Okapi Resources
Annual Report 2019

Plain-text annual report

ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2019 Okapi Resources Limited Corporate Directory ABN DIRECTORS 21 619 387 085 Klaus Eckhof – Non-executive Chairman Nigel M Ferguson – Managing Director Michael Montgomery – Technical Director Raymond (Jinyu) Liu – Non-executive Director COMPANY SECRETARY Leonard Math REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS POSTAL ADDRESS AUDITORS SHARE REGISTRY Level 2, 8 Colin Street West Perth Western Australia 6005 Telephone: (08) 6117 9338 (08) 6118 2106 Facsimile: PO Box 520 West Perth Western Australia 6872 Butler Settineri (Audit) Pty Ltd Unit 16, First Floor Spectrum Offices 100 Railway Road Subiaco Western Australia 6008 Advanced Share Registry Limited trading as Advanced Share Registry Services 110 Stirling Highway, Nedlands, Western Australia 6009 WEBSITE www.okapiresources.com STOCK EXCHANGE LISTING Australian Securities Exchange Limited (ASX Code OKR) Okapi Resources Limited Contents Contents Corporate Directory Review of Operations Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Auditor's Report ASX Additional Information 1 3 7 17 18 19 20 21 22 42 43 48 P a g e | 2 Okapi Resources Limited Review of Operations Review of Operations Mambasa Project (Option to earn in to 70% interest) Background The Mambasa Gold Project is a brownfields project with several historical colonial gold workings and current artisanal gold activity covering over a 600m strike length and up to 25m in depth. The Mambasa Project consists of two granted located approximately 18km to the south of the town of Mambasa, in the Mambasa District of Ituri Province in the north- eastern DRC. licences, PE364 and PE480, and production stratigraphic The Mambasa Project is located in a region of well documented gold has impressive potential within a and favourable structural setting that is similar to other large-scale gold deposits within including region Ashanti's Geita AngloGold (20Moz) mine in Tanzania and Loncor Resources Inc's recently defined Makapela (1Moz) and Kilo Gold’s Adumbi (1.3Moz) gold projects (Figure 1). the The region is an area that is considered to be under explored and having significant potential for large gold resources. The Company executed the Mambasa Joint Venture Agreement with Kalubamba SARL and Medidoc FZE which granted Okapi the right to earn a 70% interest in the Mambasa Project and to act as the manager. The Mambasa Joint Venture Agreement provides for an exploration expenditure earn-in by the Company over an approximate 4-year period, with a minimum spend of US$150,000 on exploration work (Phase 1 Assessment) within 12 months of the ASX listing date having already been achieved. Figure 1: Regional Location Map of the Mambasa Gold Project showing Nearby Significant Gold Projects. P a g e | 3 Mambasa Project Exploration Activities for the Year Okapi Resources Limited Review of Operations During the year, the Company completed Stage 1 & 2 Soil Sampling programs, after receiving the assay results from the 2nd Stage infill sampling program. This program was designed around areas of interest defined in the initial Stage 1 program. This second round of sampling infilled previous lines at an approximate 125 metre line spacing and at 50 metre centres, with a total of 500 samples analysed returning gold results up to 0.31 g/t gold in soils (Figure 2). latter results The further supported the regional northwest fabric and added more detail to the north- south trending structure identified in the initial in Stage 1 program. The confluence of these 2 orientations is of particular interest as it possibly defines a control on gold is mineralisation supported by the fact that Mount Pede, an area of significant artisanal mining activity, is located at this juncture. in the district. This observation Desktop analysis of these results was carried out as well as planning of follow up exploration programs. Okapi has met the Year 1 expenditure commitments for the Mambasa Gold Project as defined by the Joint Venture Agreement. Figure 2: Mambasa Phase 1 Exploration Program Gold Soil Sampling Results- Stages 1 & 2 P a g e | 4 Okapi Resources Limited Review of Operations The Crackerjack Project (100% owned) Background The Crackerjack Project (“Crackerjack”) is located approximately 85 kilometres south- west of Halls Creek in the Kimberley District of Western Australia (Figure 3). presence There had previously been very limited modern exploration work undertaken at Crackerjack, with historic results indicating the gold mineralisation. The Mount Dockrell area has been worked for alluvial gold and hard rock gold for decades with significant amounts of gold being won. high-grade of Exploration Activities for the Year results. This During the year, the Company completed a Phase 2 mapping and sampling program, that focused upon following up on the initial program so as to better understand those initial follow-up program consisted of 77 hard rock samples. The assay results have further defined the initial results at and around several prospects (Figure 4) on the tenement and included the following significant Phase 2 assay results; The Sisters - 5.0 g/t Au; Crackerjack NE – up to 3.8 g/t Au; Crackerjack – up to 1.9 g/t Au; and ‘Crackerjack Shear’ – results included 1.5 g/t Au & 0.9 g/t Au Figure 3: Location Map of the Crackerjack Project Figure 4: Crackerjack Project Prospectivity Locality Map P a g e | 5 Okapi Resources Limited Review of Operations CORPORATE During year, the Company continued to assess mineral resources projects and investment opportunities that would complement its existing portfolio of assets. In December 2018, Okapi participated in a strategic private placement ($200,000 investment) in ASX listed Amani Gold Limited (“Amani”). Amani owns the Giro Gold Project (“Giro”), which comprises two exploration permits covering a surface area of 497km² and lying within the Kilo-Moto Belt (Democratic Republic of Congo), a significant under-explored greenstone belt and which hosts Barrick Gold’s 13 million-ounce Kibali group of deposits within 35km of Giro. In March 2019, Okapi has made a further $521,000 investment in Amani and now holds an ~8% interest. Amani owns 55.25% of the Giro Gold Project (“Giro”), which comprises two exploration permits covering a surface area of 497km². The Giro Gold project is located and lying within the Kilo-Moto Belt, (Democratic Republic of Congo), a significant under-explored greenstone belt and with numerous major gold projects including AngloGold Ashanti and Barrick’s 13 million-ounce Kibali gold mine Group of deposits situated some 35km east of the Giro Project. The acquisition is part of Okapi’s strategy to seek our mineral resources investment opportunities in the DRC. During the year, the Board was further strengthened with the appointment of Mr Michael Montgomery as Technical Director. Mr Montgomery has been Okapi’s General Manager – Technical since January 2018. Mr. Montgomery is an industry professional with over 25 years’ experience in the resource industry including significant experience in sub-Saharan Africa and in particular the DRC. His experience in the DRC dates back to 2008 where he worked on several projects in the Katanga Province to his more recent appointment with Okapi. The information in this report that relates to Exploration Results is based on and fairly represents information and supporting documentation compiled by Mr. Nigel Ferguson, a Competent Person whom is a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM) and Member of the Australian Institute of Geoscientists (MAIG). Mr. Ferguson is a full-time employee of Ridgeback Holdings Pty Ltd and Director of Okapi Resources Limited. Mr Ferguson has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Ferguson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. P a g e | 6 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 The directors present their report on the consolidated entity comprising Okapi Resources Limited (“Okapi” or “the Company”) and its controlled entities (“the consolidated entity” or “Group”) for the financial year ended 30 June 2019. DIRECTORS The following persons were directors of the Company during the whole of the financial period and up to the date of this report unless otherwise indicated: Klaus Eckhof – Non-executive Chairman Nigel M Ferguson – Managing Director Michael Montgomery – Technical Director (appointed 26 April 2019) Raymond (Jinyu) Liu – Non-executive Director INFORMATION ON DIRECTORS Mr. Klaus Eckhof (Dip. Geol. TU, AusIMM) Appointed 29 May 2017 Mr Eckhof is a geologist with more than 20 years of experience identifying, exploring and developing mineral deposits around the world. Mr Eckhof worked for Mount Edon Gold Mines Ltd before it was acquired by Canadian mining company Teck. In 1994, he founded Spinifex Gold Ltd and Lafayette Mining Ltd, both of which successfully delineated gold and base metal deposits. In 2003, Mr Eckhof founded Moto Goldmines which acquired the Moto Gold Project in the Democratic Republic of Congo. There, Mr Eckhof and his team delineated more than 20 million ounces of gold and delivered a feasibility study within four years from the commencement of exploration. Moto Goldmines was subsequently acquired by Randgold Resources who poured first gold in September 2013. During the past three years, Mr. Eckhof has also served as a Director of the following listed companies: Company Date Appointed Date Ceased Amani Gold Limited 12 August 2014 11 July 2017 30 January 2019 - Argent Minerals Limited 6 December 2017 23 April 2018 AVZ Minerals Limited 12 May 2014 26 June 2018 Interest in shares and performance rights: 1,833,333 ordinary fully paid shares 1,666,667 performance rights P a g e | 7 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 Mr. Nigel Ferguson (BSc Geology, FAusIMM, MAIG) Appointed 29 May 2017 Mr Ferguson is a geologist with 30 years of experience having worked in senior management positions for the past 20 years in a variety of locations. He has experience in the exploration and definition of precious and base metal mineral resources throughout the world, including DRC, Zambia, Tanzania, Saudi Arabia, South East Asia and Central America. He has been active in the DRC since 2004 in gold and base metals exploration and resource development. During the past three years, Mr. Ferguson has also served as a Director of the following listed companies: Company Date Appointed Date Ceased AVZ Minerals Limited 2 February 2017 - Interest in shares and performance rights: 2,654,911 ordinary fully paid shares 1,000,000 performance rights Mr. Jinyu (Raymond) Liu Appointed 25 October 2017 Mr Liu is a qualified mining engineer with a commercial background and received his degree in Mining Engineering from University of Western Australia. He also holds a Master of Mineral Economics from Curtin University and a Western Australia Unrestricted Quarry Manager’s licence. Mr Liu is the founding Managing Partner of Havelock Mining Investment, a Hong Kong investment company and has been involved with numerous investments in ASX listed companies. Previously, he has served as a Director of Fosun International Australia, a Chinese conglomerate and investment company and prior to this, he held technical roles at Rio Tinto, KCGM and Mt Gibson Iron. During the past three years, Mr. Liu has also served as a Director of the following listed companies: Company Date Appointed Date Ceased Galan Lithium Limited 25 June 2018 - Interest in shares and performance rights: 300,000 ordinary fully paid shares Mr. Michael Montgomery Appointed 26 April 2019 Mr. Montgomery is an industry professional with over 25 years’ experience including in Africa and particularly DRC. His experience in the DRC dates back to 2008 where he worked on several projects in the Katanga Province to his more recent appointment with Okapi. Mr. Montgomery brings with him significant hands on experience in due diligence, exploration, mining and JORC compliance as well as more recent exposure to Corporate compliance matters. Mr. Montgomery has not held any Director position of a listed company in the past three years. Interest in shares and performance rights: 100,000 ordinary fully paid shares 200,000 performance rights P a g e | 8 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 COMPANY SECRETARY Mr. Leonard Math (BCom, CA) Appointed 26 April 2019 Mr. Math is a Chartered Accountant with more than 14 years of resources industry experience. He previously worked as an auditor at Deloitte and is experienced with public company responsibilities including ASX and ASIC compliance, control and implementation of corporate governance, statutory financial reporting and shareholder relations. He has previously acted as a Director, Chief Financial Officer and Company Secretary of a number of ASX listed Company. Interest in shares and performance rights: Nil Craig Nelmes (B. Bus Accounting & Finance) Resigned 31 July 2019 PRINCIPAL ACTIVITIES The Group is in the business of mineral exploration with a specific focus on gold exploration. The Group's primary aim in the near-term is to explore for, discover and develop gold deposits on the mineral exploration projects within Australia and Africa. The Group’s Mineral Exploration Projects are prospective for gold and/or base metals. They range from early-stage exploration over areas that have not been subject to significant exploration such as the Crackerjack Project, Australia, to more advanced exploration within the Democratic Republic of Congo (“DRC”) in areas that have recorded historical mining activity and current artisanal activity at the Mambasa Project, as well assessing projects in the Katanga Cobalt/Copper belt. The Group continues to actively review other resource projects, with a focus on advanced project opportunities that offer the best potential to generate wealth for the Group and its shareholders. FINANCIAL REVIEW The result of the Group for the financial year ended 30 June 2019 was a loss after tax of $1,071,307 (2018: $1,147,328). EARNINGS PER SHARE The basic loss per share for the year ended 30 June 2019 was 3.12 cents (2018: 4.18 cents). P a g e | 9 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 Audited Remuneration Report This report details the nature and amount of remuneration for all key management personnel of Okapi Resources Limited and its subsidiaries. The information provided in this remuneration report has been audited as required by section 308(C) of the Corporations Act 2001. For the purposes of this report, key management personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group and the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Group. The individuals included in this report are: Klaus Eckhof Nigel Ferguson Michael Montgomery Raymond (Jinyu) Liu Leonard Math Craig Nelmes Non-Executive Chairman Managing Director Technical Director Non-Executive Director Company Secretary Company Secretary (a) Remuneration Policy Appointed – 26 April 2019 Appointed – 26 April 2019 Resigned – 31 July 2019 The remuneration policy of Okapi Resources Limited has been designed to align director objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. By providing components of remuneration that are indirectly linked to share price appreciation (in the form of options and/or performance rights), executive, business and shareholder objectives are aligned. The board of Okapi Resources Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors to run and manage the Group, as well as create goal congruence between directors and shareholders. The board’s policy for determining the nature and amount of remuneration for board members is as follows: (i) Executive Directors & Other Key Management Personnel The remuneration policy and the relevant terms and conditions has been developed by the full Board of Directors as the Group does not have a Remuneration Committee due to the size of the Group and the Board. In determining competitive remuneration rates, the Board reviews local and international trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Reviews are performed to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive reward practices. The Group is an exploration entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, directors and senior executives are paid market rates associated with individuals in similar positions, within the same industry. Mr. Ferguson was appointed as Managing Director on 29 May 2017 and received an annual remuneration package of $139,375 through an Executive Services Agreement. Mr. Ferguson provides his services as Managing Director through Ridgeback Holdings Pty Ltd as trustee for the Ferguson Family Trust. Mr Ferguson’s employment may be terminated by the Group giving 6 months’ notice. The Group may otherwise terminate his employment immediately for cause. P a g e | 10 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 Mr. Montgomery was appointed as Technical Director on 26 April 2019 and received an annual remuneration package of $135,400 through a Consultancy Agreement. Mr. Montgomery provides his services as Technical Director through Geosure Geological Consultants. Mr. Montgomery’s consultancy agreement may be terminated by the Group giving 60 days’ notice. The Group may otherwise terminate his employment immediately for cause. There are no other service or consulting agreements in place with key management personnel. At this stage due to the size of the Group, no remuneration consultants have been used. The Board’s remuneration policies are outlined below: Fixed Remuneration All executives receive a base cash salary which is based on factors such as length of service and experience as well as other fringe benefits. If entitled, all executives also receive a superannuation guarantee contribution required by the government, which is currently 9.50% and do not receive any other retirement benefits. Short-term Incentives (STI) Under the Group’s current remuneration policy, executives can from time to time receive short-term incentives in the form of cash bonuses. No short-term incentives were paid in the current financial year. The Board is currently determining the criteria of eligibility for short-term incentives and will set key performance indicators to appropriately align shareholder wealth and executive remuneration. Long-term Incentives (LTI) Executives are encouraged by the Board to hold shares in the Group and it is therefore the Group’s objective to provide incentives for participants to partake in the future growth of the Group and, upon becoming shareholders in the Group, to participate in the Group’s profits and dividends that may be realised in future years. The Board considers that this equity performance linked remuneration structure is effective in aligning the long-term interests of Group executives and shareholders as there exists a direct correlation between shareholder wealth and executive remuneration. (ii) Non-Executive Directors The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. In determining competitive remuneration rates, the Board review local and international trends among comparative companies and the industry generally. Typically, the Group will compare non-executive remuneration to companies with similar market capitalisations in the exploration and resource development sector. (b) Group Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration No relationship exists between the Group performance, earnings, shareholder wealth and Directors’ and Executive remuneration for this financial period. With the exception of the Managing Director and Technical Director, no executive is receiving any base remuneration. No remuneration is currently performance related. P a g e | 11 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 (c) Details of Key Management Personnel Remuneration Name Fees Post-Employment Share Based Payments Total Remuneration as Share payments 2019 Nigel Ferguson – Managing Director Klaus Eckhof - Non-executive Chairman Michael Montgomery¹ – Technical Director Jinju (Raymond) Liu – Non-executive Director Leonard Math2 Craig Nelmes TOTAL $ $ $ $ % 139,375 84,583 135,400 30,000 389,358 4,000 68,306 461,664 - - - - - - - - 25,041 41,736 - - 66,777 - 15,363 82,140 164,416 126,319 135,400 30,000 456,135 4,000 83,669 543,804 15 33 15 ¹ Mr. Montgomery appointed on 26 April 2019. During the financial year, Mr. Montgomery provided consulting services to Okapi Resources Limited through Geosure Geological Consultants. ² Mr. Math appointed on 26 April 2019. 2018 Nigel Ferguson – Managing Director Klaus Eckhof - Non-executive Chairman Jinju (Raymond) Liu¹ – Non-executive Director Leonard Math² - Non-executive Director Craig Nelmes3 TOTAL ¹ Mr. Liu was appointed on 25 October 2017 ² Mr. Math resigned on 28 November 2017 ³ Mr. Nelmes provided CFO and secretarial services directly from April 2018. 156,797 35,000 20,000 12,500 224,297 18,332 242,629 - - - - - - - 118,850 198,082 - - 316,932 275,647 233,082 20,000 12,500 541,229 8,015 324,947 26,347 585,576 43 85 - - 30 P a g e | 12 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 (d) Share based compensation The number of performance rights and their respective vesting status as at 30 June 2019 are set out below: Class A¹ No. Class B No. Class C No. Total No. Klaus Eckhof – Non-executive Chairman 833,333 833,333 833,334 2,500,000 Nigel Ferguson – Managing Director 500,000 500,000 500,000 1,500,000 Michael Montgomery – Technical Director (appointed 26 Apr 2019) Craig Nelmes – Company Secretary/CFO (resigned 31 July 2019) - - 100.000 100,000 200,000 100,000 100,000 200,000 ¹ The Class A performance rights vesting conditions were met on 14 December 2017 however no exercise notice had been received at the date of this report. The Class A performance rights were subsequently exercised on 9 August 2019. During the year ended 30 June 2019, there was no performance rights granted to directors and key management personnel. (e) Key Management Personnel Compensation – other transactions (i) Options provided as remuneration and shares issued on exercise of such options. No options were provided as remuneration during the year. (ii) Loans to key management personnel No loans were made to any director or other key management personnel of the Group, including related parties during the financial year. (iii) Other transactions with key management personnel No other transactions with key management personnel occurred during the financial year. Terms and conditions of related party transactions Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated. P a g e | 13 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 (iv) Share-holdings of Key Management Personnel The number of shares in the Company held during the financial year by each director of Okapi Resources Limited and other key management personnel of the Company, including related parties, are set out below. There were no shares granted during the year as remuneration. 2019 Directors Klaus Eckhof Nigel Ferguson Michael Montgomery¹ Junju (Raymond) Liu Other executives Leonard Math2 Craig Nelmes3 Total Opening Balance 1 July 2018 Other changes during the year Closing Balance 30 June 2019 No. No. No. 1,000,000 2,000,010 - 300,000 - 100,000 3,400,010 - 154,901 100,000 - - - 254,901 1,000,000 2,154,911 100,000 300,000 - 100,000 3,654,911 1Mr Montgomery was appointed on 26 April 2019 and held those shares at the time of appointment. 2Mr Math was appointed as Company Secretary on 26 April 2019. 3Mr Nelmes resigned on 31 July 2019. 2018 Directors Klaus Eckhof Nigel Ferguson Leonard Math¹ Junju (Raymond) Liu² Other executives Craig Nelmes Total Opening Balance 1 July 2017 Other changes during the year Closing Balance 30 June 2018 No. No. No. 1,000,000 2,000,010 - - 100,000 3,100,010 - - - 300,000 - - 1,000,000 2,000,010 - 300,000 100,000 3,400,010 1Mr Math resigned at the 2017 AGM on 28 November 2017. 