Annual Report 2020 www.bciminerals.com.au ABN 21 120 646 924 BCI Minerals Limited (ASX:BCI) is a Western Australian company that is developing a salt and potash business. Contents Our Company Chairman’s Report Managing Director’s Report Directors’ Report Remuneration Report Director’s Declaration Annual Financial Report Independent Auditor’s Report Auditor’s Independence Declaration Additional ASX Information Mineral Resources and Ore Reserves Corporate Directory 3 5 6 8 14 20 21 49 53 54 55 56 1 “BCI is rapidly advancing its 100% owned Mardie Salt & Potash Project, a potential Tier 1 project located on the West Pilbara coast in the centre of Australia’s key salt production region.” 2 Our Company BCI Minerals Limited (ASX:BCI) is a Western Australian company that is developing a salt and potash business. BCI is rapidly advancing its 100% owned Mardie Salt & Potash Project, a potential Tier 1 project located on the West Pilbara coast in the centre of Australia’s key salt production region. A Definitive Feasibility Study (DFS) on the Mardie Project was completed in Q2 2020. Mardie aims to produce 4.4Mtpa of high-purity salt (>99.5% NaCl) and 120ktpa of sulphate of potash (SOP) (>52% K2O) via solar evaporation of seawater. Using an inexhaustible seawater resource and a production process driven mainly by natural solar and wind energy, Mardie is a sustainable opportunity to supply the salt and potash growth markets in Asia over many decades. BCI recently acquired adjacent tenements which provide capacity to optimise and expand the project beyond the DFS production levels. With a final investment decision targeted in early 2021 and construction start by mid-2021, first salt sales can be achieved by mid-2024 and first SOP sales by mid-2025. BCI receives quarterly royalty earnings from Iron Valley, an iron ore mine located in the Central Pilbara region of Western Australia which is operated by Mineral Resources Limited (ASX:MIN). BCI’s EBITDA from Iron Valley for FY20 was A$23.0M. MARDIE SALT & POTASH PROJECT KARRATHA PORT HEDLAND ONSLOW IRON VALLEY MINE NEWMAN 0 50 100 3 “The DFS results reaffirmed to the Board that Mardie has all the attributes of a globally significant and multi-generational asset.” 4 Chairman’s Report Dear shareholders, I am pleased to present BCI’s Annual Report for the 2020 financial year – a period of significant operational and corporate progress for our Company. BCI has a well-defined strategy to become a globally significant supplier of industrial and agricultural minerals through development of our 100% owned Mardie Salt & Potash Project, located on the Pilbara coast in Western Australia. The BCI Board considers the Mardie Project has all the attributes of a Tier 1 project. We believe Mardie will be a large scale and low-cost operation which can create substantial value for shareholders and stakeholders over a long operating life. As testament to its scale, Mardie will be the largest solar salt project in Australia once constructed, and the third largest in the world. It will also be the first Australian operation producing both salt and sulphate of potash (SOP) from seawater. Large strides were taken in advancing the Mardie Project during the year, including the key milestone of delivering a robust Definitive Feasibility Study (DFS). The reporting of the DFS results was the culmination of an incredible amount of work and commitment from the entire BCI organisation and I would like to thank all team members, contractors, consultants and stakeholders who played a role in delivering this excellent outcome. The DFS results reaffirmed to the Board that Mardie has all the attributes of a globally significant and multi-generational asset, including healthy financial returns over many decades, product being sold into an attractive and growing export market, and a clearly defined development pathway. Mardie also has optimisation and future expansion potential from the recently acquired tenements located immediately to the north of the DFS project area. With these outcomes in mind, the Board was able to readily resolve to approve Mardie progressing towards a Final Investment Decision early in 2021. In preparation for early works and construction, BCI is expanding its expertise with a number of senior executive appointments in recent months. BCI also added important skills to the Board with the appointment of Garret Dixon as Non-Executive Director. Garret has significant expertise in the areas of construction, contracting, civil engineering, and bulk commodity logistics, and will be a valuable contributor during Mardie’s next phase. The Board was very pleased to see Mardie awarded Major Project Status from the Federal Government in August 2020. This validates the Project’s ability to deliver substantial long-term benefits to Australia, in the form of new multi-user export infrastructure, tax and royalty revenues and extensive employment opportunities. BCI is excited about the positive impact that Mardie’s development will have on northern Australia and we look forward to working closely with the local people and various stakeholders over the coming years. It is the Board’s firm intent that BCI will establish a presence in the Karratha area and will become an active supporter of local content and services. Although we have made it clear that our primary focus is on accelerating the development of Mardie, the performance of BCI’s Iron Valley royalty should not be overlooked. It continues to deliver considerable cash flow to support our activities at Mardie. I would like to thank Iron Valley’s operator, Mineral Resources Limited, for its outstanding work, which delivered considerable value to BCI shareholders in the year. I would like to take this opportunity to thank BCI’s Managing Director, staff and Board for their unwavering commitment and efforts over the past year. All involved can take comfort in knowing that they have played a significant role towards establishing BCI as a well-positioned and clearly focused salt and SOP development company. BCI’s shareholders have been tremendously supportive and BCI would like to sincerely thank you for this commitment. We were pleased to see a higher share price sustained through the year, indicating growing market recognition of the value of our assets. The successful completion of our entitlement issue after year-end was further indication of the shareholders’ support of the Company, and the Board was especially pleased that the issue required no new shareholders to be introduced. We look forward to the current financial year, which we expect to be another year of significant progress for the Company. Brian O’Donnell Non-Executive Chairman 5 Managing Director’s Report Dear shareholders, Financial year 2020 has been a year of significant progress where BCI achieved a number of important milestones. We have delivered a positive definitive feasibility study (DFS), have significantly advanced approvals and tenure, and made solid progress in developing Mardie funding and offtake solutions. Progress across all these workstreams provided sufficient confidence for our major shareholders to support us with the recently completed interim entitlement issue. Proceeds from this equity raise will allow us to implement early construction works at Mardie over the next few months. Robust DFS confirms Mardie’s Tier 1 status At an operational level, the major highlight for the year was the delivery of a very robust DFS for the Mardie Project. From both a technical and economic perspective, the DFS findings were encouraging and included some of the key outcomes that support Mardie’s Tier 1 status: • Production of 4.4Mtpa of high purity salt and 120ktpa of premium SOP fertiliser over an operating life of at least 60 years. • Pre-tax NPV7 of approximately A$1.2 billion. • Annual EBITDA of A$197 million, which delivers total pre-tax net cash flow of more than A$10 billion. • Low salt and SOP operating costs, meaning Mardie can be profitable throughout the commodity cycle. BCI also acquired tenement rights immediately north of the existing Mardie footprint. This additional ground has the potential to add considerable value for shareholders through the optimisation and expansion of the evaporation ponds and crystallisers which could deliver an increase of production and lower overall operating costs. Evaporation trials and offtake strategy Another important operational milestone achieved was the delivery of first salt samples to prospective customers and testing laboratories. These samples were produced from our evaporation trial program based on a 1:40,000 scale version of the future pond and crystalliser layout. I am pleased to report that testing of these samples confirmed Mardie can produce the specification for high purity industrial salt, enhancing our credibility with potential customers. BCI currently has 13 non-binding salt offtake memoranda of understanding with potential customers in the key markets of China, Japan and South East Asia which at this point would support the offtake of 4.5Mtpa salt per annum – more than the intended nameplate capacity of the Mardie Project. This is an important step in BCI’s offtake strategy, and with the DFS now complete and product samples available, we will actively pursue several potential customers over the next year with a view to establishing binding offtake agreements. Funding discussions advancing on track BCI has entered the 2021 financial year in a robust financial position. The Company completed a fully underwritten A$48 million entitlement offer recently which gives BCI a very healthy cash balance of approximately A$82 million pro forma at the end of September 2020. This capital raising was strongly supported by our major shareholders and is a pleasing vote of confidence in the potential of the Mardie Project. The funds raised deliver the necessary financial flexibility and confidence to accelerate early construction works over the next few months. Looking further ahead, our team is making considerable progress in advancing discussions with potential debt providers to secure the funding required to develop Mardie. A key pillar in the funding strategy will be securing long tenor debt funding and to this end we are maintaining a positive dialogue with the Northern Australia Infrastructure Facility (NAIF), an Australian Federal Government initiative. BCI has completed NAIF’s strategic assessment and we are now well-advanced in the due diligence phase. Due diligence reviews by various technical and other experts are well-progressed, and positive dialogues are continuing with NAIF and various banks, supported by our advisors. Strengthening our team and culture As we approach the construction phase, we are proactively bolstering BCI’s executive ranks so we have the necessary mix of leadership skills to deliver the project. We have recently made a number of senior appointments including Sam Bennett as Project Director, who will bring deep construction industry experience to BCI. We welcome these new employees to the BCI team and look forward to their important contribution to the business as activity ramps up. I am also pleased to advise we had no turnover in our executive team during the year. With an expanding team and increased site activities come increased focus on two crucial management elements for the Board and the Executive Team – culture and safety. We have made positive progress in further developing our culture through refreshing our values statement and our approach to teamwork and performance. From a safety perspective, we recorded no lost time injuries for the fourth consecutive year. Further strengthening of our safety systems and practices is underway as an important part of preparing for the commencement of early works and construction. 6 Record Iron Valley earnings Iron Valley has been an important asset for BCI over the last 5 years, and the 2020 financial year delivered record financial results. Iron Valley operator, Mineral Resources Limited (MIN), shipped 6.7Mt of iron ore from the mine, which generated revenue for BCI of A$76.8 million and a record full-year EBITDA of A$23.0 million. Importantly, this contributed to a BCI group EBITDA of A$8.3 million and net profit after tax of A$0.4 million. In line with our strategy to focus on Mardie, we continued to streamline our iron ore portfolio through a series of strategic transactions with MIN resulting in a A$10 million cash injection for the business during the year. These transactions included the sale of the Buckland Project for up to A$20 million in cash (including $6 million upon completion) plus a 1% FOB revenue royalty. BCI also received a A$4 million accelerated payment of deferred consideration from the Kumina transaction which was completed in 2019. BCI and MIN also agreed to a restructure of the existing Iron Valley arrangement to the benefit of both parties. These outcomes are a credit to the constructive long-term relationship between BCI and MIN that has resulted in meaningful value being created for both companies, and I would like to acknowledge Chris Ellison and the broader MIN team. Outlook BCI has entered the new financial year with considerable momentum, as we arrive at an exciting inflection point in the Company’s development, with the transition from exploration and studies towards construction and operation now in full swing. Key targets for the BCI team over the next few months include securing environmental approvals and remaining project tenure, achieving debt commitments from lenders, and commencing the early works construction activities. The BCI team is working hard to achieve these important milestones. I would like to thank BCI’s shareholders for their ongoing support and shared vision towards developing Mardie as a world-class asset, and my fellow Board members and the BCI team for their commitment and support over the past 12 months in achieving positive progress. I look forward to reporting further positive developments over the coming months as we embark on this exciting new phase of growth. Alwyn Vorster Managing Director 7 Directors’ Report The Directors present their report on the results of the Consolidated Entity (referred to hereafter as the Company) consisting of BCI Minerals Limited (“BCI”) and the entities it controlled at the end of, or during the year ended 30 June 2020. Principal Activity The principal activities of the Company during the course of the financial year were the development of assets in the Pilbara region of Western Australia, primarily focused on the Mardie Salt and Potash Project and Iron Valley Iron Ore Mine. There has been no significant change in the nature of the Company’s activities during the financial year. Directors The names of directors of the Company in office during the financial year and up to the date of this report are: Brian O’Donnell Alwyn Vorster Michael Blakiston Director (Non-Executive) Director (Non-Executive) Jenny Bloom Director (Non-Executive) Garret Dixon Chair (Non-Executive) Managing Director (Executive) Mr Garret Dixon was appointed as a Director of the Company on 18 June 2020. Directors’ Qualifications, Experience and Special Responsibilities Mr Brian O’Donnell B