Octanex Limited
Annual Report 2020

Plain-text annual report

. . OCTANEX LIMITED ABN 61 005 632 315 ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 . OCTANEX LIMITED ABN 61 005 632 315 CORPORATE DIRECTORY CONTENTS Corporate Directory……………………..…2 Chairman’s Letter………………………….3 Operations Report…………...…………......4 Auditor’s Independence Declaration……....7 Directors’ Report…………………………...8 Corporate Governance .................................. 10 Remuneration Report ................................... 12 Directors’ Declaration .................................. 14 Audit Report ................................................. 15 Statement of Profit or Loss and Other Comprehensive Income ................................ 18 Statement of Financial Position .................... 19 Statement of Changes in Equity ................... 20 Statement of Cash Flows .............................. 22 Notes to the Financial Statements ................ 23 Shareholder Information…………….…..…48 Directors Mr Geoffrey Albers Chairman & Chief Executive Officer Ms Raewyn Clark Executive Director Datuk Kevin Kow How Non-Executive Director Mr James Willis Independent Non-Executive Director Company Secretary Mr Robert Wright Registered Office 108 Marlborough Street, Bentleigh East Victoria, 3165, Australia Telephone: Facsimile: E-mail: +61 (03) 8610 4702 +61 (03) 8610 4799 admin@octanex.com.au Auditor Grant Thornton Audit Pty Ltd Collins Square, Tower 5 727 Collins Street Melbourne, Victoria 3008 Australia Website: www.octanex.com.au Share Registry Automic Pty Ltd Level 3, 50 Holt Street Surry Hills, NSW 2010, Australia Telephone: 1300 288 664 (within Australia) Telephone: +61 (2) 9698 5414 (outside Australia) Website: www.automic.com.au Stock Exchange ASX Limited Level 4, North Tower, Rialto 525 Collins Street Melbourne, Victoria 3000 Australia ASX Code: OXX Incorporated in Victoria on 13 March 1980 Octanex Annual Report - Page | 2 OCTANEX LIMITED ABN 61 005 632 315 Chairman’s Letter Octanex has expanded its resource exploration strategy to include those metals and rare earth elements vital to support the emergence of non-hydrocarbon energy sources, as well as to include precious metals. We are entering a decarbonising world where strategic metals will play a huge part in transportation as well as electricity generation and storage. As a result, we have taken a decisive step with the application for a number of tenements in the Sefton region of the Eastern Goldfields of Western Australia. Octanex’s Sefton Project comprises exploration licence applications in an isolated and little-explored area with high-grade metamorphic granite and granite gneiss terrane with small greenstone belts and enclaves. It is surrounded on three sides by emerging world class gold camps. The project area is considered prospective for gold and nickel. Octanex continued evaluation activities in relation to our 100% interest in the Ascalon gas field offshore Western Australia, held via the exploration permit WA-407-P. I extend my thanks to our staff and contractors. I thank my co-directors and shareholders for their ongoing support of Octanex. E.G.Albers Chairman 16 October 2020 Octanex Annual Report - Page | 3 OCTANEX LIMITED ABN 61 005 632 315 Operational Review Assets and Activities Overview Sefton Gold Project, Eastern Goldfields Superterrane During the year Octanex expanded its strategy to include the objective of developing green-fields gold exploration projects. Octanex’s Sefton Gold Project comprises exploration licence applications in the largely unexplored Sefton Lineament within the Burtville Terrane of the Eastern Goldfields Superterrane in Western Australia (Figure 1). Figure 1 Sefton Project Applications (shown in blue) Previous exploration in the application areas is limited and on-ground activity has consisted largely of part- coverage geochemical surveys with little or no drilling. In some cases, significant soil anomalies from historical work by past explorers have not been drill tested. Work undertaken by the Geoscience Australia and Geological Survey of Western Australia in recent years provides Octanex with access to a large database that includes full coverage aeromagnetic data; relatively recent geological mapping; gravity, seismic and geochronology datasets and, in some cases, geochemical data. Octanex’s Sefton Project area is an isolated and little-explored high-grade metamorphic granite and granite gneiss terrane surrounded on three sides by emerging world class gold camps (refer Figure 2). World class gold mines and deposits in the neighbouring regions include Sunrise Dam (10 Moz Au), Wallaby (8 Moz Au) and Granny Smith (2.5 Moz Au) and a suite of other nearby deposits (with a combined resources of 25 Moz Au) are present to the east in the Laverton greenstone belt. The 6 Moz granitoid-hosted Gruyere deposit is located in the Dorothy Hills Belt (Yamarna greenstone belt) to the east, whilst the 7.5 Moz granite gneiss-hosted Tropicana deposit is located in the Albany-Fraser Province to the southeast. Octanex Annual Report - Page | 4 OCTANEX LIMITED ABN 61 005 632 315 Figure 2 Regional tectonic framework of the Burtville Terrane and its major resource projects Octanex’s near-term objective is to identify priority structural targets for early drill and geochemical evaluation. Although focussing principally on high calibre targets that could present opportunities for the discovery of world class gold resources quickly and cheaply, the Company’s structural focus also creates opportunity to synchronously locate shear-associated intrusions that could have potential for other commodity elements including rare earth metals, niobium and tantalum. Octanex completed geological reconnaissance in the region of the Sefton Project Area which has provided it with greater understanding of the regolith and underlying Archean bedrock. The regolith is dominated by a veneer of transported sands with lesser residual soils associated with silcrete-capped laterite breakaways. Silcrete capping the laterite breakaways appears to be silicified soils of Tertiary age. Previously mapped “Permian” sediments, capping a number of laterite breakaways in the region, show evidence of being fluvial deposits younger than the underlying Tertiary saprolite and older than the overlying silcrete caprock. Archean bedrock outcrop, largely confined to the laterite breakaways, consists mainly of deeply weathered (saprolitic) granitoid and lesser fresh granitoids, granite gneiss and schistose (sheared) granitoid. Only one outcrop of weathered mafic rock (dolerite or diorite of uncertain affinities) was identified. Evidence for quartz veining is widespread with vein quartz covered scree plains evident in some areas of interpreted regional faults/shears. The Sefton Lineament, one of the main targets, is under transported and residual soil cover and its geology remains unknown. Octanex Annual Report - Page | 5 OCTANEX LIMITED ABN 61 005 632 315 Ascalon Gas, Bonaparte Basin Octanex has a 100% interest in exploration permit WA-407-P which contains the Ascalon gas discovery. The Ascalon accumulation has an aerial extent of 320 km2, a proven source/charge, trap, seal and a high reservoir pressure (10,500 psi), which is 3,500 psi over normally pressured, but may be due to a much deeper closing contour and greater gas in place. Proximity to existing infrastructure and gas resources presents opportunities for the future development of Ascalon options. Located in shallow water (68 m), wells can be drilled using a jack-up rig, while unmanned wellhead platform development options indicate reduced CAPEX and OPEX potential. Ascalon-1A, drilled in 1995 by Mobil, encountered 155m TVD1 gross section in the same Permian formation as the Petrel and Tern Gas accumulations. However, approximately 60% of the shallower reservoir in Ascalon-1A was not flow tested due to mechanical issues. WA-407-P is in year 6 of its initial term, which commenced in February 2020 with the work program having been a amended program of geotechnical studies designed to inform a decision to drill an appraisal well. to Figure 3 Ascalon proximity to gas infrastructure Year 6 of the initial term of WA-420-P, which was adjacent to WA-407-P, ended during the year. Taking into account the relatively small proportion of the Ascalon accumulation located within the WA-420-P tenement, the higher priority locations for an Ascalon appraisal well being situated in WA-407-P, and the Commonwealth- Western Australia Joint Authority’s expectation that any renewal would include the drilling of a well in the guaranteed term, Octanex decided not to apply to renew WA-420-P and the permit expired at the end of year 6. 