Panoramic Resources Limited Annual Report 2021

Plain-text annual report

20 21 ANNUAL report Contents page ABOUT US VISION VALUES KEY POINTS FOR FINANCIAL YEAR 2020 FY2020 SIGNIFICANT EVENTS LETTER FROM THE CHAIR OF THE BOARD LETTER FROM THE MANAGING DIRECTOR DIRECTORS’ REPORT CORPORATE GOVERNANCE STATEMENT DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT AUDITOR’S INDEPENDENCE DECLARATION FINANCIAL REPORT CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED BALANCE SHEET CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ADDITIONAL ASX INFORMATION SCHEDULE OF TENEMENTS RESOURCES AND RESERVES CORPORATE DIRECTORY 3 3 3 4 6 8 10 26 53 54 56 57 62 63 64 65 67 68 69 114 115 116 119 2 | PANORAMIC RESOURCES LIMITED ABOUT PANORAMIC Panoramic Resources Limited (ASX: PAN) is a Western Australian company which owns the Savannah Nickel Project in the East Kimberley. Panoramic successfully commissioned and operated the Project from 2004 until 2016 before the mine was placed on care and maintenance. Following the discovery of the Savannah North orebody, the mine was recommissioned in 2018 before operations were temporarily suspended in 2020. Panoramic has completed an updated Mine Plan for Savannah which has outlined an attractive near-term nickel sulphide mine restart opportunity. Following the completion of a ventilation shaft for the Savannah North deposit, additional underground capital development and ancillary works, the Board of Panoramic approved the restart of Savannah in April 2021 with a target of first concentrate shipment by the end of 2021. Competent person The information in this report that relates to Mineral Resources and exploration results is based on information compiled by Andrew Shaw-Stuart. Andrew Shaw-Stuart is a member of the Australian Institute of Geoscientists (AIG) and is a full-time employee of Panoramic Resources Limited. The aforementioned has sufficient experience that is relevant to the style of mineralisation and type of target/deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Shaw-Stuart consents to the inclusion in the release of the matters based on the information in the form and context in which it appears. VISION Discover We aim to grow our in-ground resources to ensure a sustainable business Develop We will de-risk and develop our operations to maximise value for shareholders. Deliver We will produce high quality nickel, copper and cobalt products safely, economically and efficiently from our operations. VALUES PEOPLE We always work safely. We lead and act with fairness, integrity, trust and respect. We respect our people and support their growth. PROUD We take pride in the way we work, embrace our responsibilities and are accountable for our actions. We support the culture and heritage of the environment and communities in which we operate. We seek to be an organisation that our people and stakeholders are proud to be a part of. PERFORMANCE We are focussed on creating sustainable shareholder growth, efficient operations and being a reliable supplier. PROGRESS We collaborate and invest in our future through innovation to help sustain a profitable and efficient mining operation. We look for continuous improvement opportunities to be a better business tomorrow. 2021 ANNUAL REPORT | 3 KEY POINTS FROM 2021 • Completion of FAR #3 ventilation raise and four levels of underground development, critical to mining operations at Savannah North • Completed 12-month review of operational strategies to de-risk operations at Savannah • Updated 12-year mine plan with annual average production target of 9,072t nickel, 4,683t copper and 676t cobalt in concentrate • Completed update of financial model which demonstrated attractive financial returns. • Implemented contractor strategy to further de-risk operations • Received Board approval for the restart of operations at Savannah • Signed and executed four- year underground mining and development contract with Barminco • Signed and executed three- year mineral processing and maintenance contract with Primero • Secured an attractive five- year nickel and copper offtake agreement with Trafigura • Secured a US$45 million secured finance facility with Trafigura • Commenced mining operations at Savannah ahead of schedule following early mobilisation of contractors and new equipment • Completed divestment of non-core Panton PGM Project for a total of A$15 million (before fees) • Received C$3.75 million related to the sale of Thunder Bay North Project • Requisite conditions precedent met for the Trafigura-funded US$45 million Savannah finance facility with first draw-down expected in the September 2021 quarter 4 | PANORAMIC RESOURCES LIMITED Total Savannah Project Mineral Resources at 30 June 2021 stand at 13.45Mt @ 1.56% Ni, 0.70% Cu and 0.10% Co for 209.8Kt Ni, 94.2Kt Cu and 13.7Kt Co contained metal Total Savannah Ore Reserve (including Savannah North) at 30 June 2021 stand at 8.3Mt @ 1.23% Ni, 0.59% Cu and 0.08% Co for 102kt Ni, 48.5kt Cu and 7kt Co contained metal 2021 ANNUAL REPORT | 5 FY2021 SIGNIFICANT EVENTS September 2020 Grant Dyker appointed as Chief Financial Officer. October 2020 Development drive intersecting Savannah North ventilation raise complete. October 2020 - June 2021 Agreement to sell up to 100% of Panton PGM Project. Initial interest of 80% acquired by Dubai 2020 for A$12 million cash with option for remaining 20% interest for A$3 million exercised in June 2021. November 2020 FAR#3 ventilation raise completed. April 2021 Board approval received for restart of Savannah operations following 12-month technical and financial review. April 2021 Letters of intent issued to contractors Primero and Barminco. April 2021 Five-year offtake agreement and US$45 million finance facility secured with Trafigura. 6 | PANORAMIC RESOURCES LIMITED May 2021 C$3.75 million payment for Thunder Bay North received following receipt of clearance certificate from Canadian Revenue Agency. July 2021 July 2021 July 2021 Underground mining and development operations commence at Savannah following early mobilisation of contractors and new equipment. Satisfaction of conditions precedent for US$45 million finance facility with Trafigura. Four-year underground mining and development contract worth $280 million executed with Barminco. August 2021 Three-year mineral processing and maintenance contract executed with Primero. 2021 ANNUAL REPORT | 7 LETTER FROM THE CHAIR OF THE BOARD Dear fellow shareholders, I am pleased to report that your company successfully proceeded down the path set by the Board more than 12 months ago, to return the Savannah Nickel Operations (Savannah) back into production. As I conveyed to you this time last year, your Board is steadfast in its commitment to shareholders by ensuring our actions support the key objective of realising the longer intrinsic value of the Savannah asset. Core to this is undertaking careful planning and assessment to progress Savannah to the point where we are confident in executing a sustainable restart of the operation. We had aimed to be in this position by mid-2021 and I am proud to say that the hard work of our management team, led by our CEO Victor, meant the Board was able to approve the restart of Savannah in April 2021. We are bringing the asset back into production at an opportune time. Nickel prices have gone through multi-year highs and copper fundamentals look attractive on both the demand and supply sides. Corporate interest has also been rising in the nickel space and highlights the strategic value of Savannah as the next Australian nickel sulphide asset in production. Just as importantly, nickel and copper have important roles to play in the decarbonisation of our energy and transport sectors which we are pleased to be on the verge of contributing to once again. Organisationally, we have enjoyed a period of greater stability with the addition of Grant Dyker as our new Chief Financial Officer, being the only NicHOLAS Cernotta Chair OF THE BOARD 8 | PANORAMIC RESOURCES LIMITED change at a Board or executive management level. We have continued to manage through the global pandemic with no material adverse impact on our staff or local community which we remain acutely focussed on as we restart operations and increase our workforce. Your Board is conscious of the increased expectations of our investors and important stakeholders across a range of areas which are more and more acknowledged as business critical imperatives for our sustainability. To support our increased focus and transparency in this area, we have reinstated the Sustainability Report during the period. The report provides detailed information about safety, our energy usage, carbon emissions, water management, biodiversity, workforce diversity, community engagement and supply chain policies. This information can be used to benchmark our future performance in these areas and commitment to continuous and sustainable improvement across our business. On behalf of the Board, I would like to extend our thanks to our shareholders, our employees and our partners. The Board and I believe we have progressed the business to a stronger position during the past 12 months and we look forward to updating you on our continued progress in FY2022. Yours sincerly, Nicholas Cernotta Chair of the Board 2021 ANNUAL REPORT | 9 LETTER FROM THE MANAGING DIRECTOR Dear fellow shareholders, During FY2021 we worked hard to complete the operational and financial reset of the business to prepare the business for a transition back to concentrate production from the Savannah Nickel Operation (Savannah). This objective was achieved through a number of imperatives. First and foremost was the safety of our people. I am pleased to say we have kept our people and our communities safe, with no impact of COVID-19 in the period. Secondly was the completion of the updated Mine Plan and Ore Reserve for Savannah which occurred early in July 2020. This confirmed an Ore Reserve (including Savannah North) of 8.3Mt at 1.23% nickel, 0.59% copper and 0.08% cobalt for 102kt contained nickel, 48.5kt contained copper and 7kt contained cobalt. The next imperative was the completion of ancillary works at Savannah. The establishment of the FAR#3 ventilation raise was the most critical piece of infrastructure which provides life of mine ventilation into the Savannah North underground mine. This work was completed on budget, approximately three months ahead of schedule, in December 2020. After completing or advancing various workstreams, we undertook an assessment of the optimal operating strategy to support a decision to resume operations. Past learnings clearly highlighted the human Victor Rajasooriar Managing Director and CEO 10 | PANORAMIC RESOURCES LIMITED LETTER FROM THE MANAGING DIRECTOR resourcing risks, amplified by the tight labour market being experienced in the industry. This led us to pursue a contracted services strategy for both mining and processing. After engaging with a number of parties, leading underground miner Barminco was appointed on the mining side and Primero was appointed on the processing side. Securing a financing solution which minimised or removed any additional dilution on our shareholders was another priority. Led by our Chief Financial Officer Grant Dyker, we were able to link the necessary restart funding with a five-year offtake agreement starting in 2023 when our original offtake agreement expired. The offtake agreement and US$45 million finance package with Trafigura contains attractive terms for Panoramic and we are pleased to have achieved this outcome. In April, an updated Mine Plan and financial model was completed that demonstrated attractive financial returns. These estimates were made by applying commodity prices that were materially lower than the prevailing price at the end of the period. The improving trend for nickel, copper and cobalt demand provides positive sentiment and opportunity to potentially outperform the base case outcomes over the 12-year mine life. 2021 ANNUAL REPORT | 11 To say that I am pleased with the Company’s achievements this year is an understatement. Having progressed through significant bodies of work, de-risking and readying the project throughout the year, receiving strong Board support and approval for the restart of operations with top-tier partners and then commencing mining and development in early FY2022, all in a safe manner, is a significant credit to our team. We aim to continue this momentum as we push towards the first shipment of concentrate by the end of CY2021 and the ramp up of production. We remain committed to ensuring we hit our targets and reach our objectives, safely, efficiently and sustainably. Along with our dedicated employees and contracting partners, I would like to sincerely thank our shareholders, local community, stakeholders and Board of Directors for their collective commitment to Panoramic’s future success. We have worked hard to get the business in this position and hope this effort continues to reward our shareholders as we move forward. Yours faithfully, Victor Rajasooriar Managing Director and CEO 12 | PANORAMIC RESOURCES LIMITED We aim to continue this momentum as we push towards the first shipment of concentrate by the end of CY2021 and the ramp up of production. 2021 ANNUAL REPORT | 13 SAVANNAH NICKEL COPPER COBALT PROJECT The Savannah nickel- copper-cobalt Project is located 240km south of Kununurra in the East Kimberley region of Western Australia. Savannah was constructed in 2003 and commissioned in late 2004 with more than $100 million invested in mining, processing and site infrastructure including an underground mine, processing plant with annual processing capacity of one million tonnes, a paste fill plant, a 180-room accommodation village, workshops, office buildings, tailings and water storage facilities and other associated infrastructure. Ore was initially sourced from an open-pit for 18 months at which time mining transitioned underground. The Company’s tenement holdings are shown at the back of this Annual Report. 14 | PANORAMIC RESOURCES LIMITED UPDATED MINE PLAN/ RESTART DECISION Following the completion of an updated Ore Reserve and Life of Mine Plan in July 2020 (refer to ASX announcement dated 31 July 2020), the financial model supporting the Savannah restart was updated to reflect more up- to-date consensus commodity price and exchange rate assumptions, current industry cost inflation levels, the adoption of a contractor processing strategy and the completion of early works. The price estimates used a nickel price of A$9.63/lb, a copper price of A$5.25/lb, a cobalt price of A$30.40/lb and an AUD:USD exchange rate of 0.76. The outcomes demonstrate attractive financial returns over the 12 year mine life. The Company believes potential upside exists in the commodity price assumptions based on the expected impact on nickel and copper markets of the growing electrification of vehicles and uptake of renewable energy in the medium-term. Figure 2: SAVANNAH PROJECT LOCATION 2021 ANNUAL REPORT | 15 Figure 3 – Savannah North EXPLORATION TARGETS FY2021 EXPLORATION REVIEW Following the Company’s decision to suspend operations at Savannah in April 2020, exploration activities in FY2021 were limited as the Company focused on the restart of mining operations in the second half of 2021. Savannah mine (underground) exploration activity during FY2021 involved a single drill hole to test the area of strong electromagnetic (EM) anomalies located to the west of Savannah North that have been modelled and interpreted to reflect the westward continuation of the Savannah North Upper Zone resource (Figure 3). Regional surface exploration activities conducted during FY2021 involved preliminary prospectivity assessments of the Oxide, Northern Ultramafic Granulite and the recently identified Stoney Creek intrusion (Figure 4). A planned prospectivity assessment on the Norton intrusion was not able to be completed in FY2021 due to delays in completing heritage access. The regional prospectivity assessments involved a combination of diamond drilling, down hole electromagnetic (DHEM) and surface electromagnetic survey techniques. FIGURE 4 – SAVANNAH MINING COMPLEX 16 | PANORAMIC RESOURCES LIMITED Figure 5 - Savannah north section 5500me Savannah Mine A series of large, strong overlapping EM anomalies identified to the west of Savannah North are interpreted to reflect the continuation of the Upper Zone resource. An initial drill test (KUD1733C) of the area was completed in FY2021. However, drilling issues prevented the drill hole from intersecting the nominated target position, instead falling short to penetrate the 500 Fault at the base of the Savannah North intrusion located around Section 5500mE (Figure 5). On the underside of the 500 Fault which was intersected by drill hole KUD1733C, several thin bands of high-tenor, remobilised massive sulphide mineralisation grading up to 3.08% Ni, 0.11% Cu and 0.16% Co were intersected. The entire zone returned an overall intersection of 4.0m grading 0.85% Ni, 0.11% Cu and 0.05% Co. The KUD1733C intersection does not in any way diminish the significance of the strong DHEM anomalies that exists in this area. Based on the known orientation of the 500 Fault structure and its 150-metre reverse thrust displacement, the sulphide mineralisation intersected by KUD1733C is projected to have originated from a source located between 100 to 150 metres to the north-west near the planned target position for the drill hole (Figure 5). Further drill testing of this area is a high priority exploration target once the Savannah mine is fully operational. 2021 ANNUAL REPORT | 17 Regional Savannah At Oxide, surface drill hole SMD187 intersected a series of mafic to ultramafic lithologies prior to exiting the intrusion at 404 metres and terminating at a depth of 625 metres within a broad intercalated sequence of Tickalara Metamorphics and aplitic dykes. No significant magmatic nickel sulphide mineralisation was intersected by SMD187 and subsequent downhole and surface EM surveys completed over the intrusion during FY2021 failed to identify any prospective anomalies. No immediate exploration follow-up at Oxide is planned in FY2022. The Stoney Creek intrusion located immediately north of Subchamber D was only recognised as a discrete intrusion when Company geologists mapped the area in 2018/19. Apart from a small outcropping area of ultramafic located on its eastern contact, the intrusion is composed mostly of non- 18 | PANORAMIC RESOURCES LIMITED cumulate gabbro-gabbronorite rock types. In FY2021 surface drill hole SMD188 was completed at Stoney Creek and encountered a consistent gabbroic rock type prior to exiting the intrusion at a depth of 392 metres and terminating in Tickalara Metamorphics at a depth of 529 metres. No significant magmatic nickel sulphides were intersected by SMD188 and the planned DHEM survey of the hole was unable to be completed due to blocked casing. However, subsequent EM soundings and fixed loop electromagnetic (FLEM) surveys completed over the intrusion have identified a strong, discrete anomaly at depth within the intrusion. This Stoney Creek anomaly is considered to be a high-priority exploration target for follow-up in FY2022. Located along the trend of the Savannah and Savannah North deposits to the northwest, drill hole SMD189 tested an historical EM anomaly proximal to the Northern Ultramafic Granulite. Apart from minor iron-rich sulphides intersected at a depth of 440 metres, no evidence for the source of the historic EM anomaly was apparent at the target depth of 550 metres. SMD189 terminated in Tickalara Metamorphics at a depth of 628 metres. The subsequent DHEM survey of SMD189 identified a highly conductive source below and to the right of the drill hole. When jointly interpreted with the historic EM data, the SMD189 DHEM data indicate SMD189 passed subparallel to a series of bedrock conductor(s) located between 300 metres and 500 metres down hole. The conductors are modelled to be located to the right of SMD189, starting above and migrating below the hole at depth. The conductors identified by the SMD189 DHEM survey are considered to be a high-priority exploration target for follow-up in FY2022. In addition to the work completed on the three intrusions described above FLEM surveys were also conducted over Anomaly A and Three Nuns (Figure 6). No significant EM anomalies were detected consequently no follow-up work is planned on either intrusion in FY2022. Figure 6 - Savannah TENEMENT PACKAGE 2021 ANNUAL REPORT | 19 TABLE A: KEY OUTCOMES OF PLAN/FINANCIAL MODEL 28 29 27 Ni nickel Price1 base case (april 2021) US$16,055/t spot case (JULY 2021) US$19,533/t Cu copper Price US$8,750/t US$9,664/t Co cobalt Price US$50,692/t US$52,431/t Ore mined & treated (kt)1 base case (april 2021) 10,628 spot case (JULY 2021) 10,628 $AM mine revenue3 2,369 2,852 mine costs4 1,718 1,740 upfront capital costs average aic5 (A$/lb) FX (AUD:USD) life of mine (years) 41 41 6.36 6.14 0.76 0.75 12 12 Refer to the announcement “Updated Savannah Ore Reserve and Mine Plan” dated 31 July 2020. All material assumptions underpinning theproduction targets, and the forecast financial information derived from those production targets, which are referred to in the original announcement, continue to apply and have not materially changed. 1. Life of mine production of 10,628 kt @ 1.23% Ni, 0.54% Cu, and 0.08%% Co 2. Pricing based on 28 July 2021 (i.e. Ni US$19,533/t, Cu US$9,664/t, Co US$52,431/t) and AUD:USD 0.75 FX . 3. Nickel + copper + cobalt 4. Total capital and operating costs 5. Payable Ni, inclusive of all site and transport operating costs, capital costs, royalties, and net of by-product credits, but exclusive of corporate, funding and exploration costs FIGURE A: PRODUCTION PROFILE Contained Metal Tonnes 25,000 Contained Cobalt Contained Nickel Contained Copper Contained Nickel Eq Nickel Price - Spot 29 July 2021 (RHS) Nickel Price - Base Case (RHS) 20,000 15,000 10,000 A$/lb 14.00 12.00 10.00 8.00 6.00 5,000 NiEq grade and NiEq contained metal in Mineral Resource and Reserves for all projects calculated based on prevailing spot metal prices 28 July 2021 (i.e. Ni US$19,533/t, Cu US$9,664/t, Co US$52,431/t) and AUD:USD 0.75 FX. Refer to the announcement “Updated Savannah Ore Reserve and Mine Plan” dated 31 July 2020. All material assumptions underpinning the production targets, and the forecast financial information derived from those production targets, which are referred to in the original announcement, continue to apply and have not materially changed. 2.00 4.00 - - FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 20 | PANORAMIC RESOURCES LIMITED 2021 ANNUAL REPORT | 21 FOCUS FOR THE YEAR AHEAD The focus of the business this year will be centred around the ramping-up of mining and processing at Savannah. The safety of our people is ingrained in our core values and is always a primary focus, particularly as the Company progresses toward its first concentrate shipment since the resumption of operations. Exploration Additional areas of the focus will include: • • Drawdown and prudent management of Trafigura project financing facility. • Ongoing safe mobilisation of contractors to site, as operations continue to ramp up. Implementation and execution of processing improvements identified by Primero. • Completion of ancillary capital works. FY2022 is focused on a series of underground drill programs that aim to infill and expand the Savannah and Savannah North Resource. The programs include grade control, resource definition drilling and testing the open eastern and upper central sections of the Savannah North orebody. In addition, resource definition drilling above and below the 900 Fault in the Savannah Resource is planned during the year. The drilling schedule is as follows: • Grade control infill drilling in the 1381 and 1361 Savannah North ore development drives – currently underway. • A dedicated drill platform to the east of the 1381 level to provide access and extend the eastern margin of the Savannah North orebody. • Resource definition drilling in the central and upper margins of Savannah North orebody between the 1200 and 1500 levels. • Resource definition drilling above and below the 900 Fault at Savannah. New development in these areas will provide optimal angles to test the mineralisation above and below the Fault. 