Com, FCA, MAICD Chair (Non-Executive) appointed October 2014 Period of office at August 2020 – 5 years and 10 months In addition to being Chair of BCI, Mr O’Donnell is Director, Finance and Investments for the Australian Capital Equity Pty Limited (ACE) group, which includes BCI’s largest shareholder, Wroxby Pty Ltd. He is a director of various ACE group companies, including companies active in the property, agricultural, financial services and investment sectors. Mr O’Donnell is also a non-executive director of Bravo Holdco Pty Ltd (the holding company for Hive and Wellness Australia Pty Ltd - formerly Capilano Honey Limited), the West Australian Football Commission and The Guide Dog Foundation Pty Ltd (WA). He is a former director of Iron Ore Holdings Limited, Coates Group Holdings Pty Ltd, WesTrac Pty Ltd, Landis & Gyr AG, Fremantle Football Club Ltd and YMCA of Perth Inc. He is a Fellow of the Institute of Chartered Accountants and has 35 years’ experience in the finance and investment industry. Mr O’Donnell is a member of the Audit and Risk Committee. Mr Alwyn Vorster BSc (Hons) Geology, MSc (Mineral Economics) and MBA Managing Director appointed 22 September 2016 Period of office at August 2020 – 3 year and 11 months Mr Vorster has more than 25 years’ experience with numerous large mining houses in technical and commercial management roles covering the total supply chain from mine to market for iron ore, coal and other minerals. Recent roles include Group Executive Mining at Australian Capital Equity Pty Limited (ACE), Chief Executive Officer of API Management and Managing Director of Iron Ore Holdings Ltd. Ms Jenny Bloom Grad. Dip Business Administration, GAICD Director (Non-Executive) appointed March 2017 Period of office at August 2020 – 3 years and 5 months Ms Bloom has an extensive business background with experience in the public and private sectors in Western Australia and Victoria. She was most recently the Deputy Chair and Member of the Waste Authority Western Australia for eight years and was a member of the Program and Risk Committee. She is a non-executive director of Breaking the Silence (Inc) and is a director of various private businesses. Ms Bloom previously held an elected position as a Councillor and Deputy Shire President for the Shire of Broome and as an independent director of a Broome based Aboriginal Corporation. Ms Bloom was a member of the Remuneration and Nomination Committee for the financial year and from 1 July 2020 was appointed Chair of that Committee. 8 Mr Michael Blakiston B. Juris Director (Non-Executive) appointed March 2017 Period of office at August 2020 – 3 years and 5 months Mr Blakiston is a partner in Gilbert + Tobin’s Energy and Resources group. He has over 30 years’ experience across a range of jurisdictions. He advises in relation to asset acquisition and disposal, project structuring, joint ventures and strategic alliances, development agreements and project commercialisation, capital raisings and company merger and acquisitions. Mr Blakiston has served on numerous ASX listed companies and not-for-profit boards and is currently the Chair of Precision Opportunities Fund Ltd, a specialist small to medium cap fund. Mr Blakiston is the Chair of the Audit and Risk Committee and held the position of Chair of the Remuneration and Nomination Committee for the financial year. Subsequent to the financial year end, Mr Blakiston has resigned from the Remuneration and Nomination Committee. Mr Garret Dixon Director (Non-Executive) appointed 18 June 2020 Period of office at August 2020 – 2 months Mr Dixon has over 40 years of industry experience in the areas of mining, construction, contracting, civil engineering and bulk commodity logistics. Until recently, Mr Dixon held the position of Executive Vice President and President Bauxite of NYSE listed Alcoa Corporation, where he was responsible for the global bauxite mining business including seven bauxite mines on various continents. His other experience includes positions as a Non-Executive Director of Watpac Limited, Managing Director at Gindalbie Metals Limited and Executive General Manager for Henry Walker Eltin (HWE). Subsequent to the end of the financial year, Mr Dixon has been appointed a member of the Remuneration and Nomination Committee and as Chair of the Project Review Committee. Company Secretary Ms Susan Hunter BCom, ACA, F Fin, MAICD, ACIS Company Secretary appointed July 2018 Ms Hunter has over 23 years’ experience in the corporate finance industry and extensive experience in company secretarial and non-executive director roles with ASX, AIM and TSX listed companies. Ms Hunter is currently Company Secretary of several ASX listed companies. Meetings of Directors The number of meetings held during the year and the number of meetings attended by each director was as follows: Total Number of Meetings Held Attended Held Attended Held Attended Board Audit and Risk Committee* Remuneration and Nomination Committee** B O’Donnell A Vorster M Blakiston J Bloom G Dixon*** 9 9 9 9 1 9 9 9 9 1 4 - 4 - 4 - 4 - - - 1 1 - - 1 1 * Members of the Audit and Risk Committee during the financial year ended 30 June 2020 were M. Blakiston (Chair) and B. O’Donnell (Member). ** Members of the Remuneration and Nomination Committee during the financial year ended 30 June 2020 were M. Blakiston (Chair) and J. Bloom (Member). *** G. Dixon was appointed as an Independent Non-executive Director of the Company on 18 June 2020. Corporate Governance In recognising the need for high standards of corporate behaviour and accountability, the Directors of BCI Minerals Limited support and have adhered to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. The Company’s detailed corporate governance policy statement can be found in the annual report or viewed on the Company’s web site at www.bciminerals.com.au. 9 Directors’ Interests and Benefits The relevant interest of each director in the shares, Performance Rights and options over shares issued by the Company at the date of this report is as follows: Director B O’Donnell A Vorster M Blakiston J Bloom G Dixon Total Ordinary shares Direct - - - 60,000 - Indirect 676,322 5,305,645 - - - 60,000 5,981,967 Performance Rights Direct - - - - - - Indirect - 5,000,000 - - - 5,000,000 Dividends No dividends have been declared in relation to the year ended 30 June 2020 (June 2019: Nil). Rounding of Amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Review of Operations BCI is an Australian-based company that is developing a salt and potash business supported by iron ore royalty earnings. Safety performance BCI places a high priority on facilitating a safe working environment for all staff and contractors. No lost time injuries (“LTIs”) were recorded for the year ended 30 June 2020 and the lost time injury frequency rate (“LTIFR”) was zero (June 2019: 0.0). Mineral Resources Limited is responsible for Occupational Health and Safety matters at Iron Valley and therefore BCI does not report safety performance for the Iron Valley site. Operations Mardie Salt & Potash Project During the financial year, BCI’s focus at the 100% owned Mardie Salt & Potash Project was on completing the Definitive Feasibility Study (“DFS”) and progressing the funding, approvals, tenure and offtake aspects of the Project. The DFS was announced on 1 July 2020, confirming the Project is a technically viable, economically attractive and sustainable development opportunity. The DFS demonstrates that Mardie can become a Tier 1 salt and SOP operation producing 4.4Mtpa of high purity salt and 120ktpa of premium SOP fertiliser, and generating a pre-tax NPV7 of approximately $1.2B and annual EBITDA of nearly $200M. Funding for the Project was progressed with positive negotiations with the Northern Australia Infrastructure Facility (“NAIF”) and a selection of Australian and International Banks. Completion of the DFS will allow detailed lender due diligence to commence in the first quarter of the 2021 financial year. BCI continued to progress the approvals and tenure required for development of the Mardie Project. The Environmental Review Document (“ERD”) was accepted by the WA Environmental Protection Authority (“EPA”) during the final quarter of the financial year and released for public comment. EPA endorsement of the Mardie Project is targeted before the end of 2020, followed by final Ministerial approval in early 2021. BCI continued to work closely with the Pilbara Ports Authority (“PPA”) and the Department of Planning, Lands and Heritage to secure the tenure and agreements required to develop the Mardie Port facilities within the Cape Preston West Port area. Other tenure and access arrangements required for the Project were also progressed. Engagement with potential buyers of Mardie’s salt and SOP products advanced, with numerous non-binding offtake memoranda of understanding (“MOUs”) signed. BCI now has 13 salt offtake MOUs in place across Asia together with two SOP offtake MOUs. Provided all key approvals and tenure are secured, BCI is targeting a Final Investment Decision for the Mardie Project during the March 2021 quarter. 10 Iron Valley Iron Ore Mine The Iron Valley Mine is operated by Mineral Resources Limited (“MIN”) under an ore purchase agreement with BCI. MIN operates the mine at its cost and purchases iron ore from BCI at the mine gate at a price linked to MIN’s received sales price. BCI is responsible for paying third party royalties and securing key approvals. In March 2020, BCI announced an amendment to the Iron Valley agreement with MIN and from 1 April 2020, BCI will rebate 40% of its net royalties to MIN, up to a total value of $25M. The rebate is subject to BCI receiving a minimum net royalty inflow of $1.5M per quarter. The revised agreement will assist MIN to develop additional mine areas and improve longevity of the mine. During the financial year MIN shipped 6.7 million wet metric tonnes (“M wmt”) (June 2019: 7.4 wmt), which generated revenue for BCI of $76.8M (June 2019: $54.3M) and EBITDA of $23.0M (June 2019: $12.3M). Iron Valley Shipments (M wmt) Iron Valley EBITDA ($M) 10 8 6 4 2 0 FY15 FY16 FY17 FY18 FY19 FY20 25 20 15 10 5 0 FY15 FY16 FY17 FY18 FY19 FY20 Other Assets In line with the previously announced strategy, BCI continued to divest non-core assets during the year. In March 2020, BCI announced the sale of the Buckland Project to MIN for a cash consideration of up to $20M, with the first $6M received upon completion. A further $14M is payable upon certain production milestones being achieved and a 1% FOB royalty is payable on iron ore extracted from the Bungaroo South deposit. Simultaneously, BCI secured the early payment of the first $4M of deferred consideration arising from the prior year sale of the Kumina deposit to MIN. A further $4M is payable to BCI upon achievement of certain production milestones from the Kumina deposit. BCI has an interest in the Carnegie Potash Project, an SOP exploration project located approximately 220km north-east of Wiluna. BCI currently owns 30% in a joint venture with Kalium Lakes Limited (“KLL”) and has rights to earn up to a 50% interest. KLL, the joint venture manager, continues to focus on securing tenure and access to all required tenements. Environmental Regulation BCI is committed to minimising its environmental impact, with an appropriate focus on continuous monitoring of environmental matters and compliance with environmental regulations. BCI’s exploration, mining and development activities are the subject of various State and Commonwealth environmental regulations. Compliance with these environmental regulations is managed through the Environment and Heritage Management System and a series of other tools used to identify, analyse and control key risks associated with the environmental impact from the Company’s activities. A compliance program is implemented on an annual basis to ensure correct data is being gathered to measure the impacts to the environment and periodic reviews (inspections and audits) are conducted to assess performance against agreed regulatory targets. During the year, BCI submitted a number of reports and compliance statements to State and Federal regulatory bodies detailing BCI’s performance against granted approvals. This includes all Annual Environmental Reports, Annual Compliance Reports, Compliance Assessment Reports and Emissions Reports which were all submitted on time and endorsed by the regulators. There have been no material breaches of the Company’s licences, permits and approvals during the financial year. 11 Review of Results Statement of profit or loss The Company’s profit after income tax for the financial year ended 30 June 2020 was $0.4M (June 2019: $12.9M) with increased revenue recognised at Iron Valley and gains from the sale of assets offset by the investment required to develop the Mardie project and complete the Definitive Feasibility Study within the financial year. The result also includes a non-cash impairment charge of $5.0M recognised upon divestment of certain rights to develop the Cape Preston East Port relinquished upon sale. The following table provides a summary of the Company’s statement of profit and loss: Revenue EBITDA Interest, tax depreciation and amortisation Impairment of assets Net profit/(loss) after tax 30 June 2020 $M 30 June 2019 $M 77.2 8.3 (2.9) (5.0) 0.4 54.8 16.4 (0.5) (3.0) 12.9 The Company’s EBITDA for the financial year ended 30 June 2020 was $8.3M (June 2019: $16.4M), which incorporates a positive EBITDA from Iron Valley of $23.0M (June 2019: $12.3M), gains from divestments of $10.2M and increased investment in the Mardie project of $18.7M. The following table shows the EBITDA contribution for each segment of the Group: Iron Valley Gains from divestments Mardie Other Total EBITDA Statement of cash flows 30 June 2020 $M 30 June 2019 $M 23.0 10.2 (18.7) (6.2) 8.3 12.3 16.5 (8.2) (4.2) 16.4 Cash and cash equivalents as at 30 June 2020 increased to $41.5M (June 2019: $33.7M) with the positive movement resulting from increased receipts from Iron Valley and inflows from divestment of assets. Statement of financial position Net assets increased to $104.1M (June 2019: $103.6M) primarily due to the increase in cash held by the Group. Dividends The Directors have not paid or declared any dividends since the commencement of the financial year ended 30 June 2020. (a) out of the profits for the year ended 30 June 2019 and retained earnings on fully paid ordinary shares (b) out of the profits for the year ended 30 June 2020 and retained earnings on fully paid ordinary shares. 2020 Nil Nil 2019 Nil Nil Corporate Annual General Meeting The Company’s annual general meeting was held in Perth on 27 November 2019. All nine resolutions considered at the meeting were passed. 