1 True Vertical Depth Octanex Annual Report - Page | 6 Collins Square, Tower 5 727 Collins Street Melbourne Victoria 3008 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Octanex Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Octanex Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants B L Taylor Partner – Audit & Assurance Melbourne, 29 September 2020 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. OCTANEX LIMITED ABN 61 005 632 315 Directors’ Report Directors Mr Geoff Albers LL.B, FAICD Executive Chairman Appointed 2 October 1984 Mr Albers has over thirty-five years oil and gas industry experience, having first became involved in oil exploration in 1977. Mr Albers is a law graduate of the University of Melbourne and has had extensive experience as a director and administrator in corporate law, petroleum exploration and resource sector investment. Mr Albers founded Octanex Limited and is a substantial shareholder in the company. He is also a director and substantial shareholder in the ASX listed Peako Limited and Enegex Limited. Ms Rae Clark B.Bus(dist), CA, MAICD, AGIA, ACIS Executive Director Appointed 17 October 2014 Ms Clark has more than twenty years’ experience focussed primarily on the natural resource sector. She has wide operational, commercial and project development knowledge and her experience includes business development, financial modelling and analysis, capital raising and mergers and acquisitions, as well as managing joint venture partners, government, regulator and investor relations. Ms Clark was previously Commercial Manager of Octanex. Having commenced her career with Deloitte in 1997, Ms Clark has worked with oil and gas companies since 2005. She is also a Director of Peako Limited and Enegex Limited. Ms Clark holds a Bachelor of Business (with distinction), a Graduate Diploma (ICAA) and Graduate Diploma in Applied Corporate Governance. Datuk Kevin Kow How FCA Non-Executive director Appointed 18 December 2014 Datuk Kevin Kow How is a director of Sabah Development Bank. He is a member of the Malaysian Institute of Accountants, the Malaysian Institute of Certified Public Accountants and a fellow member of the Institute of Singapore Chartered Accountants and the Institute of Chartered Accountants in England & Wales. He was made a partner of Ernst & Young (“EY”), Malaysia in 1984 and served as the partner-in-charge of EY’s offices in Sabah and Sarawak. Later, from 1996 onwards, he was the partner-in-charge of EY’s practice in Sabah and Labuan until his retirement at the end of 2003. He also serves as a Director of Cahya Mata Sarawak Berhad, K&N Kenanga Holdings Berhad, Kenanga Investment Bank Berhad, Saham Sabah Berhad, Sarawak Cable Berhad, M3nergy Berhad and several private limited companies. Mr James Willis LL.M (Hons), Dip Acc Independent Non-Executive Director Appointed 18 August 2009 Previously an executive director of Octanex (2009-2011) Mr Willis is an upstream petroleum consultant who has held governance positions with and consulted to various participants in the oil and gas exploration sector. Mr Willis is a former partner in the leading New Zealand law firm of Bell Gully where his practice speciality was in the upstream oil and gas area, particularly relating to issues concerning gas contracting and the development of oil and gas reserves, joint ventures and upstream petroleum related acquisitions. Octanex Annual Report - Page | 8 OCTANEX LIMITED ABN 61 005 632 315 Mr Willis is a director of New Zealand Energy Corp, a company with New Zealand operations and listed on the TSX Venture exchange. Company Secretary Mr Robert Wright B Bus, CPA Mr Wright is a senior financial professional with over 30 years commercial experience in the resource, energy and manufacturing industries gained at various companies and locations, including 14 years at BHP. He is the Chief Financial Officer (CFO) and the Company Secretary of Octanex and CFO and company secretary of the listed companies, Enegex Limited and Peako Limited. Mr Wright is a member of CPA Australia. Principal Activities The principal activities of the consolidated entity during the year were exploration and development and investment in the natural resources sector. Financial Results The net loss of the consolidated entity for the financial year was $5,264,733 (2019: loss of $4,264,324). Dividends No dividend was declared or paid during the year and to the date of this report. Review of Operations A review of the consolidated entity’s Operations during the financial year is provided in the Operational Review. Surrendered and expired interests On 12 February 2020 WA-420-P expired. Change in State of Affairs Other than as described in these annual financial statements there have been no changes in the state of affairs of the company. Subsequent Events In July 2020 Octanex made application for a further four exploration licence applications following geological reconnaissance of its Sefton Gold Project. The area covered by the additional allocations largely overlaps Octanex’ existing exploration licence application, with the new application boundaries providing logistical and administrative advantages. Future Developments Future developments in the company’s operations and the expected result from those operations are dependent on exploration and development success in the permit areas in which the group holds interests. Directors’ Meetings There were no formal board and committee meetings held during the year. All matters that required formal Board resolutions were dealt with via written circular resolutions. The directors met and corresponded at numerous times throughout the financial year to discuss the Group’s affairs. The board undertakes all audit committee functions. Octanex Annual Report - Page | 9 OCTANEX LIMITED ABN 61 005 632 315 Share Capital Ordinary Shares The Company’s share capital consists of 242,823,840 ordinary fully paid shares (excluding 29,889,107 shares held by the Trustee of the Octanex Trustee Share Scheme). Trustee Stock Scheme As at 30 June 2020 and to the date of this report, 29,889,107 ordinary shares, previously issued to the Trustee pursuant to the Scheme, remain unsold. The Trustee does not exercise voting rights in respect of the shares held pursuant to the Scheme. Unlisted Options As at 30 June 2020 and to the date of this report, there are no options granted. 2020 2019 Unlisted Options Balance at beginning of year 7,170,000 13,770,000 (7,170,000) (6,600,000) Options expired - 7,170,000 Balance at end of year Indemnification of Directors and Officeholders During the year and to the date of this report, the company did not pay premiums in respect of contracts insuring officers or auditors of the company against liabilities arising from their position of officers or auditor of the company. The Company has entered into Deeds of Access and Indemnity with each of the Directors referred to in this report who held office during the year indemnifying each against all liabilities incurred in their capacity as directors of the Company to the full extent permitted by law. Corporate Governance The Board is responsible for the strategic
direction of the Company, the identification and implementation of corporate policies and goals, and the monitoring of the business and affairs of the Company on behalf of its shareholders. The Board delegates responsibility for the day-to-day management of Octanex to the Chief Executive Officer. All Directors have unrestricted access to Company records
and information and receive detailed financial
and operational reports. The Board is currently comprised of two Non- Executive Directors and two Executive Directors. In accordance with the Company’s Constitution and the ASX Listing Rules, the Directors (other than the Chief Executive Officer) are subject to re-election by shareholders every three years. The Board meets regularly throughout the year. Where appropriate, presentations are given to the Board from management who may be questioned directly by Board members on technical, operational and commercial issues. Details of the Company’s corporate governance practices are included in the Corporate Governance statement found on the Company’s website. Octanex Annual Report - Page | 10 OCTANEX LIMITED ABN 61 005 632 315 Auditor independence and non–audit services A copy of the auditor’s independence declaration, as required under Section 307C of the Corporations Act 2001, is attached and forms part of this Directors’ Report for the year ended 30 June 2020. No fees were paid to the auditor for non-audit services. This Directors’ Report is made in accordance with a resolution of the directors and forms part of the financial statements. On behalf of the Directors: E.G. Albers Director 29 September 2020 Octanex Annual Report - Page | 11 OCTANEX LIMITED ABN 61 005 632 315 Remuneration Report This Remuneration Report for the year ended 30 June 2020 outlines the key management personnel remuneration arrangements of the Company in accordance with the requirements of the Corporations Act 2001 (Act) and its regulations. The disclosures in this Remuneration Report have been audited as required by section 308(3C) of the Act. Key Management Personnel For the purpose of this report, Key Management Personnel (KMPs) of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company directly or indirectly. The following have been identified as KMPs at 30 June 2020 for the purpose of this Remuneration Report: Executive Directors EG Albers RL Clark Chairman & Chief Executive Officer Executive Director & Chief Operating Officer Non-executive Directors JMD Willis KK How Director Director The board of directors is responsible for determining and reviewing compensation arrangements for the directors and executives. The board assesses the appropriateness of the nature and amount of emoluments on a periodic basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executives. Remuneration levels for directors and executives of the company are competitively set to attract and retain appropriately qualified and experienced directors and executives. The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The remuneration structure takes into account: • • • The capability and experience of the directors and executives; The ability of directors and executives to control the entity’s performance; and The requirement that directors apply a portion of their remuneration to the purchase of shares in the company, at market price, so as to align the interests of directors with that of shareholders. In accordance with the company’s constitution, directors’ non-executive remuneration was approved by shareholders on 28 November 2014 at $250,000 per annum. During the year, non-executive director remuneration of $nil was paid or payable (2019: $nil). Total director remuneration (exclusive of consulting fees which are included at note 19) of $230,081 was paid and payable during the year (2019: $227,074). Octanex Annual Report - Page | 12 OCTANEX LIMITED ABN 61 005 632 315 There is no performance related remuneration for directors. Remuneration paid to directors covers all board activities, including serving on committees. Apart from a retirement benefit for the chairman and four weeks annual leave for RL Clark, the other directors do not receive employee benefits such as leave, but long annual leave and service remuneration may include the grant of options over shares of the company to align directors’ interests with that of the shareholders. There is no direct the and relationship between