2Mr Liu was appointed on 25 October 2017. This is the end of the audited remuneration report. P a g e | 14 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 SHARE OPTIONS As at 30 June 2019, there were no options over unissued ordinary shares in the Company outstanding, with no options having been issued from incorporation up to the date of this report. There have been no options issued subsequent to balance date and up to the date of this report. LIKELY DEVELOPMENTS The Group’s focus over the next financial year will be carry out early stage exploration works on its mineral resource projects and to review additional projects that may be presented to the Group. SIGNIFICANT CHANGES IN STATE OF AFFAIRS On 26 April 2019, Mr. Michael Montgomery was appointed as Technical Director and Mr. Leonard Math was appointed as Company Secretary. There were no other significant changes in the state of affairs of the Group during the financial year. SUBSEQUENT EVENTS Mr. Craig Nelmes resigned as CFO and Company Secretary on 31 July 2019. Since the end of the financial period and to the date of this report, no other matter or circumstance has arisen which has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in the subsequent financial year. DIVIDENDS PAID OR RECOMMENDED The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report. ENVIRONMENTAL REGULATION The Group is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work. INSURANCE OF DIRECTORS AND OFFICERS During the financial year, Okapi Resources Limited paid a premium to insure the directors and officers of the Group. The total amount of insurance contract premiums paid is confidential under the terms of the insurance policy. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Group. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. P a g e | 15 Okapi Resources Limited Directors’ Report For the year ended 30 June 2019 PROCEEDINGS ON BEHALF OF THE CONSOLIDATED ENTITY No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2019 has been received and forms part of the Directors’ report and can be found on page 17 of the financial report. NON-AUDIT SERVICES There have been no non-audit services provided by the Group’s auditor during the year. Signed in accordance with a resolution of the directors. On behalf of the Directors. Nigel M Ferguson Director 25 September 2019 Perth, Western Australia P a g e | 16 Okapi Resources Limited Auditor’s Independence Declaration P a g e | 17 Okapi Resources Limited Consolidated Statement of Comprehensive Income For the year ended 30 June 2019 Note 16 8 11 2019 $ 46,077 23,662 69,739 (19,218) (40,127) (57,988) (50,801) (10,580) (357,491) (178,213) (79,392) (153,015) (94,221) (100,000) 2018 $ 43,559 - 43,559 (20,076) (51,925) (87,266) (69,333) (6,193) (242,628) (86,666) (138,281) (440,155) (48,364) - (1,071,307) (1,147,328) 3 - - Revenue Interest income Other income Expenditure Audit fees Compliance expenses Consulting expenses Corporate expenses Depreciation Director and employee fees Exploration expenses Promotional & website Share based payments Administration Fair value adjustment to financial asset Loss before income tax Income tax expense Loss after income tax from continuing operations (1,071,307) (1,147,328) Other Comprehensive income Items that may be reclassified to profit or loss - - Total comprehensive income for the year (1,071,307) (1,147,328) Loss per share attributable to the ordinary security holders of the Company (cents per share) 3.12 4.18 The accompanying notes form part of these financial statements P a g e | 18 Okapi Resources Limited Consolidated Statement of Financial Position As at 30 June 2019 Note 2019 $ 2018 $ 4 5 6 7 8 9 3,210,759 53,719 3,264,478 620,695 750,405 43,760 1,414,860 4,926,958 87,550 5,014,508 - 594,160 25,731 619,891 4,679,338 5,634,399 95,792 95,792 95,792 132,561 132,561 132,561 4,583,546 5,501,838 10 11(a) 11(b) 6,236,473 593,170 (2,246,097) 4,583,546 6,236,473 440,155 (1,174,790) 5,501,838 ASSETS Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Financial assets Deferred exploration & evaluation expenditure Property plant & equipment Total assets LIABILITIES Current liabilities Trade and other payables Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity The accompanying notes form part of these financial statements P a g e | 19 Okapi Resources Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2019 Issued Capital $ Reserves Accumulated Losses $ $ Total $ 2019 Opening Balance 6,236,473 440,155 (1,174,790) 5,501,838 Loss for the year Total comprehensive income for the period Share based payments (Note 11) - - - - - (1,071,307) (1,071,307) (1,071,307) (1,071,307) 153,015 - 153,015 Balance as at 30 June 2019 6,236,473 593,170 (2,246,097) 4,583,546 2018 Opening Balance Loss for the year Total comprehensive income for the year 101,480 - - - - - (27,462) (74,018) (1,147,328) (1,147,328) (1,147,328) (1,147,328) Shares issued during the year Share issue costs Share based payments (Note 11) 6,600,000 (465,007) - - - 440,155 - - - 6,600,000 (465,007) 440,155 Balance as at 30 June 2018 6,236,473 440,155 (1,174,790) 5,501,838 P a g e | 20 Okapi Resources Limited Consolidated Statement of Cash Flows For the year ended 30 June 2019 Note 2019 $ 2018 $ Cash flows from operating activities Interest received Payments for suppliers and employees 46,077 (1,020,956) 43,497 (1,085,677) Net cash outflows from operating activities 19 (974,879) (1,042,180) Cash flows from investing activities Payments for tenement acquisitions / option fees Payments for shares in listed entity Payments for purchases of other fixed assets - (711,320) (30,000) (113,215) - (29,234) Net cash inflows from investing activities (741,320) (142,449) Cash flows from financing activities Proceeds from share issue Share issue and IPO costs Net cash inflows from financing activities - - - 6,500,000 (407,475) 6,092,525 Net (decrease)/increase in cash and cash equivalents held (1,716,199) 4,907,896 Cash and cash equivalents at the beginning of the period 4,926,958 19,062 Cash and cash equivalents at the end of the period 4 3,210,759 4,926,958 P a g e | 21 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) General information The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied, unless otherwise stated. The financial statements are for Okapi Resources Limited and its controlled entity. The financial statements are presented in the Australian currency. Okapi Resources Limited is a Company limited by shares, domiciled and incorporated in Australia. The financial statements were authorised for issue by the directors on 25 September 2019. The directors have the power to amend and reissue the financial statements. (b) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Okapi Resources Limited is a for-profit entity for the purpose of preparing the financial statements. Historical cost convention These financial statements have been prepared on an accrual basis under the historical cost convention. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. New standards and interpretations adopted in the 2019 financial year The Company has adopted AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments which became effective for financial reporting periods commencing on or after 1 January 2018. (i) AASB 15 Revenue from contracts with customers AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue related Interpretations. AASB 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue to be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The Group has applied the new Standard effective from 1 July 2018 using the modified retrospective approach. Under this method, the cumulative effect of initial application is recognised as an adjustment to the opening balance of retained earnings at 1 July 2018 and comparatives are not restated. The adoption of AASB 15 does not have a significant impact on the Group as the Group does not currently have any revenue from customers. (ii) AASB 9 Financial Instruments AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement, impairment, and hedge accounting. As a result of adopting AASB 9 Financial Instruments, the Group has amended its financial instruments accounting