22 | PANORAMIC RESOURCES LIMITED 2021 ANNUAL REPORT | 23 24 | PANORAMIC RESOURCES LIMITED INVESTMENT PROPOSITION Panoramic’s focus is on safely and successfully restarting nickel production at Savannah, ramping up production to full capacity AND, in turn, generating sustainable cashflows and returns for shareholders • First shipment concentrate December 2021. • Demand and strong nickel price outlook driven by electric vehicles. • The nickel market is already estimated to be in a supply- demand deficit. • Electric vehicle production is expected to be the source of the vast majority of demand growth in the next decade. • Long life, high quality nickel sulphide asset with significant Ore Reserves and Mineral Resources. • More than $100 million invested in mining, processing and site infrastructure with +13 years of operating history. • A largely untouched orebody at Savannah North which remains open along strike and at depth. • Updated Mine Plan has outlined a 12 year mine life with attractive financial outcomes. • Underground development underway and underground exploration recommenced in September 2021. 2021 ANNUAL REPORT | 25 DIRECTORS’ REPORT Directors' Report The directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Panoramic Resources Limited and the entities it controlled at the end of, or during, the year ended 30 June 2021. Directors Nicholas L Cernotta (Independent Non-Executive Chair) BEng (Mining) Appointed 2 May 2018, Independent Non-Executive Chair from 25 May 2020 Nicholas (Nick) is a mining engineer with over 35 years’ experience in the mining industry, spanning various commodities and operations in Australia and Overseas. Nick has held senior executive roles with extensive operational experience in both the public and private sectors of the mineral resources industry, including as Director of Operations at Fortescue Metals Group Ltd, Chief Operating Officer at MacMahon Contracting and Director of Operations at Barrick Gold. During the past three years, Nick has also served as a director of the following listed companies: • Pilbara Minerals Limited (Non-Executive Director from 6 February 2017)* • New Century Resources Limited (Non-Executive Director from 28 March 2019)* • Northern Star Resources Limited (Non-Executive Director from 1 July 2019)* * Denotes current directorship Victor Rajasooriar (Managing Director) B.Eng (Mining) AusIMM, MAICD Appointed 11 November 2019 Victor is a mining engineer with more than 25 years’ operational and technical experience in multiple disciplines across both underground and open pit operations. Victor was Managing Director and CEO of Echo Resources Limited prior to its takeover by Northern Star Resources Limited in September 2019. Prior to joining Echo, Victor held the role of Chief Operating Officer for leading underground mining contractor, Barminco Underground Contractors. In that role, Victor had responsibility for the tendering and execution of contracts and for overseeing the achievement of strict safety, cost and production targets. He was also the Managing Director of Breakaway Resources Limited and held senior operational positions for a range of mining companies including Newmont, Grange Resources and Bass Metals. During the past three years, Victor has also served as a director of the following listed companies: • Echo Resources Limited (Managing Director from October 2018 to September 2019) • Horizon Gold Limited (Non-Executive Chair from 20 November 2019 to 9 April 2020) Peter R Sullivan (Non-Executive Director) BE, MBA Appointed 1 October 2015 Peter is an engineer with an MBA and has been involved in the management and strategic development of resource companies and projects for more than 30 years. His work experience includes periods in project engineering, corporate finance, investment banking, corporate and operational management and public company directorships. During the past three years, Peter has also served as a director of the following listed companies: • GME Resources Limited (Managing Director from 24 June 1996 to 1 October 2004, Non-Executive Director from 1 October 2004 and Non-Executive Chairman from 2017)* • Copper Mountain Mining Corporation (Non-Executive Director from 30 October 2020)* • Zeta Resources Limited (Non-Executive Chairman from 7 June 2013)* • Horizon Gold Limited (Non-Executive Chair from 7 July 2020)* • Resolute Mining Limited (Managing Director from 14 February 2001 to 30 June 2015 and Non-Executive Director from 30 June 2015 to 27 May 2021) • Bligh Resources Limited (Non-Executive Director from 13 July 2017 to 14 August 2019) * Denotes current directorship 2021 ANNUAL REPORT | 27Directors (continued) Rebecca J Hayward (Independent Non-Executive Director) LLB Appointed 21 June 2018 Rebecca is an experienced infrastructure and resources lawyer, with a strong background in mining, energy and large scale infrastructure transactions. Rebecca currently manages the legal, contracts and procurement function for the Projects division of Fortescue Metals Group. Rebecca was a Senior Associate at Clayton Utz in the Melbourne Construction and Major Projects team, where she had a lead role in a number of large infrastructure projects for both the private and public sectors. During the past three years, Rebecca has not served as a director of any other listed company. Gillian Swaby (Independent Non-Executive Director) BBus, FAICD, FGIA, AAusIMM Appointed 8 October 2019 Gillian is an experienced mining executive with over 30 years’ experience in the resources sector and a broad skillset across a range of corporate, finance and governance areas having held senior roles including Chief Financial Officer, Company Secretary, Director and corporate advisor. She worked at Paladin Energy Limited between 1993 and 2005, including 10 years as an executive director, at a time when that uranium company was growing rapidly through mine development, operation, acquisition and exploration in multiple African countries. During the past three years, Gillian has served as a director of the following listed companies: • Deep Yellow Limited (Executive Director from 29 June 2017)* • Comet Ridge Limited (Non-Executive Director from 9 January 2004)* • Firefinch Limited (formerly Birimian Limited) (Non-Executive Director from 26 April 2017, until 13 November 2018) * Denotes current directorship Company Secretary Susan Park BCom; ACA; F Fin; FGIA; FCG; GAICD Appointed 9 April 2020 Ms Park has 24 years’ experience in the corporate finance industry and extensive experience in Company Secretarial and Non-Executive Director roles with ASX, AIM and TSX listed companies. She is founder and Managing Director of boutique consulting firm Park Advisory which specialises in the provision of corporate governance and company secretarial advice to ASX listed companies and has held senior executive roles at Ernst & Young and PricewaterhouseCoopers in their Corporate Finance divisions and at BankWest in their Strategy and Ventures division. Meetings of Directors The number of meetings of directors (including committee meetings of directors) held during the year ended 30 June 2021, and the number of meetings attended by each director are as follows: Board Meetings Audit and Governance Committee Remuneration Committee Risk and Sustainability Committee N. Cernotta V. Rajasooriar P. Sullivan R. Hayward G. Swaby Held 11 Attended Held - 11 11 11 11 11 11 11 11 11 - 6 6 6 Attended Held - - 6 6 6 2 - 2 - 2 Attended Held 3 2 Attended 3 - 2 - 2 3 - 3 - 3 - 3 - 2021 ANNUAL REPORT | 28Committee Membership As at the date of this report, the Company has an Audit and Governance Committee, a Remuneration Committee and a Risk and Sustainability Committee. The full Board acts as the Nomination Committee. Members acting on the sub-committees of the Board at the date of this Directors’ Report are: Audit and Governance Committee Remuneration Committee G. Swaby (Chair) P. Sullivan (Chair) R. Hayward P. Sullivan N. Cernotta G. Swaby The company secretary acts as the secretary on each of the committees of the Board. Risk and Sustainability Committee R. Hayward (Chair) N. Cernotta V. Rajasooriar Directors' Interests The relevant interest of each director in the share capital as notified by the directors to the Australian Securities Exchange (ASX) in accordance with S205G(1) of the Corporations Act 2001, as at the date of this Directors’ Report is as follows: Name of Director N Cernotta V Rajasooriar P Sullivan R Hayward G Swaby Ordinary Shares Performance rights over Direct - - - 107,500 Indirect 107,500 1,791,666 - - ordinary shares - 7,416,488(1) - - 107,500 - (i) Does not include an award of rights to Mr Rajasooriar (Managing Director) post 30 June 2021 totalling 3,992,813 that is subject to shareholder approval at the Company’s upcoming 2021 annual general meeting of shareholders. Securities Options At the date of this report, unissued ordinary shares of the Company under option are: Number of options 28,520,525 Exercise price $0.16 Expiry date 30 June 2023 No options have been granted during the financial year or subsequent to the reporting date and to the date of signing this report. Performance Rights On 11 September 2020 the Company issued 5,316,748 performance rights to employees. These performance rights are subject to performance conditions and expire on 30 June 2025. On the 30 September 2020, performance rights (included in the above issue) totalling 3,235,844 were forfeited and cancelled following the resignation of Mr Michael Ball. On 21 October 2020 the Company issued 1,936,910 performance rights to the Chief Financial Officer Mr Grant Dyker. These performance rights are subject to performance conditions over the period to 30 June 2023 and expire on 30 June 2025. On 17 November 2020, following shareholder approval, the Company issued 7,416,488 performance rights to the Managing Director and CEO Mr Victor Rajasooriar. These performance rights are subject to performance conditions over the period to 30 June 2023 and expire on 30 June 2025. No shares were issued on exercise of performance rights during the year. A reconciliation of performance rights outstanding at the date of this report appears below. 2021 ANNUAL REPORT | 29 Operating and Financial Review (continued) Rights outstanding at 30 June 2020 Rights issued during the year Rights vested during the year Rights lapsed during the year Rights forfeited during the year Rights issued post year end(i) Rights forfeited post year end Number of rights - 14,670,146 - - (3,235,844) 7,563,220 (1,164,033) Rights outstanding at the date of this report 17,833,489 (i) Includes an award of rights to Mr Rajasooriar (Managing Director) totalling 3,992,813 that is subject to shareholder approval at the Company’s upcoming 2021 annual general meeting of shareholders. These LTI awards will be subject to testing including the Company’s performance against total shareholder return measures. The awards have a three-year performance period ending on 30 June 2024. Dividends No final dividend has been declared for the financial year ended 30 June 2021 (2020: nil). Principal Activities The principal activities of the consolidated entity during the course of the financial year comprised care and maintenance activities at the Savannah Nickel Project together with capital infrastructure works within the underground mine and on surface, aimed at de-risking the Project in preparation for a restart of operations during the second half of CY2021. Business Divisions Previously, the Group had identified the following four operating segments: (1) (2) (3) (4) Nickel - the Savannah Nickel Project; Gold - 51% equity interest in Horizon Gold Limited (divested 29 June 2020); Platinum Group Metals (PGM) - the Panton PGM Project (80% equity interest divested 17 December 2020, remaining 20% divested 16 June 2021); and Exploration - greenfield exploration activities. For the year ended 30 June 2021, the Company has reduced the number of business divisions to one segment comprising Nickel. This change aligns with the Company’s stated goal of focusing on the Group’s core assets being Nickel and is supported by the divestment of equity interests in Horizon Gold Limited and Panton Sill Pty Ltd. As at 30 June 2021, the Company had no ownership interest in Horizon Gold Limited and Panton Sill Pty Ltd. Exploration is no longer viewed as a separate segment as all activities are focused on the tenements surrounding the Savannah Nickel Project. Operating and Financial Review Operating Results for the Year The Group recorded a profit after tax for the financial year ending 30 June 2021 of $295,000 (2020: after tax loss of $87,888,000). 2021 ANNUAL REPORT | 30 Operating and Financial Review (continued) Financial Performance The Group's performance during the financial year ended 30 June 2021 and for the four previous financial years, are set out in the table below. The financial results shown below were all prepared under the Australian Accounting Standards. Year Ended 30 June Revenue and other income ($'000) Cost of sales of goods ($'000) Royalties ($'000) Exploration and evaluation ($'000) Care and maintenance expenses ($'000) Fair value change of financial assets ($'000) Corporate and marketing costs ($'000) Other (expenses)/income ($'000) EBITDA (before impairment) ($'000) Depreciation and amortisation ($'000) Net reversal/(impairment) of assets ($'000) Finance costs ($'000) Profit/(Loss) before tax ($'000) Income tax (expense)/benefit ($'000) Net Profit/(Loss) after tax ($'000) (Loss)/earnings per share (cents) Dividends per share (cents) Dividends pay out ratio (%) Market capitalisation ($'000) Closing share price ($ per share) Return on equity (%) 2021 10,677 - - (945) (11,442) (121) (5,656) (956) (8,443) (5,028) 14,187 (422) 295 - 295 0.0 - - 2020 80,345 (87,000) (3,402) (484) (619) (190) (7,695) (15,864) (34,909) (18,656) (27,063) (7,260) (87,888) - (87,888) (8.8) - - 2019 27,885 (20,900) (1,904) (671) (847) (1,511) (4,929) 2,273 (604) (7,039) 18,255 (1,383) 9,229 - 9,229 1.4 - - 2018 1,714 - - (487) (5,474) - (4,022) 114 (8,155) (430) (38,511) (943) 2017 9,666 (8,473) (490) (493) (7,539) - (5,365) (4) (12,698) (760) 9,178 (490) (48,039) (4,770) - (48,039) (9.1) - - - (4,770) (1.0) - - 94,285 0.220 (2.8) 307,637 166,124 163,307 304,788 0.15 0.1 0.081 (31.2) 0.295 4.6 0.620 (26.8) Note (1): Comparative information has not been restated for the impact of AASB 9 Financial Instruments, AASB 15 Revenue from contracts with customers (adopted in 2019) and AASB 16 Leases (adopted in 2020). Note (2): EBITDA (before impairment) is non-IFRS information and has not been audited by the Company's auditor, Ernst & Young (EY). The table above shows how it is reconciled to the Consolidated Income Statement. EBITDA (before impairment) has been included for the purpose of reconciling earnings without impairment. Revenue and Other Income Operations at the Savannah Nickel Project remained suspended during the year on care and maintenance. As a result, there were no concentrate sales during the year (2020: $69,097,000). Other income totalled $10,677,000 (2020: $11,248,000) which included a gain on the sale of the subsidiary Panton Sill Pty Ltd $7,659,000, gain on the sale of shares in listed investments Horizon Gold Limited and GME Resources Limited $870,000, Job Keeper income $1,279,000, interest and other income of $869,000. Cost of Production No direct production costs were incurred during the year (2020: 82,547,000) as operations at the Savannah Nickel Project remained suspended on care and maintenance. Care and Maintenance Costs Costs associated with care and maintenance activities during the year totalled $11,442,000 (2020: $619,000). Capital works were undertaken during the year to progress the de-risking of the project for a restart. The capitalised cost of these activities totalled $13.611 million (2020: nil) and included the successful completion of raise bore works for the FAR#3 ventilation shaft, underground level development within the Savannah North orebody, paste fill infrastructure (on surface and underground), and surface electrical and ventilation works. 2021 ANNUAL REPORT | 31Operating and Financial Review (continued) Corporate and Marketing Costs Corporate and marketing costs of $6,014,000 (2020: $7,695,000) were lower than the previous reporting period. The prior year included costs for the restructure and recapitalisation of the Groups funding position and employee termination costs associated with the suspension of operations at the Savannah Nickel Project. Exploration Costs Exploration costs in the period totalled $996,000 (2020: $1,720,000). This expenditure was incurred on areas of interest where reserves have not yet been established. Impairment In the prior financial year end 30 June 2020, a net impairment loss of $27.063 million was recorded. This comprised an impairment of $32.948 million which was recorded against the nickel cash generating unit as a result of the suspension of operations at the Savannah Nickel Mine, netted off against an impairment reversal relating to the disposal of the Thunder Bay North PGM Project totalling $5.332 million. On 6 April 2021, the Company announced to the ASX that a decision to re-start operations at the Savannah Nickel Project in the second half of CY2021 had been made. The decision was underpinned by a combination of improving commodity and foreign exchange pricing and the completion of de-risking capital project works on site. The decision to restart operations at the Savannah Nickel Project was considered to be a reversal indicator for impairment losses recognised in prior periods and, as such, a formal estimate of the recoverable amount of the nickel cash generating unit (CGU) was performed. The financial assessment inclusive of updated commodity and foreign exchange prices together with appropriate sensitivity analysis indicated that the carrying values of the nickel CGU’s assets were supported by the valuation (within a sensitivity range) and no further impairment adjustment (loss / reversal) was required in the current financial year. Refer to note 10 for further details on impairment. Review of Financial Condition Balance Sheet Net Working Capital - current assets less current liabilities In the prior financial year, the Group undertook a recapitalisation of its funding position which resulted in the repayment of its debt facilities and the strengthening of its balance sheet. At that time, sufficient funding was secured to allow the Savannah Nickel Project to remain on care and maintenance for an extended period of time. Operations were suspended in April 2020 and the Group since then has not generated operating cash flows from the project. During the year ended 30 June 2021 the Group has incurred care and maintenance expenditure and undertaken several capital works programs to prepare the project for a restart in the second half CY2021. This expenditure has been partially offset by the receipt of income from the disposal of Panton Sill Pty Ltd, Thunder Bay sale proceeds instalments and the sale of shares in listed investments. As a result of the net outflow of cash from the Group, the working capital position has reduced by $14,153,000. The Group’s working capital position is $21,682,000 (2020: $35,835,000). Net Tax Balances At balance date, the consolidated entity had an unrecognised deferred tax asset value of $67,042,000 (2020: $74,445,000). Until such time as the Savannah Nickel Project is generating sustainable taxable income, this asset is not being recognised in the consolidated statement of financial position. Net Assets/Equity The net asset position of the consolidated entity increased 0.36% to $166,682,000 (2020: $166,085,000), primarily due to the expenditures on care and maintenance activities at the Savannah Nickel Project, expensing of exploration and corporate office costs. Capital Structure The debt to equity ratio (borrowings on contributed equity) at 30 June 2021 was 2% (2020: 2%). 2021 ANNUAL REPORT | 32Review of Financial Condition (continued) Business and Financial Risks Exposure to movements in nickel, copper, cobalt and diesel (input) prices and the Australian dollar exchange rate to the United States dollar (A$:US$) are significant business and financial risks in the Nickel Division. As a price- taker, the consolidated entity has no ability to control the global spot prices it receives for the sales of nickel concentrate and nickel ore. Any negative commodity price movement directly impacts the business by reducing the sales revenue the consolidated entity receives in United States dollars. Similarly, the conversion of sales revenue received in United States dollars into Australian dollars exposes the consolidated entity to movements in the foreign exchange rate between the Australian dollar and the United States dollar. If the Australian dollar is strong relative to the United States dollar at the time of conversion, the consolidated entity will receive less Australian dollar revenue. On 6 April 2021 the Company announced to the ASX a decision had been made to re-start operations at the Savannah Nickel Project in the second half of CY2021. The commodity prices mentioned above, and the A$:US$ exchange rate has had a significant bearing on this decision and timing of the restart of operations at the Savannah Nickel Project. In the prior financial year, the Group was significantly affected by the impact of Covid-19, with the impact of Covid- 19 being a significant factor in the decision to suspend operations at the Savannah Nickel Project on 15 April 2020. The Project is located in the Kimberley region which has previously been subjected to heightened travel restrictions under the Biosecurity Act (2015). In response to Covid-19 the Company developed a specific Covid-19 management plan and implemented a range of measures to minimise the risk of potential transmission of Covid- 19 to the Company’s employees and the communities in which it operates. The Company is closely monitoring Covid-19 related developments including the potential for stricter travel restrictions in the Kimberley or broader regions in which the Company’s workforce and suppliers live and operate in. As a result of the suspension of operations at the Savannah Nickel Project in the prior financial year, onsite presence reduced to a minimum to allow the necessary care and maintenance activities and pre-production capital works to be carried out. The company has put in place contractual measures to provide flexibility and minimise the potential cost of the impact of any further restrictions or changes to existing restrictions. The impact of Covid-19, including any restrictions on travel and the movement of supplies to Savannah has the potential to impact the activities of the Company by reducing productivities and/or increasing the cost of performing the Company’s activities. The potential impact of Covid-19 has been a significant factor that was considered in the decision to restart the operations at Savannah. The timing of the restart and possibility for unforeseen delays due to Covid-19 also has the potential to impact the carrying value of the Company’s assets or certain liabilities such as rehabilitation and restoration costs. Further disclosures around the potential impact of Covid-19 are contained in the Review of Operations and in the notes to the financial statements. Commodity and US$ Foreign Currency Hedging To limit the exposure to commodity price risk and foreign exchange currency risk between the Australian dollar and United States dollar, the consolidated entity utilises commodity and United States dollar foreign exchange derivatives. All commodity and United States dollar foreign exchange derivatives were closed out in the 30 June 2020 financial year. During the year there were no derivative transactions. Risk Management Other business risks can have an impact on the profitability of the consolidated entity. The recognition, management and control of these risks are key elements of the Group enterprise-wide risk management framework, as detailed in the Corporate Governance Statement. 