company’s performance for the last five years. remuneration Components of directors’ compensation paid are disclosed below. Short Term Post Employment Directors Fees Salary $ - - - - - - - - - - $ - - - - 210,120 207,374 - - 210,120 207,374 Super- annuation $ - - - - 19,961 19,700 - - 19,961 19,700 Retirement Benefits $ - - - - - - - - - - Total Equity Settled Options $ $ - - - - - - - - - 230,081 - 227,074 - - - - - 230,081 - 227,074 EG Albers JMD Willis RL Clark K How TOTAL 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 Interests in Equity Instruments The disclosures relating to equity instruments of directors includes equity instruments of personally related entities, being relatives and the spouses of relatives of the director and any entity under the joint or several control or significant influence of the director. All equity transactions with directors, other than options granted as remuneration, have been entered into under terms and conditions, applicable to all shareholders. Interests in fully paid ordinary shares Net Change Balance Balance Interests in unlisted options Held at Expired Held at EG Albers(1) RL Clark KK How JMD Willis 1/7/2019 152,373,074 57,551 100,000 3,117,382 30/6/2020 152,373,074 1/7/2019 - 57,551 4,300,000 880,000 100,000 3,117,382 1,750,000 - - - - - (4,300,000) (880,000) (1,750,000) 30/6/2020 - - - - (1) Net change in shares for the year is all through on-market purchases. End of Remuneration Report. Vested and exercisable 30/6/2020 - - - - Octanex Annual Report - Page | 13 OCTANEX LIMITED ABN 61 005 632 315 Directors Declaration The directors of the company declare that: 1. The financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of cash flows, statement of changes in equity, and accompanying notes, are in accordance with the Corporations Act 2001 and: (a) (b) (c) comply with Australian Accounting Standards and the Corporations Regulations 2001; and give a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the year ended on that date. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a). In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay 2. its debts as and when they become due and payable. The remuneration disclosures included in pages 12 to 13 of the directors’ report, (as part of audited 3. Remuneration Report), for the year ended 30 June 2020, comply with section 300A of the Corporations Act 2001. The directors have been given the declarations by the chief executive officer and chief financial officer 4. required by section 295A. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by: E.G. Albers Director Melbourne 29 September 2020 Octanex Annual Report - Page | 14 Collins Square, Tower 5 727 Collins Street Melbourne Victoria 3008 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Octanex Limited Report on the audit of the financial report Opinion We have audited the financial report of Octanex 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, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, 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: a giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the year ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We 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. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation.  Key audit matter How our audit addressed the key audit matter Exploration and Evaluation Assets Valuation (Note 9 ) The tenements held by Octanex Limited and its subsidiaries are in the exploration stage and exploration expenditure is capitalised in accordance with Australian Accounting Standard AASB 6 Exploration for and Evaluation of Mineral Resources. The Group is required to assess at each reporting date if there are any triggers for impairment which may suggest the carrying value is in excess of the recoverable value. Any impairment losses are then measured in accordance with AASB 136 Impairment of Assets. AASB 6 requires exploration and evaluation asset to be assessed for impairment when there are indicators of impairment. AASB 6 provides a list of indicators, however that list is not exhaustive and therefore subjectivity is involved in the assessment. This area is a key audit matter as significant judgement is required in determining whether the facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount, and then consequently in measuring any impairment loss. Our procedures included, amongst others:  Obtaining the management prepared reconciliation of capitalised exploration and evaluation expenditure and agreeing to the general ledger;  Selecting a sample of capitalised exploration and evaluation expenditure and obtaining documentation to support the amount capitalised in line with AASB 6;  Critically reviewing management's assessment of impairment indicators for the Group’s capitalised exploration assets under AASB 6 by:   Assessing the period for the right to explore the areas of interest have not expired or will not expire in the near future without an expectation of renewal; Enquiring of management regarding their intentions to carry out exploration and evaluation activity in the relevant exploration area, including review of managements’ budgeted expenditure;  Understanding whether any data exists that indicates the carrying value of exploration and evaluation assets is unlikely to be recovered from successful development or by sale; and  Considering any other available evidence of impairment.  Assessing the accuracy of impairment recorded for the year as it pertained to exploration interests; and  Reviewing related financial statement disclosures. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.  Responsibilities of the Directors’ for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Company’s/Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company/Group or to cease operations, or have 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 at: http://www.auasb.gov.au/auditors_responsibilities/ar1_2020.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 12 to 13 of the Directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Octanex Limited, for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants B L Taylor Partner – Audit & Assurance Melbourne, 29 September 2020 OCTANEX LIMITED ABN 61 005 632 315 Consolidated Statement of Profit or Loss and Other Comprehensive Income Year Ended 30 June 2020 Interest income Other income Interest and finance costs Expenses NOTE 2 3 2020 $ 6,660 2019 $ 4,796 257,990 11,134,972 - (631,760) (899,443) (1,481,458) Impairment of exploration assets 9,24 (4,629,940) (7,262,178) Share of loss of Ophir Production Sdn Bhd Impairment of advance to Ophir Production Sdn Bhd - - (1,756,751) (4,270,353) Loss before tax Income tax benefit Net Loss after tax (5,264,733) (4,262,732) 4 - (1,592) (5,264,733) (4,264,324) Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operation Income tax effect Foreign currency translation reserve realised on sale of foreign subsidiaries Items that will not be reclassified subsequently to profit or loss Changes in financial assets at fair value through other comprehensive income Income tax on items of comprehensive income Other comprehensive income for the year net of tax Total comprehensive income for the year Basic loss per share (cents per share) Diluted loss per share (cents per share) - - 117,420 - - (1,286,141) 17,694 (5,308) (5,308) 12,386 1,592 (1,172,437) (5,252,347) (5,436,761) (2.168) (2.168) (1.756) (1.756) 13 13 22 22 The above Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying notes. Octanex Annual Report - Page | 18 OCTANEX LIMITED ABN 61 005 632 315 Consolidated Statement of Financial Position As at 30 June 2020 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Prepayments TOTAL CURRENT ASSETS NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income Exploration and evaluation assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issue capital Reserves Accumulated losses TOTAL EQUITY NOTE 5 6 7 8 9 10 11 12 13 2020 $ 481,358 244,360 104,880 830,598 2019 $ 1,790,892 108,702 - 1,899,594 30,082 17,696 4,925,108 9,382,098 4,955,190 9,399,794 5,785,788 11,299,388 102,742 160,591 263,333 392,928 131,658 524,586 263,333 524,586 5,522,455 10,774,802 68,867,927 68,867,927 220,108 207,722 (63,565,580) (58,300,847) 5,522,455 10,774,802 The above Statement of Financial Position is to be read in conjunction with the accompanying notes. Octanex Annual Report - Page | 19 l a t o T n o i t p O e v r e s e r n g i e r o F y c n e r r u c n o i t a l s n a r t e v r e s e r l a i c n a n i F r i a f t a s t e s s a h g u o r h t e u l a v r e h t o e v i s n e h e r p m o c e m o c n i d e t a l u m u c c A d e t u b i r t n o C s e s s o l y t i u q e $ $ $ $ $ $ , 2 0 8 4 7 7 0 1 , - 6 8 3 2 1 , , ) 3 3 7 4 6 2 5 ( , , ) 7 4 3 2 5 2 5 ( , - - - - - , 3 6 5 7 3 0 1 , , 5 5 4 2 2 5 5 , , 3 6 5 7 3 0 1 , - - - - - - - - - - - ) 1 4 8 9 2 8 ( , 6 8 3 2 1 , 6 8 3 2 1 , ) 5 5 4 7 1 8 ( , 0 2 | e g a P - t r o p e R l a u n n A x e n a t c O - - - , ) 3 3 7 4 6 2 5 ( , , ) 3 3 7 4 6 2 5 ( , - - - - - , ) 7 4 8 0 0 3 8 5 ( , , 7 2 9 7 6 8 8 6 , , ) 0 8 5 5 6 5 0 6 ( , , 7 2 9 7 6 8 8 6 , . s e t o n g n i y n a p m o c c a e h t h t i w n o i t c n u n o c n j i d a e r e b o t s i y t i u q E n i s e g n a h C f o t n e m e t a t S e v o b a e h T y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C 0 2 0 2 e n u J 0 3 d e d n E r a e Y D E T I M I L X E N A T C O 5 1 3 2 3 6 5 0 0 1 6 N B A s n o i t a r e p o n g i e r o f f o n o i t a l s n a r t f o s e c n e r e f f i d e g n a h c x E x a t f o t e n f o e l a s n o d e s i l a e r e v r e s e r n o i t a l s n a r t y c n e r r u c n g i e r o F s e i r a i d i s b u s n g i e r o f e u l a v r i a f t a s t e s s a l a i c n a n i f n o e u l a v r i a f n i s e g n a h C x a t f o t e n e m o c n i e v i s n e h e r p m o c r e h t o h g u o r h t r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T 0 2 0 2 e n u J 0 3 t A Y T I T N E D E T A D I L O S N O C 9 1 0 2 y l u J 1 t A x a t r e t f a s s o L e m o c n i e v i s n e h e r p m o c r e h t O l a t o T n o i t p O e