12 Performance Rights and Share Rights As at the date of this report, there were 11,000,000 Performance Rights and 1,445,348 Share Rights on issue to employees under the Performance Right Plan and Share Right Plan, both approved at the November 2019 AGM. All rights remain unvested (30 June 2019: 1,320,000). Refer to the Remuneration Report for further details of Performance Rights and Share Rights outstanding. No Performance Right or Share Right holder has any right to be provided with any other share issue of the Company by virtue of their Performance Rights or Share Rights holding. None of the Performance Rights or Share Rights are listed on the ASX. Shares issued as a result of conversion of performance rights and share rights Since the end of the financial year, the Company issued no ordinary shares as a result of the conversion of performance rights or share rights. Likely Developments and Expected Results The Company plans to focus on developing the Mardie Salt and SOP Project through to Final Investment Decision and subsequently the first round of funding to commence construction in the first half of 2021. BCI expects to continue receiving revenue and EBITDA from Iron Valley during the 2021 financial year. The Company may also receive income from the divestment of exploration tenements and other assets during the year. Significant Changes in State of Affairs There were no significant changes in the Company’s state of affairs not otherwise included in this report. Matters Subsequent to the Reporting Date On the 31st of July, the Company exercised the option to acquire additional tenement rights for land adjacent to the Mardie Project with a payment of $2.5M. Other than disclosed above, no matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in financial periods subsequent to the financial year ended 30 June 2020. Audit Independence and Non-Audit Services Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is attached to the independent auditor’s report and forms part of the Directors’ Report. Non-audit services For the year ended 30 June 2020 the Board of Directors is satisfied that the auditor, BDO Audit (WA) Pty Ltd, did not provide any non-audit services to the Company, as set out in Note 25 to the Financial Statements, that compromised the auditor independence requirements of the Corporations Act 2001. Signed in accordance with a resolution by the Directors. Brian O’Donnell Chairman Perth, Western Australia 20 August 2020 Alwyn Vorster Managing Director Perth, Western Australia 20 August 2020 13 Remuneration Report The Remuneration Report outlines the remuneration arrangements in place for Directors and other Key Management Personnel (“KMP”) of the Company in accordance with section 308 (3c) of the Corporations Act 2001. For the purpose of this report the KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any directors of the Company. Directors B O’Donnell M Blakiston J Bloom G Dixon Non-executive Chair Non-executive Director Non-executive Director Non-executive Director (Appointed 18 June 2020) Executive Directors and Executives A Vorster S Hodge A Chamberlain Managing Director Chief Financial Officer Project Director Remuneration and Nomination Committee The Remuneration and Nomination Committee (“RNC”) is a committee of the Board comprised of two independent Non-Executive Directors, being Ms Bloom (Chair) and Mr Dixon. Prior to 1 July 2020, the Remuneration and Nomination Committee comprised Mr Blakiston (Chair) and Ms Bloom. The role of the RNC is to assist the Board to fulfil its responsibilities with respect to employee and director remuneration, and board composition and diversity, by making recommendations to the Board on: • The Company’s People Policy which sets out the Company’s approach to Remuneration, Diversity and Privacy; • A Remuneration Framework which enables the Company to attract, retain and motivate high quality senior executives who create value for shareholders; and • The selection, composition, performance and appointment of members of the Board so that it is effective and able to operate in the best interests of shareholders. Remuneration Framework The Remuneration Framework of the Company aims to: • Reward employees fairly and responsibly in accordance with the Australian market; • Provide competitive rewards that attract, retain and motivate employees; • Ensure incentives provide fair reward in line with company and individual performance to deliver on the current and long term strategic objectives; and • Ensure a level of equity and consistency across BCI and alignment with BCI’s culture. Non-Executive Director Remuneration Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors and are reviewed annually by the Board. The Chairman is not present at any discussions relating to determination of his own remuneration. Directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $900,000 in aggregate and was approved by shareholders at the annual general meeting on 19 November 2014. This amount is separate from any specific tasks the directors or their related entities may take on for the Company. Fixed Remuneration Non-Executive Directors’ fixed remuneration comprise the following: • Cash remuneration; and • Superannuation. 14 Executive Remuneration The objective of the Company’s executive remuneration is to ensure reward for performance is market competitive and appropriate for the results delivered. The executive remuneration is aligned with achievement of strategic and project objectives and the creation of value for shareholders. The Board ensures that executive reward satisfies the following key criteria in line with appropriate corporate governance practices: • Competitiveness and reasonableness; • Acceptability to shareholders; • Performance linkage/alignment of executive compensation; • Transparency; and • Prudent capital management. Fixed Remuneration The components of executives’ fixed remuneration are determined individually and may include: • Base Salary; • Superannuation; and • Insurances, parking and other benefits. Variable Remuneration Short-term Incentives Executives listed in this report may receive a short-term incentive (“STI”) of up to 50 - 70% of their annual fixed remuneration. The STI is an “at risk” component of remuneration and payment may, at the Board’s discretion, be in cash and/or equity. Measurement is based on performance against annually agreed key performance indicators (“KPIs”). These KPIs will typically be aligned to specific project and corporate objectives in relation to each financial year. For the 2020 financial year, the Board exercised its discretion to award an STI based on the KPIs achieved during the year. Executive KMP were in aggregate awarded an STI cash incentive of $260,182 (21% of their aggregate annual salary) with an additional award of share rights valued at $261,000 (21% of aggregate annual salary). The STI cash incentive is recorded as an expense incurred by the Company during the financial year ended 30 June 2020 with the cash payment to Executives occurring post year-end in the 2021 financial year. Subsequent to year end, a total of 798,745 share rights were granted to KMP under the approved Share Right Plan. Rights granted are subject to a vesting period over which the fair value of such rights will be expensed. For the 2019 financial year, the Board exercised its discretion to award an STI based on the KPIs achieved during year. Executives listed in this report were, in aggregate, awarded an STI cash incentive of $227,125 (25% of their aggregate annual salary). The STI was recorded as an expense incurred by the Company during the financial year ended 30 June 2019 with the payment to Executives occurring during the 2020 financial year. Long-term Incentives Longer term incentive awards occur through the Performance Rights Plan (“PRP”) which forms part of an “at risk” component of remuneration. Performance Rights generally have a vesting period longer than one year. Performance hurdles are primarily based on company share price and/or other relevant shareholder return measures. The PRP operates entirely at the discretion of the Company’s Board and may be terminated, suspended or amended at any time, or from time to time, in it’s entirely or in part in relation to any or all employees (except where contractual rights have been created). At the November 2019 Annual General Meeting, shareholders approved the grant of Performance Rights to the Managing Director, Alwyn Vorster. Performance Rights were issued on 27 November 2019 to Mr Vorster and Key Management Personnel and are subject to the following Performance Conditions: Test Date Tranche 1 1 December 2020 Tranche 2 1 December 2022 Performance Period 1 December 2018 to 30 November 2020 1 December 2020 to 30 November 2022 Performance Conditions Average share price over the performance period is $0.35 per share or higher Average share price over the performance period is $0.50 or higher. Use of Remuneration Consultants The Board and Remuneration Committee reviews executive remuneration annually, including assessment of: • Individual and business performance measurement against both internal targets and appropriate external comparatives; and • General remuneration advice from both internal and independent external sources. In the relevant financial year, the Board engaged BDO as external remuneration consultant to provide a comprehensive benchmarking review of Executive Remuneration. Industry remuneration data has been sourced through Aon Hewitt, the Gold and General Mining Industry Remuneration report for the benchmarking of new positions and projected industry market movements. No recommendations on executive remuneration were sought from external consultants during the financial year. 15 Share Trading Policy The trading of shares by all employees is subject to, and conditional upon, compliance with the Company’s share trading policy which is available on the Company’s website: www.bciminerals.com.au. Directors and employees may not engage in short-term or speculative trading of the Company’s securities and are prohibited from trading in financial products issued or created over, or in respect of the Company’s securities during a non-trading period. Service Agreements The remuneration and other terms of employment for executive KMP are covered in formal employment contracts. The key terms of their employment contracts, at the date of release of this report, are shown in the table below. Name Terms/Notice periods/Termination payment A Vorster (Managing Director) S Hodge (Chief Financial Officer) A Chamberlain (Project Director) Base salary inclusive of superannuation of $524,300 reviewed at intervals to be determined by the Company. Employment can be terminated at three months’ notice by Mr Vorster or by the Company. If the Company elects to terminate the employment agreement for reasons other than Mr Vorster’s gross misconduct or default, Mr Vorster will be entitled to a payment equal to six months’ total fixed remuneration. Certain agreed trigger events will lead to Mr Vorster having the option to terminate the contract and receive a payment equal to twelve months’ total fixed remuneration. Base salary inclusive of superannuation $338,836 reviewed at intervals to be determined by the Company. Employment can be terminated at twelve weeks’ notice by Mr Hodge or by the Company. Certain agreed trigger events will lead to Mr Hodge having the option to terminate the contract and receive a payment equal to six months’ total fixed remuneration. Base salary inclusive of superannuation $375,804 reviewed at intervals to be determined by the Company. Employment can be terminated at three months’ notice by Mr Chamberlain or by the Company. Certain agreed trigger events will lead to Mr Chamberlain having the option to terminate the contract and receive a payment equal to six months’ total fixed remuneration Remuneration of Key Management Personnel for the Year Ended 30 June 2020 The remuneration table below sets out the remuneration information for the directors and executives, which includes the managing director, who are considered to be KMP of the Company. Short Term Post Employment Share Based Payments Salary and fees $ Incentives(a) $ Other benefits(b) $ Super- annuation $ Performance Rights(c) $ Termination Payment $ Performance Related(d) % Total $ Directors B O’Donnell M Blakiston J Bloom G Dixon(e) Executives A Vorster S Hodge 132,527 82,192 69,863 - 284,582 - - - - - 512,387 321,897 119,832 63,931 A Chamberlain 354,492 43,362(f) TOTAL 1,188,776 1,473,358 227,125 227,125 - - - - - 13,395 13,346 8,394 35,135 35,135 9,223 7,808 6,637 - 23,668 21,003 21,003 21,003 63,009 86,677 - - - - - 46,775 16,839 18,710 82,324 82,324 - - - - - - - - - - 141,750 90,000 76,500 - 308,250 713,392 437,016 445,961 1,596,369 1,904,619 0 0 0 0 0 23 18 14 19 16 (a) Short term incentives relate to performance in the previous financial year. Please refer to section on short-term incentive payments above. (b) Other benefits include fuel, parking and insurances. Directors’ and Officers’ liability premiums have not been allocated to individual directors. (c) Share-based payments represent the accounting expense incurred by the Company for the stated financial period, reflecting the terms of the Performance Rights as valued using a Monte Carlo simulation. (d) Percentage performance related is the sum of short-term incentives and share based payments divided by total remuneration, reflecting the actual percentage of remuneration at risk for the year. Note that short-term incentives are reported in the year in which they are paid but relate to performance in previous reporting periods. (e) Appointed 18 June 2020. (f) Appointed 31 January 2019 – STI amount prorated. 16 Remuneration of Key Management Personnel for the Year Ended 30 June 2019 The remuneration table below sets out the remuneration information for the directors and executives, which includes the managing director, who are considered to be KMP of the Company. Short Term Post Employment Share Based Payments Salary and fees $ Incentives(a) $ Other benefits(b) $ Super- annuation $ Performance Rights(c) $ Termination Payment $ Performance Related(d) % Total $ Directors B O’Donnell M Bryant (e) A Haslam (e) M Blakiston J Bloom Executives A Vorster S Hodge A Chamberlain (f) 129,452 27,911 31,335 78,767 69,863 337,328 478,836 283,340 140,161 902,337 TOTAL 1,239,665 - - - - - - - - - - - - 75,000 56,236 - 131,236 131,236 12,201 13,601 3,812 29,614 29,614 12,298 2,652 2,977 7,483 6,637 32,047 20,531 20,531 13,315 54,377 86,424 - - - - 1,478 1,478 50,484 37,543 - 88,027 89,505 - - - - - - - - - - - 141,750 30,563 34,312 86,250 77,978 370,853 637,052 411,251 157,288 1,205,591 1,576,444 0 0 0 0 2 0 20 23 0 18 14 (a) Short term incentives relate to performance in the previous financial year. Please refer to section on short-term incentive payments above. (b) Other benefits include fuel, parking and insurances. Directors’ and Officers’ liability premiums have not been allocated to individual directors. (c) Share-based payments represent the accounting expense incurred by the Company for the stated financial period, reflecting the terms of the Performance Rights as valued using a Monte Carlo simulation. (d) Percentage performance related is the sum of short-term incentives and share based payments divided by total remuneration, reflecting the actual percentage of remuneration at risk for the year. Note that short-term incentives are reported in the year in which they are paid but relate to performance in previous reporting periods. (e) Resigned 30 November 2018. (f) A Chamberlain became a KMP on 31 January 2019. Performance Rights on Issue The terms and conditions of Performance Rights granted to KMP affecting remuneration in the current or future reporting periods are set out in the following table. Grant date Date to vest Expiry date Risk free rate at grant date Value per right at grant date Number granted during the year Value at grant date Number vested Number lapsed Executives A Vorster A Vorster S Hodge S Hodge 27/11/2019 30/11/2020 30/11/2022 27/11/2019 30/11/2022 30/11/2024 27/11/2019 30/11/2020 30/11/2022 27/11/2019 30/11/2022 30/11/2024 A Chamberlain 27/11/2019 30/11/2020 30/11/2022 A Chamberlain 27/11/2019 30/11/2022 30/11/2024 0.68% 0.68% 0.68% 0.68% 0.68% 0.68% 0.0186 0.0398 0.0186 0.0398 0.0186 0.0398 2,500,000 46,500 2,500,000 99,500 900,000 900,000 1,000,000 16,740 35,820 18,600 1,000,000 39,800 - - - - - - - - - - - - A Monte Carlo simulation is used to value all Performance Rights granted by the Company. The Monte Carlo valuation simulates the Company’s share price and depending on the hurdle, arrives at a value based on the number of Performance Rights that are likely to vest. The risk-free rate of the Performance Rights on the date granted is shown in the table above. 