquisition of Century Project, the Group has an agreement with MMG for MMG to acquire and stand behind a Financial Assurance Bond of $193,700,000 for the benefit of Century to meet its financial assurance obligations with the Queensland Government for a period of ten years through to 31 December 2026. Once commercial production has been declared for accounting purposes at the Century Project, the Group must allocate an amount equal to 40 percent of its earnings before interest, tax, depreciation and amortisation (EBITDA), which will go towards replacing the Financial Assurance Bond. In the event that the total balance of the Financial Assurance Bond has not been replaced by 31 December 2026, the Group will be required to source alternative financing for the outstanding amount. Both the Company and subsidiaries holding the Century Project have indemnified MMG against any default on amounts owing to MMG under these agreements. The Group has an obligation to pay MMG a fee of 1.35 percent per annum payable quarterly in advance on the face value of the Financial Assurance Bond until the expiry of the Financial Assurance Bond agreement on 31 December 2026. 62 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Community commitment Community commitment relate to the Group’s contractual obligations under the Gulf Communities Agreement with the local communities. In the past, this obligation was met by MMG under various support agreements. The estimated commitments in respect of community expenses which is not recognised as a liability as at 30 June 2019 is approximately $28,000,000. These payments are made throughout the life of the project. Take or pay contracts The Group has entered into take or pay contracts for supply of electricity and gas for its Century Mine. The aggregate future take or pay commitment as at 30 June 2019 was $75,000,000 (30 June 2018: $130,000,000). Operating leases Upon the adoption of AASB 16 from 1 July 2019, the Group will no longer have any operating lease commitments. Under the existing AASB 117, at the reporting date, the Group had outstanding commitments for future minimum lease payments (undiscounted) under non- cancellable operating leases, which fall due as follows Up to 1 year In the second to fifth years inclusive More than five years Total 2019 $ 11,851,931 33,857,329 5,170,570 50,879,830 The aggregate minimum lease payments under non-cancellable operating leases at 30 June 2018 was approximately $1,000,000. Capital commitments The Group did not have any significant commitments for capital expenditure contracted for at the reporting date but not recognised as liabilities. Note 29. Financial instruments Financial risk management The Group’s principal financial instruments are cash, receivables, deposits held as security guarantees, and payables. Overview The Group has exposure to the following financial risks from their use of financial instruments: - - - - liquidity risk credit risk interest rate risk; and foreign exchange risk This note presents information about the Group’s exposure to each of the above risks. There was no material exposure to price risk or market risk in respect of financial instruments in 2019 as the Group had no significant exposures to equity markets or derivatives. 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. 63 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Financial assets Cash and cash equivalents Trade and other receivables (excluding GST receivable) Current financial assets Non-current financial assets Total Financial liabilities Trade and other payables (excluding deferred proceeds) - Note 13 Borrowings Financial liability at fair value through profit or loss Total 2019 $ 2018 $ 34,282,769 7,324,588 5,750,000 13,166,698 46,249,135 341,907 17,250,000 3,167,752 60,524,055 67,008,794 46,175,379 54,100,350 7,137,249 23,013,820 - - 107,412,978 23,013,820 Non-current other financial assets of $13,166,698 (2018: $3,167,752) consist of security deposits of $9,505,148 (2018: $2,398,104) plus an environmental bond of $828,370 (2018: $769,648). 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 following are the contractual maturities of financial liabilities: Carrying amount Under 6 Months 6 – 12 Months 1 - 2 years 2 – 5 years 30 June 2019 Trade and other payables Borrowings Financial liability at fair value through profit or loss 46,175,379 54,100,350 46,175,379 - - 14,076,069 - 19,613,790 - 20,410,491 7,137,249 - 1,233,331 3,525,073 2,378,845 Total 107,412,978 46,175,379 15,309,400 23,138,863 22,789,336 30 June 2018 Trade and other payables 23,013,820 23,013,820 Total 23,013,820 23,013,820 - - - - - - 64 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 The table details changes in Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be classified in the Group’s consolidated cash flow statement as cash flows from financing activities. 