v r e s e r n g i e r o F y c n e r r u c n o i t a l s n a r t e v r e s e r l a i c n a n i F r i a f t a s t e s s a h g u o r h t e u l a v r e h t o e v i s n e h e r p m o c e m o c n i d e t a l u m u c c A d e t u b i r t n o C s e s s o l y t i u q e $ $ $ $ $ $ , 3 6 5 1 1 2 6 1 , , 3 6 5 7 3 0 1 , , 1 2 7 8 6 1 1 , , ) 4 2 3 4 6 2 4 ( , ) 6 1 7 3 ( , 0 2 4 7 1 1 , , ) 1 4 1 6 8 2 1 ( , , ) 7 3 4 2 7 1 1 ( , , ) 1 6 7 6 3 4 5 ( , - - - - - - - 0 2 4 7 1 1 , - , ) 1 4 1 6 8 2 1 ( , , ) 1 2 7 8 6 1 1 ( , , ) 1 2 7 8 6 1 1 ( , - - - ) 6 1 7 3 ( , ) 6 1 7 3 ( , ) 6 1 7 3 ( , ) 5 2 1 6 2 8 ( , 1 2 | e g a P - t r o p e R l a u n n A x e n a t c O , 2 0 8 4 7 7 0 1 , , 3 6 5 7 3 0 1 , - ) 1 4 8 9 2 8 ( , , ) 3 2 5 6 3 0 4 5 ( , , 7 2 9 7 6 8 8 6 , , ) 4 2 3 4 6 2 4 ( , - - - - , ) 4 2 3 4 6 2 4 ( , , ) 7 4 8 0 0 3 8 5 ( , - - - - - - , 7 2 9 7 6 8 8 6 , y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C 9 1 0 2 e n u J 0 3 d e d n E r a e Y D E T I M I L X E N A T C O 5 1 3 2 3 6 5 0 0 1 6 N B A s n o i t a r e p o n g i e r o f f o n o i t a l s n a r t f o s e c n e r e f f i d e g n a h c x E x a t f o t e n f o e l a s n o d e s i l a e r e v r e s e r n o i t a l s n a r t y c n e r r u c n g i e r o F s e i r a i d i s b u s n g i e r o f e u l a v r i a f t a s t e s s a l a i c n a n i f n o e u l a v r i a f n i s e g n a h C x a t f o t e n e m o c n i e v i s n e h e r p m o c r e h t o h g u o r h t r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t o l a t o T 9 1 0 2 e n u J 0 3 t A Y T I T N E D E T A D I L O S N O C 8 1 0 2 y l u J 1 t A x a t r e t f a s s o L e m o c n i e v i s n e h e r p m o c r e h t O OCTANEX LIMITED ABN 61 005 632 315 Consolidated Statement of Cash Flows Year Ended 30 June 2020 CASH FLOWS FROM OPERATING ACTIVITIES Administration fees received Interest received Payments to suppliers Government Grants – Covid Net cash outflow from operating activities NOTE 2020 $ 2019 $ 84,403 6,660 (1,287,647) 60,000 (1,136,584) 49,334 4,796 (897,075) - (842,945) (i) CASH FLOWS FROM INVESTING ACTIVITIES Payments to suppliers - exploration Proceeds from loan repayment by Ophir Production Sdn Bhd Net cash (outflow) / inflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowing Net outflow from financing activities (172,950) - (172,950) (228,991) 4,391,144 4,162,153 - - (2,924,092) (2,924,092) Net (decrease) / increase in cash and cash equivalents Exchange gains Cash and cash equivalents at beginning of the year CASH AND CASH EQUIVALENTS AT 30 JUNE 5 (1,309,534) - 1,790,892 481,358 395,116 63,931 1,331,845 1,790,892 (5,264,733) (i) RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES WITH LOSS AFTER INCOME TAX (4,264,324) Loss after income tax Non cash items: Borrowing Costs Exchange rate changes on the balances held in a foreign currency Employee Provisions expense Extinguishment of Convertible Notes Share of loss of Ophir Production Sdn Bhd Impairment of exploration assets Reversal of impairment of OPSB advance Changes in assets and liabilities: Decrease in receivables Decrease in tax liabilities Increase in payables Net Cash outflow from Operating Activities (228) (9,726,131) 1,756,751 7,262,178 4,270,353 28,933 - - 4,629,940 - (240,538) - (290,186) (1,136,584) (83,447) 1,592 432,016 (842,945) 115,543 (607,248) - - 24 The above Statement of Cash Flows is to be read in conjunction with the accompanying notes Octanex Annual Report - Page | 22 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Octanex Limited (“Octanex” or “the company”) is a for-profit company incorporated and domiciled in Australia with its registered office and principal place of business located at 108 Marlborough Street, Bentleigh East, Victoria 3165. The consolidated financial report of the company for the year ended 30 its June 2020 comprises subsidiaries the (together “consolidated entity” or “the group”) and the consolidated entity’s interest in joint operations. Financial information for Octanex Limited as an individual entity is included in Note 23. The financial report was authorised by the directors for issue on 29 September 2020. the company and referred as to (a) Statement of compliance financial report The consolidated is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, including the Accounting Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The consolidated financial statements and notes comply with International Financial Reporting Standards and Interpretations International Accounting Standards Board. issued the by underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of Australian Accounting Standards that have a significant effect on the financial report and estimates with a significant risk of material adjustment in the next year are discussed in note 1(q). The accounting policies set out below have been applied consistently to all periods presented in the financial report. New and revised accounting standards applicable for the first time to the current reporting period The company has adopted all new and revised Australian Accounting Standards and Interpretations that became effective for the first time and are relevant to the company. The adoption of the new and revised Australian Accounting Standards and Interpretations has had no impact on the company’s accounting policies or the amounts reported during the current year. (b) Basis of preparation (c) Principles of consolidation The financial report is presented in Australian dollars, which is the consolidated group’s functional currency, rounded to the nearest dollar. It has been prepared under the historical cost convention as modified by the revaluation of the available for sale investments at fair value. The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income The estimates and associated and expenses. assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and consolidated statements The consolidate those of the company and all of its subsidiaries as at year end. financial entity Octanex Annual Report - Page | 23 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (i) Subsidiaries The company controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in subsidiaries are carried at their cost of acquisition in the parent entity note. All transactions and balances between companies within the consolidated entity are eliminated on consolidation, including unrealised gains and losses on transactions between group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a consolidated entity perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the consolidated entity. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. (ii) Investments in associates and joint ventures Associates are consolidated entity influence but which are not subsidiaries. the is able to exert significant those entities over which that joint venture is an arrangement A the consolidated entity controls jointly with one or more other investors, and over which the consolidated entity has rights to a share of the arrangement’s net assets rather than direct rights to underlying assets and obligations for underlying liabilities. A joint arrangement in which the consolidated entity has direct rights to underlying assets and obligations for underlying liabilities is classified as a joint operation. Interests in joint operations are accounted for by recognising the consolidated entity’s assets and liabilities (including its share of any assets and liabilities held jointly), its revenue from the sale of its jointly). Any goodwill or share of the output arising from the joint operation, and its expenses (including its share of any expenses fair value incurred adjustment attributable to the consolidated entity’s share in the associate or joint venture is not recognised separately and is included in the amount recognised as investment. The carrying amount of the investment is increased or decreased to recognise the consolidated entity’s share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the consolidated entity. in associates and joint ventures When the consolidated entity’s share of losses exceeds its interest in the associate or joint venture the entity discontinues recognising its share of further losses. The interest in an associate or joint venture is the carrying amount of the investment in the associate or joint venture together with long-term interests that in substance form part of the entity’s net investment in the associate or joint venture. Unrealised gains and losses on transactions between the consolidated entity and its associates and joint ventures are eliminated to the extent of the consolidated entity’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment. (iii) Joint operations The interest of the company and of the consolidated entity in unincorporated joint operations and joint to account by operated assets are brought recognising in its financial statements the assets it controls, the liabilities that it incurs, the expenses it incurs and its share of income that it earns from the sale of goods or services by the joint operation. The financial statements of the unincorporated joint operations and assets are prepared for the same reporting period as the parent company using consistent accounting policies. Octanex Annual Report - Page | 24 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 June 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (iv) Transactions eliminated on consolidation income and expenses arising Intragroup balances and any unrealised gains and losses or from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the consolidated entity’s interest in the entity with adjustments made to the ‘Investment in associates’ and ‘Share of associates’ net profit accounts. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the associates or, if not consumed or sold by the associate, when the consolidated entity’s interest in such entities is disposed of. (d) Taxes Income Tax Income taxes are accounted comprehensive balance sheet whereby: for using the liability method The tax consequences of recovering (settling) all assets (liabilities) are reflected in the financial statements; Current and deferred tax is recognised as income or expense except to the extent that the tax related to equity items or to a business combination; • A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available to realise the asset; • Deferred tax asset and liabilities are measured at the tax rates that are expected to apply to the period where the asset is realised or the liability settled. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST from the taxation incurred is not recoverable authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO 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. Tax Consolidation The company and its wholly owned resident entities are part of a tax-consolidated group. As a consequence, all members of the tax-consolidated group are taxed as a single entity. The head entity within the tax-consolidated group is Octanex Limited. Current tax expense / income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of the assets and financial statements of each entity and the tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity tax-consolidated group and are recognised by the Company as amounts payable (receivable) to / (from) other entities in the tax- consolidated group in conjunction with any tax funding arrangement amounts.. in the separate liabilities the in The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only. (e) Foreign Currency Translation The functional and presentation currency of Octanex Limited and its Australian subsidiaries is Australian dollars (A$). Octanex Annual Report - Page | 25 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 June 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) from restating Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Foreign exchange gains and losses resulting from settling foreign currency transactions, as well as foreign currency denominated monetary assets and liabilities, are recognised in the Statement of Profit or Loss and Other Comprehensive Income, except when they are deferred in equity as qualifying cash flow hedges or where they relate to differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined. Group companies On consolidation, the assets and liabilities of foreign operations are translated into dollars at the rate of exchange prevailing at the reporting date and their Statements of Profit or Loss and Other Comprehensive Income are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss. recognised are in (h) Cash and cash equivalents Cash and cash equivalents comprise cash balances and at call bank deposits. Bank overdrafts that are repayable on demand and form an integral part of the company’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement. (i) Payables Trade, accruals and other payables are recorded initially at fair value and subsequently at amortised cost. Trade and other payables are non-interest bearing and are normally settled on 60-day terms. (k) Trade and other receivables and contract assets The company makes uses of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as losses. These are the lifetime expected credit expected shortfalls flows, considering the potential for default at any point during the life of the financial instrument. In its historical calculating, experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. in contractual cash company uses the (l) Equity investments All equity investments are measured at fair value. Equity investments that are held for trading are measured at fair value through profit or loss. For all other equity investments, the group can make an irrevocable election at initial recognition of each investment to recognise changes in fair value through other comprehensive income (“OCI”) rather than profit or loss. At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Octanex Annual Report - Page | 26 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 June 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Transaction costs of financial assets carried at fair value through profit or loss are expensed as profit or loss. The group subsequently measures all equity investments at fair value. The directors have elected to present fair value gains and losses on equity investments is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments continue to be recognised in profit or loss as other revenue when the group’s right to receive payments is established and as long as they represent a return on investment. in OCI. There (m) Share capital Ordinary share capital is recognised at the fair value of the consideration received by the company. Transactions costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the consideration received, net of any income tax benefit. Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration (n) Impairment At each reporting date the Group assesses whether there is any indication that individual assets are impaired. Where indicators exist, impairment recoverable amount is determined and impairment losses are recognised in the profit or loss where the asset's carrying value exceeds its recoverable amount. (i) Calculation of recoverable amount Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other groups or assets, in which case, the recoverable amount is determined for the class of assets to which the asset belongs. (ii) Reversals of impairment Impairment losses are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (o) Restoration, rehabilitation and environment expenditure Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are provided for as part of the cost of those activities. Costs are estimated on the basis of current legal requirements, anticipated technology and future costs that have been discounted to their present value. Estimates of future costs are reassessed at each reporting date. (p) Exploration and evaluation assets Exploration and evaluation assets, including the costs of acquiring permits or licences, are capitalised as exploration and evaluation assets on an area of interest basis. Exploration and evaluation assets are only recognised if the rights to tenure of the area of interest are current and either: i. ii. the expenditures are expected to be recouped and through exploitation of interest, or alternatively, by its sale or partial sale: or the area of development successful activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. Octanex Annual Report - Page | 27 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The tests contained in AASB6.20 are applied to determine whether exploration and evaluation assets are assessed for impairment: i. the exploration and evaluation tenure right has expired or are expected to expire in the near future, and is not expected to be renewed. ii. substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. iii. exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area. iv. sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale Proceeds from the sale of exploration permits or recoupment of exploration costs farmin arrangements are credited against exploration costs previously capitalised. Any excess of the proceeds overs costs recouped are accounted for as a gain on disposal. from Farmouts in the exploration and evaluation phase The group does not record any expenditure made by the farminee on its account. It also does not recognise any gain or loss on its exploration and evaluation farmout arrangements, but redesignates any costs previously capitalised in relation to the whole interest as relating to the partial interest retained. Any additional cash consideration received directly from the farminee is credited against costs previously capitalised in relation to the whole interest, with any excess accounted for as a gain on disposal. (q) Accounting estimates and judgements Management determine the development, selection and disclosure of the company’s critical accounting policies and estimates and the application of these policies and estimates. Other than as disclosed in these notes, there are no estimates and judgements that are considered to have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. There is, however, a risk that actual expenditure to achieve minimum work obligations could differ from estimates disclosed in the notes to the financial statements (see Note 14). Work requirements achieved by farm-ins materially reduce the level of expenditure incurred by the company program to commitments. comply with work Per Note 1(p), management exercises judgement as to the recoverability of exploration expenditure. Any judgment may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, management concludes, once activities in the area of interest have reached a stage which permits a reasonable assessment of technical feasibility and commercial viability, that is unlikely to be the capitalised expenditure recovered by future sale or exploitation, then the relevant capitalised amount will be written off through the statement of profit or loss and other comprehensive income. The consolidated entity is subject to income taxes in numerous jurisdictions. The determination of the consolidated entity's provision for current income tax as well as deferred tax assets and liabilities involves significant judgements and estimates on certain matters and transactions, for which the ultimate outcome may be uncertain. If the final outcome differs from the consolidated entity's estimates, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Octanex Annual Report - Page | 28 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) statement of profit or loss and other comprehensive income with a corresponding adjustment to equity. (t) Fair value Fair values may be used for financial asset and for sundry liability measurement as well as disclosures. Fair values for financial instruments traded in active markets are based on quoted market prices at reporting date. The quoted market price for financial assets is the current bid price and the quoted market price. The fair value of financial instruments that are not traded in an active market are determined using valuation techniques. Assumptions used are based on observable