17 Share Rights on Issue The terms and conditions of Share Rights granted to KMP affecting remuneration in the current or future reporting periods are set out in the following table. Additional Share Rights are proposed to be issued to the Managing Director, Alwyn Vorster, subject to approval at the Company’s next General Meeting. Grant date Test date Vesting date Final conversion date Value per right at grant date Number granted during the year Value at grant date Number vested Number lapsed Executives S Hodge 31/7/2020 2/8/2021 4/8/2021 4/8/2023 A Chamberlain 31/7/2020 2/8/2021 4/8/2021 4/8/2023 0.1903 0.1903 412,051 386,694 78,423 73,597 - - - - Equity Instrument Disclosures The interests of Directors and Executives in shares at the end of the financial year 2020 are as follows: Directors B O’Donnell M Blakiston J Bloom G Dixon Executives A Vorster S Hodge A Chamberlain Total Balance at 1 July 2019 Acquired during year Performance Rights converted during year Disposed during the year Other changes Balance at 30 June 2020 351,998 324,324 - 60,000 - 3,985,645 462,000 - - - - - - - - - - - 1,320,000 - - 4,859,643 324,324 1,320,000 - - - - - - - - - - - - - - - - 676,322 - 60,000 - 5,305,645 462,000 - 6,503,967 The interests of Executives in Performance Rights at the end of the financial year 2020 are as follows. Executives A Vorster S Hodge A Chamberlain Total Balance at 1 July 2019 Granted as compensation Converted to shares Rights lapsed/ cancelled Balance at 30 June 2020 4,000,000 5,000,000 (1,320,000) (2,680,000) 5,000,000 2,750,000 1,800,000 - 2,000,000 - - (2,750,000) 1,800,000 - 2,000,000 6,750,000 8,800,000 (1,320,000) (5,430,000) 8,800,000 Company Performance The table below shows key financial measures of company performance over the past five years. Continuing operations Revenue Net profit/(loss) after tax Basic earnings/(loss) per share Dividends paid per share $million $million Cents Cents Share price (last trade day of financial year) A$ 2020 2019 2018 2017 2016 77.3 0.4 0.09 - 0.17 54.8 12.9 3.26 - 0.18 33.4 (16.9) (4.29) - 0.14 64.0 7.1 2.2 - 0.14 40.4 (43.9) (22.4) - 0.11 18 Transactions with Key Management Personnel On 1 March 2017, Michael Blakiston was appointed as a Non-Executive Director of the Company. Mr Blakiston is a partner in the legal firm Gilbert + Tobin. During the current financial year, the Company made legal fee payments to Gilbert + Tobin of $511K (2019: $445K). All transactions were on normal commercial terms and conditions. Refer to Note 26 for further detail on Related Party transactions. Voting and Comments Made at the Company’s 2019 Annual General Meeting The Company received 98% of ‘yes’ votes cast on its remuneration report for the 2019 financial year. Other Information Insurance of officers During the financial period, the Company incurred premiums of $131,630 (2019: $111,241) to insure the directors, company secretaries and officers of the Company. The liability insured is the indemnification of the Company against any legal liability to third parties arising out of any directors’ or officers’ duties in their capacity as a director or officer other than indemnification not permitted by law. No liability has arisen under this indemnity as at the date of this report. The Company has entered into indemnity deeds with each director and officer. Under the deeds, the Company indemnifies each director and officer to the maximum extent permitted by law against legal proceedings or claims made against or incurred by the directors or officers in connection with being a director or officer of the Company, or breach by the Company of its obligations under the deed. Independent Audit of Remuneration Report The Remuneration Report has been audited by BDO. Please see page 51 of this report for BDO’s report on the Remuneration Report. Signed in accordance with a resolution by the Directors. Brian O’Donnell Chairman Perth, Western Australia 20 August 2020 Alwyn Vorster Managing Director Perth, Western Australia 20 August 2020 19 Director’s Declaration In the opinion of the Directors of BCI Minerals Limited: a. the financial statements comprising the consolidated statement of profit or loss and other comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and accompanying notes are in accordance with the Corporations Act 2001 including: i. giving a true and fair view of the financial position of the Consolidated Entity as at 30 June 2020 and of its performance for the financial year ended 30 June 2020; and ii. complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements. b. there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable. c. the Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001 (Cth). This declaration is made in accordance with a resolution of the Directors and is signed on their behalf by: Brian O’Donnell Chairman Perth, Western Australia 20 August 2020 20 BCI Minerals Limited Annual Financial Report For the Year Ended 30 June 2020 www.bciminerals.com.au ABN 21 120 646 924 21 Financial Statement Contents Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Note 1 – Revenue Note 2 – Expenses Note 3 – Impairment of Non-Financial Assets Note 4 – Income Taxes Note 5 – Cash and Cash Equivalents Note 6 – Trade and Other Receivables Note 7 – Property, Plant and Equipment Note 8 – Exploration and Evaluation Note 9 – Intangibles Note 10 – Leases Note 11 – Trade and Other Payables Note 12 – Provisions Note 13 – Capital Risk Management Note 14 – Contributed Equity Note 15 – Reserves Note 16 – Accumulated Losses Note 17 – Earnings per Share Note 18 – Financial Risk Management Note 19 – Subsidiaries Note 20 – Segment Information Note 21 – Commitments Note 22 – Contingent Liabilities and Assets Note 23 – Events Occurring After the Reporting Period Note 24 – Parent entity Note 25 – Auditor’s Remuneration Note 26 – Related Party Transactions Note 27 – Share Based Payments Note 28 – Other Accounting Policies 23 24 25 26 27 29 29 30 31 33 34 35 36 37 38 39 39 40 40 41 41 41 42 43 44 45 45 45 45 45 46 46 48 22 Consolidated Statement of Profit or Loss and Other Comprehensive Income BCI Minerals Limited and its controlled entities for the year ended 30 June 2020 Revenue from continuing operations Sale of goods Other revenue Total revenue from continuing operations Cost of sales Administration expenses Exploration and evaluation expenditure Loss on sale of asset Profit on sale of exploration and intangible assets Impairment on sale of exploration and intangible assets Profit / (loss) before finance cost and income tax Finance costs Profit / (loss) before income tax Income tax benefit / (expense) Profit / (loss) after income tax from continuing operations attributable to owners of BCI Minerals Limited Basic earnings / (loss) per share from continuing operations Diluted earnings / (loss) per share from continuing operations Notes 2020 $000’s 2019 $000’s 76,793 466 54,170 630 77,259 54,800 (56,231) (44,330) (6,432) (19,342) - 10,190 (5,030) 414 (37) 377 - 377 Cents 0.09 0.09 (5,419) (9,655) (3) 19,019 (3,025) 11,387 - 11,387 1,510 12,897 Cents 3.26 3.26 1 2 2 8,9 8,9 10 4 17 17 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 23 Consolidated Statement of Financial Position BCI Minerals Limited and its controlled entities for the year ended 30 June 2020 Current assets Cash and cash equivalents Short term investments Trade and other receivables Total current assets Non-current assets Receivables Property, plant and equipment Exploration and evaluation assets Intangibles Right of use assets Total non-current assets Total assets Current liabilities Trade and other payables Lease liability Provisions Total current liabilities Non-current liabilities Lease liability Provisions Total non-current liabilities Total liabilities Net assets Shareholders’ equity Contributed equity Reserves Accumulated losses Total shareholders’ equity Notes 2020 $000’s 2019 $000’s 5 6 6 7 8 9 10 11 10 12 10 12 14 15 16 41,548 33,702 552 16,205 58,305 12,295 39,848 6,425 18,502 745 77,815 340 22,251 56,293 8,285 39,683 2,575 23,532 - 74,075 136,120 130,368 18,345 18,092 231 591 - 379 19,167 18,471 541 12,295 12,836 32,003 104,117 - 8,285 8,285 26,756 103,612 267,303 267,212 5,455 5,418 (168,641) (169,018) 104,117 103,612 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 24 Consolidated Statement of Changes in Equity BCI Minerals Limited and its controlled entities for the year ended 30 June 2020 Contributed equity $000’s Accumulated losses $000’s Balance at 1 July 2018 Profit for the year Total comprehensive income 266,984 - - Transactions with equity holders in their capacity as equity holders Performance Rights converted Share based payments 228 - (181,915) 12,897 12,897 - - Balance at 30 June 2019 267,212 (169,018) Profit for the year Total comprehensive income - - Transactions with equity holders in their capacity as equity holders Performance Rights converted Share based payments 91 - 377 377 - - Balance at 30 June 2020 267,303 (168,641) Reserves $000’s 5,542 - - (228) 104 5,418 - - (91) 128 5,455 Total $000’s 90,611 12,897 12,897 - 104 103,612 377 377 - 128 104,117 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 25 Consolidated Statement of Cash Flows BCI Minerals Limited and its controlled entities for the year ended 30 June 2020 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Income tax refund Notes 2020 $000’s 2019 $000’s 82,329 39,794 (78,412) (48,087) 466 0 630 1,510 Net cash flows provided by / (used) in operating activities 5 4,383 (6,153) Cash flows from investing activities Proceeds from disposal of exploration tenements Proceeds from disposal of plant and equipment Payments for short term investments Payments for plant and equipment Payments for exploration and evaluation assets 10,814 27,294 0 (189) (3,312) (3,850) 1 (340) (157) - Net cash flows from/(used in) investing activities 3,463 26,798 Cash flows from financing activities Net cash flows from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 5 - 7,846 33,702 41,548 - 20,645 13,057 33,702 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 26 Notes to the Consolidated Financial Statements BCI Minerals Limited and its controlled entities for the year ended 30 June 2020 Preface to the Notes The notes include information which is required to understand the financial statements and is material and relevant to the operations and the financial position and performance of the Company. Information is considered relevant and material if: • The amount is significant due to its size or nature; • The amount is important in understanding the results of the Company; • It helps to explain the impact of significant changes in the Company’s business; or • It relates to an aspect of the Company’s operations that is important to its future performance. The notes are organised into the following sections: • Basis of preparation; • Key numbers; • Capital; • Risk management; • Group structure; • Unrecognised items; and • Other notes. Basis of Preparation Corporate information The financial statements for BCI Minerals Limited for the year ended 30 June 2020 were authorised for issue in accordance with a resolution of the Directors on 20 August 2020. BCI Minerals Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. BCI Minerals Limited and its subsidiaries together are referred to in these financial statements as the ‘Company’ or the ‘Consolidated Entity’. The principal activities of the Company during the financial year were the development of assets in the Pilbara region of Western Australia, including the Mardie Salt & Potash Project. The Company also receives revenue from the Iron Valley Iron Ore Mine under the terms of an Iron Ore Sale and Purchase Agreement. Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out in the notes to the accounts. These policies have been consistently applied to all the financial years presented, unless otherwise stated. These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”), and the Corporations Act 2001. BCI Minerals Limited is a for-profit entity for the purpose of preparing the financial statements. The financial statements are presented in Australian dollars. The Company is of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, and in accordance with that Corporations Instrument amounts in the directors’ report and annual financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. Compliance with IFRS The consolidated financial statements of BCI Minerals Limited comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and cash flow hedges at fair value through other comprehensive income. 27 New, revised or amending Accounting Standards and Interpretations adopted New and amended standards adopted by the group AASB 16 – Leases became effective for annual reporting periods commencing on or after 1 January 2019 and is applicable to the Group for the reporting period. As a result of this standard, the group has revised its accounting policies regarding leases to comply with the new standard. The impact from adopting the leasing standard and the new accounting policies are disclosed in note 10 below. Impact of standards issued but not yet applied by the entity There are no new standards yet to be applied by the Group. Changes in accounting policy, estimates disclosures, standards and interpretations Except for matters relating to the adoption of new Australian Accounting Standards referred to above, the accounting policies adopted and estimates made are consistent with those of the previous financial year. Foreign currency The financial statements are presented in Australian dollars which is the Company’s functional and presentation currency. Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Comparatives Where applicable, comparatives have been adjusted to conform with current year presentation. Key estimates and judgements In the process of applying the Company’s accounting policies, management has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are found in the following notes: Note 3: Impairment of non-financial assets Note 4: Income taxes Note 7: Property, plant and equipment Note 8: Exploration and evaluation Note 9: Intangibles Note 12: Provisions Note 27: Share based payments 28 KEY NUMBERS Note 1 – Revenue Sales – Iron Valley Net gain / (loss) on pricing changes Rebate – Iron Valley Sale of Goods Interest revenue Other income Total Accounting policy 2020 $000’s 80,283 (700) (2,790) 76,793 466 0 2019 $000’s 54,312 - - 54,312 630 (142) 77,259 54,800 Revenue is recognised if it meets the criteria outlined below. Sales – Iron Valley Revenue from contracts with customers for the sale of goods is recognised when persuasive evidence, usually in the form of an executed sales agreement, or an arrangement exists, indicating there has been a transfer of control to the customer, no further work or processing is required by the Company, the quantity and quality of the goods has been determined with reasonable accuracy, the price can be reasonably estimated, and collectability is reasonably assured. The Company receives revenue from Mineral Resources Limited (“MIN”) based on a mine gate sale agreement based on MIN’s realised price. The Company recognises revenue when the ore passes over the ships rail which is typically at the bill of lading. MIN send monthly shipping information on either a provisional basis at the date of shipment or the subsequent final pricing, which is typically once the vessel has arrived at its destination and quotation pricing has been determined. BCI recognises revenue on provisionally priced sales based on the estimated fair value of the total consideration, adjusted for any changes when pricing is finalised. Provisionally priced sales for which price finalisation is referenced to the relevant metal price index have an embedded commodity derivative. The embedded derivative is carried at fair value through profit and loss as part of trade receivables. The period between provisional pricing and final invoices is typically 30 to 90 days. Interest revenue Interest revenue is recognised on a time proportionate basis using the effective interest method. Note 2 – Expenses Amortisation of mine properties Royalties Cost of sales Employee benefits expense Depreciation and amortisation Share based payments Non-executive directors’ fees Occupancy related expenses Consultant and legal fees Other Administration expenses 2020 $000’s 2,493 53,738 56,231 3,112 872 128 390 414 454 1,062 6,432 2019 $000’s 2,547 41,783 44,330 2,891 76 104 466 395 170 1,317 5,419 29 Note 3 – Impairment of Non-Financial Assets Accounting policy Assets are reviewed for impairment at each reporting date or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which an asset’s carrying amount exceeds its recoverable amount. The valuation used by BCI to determine recoverable amount is the higher of an asset’s fair value less costs of disposal (“FVLCD”) and value in use (“VIU”). Accounting standards require that the valuation technique used be consistent with one of three commonly accepted approaches outlined below: • Level 1 Market - The market approach uses prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets, liabilities or a group of assets and liabilities, such as a business. Examples relevant to BCI include earnings multiples or JORC reserve/resource multiples; • Level 2 Cost - The cost approach reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost); and • Level 3 Income - The income approach converts future amounts (e.g. cash flows or income and expenses) to a single current (i.e. discounted) amount. When the income approach is used, the fair value measurement reflects current market expectations about those future amounts. Examples include Net Present Value (“NPV”) techniques. FVLCD is an NPV calculation which is consistent with the Level 3 income approach. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash flows from other assets or groups of assets (cash-generating units). An impairment loss is recognised for the amount by which an asset’s carrying amount exceeds its recoverable amount. Non-financial assets other than goodwill that have been impaired are reviewed for possible reversal of impairment at each reporting period. Impairment assessment The Company has completed its annual review of its assets for impairment. Based on these assessments, the Company has concluded that impairment of assets was not required, with the exception of impairment recognised on assets sold, refer to note 8 and 9 for further detail. Revenue assumptions Cash flow projections used to estimate recoverable amounts include assumptions on revenue. The assumptions used for revenue in impairment testing are summarised below: CFR 62% Fe iron ore price (USD/dmt, nominal) Years 1-5 Years 6-10 Years 11-20 Foreign exchange rate (AUD:USD, nominal) Years 1-5 Years 6-10 Years 11-20 Inflation (% per annum) USD inflation rate Key estimates and judgements 2020 2019 79-81 80-81 82-85 71-81 68-74 76-92 0.68-0.71 0.74-0.78 0.69 0.69 0.5 0.74 0.74 2.2 The recoverable amount of mine property, plant and equipment and intangible assets is estimated on the basis of the discounted value of future cash flows. The estimates of future cash flows are based on significant assumptions including: • estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction and the timing of access to these reserves and resources; • future iron ore prices and exchange rates based on forecasts by a range of recognised economic forecasters as well as recent spot prices and rates; • production rates, production costs and capital expenditure based on approved budgets and projections including inflation factors; • the timing of when production will commence from projects for which royalties are payable to the Company; and • the asset specific discount rate applicable to the cash generating unit. 30 Note 4 – Income Taxes Current tax expense/(benefit) Current period Adjustments for prior periods Deferred tax expense/(benefit) Origination and reversal of temporary differences De-recognition of deferred tax assets Recognition of previously unrecognised tax losses Equity deferred tax movement Adjustments for prior periods Income tax (expense)/benefit reported in the Consolidated statement of profit or loss and other comprehensive income Reconciliation of effective tax rate Profit / (loss) before tax Income tax at the statutory rate of 30 per cent (2019: 30 per cent) Non-deductible expenses Temporary differences derecognised Utilisation of tax losses Tax losses not recognised Recognised directly in equity Under/(over) provided in prior periods and other Tax refund from prior years Income tax (expense)/benefit reported in the Consolidated statement of profit or loss and other comprehensive income 2020 $000’s 2019 $000’s - - - (127) 152 - (80) 55 - - 377 113 39 (127) - - (80) 55 - - 94 1,495 1,589 (39) (848) 1,073 (79) (186) (79) 1,510 11,932 3,580 31 (769) 902 (3,650) (79) (15) 1,510 1,510 Accounting policy The income tax expense on income for the financial year is the tax payable on the current financial period’s taxable income based on the national income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. 31 Significant judgement The Company is subject to income taxes in Australia. Significant judgement is required in determining the provisions for income taxes. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination may be subject to change. The Company estimates its tax liabilities based on the Company’s understanding of the tax law. 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 income tax assets and liabilities in the period in which such determination is made. The Company recognises deferred tax assets relating to carried forward tax losses to the extent they can be utilised. The utilisation of the tax losses depends on the ability of the entities to generate sufficient future taxable profits. At 30 June 2020, the Company had unrecognised deferred tax assets relating to tax losses of $73.9M (2019: $73.1M). The Company also has an R&D off-set available of $1.3M (2019 $5.7M). During the year, the Group recognised a capital gain for tax purposes upon the sale of the Buckland project. The gain of $13.7M, comprising consideration received during the current year and an estimate of the value of deferred contingent consideration receivable, has been offset against the current year income loss, carried forward capital losses and the R&D offset available. 2020 $000’s (4,063) 73,902 - 2019 $000’s (5,875) 70,423 2,702 Assets Liabilities Net 2020 $000’s 2019 $000’s 2020 $000’s 2019 $000’s 2020 $000’s 2019 $000’s (3,535) (3,296) (3,535) (3,296) - 177 - - 802 159 1,138 - 1,138 - 113 - - 529 160 802 - 802 - (900) (282) (484) - (5,201) 4,063 (1,138) - (2,409) (591) (381) 177 (900) (282) 318 - 159 (6,677) (4,063) 5,875 (802) 4,063 - Provisions $000’s Share issue costs $000’s Mine property $000’s 141 238 (28) 113 64 177 (79) 160 (1) 159 - - - - - - - Other $000’s 843 (339) 25 529 273 - 802 Temporary differences derecognised $000’s - - - - - - - 113 (2,409) (591) 148 160 (5,875) 5,875 - Total $000’s 1,222 (446) 25 802 336 1,138 Deferred tax assets not recognised Temporary differences Income Tax losses Capital losses Deferred tax assets and liabilities Amounts recognised in Profit or Loss: Mine property, plant and development Provisions Intangibles Exploration Other items Amounts recognised directly in equity: Share issue costs in equity Temporary differences derecognised Tax assets/(liabilities) Movements in deferred tax assets At 1 July 2018 (Charged)/credited to profit or loss to (under)/over prior period At 30 June 2019 (Charged)/credited to profit or loss to (under)/over prior period At 30 June 2020 32 Movement in deferred tax liabilities At 1 July 2018 (Charged)/credited to profit or loss to (under)/over prior period At 30 June 2019 (Charged)/credited to profit or loss to (under)/over prior period At 30 June 2020 Note 5 – Cash and Cash Equivalents Cash at bank Cash on deposit Total Intangibles $000’s Mine property $000’s Exploration $000’s Other $000’s Temporary differences derecognised $000’s (2,409) (2,757) (781) (302) 5,027 - - (486) (53) (2,409) (3,296) 1,509 - (239) - (900) (3,535) 190 - (591) 309 - (282) (79) - (381) 848 - 5,875 (103) (1,812) - - Total $000’s (1,222) 473 (53) (802) (336) - (484) 4,063 (1,138) 2020 $000’s 9,711 31,837 41,548 377 3,147 5,000 128 2019 $000’s 12,219 21,483 33,702 12,897 2,623 3,025 104 (10,161) (19,019) (1) 30 (3) 8 5,805 (14,415) (262) 320 4,383 8,719 (92) (6,153) Reconciliation of profit / (loss) after income tax to net cash flows from operating activities Net Profit / (loss) Depreciation and amortisation Impairment of exploration tenements Share based payments Gain on disposal of exploration tenements Gain on disposal of plant and equipment Other (Increase)/decrease in assets Trade and other receivables Increase/(decrease) in liabilities Trade and other payables Provisions Net cash inflow / (outflow) from operating activities Cash on deposit relates to 31-day term deposits held with financial institutions. See Note 18 – Financial risk management note for further details. Accounting policy For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. There are no non-cash investing or financing activities. 33 Note 6 – Trade and Other Receivables Current Trade receivables and prepayments Other receivables Total current Non-current Other receivables Total non-current Total trade and other receivables 2020 $000’S 2019 $000’S 16,205 - 16,205 12,295 12,295 28,500 21,566 685 22,251 8,285 8,285 30,536 Due to the short-term nature of current receivables, their carrying amount is approximate to their fair value. As at 30 June 2020 no receivables were past due or impaired (2019: Nil). Other non-current receivables represent an estimate of the amount payable by the operator of the Iron Valley operation for fulfilment of rehabilitation obligations at the end of operations. Refer to Note 18 for information on the financial risk management policy of the Company. Accounting policy Trade receivables are amounts due from customers for commodities sold in the ordinary course of business. Trade Receivables that are Provisionally Priced Trade receivables that contain an embedded derivative relating to the provisional pricing of iron ore are measured at fair value. At each reporting date the provisional priced receivable is marked to market based on the forward selling price for the quotation period stipulated in the contract until the quotation period expires and the change in value is recognised in the profit or loss. Other Trade Receivables Trade receivables that do not contain an embedded derivative are measured at the amount of consideration that is unconditional. The Group holds trade receivables with the objective to collect the contractual cash flows and measures them at amortised cost. The Group applies the simplified impairment methodology permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. 34 Note 7 – Property, Plant and Equipment Mine Properties $000’s Plant and equipment $000’s Office furniture, equipment and IT $000’s Year ended 30 June 2019 Opening net book value Additions Disposals Depreciation and amortisation expense Closing net book value At 30 June 2019 Cost Accumulated depreciation and amortisation Net carrying amount Year ended 30 June 2020 Opening net book value Additions Disposals Reclassification of assets Depreciation and amortisation expense Closing net book value At 30 June 2020 Cost Accumulated depreciation and amortisation Net carrying amount Accounting policy 42,049 - - (2,547) 39,502 51,658 (12,156) 39,502 39,502 - - - (2,492) 37,010 51,658 (14,648) 37,010 25 140 (3) (22) 140 870 (730) 140 140 2,979 (1) 5 (597) 2,526 3,853 (1,327) 2,526 79 16 - (54) 41 1,711 (1,670) 41 41 335 - (5) (59) 312 957 (645) 312 Total $000’s 42,153 156 (3) (2,623) 39,683 54,239 (14,556) 39,683 39,683 3,314 (1) - (3,148) 39,848 56,468 (16,620) 39,848 Mine Properties Once a mining project has been established as commercially viable and technically feasible, expenditure other than that on land, buildings, plant and equipment is transferred and capitalised as mine property. Mine property costs include past capitalised exploration and evaluation costs, pre-production development costs, development excavation, development studies and other subsurface and permanent installation expenditure pertaining to that area of interest. Mine property costs are accumulated in respect of each separate area of interest. Costs associated with commissioning new assets in the period before they are capable of operating in the manner intended by management, are capitalised. Mine property costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit. When an area of interest is abandoned, or the Directors decide that it is not commercial or technically feasible, any accumulated cost in respect of that area is written off in the financial period the decision is made. Each area of interest is reviewed at the end of each accounting period and accumulated costs written off to the profit or loss to the extent that they will not be recoverable in the future. Amortisation of mine property costs is charged on a unit of production basis over the life of economically recoverable reserves once production commences. Mine property assets are assessed for impairment if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, mine property is allocated to cash-generating units to which the development activity relates. The cash generating unit shall not be larger than the area of interest. Plant and equipment Plant and equipment, including mechanical, electrical, field and computer equipment as well as furniture, fixtures and fittings, is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis so as to write off the net cost of each asset over either its expected useful life of 2.5 to 5 years for furniture, computers and equipment, or the life of the mine for plant and equipment. Spare parts, stand-by equipment and servicing equipment is classified as property, plant and equipment if they are expected to be used during more than one period. Otherwise they are classified as inventory. Assets acquired as part of the early construction at the Mardie project site will be depreciated on a straight line basis over 2 to 3 years depending on the useful life of the assets. Key judgement – ore reserves and mineral resources Amortisation of mine property assets is based on the depletion of economically recoverable reserves. The rate of amortisation is re-assessed on a prospective basis when ore reserves are changed for the appropriate ore body in accordance with the JORC 2012 Guidelines. 