1 July 2018 $ Financing cash inflows $ Financing cash outflows $ Foreign exchange adjustment $ Fair value adjustment $ 30 June 2019 $ Varde loan Financial liability at fair value NAB loan MMG funding support - 60,397,015 - 840,584 (7,137,249) 54,100,350 - - 17,250,000 - 11,438,424 (11,500,000) - (11,438,424) - - - - 7,137,249 - - 7,137,249 - 5,750,000 Total 17,250,000 60,335,439 (11,438,424) 840,584 - 66,987,599 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 MMG. 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. 65 2019 Financial assets Cash and cash equivalents Trade and other receivables Current financial assets Non-current financial assets Financial liabilities Trade and other payables Borrowings Financial liability at fair value through profit or loss Net financial liabilities 2018 Financial assets Cash and cash equivalents Trade and other receivables Current financial assets Non-current financial assets Financial liabilities Trade and other payables New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 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: Weighted average interest rate % Fixed interest maturing in 1 year or less $ Fixed interest maturing in over 1 year $ Floating interest rate $ Non- interest bearing $ Total $ 0.43 26,050,221 - - 2.15 0.06 8.07 - - - - - - - - - - 12,337,128 - - - - 8,232,548 34,282,769 7,324,588 5,750,000 7,324,588 5,750,000 829,570 13,166,698 (285,490) (14,076,069) - (40,024,281 ) (45,889,889 ) - (46,175,379 ) (54,100,350 ) - - (7,137,249) (7,137,249) 26,050,221 (2,024,431) (40,024,281 ) (30,890,432 ) (46,888,923 ) 1.25 16,310,520 29,500,000 - - 1.5 - - - - - 2,388,879 0.42 - (968,409) - - - - - - 438,615 46,249,135 341,907 17,250,000 341,907 17,250,000 778,873 3,167,752 (22,045,411 ) (23,013,820 ) (3,236,016) 43,994,974 Net financial assets 16,310,520 30,920,470 In respect of the above interest rate risk exposure at the balance date, an increase or decrease in interest rates by 1 percent would have decreased the post-tax loss and increased equity by $159,986 (2018: increased in both post-tax loss and equity by $472,310). 66 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 The following tables summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk: Carrying Amount $ -1% +1% Profit Equity Profit Equity $ $ $ $ 34,282,769 7,324,588 5,750,000 13,166,698 (46,175,379) (54,100,350) (260,502) - - (123,371) 2,855 541,004 (260,502) - - (123,371) 2,855 541,004 260,502 - - 123,371 (2,855) (541,004) 260,502 - - 123,371 (2,855) (541,004) (7,137,249) - - - - 159,986 159,986 (159,986) (159,986) 46,249,135 341,907 17,250,000 3,167,752 (23,013,820) (458,105) - - (23,889) 9,684 (458,105) - - (23,889) 9,684 (472,310) (472,310) 458,105 - - 23,889 (9,684) 472,310 458,105 - - 23,889 (9,684) 472,310 2019 Cash and cash equivalents Trade and other receivables Current financial assets Non-current financial assets Trade and other payables Borrowings Financial liability at fair value through profit or loss Total increase/(decrease) 2018 Cash and cash equivalents Trade and other receivables Current financial assets Non-current financial assets Trade and other payables Total increase/(decrease) Foreign exchange risk 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. 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. 2019 Net Financial Assets/(Liabilities) in $AUD Consolidated Group USD (53,491,765) Total (53,491,765) 2018 Net Financial Assets/(Liabilities) in $AUD Consolidated Group USD (106,223) 67 Total (106,223) New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 In respect of the above USD foreign currency risk exposure in existence at the balance sheet date a sensitivity of -10 percent lower and 10 percent higher has been applied in the US dollar against the Australia dollar. With all other variables held constant, post tax loss and equity would have been affected as follows: AUD $4,862,888 gain; AUD $5,493,529 loss (2018: AUD $10,622 gain; AUD $10,622 loss). 