2021 ANNUAL REPORT | 33Review of Operations The activities of the Group during the year included capital works that were undertaken to progress the de-risking of the Savannah Nickel Project for a restart and included the successful completion of raise-bore works for the FAR#3 ventilation shaft, underground level development within the Savannah North orebody, paste fill infrastructure (on surface and underground), and surface electrical and ventilation works. The Group recorded a profit from continuing operations after income tax for the full-year ended 30 June 2021 of $0.295 million (2020: loss after tax of $87.89 million). The results, in comparison to the previous corresponding full-year, reflect: • a 100% decrease in sales revenue. The operation did not produce or sell concentrate in the period as the Project is on care and maintenance. As a result, concentrate sales income for the full-year is recorded as nil, whereas the corresponding prior year achieved $69.1 million in sales. • Cost of goods sold and gross margin on sale of goods have a recorded value for the year of nil (prior corresponding full-year, gross margin was a loss of $39.58 million). This result reflects the suspension of operations at the Project. • During the financial year the Group sold a 100% equity interest in Panton Sill Pty Ltd (PGM project), recording a profit on sale of $7.66 million. As the COVID-19 pandemic continues to impact Australia and the world, the Group’s focus remains on keeping its people well, and maintaining safe and reliable operations. The Group has been proactive in its response to the COVID-19 pandemic and has implemented a range of protective and preventative measures. The Savannah Nickel Project, through its COVID-19 management plan, is continuing to operate unaffected by the pandemic, however, a number of changes have been made at the operations such that persons employed at the site have reduced exposure to potential sources of COVID-19, are able to abide by social distancing requirements and improve hygiene standards. To date, the impact of border and travel restrictions on the Group’s ability to employ and move employees and contractors into and out of the project has been minimal. Savannah Nickel Project – Operating Activities On 15 April 2020, the Company announced to the ASX a decision to suspend operations at the Savannah Nickel Project. A number of factors contributed to this decision including the reduced operating performance of the mine, lower prevailing commodity prices and the impact of Covid-19 related restrictions. The Savannah Nickel Project was subject to travel restrictions that commenced late March 2020 and ended in June 2020. These restrictions were imposed as part of the government’s measures to manage the impact of Covid-19 on the indigenous communities in the Kimberley. There were no further travel restrictions imposed during the financial year ended 30 June 2021. This allowed the Company to continue with existing onsite care and maintenance activities and undertake capital and ancillary works with the aim of de-risking the project for a restart in the second half of CY2021. These capital works commenced in August 2020. 2021 ANNUAL REPORT | 34Review of Operations (continued) The following table summarises the production results. Area Details Units Mining Milling Ore mined Ni grade Ni metal contained Cu grade Co grade Ore milled Ni grade Cu grade Co grade Ni Recovery Cu Recovery Co Recovery Concentrate Production Concentrate Concentrate Shipments1 Ni grade Ni metal contained Cu grade Cu metal contained Co grade Co metal contained Concentrate Ni grade Ni metal contained Cu grade Cu metal contained Co grade dmt % dmt % % dmt % % % % % % dmt % dmt % dmt % dmt dmt % dmt % dmt % Financial Year Ended 30 June 2021 - - - - - - - - - - - - - - - - - - - - - - - - - Financial Year Ended 30 June 2020 372,842 1.05 2,446 0.60 0.05 388,759 1.05 0.61 0.05 83.7 93.7 88.3 45,883 7.45 3,417 4.82 2,215 0.39 176 50,535 7.15 3,613 4.23 2,137 0.38 1 dmt Mining and processing activities finished around 15 April 2020. The final concentrate shipment for 1,687 tonnes departed Wyndham Port in June 2020. Co metal contained 190 - On 31 July 2020, the Company released to the ASX an updated Savannah ore reserve and mine plan. Based on a mining inventory (inclusive of some Inferred Resources located near Ore Reserves) of 10.4Mt @ 1.22% Ni, 0.54% Cu and 0.08% Co for 127kt Ni, 56kt Cu and 8.5kt Co contained metal, the new mine plan has a mine life of approximately 13 years, with the majority of ore sourced from the Savannah North orebody. This results in average annual production for years 1 to 12 of 8,810t Ni, 4,579t Cu and 659t Co in concentrate. The project economics presented in this announcement indicate an attractive, near-term nickel sulphide mine restart opportunity. The Savannah Ore Reserve (including Savannah North) at the time of this announcement was 8.3Mt @ 1.23% Ni, 0.59% Cu and 0.08% Co for 102kt Ni, 48.5kt Cu and 7kt Co contained metal. Underground development works recommenced in August 2020, with mining contractor Barminco mobilising to site. The key priority for the contractor was to complete a 468m horizontal development drive to intersect the Savannah North FAR #3 ventilation raise. This development work was successfully completed on 1 October 2020, allowing Barminco to undertake and complete other incline, decline and development work, primarily aimed at opening up additional working levels in Savannah North. Barminco completed the assigned tasks, opening up four mining levels in Savannah North ahead of schedule. They demobilised from site late December 2020. The completion of the FAR #3 ventilation works together with the on-surface fan infrastructure will provide the required ventilation to support future full-scale mining operations within the Savannah North ore body. 2021 ANNUAL REPORT | 35Review of Operations (continued) The raise boring contractor, RUC Mining, mobilised to site in late September 2020 and commenced work in mid- October back-reaming the FAR #3 ventilation rise. A total of 354m of back reaming at a diameter of 3.85m was successfully completed three months ahead of schedule. This work finished on 30 November 2020 with the contractor demobilising from site in December 2020. In January 2021, capital works commenced on the following projects that are a continuation of the de-risking strategy that prepares the project for a restart of operations. - - - Drilling of paste lines into Savannah North and installation of pipes; Surface power reticulation upgrade; and Surface return air raise fan refurbishment, civil construction and installation. As at 30 June 2021, the surface power reticulation upgrade had been completed, with work on the other projects scheduled to be completed by the end of August 2021. On 6 April 2021 the Company announced to the ASX a decision had been made to re-start operations at the Savannah Nickel Project in the second half of CY2021. The announcement referred to the following positive developments which underpinned the decision. - - - - - - - - Improved commodity and foreign exchange pricing and sentiment. Updated financial model confirming attractive financial outcomes over an optimised twelve-year mine life. Completion of capital works that de-risk the restart of operations, primarily the raise bore works associated with FAR #3. Additional underground development to open up four new mining levels at Savannah North. Updated process schedule based on additional metallurgical test work. Evaluation of owner-operate and contractor-operated mining and processing models, which resulted in: Letter of Intent signed with underground mining contractor Barminco Limited for mining services. Letter of Intent signed with Primero Group Pty Ltd to operate the processing plant. o o US$45 million debt facility secured with Trafigura Pte Ltd. New offtake terms secured for the period February 2023 to February 2028 with Trafigura Pte Ltd. On 6 April 2021, the results from an updated financial model that supported the Savannah restart were announced to the ASX. The update included latest consensus commodity price and exchange rate assumptions, cost inflation allowances that reflect current industry pricing conditions, the adoption of a contractor processing strategy and the completion of some early capital works. The commodity price forecasts used in the model included a nickel price of A$9.63/lb, a copper price of A$5.25/lb, a cobalt price of A$30.40/lb and an AUD:USD exchange rate of 0.76. The outcome of this model update demonstrated attractive financial returns. The Company believes potential upside exists in the commodity price assumptions based on the expected impact on nickel and copper markets of the growing electrification of vehicles and uptake of renewable energy in the medium-term. The following table and graph provide a summary of the key physical and financial metrics from the updated life of mine model. 2021 ANNUAL REPORT | 36April 2021 (Consensus Case) April 2021 (Base Case) April 2021 (Base Case + 20 % Ni Price) 10,628 10,628 10,628 Review of Operations (continued) Key Metrics Ore mined & treated Ni grade Cu grade Co grade Mine Revenue (Ni + Cu + Co) Mine Costs (total capital and operating) Upfront capital costs Average AIC (payable Ni, net of byproduct credits) Life of Mine (LOM) Average nickel production (contained in concentrate) Average copper production (contained in concentrate) Average cobalt production (contained in concentrate) Nickel price Copper price Cobalt price FX: AUD:USD kt % % % A$M A$M A$M A$/lb years t t t USD/t USD/t USD/t 1.23 0.54 0.08 2,386 1,717 41 6.73 12 9,072 4,683 676 16,976 7,629 45,947 AUD:USD 0.76 1.23 0.54 0.08 2,369 1,718 41 6.36 12 9,072 4,683 676 16,055 8,750 50,692 0.76 1.23 0.54 0.08 2,753 1,735 41 6.37 12 9,072 4,683 676 19,266 8,750 50,692 0.76 A separate financial model has been prepared for the purpose of assessing impairment at 30 June 2021. This model has used financial inputs that vary to those used in the table above. These inputs include changes to commodity and foreign exchange pricing, taxation, exploration expenditure and debt funding. Refer to note 10 for further information. On 3 April 2021, the Company entered into a secured loan agreement of up to US$45.0 million from Trafigura Pte Ltd. The facility has two secured tranches comprising a US$30 million five-year Prepayment Loan Facility (PLF) and a US$15 million Revolving Credit Loan Facility (RCF). The PLF has a five-year term from drawdown with interest-only repayments required in the first 12 months. Debt repayments begin in the second year and are sculpted to align with project cash flows. The RCF has an 18-month term from 1 July 2021, and has the option (at the Company’s election) to be repayable by way of a final bullet repayment of US$15 million at the end of the facility term. 2021 ANNUAL REPORT | 37Review of Operations (continued) The proceeds from the facility can be used for project-related expenditure and corporate purposes. Ongoing covenants are typical for a facility of this nature. Both facilities use the 3-month LIBOR as a base interest rate plus a favourable interest margin. There is no mandatory hedging requirement with either tranche. Both facilities are secured by the Savannah project assets (including mining and exploration leases), the assets of the other applicable operating subsidiary PAN Transport Pty Ltd and the shareholding held by Panoramic Resources Ltd in Savannah Nickel Mines Pty Ltd. Ongoing covenants are light and typical for a facility of this nature. Both tranches permit early repayment without penalty. All conditions precedent to first draw down were satisfied on 2 July 2021 and all registrations with respect to security were completed in June 2021. The Company anticipates drawing the PLF in the September 2021 quarter. On 3 April 2021, the Company entered into a new five-year nickel and copper concentrate offtake agreement for the period February 2023 to February 2028 with Trafigura Group Pte Ltd (Trafigura), which aligns with the expiry of the existing offtake agreement with Jinchuan Group Co. Ltd / Sino Nickel Pty Ltd. The Trafigura offtake agreement was concluded following a competitive tender process and reflects terms and payabilities which are in line with, or more favourable than, the existing offtake agreement. This agreement is subject to and conditional upon the drawing of the first tranche of debt (US$30 million) from Trafigura. On 6 April 2021 mining contractor Barminco, a subsidiary of the Perenti Group (ASX:PRN), was awarded a four- year underground mining contract under a binding Letter of Intent. Initial mobilisation to site occurred in June 2021. Underground mining activities commenced in July 2021 one month ahead of the announced scheduled commencement. Ore will initially be sourced from both the Savannah and the Savannah North deposits. By October 2021, it is anticipated that more than 50% of underground ore is scheduled to be consistently sourced from Savannah North, rising to more than 60% by mid-CY2022 and continuing to increase as the Savannah remnants are depleted. The contract will be serviced by new underground mining equipment including the use of teleremote mining equipment which is expected to deliver both safety and productivity benefits. Based on Barminco’s previous working knowledge at Savannah, opportunities to increase ore production and reduce dilution have also been identified. A formal contract with Barminco was signed on 8 July 2021. The Company signed a non-binding Letter of Intent on 6 April 2021, with specialist mineral processing engineering group, Primero Group Pty Ltd (which is owned by NRW Holdings (ASX:NRW)). The non-binding Letter of Intent envisaged a three-year agreement, and relates to all processing and maintenance work at the Savannah processing plant, which has been maintained in excellent condition during the suspension. A number of opportunities for improved recoveries through enhanced operating practices and minor capital projects have been identified. The non-binding Letter of Intent with Primero has been structured to incentivise achieving higher than budget recoveries. Ore processing is forecast to restart in November 2021, allowing ore stockpiles (from mining) to build for around three months (100,000t) to de-risk the supply of ore to the plant during the commissioning phase. First concentrate shipment from the Wyndham Port is targeted for December 2021. A formal contract with Primero was signed on 30 July 2021. Savannah Nickel Project – Exploration Activities In September 2020, a surface exploration drilling program commenced, with a combination of deep surface diamond drilling and electromagnetic surveying being used to explore for nickel sulphide mineralisation at a number of prospective targets in close proximity to the Savannah Mine Complex. These targets include the Northern Ultramafic Granulite, Oxide and Stoney Creek intrusions. The aim of this surface-based exploration program was to complete preliminary nickel prospectively assessments and initial stratigraphic drilling of these targets. On 22 October 2020 the Company announced this exploration program had been completed. The Northern Ultramafic Granulite program resulted in a new interpretation of the Down Hole Electromagnetic (DHEM) anomaly which requires further drill testing. At Oxide, no significant magmatic nickel sulphide mineralisation was intersected by the drill hole. The results from Stoney Creek did not intersect any significant magmatic nickel sulphide mineralisation however follow up DHEM is required to complete the initial assessment. The Company intends undertaking this follow up work in FY2022. 2021 ANNUAL REPORT | 38Review of Operations (continued) In October 2020, additional drilling to test a potential extension to the West of the Savannah North Upper Zone orebody commenced from underground. The program was targeting an electromagnetic conductor. This work was completed in December 2020, however the target was not properly tested as the drilling deviated below the target. Remobilised mineralisation was encountered in this hole (refer to ASX announcement 28 January 2021). The large DHEM target has not been effectively tested and follow up work will be assessed by the Company with a further program to be undertaken when new in-mine drill positions have been established in FY2022. The Company intends to commence an expanded in-mine exploration drilling program in the September 2021 quarter (refer to ASX announcement 28 July 2021). There were no other significant regional exploration activities undertaken during the financial year as the Company’s resources were primarily focussed on the restart of mining operations at Savannah. Regional exploration activities will resume in the second half of the 2022 financial year. The Company is currently assessing a number of regional targets including those prospects previously drilled (noted above). On the 22 July 2021, the Company published (on the ASX) a 2021 Mineral resource and Ore Reserve Statement. In comparison to the previously released statement, there were no material changes to the stated resource and reserve. Panton PGM Project In October 2020, the Company entered into a binding agreement to sell an equity interest in Panton Sill Pty Ltd, a subsidiary company that holds the Panton PGM Project and associated tenements in the East Kimberly of Western Australia. The purchaser, Great Northern Palladium Pty Ltd (“Great Northern Palladium”), agreed to acquire an 80% equity interest in Panton for A$12.0 million (inclusive of a $200,000 non-refundable deposit). The sale of the 80% equity interest was completed on 17 December 2020. The agreement gave Great Northern Palladium a right to purchase the remaining 20% of Panton from the Company for an additional A$3.0 million within a prescribed timeframe. This timeframe comprised either a six month period from the completion of the sale or a nine month period from the completion of the sale should there be a change of control of Panoramic Resources Ltd. If the right expired unexercised, then the Company and Panton will participate in an incorporated joint venture in respect of the project, with the Company participating on a free carry basis until a decision to mine has been made. On 14 June 2021 Great Northern Palladium exercised its right to acquire the remaining 20% interest in Panton. The transaction was cash settled on 16 June 2021. As at 30 June 2021, the Company had no ownership interest in Panton. Thunder Bay North PGM Project On 15 May 2020, the Company completed the sale of all the shares in Panoramic PGMs (Canada) Limited (PAN PGMs) to Clean Air Metals (formerly Regency Gold Corp.) PAN PGMs owned 100% interest in the Thunder Bay North PGM Project situated in Northern Ontario, Canada. Under the share purchase agreement announced on 6 January 2020, the purchase price comprised total cash consideration of C$9.0 million. A deposit of C$0.25 million was received on execution of the agreement. A further C$4.25 million was received on closing, with C$2.25 million of that held in trust by the Company’s Canadian lawyers pending the receipt of a Clearance Certificate as required under the Income Tax Act (Canada). In addition, further sale consideration (on a deferred basis) totalling C$4.5 million was due to be received by the Company in three equal instalments on the first, second and third anniversaries of the completion of the sale. The deferred consideration payments are secured by way of a general security agreement over all of the assets of PAN PGMs, including the Thunder Bay North Project, and a first ranking charge over the shares held by Clean Air Metals in PAN PGMs. On 7 May 2021, the Company received a total of C$3.75 million in deferred proceeds from the sale. This amount comprised the release of C$2.25 million that was held in trust pending the receipt of a Clearance Certificate and C$1.5 million being the first anniversary instalment. 2021 ANNUAL REPORT | 39Corporate The Company is limited by shares and is domiciled and incorporated in Australia. Significant events of the consolidated entity during the financial period of a corporate nature were as follows: Significant Changes in the State of Affairs Savanah Nickel Project - Restart Decision On 6 April 2021 the Company announced to the ASX a decision had been made to re-start operations at the Savannah Nickel Project in the second half of CY2021. The announcement referred to the following positive developments which underpinned the decision. - - - - - - Improved commodity and foreign exchange pricing and sentiment. Updated financial model confirming attractive financial outcomes over a twelve-year mine life. Completion of capital works that de-risk the restart of operations, primarily the raise bore works associated with FAR #3. Completion of underground development works to open up four new mining levels at Savannah North. Updated process schedule based on additional metallurgical test work. Evaluation of owner-operate and contractor-operated mining and processing models, which resulted in; Letter of Intent signed with underground mining contractor Barminco Limited for mining services. Letter of Intent signed with Primero Group Pty Ltd to operate the processing plant. o o On 8 July 2021, a four-year Underground Mining Services contract was executed with Barminco Limited. On 30 July 2021, a three-year Operating and Maintenance agreement was executed with Primero Group Pty Ltd. Debt Funding On 6 April 2020 the Company announced it had secured a financing facility from Trafigura Pte Ltd totalling US$45 million comprising two tranches. The first tranche is a term loan facility for five years totalling US$30 million. The second tranche is a revolving credit facility for US$15 million repayable if drawn in eighteen months from 1 July 2021. See review of operations and note 21 for further details. This funding in combination with existing cash on hand at 30 June 2021 together with anticipated concentrate sales revenue (targeted for December 2021) position the Company to be fully funded to recommence operations at the Savannah Nickel Project. Offtake Funding On 3 April 2021, the Company entered into a new five-year nickel and copper concentrate offtake agreement for the period February 2023 to February 2028 with Trafigura Pte Ltd, which aligns with the expiry of the existing offtake agreement with Jinchuan Group Co. Ltd / Sino Nickel Pty Ltd. This agreement is subject to and conditional upon the drawing of the first tranche of debt (US$30 million) from Trafigura Pte Ltd. Exploration The Group is now sufficiently funded to allow the recommencement of both in-mine and regional exploration. As referred in the Review of Operations, exploration programs are being planned for both drilling and geophysical activities which are due to commence in the first half of FY 2022. Matters Subsequent to the End of the Financial Year The following events occurred after the end of the financial year. On 2 July 2021, all conditions precedent were satisfied for the US$45 million secured loan facility with Trafigura Pte Ltd including the registration of security interests. On 8 July 2021 the four-year underground mining contract with Barminco was executed. The contract value is approximately $280 million. Underground mining activities also commenced at the Savanah Nickel Project. 