35 Note 8 – Exploration and Evaluation Opening balance Carrying value of tenements sold Write down of tenements to recoverable value Exploration earn-in Exploration tenements acquisition Unsuccessful exploration expenditure derecognised Net carrying amount Accounting policy 2020 $000’s 2,575 - - 200 3,650 - 6,425 2019 $000’s 14,500 (8,900) (3,025) - - - 2,575 The Company accounts for exploration and evaluation activities as follows: Acquisition and Exploration earn-in Exploration and evaluation costs arising from acquisitions and earn-ins are carried forward where exploration and evaluation activities have not, at reporting date, reached a stage to allow a reasonable assessment of economically recoverable reserves otherwise they are written down to their recoverable amount. Exploration and evaluation costs Costs arising from on-going exploration and evaluation activities are expensed as incurred. Disposal of tenements On the 31st of March 2020, the Group announced the sale of Buckland project to Mineral Resources Limited. As per the terms of the sale and purchase agreement, BCI received an amount of $6M on completion of the sale, a further $10M is payable to BCI upon first shipment of iron ore extracted from the area sold, with an additional $4M due one year after the date of first shipment of iron ore. The group is also entitled to a royalty equal to 1% of the FOB revenue earned from iron ore mined at Bungaroo South. No receivable has been recognised in relation to these future payments due to the uncertainty over the timing and development of the project by Mineral Resources Limited. The tenements associated with the Buckland project had been carried at nil value however an impairment charge of $5.0M has arisen through change in value of associated intangible assets, refer to note 9 below. In addition to the above, the group announced the early receipt of a $4M payment related to the sale of the Kumina tenements in the prior year. Other tenement sales during the financial year generated $0.2M, and the Group received the second Tranche payment of $0.6M due from disposal of a tenement in the prior year, taking the total cash receipts from divestment of assets to $10.8M. Key judgement – Capitalisation of exploration and evaluation expenditure The Company has capitalised acquired exploration and evaluation expenditure and earn-in expenditure on the basis that either it is expected to be recouped through future successful development (or alternatively sale) of the areas of interest concerned or on the basis that it is not yet possible to assess whether it will be recouped. The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Company decides to exploit the related lease itself, or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal changes (including changes to environmental rehabilitation obligations) and changes to commodity prices. During the financial year, BCI announced an agreement with Leichardt Industrials Pty Ltd to secure the right to purchase an additional tenement area adjacent to the Mardie project. An amount of $3.5M was paid in May for the right to acquire the southern tenement area and an option to acquire the rights for the remaining northern tenement area within the following 12 months. The additional tenement area provides optionality for future layout optimisation and expansion of the Mardie project. BCI currently holds a 30% interest in the Carnegie Potash in a joint venture with ASX-listed potash development company, Kalium Lakes Limited (“KLL”), who is the joint venture manager. BCI has rights to earn up to a 50% interest through sole- funding the Pre-Feasibility Study and Feasibility Study phases. 36 Note 9 – Intangibles Net carrying value of intangibles: Royalties Cape Preston East Port rights Net carrying amount 2020 $000’s 2019 $000’s 15,502 3,000 18,502 15,502 8,030 23,532 The intangible assets were acquired through Iron Ore Holdings Limited as follows: Royalties The Company holds royalties over the Koodaideri South and North Marillana Extension tenements. The assets have a finite life reflecting the underlying resource and will be amortised as the resource is depleted. Production has not commenced at either Koodaideri South or North Marillana and hence the assets remain unamortised. The Koodaideri South royalty asset has been tested for impairment with the recoverable amount assessed by reference to the FVLCD, in line the policy in note 3 and classified as level 3 under the fair value hierarchy. FVLCD was determined using an income approach based on the net present value of future cash flows projected over the estimated mine life of 32 years. The post-tax nominal discount rate used in determining FVLCD was 7.7%. Forecast iron ore price, foreign exchange and inflation assumptions used in the calculation of FVLCD are summarised in Note 3. The North Marillana Extension royalty asset has been tested for impairment with the recoverable amount assessed by reference to the FVLCD, in line with the policy in note 3 and classified as level 3 under the fair value hierarchy. FVLCD was determined using an income approach based on the net present value of future cash flows projected over the estimated mine life of 10 years. The post-tax nominal discount rate used in determining FVLCD was 7.7%. Forecast iron ore price, foreign exchange and inflation assumptions used in the calculation of FVLCD are summarised in Note 3. The recoverable amounts were determined to be in excess of carrying values, and there are no probable changes to key assumptions that would cause the asset to be impaired. Refer to Note 3 for details of the key estimates and judgements applied in determining the recoverable amount. Cape Preston East Port Rights As disclosed at Note 8 above, during the year the Group disposed of all assets associated with the Buckland project and in this process, relinquished the certain previously held rights to develop and lease the Cape Preston East Port. An impairment charge of $5.0M has been recognised in the statement of comprehensive income to reflect the decline in value of the intangible assets associated with the Cape Preston East Port rights. The residual $3.0M intangible asset reflects the value associated with the remaining intellectual property being Ministerial Statement 949 (“MS949”), documentation of design and studies to support development of the port, all of which remain with the Group. The $3.0M carrying value of the asset is expected to be recovered in future through sale of the intellectual property asset on commercial terms. 37 Note 10 – Leases The Group has adopted AASB 16 with effect from 1 July 2019 (the ‘adoption date’) but has not restated comparatives for the June 2019 reporting period as allowed under AASB 16. All relevant contracts, other than short term contracts or those relating to low-value assets have been assessed to determine whether they are leases, or contain, leases. For initial adoption purposes the group has relied on the practical expedient where short term contracts include contracts that were for a total period greater than 12 months but that expire within 12 months or less of the adoption date. As at 1 July 2019 the Group did not have any lease contracts which required right of use assets or lease liabilities to be recognised as the lease terms ended within 12 months of the date of initial application. Therefore no right of use asset or lease liability was recognised at this date. Lease liabilities have been measured at amounts equal to the net present value of remaining lease payments over the remaining term of the lease, discounted at the Group’s incremental borrowing rate. The weighted average interest rate applied was 4.7%. The discount rate used in calculating the carrying amount of lease liabilities considers the circumstances applicable over the underlying leased assets, in particular the lease value, the term and economic environment. Operating lease commitments disclosed at the end of the comparative reporting period are reconciled to the opening lease liability balance as follows: Operating lease commitments disclosed at 30 June 2019 Discounted at the Group’s discount rate at the date of application Less: Short term leases recognised on a straight-line basis as an expense Lease liabilities recognised on adoption on 1 July 2019 June 2020 $000’s 87 86 (86) 0 Right of use assets were measured at amounts equal to the carrying value of their respective lease liabilities on the adoption date, adjusted for incentives, accruals and prepayments relating to the contractual agreement. Right of use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. There are no onerous lease contracts that would require adjustment to the right of use assets on the adoption date. Lease liabilities Recognised on adoption Additional lease contracts entered into during the interim period Add: Borrowing costs Less: Payments Lease liabilities as at 30 June 2020 Disclosure in Statement of Financial Position Current lease liability Non-current lease liability Total Lease liability Right of use assets Recognised on adoption Additional right of use assets recognised Accumulated amortisation Right of use assets as at 30 June 2020 June 2020 $000’s - 962 37 (227) 772 231 541 772 0 964 (218) 745 The impact on the profit or loss due to adoption AASB 16 was not material, nor was there a material impact on Group earnings per share. 38 Note 11 – Trade and Other Payables Current Trade payables and accruals Total Accounting policy 2020 $000’s 2019 $000’s 18,345 18,345 18,092 18,092 These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe (refer to Note 18). Note 12 – Provisions Current Employee benefits Total current Non-current Rehabilitation Total non-current Total Movement in Provisions in 2020 Opening balance 1 July 2019 Changes in rehabilitation estimate Unwinding of discount (non-cash expense) Amounts provided during the year Closing balance Accounting policy 2020 $000’s 2019 $000’s 591 591 12,295 12,295 12,886 Rehabilitation and site closure $000’s Employee benefits $000’s 8,285 3,898 112 - 12,295 379 - 212 591 379 379 8,285 8,285 8,664 Total $000’s 8,664 3,898 112 212 12,886 Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Employee benefits, salaries and annual leave Liabilities for salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employee’s services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Employee benefits – long service leave The liability for long service leave is recognised and measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. 39 Rehabilitation The Company has obligations to dismantle and remove certain items of property, plant and equipment and to restore and rehabilitate the land on which they are situated. A provision is raised for the estimated cost of settling the rehabilitation and restoration obligations existing at balance date, discounted to present value using an appropriate discount rate. When provisions for rehabilitation are initially recognised, the corresponding cost is capitalised as an asset within mine properties and amortised accordingly. Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure, costs are charged to the profit or loss in the period in which the work is undertaken. At each reporting date the rehabilitation liability is re-measured to account for any new disturbance, updated cost estimates, changes to the estimated lives of operations, new regulatory requirements and revisions to discount rates. Changes to the rehabilitation liability are added to or deducted from the related rehabilitation asset and amortised accordingly. Key estimate – Rehabilitation The Company’s accounting policy for the recognition of rehabilitation provisions requires significant estimates in determining the estimated cost for the rehabilitation of disturbed areas, removal of infrastructure and site closure at a point in the future. These uncertainties may result in future actual expenditure differing from the amounts currently provided. A provision is made for the estimated cost to rehabilitate the Iron Valley site, which is offset by a receivable from Mineral Resources Limited recognising the contractual requirement to rehabilitate the site. Note 13 – Capital Risk Management The Company’s objective when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns to shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company defines capital as equity and net debt. Net debt is defined as borrowings less cash and cash equivalents, and equity as the sum of share capital, reserves and accumulated losses/retained earnings. Net debt to equity Total debt Less cash and cash equivalents Excess of cash over debt Equity Net debt as percentage of equity - not applicable as the Company has no debt. 2020 $000’s 2019 $000’s - 41,548 41,548 104,117 - 33,207 33,207 103,612 Note 14 – Contributed Equity Share capital Ordinary shares - fully paid Movements in ordinary share capital Opening balance 2020 2019 Number $000’s Number $000’s 398,928,910 267,303 397,608,910 276,212 397,608,910 267,212 394,968,910 266,984 Issue of shares under Employee Performance Rights Plan 1,320,000 91 2,640,000 228 Closing balance Accounting policy 398,928,910 267,303 397,608,910 267,212 Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are recorded in equity as a deduction, net of tax, from the proceeds. Terms and conditions of ordinary shares Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors are fully entitled to any proceeds of liquidations. 