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 and ageing analysis for credit risk 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. Note 30. Impairment Pre tax 2019 $ Tax impact 2019 $ Post tax 2019 $ Pre tax 2018 $ Tax impact 2018 $ Post tax 2018 $ Property, plant and equipment Deferred exploration and development expenditure Total impairment - - - - - - - - - 14,368,184 3,785,222 18,153,406 - - - 14,368,184 3,785,222 18,153,406 No impairment is recognised in the current financial year. In the previous financial year, the Group recognised an impairment loss of $18,153,406 for its Kodiak Project comprising property plant and equipment impairment of $14,368,184 and deferred exploration and development impairment of $3,785,222. This resulted in the carrying value of Kodiak Project reduced to nil as at 30 June 2018. The Group performs an impairment assessment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The impairment assessment at 30 June 2018 was triggered by the fact that the Kodiak Project is currently on care and maintenance. Impairment is recognised when the accounting carrying amount exceeds the recoverable amount. Any variation in the key assumptions used to determine the value would result in a change of the assessed value. 68 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 31. Acquisition of Century Project During the year ended 30 June 2019, there were no business combination transactions. During 2017, the Company executed a binding earn-in agreement to earn 100 percent of Century Mine Rehabilitation Project Pty Ltd (CMRP), a wholly owned subsidiary of Century Bull Pty Ltd (Century Bull), via: - Initial 70 percent of CMRP (transferred up front) in consideration for: the issue of 30,000,000 unquoted options in New Century Resources Limited with an exercise price of $0.25 each and expiring five years from the date of issue to Century Bull or its nominees; a 2 percent net smelter royalty from operations; and a commitment to sole fund project expenditure of $10,000,000 for first three years. - Following expenditure of the $10,000,000, an option to acquire the remaining 30 percent based on an agreed New Century Resources Limited enterprise value formula, being 30 percent of the fully diluted enterprise value of New Century Resources Limited, paid in the form of New Century Resources Limited shares which received requisite shareholder approval. Completion of this acquisition was finalised on 13 July 2017. Evan Cranston and Patrick Walta, both Directors of New Century Resources Limited, were shareholders in Century Bull. John Carr, a former KMP of the Group was also a shareholder in Century Bull. CMRP owns 100 percent of the Century Mine and associated infrastructure in accordance with the agreements with MMG for the acquisition of the relevant MMG Australian subsidiaries which hold the Century assets. The Century assets include: - All Mining Leases and the Exploration Permit Minerals associated with the Century Project; - 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 percent interest in the Lawn Hill & Riversleigh Pastoral Holding Company. As part of the transaction with MMG, CMRP also received: - - $34,500,000 in progressive cash payments to assist with ongoing rehabilitation and care and maintenance activities for the site; $12,100,000 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 for MMG to procure and stand behind the existing provision of bank guarantees of $193,731,600 for the benefit of Century to meet its financial assurance obligation with the Queensland Government for a period of ten years through to 31 December 2026, which is to be progressively replaced via profits from operations. On 13 July 2017, the Group issued 30,000,000 unquoted share options (Consideration Options) exercisable at $0.25 each and expiring on 13 July 2022 in partial consideration for the Century Project. The Consideration Options were valued at a total of $2,471,700. The acquisition has been accounted for as an acquisition of subsidiaries with associated assets and liabilities, not as an acquisition of a business combination. It is not considered a business combination because relevant processes were not acquired as part of the acquisition. John Carr and Patrick Walta each received 7,000,000 of the 30,000,000 share options as purchase consideration for the initial 70 percent interest in Century Mining Rehabilitation Project Pty Ltd. These share options had been valued at $0.08239 per share option as shown in Note 23. 