market prices and rates at reporting date. Estimated discounted cash flows are used to determine fair value of the remaining financial instruments. are assumed and payables The carrying value less impairment provision of trade to receivables approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments. (r) Revenue the is recognised at Revenue fair value of consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. The following specific recognition criteria must also be met before revenue is recognised: (s) Share-based payment transactions Equity settled transactions The fair value of options granted are recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the grantee become unconditionally entitled to the options. The fair value at grant date is independently determined using an option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. Equity settled transactions The fair value of options granted are recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the grantee become unconditionally entitled to the options. is independently The fair value at grant date determined using an option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. vesting The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non- in conditions market assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the included are Octanex Annual Report - Page | 29 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (v) Earnings per Share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to members of Octanex by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares during the year. In calculating the weighted average number of ordinary shares outstanding, the partly paid shares are accounted for on a pro-rata basis according to the amount of call outstanding in relation thereto. Diluted earnings per share Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by 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. (w) New and revised accounting standards issued not yet effective The Directors do not believe that new and revised standards issued by AASB (that are not as yet effective), will have any material financial impact on the financial statements. Octanex Annual Report - Page | 30 NOTE 17(ii) 19 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 2 OTHER INCOME Government grants - Covid Sundry income – director related Foreign currency translation reserve realised on sale of foreign subsidiary Extinguishment of Convertible Notes Total income NOTE 3 EXPENSES Audit fees Consulting Foreign exchange loss Management fees Reporting, registry and stock exchange Office expenses Other expenses Project costs Salaries Total expenses NOTE 4 INCOME TAX Components of income tax benefit Current tax expense Current period Deferred tax expense Origination and reversal of temporary differences Total Tax losses do not expire under current tax legislation. 2020 $ 60,000 197,990 2019 $ - 122,700 - 1,286,141 - 257,990 9,726,131 11,134,972 32,137 76,635 - 25,000 20,725 105,150 144,672 - 495,124 899,443 45,647 9,531 561,531 40,000 28,115 199,472 112,034 (3,156) 488,284 1,481,458 - - - 1,592 - 1,592 Deferred tax assets have not been recognised in respect of tax losses because there is presently no expectation of future taxable profit against which the Group could utilise such benefits. Octanex Annual Report - Page | 31 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 4 INCOME TAX (CONTINUED) Reconciliation between tax benefit and pre-tax loss Loss before tax Income tax benefit using statutory income tax rate of 30% Tax effect of adjustment recognised in the period for: Prospectus costs Tax losses not brought to account Non-assessable income Equity accounted loss – non deductible Impairment of OPSB advance – non deductible Other non–deductible expenses Income tax benefit Unrecognised deferred tax asset The estimated deferred tax asset arising from tax losses and temporary differences not brought to account at balance date as realisation of the benefit is not probable: Tax losses carried forward Temporary differences Franking credit balance: NOTE 2020 $ 2019 $ (5,264,733) (1,579,420) (4,262,732) (1,278,820) - 208,354 (18,000) - - 1,389,066 - (3,005) 2,216,557 (3,421,806) 524,025 1,796,292 168,349 1,592 6,222,548 (1,456,481) 4,766,067 5,937,726 (2,765,278) 3,172,448 Franking account balance as at end of year 1,741,532 1,741,532 NOTE 5 CASH AND CASH EQUIVALENTS Cash at bank and on hand 481,358 1,790,892 Cash and cash equivalents are subject to interest rate risk as they earn floating rates. In the year to 30 June 2020 the average floating rate for the consolidated entity was 0.05% (2019: 1.2%). Details of interest rate risk and sensitivity can be found in Note 18. At 30 June 2020 all bank deposits are at call. NOTE 6 TRADE AND OTHER RECEIVABLES Current Other receivables Director-related entities - other receivables 17(ii) 12,607 231,753 244,360 15,012 93,690 108,702 The carrying amount of all receivables is equal to their fair value as they are short term. At 30 June 2020 no receivables are impaired or past due. All receivables are non-interest bearing. Octanex Annual Report - Page | 32 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 7 PREPAYMENTS NOTE Consolidated 2020 $ 2019 $ Prepaid tenement rent 104,880 - The Group applied for six exploration tenements in the Eastern Goldfields Superterrane in Western Australia during the year. If the tenements are granted rent paid on application will cover rent required on the first year of exploration in all tenements. As at 30 June 2020 and to the date of signing the report the tenements have not been granted. If the tenements are not granted the rent paid on application is fully refundable. In July 2020 Octanex made application for a further four exploration licence applications following geological reconnaissance of its Sefton Gold Project (Note 21). The area covered by the additional allocations largely overlaps Octanex’ existing exploration licence application, with the new application boundaries providing logistical and administrative advantages. NOTE 8 OTHER FINANCIAL ASSETS (NON-CURRENT) Financial Assets at fair value through other comprehensive income Investment in director-related equities At cost: Shares in controlled entities 8(a)(b) 8(c) (a) Director-related Entities: Enegex Limited Principal activity is oil and gas exploration (Note 16) (b) Reconciliation of the carrying amount of Financial Assets at fair value through other comprehensive income Balance at beginning of year Net revaluation increment (decrement) Details of market price risk and sensitivity can be found in Note 18. (c) Shares in Controlled Entities United Oil & Gas Pty Ltd 30,081 1 30,082 17,695 1 17,695 30,081 17,695 17,695 12,386 30,081 23,003 (5,308) 17,695 1 1 United Oil & Gas Pty Ltd, a company incorporated in Australia, is owned 50% by Octanex and 50% by a fully owned subsidiary of Octanex, Strata Resources Pty Ltd. The consolidated entity did not consolidate United Oil & Gas Pty Ltd on the grounds that balances were not considered material. Octanex Annual Report - Page | 33 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 9 EXPLORATION AND EVALUATION ASSETS Carrying amount at beginning of year Impairment of exploration assets Cost incurred during the year Carrying amount at end of year NOTE 24 Consolidated 2020 $ 2019 $ 9,382,098 (4,629,940) 172,950 4,925,108 16,399,197 (7,262,178) 245,079 9,382,098 Ultimate recovery of exploration and evaluation assets is dependent upon exploration success and/or the company maintaining appropriate funding to support continued exploration activities. Exploration and evaluation assets relate to the areas of interest in the exploration and evaluation phase for petroleum exploration permits as shown in the table below: 30/06/2020 30/06/2019 Notes Exploration Permits WA-407-P - WA-407-P Held by wholly-owned subsidiary, Octanex Bonaparte Pty Ltd WA-420-P Held by wholly-owned subsidiary, Octanex Bonaparte Pty Ltd NOTE 10 TRADE AND OTHER PAYABLES Financial liabilities at amortised cost Current Trade creditors and accruals Director-related entities - other payables 17 49,684 53,058 102,742 57,348 335,580 392,928 Trade and other payables are current liabilities of which the fair value is equal to the current carrying amount. Information about the company’s exposure to foreign exchange risk in relation to trade payables, including sensitivities to changes in foreign exchange rates, is provided in Note 18. Octanex Annual Report - Page | 34 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 11 PROVISIONS Current Annual Leave Directors’ retirement benefit (1) Long service leave NOTE Consolidated 2020 $ 2019 $ 17,597 82,125 60,869 160,591 8,906 82,125 40,627 131,658 (1) On the 29th October 1997 a Deed of Appointment was signed by EG Albers. The Deed detailed terms of continuation of his appointment as chairman of Octanex Limited. Amongst other things, it provides for a payment of a retirement benefit to EG Albers as chairman. A deed of variation was signed 16 August 2016, and effective 30 June 2016, that varied the terms of calculation of the Retirement Benefit under the original Deed. The amount reflects the 28 years of service EG Albers has provided to the company. Octanex Annual Report - Page | 35 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 12 CONTRIBUTED EQUITY Issued Capital Ordinary shares fully paid (a) Ordinary shares issued pursuant to trustee stock scheme(b) Balance at end of year 2020 Shares 242,823,840 29,889,107 2019 Shares 242,823,840 29,889,107 2020 $ 68,867,927 - 2019 $ 68,867,927 - 272,712,947 272,712,947 68,867,927 68,867,927 (a) Ordinary shares fully paid Balance at beginning of year Trustee shares sold Issue costs Balance at end of year 242,823,840 - - 242,823,840 242,823,840 - - 242,823,840 68,867,927 - - 68,867,927 68,867,927 - - 68,867,927 (b) Ordinary Shares Issued Pursuant to Trustee Stock Scheme Balance at beginning of year Trustee shares sold Balance at end of year 29,889,107 - 29,889,107 29,889,107 - 29,889,107 - - - - - - In November 2015, the members of Octanex voted to extend the existing trustee stock scheme by