policies to align with AASB 9. AASB 9 makes major changes to the previous guidance on the classification and measurement of financial assets and introduces an ‘expected credit loss’ model for impairment of financial assets. P a g e | 22 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 There were no financial instruments which the Group designated at fair value through profit or loss under AASB 139 that were subject to reclassification. The Board assessed the Group’s financial assets and determined the application of AASB 9 does not result in a change in the classification of the financial instruments. The adoption of AASB 9 does not have a significant impact on the financial report. New and revised Accounting Standards for Application in Future Periods AASB 16: Leases applies to annual reporting periods beginning on or after 1 January 2019. This Standard supersedes AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, AASB interpretation 115 Operating Leases-Incentives and AASB interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of lease. AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under AASB 117. The key features of AASB 16 are as follows: -Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. -A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. -Assets and Liabilities arising from the lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend to lease, or not to exercise an option to terminate the lease. -AASB 16 contains disclosure requirements for leases. (i) Lessor accounting -AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. -AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk. Estimated impact of AASB 16 on the Group when the standard is applied Due to the adoption of AASB 16, the Group’s operating profit will improve, while its interest expense will increase This is due to the change in the accounting for expenses of leases that were classified as operating leases under AASB 117. (ii) Other standards not yet applicable There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. P a g e | 23 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 (c) Principals of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Okapi Resources Limited (“Company” or “Parent Entity”) as at 30 June 2019 and the results of all subsidiaries for the year. Okapi Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are entities the parent controls when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de- consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. (i) Subsidiaries (continued) Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and statement of financial position respectively. (ii) Changes in ownership interests The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Okapi Resources Limited. When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a jointly controlled entity or associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. P a g e | 24 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 (d) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the full Board of Directors. (e) Revenue recognition Revenue from contract(s) with customers Revenue is recognised at an amount that reflects the consideration to which the group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Interest Revenue Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial assets (f) Financial instruments Classification of financial instruments The Group classifies its financial assets into the following measurement categories: • those to be measured at fair value (either through other comprehensive income, or through profit or loss); and those to be measured at amortised cost. • The classification depends on the Group’s business model for managing financial assets and the contractual terms of the financial assets' cash flows. The Group classifies its financial liabilities at amortised cost unless it has designated liabilities at fair value through profit or loss or is required to measure liabilities at fair value through profit or loss such as derivative liabilities. Debt instruments Investments in debt instruments are measured at amortised cost where they have: • contractual terms that give rise to cash flows on specified dates, that represent solely payments of principal and interest on the principal amount outstanding; and are held within a business model whose objective is achieved by holding to collect contractual cash flows. • These debt instruments are initially recognised at fair value plus directly attributable transaction costs and subsequently measured at amortised cost. The measurement of credit impairment is based on the three- stage expected credit loss model described below regarding impairment of financial assets. Financial instruments designated as measured at fair value through profit or loss Financial instruments held at fair value through profit or loss are initially recognised at fair value, with transaction costs recognised in the income statement as incurred. Subsequently, they are measured at fair value and any gains or losses are recognised in the income statement as they arise. P a g e | 25 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 Where a financial asset is measured at fair value, a credit valuation adjustment is included to reflect the credit worthiness of the counterparty, representing the movement in fair value attributable to changes in credit risk. A financial liability may be designated at fair value through profit or loss if it eliminates or significantly reduces an accounting mismatch or: • • if a host contract contains one or more embedded derivatives; or if financial assets and liabilities are both managed and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy. Where a financial liability is designated at fair value through profit or loss, the movement in fair value attributable to changes in the Group’s own credit quality is calculated by determining the changes in credit spreads above observable market interest rates and is presented separately in other comprehensive income. Impairment of financial assets The entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12- month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. (f) Financial instruments (continued) Recognition and derecognition of financial instruments A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument, which is generally on trade date. Loans and receivables are recognised when cash is advanced (or settled) to the borrowers. Financial assets at fair value through profit or loss are recognised initially at fair value. All other financial assets are recognised initially at fair value plus directly attributable transaction costs. The Group derecognises a financial asset when the contractual cash flows from the asset expire or it transfers its rights to receive contractual cash flows from the financial asset in a transaction in which substantially all the risks and rewards of ownership are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. A financial liability is derecognised from the balance sheet when the Group has discharged its obligations, or the contract is cancelled or expires. Offsetting Financial assets and liabilities are offset and the net amount is presented in the balance sheet when the Group has a legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle the liability simultaneously. P a g e | 26 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 (g) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (h) Exploration, evaluation and development expenditure Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied: (i) the rights to tenure of the area of interest are current; and (ii) at least one of the following conditions is also met: (a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or (b) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. P a g e | 27 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. (i) Employee benefits Wages and salaries, annual leave and long service leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and long service leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. (j) Cash and cash equivalents Cash reserves in the statement of financial position comprise cash on hand. (k) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the net asset or part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash flows. (l) Trade and other payables Trade and other payables are carried at cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (m) Contributed equity Ordinary shares and options are classified as contributed equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. P a g e | 28 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 Significant accounting judgements and key estimates The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. Exploration expenditure Exploration and evaluation costs are assessed on the basis of whether or not it is appropriate to carry as a Deferred exploration asset – refer to (e) above. (n) Share based payments The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’), refer to note 11. The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. Options over ordinary shares have also been issued as consideration for the acquisition of interests in tenements and other services. These options have been treated in the same manner as employee options described above, with the expense being included as part of exploration expenditure. (o) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. P a g e | 29 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 2. FINANCIAL RISK MANAGEMENT The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out by the full Board of Directors as the Group believes that it is crucial for all Board members to be involved in this process. The Board, with the assistance of senior management as required, has responsibility for identifying, assessing, treating and monitoring risks and reporting to the Board on risk management. (a) Market risk (i) Foreign exchange risk The Group has minimal operations internationally and there are currently limited exposures to foreign exchange risk arising from currency exposures. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The Group has not formalised a foreign currency risk management policy, however it monitors its foreign currency expenditure in light of exchange rate movements. (ii) Price risk Given the current level of operations, the Group is not exposed to price risk. (iii) Interest rate risk The Group is exposed to movements in market interest rates on cash and cash equivalents. The proportional mix of floating interest rates and fixed rates to a maximum of six months fluctuate during the year depending on current working capital requirements. The weighted average interest rate received on cash and cash equivalents by the Group was 1.15%. (2018: 1.1%). Balance subject to fixed rates is nil. Balance subject to variable rates is $3,210,759 and balances subject to zero rates is nil. (b) Credit risk The maximum exposure to credit risk at reporting date is the carrying amount (net of provision for impairment) of those assets as disclosed in the statement of financial position and notes to the financial statements. The only significant concentration of credit risk for the Group is the cash and cash equivalents held with financial institutions. All bank deposits are held with the major Australian banks for which the Board evaluate credit risk to be minimal. As the Group does not presently have any trade debtors, lending, significant stock levels or any other credit risk, a formal credit risk management policy is not maintained. (c) Liquidity risk The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with a view to initiating appropriate capital raisings as required. The financial liabilities of the Group are confined to trade and other payables as disclosed in the Statement of financial position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date. P a g e | 30 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All financial assets and financial liabilities of the Group at the balance date are recorded at amounts approximating their carrying amount. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. 3. INCOME TAX (a) Income tax expense Current tax Deferred tax 2019 $ 2018 $ - - - - - - (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense (1,071,307) (1,147,328) Prima facie tax benefit at Australian tax rate of 27.5% (2018: 27.5%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Capital raising fees Non-deductible expenses Other allowable expenditure Overseas projects income & expenses Provisions Tax effect of current year tax losses for which no deferred tax asset has been recognised Income tax expense (c) Unrecognised deferred tax assets (i) Capital raising costs Carry forward tax losses Gross deferred tax assets (294,609) (315,515) (25,575) 27,500 (12,388) 49,009 (13,185) (25,575) 9,553 (54,808) 23,833 16,138 (269,248) (346,374) 269,248 346,374 - - 73,149 624,690 697,839 98,725 355,441 454,166 (i) No deferred tax asset has been recognised for the above balance as at 30 June 2019 as it is not considered probable that future taxable profits will be available against which it can be utilised. P a g e | 31 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 4. CURRENT - CASH AND CASH EQUIVALENTS Cash at bank & on hand Cash – at call deposits (i) 2019 $ 2018 $ 90,416 3,120,343 3,210,759 92,462 4,834,496 4,926,958 (i) At call deposits earn interest at floating rates based on daily bank deposit rates. 5. CURRENT - TRADE AND OTHER RECEIVABLES Prepayments GST receivables Sundry debtors (i) Exploration advances - 13,319 5,445 34,955 53,719 9,375 17,098 641 60,436 87,550 (i) Exploration advances & sundry debtors are non-interest bearing and have repayment terms between 30 and 60 days. 6. NON-CURRENT – FINANCIAL ASSETS Financial assets at fair value through profit or loss: Listed Shares 620,695 620,695 7. NON-CURRENT – DEFERRED EXPLORATION & EVALUATION EXPENDITURE Deferred exploration and evaluation – at cost (i) Beginning of financial year/(period) Tenement acquisition costs – issue of shares to Mambasa vendors Tenement acquisition costs - other Exploration & evaluation costs for the year Exploration & project due diligence costs written-off End of financial year/(period) 594,161 - - 334,457 (178,213) 750,405 - - - 100,000 128,220 452,607 (86,666) 594,161 (i) The Group has capitalised all costs associated with its 100% Crackerjack (Australia) and its earn-into the Mambasa Project (DRC). The recoverability of the carrying amount of these exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. P a g e | 32 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 8. NON-CURRENT – PROPERTY PLANT & EQUIPMENT Office Equipment – at cost (i) Cost Accumulated depreciation Net book amount Reconciliation 2019 $ 2018 $ 59,940 (16,180) 43,760 31,924 (6,193) 25,731 A reconciliation of the carrying amounts of property, plant and equipment at the beginning and end of the current financial period. Property, Plant & Equipment Carrying amount at beginning of the year Additions Disposal Depreciation Carrying amount at end of the year 25,731 30,000 (1,391) (10,580) 43,760 - 31,924 - (6,193) 25,731 9. TRADE AND OTHER PAYABLES Current Trade payables (i) Accruals and other payables (i) 2019 $ 2018 $ 58,768 37,024 95,792 39,618 92,943 132,561 (i) Trade and other payables amounts represent liabilities for goods and services provided to the Group with respect to the financial period and which are unpaid. The amounts are unsecured and are usually paid within 30 days of invoice date. P a g e | 33 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 10. ISSUED CAPITAL Ordinary shares - fully paid Total Share Capital (a) Movements in share capital Balance at beginning of year Issued during the year: Share issue - IPO Mambasa vendor shares (non- cash) Placement Share issue costs Issue Price ($) 2019 Number 2019 $ 2018 Number 2018 $ 34,342,867 6,236,473 34,342,867 6,236,473 34,342,867 6,236,473 34,342,867 6,236,473 34,342,867 6,236,473 5,200,100 101,480 $0.20 $0.05 $0.70 - - - - - - - - 25,000,000 5,000,000 2,000,000 2,142,857 - 100,000 1,500,000 (465,007) Balance at the end of year 34,342,867 6,236,473 34,342,867 6,236,473 (b) Ordinary Performance rights on issue for the year There were no Performance Rights issued during the year. As at 30 June 2019, a total of 6,000,000 unlisted Performance Rights were outstanding. There were issued in prior year to directors, employees and/or key consultants of the Group, and for which there exists three Class each with specific performance hurdles: Class A No. Class B No. Class C No. Total No. Opening – 1 July 2017 28 Sep 2017 - performance rights issued on ASX listing (d) 21 Dec 2017 – performance rights issued under plan (d) (e) Closing – 30 June 2018 - - - - 1,699,999 1,699,999 1,700,002 5,100,000 - 450,000 450,000 900,000 1,699,999 2,149,999 2,150,002 6,000,000 Closing – 30 June 2019 1,699,999 2,149,999 2,150,002 6,000,000 P a g e | 34 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 10. ISSUED CAPITAL (CONTINUED) (c) Performance rights – Vesting Conditions The Performance Rights shall vest upon satisfaction of the following milestones: Class A - the Company achieving and maintaining a market capitalisation of $12m or more for a continuous period of 30 days on or before 31 December 2021, and the vesting condition was met on 14 December 2017. No exercise of these performance rights has been received as at the date of this report. Class B - the Company achieving and maintaining a market capitalisation of $18m or more for a continuous period of 30 days on or before 31 December 2021. Class C - the Company achieving and maintaining a market capitalisation of $24m or more for a continuous period of 30 days on or before 31 December 2021 (d) Performance Rights Plan The Incentive Performance Rights Plan, was approved by shareholders at the 2017 AGM, held in November 2017. (e) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. (f) Capital risk management The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group at 30 June 2019 and 30 June 2018 are as follows: Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position 2019 $ 2018 $ 3,210,759 4,926,958 53,719 (95,792) 78,175 (132,561) 3,168,686 4,872,572 P a g e | 35 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 11. RESERVES & ACCUMULATED LOSSES (a) Reserves Share based payments reserve (i) Movements: Share based payments reserve Balance at the beginning of the year Share based payments (performance rights) – under IPO prospectus Share based payments (performance rights) – under PR plan Balance as at the end of the year (b) Accumulated losses - movements Balance at beginning of year Net loss for the year Balance at end of year 2019 $ 2018 $ 593,170 440,155 440,155 - 153,015 593,170 - 404,088 36,067 440,155 (1,174,790) (1,071,307) (2,246,097) (27,462) (1,147,328) (1,174,790) (c) Share based payments – performance rights expense for the period Class A Class B Class B Class C Class C Number Issued (No.) 1,699,999 1,699,999 450,000 1,700,002 450,000 Grant Date 28-Sep-2017 28-Sep-2017 21-Dec-2017 28-Sep-2017 21-Dec-2017 Expiry/Amortisation Date 14-Dec-2017¹ 31-Dec-2021 31-Dec-2021 31-Dec-2021 31-Dec-2021 Volatility percentage (%) 100% 100% 100% 100% 100% Risk free rate (%) 1.5% 1.5% 1.5% 1.5% 1.5% Underlying Fair Value on Grant ($) $0.20 $0.1112 $0.3187 $0.1007 $0.2958 Total Fair Value ($) – Life of Right $340,000 $189,040 $143,415 $171,190 $133,110 Total Fair Value ($) – Expensed 30 June 2019 - $44,679 $35,854 $40,461 $32,021 ¹ The vesting condition achieved on 14 December 2017 (Note 10 (d)) 12. CONTINGENT LIABILITIES The Group does not have any contingent liabilities as at reporting date. $153,015 P a g e | 36 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 13. COMMITMENTS (a) Exploration commitments The Group has certain commitments to meet minimum expenditure on the mineral assets it has an interest in or an option to earn an interest in. 2019 $ 2018 $ Annual commitment Crackerjack Project – Western Australia Less than one year (i) 15,000 10,000 Annual contractual commitment Mambasa Project, DRC Less than one year (ii) Greater than one and less than three years (ii) - 746,288 - 676,498 13. COMMITMENTS (CONTINUED) (i) Okapi, through its wholly owned subsidiary Panex Resources WA Pty Ltd is the 100% owner of the tenement. In the current financial year, minimum expenditure commitments were far exceeded with direct expenditure of $45,048 (2018:$171,114). (ii) The Company has contractual exploration commitments under the Mambasa Joint Venture Agreement (“Agreement”) between the Company and Kalubamba SARL and Medidoc FZE. Since entering into this Agreement, Okapi has spent direct expenditures of $229,592 (approximately USD$172,194) in the Mambasa Project and enabled it to meet its Phase 1 contractual commitment of USD$150,000. For Okapi to acquire a 70% in the Mambasa Project, it must next have exploration expenditure of up to USD$500,000 on or before 30 June 2021 (Refer 14 (a)). As at 30 June 2019, Okapi has not met this commitment to earn 70% in the Mambasa Project. 14. INTEREST IN JOINT VENTURES Mambasa Project – Democratic Republic of Congo (“DRC”) Since entering into the Mambasa Joint Venture Agreement, Okapi completed the Phase 1 minimum expenditure obligations, being USD $150,000. As at the date of this report, Okapi has commenced the Phase 2 stage but yet to complete the Phase 2. Phase 2 – to acquire a 70% Interest in the Mambasa Project: (a) Okapi must fund as sole contributor an aggregate Expenditure of up to US$500,000 before 30 June 2021; (b) produce a JORC compliant report outlining an indicated and inferred resource in excess of 500,000 ounces of gold at the Tenements (Resource 1); and (c) within 14 days of the announcement of Resource 1 on the ASX: issue 1,000,000 fully paid ordinary shares to Kalubamba; and (i) (ii) pay US$50,000 to Kalubamba. P a g e | 37 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 Phase 2 – Larger Resource: If Okapi announces an indicated & inferred resource in excess of 1,000,000 ounces of gold at the Tenements Resource 2, then Okapi must; (a) within 14 days of the announcement of Resource 2 on the ASX: issue a further 1,000,000 fully paid ordinary shares to Kalubamba; and (i) (ii) pay a further US$100,000 to Kalubamba. Phase 3 – Decision to Mine To retain its 70% Interest and having completed obligations under Phases 1 and 2, Okapi must; (a) fund as sole contributor the production of a Definitive Feasibility Study on or before 31 December 2023; and (b) within 14 days of the delivery of the Definitive Feasibility Study to Okapi: issue 2,000,000 Okapi Shares to Kalubamba; and (i) (ii) pay US$250,000 to Kalubamba. 15. DIVIDENDS No dividends were paid or recommended for payment during the financial year. 16. REMUNERATION OF AUDITORS 2019 $ 2018 $ During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: (a) Audit services Butler Settineri (Audit) Pty Ltd - audit and review of financial reports - Statutory audit – Okapi Resources Limited 19,218 20,076 Total remuneration for audit services 19,218 20,076 P a g e | 38 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 17. RELATED PARTY TRANSACTIONS (a) Parent entity Okapi Resources Limited (ASX Code: OKR) (b) Subsidiaries Interests in subsidiaries are set out in note 18. (c) Transactions with related parties Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated. As at reporting date the following amounts were payable to the directors of the Company and included to Trade and other creditors (Note 9) Mr. Jinju (Raymond) Liu Mr. Klaus Eckhof Mr. Nigel Ferguson Mr. Michael Montgomery 18. SUBSIDIARIES 2019 $ 2018 $ 15,000 20,000 - - - - - - The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described in note 1(c): Name Country of Incorporation Class of Shares Equity Holding¹ Panex Resources WA Pty Ltd Australia Ordinary 2019 2018 % 100 % 100 ¹The proportion of ownership interest is equal to the proportion of voting power held. P a g e | 39 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 19. STATEMENT OF