69 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Details of the purchase consideration and the net deficit acquired are as follows: Purchase consideration paid by New Century Resources Limited Consideration options Total purchase consideration The fair value of assets and liabilities recognised as a result of the acquisition are as follows: Cash and cash equivalents Trade and other receivables and prepayments MMG funding support payments receivable Property, plant and equipment Trade and other payables Employee provisions Provision for rehabilitation Net deficit acquired at fair value 13 July 2017 $ 2,471,700 2,471,700 4,732,628 1,421,018 20,494,857 1,800,000 (1,035,219) (269,344) (94,764,306) (67,620,366) Loss on acquisition classified as an exploration expenditure (70,092,066) Non-controlling interest acquisition on 27 February 2018 On 27 February 2018, following shareholder approval on 23 February 2018, the Company acquired the remaining 30 percent interest in the Century Project in consideration for 126,000,000 shares and 35,000,000 unquoted share options (Non-controlling Interest Consideration Options). This interest was acquired through the acquisition of Century Bull. The shares were valued at $1.39 each, being the fair value on 27 February 2018 based on the closing share price on the ASX, for a total value of $175,140,000. The Non-controlling Interest Consideration Options had a total value of $38,256,500. The total of $175,140,000 for issue of the shares along with the $4,289,474 balance of the non-controlling interest as at the transaction date, totalling $179,429,474 was recognised directly in accumulated losses, a component of equity in the previous financial year. Vendors for Century Bull and the non-controlling interest included Directors Patrick Walta and Evan Cranston, along with John Carr, a former KMP of the Group. Evan Cranston, Patrick Walta and John Carr each received 31,500,000 ordinary shares and a total of 8,750,000 share options as part of the purchase consideration for the remaining non- controlling interest. 70 New Century Resources Limited and Controlled Entities - ABN 53 142 165 080 Note 32. Dividends No dividend has been declared or paid by the Group during the year and the Directors do not at present recommend a dividend. No dividends were declared or paid in the comparative year. Note 33. Events occurring after reporting period Subsequent to year end, in August 2019, the Company raised $42,500,000 (before transaction costs) via a placement to institutional and sophisticated investors which was completed over two tranches. Tranche one completed in August 2019 and tranche two was approved by shareholders at an extraordinary general meeting of the Company and completed in September 2019. As disclosed in Note 14 to the Financial Statements, in February 2019, the Group secured a new financing facility with Varde Partners Inc. This comprises a secured facility of US$42,900,000 which has been drawn down and an unsecured facility of US$28,600,000 which was subject to conditions precedent before draw down. Prior to the end of September 2019, Varde advised that the availability of this unsecured facility has expired. Discussion in relation to a US$28,600,000 facility are continuing with Varde. Robert McDonald was appointed as the Chairman of New Century Resources Limited on 17 July 2019. Tolga Kumova resigned as a Director of New Century Resources Limited on 17 July 2019. Further details are set out above in the Directors Report. There have been no other events that have occurred subsequent to the reporting date which have significantly affected or may significantly affect the Group’s operations or results in future years. 71 New Century Resources Limited 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 23 to 71 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 2019 and of the performance for the year ended on that date of the Company and Group; 2. in the Directors’ opinion there are reasonable grounds to believe that the Company and the Group 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 2019. This declaration is made in accordance with a resolution of the Board of Directors. Robert McDonald Chairman 30 September 2019 72 Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 Australia Tel: +61 3 9671 7000 www.deloitte.com.au 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 2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to directors of the Company, would be in the same terms if given to directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 73 Key Audit Matter How the scope of our audit responded to the Key Audit Matter Recognition and measurement of the mine site restoration provision Given the nature of its operations, the Group incurs obligations to close, restore and rehabilitate its sites. Closure and restoration legislative activities are governed by requirements. As disclosed in note 16, at 30 June 2019 the Group has a Mine Site Restoration Provision of the Group’s $200.8 million relating requirement to rehabilitate its development and exploration areas. to Due to the calculation of the provision requiring significant judgment in estimating the future costs, the timing as to when the future costs will be the