2021 ANNUAL REPORT | 40Matters Subsequent to the End of the Financial Year (continued) On 30 July 2021 the three-year Operating and Maintenance Agreement was executed with Primero Group Pty Ltd. The contract value is approximately $34 million. Primero commenced initial mobilisation to the Savannah site in August 2020. In the interval between the end of the financial year and the date of this report, other than as disclosed above or previously in the Review of Operations, there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years. Business Strategies and Prospects The Company’s primary goal is to explore for, develop and mine its resources profitably and return value to shareholders through capital growth and dividends. The Company’s vision is to broaden its exploration and production base, with the aim of becoming a major, diversified mining house. The likely developments in the next 12 months will be the ongoing focus to restart, commission and ramp up production activities at the Savannah Nickel Project. Current plans are targeting 100,000 tonnes of mined ore available for the commencement of processing in November 2021, first shipment of concentrate in December 2021 and ore run rates from underground mine production (tonnes basis) fully ramped up by June 2022. Shares Under Option At the date of signing, there were 28,520,525 unissued ordinary shares of the Company under Option (2020: 28,520,525). Refer to note 36(a). Indemnification of Auditors To the extent permitted by law, the Company has agreed to indemnify the auditors, Ernst & Young (EY), as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payments have been made to indemnify Ernst & Young (EY) during or since the financial year. Indemnification and Insurance of Directors and Officers The Company has agreed to indemnify the directors and senior executives against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors and officers of the Company, except where the liability arises out of certain wrongful acts for which the Company has not agreed to provide indemnity. The agreement stipulates that the Company will meet the full amount of any such liabilities including costs and expenses. During the financial year, the Company has accrued and/or paid premiums in respect of contracts insuring all the directors and officers against legal costs incurred in defending proceedings. The insurance premiums relate to: • • costs and expenses incurred by the relevant officers in defending legal proceedings, both civil and criminal and whatever the outcome; and other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage. The terms of the insurance contract are confidential and do not permit the disclosure of insured amounts, the premium cost for the policies or any other condition. 2021 ANNUAL REPORT | 412021 Remuneration Report (Audited) This 2021 remuneration report outlines the remuneration arrangements in place for the directors and executives of the Company and the Group in accordance with the Corporations Act 2001 and its Regulations (the Act). The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. For the purposes of this report, Key Management Personnel (“KMP”) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term ‘executive’ encompasses the Managing Director and the individuals listed under Named Executives below. (a) Directors and Key Management Personnel Disclosed in this Report (i) Directors Nicholas Cernotta Victor Rajasooriar Peter Sullivan Rebecca Hayward Gillian Swaby Chair (Non-Executive) Managing Director Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) (ii) Named Executives Grant Dyker(i) Michael Ball(ii) Chief Financial Officer Chief Financial Officer (i) Grant Dyker was appointed Chief Financial Officer on 5 October 2020. (ii) Michael Ball resigned from his position as Chief Financial Officer on 30 September 2020. (b) Remuneration Philosophy The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives. To this end, the Company embodies the following principles in its remuneration framework: • • • • provide competitive rewards to attract and retain high calibre executives; link executive rewards to shareholder value and company profits; structure a significant portion of executive remuneration 'at risk', dependent upon meeting pre-determined performance hurdles; and establish appropriate and demanding performance hurdles in relation to 'at risk' executive remuneration. (c) Remuneration Committee The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the Managing Director and the senior executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of executives 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, high performing and committed senior executive team. (d) Remuneration Structure In accordance with best practice corporate governance, the remuneration structure of the non-executive directors, and senior management, is separate and distinct. 2021 ANNUAL REPORT | 42 2021 Remuneration Report (Audited) (continued) (e) Use of Remuneration Consultants Where appropriate, the Remuneration Committee and the Board seek advice from independent remuneration consultants to ensure the remuneration paid to the non-executive directors and senior management is appropriate and in line with the market. As defined under the Corporations Amendment (Improving Accountability on Director and Executive Remuneration), the Remuneration Committee received remuneration advice from BDO Remuneration and Reward Services Pty Ltd (“BDO”) in the first two months of the 2020/21 financial year, on aspects of the design of the FY2021 Long Term Incentive (“LTI”) scheme for the Group’s KMP. For this remuneration advice, BDO was paid a fee of $5,650 (ex GST). The Remuneration Committee also engaged Guerdon Associates in July 2021 to provide further remuneration advice with respect to the executive remuneration framework and the design of the FY2023 LTI scheme for the Group’s KMP. For this remuneration advice, Guerdon Associates were paid a fee of $19,435 (ex GST). Following the receipt of the advice and recommendations from these advisors and the ensuing discussions with the Remuneration Committee, the final design and approval of the executive remuneration framework including the LTI scheme for both financial years ended 30 June 2021 and 30 June 2022 was made solely by the Company’s Non-Executive Directors, therefore the Board is satisfied that there was no undue input or influence by any member of the KMP. (f) Non-Executive Director Remuneration (i) Fixed Remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Company's Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting of shareholders. An amount not exceeding the amount determined is then divided between the directors as agreed. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the Company. This fee is inclusive for each Board committee on which a director is a member. Since the date of last review of non-executive director fees on 1 September 2019, subject to the comments below, the Non-Executive Chair’s annual remuneration was $140,000 per annum and other non-executive director’s annual remuneration was $90,000 per annum. In addition, each Chair of a Board Sub-Committee is paid an annual fee of $10,000. Effective 1 May 2020 as a result of the suspension of operations at the Savannah Nickel Mine non-executive director fees were reduced by 25%. On 1 August 2020, with the commencement of capital development activities at the Savannah Nickel Mine, non-executive director fees were returned to pre-suspension levels. A review of non-executive director fees was undertaken following the end of the financial year. With effect from 1 July 2021 the Non-Executive Chair’s remuneration will increase to $145,000 (an increase of $5,000 from the previous year) and each Chair of a Board Sub-Committee will be paid an annual fee of $15,000 an increase of $5,000 from the previous year. All other Director fees remain unchanged. The fees paid to non-executive directors for the period ending 30 June 2021 are detailed in Table 1 on pages 50 and 51 of this report. Fees for the non-executive directors were determined within an aggregate directors’ fee pool limit of $600,000 which was last approved by shareholders on 20 November 2007. 2021 ANNUAL REPORT | 432021 Remuneration Report (Audited) (continued) (ii) Variable Remuneration The Company does not reward non-executive directors with variable (or ‘at risk’) remuneration. Any shares in the Company that are held by non-executive directors at the date of this report are separately purchased and held by each director and have not been issued by the Company as part of the director’s remuneration package. (g) Executive Remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company so as to: • • • • reward executives for Company and individual performance against pre-determined targets; align the interests of executives with those of shareholders; link reward with the strategic goals and the performance of the Company; and ensure total remuneration is competitive by market standards. Structure In determining the level and composition of executive remuneration, the Remuneration Committee takes into consideration the operational and economic circumstances the Company is facing and likely to face in the medium term together with the current market levels of remuneration for comparable executive roles. It is the Remuneration Committee’s policy that employment contracts are entered into with the Managing Director and other KMP. Details of these KMP contracts are provided on pages 49 to 50. Remuneration consists of the following key elements: • • Fixed Remuneration (base salary, superannuation and non-monetary benefits); and Variable Remuneration - Short Term Incentive (“STI”) and Long Term Incentive (“LTI”). The proportion of fixed remuneration and variable remuneration (‘at risk’ short term and long term incentives), is established for each senior executive by the Remuneration Committee. Table 1 on page 50 and 51 details the variable component (%) of the Group’s KMP. (i) Fixed Remuneration Objective The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed by the Remuneration Committee on a regular basis and the process consists of a review of Company-wide, business unit and individual performance, the Company’s operational and economic circumstances, relevant comparative remuneration in the market and internal and, when appropriate, external advice on policies and practices. As noted above, the Remuneration Committee has access to external advice, independent of management. Structure Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company. 2021 ANNUAL REPORT | 442021 Remuneration Report (Audited) (continued) Effective 1 May 2020, as a result of the suspension of operations at the Savanna Nickel Mine, KMP and other senior management salaries were reduced by 20%. On 1 August 2020, with the commencement of capital development activities at the Savannah Nickel Mine, KMP and senior management salaries were returned to pre-suspension levels. The fixed remuneration component of the Group’s KMP is detailed in Table 1 on page 49 and 50. (ii) Variable Remuneration - Short-term Incentive (STI) Objective The objective of the STI scheme is to encourage and provide an incentive to executives and senior managers to achieve, on a consistent basis, a number of annually set, pre-determined weighted Company and Individual Key Performance Indicators (KPIs). Structure The Remuneration Committee may, at its sole discretion, set the KPIs for the Executive Directors or other Executive Officers. The KPIs are chosen to align the reward of the individual Executives to the strategy and performance of the Company. Performance objectives, which may be financial or non-financial, or a combination of both, are determined by the Board. No short-term incentives are payable to Executives where it is considered that the actual performance has fallen below the minimum requirement. In the STI scheme, each participant is entitled to receive a cash bonus calculated on a certain percentage, depending on the participant’s level of seniority, of their Total Fixed Remuneration (TFR) provided one or more of the KPIs is achieved. All KMP are eligible to participate in the STI plan with awards capped at 100% of the target opportunity. The target opportunity for KMP is 60% of total fixed remuneration for the Managing Director and 50% for other KMP. A summary of the KPI targets which were assessed on an annual basis for FY2021 and their respective weightings is as follows: KPI 1. Safety & Environment Weighting 20% Measure The Safety Performance KPI is based on the rate of total recordable injuries improvement against previous year's safety performance. No significant environmental incidents leading to prosecution and / or fine. 2. Capital Works 40% Execute planned capital works and exploration activities within budget. Ventilation rise FAR#3 to be successfully completed during the financial year ended 30 June 2021. 3. Personal Performance 40% KPI measures include: - - - - - Leadership through vision and values. Identify, communicate and execute strategic corporate initiatives. Establish a leadership team to transition the business in line with the agreed business strategy. Implement and optimise IT / financial systems in preparation for a restart of operations. Establish and implement a project financing strategy that supports the funding requirements for a restart of operations. 2021 ANNUAL REPORT | 452021 Remuneration Report (Audited) (continued) Based on an assessment undertaken by the Remuneration Committee, STI awards for FY2021 to KMPs were as follows: Name Position Victor Rajasooriar Grant Dyker(i) Michael Ball(ii) Managing Director & CEO Chief Financial Officer Chief Financial Officer Maximum STI opportunity 60% of TFR 50% of TFR 50% of TFR Achieved STI Awarded STI 96% 100% 0% $331,200 $123,188 Nil (i) Grant Dyker was appointed Chief Financial Officer on 5 October 2020. Eligible STI target amounts have been reduced on a pro-rata basis for the period of time employed (being less than 12 months). (ii) Michael Ball resigned from his position as Chief Financial Officer on 30 September 2020. No STI award was made as the STI assessment period was not completed. The achieved STI was in respect of the full year ended 30 June 2021 where the KPI metrics were met. The STI outcome is generally determined after the completion of the performance period (a financial year). The above amounts were expensed in the FY2021 and will be paid in the September 2021 quarter. No STI was paid or awarded in the prior FY2020. The Board retains the discretion to waive or amend any vesting or performance criteria applying to the scheme, or to make discretionary payments outside of the scheme in limited circumstances where it is considered warranted. (iii) Variable Remuneration - Long Term Incentive (LTI) Objective The objective of a LTI program is to reward and incentivise executives in a manner which aligns this element of remuneration with the creation of long term sustainable shareholder value and to provide greater incentive to the participant focus on the Company’s longer term goals. The Company’s LTI Plan was revised by the Remuneration Committee with the assistance of remuneration consultants BDO and named the “Incentive Options & Performance Rights Plan” (“2018 ES Plan”). The 2018 ES Plan was subsequently approved for a three-year period by the Company’s shareholders at the 2018 Annual General Meeting on 21 November 2018. Structure Under the 2018 ES Plan, eligible participants are able to be granted Options and/or Performance Rights (collectively defined as “Awards”). Notwithstanding that the 2018 ES Plan includes the offer and granting of Options, in its discretion, the Remuneration Committee has determined that the grant of performance rights is the preferred LTI reward vehicle. A performance right is a right to be issued or transferred an ordinary share at a future point, subject to the satisfaction of pre-determined vesting Conditions. No exercise price is payable and eligibility to a grant of performance rights under the 2018 ES Plan is at the Board’s discretion. If approved by the Board, a participant under the 2018 ES Plan may be paid, as an alternative, a cash amount equal to the market value of a share as at the date the performance right is exercised instead of being issued or transferred a Share. The LTI dollar value that each KMP and senior managers will be entitled to receive in performance rights (or options if applicable) is set at a fixed percentage of their annual TFR (base salary plus statutory superannuation and benefits) and varies according to the participant’s level of seniority and ability to influence performance. The number of performance rights to shares to be granted is determined by dividing the LTI dollar value by the volume weighted average price of the Company’s shares over the last 20 trading days of the month of June preceding the start of the vesting period. 2021 ANNUAL REPORT | 462021 Remuneration Report (Audited) (continued) Grants of performance rights made under the 2018 ES Plan are subject to the satisfaction of a time-based service criteria and pre-determined vesting criteria over a three-year vesting period. These vesting conditions are established in advance of grant by the Remuneration Committee. Performance and service criteria may be varied from year to year by the Remuneration Committee as appropriate to ensure that the criteria align with the Company’s strategies. The Board retains the discretion (except to the extent otherwise provided by an offer to apply for awards), by written notice to a Participant, to resolve to waive or amend any vesting criteria applying to an award in whole or in part. In accordance with the Listing Rules and the Corporations Act, grants of awards (performance rights or options if applicable) under the 2018 ES Plan to the Company’s Managing Director will be subject to approval by the Company’s shareholders. Approval by shareholders would also be necessary for any grant of Awards under the 2018 ES Plan to the non-executive directors. There are no such grants proposed to non-executive directors. The fair value of the performance rights granted are determined using Monte Carlo simulation, a review of historical share price volatility and correlation of the share price of the Company to its Peer Group. The fair value is allocated to each reporting period evenly over the period from grant date to vesting date. During the year the Company issued 12,589,242 Performance Rights to KMP in respect of the LTI component of their FY2021 remuneration. There were no LTI awards granted to the named executives and senior managers under the 2018 ES Plan during the FY2020. The table below shows the number of performance rights granted to KMPs during the FY2021. Name Victor Rajasooriar(i) Grant Dyker(ii) Michael Ball(iii) Maximum LTI Opportunity 100% of total fixed remuneration 75% of total fixed remuneration 75% of total fixed remuneration Number of Performance Rights granted during FY2021 7,416,488 Fair Value of Performance Rights $0.11 1,936,910 3,235,844 $0.07 $0.06 (i) The performance rights issued to Mr Rajasooriar were approved by shareholders on 17 November 2020. (ii) Mr Dyker was appointed Chief Financial Officer on 5 October 2020. The eligible LTI target amount has been reduced on a pro-rata basis for the period of time employed (being less than 12 months). (iii) Performance rights were issued to Mr Ball on 9 September 2020. Following his resignation on 30 September 2020 these rights were forfeited. The table below outlines the movements in performance rights during the 2021 financial year and the balance held by each KMP at 30 June 2021. Name Balance at 1 July 2020 Granted in FY2021 Victor Rajasooriar Grant Dyker Michael Ball Total - - - - 7,416,488 1,936,910 3,235,844 12,589,242 Vested Lapsed Other - - - - - - 3,235,844 3,235,844 - - - - Balance at 30 June 2021 7,416,488 1,936,910 - 9,353,398 On vesting, each right automatically converts to one ordinary share. If the employee ceases employment before the rights vest, the rights will be forfeited, except in limited circumstances that are approved by the Board. The following table details the terms and conditions of the grant and the assumptions used in estimating fair value for performance rights issued to KMP during the 2021 financial year. 2021 ANNUAL REPORT | 472021 Remuneration Report (Audited) (continued) Item Grant date Number of ATSR rights Number of RTSR rights Value of underlying security at grant date Fair value per ATSR Right Total ATSR Expense for the period Fair value per RTSR Right Total RTSR Expense for the period Dividend yield Risk free rate Volatility Performance period (years) Commencement of measurement period Test date Remaining performance period (years) Maximum expense amount to be recognised in future period M Ball G Dyker V Rajasooriar 11 September 2020 21 October 2020 17 November 2020 808,961 2,426,883 $0.081 $0.059 - $0.057 - 0% 0.47% 80% 3.0 484,228 1,452,683 $0.100 $0.070 $8,109 $0.072 1,854,122 5,562,366 $0.095 $0.111 $52,008 $0.107 $25,023 $150,403 0% 0.30% 80% 3.0 0% 0.175% 80% 3.0 1 July 2020 1 July 2020 1 July 2020 30 June 2023 30 June 2023 30 June 2023 2.0 Nil 2.0 2.0 $101,198 $574,942 The performance rights granted to Mr Rajasooriar and Mr Dyker are subject to certain operational and market performance conditions being met and will vest at the measurement date. The performance measures adopted align with the Company’s objectives of restarting the Savannah Nickel project and achieving a successful ramp up of that operation. The number of performance rights that vest will be subject to the Company’s performance against total shareholder return and Company performance vesting conditions. The performance rights granted to Mr Ball were forfeited in September 2020 following his resignation from the Company. Tranche Amount Weighting Performance Conditions Victor Rajasooriar 1,854,122 25% of the Performance Rights ATSR performance. Performance rights vest on a pro-rata scale from 25% to 100% for ATSR performance between 5% and 15%. (measured over the 3 year period to 30 June 2023) 5,562,366 75% of the Performance Rights RTSR performance relative to a defined peer group. Performance rights vest on a stepwise basis from 25% to 100% for RTSR performance between 50th and 75th percentile. (measured over the 3 year period to 30 June 2023) Grant Dyker 484,228 25% of the Performance Rights ATSR performance. Performance rights vest on a pro-rata scale from 25% to 100% for ATSR performance between 5% and 15%. (measured over the 3 year period to 30 June 2023) 1,452,682 75% of the Performance Rights RTSR performance relative to a defined peer group. Performance rights vest on a stepwise basis from 25% to 100% for RTSR performance between 50th and 75th percentile. (measured over the 3 year period to 30 June 2023) ATSR: Absolute Total Shareholder Return measures the return received by shareholders from holding shares over the performance period. Rights vest upon achievement of pre-specified 20-day volume weighted average price targets. The number of rights that vest is determined pro-rata based on the level of performance achieved. RTSR: Relative Total Shareholder Return measures the TSR performance of the Company over the performance period relative to the TSR of each of the companies in the defined peer group. Rights, vest upon achievement of pre-specified 20-day volume weighted average price targets as measured against a specified peer group of like companies over the Performance Period. The number of rights that vest is determined based on whether the performance achieved is greater than the fiftieth percentile of the peer group. If below this level, then none of the rights vest. Above this level the number is determined stepwise in line with the relative percentile achieved. 