CASH FLOWS (a) Reconciliation of net loss after income tax to net cash outflow from operating activities Net loss for the year Exploration expenditure capitalised Depreciation of non-current assets Net loss on available for sale asset Share based payments – performance rights Change in operating assets and liabilities (Increase)/decrease in trade, other receivables and assets Increase/(decrease) in trade and other payables 2019 $ 2018 $ (1,071,307) (1,147,328) (156,244) (346,881) 10,580 100,000 153,015 6,193 - 440,155 25,847 (36,770) (64,840) 70,521 Net cash outflow from operating activities (974,879) (1,042,180) (b) Non-cash investing and financing activities There we no non-cash investing or financing transactions for the financial year. 20. LOSS PER SHARE 2019 $ 2018 $ (a) Reconciliation of earnings used in calculating loss per share Loss attributable to the owners of the Company used in calculating the loss per share (1,071,308) (1,147,328) (b) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 34,342,867 27,445,521 Number of shares Number of shares 21. EVENTS SUBSEQUENT TO REPORTING DATE Since the end of the financial year and to the date of this report, no matter or circumstance has arisen which has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in the subsequent financial year. P a g e | 40 Okapi Resources Limited Notes to the Financial Statements For the year ended 30 June 2019 22. SEGMENT INFORMATION Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. For management purposes, the Group has identified one reportable operating segment being exploration activities undertaken in two geographical segments being Australasia and Africa. These segments include the activities associated with the determination and assessment of the existence of commercial economic reserves, from the Group’s mineral assets in the sole geographic location. Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Group’s accounting policies. Australasia Africa Consolidated Total 2019 $ 2018 $ Segment revenue Reconciliation of segment revenue to total revenue before tax: Interest revenue Segment results Reconciliation of segment result to net loss before tax: Share based payments – performance rights Other corporate and administration Net loss before tax - - - - - - - - - - 2019 $ - - 2018 $ - - 2019 $ - 2018 $ - 46,077 43,559 (178,213) (86,666) (178,213) (86,666) - - - - 153,015 (786,156) (440,155) (664,066) (1,071,307) (1,147,328) Segment operating assets 244,351 199,303 541,009 455,294 785,360 654,597 Reconciliation of segment operating assets to total assets: Other corporate and administration assets Total assets 3,893,978 4,679,338 4,979,803 5,634,400 Segment operating liabilities 242 726 2,332 22,477 2,574 23,203 Reconciliation of segment operating liabilities to total liabilities: Other corporate and administration liabilities Total liabilities 93,217 95,791 109,358 132,561 P a g e | 41 Okapi Resources Limited Directors’ Declaration For the year ended 30 June 2019 In the directors’ opinion: (a) the financial statements and notes set out on pages 18 to 41 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the company’s and the consolidated entity’s financial position as at 30 June 2019 and of their performance for the financial year ended on that date; (b) the audited remuneration disclosures set out on the pages 10 to 14 of the directors' report complies with section 300A of the Corporations Act 2001; (c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and (d) a statement that the attached financial statements are in compliance with Australian Accounting Standards has been included in the notes to the financial statements. The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. On behalf of the Board. Nigel M Ferguson Director 25 September 2019 Perth, Western Australia P a g e | 42 Okapi Resources Limited Independent Audit Report For the period ended 30 June 2019 P a g e | 43 Okapi Resources Limited Independent Audit Report For the period ended 30 June 2019 P a g e | 44 Okapi Resources Limited Independent Audit Report For the period ended 30 June 2019 P a g e | 45 Okapi Resources Limited Independent Audit Report For the period ended 30 June 2019 P a g e | 46 Okapi Resources Limited Independent Audit Report For the period ended 30 June 2019 P a g e | 47 Okapi Resources Limited ASX Additional Information For the period ended 30 June 2019 (a) Shareholding The distribution of members and their holdings of equity securities as at 9 October 2019 is as follows: 1 1,001 5,001 10,001 100,001 - - - - 1,000 5,000 10,000 100,000 and over The number of shareholders holding less than a marketable parcel of shares are: (b) Twenty largest shareholders Ordinary shares Number of holders Number of shares 20 89 98 220 41 468 41 6,229 262,748 849,935 7,135,462 27,788,492 36,042,866 36,964 The names of the twenty largest holders of quoted ordinary shares are as follows: Listed ordinary shares Kalubamba SARL JP Morgan Nominees Australia PL 1 McNeil Nominees Pty Ltd 2 Havelock Mining Investment Ltd 3 Ridgeback Holdings Pty Ltd 4 Mr Klaus Eckhof 5 Mr David Samuel Nour 6 7 Windhager Holdings AG 8 HSBC Custody Nominees (Australia) Limited 9 10 Medidoc Fze 11 10 Bolivianos PL 12 Mr Colin Weekes 13 Ironside PL 14 Granet Superannuation and Investment Services PL 15 Hongze Group Ltd 16 Mr Stephen Baxter and Mrs Sarah-May Baxter 17 Mr Mark Gasson 18 Buckingham Investment Financial Services Pty Ltd 19 BNP Paribas Nominees PL 20 Mr Christopher Hooper and Mrs Moe Hooper (c) Substantial shareholders McNeil Nominees Pty Ltd Havelock Mining Investment Ltd Ridgeback Holdings Pty Ltd Mr Klaus Eckhof (d) On-Market Buy-back There is no current on-market buy-back. Number of shares 4,907,814 4,799,143 2,654,901 1,833,333 1,500,000 1,412,650 1,200,000 1,080,851 1,000,000 1,000,000 933,333 898,134 430,000 354,166 300,000 300,000 283,597 235,000 209,489 185,000 25,517,411 Percentage of ordinary shares 13.62% 13.32% 7.37% 5.09% 4.16% 3.92% 3.33% 3.00% 2.77% 2.77% 2.59% 2.49% 1.19% 0.98% 0.83% 0.83% 0.79% 0.65% 0.58% 0.51% 70.79% Number of Shares 4,907,814 4,799,814 2,654,901 1,833,333 P a g e | 48 Okapi Resources Limited ASX Additional Information For the period ended 30 June 2019 (e) Unquoted equity securities – performance rights Class Performance Hurdle Number on issue Number of Holders B C The Company achieving and maintaining a market capitalisation of $18m or more for a continuous period of 30 days on or before 31 December 2021 2,149,999 The Company achieving and maintaining a market capitalisation of $24m or more for a continuous period of 30 days on or before 31 December 2021 2,150,002 9 9 (f) Voting rights The voting rights attaching to each class of equity securities are set out below: (i) Ordinary shares All ordinary shares (whether fully paid or not) carry one vote per share without restriction. (ii) Performance rights These securities have no voting rights. (g) Application of Funds During the financial year, Okapi Resources Limited confirms that it has used its cash and assets (in a form readily convertible to cash) in a manner which is consistent with the Company’s business objectives. (h) Corporate Governance The Board of Okapi Resources Limited is committed to Corporate Governance. The Board is responsible to its Shareholders for the performance of the Company and seeks to communicate with Shareholders. In accordance with ASX Listing Rule 4.10.3, the Company has elected to disclose its Corporate Governance policies and its compliance with them on its website, rather than in the Annual Report. Accordingly, information about the Company's Corporate Governance practices is set out on the Company's website at https://okapiresources.com/corporate-governance. (i) Tenement Schedule Project/Location Country Tenement(s) Percentage held/earning Crackerjack Mambasa Project Australia DRC, Africa E80/4675 PE364 & PE480 100% 0%¹ 1 Okapi is earning an interest in the Mambasa Joint Venture Agreement (Refer to Note 14). P a g e | 49 

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