determination of an appropriate rate to discount the future costs to their net present value, we have considered this provision to be a key audit matter. incurred and Capitalisation of the development costs of the Century Mine The Century Mine is in the development phase. During the year ended 30 June 2019, the Group capitalised costs of $287.9 million, and recognised proceeds from sales in the development phase of $115.2 million against Capital Work in Progress, which increased the carrying value of Capital Work in Progress at 30 June 2019 to $230.5 million. for that criteria As disclosed in Note 2, management has the the determined assessment of when the Century Mine achieves commercial production, being when the Century Mine is available for use in the manner intended by management, includes, but is not limited to, completion of a reasonable period of testing of the mine plant and equipment, the ability to produce metal in saleable form (within specifications) and the ability to sustain ongoing production of metal. Our procedures included but were not limited to:  Obtaining an understanding of the controls key management has in place to estimate the mine site restoration provision; processes and  Confirming the timing of closure and restoration estimates are consistent with the latest estimate of the life of mine; in  Assessing the competence and work in-house mine of management’s identifying closure specialists against rehabilitation legislative and assessing their timing and likely cost. their methodology We evaluated against industry practice and our understanding of the business; and activities requirements  Assessing site the accuracy of the calculations used to determine the mine restoration provision including the discount rate applied and the the appropriateness of current and non-current classification of the provision. We also assessed the appropriateness of the related disclosures included in notes 1(x), 2 and 16 to the financial report. Our procedures included but were not limited to:  Obtaining an understanding of and evaluating the Group’s processes and controls the capitalisation of costs to Capital Work in Progress; relation to in Evaluating and assessing that the capitalised costs within Capital Work the offsetting in Progress and proceeds the in development phase received are in the accounting accordance with Group’s and standards capitalisation policy; sales from the Testing additions to Capital Work in records, to underlying Progress the of consideration including appropriateness of the amounts capitalised;   74 Key Audit Matter Based on management’s analysis performed, at 30 June 2019, the Century Mine does not meet the metal concentrate production tonnes, grade and recovery targets, as set by the Board for commercial levels of production. the financial significance of Given the amounts capitalised, and the risk of incorrect classification of costs where costs are capitalised that are not directly attributable to the development of the Century Mine or project costs are incorrectly expensed, the capitalisation of the development costs has been identified as a key audit matter. How the scope of our audit responded to the Key Audit Matter  Testing the proceeds from sales in the development phase to underlying contracts; and  Assessing the judgements made and the asset commissioning criteria used by the Group for determining whether commercial production has been achieved through discussion with management and assessment of feasibility studies and Board reports. We also assessed the appropriateness of the related disclosures included in notes 2 and 11 to the financial report. 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 2019, 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 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 preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group to cease operations, or has no realistic alternative but to do so. 75 Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  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.  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, 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. 76 Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 11 to 20 of the Directors’ Report for the year ended 30 June 2019. In our opinion, the Remuneration Report of New Century Resources Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Suzana Vlahovic Partner Chartered Accountants Melbourne, 30 September 2019 77 ASX Additional Information Shareholder Information The following information is based on share registry information processed up to 8 October 2019. 