2021 ANNUAL REPORT | 482021 Remuneration Report (Audited) (continued) The peer group comprises Aeris Resources Ltd, Aurelia Metals Ltd, Blackstone Minerals Ltd, Copper Mountain Mining Corp, Core Lithium, Liontown resources, Metals X Ltd, Mincor Resources Ltd, Neometals, New Century Resources Ltd, Poseidon Nickel Ltd, Red River Resources Ltd, Sandfire Resources Ltd, and Western Areas Ltd. In the period from the end of the financial year to the date of signing this Directors’ Report, the Company has granted new performance rights totalling 7,563,220 to the named executives and senior managers under the 2018 ES Plan. Mr Rajasooriar was awarded (subject to shareholder approval at the Company’s upcoming 2021 annual general meeting of shareholders) 3,992,813 performance rights, Mr Dyker was awarded 1,866,640 performance rights and senior managers were awarded 1,703,766 performance rights. These LTI awards will be subject to testing including the Company’s performance against ATSR and RTSR. The awards have a three-year performance period ending on 30 June 2024. No Hedging Contracts on LTI Grants The Company does not permit executives or senior managers to enter into contracts to hedge their exposure to options or performance rights to shares granted as part of their remuneration package. This policy is strictly enforced by the Managing Director under the Company’s Share Trading Policy detailed in the Corporate Governance Statement. (h) Employment contracts (i) Non-Executive Directors All non-executive directors are contracted under the following terms: • • A non-executive director may resign from their position and thus terminate their contract on written notice. The director’s appointment is subject to the provisions of the Company’s Constitution regarding retirement by rotation and re-election and will cease at the end of any meeting at which the director is not re-elected as a director by the shareholders of the Company. Peter Sullivan Non-Executive Director Nicholas Cernotta Annual Directors Fees $140,000 $100,0001 $100,0001 $100,0001 1 Includes $10,000 annual fee for Chairing of Board Sub-Committee. Rebecca Hayward Gillian Swaby (ii) Managing Director The key terms of the Managing Director’s contract are as follows: • • • • • • Total fixed remuneration (TFR) of $600,000 per annum inclusive of benefits and statutory superannuation. Short Term Incentives in accordance with the STI Plan Rules that apply from time to time up to 60% of TFR. Long Term Incentives (“LTI”) in accordance with the rules of the 2018 ES Plan of up to 100% of TFR. The Company may terminate a directorship by providing 6 months’ written notice or provide payment in lieu of the notice period (based on the TFR component of remuneration) if termination is initiated by the Company, except where termination is from serious misconduct. The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with such cause occurs, the Managing Director is only entitled to that portion of remuneration which is fixed, and only up to the date of termination. If at any time during the employment there is a material diminution in the position, the Managing Director will be entitled to an immediate payment of 6 months’ severance pay. 2021 ANNUAL REPORT | 49 2021 Remuneration Report (Audited) (continued) (iii) Named Executives The named executives and the commencement date of their contracts are as follows: Named Executive Grant Dyker Michael Ball Date of Current Employment Contract1 5 October 2020 12 December 2019 Position Chief Financial Officer Chief Financial Officer (ceased employment on 30 September 2020) 1 Note that the date of the current employment contract is not necessarily the commencement date of employment Employment Contracts Mr Dyker is entitled to a total fixed remuneration (TFR) of $328,500 per annum inclusive of benefits and statutory superannuation. He may also participate from time to time in short term incentives (up to 50% of TFR) and long term incentives (up to 75% of TFR) in accordance with the STI plan rules and 2018 ES Plan. Mr Dyker may resign from his position by providing 3 months’ written notice. The Company may terminate the executive employment contract by providing 3 months’ notice, except in the case of serious misconduct in which case the contract may be terminated immediately. If at any time during the employment there is a material diminution in the position, he will be entitled to an immediate payment of 6 months’ severance pay. (i) Details of Remuneration Remuneration of Directors and Executive Officers The remuneration in Table 1 for each named person, is the total of fixed remuneration (base salary, superannuation and non-monetary benefits) and variable remuneration (short term and long term incentives). Excluding the cash component of remuneration, the total remuneration shown is the amount expensed by the Company and does not, in every case, represent what each named individual ultimately received in cash. Table 1: Remuneration of Directors and Executive Officers 2021 Short-term benefits Post- employment benefits Long- term benefits Bonus Other Super- annuation(b) Annual and Long Service Leave(c) Cash salary and fees(a) ($) ($) ($) ($) ($) ($) ($) ($) (%) Share based payments Rights to shares Termination / Resignation payments Total Performance related(d) Name Non-Executive Directors P R Sullivan N L Cernotta R J Hayward G Swaby Executive Directors R V Rajasooriar Executives G Dyker (e) M B Ball (f) 97,917 126,202 89,422 89,422 - - - - - - - - - 10,881 8,495 8,495 - - - - - - - - 526,922 331,200 3,486 25,000 43,821 226,039 - - - - - 97,917 137,083 97,917 97,917 1,156,468 48% 216,727 123,188 2,522 2,101 - 71,414 19,194 17,111 17,008 5,817 37,291 - - 82,125 415,928 178,568 39% - 1,218,025 454,388 8,109 89,176 66,645 263,330 82,125 2,181,798 33% (a) Short term benefits as per Corporations Regulation 2M.3.03(1) Item 6. (b) Post-employment benefits are provided through superannuation contributions. (c) Other long-term benefits as per Corporations Regulations 2M.3.03(1) Item 8. (d) Calculated as bonus (short term benefits) and share based payments divided by total remuneration. (e) Mr G Dyker joined the Company on 5 October 2020. (f) Mr M Ball resigned on 30 September 2020. 2021 ANNUAL REPORT | 50 2021 Remuneration Report (Audited) (continued) 2020 Short-term benefits Post- employment benefits Long- term benefits Super- annuation(b) Annual and Long Service Leave(c) Share based payments Rights to shares Termination / Resignation payments Total Performance related(d) Bonus(r) Other ($) ($) ($) ($) ($) ($) ($) (%) Cash salary and fees(a) ($) 89,802 115,587 84,573 62,479 55,555 Non-executive directors N Cernotta P Sullivan R Hayward G Swaby (e) B Phillips (f) Executive directors V Rajasooriar (g) - - - - - - - - - - 315,542 100,000 4,281 P Harold (h) 201,414 - 2,483 Executives M Ball (i) J Hicks T Eton (j) B Timler (k) B Robinson (l) T Mason (m) R Lampard (n) S Park (o) D Edwards (p) 153,822 222,864 172,926 178,494 36,291 111,409 100,000 11,950 34,235 50,000 - - - - - - - - 2,835 6,782 3,929 3,039 - 3,076 3,336 - - 8,531 - 8,035 5,935 - 39,476 19,134 19,363 21,172 16,428 16,957 3,448 10,726 9,500 - 3,252 - - - - - 25,407 7,442 10,401 458 17,384 13,741 2,781 - 622 - - - - - - - - - - - - - - - - - - - - - - - - - 465,326 - - - 109,500 107,125 - - - - 98,333 115,587 92,608 68,414 55,555 484,707 695,799 236,421 251,276 210,667 321,731 149,645 125,261 113,458 11,950 37,487 - - - - - 21% - 21% - - - - - - - - 681,951 3,068,899 5% 1,946,993 150,000 29,761 181,957 78,236 B Phillips retired from the Board on 20 November 2019. (a) Short term benefits as per Corporations Regulation 2M.3.03(1) Item 6. (b) Post-employment benefits are provided through superannuation contributions. (c) Other long-term benefits as per Corporations Regulations 2M.3.03(1) Item 8. (d) Calculated as bonus (short term benefits) and share based payments divided by total remuneration. (e) G Swaby was appointed to the Board on 8 October 2019. (f) (g) V Rajasooriar joined the Company on 11 November 2019. (h) P Harold ceased employment on 11 November 2019. (i) M Ball joined the Company on 12 December 2019. (j) T Eton retired on 28 January 2020. (k) B Timler resigned on 11 December 2019. B Robinson resigned on 14 August 2019. (l) (m) T Mason resigned on 13 December 2019. (n) R Lampard resigned on 27 December 2019. (o) S Park was appointed Company Secretary on 9 April 2020. S Park is remunerated through Park Advisory Pty Ltd. (p) D Edwards was appointed Company Secretary on 23 January 2020 and resigned on 9 April 2020. (q) Certain Board members participated as sub underwriters in the entitlement offer completed in January 2020 in accordance with the Corporations Act. The directors participated on the same terms as other sub underwriters’ of the same class. The sub-underwriting arrangement was not linked to the performance of the Company or the Board member. (r) A discretionary payment, not linked to the performance of the Company, was approved for Mr Rajasooriar and Mr Ball as a result of their personal and professional contributions to the recapitalisation of the Company in the prior financial year. (j) Overview of Company performance The table below sets out information about the Company’s earnings and movements in shareholders wealth for the past five years up to and including the current financial year. Comparative information has not been restated for the impact of AASB 9 Financial Instruments, AASB 15 Revenue from contracts with customers adopted in FY19 and AASB 16 Leases adopted in FY20 Year Ended 30 June Earnings/(Loss) per share (cents) Dividends per share (cents) Dividends pay out ratio (%) Closing share price ($ per share) Return on equity (%) 2021 - - - 0.15 - 2020 (8.8) - - 0.081 (31.2) 2019 1.4 - - 0.295 4.6 2018 (9.1) - - 0.620 (26.8) 2017 (1.0) - - 0.220 (2.8) 2021 ANNUAL REPORT | 51 2021 Remuneration Report (Audited) (continued) (k) Details of share-based compensation and bonuses (i) Securities granted as part of remuneration Performance Rights to Shares Performance rights were issued to KMP totalling 12,589,242 in the financial year ended 30 June 2021 (30 June 2020: nil). No options to shares were granted as compensation to KMP in the financial year ended 30 June 2021 (30 June 2020: nil). There were no ordinary shares issued to KMP on the exercise of securities during the financial year (2020: Nil). (ii) Equity instrument disclosures relating to KMP Securities provided as remuneration Details of securities provided as remuneration are shown in Table 2. Security holdings A total of 9,353,398 securities (performance rights) over ordinary shares in the Company were held by the Managing Director of Panoramic Resources Limited and other KMP of the Group, including their personally related parties at 30 June 2021. No comparative table has been provided as there were no performance right issues or holdings for the previous financial year. Table 2: Securities holdings of Managing Director and specified executives 2021 Performance Rights Balance at start of the year (number) Granted as compen- sation (number) Exercised (number) Other changes (number) Balance at end of the year (number) Vested and exercisable Unvested (number) (number) Managing Director of Panoramic Resources Limited V Rajasooriar Other KMP of the Group G Dyker M Ball Shareholdings - 7,416,488 1,936,910 3,235,844 - - - 12,589,242 - - - - - 7,416,488 1,936,910 - - (3,235,844) (3,235,844) 9,353,398 - - - - 7,416,488 1,936,910 - 9,353,398 The numbers of shares in the Company held during the financial year by each director of Panoramic Resources Limited and other KMP of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as remuneration. 2021 Ordinary Shares Balance at the start of the year (number) Received during the year on the exercise of options (number) Purchases of shares1 (number) Other changes during the year2 (number) Balance at end of the year (number) Directors of Panoramic Resources Limited N Cernotta V Rajasooriar P Sullivan R Hayward G Swaby Other KMP of the Group G Dyker M Ball2 107,500 1,791,666 - 107,500 107,500 - - 2,114,166 - - - - - - - - - - - - - - - - - - - - - - - - 107,500 1,791,666 - 107,500 107,500 - - 2,114,166 1 Trades on market or via participation in entitlement issues during the financial year. 2 Represents the balance held by the director or KMP on cessation of employment with the Company. 2021 ANNUAL REPORT | 522021 Remuneration Report (Audited) (continued) All equity transactions with KMP other than those arising from the exercise of performance rights to shares have been entered into on terms and conditions no more favourable than those the Group would have adopted if dealing at arm's length. Securities granted and exercised as part of remuneration There were no securities granted or exercised as part of remuneration during the financial year ended 30 June 2021 (2020: Nil). There were no alterations to the terms and conditions of securities granted as remuneration from their grant date until their vesting date. (l) KMP Transactions There were no loans to KMP and their related parties at any time during the year ended 30 June 2021. There were no transactions involving key management personnel and their related parties other than compensation and transaction concerning shares and performance rights to shares as discussed in the Remuneration Report. This marks the end of the 2021 Remuneration Report. Corporate Governance Statement The Board of Panoramic Resources Limited is committed to achieving and demonstrating the highest standards of Corporate Governance. The Board is responsible to its Shareholders for the performance of the Company and seeks to communicate extensively with Shareholders. The Board believes that sound Corporate Governance practices will assist in the creation of Shareholder wealth and provide accountability. 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 and the 2021 Corporate Governance Statement is set out on the Company’s website at https://panoramicresources.com/corporate-governance/. Environmental Regulation and Performance The Group’s operations are subject to significant environmental regulations under both Commonwealth and State legislation in relation to its development, mining and exploration activities. The Group’s management monitors compliance with the relevant environmental legislation. The directors are not aware of any serious breaches of the legislation during the period covered by this report. Rounding of Amounts The amounts contained in this report and in the Financial Report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. Auditor's Independence Declaration Section 307C of the Corporations Act 2001 requires our auditors, Ernst & Young (EY), to provide the directors of Panoramic Resources Limited with an Independence Declaration in relation to the audit of the Financial Report for the year ended 30 June 2021. This Independence Declaration is attached to the Directors’ Report and forms a part of the Directors’ Report. 2021 ANNUAL REPORT | 53Non-audit Services The following non-audit services were provided by the entity’s auditor, Ernst & Young (EY). The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. EY received or are due to receive the following amounts for the provision of non-audit services: • Tax compliance and other consulting services of $49,638. Refer to note 27 for further details regarding non-audit services. Signed in accordance with a resolution of the directors. Victor Rajasooriar Managing Director Perth, 31 August 2021 Competent Person Statements The information in this report that relates to exploration activities has been complied or reviewed by Andrew Shaw- Stuart. Mr Shaw-Stuart is a member of the Australian Institute of Geoscientists (AIG) and is a full-time employee of Panoramic Resources Limited. The aforementioned has sufficient experience that is relevant to the style of mineralisation and type of target/deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Shaw-Stuart consents to the inclusion in the report of the matters based on the information in the form and context in which it appears. No New Information or Data This report contains references to exploration results, Mineral Resource and Ore Reserve estimates, and feasibility study results including production targets, all of which have been cross referenced to previous market announcements made by the Company. The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcements and, in the case of estimates of Mineral Resource and Ore Reserve estimates, and feasibility study results including production targets, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. 2021 ANNUAL REPORT | 54In accordance with a resolution of the directors of Panoramic Resources Limited, I state that: 1. In the directors' opinion: (a) the financial statements and notes set out on pages 63 to 113 are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Consolidated entity’s financial position as at 30 June 2021 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001. (ii) (b) subject to the achievement of the matters set out in Note 1(b), there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial period ending 30 June 2021. 3. In the opinion of the directors, as at the date of this declaration, subject to the achievement of the matters set out in Note 1(b), there are reasonable grounds to believe that the members of the Closed Group identified in note 32 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee. On behalf of the Board Victor Rajasooriar Managing Director Perth, 31 August 2021 2021 ANNUAL REPORT | 55Auditor’s Independence Declaration to the directors of Panoramic Resources Limited As lead auditor for the audit of the financial report of Panoramic Resources Limited for the financial year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Panoramic Resources Limited and the entities it controlled during the financial year. Ernst & Young Philip Teale Partner 31 August 2021 2021 ANNUAL REPORT | 56Independent auditor’s report to the members of Panoramic Resources Limited Report on the audit of the financial report Opinion We have audited the financial report of Panoramic Resources Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June 2021, the consolidated income statement, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the 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 consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1(b) in the financial report. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 2021 ANNUAL REPORT | 57Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying financial report. 1. Impairment reversal of non-current assets Why significant Following an impairment and impairment reversal trigger assessment at 30 June 2021, the Group concluded that an impairment reversal trigger had occurred in respect of the Savannah Nickel Mine Cash Generating Unit (“Savanah CGU”). Accordingly, the Group evaluated the recoverable amount of the Savannah CGU at 30 June 2021 by reference to its fair value less costs to dispose. Based on this assessment, an impairment reversal of $14.187 million was recognised (refer to note 10). We considered this to be a key audit matter because of the: ► ► ► Significance of the carrying value of property, plant and equipment and mine property assets in comparison to total assets at 30 June 2021 Significant judgement involved in determining if there was an indicator that an impairment loss recognised in prior periods may need to be reversed in full or in part or whether further impairment was required Significant judgment and estimates involved in the determination of the recoverable amount of the Savannah CGU including assumptions relating to future commodity prices, foreign currency exchange rates, operating and capital costs, future production volumes and an appropriate discount rate to reflect the risk associated with the forecast cash flows having regard to the current status of the project. How our audit addressed the key audit matter We assessed the reasonableness of the Group’s impairment reversal assessment process and the resultant recoverable value for the Savannah CGU. Our audit procedures included the following: ► ► ► ► Evaluated the Group’s assessment as to the presence of indicators of an impairment reversal Evaluated the assumptions and methodologies used by the Group, in particular, those relating to forecast cash flows and inputs used to formulate them. This included assessing, with involvement from our valuation specialists, the foreign currency exchange rates and commodity prices with reference to broker consensus forecasts Evaluated the work of the Group’s internal and external experts with respect to the capital and operating expenditure assumptions including whether these expenditure assumptions were consistent with historical performance, information in Board reports and releases to the market. We also examined the competence, qualifications and objectivity of the experts Assessed the work of the Group's experts with respect to the reserve assumptions used in the cash flow forecasts. This included understanding the reserve estimation process. We also examined the competence, qualifications and objectivity of the Group's experts, and assessed whether key reserve economic assumptions were consistent with those used elsewhere in the financial report 2021 ANNUAL REPORT | 58Why significant How our audit addressed the key audit matter ► With involvement from our valuation specialists, we tested the mathematical accuracy of the Group's discounted cash flow impairment reversal model, including whether the discount rate used was reasonable ► ► Assessed the impact of a range of sensitivities to the assumptions underpinning the Group’s impairment reversal assessment Evaluated the adequacy of the Group’s disclosures relating to the impairment reversal assessment. 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 Company’s 2021 annual report but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. 2021 ANNUAL REPORT | 59Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.  Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.  Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 2021 ANNUAL REPORT | 60We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Panoramic Resources Limited for the year ended 30 June 2021, 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. Ernst & Young Philip Teale Partner Perth 31 August 2021 2021 ANNUAL REPORT | 61FINANCIAL REPORT Revenue Cost of sales of goods Gross loss Other income Care and maintenance expenses Corporate and marketing costs Exploration expenditure written-off Fair value losses on derivatives Change in fair value of financial assets at fair value through profit or loss Impairment reversal/(loss) Other expenses Finance costs Profit/(loss) before income tax Income tax expense Profit/(loss) for the year Profit/(loss) for the year is attributable to: Owners of Panoramic Resources Limited Non-controlling interests Consolidated income statement For the year ended 30 June 2021 Notes 2021 $'000 2020 $'000 3 5 4 5 10 5 5 6 - - - 10,677 (16,111) (6,014) (945) - (121) 14,187 (956) (422) 295 - 295 295 - 295 69,097 (108,678) (39,581) 11,248 (619) (7,695) - (10,148) (190) (27,063) (6,579) (7,261) (87,888) - (87,888) (87,366) (522) (87,888) Cents Cents Earnings/(Loss) per share for loss attributable to the ordinary equity holders of the Company: Basic earnings/(loss) per share Diluted earnings/(loss) per share 35 35 0.0 0.0 (8.8) (8.8) The above consolidated income statement should be read in conjunction with the accompanying notes. 2021 ANNUAL REPORT | 63Consolidated statement of comprehensive income For the year ended 30 June 2021 Notes 2021 $’000 2020 $'000 Profit/(loss) for the year Other comprehensive income Items that may reclassified to profit or loss Changes in fair value of cash flow hedges, net of tax Transfer of fair value of cash flow hedges to profit and loss, net of tax Transfer of foreign currency translation reserve relating to disposal group Other comprehensive loss for the year, net of tax Total comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year is attributable to: Owners of Panoramic Resources Limited Non-controlling interests 295 (87,888) - - - - (9,872) 10,148 (1,200) (924) 295 (88,812) 295 - 295 (88,290) (522) (88,812) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. . 