40 Note 15 – Reserves Share based payments reserve Balance as at 1 July Share based payments expense Issue of shares under Employee Performance Rights Plan Balance as at 30 June Financial assets at fair value through other comprehensive income Balance as at 1 July Balance as at 30 June Options exercised reserve Balance as at 1 July Balance as at 30 June Total reserves Nature and purpose of reserves 2020 $000’s 2019 $000’s 10,640 128 (91) 10,677 (9,009) (9,009) 3,787 3,787 5,455 10,764 104 (228) 10,640 (9,009) (9,009) 3,787 3,787 5,418 The share based payments reserve is used to recognise the fair value of options (not exercised), Performance Rights and equity-settled benefits issued in settlement of share issue costs. Changes in the fair value of investments such as equities measured at fair value through other comprehensive income, are recognised in other comprehensive income and accumulated in a separate reserve within equity. On adoption of AASB 9 Financial Instruments investments in listed shares previously classified as available-for-sale were reclassified as financial assets at fair value through other comprehensive income. The options exercised reserve is used to recognise the fair value of options exercised. Note 16 – Accumulated Losses Balance as at 1 July Net profit / (loss) Balance as at 30 June Note 17 – Earnings per Share Earnings per share from continuing operations Profit / (loss) after income tax from continuing operations 2020 $000’s (169,018) 377 2019 $000’s (181,915) 12,897 (168,641) (169,018) 2020 $000’s 2019 $000’s 377 12,897 Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 398,712,517 397,237,863 Adjustments for calculation of diluted earnings per share: Vested Performance Rights outstanding at year end - 1,320,000 Weighted average number of ordinary shares used in calculating diluted earnings per share 398,712,517 398,557,863 Earnings per share attributable to the ordinary equity holders of the company Basic earnings / (loss) per share Diluted earnings / (loss) per share Accounting policy Cents 0.09 0.09 Cents 3.26 3.26 Basic earnings per share is calculated by dividing net profit after income tax attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the financial year. Diluted earnings per share is calculated using net profit after income tax attributable to equity holders of the Company adjusted for the after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted average number of shares used is adjusted for the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. 41 RISK MANAGEMENT Note 18 – Financial Risk Management The Company holds the following financial instruments: Financial assets Cash and cash equivalents Short term investments Trade and other receivables Financial liabilities Trade and other payables 2020 $000’s 2019 $000’s 41,548 553 28,500 70,601 18,345 18,345 33,702 340 30,536 64,578 18,092 18,092 Market (including foreign exchange, commodity price and interest rate risk), credit and liquidity risks arise in the normal course of the Company’s business. Primary responsibility for identification and control of financial risk rests with senior management under directives approved by the Board. a. Market risk i. Foreign exchange risk Foreign exchange risk arises from future commitments, assets and liabilities that are denominated in a currency that is not the functional currency in which they are measured. The Company is not exposed to foreign exchange risk on trade receivables. ii. Commodity price risk The Company’s revenue is exposed to commodity price fluctuations, specifically iron ore prices. The Company measures exposure to commodity price risk by monitoring and stress testing the Company’s forecast financial position to sustained periods of low iron ore prices on a regular basis. Trade receivables outstanding at year end are subject to potential changes in future iron ore prices. b. Credit risk Credit risk arises from cash and cash equivalents and deposits with financial institutions, and from receivables from customers for iron ore sales. For banks and financial institutions, only independently rated parties with a minimum rating of “A” are accepted in accordance with ratings guidelines of major global credit rating agencies. For customers, credit reference checks are undertaken. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Company’s maximum exposure to credit risk without taking account of the fair value of any collateral or other security obtained. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised at the beginning of this note. The credit quality of financial assets that are neither past due nor impaired can be summarised as follows: • Cash and cash equivalents $41.5M (2019: $33.7M) held with banks with minimum long term external credit rating of AA-. • Short term investments $0.5 M (2019: $0.3) held with banks with a minimum long term external credit rating of AA- • Current trade and other receivables $16.2M (2019: $22.2M) due from existing customers are backed by an agreement with quarterly invoices paid within 5 working days. There has been no history of default in the past. • Non-current receivables $12.3M (2019: $8.3M) due from Mineral Resources Limited under a contractual arrangement as described in Note 6. No default is expected. c. Liquidity risk Prudent liquidity management involves the maintenance of sufficient cash and access to capital markets. It is the policy of the Board to ensure that the Company is able to meet its financial obligations and maintain the flexibility to pursue attractive investment opportunities through keeping committed credit lines available where possible, ensuring the Company has sufficient working capital and preserving the 15% share issue limit available to the Company under the ASX Listing Rules. Maturity analysis of financial assets and liabilities Financial liabilities comprise trade and other payables which have a maturity of less than six months and lease liabilities with a fixed payment commitment of up to 4 years. 42 GROUP STRUCTURE Note 19 – Subsidiaries The consolidated financial statements include the financial statements of BCI Minerals Limited and the subsidiaries listed in the following table. BC Iron Nullagine Pty Ltd BCI (SA) Pty Ltd BC Potash Pty Ltd BC Gold Pty Ltd BC Pilbara Iron Ore Pty Ltd PEL Iron Ore Pty Ltd Buckland Minerals Transport Pty Ltd* Cape Preston Logistics Pty Ltd* Mardie Minerals Pty Ltd Iron Valley Pty Ltd Bungaroo South Pty Ltd* Mal’s Ridge Pty Ltd Maitland River Pty Ltd BCI Exploration Pty Ltd Country of incorporation Functional currency 2020 % 2019 % Beneficial interest Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia AUD AUD AUD AUD AUD AUD AUD AUD AUD AUD AUD AUD AUD AUD 100 100 100 100 100 100 0 0 100 100 0 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 * Subsidiaries sold during the year ended 30 June 2020. Accounting policy The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of BCI Minerals Limited as at 30 June 2020, and the results of all subsidiaries for the year then ended. Subsidiaries are all entities (including structured entities) over which the Company has control. The Company controls an entity when the Company 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Consolidated Entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of an asset transferred. Accounting policies of subsidiaries are consistent with the policies adopted by the Consolidated Entity. 43 Note 20 – Segment Information 2020 Segment Information Segment revenue Sales revenue Other revenue Total Segment results EBITDA Interest revenue Finance costs Depreciation and amortisation Impairment of assets Iron Valley $000’s Mardie $000’s Buckland $000’s Other $000’s Consolidated $000’s 76,793 - 76,793 - - - - - - - 466 466 22,968 (18,722) 9,950 (5,853) - - (2,493) - - - (577) - - - (5,030) 4,920 -* - 466 (37) (295) (5,719) 63,425 3,144 76,793 466 77,259 8,343 466 (37) (3,365) (5,030) 377 136,120 32,003 Profit / (loss) before income tax 20,475 (19,299) Segment assets Segment liabilities 65,162 26,817 7,533 2,042 * Assets previously held by Buckland entities now transferred to Other following sale of Buckland project. 2019 Segment Information Segment revenue Sales revenue Other revenue Total Segment results EBITDA Interest revenue Write down of tenements Depreciation and amortisation Profit / (loss) before income tax Segment assets Segment liabilities Iron Valley $000’s Mardie $000’s Buckland $000’s Other $000’s Consolidated $000’s 54,312 (142) 54,170 - - - - - - 12,296 (8,200) 16,499 - - (2,547) 9,749 69,188 23,553 - - - - (8,200) 16,499 800 - 8,030 - - 630 630 (4,190) 630 (3,025) (76) (6,661) 52,350 3,203 54,312 488 54,800 16,405 630 (3,025) (2,623) 11,387 130,368 26,756 Management has determined that the Company has four reportable segments, being Iron Valley, Mardie, Buckland and Other (Corporate and other assets). Sales revenue comprises iron ore sales from a single location to a single customer in Australia. Accounting policy Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Company’s Board. Internal reporting is provided to the Board on a consolidated basis. 44 UNRECOGNISED ITEMS Note 21 – Commitments The Company has two property leases and a lease for vehicles at the Mardie project site. Future lease commitments are now disclosed as per AASB 16 – Leases, refer to note 10 for further detail (30 June 2019: $87k). Note 22 – Contingent Liabilities and Assets As at 30 June 2020, the Company has no contingent liabilities or assets other than additional cash payments it may receive in respect of the sale of the Buckland project and Kumina tenements disclosed in Note 8. Note 23 – Events Occurring After the Reporting Period On the 31st of July, the Company exercised the option to acquire additional tenement land adjacent to the Mardie Project with a payment of $2.5M. Other than disclosed above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in financial periods subsequent to the year ended 30 June 2020. OTHER NOTES Note 24 – Parent entity The following details information related to the parent entity, BCI Minerals Limited, as at 30 June 2020. The information presented here has been prepared using accounting policies consistent with those presented in the notes to the accounts. Statement of Financial Position Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Reserves Accumulated losses Total shareholders’ equity Profit / (Loss) for the year Total comprehensive income / (loss) for the year Included in note 21 are commitments incurred by the parent entity relating to the lease of offices. Note 25 – Auditor’s Remuneration The auditor of BCI Minerals Limited is BDO Audit (WA) Pty Ltd. Amounts received or due and receivable by BDO Audit (WA) Pty Ltd for: Audit or review of financial reports for the Company Non-audit services – other services Non-audit services – tax services Total 2020 $000’s 2019 $000’s 39,261 172,319 2,587 13,390 267,303 5,583 33,481 141,438 1,125 53,937 267,212 5,546 (193,155) (185,257) 79,731 (7,898) (7,898) 87,501 1,805 1,805 2020 $ 2019 $ 61,000 20,350 - 81,350 65,896 10,211 52,312 128,419 45 Note 26 – Related Party Transactions a. Parent entity BCI Minerals Limited is the parent entity. b. Subsidiaries Interests in subsidiaries are set out in note 19. c. Key management personnel Disclosures relating to Key Management Personnel are set out in the Audited Remuneration Report. Short-term employee benefits Share based payments Post-employment benefits Total d. Transactions with related parties Payment for services made to other related entities 2020 $ 2019 $ 1,735,618 1,400,515 82,324 86,677 89,505 86,424 1,904,619 1,576,444 2020 $ 2019 $ 1,133,863 445,095 On 1 March 2017, Michael Blakiston was appointed as a Non-Executive Director of the Company. Mr Blakiston is a partner in the legal firm Gilbert + Tobin. During the current financial year, the Company made legal fee payments to Gilbert + Tobin of $511K (2019: $445K). All transactions were on normal commercial terms and conditions. During the year, a company within the same consolidated group as Wroxby Pty Ltd, a substantial shareholder of the Company, provided the Company with rental premises for which payments were made in the amount of $623K (2019: nil). All transactions were on normal terms and conditions. Note 27 – Share Based Payments During the current and prior financial years, the Company has provided share based payments to employees. An Employee Performance Right Plan was initially approved at the shareholder’s annual general meeting of 19 November 2010 and a revised Performance Right Plan and a Share Right Plan were approved at the Company’s annual general meeting held on 27 November 2019. Under the terms of these plans, the Board may offer Performance Rights or Share Rights at no more than nominal consideration to employees or directors (the latter subject to shareholder approval) based on a number of criteria, including contribution to the Company, period of employment, potential contribution to the Company in the future and other factors the Board considers relevant. These long-term incentives are provided to certain employees at the discretion of the Board to deliver long-term shareholder returns. Set out below is a summary of the Performance Rights granted by the Company during the financial year. Employee Performance Rights During the year the Company issued share based payments in the form of Performance Rights to directors and employees as per below. Refer to the Remuneration Report in the Directors’ Report for more information. 2020 – Performance Rights Grant date 27/11/2019 – Tranche 1 27/11/2019 – Tranche 2 *Source: www.asx.com.au Granted during the year 5,500,000 5,500,000 Vesting date 30/11/2020 30/11/2022 Fair value per right at grant date Share price on grant date* Expected dividends $0.0186 $0.0398 $0.18 $0.18 0% 0% The fair value per Performance Right on grant date was determined as follows: Grant date Vesting date Grant date share price Volatility (per cent) Dividend yield (per cent) Risk free rate (per cent) 46 27/11/2019 Tranche 1 27/11/2019 Tranche 2 30/11/2020 30/11/2022 $0.18 48.0 0 0.68 $0.18 60.1 0 0.68 2019 – Performance Rights Grant date 23/08/2018 *Source: www.asx.com.au Granted during the year Vesting date Fair value per right at grant date Share price on grant date* 2,050,000 30/06/2020 $0.01 $0.14 Expected dividends 0% The fair value per Performance Right on grant date was determined as follows: Grant date Vesting date Grant date share price Volatility (per cent) Dividend yield (per cent) Risk free rate (per cent) 23/08/2018 30/06/2020 $0.14 75.9 0 2.5 Summary of Performance Rights on issue Vesting date 30/06/2019 30/06/2020 30/11/2020 30/11/2022 Total Opening balance at 1 July 2019 Rights granted during the year Rights cancelled /lapsed during the year Rights converted to shares during the year Closing balance at 30 June 2020 Rights vested since 30 June 2020 3,925,000 5,400,000 - - - - 5,500,000 5,500,000 (2,605,000) (1,320,000) (5,400,000) - - - - - - - 5,500,000 5,500,000 9,325,000 11,000,000 (8,005,000) (1,320,000) 11,000,000 - - - - - a. Expenses arising from share-based payment transactions Total expenses arising from share based payments recognised during the financial period as part of employee benefits expense were as follows. Where Performance Rights are forfeited or cancelled due to a non-market vesting condition not being satisfied, the previously recognised cumulative share based payment expense is reversed. Director benefits Employee benefits Total Accounting policy 2020 $ 82,324 45,675 127,999 2019 $ 51,962 66,022 117,984 The fair value of share based payments granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options or Performance Rights. A Monte Carlo simulation is used to value Performance Rights. The Monte Carlo calculation simulates the Company’s share price and depending on the hurdle arrives at a value based on the number of Performance Rights that are likely to vest. The employee benefit expense recognised each period takes into account the most recent estimate of the options and Performance Rights. The impact of revision to original estimates, if any, is recognised in the profit or loss with a corresponding adjustment to equity. Key estimate: Share-based payment costs The cost of share-based payments to financiers is measured by reference to the difference between the nominal value and net present value of the finance facility provided. The net present value is determined based upon a market comparable discount rate applicable to similar size companies within the mining sector. A Monte Carlo simulation has been used to value Performance Rights. The Monte Carlo calculation simulates the returns of the Company in relation to the peer group and arrives at a value based on the number of Performance Rights that are likely to vest. 47 Note 28 – Other Accounting Policies Summary of other significant accounting policies Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, except where the GST incurred 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. Receivables and payables are stated inclusive of the amount of GST receivable or payable, where an invoice has been issued. The net amount of GST recoverable from, or payable to, the taxation authority is included within receivables or payables in the statement of financial position. 