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 Number of Holders Number of Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total 360 824 513 1,282 352 3,331 210,025 2,471,134 4,138,455 46,469,225 584,079,594 637,368,433 There are 546 holders of unmarketable parcels comprising a total of 478,246 ordinary shares. Twenty Largest Holders of Shares in New Century Resources Ltd 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Shareholder Citicorp Nominees Pty Limited CS Fourth Nominees Pty Limited JP Morgan Nominees Australia Pty Limited Mr Patrick Christopher Andrew Walta Konkera Pty Ltd Mr John Carr HSBC Custody Nominees (Australia) Limited Buttonwood Nominees Pty Ltd Pacreef Investments Pty Ltd Kingslane Pty Ltd Kitara Investments Pty Ltd Kingslane Pty Ltd Kingslane Pty Ltd CS Third Nominees Pty Limited 15 Westyle Pty Ltd 16 Warbont Nominees Pty Ltd 17 18 19 20 Mr Michael Robert Pitt Mr Terence Bernard Moylan Mr Rodney John Smith Dr Stuart Lloyd Phillips & Mrs Fiona Jane Phillips Total Number Held 63,433,756 60,445,209 37,029,869 32,088,455 31,545,455 31,500,000 31,200,927 25,474,213 24,475,631 17,155,000 16,666,666 10,914,150 7,598,356 7,270,384 6,614,820 6,577,900 6,300,000 5,680,000 5,200,000 4,370,000 431,540,791 % of Issued Shares 9.95 9.48 5.81 5.03 4.95 4.94 4.90 4.00 3.84 2.69 2.61 1.71 1.19 1.14 1.04 1.03 0.99 0.89 0.82 0.69 67.71 There are 637,368,433 ordinary fully paid shares currently listed and trading on the Australian Securities Exchange. There is no current on-market buy back taking place. 78 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. Unquoted Equity Securities Quantity 12,900,000 6,000,000 7,500,000 7,500,000 7,500,000 7,500,000 30,000,000 500,000 22,000,000 6,000,000 3,500,000 3,500,000 500,000 1,000,000 1,000,000 250,000 1,000,000 1,000,000 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 Options exercisable at $0.25 each on or before 27 February 2021 Options exercisable at $0.50 each on or before 27 February 2021 Options exercisable at $0.75 each on or before 27 February 2021 Options exercisable at $1.00 each on or before 27 February 2021 Options exercisable at $1.99 each on or before 27 February 2021 Options exercisable at $1.20 each on or before 28 March 2022 Options exercisable at $1.50 each on or before 28 March 2022 Options exercisable at $0.95 each on or before 6 June 2022 Options exercisable at $0.56 each on or before 18 September 2022 Options exercisable at $0.70 each on or before 18 September 2022 79 Holders of Unquoted Securities Holding More than 20% of Each 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 Options exercisable at $0.25 each on or before 27 February 2021 Options exercisable at $0.50 each on or before 27 February 2021 Options exercisable at $0.75 each on or before 27 February 2021 Options exercisable at $1.00 each on or before 27 February 2021 Options exercisable at $1.99 each on or before 27 February 2021 Options exercisable at $1.20 each on or before 28 March 2022 Options exercisable at $1.50 each on or before 28 March 2022 Options exercisable at $0.95 each on or before 6 June 2022 Options exercisable at $0.56 each on or before 18 September 2022 Options exercisable at $0.70 each on or before 18 September 2022 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 Mr John Carr Konkera Pty Ltd Mr Patrick Christopher Andrew Walta Mr John Carr Konkera Pty Ltd Mr Patrick Christopher Andrew Walta Mr John Carr Konkera Pty Ltd Mr Patrick Christopher Andrew Walta Mr John Carr Konkera Pty Ltd Mr Patrick Christopher Andrew 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 5,500,000 5,500,000 5,500,000 1,500,000 1,500,000 1,500,000 875,000 875,000 875,000 875,000 875,000 875,000 500,000 Mr Nicholas Luigi Cernotta 1,000,000 Mr Nicholas Luigi Cernotta 1,000,000 Mr Mark Chamberlain The Minera Group Pty Ltd The Minera Group Pty Ltd 250,000 1,000,000 1,000,000 80 Schedule of Mining Tenements Project Location Status Interest Century Zinc Mine Queensland, Australia ML 90058 ML 90045 EPM 10544 EPM 26722 EPM 26772 EPM 26812 EPM 26868 EPM 26873 EPM 26874 EPM 26778 EPM 26976 Mt Isa Mt Isa Mt Isa Mt Isa Mt Isa Mt Isa Mt Isa Mt Isa Mt Isa Mt Isa Mt Isa Granted Granted Granted Granted Granted Granted Granted Granted Granted Application Application 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 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 70% 70% 70% 70% Company Secretary Ms Oonagh Malone Registered Office Level 4 360 Collins Street Melbourne VIC 3000 Telephone: +61 3 9070 3300 Share Registry Automic Registry Services 126 Phillip Street Sydney NSW 2000 Telephone: 1300 992 916 81

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