five years to 30 November 2020. The company has unlimited authorised capital with no par value. Terms and Conditions of Contributed Equity Ordinary shares confer on the holder the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of (irrespective of the amounts paid up on) shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. Octanex Annual Report - Page | 36 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 12 CONTRIBUTED EQUITY (CONTINUED) Trustee Stock Scheme Octanex is party to a Trustee Stock Scheme, pursuant to which ordinary shares ranking equally with other ordinary shares on issue were issued to a trustee. When those shares are sold by the trustee the net proceeds are paid to the Company by way of subscription moneys. The trustee does not exercise voting rights in respect of shares held pursuant to the scheme. Unlisted Options - (Share Based Payment) Nil. Unlisted Options Balance at beginning of year Options expired / cancelled Balance at end of year NOTE 13 RESERVES Financial assets at fair value through other comprehensive income reserve Option reserve value Financial assets at fair comprehensive income reserve Balance at beginning of financial year Changes in fair value on financial assets at fair value through other comprehensive income Income tax on other comprehensive income through other 2020 Options 2019 Options 7,170,000 (7,170,000) - 13,770,000 (6,600,000) 7,170,000 NOTE Consolidated 2020 $ 2019 $ (817,455) (829,841) 1,037,563 1,037,563 220,108 207,722 (829,841) 17,694 (826,125) (5,308) (5,308) (817,455) 1,592 (829,841) The financial assets at fair value through other comprehensive income reserve represents the changes in fair value on the group’s equity instruments including realised gains or losses on those investments. Further information on the investments is set out in Notes 8 and 18. Octanex Annual Report - Page | 37 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 13 RESERVES (CONTINUED) Option reserve Balance at beginning of financial year Share based payment expense NOTE Consolidated 2020 $ 2019 $ 1,037,563 - 1,037,563 1,037,563 - 1,037,563 The options reserve relates to share options granted to the company secretary, the directors and individuals. NOTE 14 EXPLORATION AND EVALUATION EXPENDITURE COMMITMENTS The consolidated entity share of minimum work requirements in exploration permit and retention lease interests held by the consolidated entity or in joint operations is estimated at reporting date: Payable not later than one year Payable later than one year but not later than three years 202,500 - 202,500 99,400 - 99,400 Estimated expenditure, arising from retention lease work programme which, may, subject to negotiation and approval, be varied. They may also be satisfied by farmout, sale, relinquishment or surrender. NOTE 15 INTEREST IN UNINCORPORATED JOINT OPERATIONS The consolidated entity has an interest in the assets, liabilities and output of joint operations for the exploration and development of petroleum in Australia. The consolidated entity has taken up its share of joint operations transactions based on its contributions to the joint operations. The consolidated entity’s interests in the joint operations: Joint Operation Cornea Permit expired 5 May 2019. 2020 Interest - 2019 Interest 18.75% Permits WA-54-R Octanex Annual Report - Page | 38 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE Consolidated 2020 $ 2019 $ NOTE 15 INTEREST IN UNINCORPORATED JOINT OPERATIONS (CONTINUED) Assets and liabilities of the joint operations are included in the financial statements as follows: CURRENT ASSETS Cash and cash equivalents Receivables NON-CURRENT ASSETS Exploration and evaluation assets CURRENT LIABILITIES Payables Payables – director-related entity - - - - - 5,887 1,408 - 4,269 1,741 9 10 10, 16 There are no contingent liabilities in any of the joint operations. NOTE 16 KEY MANAGEMENT PERSONNEL Executive Directors Non-Executive Directors EG Albers RL Clark KK How JMD Willis Individual compensation disclosures Information regarding individual director’s compensation is provided in the remuneration report section of the directors’ report. There are no employees who meet the definition of key management personnel other than the executive directors of the company. A summary of the remuneration report is shown below. Short Term Post Employment Equity Settled Total Directors Fees $ - Salary Superannuation $ 210,120 - 207,737 $ 19,961 19,700 TOTAL 2020 2019 Retirement Benefits $ - - Options $ - - $ 230,081 227,437 Octanex Annual Report - Page | 39 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 17 RELATED PARTY DISCLOSURES The consolidated financial statements of the Group include: Name United Oil & Gas Pty Ltd Goldsborough Pty Ltd Octanex Bonaparte Pty Ltd Braveheart Energy Pty Ltd Octanex Cornea Pty Ltd Octanex Winchester Pty Ltd Winchester Exploration Pty Ltd Octanex Operations Pty Ltd Strata Resources Pty Ltd Octanex Exmouth Pty Ltd Director-related Entities 2020 Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2019 Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Country of Incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Companies in which an Octanex director controls or significantly influences, that provide services to the group or to a joint operation in which the group has an interest, or that also hold an interest in those joint operations or in which the group holds an investment. (i)Providers of Services by Related Party During the year services and/or facilities were provided under normal commercial terms and conditions by director-related entities as disclosed below together with amounts payable to related parties including those under joint operation arrangements: Entity Exoil Pty Ltd Service Related director EG Albers Office services and amenities in Melbourne Payable at Amounts paid 2019 2020 $ $ 105,016 199,723 23,908 30/06/20 $ 30/06/19 $ 56,542 Natural Resources Group Pty Ltd Samika Pty Ltd EG Albers Management and project services 26,500 33,938 29,150 279,038 RL Clark Management of retention lease - - 131,516 235,256 53,058 1,595 - 335,580 Octanex Annual Report - Page | 40 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 17 RELATED PARTY DISCLOSURES (Continued) (ii)Providers of Services to Related Party During the year accounting services were provided under normal commercial terms and conditions as disclosed below: Entity Related director Enegex Limited Exoil Pty Ltd Cornea Resources Pty Ltd Cue Petroleum Pty Ltd Peako Limited EG Albers EG Albers EG Albers EG Albers EG Albers (iii) Investments in director-related companies Receivables Sundry Revenue 30/06/20 2019 2020 $ $ $ 30,211 21,475 27,465 11,990 20,625 22,275 - 1,885 - 3,410 18,865 10,230 138,020 59,850 186,142 197,990 122,700 231,753 30/06/19 $ 10,225 8,580 1,885 10,285 62,715 93,690 At 30 June 2020, the company carried an investment in an ASX listed company Enegex Limited, (Note 8), which is a director-related entity of EG Albers. Octanex Annual Report - Page | 41 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 18 FINANCIAL INSTRUMENTS Categories of Financial Instruments Financial Assets Cash & cash equivalents At fair value through other comprehensive income Trade and other receivables – current ex prepayments Financial Liabilities Financial Liabilities at amortised cost Trade and other payables Recognition and derecognition NOTE 2020 $ 2019 $ 481,358 30,082 244,360 755,800 1,790,892 17,696 108,892 1,917,480 102,742 392,928 Purchases and sales of financial assets and financial liabilities are recognised on trade date which is the date on which the consolidated entity commits to purchase or sell the financial assets or financial liabilities. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. Exposure to credit, interest rate, liquidity, foreign currency, market price and currency risks arises in the normal course of the consolidated entity’s business. The consolidated entity’s overall risk management approach is to identify the risks and implement safeguards which seek to minimise potential adverse effects on the financial performance of the consolidated entity’s business. The board of directors are responsible for monitoring and managing the financial risks of the consolidated entity. Fair value The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 13 requires disclosure of fair value measurements by level of the fair value hierarchy, as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The consolidated entity’s financial assets measured and recognised at fair value at 30 June 2020 and 30 June 2019 on a recurring basis are as follows: Octanex Annual Report - Page | 42 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 18 FINANCIAL INSTRUMENT (Continued) 30 June 2020 Assets Listed securities and debentures Liabilities Derivative financial liability Net fair value 30 June 2019 Assets Listed securities and debentures Liabilities Derivative financial liability Net fair value Credit risk Level 1 $ 30,082 - 30,082 Level 1 $ 17,696 - 17,696 Level 2 $ Level 3 $ Total $ - - - - - - 30,082 - 30,082 Level 2 $ Level 3 $ Total $ - - - - 17,696 - - - 17,696 Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. At the reporting date there were is no credit risk as the consolidated entity has no trade sales or trade receivables. Interest rate risk All financial liabilities and financial assets at floating rates expose the company to cash flow interest rate risk The consolidated entity has no exposure to interest rate risk at reporting date, other than in relation to cash and cash equivalents which attract an interest rate. Convertible notes are at a fixed rate of interest. Sensitivity Analysis At reporting date a 1% (100 basis point) increase/decrease in the interest rate would increase/decrease the consolidated entity loss by $3,370 (2019: $9,323). Octanex Annual Report - Page | 43 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 18 FINANCIAL INSTRUMENTS (Continued) Liquidity risk Liquidity risk is monitored to ensure sufficient monies are available to meet contractual obligations as and when they fall due. The following