2021 ANNUAL REPORT | 64ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Total current assets Non-current assets Receivables Financial assets at fair value through profit or loss Property, plant and equipment Exploration and evaluation Development properties Mineral properties Right-of-use assets Other financial assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Provisions Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulated losses Non-controlling interests Total equity Consolidated statement BALANCE SHEET AS AT 30 June 2021 Notes 2021 $'000 2020 $'000 7 8 9 12 17 13 16 16 16 14 17 18 19 20 21 23 24,237 1,942 557 1,494 28,230 1,536 12 25,711 5,551 136,052 24 4,195 221 173,303 201,533 4,388 1,445 714 6,547 4,738 23,566 28,304 34,851 166,682 31,164 11,426 - 872 43,462 2,787 767 51,178 12,535 86,673 22 5,958 251 160,171 203,633 3,396 1,827 2,404 7,627 5,423 24,498 29,921 37,548 166,085 24 25(a) 353,550 22,476 (209,345) - 353,550 22,172 (209,637) - 166,682 166,085 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 2021 ANNUAL REPORT | 651 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F i y t u q e n i s e g n a h c f o t n e m e t a t s i d e t a d l o s n o C l a t o T 0 0 0 $ ' y t i u q e - n o N 0 0 0 $ ' s t s e r e t n i g n i l l o r t n o c 0 0 0 $ ' i d e n a t e R i s g n n r a e 0 0 0 $ ' y t i u q E e v r e s e R - e r a h s d e s a b 0 0 0 $ ' e v r e s e r t n e m y a p d n a n o i t p O 0 0 0 $ ' e g d e h e v r e s e r w o l f h s a C p u o r g 0 0 0 $ ' y t i u q E l a s o p s i d o t g n i t a l e r 0 0 0 $ ' y t i u q e d e t u b i r t n o C s e t o N 2 2 1 , 6 1 1 2 4 6 , 5 ) 3 2 8 , 1 2 1 ( ) 6 4 4 ( 6 1 7 , 1 2 ) 6 7 2 ( 0 0 2 , 1 9 0 1 , 0 1 2 - 6 7 2 ) 8 8 8 , 7 8 ( ) 2 1 6 , 7 8 ( 1 4 4 , 3 4 1 ) 0 2 1 , 5 ( 6 5 4 ) 0 0 2 , 1 ( 5 7 7 , 8 3 1 5 8 0 , 6 6 1 - - - - - ) 2 2 5 ( ) 2 2 5 ( ) 0 2 1 , 5 ( - ) 0 2 1 , 5 ( - - - - - ) 6 6 3 , 7 8 ( ) 6 6 3 , 7 8 ( - - - - - - - ) 7 3 6 , 9 0 2 ( - ) 6 4 4 ( ) 6 4 4 ( 6 4 4 6 4 4 - - - - - - - 6 5 4 6 5 4 2 7 1 , 2 2 - 6 7 2 6 7 2 - - - - - - - - - - - - - - - - ) 0 0 2 , 1 ( - - - - - - - 1 4 4 , 3 4 1 1 4 4 , 3 4 1 0 5 5 , 3 5 3 4 2 3 2 1 3 4 2 4 2 x a t d n a s t s o c n o i t c a s n a r t f o t e n , y t i u q e f o s n o i t u b i r t n o C r a e y e h t r o f s s o l e v i s n e h e r p m o c l a t o T e m o c n i i e v s n e h e r p m o c r e h O t r a e y e h t r o f s s o L 9 1 0 2 y l u J 1 t a e c n a l a B i y r a d s b u s i f o l i a s o p s d n o d e t a n m i i l e t s e r e t n i g n i l l o r t n o c - n o N d e u s s i s n o i t p O p u o r g l i a s o p s d o t g n i t a e r e v r e s e r l i i s g n n r a e d e n a t e r o t e v r e s e r f o r e f s n a r T f o r e f s n a r T 0 2 0 2 e n u J 0 3 t a e c n a l a B i t . s e o n g n y n a p m o c c a e h t h t i w n o j i t c n u n o c n i d a e r e b d u o h s l 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 e v o b a e h T 2021 ANNUAL REPORT | 66 1 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F i y t u q e n i s e g n a h c f o t n e m e t a t s i d e t a d l o s n o C - n o N d n a n o i t p O y t i u q E d e s a b - e r a h s w o l f h s a C o t g n i t a l e r l a t o T 0 0 0 $ ' y t i u q e 0 0 0 $ ' 0 0 0 $ ' 0 0 0 $ ' 0 0 0 $ ' s t s e r e t n i g n i l l o r t n o c i d e n a t e R i s g n n r a e e v r e s e R e v r e s e r y t i u q E t n e m y a p 0 0 0 $ ' e g d e h e v r e s e r p u o r g 0 0 0 $ ' 0 0 0 $ ' y t i u q e l a s o p s i d d e t u b i r t n o C 5 8 0 , 6 6 1 5 9 2 5 9 2 4 0 3 2 8 6 , 6 6 1 - - - - - ) 7 3 6 , 9 0 2 ( - 5 9 2 5 9 2 ) 2 4 3 , 9 0 2 ( - - - - - 2 7 1 , 2 2 - - 4 0 3 6 7 4 , 2 2 - - - - - - - - - - 0 5 5 , 3 5 3 - - - 0 5 5 , 3 5 3 s e t o N 6 3 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 d e u s s i s t h g i r e c n a m r o f r e P 1 2 0 2 e n u J 0 3 t a e c n a l a B 0 2 0 2 y u J 1 l t a e c n a l a B r a e y e h t r o f t i f o r P i t . s e o n g n y n a p m o c c a e h t h t i w n o j i t c n u n o c n i d a e r e b l d u o h s 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 e v o b a e h T 2021 ANNUAL REPORT | 67 Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Other revenue Interest paid Net cash used in operating activities Cash flows from investing activities Payments for property, plant and equipment Payment of development costs Exploration and evaluation expenditure Disposal of cash from sale of subsidiaries Proceeds from sale of subsidiary (net of cost) Return of proceeds from cash backed performance bonds Proceeds from sale of property, plant and equipment Proceeds from sale of financial assets at fair value through profit or loss Interest received Net cash from/(used) in investing activities Cash flows from financing activities Proceeds from issues of shares (net of share issue costs) Proceeds from borrowings Repayment of borrowings Payments for leased assets Net cash (outflow)/inflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year Consolidated statement of CASH FLOWS For the year ended 30 June 2021 Notes 34 4 21(a) 7 2021 $'000 2,556 (23,150) 3,337 (167) (17,424) (460) (11,397) (1,025) - 22,384 - 22 1,815 162 11,501 - - - (1,004) (1,004) (6,927) 31,164 24,237 2020 $'000 68,201 (100,040) 4,412 (6,225) (33,652) (19,041) (23,831) (1,913) (160) 8,252 (70) 822 - 168 (35,773) 143,441 18,500 (69,138) (4,947) 87,856 18,431 12,733 31,164 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 2021 ANNUAL REPORT | 68Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies The consolidated Financial Report of Panoramic Resources Limited and its subsidiaries (collectively, the Group) for the year ended 30 June 2021 was authorised for issue in accordance with a resolution of the directors on 25 August 2021, subject to final review. Panoramic Resources Limited (the Parent or the Company) is a for-profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Stock Exchange. The Group's registered office is Level 9, 553 Hay Street, Perth WA 6000. The principal activities of the Group during the financial year consisted of onsite care and maintenance and capital mine infrastructure works at the Savannah Nickel Project. Exploration and evaluation activities were also undertaken on tenements at the Savannah project. (a) Basis of preparation The Financial Report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been prepared on a historical cost basis, except for derivative financial instruments, and certain financial assets, which have been measured at fair value. The financial report complies with International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board. (b) Going concern basis The Group had cash outflows from operating and investing activities of $5.92 million for the year ended 30 June 2021 (2020: $69.43 million). At 30 June 2021, the Group had cash on hand of $26.45 million (2020: $31.16 million). These financial statements have been prepared on a going concern basis which assumes the Group will be able to meet its liabilities as they fall due for the foreseeable future. The Savannah Nickel Project continued to be on care and maintenance during the financial year. The Group undertook additional evaluation work on the economics of a restart of the Savannah Nickel Project, producing an updated financial model in April 2021 that demonstrates that the Project is economic at current nickel prices. On 6 April 2021 the Company announced to the ASX a decision had been made to re-start operations at the Savannah Nickel Project in the second half of CY2021. The announcement referred to the following positive developments which underpinned the decision. - - - - - - Improved commodity and foreign exchange pricing and sentiment. Updated financial model confirming attractive financial outcomes over an optimised twelve-year mine life. Completion of capital works that de-risk the restart of operations, primarily the raise bore works associated with FAR #3. Completion of underground development works to open up four new mining levels at Savannah North. Updated process schedule based on additional metallurgical test work. Evaluation of owner-operate and contractor-operated mining and processing models, which resulted in: Letter of Intent signed with underground mining contractor Barminco for mining services. Letter of Intent signed with Primero Group Pty Ltd to operate the processing plant. o o On 3 April 2021 the Company announced it had secured a financing facility from Trafigura Pte Ltd totalling US$45 million comprising two tranches. The first tranche is a term loan facility for five years totalling US$30 million. The second tranche is a revolving credit facility for $US$15 million repayable if drawn in eighteen months from 1 July 2021. This funding in combination with existing cash on hand at 30 June 2021 together with anticipated concentrate sales revenue (targeted for December 2021) position the Company to be fully funded to recommence operations at the Savannah Nickel Project. On 3 April 2021, the Company entered into a new five-year nickel and copper concentrate offtake agreement for the period February 2023 to February 2028 with Trafigura Group Pte Ltd (Trafigura), which aligns with the expiry of the existing offtake agreement with Jinchuan Group Co. Ltd / Sino Nickel Pty Ltd. This agreement is subject to and conditional upon the drawing of the first tranche of debt (US$30 million) from Trafigura. The impact of Covid-19, including any restrictions on travel and the movement of supplies to Savannah has the potential to impact the activities of the Company by reducing productivities and/or increasing the cost of performing the Company’s activities. The potential impact of Covid-19 has been a significant factor that was considered in the decision to restart the operations at Savannah. The timing of the restart and possibility for unforeseen delays due to Covid-19 also has the potential to impact the carrying value of the Company’s assets or certain liabilities such as rehabilitation and restoration costs. Further disclosures around the potential impact of Covid-19 are contained in the Review of Operations and in the notes to the financial statements. 2021 ANNUAL REPORT | 69Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) The Directors consider the going concern basis of preparation to be appropriate based on the cash flow forecasts. The Group is expected to start generating revenue from the Savannah Nickel Project in the first half of FY2022. The achievement of cash flow forecasts is dependent upon the Group achieving forecast targets for concentrate revenue, mining operations and processing activities that are in accordance with management’s plans and forecast commodity pricing (nickel, copper and cobalt) and foreign exchange assumptions to enable the cash flow forecast to be achieved. Critical to achieving forecast cash flows is the Group’s ability to achieve forecast concentrate production in accordance with Board approved forecasts. Should this not occur it is likely that the Group will require additional capital to fund the restart of operations at the Savannah Nickel Project. The Directors are satisfied there is a reasonable basis that the Group will be able to secure additional funds as required and thus it is appropriate to prepare the financial statements on a going concern basis. In the event that the Company is unable to obtain sufficient funding for ongoing operating and capital requirements, there is material uncertainty whether it will continue as a going concern and therefore whether it will realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial statements. The financial statements do not include any adjustment relating to the recoverability or classification of recorded asset amounts or to the amounts or classification of liabilities that may be necessary should the Company not be able to continue as a going concern. (c) Changes in accounting policies and disclosures Since 1 July 2020, the Group has adopted all Accounting Standards and Interpretations effective from 1 July 2020. Accounting policies adopted by the group are consistent with those of the previous financial year. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The new and amended Accounting Standards and Interpretations applied for the first time from 1 July 2020, but did not have an impact on the consolidated financial statements of the Group and, hence, have not been disclosed. There is no material impact of any new and amended accounting standards issued but not yet effective. (d) Significant accounting judgments, estimates and assumptions In the process of applying the Group's accounting policies, management has made the following judgments, and estimations which have the most significant effect on the amounts recognised in the financial statements. Key judgments (i) Revenue For sales sold under Cost, Insurance and Freight ("CIF") Incoterms, the Group is responsible for providing freight/shipping services. Whilst the Group does not actually provide nor operate the vessels, the Group has determined that it is the principal in these arrangements because it has concluded it controls the specified services before they are provided to the customer. The terms of the Group’s contract with the service provider give the Group the ability to direct the service provider to provide the specified services on the Group’s behalf. The Group has also concluded that revenue for freight/shipping services is to be recognised over time because the customer simultaneously receives and consumes the benefits provided by the Group. The fact that another entity would not need to re-perform the freight/shipping services that the Group has provided to date demonstrates that the customer simultaneously receives and consumes the benefits of the Group’s performance as it performs. The Group determined that the output method is the best method for measuring progress of the freight/shipping services because there is a direct relationship between the Group’s effort and the transfer of services to the customer. The Group recognises revenue on the basis of the time elapsed relative to the total expected time to complete the service. (ii) Determining the beginning of production Judgment is required to determine when capitalisation of development costs cease, with amortisation of the associated mine assets commencing upon the start of commercial production. This is based on the specific circumstances of the project and takes into consideration when the specific asset is substantially complete and becomes ‘available for use’ as intended by management. This includes consideration of the following factors: • completion of reasonable testing of the mine plant and equipment; • mineral recoveries, availability and throughput levels at or near expected levels; • the ability to produce nickel concentrate in saleable quantity and form; and • the achievement of continuous production. On 15 April 2020 operations at the Savannah Nickel Mine were suspended resulting in the halting of production. Since then, on-site care and maintenance activities have been undertaken together with capital works that de-risk and prepare the mine for a restart of operations. The Company announced on 6 April 2021 a decision to restart the mine in the first half of FY2022. 2021 ANNUAL REPORT | 70Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (d) Significant accounting judgments, estimates and assumptions (continued) (iii) Lease term for contracts with renewal options The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group applies judgment in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business strategy). The Group included the renewal period as part of the lease term for leases of plant and machinery due to the significance of these assets to its operations. (iv) Incremental borrowing rate for lease liabilities In measuring the present value of the lease liability, the standard requires that the lessee’s incremental borrowing rate is used if the rate implicit in the lease cannot be readily determined. Panoramic uses a consistent approach reflecting the Group’s borrowing rate and the duration of the lease term, which requires the use of judgment. (v) Determination of mineral resources and ore reserves The Group estimates its mineral resources and ore reserves in accordance with the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘JORC Code’) as a minimum standard. The information on mineral resources and ore reserves were prepared by or under the supervision of a Competent Person(s) as defined in the JORC Code. The amounts presented are based on the mineral resources and ore reserves determined under the 2012 edition of the JORC Code. There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Significant judgment is required in assessing the available reserves. Factors that must be considered in determining reserves and resources are the Company's history of converting resources to reserves and the relevant time frame, market conditions and likely future developments. Changes in the forecast prices of commodities, foreign currency exchange rates, production costs or recovery rates may change the economic status of reserves and may ultimately result in the reserves being restated. Such changes in reserves could impact future depreciation and amortisation rates, asset carrying values and the provision for decommissioning and restoration. Key estimates (vi) Impairment of capitalised exploration and evaluation expenditure The Group assesses impairment of all exploration and evaluation assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it is likely to be able to successfully recover the related exploration and evaluation asset through sale. Factors which could impact the future recoverability include the level of proved and probable reserves and mineral resources, future technological changes which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, this will reduce profits and net assets in the period in which this determination is made. In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent that it is determined in the future that this capitalised expenditure should be written off, this will reduce profits and net assets in the period in which this determination is made. Capitalised exploration and evaluation expenditure that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. 2021 ANNUAL REPORT | 71Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (d) Significant accounting judgments, estimates and assumptions (continued) (vii) Impairment of property, plant and equipment, capitalised mine development expenditure and mine properties expenditure The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If indications of impairment exist, the recoverable amount of the asset is determined. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use’ (being the net present value of expected future cash flows of the relevant cash-generating unit ("CGU") and ‘fair value less costs to dispose ("FVLCD"). In determining value in use, future cash flows were based on: • estimates of the quantities of ore reserves and mineral resources for which there is a sufficient degree of confidence of economic extraction; spot commodity prices at balance date; • estimates of future production levels based on current operating capacity; • • estimates of future cash costs of production; and • estimates of the impact of COVID-19 on the expected timing of restart of operations and on costs. Variations to the expected future cash flows, and the timing thereof, could result in significant changes to any impairment losses recognised, if any, which could in turn impact future financial results. Property, plant and equipment that suffered an impairment is tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. Refer to note 13 for further information. (viii) Provision for decommissioning and rehabilitation Decommissioning and restoration costs are a normal consequence of mining, and the majority of this expenditure is incurred at the end of a mine’s life. In determining an appropriate level of provision, consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine), and the estimated future level of inflation. The ultimate cost of decommissioning and restoration is uncertain, and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques, discount rates and cost inflation applied, the timing that activities are expected to be undertaken and experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in mineral inventory or to production rates. To the extent cost of decommissioning and restoration increase or decrease by 10%, there would be a +/- $2.5 million impact on the provision. The carrying amount of the provision for decommissioning and rehabilitation as at 30 June 2021 was $23.556 million (2020: $24.498 million). The Group estimates that the costs will be incurred towards the end of the respective mine lives (being 12 years to FY2034) and calculates the provision using the discounted cash flow method based on expected costs to be incurred to rehabilitate the disturbed area. These costs have been discounted at the Government bond rate for a comparable period which is 1.58% (2020: 1.06%). Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn impact future financial results. (e) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: • power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); • exposure, or rights, to variable returns from its involvement with the investee; and • the ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • • • the contractual arrangement with the other vote holders of the investee; rights arising from other contractual arrangements; and the Group’s voting rights and potential voting rights. 2021 ANNUAL REPORT | 72Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (e) Basis of consolidation (continued) The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: • de-recognises the assets (including goodwill) and liabilities of the subsidiary; • de-recognises the carrying amount of any non-controlling interests; • de-recognises the cumulative translation differences recorded in equity; • • • • recognises the fair value of the consideration received; recognises the fair value of any investment retained; recognises any surplus or deficit in profit or loss; and reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities. (f) Revenue (i) Revenue from contracts with customers The Group was engaged in the business of producing nickel concentrate. Revenue from contracts with customers was recognised when control of the goods or services was transferred to the customer at an amount that reflected the consideration to which the Group expected to be entitled in exchange for those goods or services. The Group has concluded that it was the principal in its revenue contracts because it typically controlled the goods or services before transferring them to the customer. For metal-in-concentrate sales under CIF international commercial terms, the performance obligations were the delivery of the concentrate and the provision of shipping services. Based on the contractual terms, revenue from the sale of nickel concentrate was recognised when control passes to the customer, which occurred at a point in time when the nickel concentrate was physically transferred onto a vessel. The Group’s sales of nickel concentrate allowed for price adjustments based on the market price at the end of the relevant Quotational Period (“QP”) stipulated in the contract. These are referred to as provisional pricing arrangements and are such that the selling price for nickel concentrate was based on prevailing spot prices on a specified future date after shipment to the customer. Adjustments to the sales price occurred based on movements in quoted market prices up to the end of the QP. The period between provisional invoicing and the end of the QP can be up to two months. Revenue from the sale of nickel concentrate was measured at the amount to which the Group expected to be entitled being the forward price at the date the revenue was recognised, net of treatment and refining charges, and a corresponding trade receivable was recognised. 