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. Commitments and contingencies are disclosed net of the amount of GST recoverable from or payable to the taxation authority. Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is based on the presumption that the transaction takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market. The principal or most advantageous market must be accessible to, or by, the Company. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest. The fair value measurement of a non-financial asset takes into account the market participant’s ability to generate economic benefits by using the asset at its highest and best use or by selling it to another market participant that would use the asset at its highest and best use. In measuring fair value, the Company uses valuation techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Tax consolidation legislation BCI Minerals Limited and its wholly owned Australian controlled entities have entered into the tax consolidation legislation. On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which, limits the joint and several liability of the wholly owned entities in the case of a default by the head entity, BCI Minerals Limited. The entities entered into a tax funding agreement under which the wholly owned entities fully compensate BCI Minerals Limited for any current tax payable assumed and are compensated by BCI Minerals Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to BCI Minerals Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ financial statements. The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which where appropriate, is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables. New, revised or amending Accounting Standards and Interpretations adopted There are no new accounting standards, amendment of standards or interpretations that are yet to be implemented by the Group. 48 Independent Auditor’s Report Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of BCI Minerals Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of BCI Minerals Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 49 Carrying Value of Mine Properties and Intangible Assets Key audit matter How the matter was addressed in our audit At 30 June 2020, we note that the carrying values of Our procedures included, but were not limited to the Mine Properties and Intangible Assets are significant to following: the financial statements, as disclosed in Note 7 and Note 9. An annual impairment test is required for Intangible Assets not being amortised under the Australian Accounting Standards. The assessment of the carrying values of Mine Properties and Intangible Assets requires management to make significant accounting judgements and estimates to determine whether the assets require impairment. Due to the significance of the estimates and assumptions in these assessments, we have identified this as a key audit matter. Refer to Note 3, Note 7 and Note 9 for detailed disclosures, which include the related accounting policies and critical accounting judgements and estimates. • • • • • • Analysing management’s key assumptions used in the discounted cash flow models against external data and market information to determine their reasonableness; Challenging the appropriateness of management’s discount rates used in the discounted cash flow models in conjunction with our internal valuation experts; Challenging assumptions around timing of future cash flows; Reviewing mathematical accuracy of the discounted cash flow models; Performing sensitivity analysis on significant assumptions to determine if there would be a significant change to the carrying value of the assets; and Assessing the adequacy of the Groups’ disclosure in respect of mine property carrying values and impairment assessment assumptions as disclosed in Note 3, Note 7 and Note 9 of the financial report. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and the auditor’s report thereon, which we obtained prior to the date of this auditor’s report, and the mineral resources and ore reserves information, which is expected to be made available to us after that date. 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. 50 When we read the mineral resources and ore reserves information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and will request that it is corrected. If it is not corrected, we will seek to have the matter appropriately brought to the attention of users for whom our report is prepared. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 9 to 15 of the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of BCI Minerals Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. 51 Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Glyn O’Brien Director Perth, 20 August 2020 52 Auditor’s Independence Declaration Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF BCI MINERALS LIMITED As lead auditor of BCI Minerals Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of BCI Minerals Limited and the entities it controlled during the period. Glyn O’Brien Director BDO Audit (WA) Pty Ltd Perth, 20 August 2020 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 53 Additional ASX Information (as at 13 October 2020) Substantial Shareholders Substantial shareholders as disclosed in substantial notices given to the Company are as follows: Shareholder Wroxby Pty Ltd Sandon Capital Pty Ltd Distribution of Shareholdings Size of shareholding 1-1,000 1,001-5,000 5,001-10,000 10,001 – 100,000 100,001 and over Total Shares held % of issued capital 236,750,238 36,277,729 39.6 6.1 Number of holders Number of shares % of issued capital 1,360 1,963 938 1,746 392 598,553 5,536,390 7,307,535 59,075,192 525,876,163 6,399 598,393,833 0.10 0.93 1.22 9.87 87.88 100.00 Unmarketable Parcels There were 2,066 members holding less than a marketable parcel of shares in the Company at $0.245 per share. Twenty Largest Shareholders # 1 Shareholder Wroxby Pty Ltd 2 Wroxby Pty Ltd 3 4 5 6 7 8 9 J P Morgan Nominees Australia Limited Ryder Capital Management Pty LtdNorfolk Enchants Pty Ltd One Managed Invt Funds Ltd National Nominees Limited Citicorp Nominees Pty Limited CS Third Nominees Pty Limited 10 Mineralogy Pty Ltd 11 12 One Managed Invt Funds Ltd <1 A/C> HSBC Custody Nominees (Australia) Limited – A/C 2 13 Mr Alwyn Petrus Vorster 14 Mr Dennis Jonathan Kar Que Lum 15 Ms Karen Anne Davies + Mr Bruce Donald Maclean 16 17 CS Fourth Nominees Pty Limited HSBC Custody Nominees (Australia) Limited 18 Mr Richard Cheng Shih Koo + Ms Cindy Bee Har Koo 19 Mr Graham Stewart Campbell + Mrs Heather Roslyn Campbell 20 Glyde Street Nominees Pty Ltd 20 Perth Capital Pty Ltd Total Voting Rights All issued shares carry voting rights on a one for one basis. Unlisted Securities Security type Performance rights Share rights 54 Shares held % of issued capital 134,636,106 102,114,132 33,772,722 24,873,512 18,333,276 18,157,751 13,419,961 9,966,960 7,319,599 6,090,000 6,000,000 5,616,081 5,305,645 4,034,407 3,275,868 2,933,656 2,620,457 2,469,944 2,295,000 2,000,000 2,000,000 22.50 17.06 5.64 4.16 3.06 3.03 2.24 1.67 1.22 1.02 1.00 0.94 0.89 0.67 0.55 0.49 0.44 0.41 0.38 0.33 0.33 407,235,077 68.05 Number Number of holders 11,000,000 1,445,348 5 4 Mineral Resources and Ore Reserves BCI’s Mineral Resources and Ore Reserves are at the Iron Valley iron ore mine. Iron Valley is 100% owned by BCI and is being operated by Mineral Resources Limited (MIN) under a royalty-type agreement. MIN operates the mine at its cost and purchases Iron Valley product from BCI at a price linked to MIN’s realised sale price. Estimates for Iron Valley as at 30 June 2020 are set out below, with a comparison to 30 June 2019 figures. Mineral Resources reduced by 7.9Mt and Ore Reserves reduced by 6.7Mt during the year due to mining depletion and stockpile adjustments. Iron Valley Mineral Resource Estimate (100% BCI, subject to iron ore sale agreement with MIN) Classification Measured – In-situ Measured – Stockpiles Indicated – In-situ Inferred – In-situ Total at 30 June 2020 Total at 30 June 2019 Cut-off % Fe 50 50 50 50 50 50 Mt 78.6 2.8 74.5 26.1 182.0 189.9 Fe % CaFe % SiO2 % Al2O3 % 57.7 55.5 58.5 57.8 58.0 58.0 62.6 59.5 63.0 61.3 62.6 62.5 5.3 8.3 5.1 6.6 5.5 5.5 3.2 3.8 3.2 3.9 3.3 3.3 Iron Valley Ore Reserve Estimate (100% BCI, subject to iron ore sale agreement with MIN) Classification Proved – In-situ Proved – Stockpiles Probable – In-situ Total at 30 June 2020 Total at 30 June 2019 Cut-off % Fe 54 54 54 54 54 Mt 49.3 2.8 30.2 82.3 89.0 Fe % CaFe % SiO2 % Al2O3 % 58.2 55.5 58.6 58.2 58.3 63.1 59.5 63.2 63.0 63.0 4.7 8.3 5.0 4.9 5.0 3.1 3.8 3.1 3.1 3.1 Notes: • Tonnages are dry metric tonnes and have been rounded. Small difference in totals may exist due to rounding. • CaFe means “calcined Fe” and equals Fe% / (1- LOI%). • Stockpiles have been converted to dry tonnes based on a 6% moisture content. • Stockpiles include 0.2Mt of post-process lump and fines products and 2.8Mt of pre-process ore. P % 0.19 0.16 0.17 0.14 0.17 0.17 P % 0.19 0.16 0.16 0.18 0.18 LOI % 7.9 6.8 7.2 5.6 7.3 7.2 LOI % 7.9 6.8 7.3 7.6 7.5 Mineral Resources and Ore Reserves Governance Iron Valley Mineral Resource and Ore Reserve estimates are completed by or under the guidance of a suitably qualified MIN or independent Competent Person in accordance with JORC (2012) guidelines. BCI is satisfied with the procedures MIN has advised it has in place for Mineral Resource and Ore Reserve estimation. Suitably qualified BCI personnel have also reviewed the documentation and are comfortable with the methodologies used by MIN. The Mineral Resources and Ore Reserves statement included in the Annual Report is reviewed and approved by a suitably qualified BCI Competent Person prior to its inclusion. Competent Persons Statements The Mineral Resources and Ore Reserves statement in this report has been approved by Mr Paul Penna who is an employee of BCI Minerals Limited and a Member of the Australian Institute of Geoscientists. Mr Penna consents to the inclusion in this report of the Mineral Resources and Ore Reserves statement in the form and context in which it appears. The information in this report that relates to the Mineral Resource estimate at Iron Valley is based on, and fairly represents, information that has been compiled by Mr Matthew Watson, who is a full time employee of Mineral Resources Limited and a Member of the Australasian Institute of Mining and Metallurgy. Mr Watson has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Watson consents to the inclusion in this report on the matters based on his information in the form and context in which they appear. The information in this report that relates to the Ore Reserve estimate at Iron Valley is based on, and fairly represents, information that has been compiled by Mr Ross Jaine, who is a full time employee of Mineral Resources Limited and a Member of the Australasian Institute of Mining and Metallurgy. Mr Jaine has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Jaine consents to the inclusion in this report on the matters based on his information in the form and context in which they appear. 55 Corporate Directory BCI Minerals Limited ABN 21 120 646 924 Annual General Meeting The 2020 Annual General Meeting of BCI Minerals Limited will be held at 2pm (AWST) on Thursday 26 November 2020 at the offices of BDO, 38 Station Street, Subiaco, Western Australia. Details of the business of the meeting will be provided in the Notice of Meeting. Copies of the Chairman’s and Managing Director’s speeches will be available on the Company’s website. Financial Calendar* September 2020 quarter report: Annual General Meeting: Half-year results: 27 October 2020 26 November 2020 24 February 2021 *Timing of events is subject to change Registered Office and Principal Place of Business Level 2, 1 Altona Street West Perth, Western Australia 6005, Australia Telephone: +61 (08) 6311 3400 Facsimile: +61 (08) 6311 3449 Website: www.bciminerals.com.au info@bciminerals.com.au Email: Postal Address GPO Box 2811 Perth, Western Australia 6001, Australia Executive Directors Alwyn Vorster – Managing Director Non-executive Directors Brian O’Donnell – Chairman Michael Blakiston Jenny Bloom Garret Dixon Company Secretary Susan Hunter Share Registry Investors seeking information about their shareholdings should contact the company’s share registry: Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace Perth, Western Australia 6000 Postal address: GPO Box 2975, Melbourne Victoria 3001 Telephone: 1300 850 505 (within Australia) +61 3 9415 4000 (outside Australia) (03) 9473 2500 (within Australia) +61 3 9473 2500 (outside Australia) web.queries@computershare.com.au www.investorcentre.com/contact Facsimile: Email: Website: The share registry can assist with queries on share transfers, dividend payments and changes of name, address or bank account details. For security reasons you will need your Security Reference Number (SRN) or Holder Identification Number (HIN) when communicating with the share registry. Australian Securities Exchange Listing BCI Minerals Limited securities are listed on the Australian Securities Exchange (ASX) under the code BCI. 56 Level 2, 1 Altona Street, West Perth, Western Australia 6005, Australia GPO Box 2811, Perth, WA 6001 Telephone: +61 (08) 6311 3400 Facsimile: +61 (08) 6311 3449 Email: info@bciminerals.com.au www.bciminerals.com.au ABN 21 120 646 924