are the contractual maturities of the financial liabilities, including interest payments. Contractual amounts have not been discounted. Consolidated Carrying Amount $ Contractual cash flows $ 0-12 months $ 1-2 years $ 2-10 years $ 30 June 2020 Non-derivative Financial Liabilities Trade and other payables 102,742 102,742 102,742 - Consolidated Carrying Amount $ Contractual cash flows $ 0-12 months $ 1-2 years $ 2-10 years $ 30 June 2019 Non-derivative Liabilities Trade and other payables Financial Foreign currency risk 392,928 392,928 392,928 - - - The consolidated entity is exposed to foreign currency risk arising from purchases of goods and services that are denominated in a currency other than the Australian dollar functional currency. Seismic and well drillings costs are usually denominated in US dollars. To this extent, the consolidated entity is exposed to exchange rate fluctuations between the Australian and US dollar. At 30 June 2020 the consolidated entity has a foreign currency exposure by holding US dollars in bank accounts totalling US$63 (2019: $63). Octanex Annual Report - Page | 44 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 18 FINANCIAL INSTRUMENTS (Continued) Equity price risks Equity price risk applies at fair value through other comprehensive income investments. The investments are subject to movements in prices of the investment markets. Financial Assets at fair value through other comprehensive income Investments in listed equities Enegex Limited 2020 $ 2019 $ 30,082 17,696 The consolidated entity and company investments in listed equities are listed on the Australian Securities Exchange. A 10% increase / decrease at the reporting date in closing share price of each share held would have increased/decreased consolidated equity by $3,008 (2019: $1,770). There would have been no effect on profit. Capital Management When managing capital, the directors’ objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. It is the company’s plan that capital, as and when required, further, will be raised by any one or a combination of the following manners: placement of shares to excluded offerees, pro-rata issue to shareholders, the exercise of outstanding options, and/or a further issue of shares. Should these methods not be considered to be viable, or in the best interests of shareholders, then it would be the consolidated entity’s intention to meet its exploration obligations by either partial sale of its interests or farmout. No company in the consolidated entity is subject to any externally imposed capital requirements. NOTE 19 AUDITOR’S REMUNERATION Amounts received or due and receivable by: Grant Thornton Audit Pty Ltd - Auditor of the consolidated entity and company NOTE 20 SEGMENT INFORMATION 2020 $ 2019 $ 32,137 45,647 Under AASB 8 Operating Segments, segment information is presented using a 'management approach', i.e. segment information is provided on the same basis as information used for internal reporting purposes by the board of directors At regular intervals the board is provided management information at a group level for the group’s cash position, the carrying values of exploration permits and a group cash forecast for the next twelve months of operation. On this basis, no segment information is included in these financial statements. All interest received has been derived in Australia. All exploration and evaluation assets are held in Australia. Octanex Annual Report - Page | 45 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 21 EVENTS AFTER THE END OF THE REPORTING PERIOD In July 2020 Octanex made application for a further four exploration licence applications following geological reconnaissance in the Eastern Goldfields Superterrane in Western Australia. The area covered by the additional allocations largely overlaps Octanex’ existing exploration licence applications (Note 7), with the new application boundaries providing logistical and administrative advantages. NOTE 22 LOSS PER SHARE The following reflects the income and share data used in the calculations of basic and diluted earnings per share: Net loss Weighted average number of shares 2020 $ 2019 $ (5,264,733) (4,262,732) Number of Shares 242,823,840 Number of Shares 242,823,840 NOTE 23 PARENT ENTITY INFORMATION The following details information related to the parent entity, Octanex Limited at 30 June 2020. The information presented here has been prepared using consistent accounting policies as presented in Note 1, except for the use of the cost method for investment in subsidiary companies by the parent. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Options reserve Financial assets at fair value through other comprehensive income reserve Accumulated losses Total equity Loss for the year Other comprehensive income for the year Total comprehensive income for the year No dividends were paid by the parent entity in 2020 (2019: Nil). 725,714 17,566,361 18,292,075 258,033 13,013,048 13,271,081 68,867,927 1,037,563 (639,113) 1,896,283 21,958,213 23,854,496 516,564 13,013,440 13,530,004 68,867,927 1,037,563 (639,113) (64,245,383) 5,020,994 (58,941,885) 10,324,492 (5,303,498) (4,723,819) - - (5,303,498) (4,723,819) Octanex Annual Report - Page | 46 OCTANEX LIMITED ABN 61 005 632 315 Notes to the Financial Statement 30 JUNE 2020 NOTE 24 IMPAIRMENT OF EXPLORATION AND EVALUATION ASSET On 12 February 2020 WA-420-P was not renewed and so expired on that date. Capitalised exploration and evaluation costs of $4,629,940 were written off. Octanex Annual Report - Page | 47 OCTANEX LIMITED ABN 61 005 632 315 Shareholder Information (compiled as at 15 October 2020) Ordinary share capital As at 15 October 2020 the company had on issue the following shares: Fully Paid Ordinary Shares 272,712,947 held by 1,344 holders All issued fully paid ordinary shares carry one vote per share Trustee Shares 29,889,107 held by Doravale Enterprises Pty Ltd (the Trustee)2 Other than in extremely limited circumstances, the Trustee has bound itself by the deed of covenant entered into in association with the Scheme not to vote at the meetings of members of Octanex. Options As at 15 October 2020 the company had no options on issue. Distribution of holders Holding Ranges Holders Total Units % Issued Share Capital 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 Over 100,000 Totals * Based on the price per security, number of holders with an unmarketable holding: 1,138 53,556 1,593,287 1,050,210 10,954,910 259,060,984 272,712,947 171 628 133 317 100 1,344 0.02% 0.58% 0.39% 4.02% 94.99% 100.00% Substantial shareholders Substantial shareholders as disclosed in substantial shareholding notices given to the Company are as follows: Shareholder Interest in voting rights % of Voting Rights The Albers Group Sabah International Petroleum 155,019,083 40,332,663 56.84 14.79 2 These ordinary shares were issued to the Trustee on trust for sale in accordance with a scheme of arrangement approved by the Supreme Court of Victoria on 17 November 2010 in Matter SCI 210 04962 (the Scheme). As previously advised to the ASX and to members, those shares are ordinary shares held on trust for sale by the trustee on the basis that the net proceeds of sale will present the subsection moneys thereof. The shares may be sold as fully paid up or as partly paid up. Until sold, by the terms of the Scheme, the Trustee will not participate in dividends or distributions are to the account of the members of Octanex pro rata their respective shareholdings. Octanex Annual Report - Page | 48 OCTANEX LIMITED ABN 61 005 632 315 Twenty largest shareholders as at 15 October 2020* Holder Number of shares Sabah International Petroleum Ltd Gascorp Australia Pty Ltd Mr Ernest Geoffrey Albers & Mrs Pamela Joy Albers Mr Ernest Geoffrey Albers Sacrosanct Pty Ltd Great Missenden Holdings Pty Ltd National Gas Australia Pty Ltd Great Australia Corporation Pty Ltd Bass Strait Group Pty Ltd Cue Petroleum Pty Ltd The Albers Companies Incorporated Pty Ltd Australis Finance Pty Ltd Fugro Exploration Pty Ltd Mrs Pamela Joy Albers Miller Anderson Pty Ltd Bond Street Custodians Limited Great Missenden Group Pty Ltd Albers Family Custodian Pty Ltd Seaquest Petroleum Pty Ltd Wilstermere Corporation Pty Ltd Total Top 20 * Excluding 29,889,107 Trustee Shares held by Doravale Enterprise Pty Ltd 40,332,663 35,200,014 25,868,034 17,297,794 14,436,081 12,946,004 7,200,000 6,291,000 6,059,049 5,763,357 3,780,491 3,773,188 3,691,721 3,062,500 3,000,000 2,819,512 2,765,060 2,542,875 2,248,000 2,106,500 201,183,843 % of Fully Paid Shares 14.79% 12.91% 9.49% 6.34% 5.29% 4.75% 2.64% 2.31% 2.22% 2.11% 1.39% 1.38% 1.35% 1.12% 1.10% 1.03% 1.01% 0.93% 0.82% 0.77% 73.77% Mineral and Petroleum Tenements held/applied for at 30 June 2020 Tenement Octanex interest Tenement status Offshore Western Australia (Bonaparte Basin) WA-407-P 100% Granted Western Australia (Mount Margaret District) E 38/3416 Up to 80% Application E 38/3417 Up to 80% Application E 38/3418 Up to 80% Application E 38/3431 Up to 80% Application E 38/3432 Up to 80% Application E 38/3433 Up to 80% Application Octanex Annual Report - Page | 49 OCTANEX LIMITED ABN 61 005 632 315 Tenements acquired during the year and their location Tenement Octanex interest Tenement status Western Australia (Mount Margaret District) E 38/3416 Up to 80% Application E 38/3417 Up to 80% Application E 38/3418 Up to 80% Application E 38/3431 Up to 80% Application E 38/3432 Up to 80% Application E 38/3433 Up to 80% Application Tenements disposed of during the quarter and their location Tenement Octanex interest Tenement status Offshore Western Australia (Bonaparte Basin) WA-420-P 100% Expired Beneficial percentage interests held in farm-in or farm-out agreements at 30 June 2020: Octanex’s Mount Margaret District tenements have been applied for pursuant to an agreement with Mr Christopher Reindler. Under the terms of the agreement Octanex has the right to a 65% interest or an 80% interest by satisfying specific exploration expenditures. Octanex Annual Report - Page | 50 

Continue reading text version or see original annual report in PDF format above