2021 ANNUAL REPORT | 73Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (f) Revenue (continued) For the provisional pricing arrangements, any future changes that occurred over the QP were embedded within the provisionally priced trade receivable. Given the exposure to the commodity price, these provisionally priced trade receivables failed the cash flow characteristics test and were classified and measured at fair value through profit or loss from initial recognition and until the date of settlement. Subsequent changes in fair value of the receivable were recognised in the profit or loss each period and presented separately from revenue from contracts with customers as part of ‘fair value gains/losses on provisionally priced trade receivables. Changes in fair value over, and until the end of, the QP, are estimated by reference to updated forward market prices for nickel as well as taking into account relevant other fair value considerations, including interest rate and credit risk adjustments. Revenue was initially recognised based on the most recently determined estimate of nickel concentrate using the expected value approach based on initial internal assay and weight results. The Group has determined that it was highly unlikely that a significant reversal of the amount of revenue recognised will occur due to variations in assay and weight results. Subsequent changes in the fair value based on the customer’s final assay and weight results were recognised in revenue at the end of the QP. For CIF arrangements, the transaction price (as determined above) was allocated to the nickel concentrate and shipping services using the relative stand alone selling price method. The consideration was received from the customer at, or around, the date of shipment under a provisional invoice. Therefore, some of the upfront consideration that related to the shipping services yet to be provided was deferred. This was generally not material at the balance sheet date. Shipping revenue was recognised over time using an output method (being days of shipping/transportation elapsed) to measure progress towards complete satisfaction of the service as this best represented the Group’s performance. This was on the basis that the customer simultaneously received and consumed the benefits provided by the Group as the services were being provided. The costs associated with these freight/shipping services were also recognised over the same period of time as incurred. (ii) Interest income and dividends Interest income Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Dividends Dividends are recognised as revenue when the right to receive payment is established. (g) Borrowing costs Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with arrangement of borrowings, and finance charges in respect of finance leases. Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale, which is generally taken to be more than twelve months. In these circumstances, borrowing costs are capitalised to the costs of the assets. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is those incurred in relation to that borrowing, net of any interest earned on those borrowings. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate to the extent that they relate to the qualifying asset. The weighted average capitalisation rate applied during the year was 6.02% (2020: 9.34%). Exploration and evaluation expenditure carried forward relating to areas of interest which have not reached a stage permitting reliable assessment of economic benefits are not qualifying assets. 2021 ANNUAL REPORT | 74Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (h) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at nominal value. For the purpose of the statement of cash flows, cash includes cash on hand and at banks and on short term deposits with an original maturity not exceeding three months. (i) Inventories (i) Raw materials and stores, work in progress and finished goods Inventories are valued at the lower of cost (determined based on the weighted average cost) and net realisable value. Costs incurred in bringing inventory to its present location and condition are accounted for as follows: • ore stocks - cost of direct mining and a proportion of site overheads; and • concentrates and work in progress - cost of direct mining, processing, transport and labour and a proportion of site overheads. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. (ii) Spares for production Inventories of consumable supplies and spare parts expected to be used in production are valued at the weighted average cost. Obsolete or damaged inventories of such items are valued at net realisable value. (j) Derivative financial instruments and hedging The Group used derivatives such as United States Dollar nickel and copper forward sales contracts, United States Dollar nickel options, United States denominated currency options and United States denominated forward currency sales contracts to manage its risks associated with foreign currencies and commodity price fluctuations. These derivative financial instruments were stated at fair value. Derivatives were not held for speculative purposes. Derivatives were initially recognised at fair value on the date a derivative contract was entered into and were subsequently remeasured to their fair value at each reporting date. The resulting gain or loss was recognised in profit or loss immediately unless the derivative was designated and effective as a cash flow hedging instrument, in which event, the timing of the recognition in profit or loss depended on the nature of the hedge relationship. A hedge of the foreign currency risk and commodity price risk of a firm commitment was accounted for as a cash flow hedge. At the inception of a hedge relationship, the Group formally designated and documented the hedge relationship to which the Group wished to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation included identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges were expected to be highly effective in achieving offsetting changes in the fair value or cash flows and were assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. 2021 ANNUAL REPORT | 75Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (j) Derivative financial instruments and hedging (continued) The hedges that met the strict criteria for cash flow hedge accounting were accounted for as follows: Cash flow hedges Cash flow hedges were hedges of the Group’s exposure to variability in cash flows that was attributable to a particular risk associated with a highly probable forecast transaction and that could affect profit and loss. The effective portion of changes in the fair value of derivatives that were designated and qualified as cash flow hedges were deferred in equity. The gain or loss relating to the ineffective portion was recognised immediately in the income statement. Amounts deferred in equity were recycled in the income statement in the periods when the hedged item was recognised in the income statement. Hedge accounting was discontinued when the hedging instrument was expired or sold, terminated, or exercised, or no longer qualified for hedge accounting. At that time, any cumulative gain or loss deferred in equity remained in equity and was recognised when the forecast transaction was ultimately recognised in the income statement. When a forecast transaction was no longer expected to occur, the cumulative gain or loss that was deferred in equity was recognised immediately in the income statement. The Group tested each of the designated cash flow hedges for effectiveness at the inception of the hedge and then again at each reporting date, both prospectively and retrospectively, using the dollar offset method. This was done by comparing the changes in present value of the cash flows arising from the hedged forecast sales at the forward rates, compared to changes in the fair values of those forward contracts. Measurement of the cash flow changes was based on the respective forward curves over the hedge horizon. At each balance sheet date, the Group measured ineffectiveness using the ratio offset method. For cash flow hedges if the risk was over-hedged, the ineffective portion was taken immediately to income/expense in the income statement. Derivatives that do not qualify for hedge accounting Certain derivative instruments did not qualify for hedge accounting. Changes in the fair value of any derivative instruments that did not qualify for hedge accounting were recognised immediately in the income statement. (k) Foreign currency translation Both the functional and presentation currency of the Company and its Australian subsidiaries is Australian dollars. Transactions and balances Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income. 2021 ANNUAL REPORT | 76Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (l) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided for using the full liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences: • except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. • Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised: • except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. • The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred tax assets and liabilities are reassessed at each balance sheet date and reduced to the extent that it is no longer probable that future taxable profit will allow the deferred tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. (i) Tax consolidation legislation The Company and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Panoramic Resources Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right. In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. 2021 ANNUAL REPORT | 77Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (l) Income tax (continued) Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Company. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities. (m) Other taxes Revenue, expenses and assets are recognised net of the amount of goods and services taxation ("GST") except: • where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. • The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis and where the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (n) Property, plant and equipment Items of plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The cost of plant and equipment constructed for and by the consolidated entity, where applicable, includes the cost of materials and direct labour. The proportion of overheads and other incidental costs directly attributable to its construction are also capitalised to the cost of plant and equipment. Costs incurred on plant and equipment subsequent to initial acquisition are capitalised when it is probable that future economic benefits, in excess of the originally assessed performance of the asset will flow to the consolidated entity in future years. Where these costs represent separate components of a complex asset, they are accounted for as separate assets and are separately depreciated over their useful lives. Costs incurred on plant and equipment that do not meet the criteria for capitalisation are expensed as incurred. (i) Depreciation and amortisation Depreciation and amortisation are calculated on a straight line basis or units of production over the estimated useful lives of the asset. The estimated useful lives used for each class of asset are as follows: Office equipment Office furniture and fittings Process plant and buildings 3 - 4 years 5 years Lesser of life of mine and life of asset (ii) Impairment The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. 2021 ANNUAL REPORT | 78Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (n) Property, plant and equipment (continued) For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The recoverable amount of plant and equipment is the greater of fair value less costs to dispose and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Property, plant and equipment that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. (iii) Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. (o) Exploration, evaluation, development, mine properties and rehabilitation expenditure (i) Exploration and evaluation expenditure Expenditure on exploration and evaluation is accounted for in accordance with the ‘area of interest’ method. Acquisition costs are carried forward at cost where rights to tenure of the area of interest is current and it is expected that expenditure will be recouped through successful development and exploitation of the area of interest or alternatively by its sale and/or; exploration and evaluation activities are continuing in an area of interest but at reporting date have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. Exploration and Evaluation expenditure subsequent to acquisition on an area of Interest which has not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves is capitalised as incurred When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated and a decision to develop has been made, any capitalised exploration and evaluation expenditure is reclassified as capitalised mine development. Prior to reclassification, capitalised exploration and evaluation expenditure is assessed for impairment. Impairment The carrying value of capitalised exploration expenditure is assessed for impairment at the cash-generating unit level whenever circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. (ii) Mine development expenditure Mine development expenditure represents the costs incurred in preparing mines for production and includes stripping and waste removal costs incurred before production commences. These costs are capitalised to the extent they are expected to be recouped through successful exploitation of the related mining leases. Once production commences, these are amortised using the units of production method based on the estimated economically recoverable reserves to which they relate or are written off if the mine property is abandoned. Impairment The carrying value of capitalised mine development is assessed for impairment whenever circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. 2021 ANNUAL REPORT | 79Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (o) Exploration, evaluation, development, mine properties and rehabilitation expenditure (continued) (iii) Mineral properties expenditure Mineral properties expenditure represents the costs incurred in the acquisition of a mining lease, and represents the excess of the cost of acquisition over the fair value of the net identifiable assets of the acquired mining lease at the date of acquisition. These costs are capitalised to the extent they are expected to be recouped through successful exploitation of the related mining leases. Once production commences, these costs are amortised using the units of production method based on the estimated economically recoverable reserves to which they relate or are written off if the mine property is abandoned. Impairment The carrying value of capitalised mine properties expenditure is assessed for impairment whenever circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. (iv) Provision for decommissioning and rehabilitation The Group is required to decommission and rehabilitate mines and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities. The expected costs of any approved decommissioning or rehabilitation programs, discounted to their net present values, are provided for in the period in which the associated obligations arise. The costs are capitalised when they relate to the development of an asset, whether the rehabilitation activity is expected to occur over the life of the operation or at the time of closure. Over time, the liability is increased for changes in net present values based on pre-tax discount rates appropriate to the risks inherent in the liabilities. Discount rates are risk adjusted to the extent the risks are not adjusted in the cash flow. The unwinding of the discounts are included in financing costs. Expected decommissioning and rehabilitation costs are based on the discounted values of the estimated future costs of detailed plans prepared for each site. Where there are changes in the expected decommissioning and rehabilitation costs, the values of the provisions and any related assets are adjusted and the effect is recognised in the income statement on a prospective basis over the remaining life of the operations. (p) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined on an individual asset basis, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at a revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would be determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit and loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Non-financial assets that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. 2021 ANNUAL REPORT | 80Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (q) Trade and other payables Trade payables and other payables are carried at amortised 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. (r) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at fair value net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in the income statement when the liabilities are derecognised and through the amortisation process. (s) Provisions Provisions are recognised when the economic entity has a present obligation (legal or constructive) to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. The effect of the time value of money is material and provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. (t) Employee benefits (i) Short term benefits Liabilities for short term benefits expected to be wholly settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date of corporate bond rates with terms of maturity and currencies that match, as closely as possible, the estimated future cash outflows. (iii) Share-based payments Equity-settled transactions The Group provides benefits to employees (including executive directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for rights over shares ("equity-settled transactions"). 2021 ANNUAL REPORT | 81Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (t) Employee benefits (continued) 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 using a Monte-Carlo simulation model or binomial model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of shares of Panoramic Resources Limited if applicable. The cost of equity-settled transactions is recognised, together with the corresponding increase in reserve, 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 awards 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. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. There is a corresponding entry to equity. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. If the terms of an equity-settled award are subsequently modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If 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, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. (iv) Bonus plans When applicable, the Company recognises a liability and an expense for bonuses based on a formula that takes into consideration the performance and service criteria, where relevant, and the likelihood that the criteria will be met. The Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. (u) Contributed equity Issued and paid-up capital is recognised at the fair value of the consideration received by the Group. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are deducted from equity and not expensed as an acquisition related cost. (v) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at balance date. (w) Business combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred. 2021 ANNUAL REPORT | 82Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (w) Business combinations (continued) When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 9 Financial Instruments either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured. (x) Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the period that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. (y) Financial assets Initial recognition and measurement: Financial assets are classified, at initial recognition, as measured at amortised cost, fair value through other comprehensive income, or fair value through profit or loss. The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables, the Group initially 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. Trade receivables are measured at the transaction price determined under the Group’s accounting policy for revenue from contracts with customers (see note 1(f)). In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are "solely payments of principal and interest" ("SPPI") on the principal amount outstanding. This assessment referred to as the SPPI test is performed at an instrument level. Subsequent measurement: For purposes of subsequent measurement, financial assets are classified in four categories: • • financial assets at amortised cost (debt instruments); financial assets at fair value through other comprehensive income with recycling of cumulative gains and losses (debt instruments); financial assets designated at fair value through other comprehensive income with no recycling of cumulative gains and losses upon derecognition (equity instruments); or financial assets at fair value through profit or loss. • • 2021 ANNUAL REPORT | 831 Summary of significant accounting policies (continued) (y) Financial assets (continued) Financial assets at amortised cost (debt instruments) Notes to the consolidated financial statements 30 June 2021 (CONTINUED) The Group measures financial assets at amortised cost if both of the following conditions are met: • the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. • Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost include cash and cash equivalents, short term deposits and other receivables. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, or financial assets mandatorily required to be measured at fair value. Financial assets with cash flows which do not pass the SPPI test are classified and measured at fair value through profit or loss, irrespective of the business model. Debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in profit or loss. This category also includes trade receivables subject to provisional pricing (QP adjustment), and listed equity investments. Impairment of financial assets The Group recognises an allowance for expected credit losses ("ECLs") for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For receivables other than those subject to provisional pricing, and due in less than 12 months, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. The Group has established a provision matrix for these receivables that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. For any other financial assets carried at amortised cost (which are due in more than 12 months), the ECL is based on the 12- month ECL when there has not been a significant increase in credit risk since origination. The 12-month ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. 2021 ANNUAL REPORT | 84Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 1 Summary of significant accounting policies (continued) (y) Financial assets (continued) When there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment including forward-looking information. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. (z) Lease liabilities (i) Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term (where the entity does not have a purchase option at the end of the lease term). Right-of-use assets are subject to impairment. The Group’s right-of-use assets include the onsite power station at the Savanah Nickel Project, storage and ship loading facilities at the Wyndham port and the rental of the corporate office space in Perth. (ii) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The Group’s lease liabilities include on-road haulage prime movers at the Savannah Nickel Project and IT equipment. (iii) Short term leases and leases of low value assets The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low value assets recognition exemption. Lease payments on short term leases and leases of low value assets are recognised as an expense on a straight-line basis over the lease term. (iv) Depreciation Depreciation is calculated on a straight-line basis over the estimated useful lives of the asset. The estimated useful lives used for each class of asset are as follows: Plant and equipment under lease - Lesser of the lease term and useful life (which range between 3 - 8 years) o 2021 ANNUAL REPORT | 85Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 2 Segment information (a) Reporting segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources. Previously, the Group had identified the following four operating segments: (1) Nickel - the Savannah Nickel Project; (2) Gold - 51% equity interest in Horizon Gold Limited (divested 29 June 2020); (3) Platinum Group Metals (PGM) - the Panton PGM Project (80% equity interest divested 17 December 2020 and remaining 20% equity interest divested 14 June 2021); and (4) Exploration - greenfield exploration activities. For the current year, the Company has reduced the number of business divisions to one segment comprising Nickel. This change aligns with the Company’s stated goal of focusing on the Group’s core assets being Nickel and is supported by the divestment of equity interests in Horizon Gold Limited and Panton Sill Pty Ltd. Exploration is no longer viewed as a separate segment as all activities are focused on supporting the Savannah Nickel Project. All Group assets are within the Nickel segment located in the East Kimberley region of Western Australia as at 30 June 2021 and 30 June 2020. The reportable segment is represented by the primary statements forming these financial statements. 3 Revenue Revenue from contracts with customers Sale of nickel concentrate 4 Other income Net gain on sale of subsidiary Debt forgiveness Net gain on sale of investment Quotational period (QP) price adjustments relating to current period Quotational period (QP) price adjustments relating to prior period Interest income calculated using the effective interest rate method Foreign exchange loss Sundry income 2021 $'000 2020 $'000 - 69,097 2021 $'000 7,659 - 870 - 139 403 (127) 1,733 2020 $'000 3,812 3,719 - 1,678 737 171 (97) 1,228 10,677 11,248 During the financial year the Group sold a 100% equity interest in Panton Sill Pty Ltd (PGM project), recording a profit on sale of $7.66 million. The sale comprised the disposal of an 80% interest on 17 December 2020 for a cash consideration of $12.0 million before costs. Great Northern Palladium exercised its option to acquire the remaining 20% equity interest from the Company on 16 June 2021 for a cash consideration of $3.0 million before costs. Foreign exchange loss includes the revaluation of a Canadian dollar receivable due from Clean Air Metals. The receivable forms part of the deferred consideration from the sale of Thunder Bay North PGM project that was settled on 15 May 2020. Sale proceeds (in part) are to be received by the Company in three equal instalments on the first, second and third anniversaries of the completion of the sale. During the year, the Company received Job Keeper income from the Australian Government totalling $1.279 million. This amount has been included in Sundry Income. During the year the Company sold its remaining shareholding in listed companies Horizon Gold Limited and GME Resources Ltd. Consideration received from the sale of these investments totalled $1.8 million. 2021 ANNUAL REPORT | 865 Expenses Loss/(profit) before income tax includes the following specific expenses: Cost of sales of goods Cost of goods sold Shipping costs Royalties Depreciation - property, plant and equipment Amortisation - deferred development costs Amortisation - mineral properties Care and Maintenance costs Depreciation – property, plant and equipment Property, plant and equipment written off Site maintenance costs Finance costs Finance charges Interest paid on leases Accretion interest on rehabilitation provision Other financing costs Derivative financial instruments Fair value losses on derivatives instruments which are not in an effective hedge relationship or recycled through profit and loss (note 11) Other Net realisable value of write down spares Depreciation - property, plant and equipment not used in production Other expenses Net foreign exchange loss Net gain on disposal of property, plant and equipment Breakdown of total employee benefits Employee remuneration and benefits expensed Termination benefits on restructure Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 2021 $'000 2020 $'000 - - - - - - - 82,545 4,455 3,402 9,240 9,034 2 108,678 4,669 648 10,794 16,111 2021 $'000 - 167 201 54 422 - - 619 619 2020 $'000 5,276 1,154 375 456 7,261 - 10,148 - 371 607 - (22) 956 6,571 139 6,710 6,618 382 484 203 (1,108) 6,579 31,974 1,248 33,222 2021 ANNUAL REPORT | 87Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 6 Income tax (a) Numerical reconciliation of income tax benefit to prima facie tax Profit/(Loss) from continuing operations before income tax benefit Tax expense/(benefit) at the Australian tax rate of 30% (2020: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Entertainment expense Share-based payment Disposal of subsidiary Other (Benefits arising from previously unrecognised deferred tax assets)/Deductible temporary differences not recognised Income tax expense/(benefit) (b) Tax losses Unused tax losses for which no deferred tax asset has been recognised Capital losses Income tax losses transferred to Panoramic Resources Limited upon purchase of subsidiary on tax consolidation Income tax losses of Panoramic Resources Limited Potential tax benefit @ 30% 7 Current assets - Cash and cash equivalents Cash at bank and in hand Short term deposits 2021 $'000 2020 $'000 295 88 (87,888) (26,366) 4 91 1,941 2 3 137 (5,549) (108) (2,126) 31,883 - - - 6,708 23,639 23,639 197,345 66,295 207,861 71,462 2021 $'000 15,160 9,077 24,237 2020 $'000 10,179 20,985 31,164 (a) Reconciliation to cash at the end of the year The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement of cash flows as follows: Cash at bank and in hand and deposits at call (b) Cash at bank and on hand 2021 $'000 2020 $'000 24,237 31,164 Cash at bank earns interest at floating rates based on daily bank deposit rates. The weighted average interest rate achieved for the year was 0.37% (2020: 0.64%). 2021 ANNUAL REPORT | 88 7 Current assets - Cash and cash equivalents (continued) Notes to the consolidated financial statements 30 June 2021 (CONTINUED) (c) Short term deposits Short term deposits are made for varying periods typically between one day and three months depending on the immediate cash requirements of the Group and earn interest at short term rates. If short term deposits have original maturity greater than three months, principal amounts must be able to be redeemed in full prior to scheduled maturity with no significant interest penalty otherwise the amounts will be classified as other financial non-current assets. The weighted average interest rate achieved for the year was 0.91% (2020: 1.01%). Deposits are held with various financial institutions with short term credit ratings of A-1+ (S&P). As these instruments have maturities of less than twelve months, the Group has assessed the credit risk on these financial assets using lifetime expected credit losses. In this regard, the Group has concluded that the probability of default on the deposits is relatively low. Accordingly, no impairment allowance has been recognised for expected credit losses on the term deposits. (d) Fair value The carrying amount for cash and cash equivalents equals the fair value. 8 Current assets - Trade and other receivables Trade receivables - at fair value Other receivables - at amortised cost (a) Trade receivables 2021 $'000 - 1,942 1,942 2020 $'000 2,417 9,009 11,426 Trade receivables were non-interest bearing and are generally on 30 to 90 day terms. Under the current offtake agreement, on presentation of ship loading documents and the provisional invoice, the customer settled 100% of the provisional sales invoice value within approximately 7 days and the final sales invoice value was settled in approximately 5 days upon presentation of the final invoice. Sales were invoiced and received in US dollars (US$). As at 30 June 2021 all trade receivables with respect to nickel concentrate sales had been collected and all adjustments with respect to QP pricing had been settled within the financial year (2020: 1,687 tonnes of nickel concentrate were subject to QP pricing and settlement remeasured to an average forward nickel price of US$6.40 per pound). There are no copper and cobalt exposures at 30 June 2021 (2020: nil). The amount of fair value changes recognised in the income statement during the year ended 30 June 2021 (on account of prior year concentrate sales) was $0.139 million (2020: $0.308 million). All receivables are current and not past due. (b) Other receivables Sundry debtors are non-interest bearing and have repayment terms between 30 and 90 days. There is an insignificant probability of default as sundry debtors are short term, have no history of default and customers have passed the Group’s internal credit assessment. Other receivables (current and non-current) include deferred sale proceeds arising from the sale of a wholly owned subsidiary in the prior year. The Company completed the sale of 100% owned Canadian entity, Panoramic PGMs (Canada) Limited, the owner of the Thunder Bay North PGM Project, to Clean Air Metals Inc on 15 May 2020. Under the terms of the sale agreement, the purchase price comprised total cash consideration of $9.0 million Canadian dollars, of which $4.5 million Canadian dollars comprised deferred consideration. The deferred consideration is receivable in three equal instalments on the first, second and third anniversaries of the completion of the sale. On 6th May 2021 the first instalment of the deferred consideration was received. At 30 June 2021, the deferred consideration receivable balance totalled C$3.0 million. The consideration receivable is measured using the effective interest rate method. Clean Air Metals and PAN PGM’s have granted first ranking charges over the shares in PAN PGM’s and the Project to secure the deferred consideration payments. (c) Foreign currency exchange rate and interest rate risk The balance of trade receivables is exposed to movements in AUD:USD exchange rates and commodity prices during the quotational period. Information on foreign currency exchange and interest rate risk is provided in note 38. (d) Fair value and credit risk Information on fair value and credit risk is provided in note 38. 2021 ANNUAL REPORT | 899 Current assets - Inventories Spares for production - at lower of cost or net realisable value Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 2021 $'000 2020 $'000 557 557 - - No provision was recorded at 30 June 2021 to write down inventories to their recoverable value (2020: $6.619 million). Spares for production include diesel and other consumable items. Inventory recognised as an expense during the period totalled $3.7 million (2020: $40.5 million). 10 Impairment An impairment reversal of $14.187 million was recorded in the current period (2020: net impairment loss of $27.063 million which comprises an impairment of the nickel cash generating unit of $32.948 million and an impairment reversal relating to the disposal of the Thunder Bay North PGM Project totalling $5.885 million). The impairment reversal is attributable to the nickel cash generating unit, refer to the following section for details. Nickel cash generating unit On 6 April 2021, the Company announced to the ASX a decision had been made to re-start operations at the Savannah Nickel Project in the second half of CY2021. The announcement referred to the following positive developments which underpinned the decision. - - - - - - - - Improved commodity and foreign exchange pricing and sentiment. Updated financial model confirming attractive financial outcomes over an optimised twelve-year mine life. Completion of capital works that de-risk the restart of operations, primarily the raise bore works associated with FAR #3. Additional underground development to open up four new mining levels at Savannah North. Updated process schedule based on additional metallurgical test work. Evaluation of owner-operate and contractor-operated mining and processing models, which resulted in: Letter of Intent signed with underground mining contractor Barminco for mining services. Letter of Intent signed with Primero Group Pty Ltd to operate the processing plant. o o US$45 million debt facility secured with Trafigura Pte Ltd. New offtake terms secured for the period February 2023 to February with Trafigura Pte Ltd. The decision to restart operations at the Savannah Nickel Project and the improved commodity prices were considered to be impairment reversal indicators for impairment losses recognised in prior periods, and as such, a formal estimate of the recoverable amount of the Nickel cash generating unit (CGU) was performed. In assessing whether an impairment reversal is required, the carrying amount of the CGU is compared with its estimated recoverable amount. The recoverable amount is the higher of the CGU’s fair value less costs of disposal (FVLCD) and value in use (VIU). Given the nature of the Group’s activities, the FVLCD for the CGU was estimated based on discounted future cash flows (expressed in real terms) expected to be generated from the continued use of the CGU using market-based commodity price and exchange assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, and the latest life of mine plans. The cash flows were discounted using a real post tax discount rate that reflected market assessments of the time value of money and the risks specific to the CGU. Price sensitivities were considered in the assessment which included both consensus, high and low value inputs into the financial model. A valuation range was developed which then formed the basis for the accounting treatment. The determination of FVLCD for the CGU is considered to be a Level 3 fair value measurement as it is derived from valuation techniques that involve inputs that are not based on observable market data. The Group considers the inputs and the valuation approach to be consistent with the approach taken by market participants. The FVLCD valuation exceeded the $146.811 million carrying amount (before impairment reversal) of the Nickel CGU’s assets and as such an impairment reversal of $14.187 million was recorded in the current year. The reversal has been allocated against property, plant and equipment, development properties and mineral properties on a proportional allocation basis with reference to the treatment of the prior year impairment loss (refer to notes 13, 14 and 16 for further information.) 2021 ANNUAL REPORT | 90Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 10 Impairment (continued) (a) Nickel cash generating unit (continued) (i) Key assumptions The determination of FVLCD is most sensitive to the following key assumptions: • production volumes; • • • discount rates. commodity prices and exchange rates; capital and operating costs; and Production Volumes In calculating FVLCD, production volumes and grades were derived from the latest mineral resource estimate and ore reserve estimates and represent the estimated recoverable mining inventory incorporated into a detailed mine design and life of mine plan as part of the long-term planning process. The production volume incorporated into the cash flow model was 10.6 million tonnes ore at an average grade of 1.23% per tonne (%/t) nickel, 0.54%/t copper and 0.08%/t cobalt for an approximate 12-year mine life. Production volumes are dependent on a number of variables, such as the underlying resource and reserve estimation, estimates of mining dilution and recoveries, geotechnical assumptions, assessments of ventilation requirements, the production profile, mining productivity, estimates of the costs of extraction and processing, metallurgical recoveries, the contractual duration of mining rights, refining and offtake terms, and the selling price of the commodities extracted. These assumptions are then assessed to ensure they are consistent with what a market participant would estimate. Commodity Prices and Exchange Rate Forecast commodity prices and exchange rates (US Dollar to Australian Dollar) are based on management’s estimates and are derived from forward price curves and long terms views of global supply and demand, interest and inflation rates, building on past experience of the industry and consistent with external sources. Estimated long term nickel and copper prices and USD:AUD exchange rates used in the estimation of future revenues were as follows: Economic Assumptions Nickel (USD per tonne) Copper (USD per tonne) USD to AUD exchange rate FY2022 16,013 FY2023 15,423 FY2024 15,287 FY2025 FY2026 On 16,314 15,357 8,436 0.77 7,871 0.76 7,474 0.75 6,962 0.76 7,165 0.75 Capital and Operating Costs Capital and operating costs have been derived from a recent mining study prepared by specialist consultants with input where required by Management and referencing historical data where relevant. Costs have been benchmarked against industry experience and current contracts for the supply of goods and services where applicable. Estimates have been incorporated into the discounted cash flow analysis for corporate costs and corporate taxation that a purchaser would incur. Discount Rates In determining FVLCD, a real post-tax discount rate of 7.5% was applied to the post tax cash flows expressed in real terms. The discount rate is derived from an estimate of the post-tax market rate based on a market participant’s weighted average cost of capital. The WACC takes into account an estimation of the mix of debt and equity funding and associated costs of each funding source. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on an estimate of the funding debt cost that the Group would be able to secure, with reference to past costs. Risk is incorporated by applying beta factors. 2021 ANNUAL REPORT | 91Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 10 Impairment (continued) (a) Nickel cash generating unit (continued) Timing of Restart Decision The discounted cash flow analysis assumes that operations at the Savannah Nickel Project will proceed to a restart in the first half of the 2022 financial year. The decision to restart operations at Savannah is dependent on a range of factors including commodity prices and exchange rates, travel and other restrictions in place related to Covid, the completion of pre-production development works and the ability to secure the necessary funding required on terms that the Company considers reasonable. (ii) Sensitivities The FVLCD is most sensitive to the following assumptions, with sensitivity based on management’s assessments of reasonably possible changes to inputs over the period of the discounted cash flow analysis. Commodity Price Exchange Rate Operating and Capital Costs Discount Rate High1 Low1 +10% +10% -5% -2% -10% -10% +5% +2% Impact High1 $000's 124,005 129,537 75,031 32,979 Impact Low1 $000's (135,166) (106,503) (75,614) (27,260) 1 High indicates a higher valuation and lower (or nil) impairment and low indicates a lower valuation with a greater impairment. Impact indicates the change to the FVLDC. (iii) Prior year nickel CGU impairment loss On 15 April 2020, as a result of the combination of significant operational uncertainty, disruption and cost escalation caused by COVID-19 restrictions, a slower ramp up than planned and depressed commodity prices the Company elected to suspend operations at the Savannah Nickel Mine. The suspension of operations was deemed to be an indicator of impairment, and as such, a formal estimate of the recoverable amount of the Nickel cash generating unit (CGU) was performed at 30 June 2020. The recoverable amount of the Savannah Nickel Project CGU was determined based on a combination of a discounted cash flow (DCF) calculation at 30 June 2020 using cash flow projections based on financial budgets covering the life of the project incorporating current market assumptions approved by the Company's Directors and independent valuations from external valuers. The fair value methodology adopted was categorised as Level 3 in the fair value hierarchy. In determining the FVLCD, estimates were made in relation to the underlying resources/reserve and the valuation multiples. The assessed FVLCD valuation was below the carrying amount of the Nickel CGU’s assets of $166.710 million and as such an impairment loss of $32.948 million was recorded in the prior year. The impairment was recognised in the consolidated income statement and was allocated against property, plant and equipment, development properties and mineral properties in the balance sheet. 2021 ANNUAL REPORT | 92 Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 11 Derivative financial instruments As at 30 June 2021 the Company did not have any derivative financial instruments in place. On 31 March 2020, the Company closed out the nickel, copper and AUD:USD foreign exchange contracts resulting in the crystallisation of a loss of approximately $10.148 million. As operations at the Savannah Nickel Mine were suspended the loss was recycled from reserves to the profit and loss. As at 30 June 2020 the Company did not have any derivative financial instruments in place. 12 Non-current assets - Receivables Other receivables 2021 $'000 1,536 2020 $'000 2,787 Other receivables consist of the unpaid portion of the sales proceeds in relation to the sale of the Thunder Bay North (TBN) PGM Project not due within the next twelve months. Refer to note 8 for the current portions of these receivables. 13 Non-current assets - Property, plant and equipment Year ended 30 June 2021: Net book amount at 30 June 2020 Additions Depreciation charge Impairment reversal Transfer to other asset class Disposals Closing net book amount At 30 June 2021: Gross carrying amount - at cost Accumulated depreciation and impairment Net book amount Plant and Equipment $'000 Construction in progress $'000 30,125 - (2,924) 2,317 (5,083) - 24,435 21,053 14,834 - 53 (34,016) (648) 1,276 Total $'000 51,178 14,834 (2,924) 2,370 (39,099) (648) 25,711 151,466 1,276 152,742 (127,031) 24,435 - 1,276 (127,031) 25,711 2021 ANNUAL REPORT | 9313 Non-current assets - Property, plant and equipment (continued) Notes to the consolidated financial statements 30 June 2021 (CONTINUED) Year ended 30 June 2020: Net book amount at 30 June 2019 Reclassification to right-of-use asset on adoption of AASB 16 at 1 July 2019 Net book value at 1 July 2019 Additions Depreciation charge Impairment loss Transfer from/(to) other asset class Disposals Closing net book amount At 30 June 2020: Gross carrying amount - at cost Accumulated depreciation and impairment Net book amount Refer to note 10 for discussion of impairment. 14 Non-current assets – Right of use assets Right-of-use assets As at 1 July 2020 Adjustments Disposal Depreciation expense Impairment reversal (note 10) Derecognised As at 30 June 2021 As at 1 July 2019 on adoption of AASB 16 Additions Depreciation expense Impairment loss (note 10) Derecognised As at 30 June 2020 Plant and equipment $'000 Leased plant and equipment $'000 Construction in progress $'000 Total $'000 42,318 7,102 9,584 59,004 - 42,318 310 (3,884) (6,923) 2,770 (4,466) 30,125 166,858 (136,733) 30,125 (7,102) - - - - - - - - 9,584 19,081 - (4,842) (2,770) - 21,053 (7,102) 51,902 19,391 (3,884) (11,765) - (4,466) 51,178 - - - 21,053 - 21,053 187,911 (136,733) 51,178 Land and buildings $000 1,062 12 (64) (361) 49 - 695 1,570 - (395) (113) - 1,062 Plant and equipment $000 4,896 - - (1,743) 347 - 3,500 15,782 26,482 (5,343) (1,127) (30,898) 4,896 Total $000 5,958 12 (64) (2,104) 393 - 4,195 17,352 26,482 (5,738) (1,240) (30,898) 5,958 The Group recognised rent expense from short term leases of $109,000 for the financial year ended 30 June 2021. (a) Non-current assets pledged as security Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. At 30 June 2021, the carrying amounts of assets pledged as security for current and non-current lease liabilities were $4.195 million (2020: $5.958 million). 2021 ANNUAL REPORT | 9415 Non-current assets - Deferred tax assets The balance comprises temporary differences attributable to: Tax losses Employee benefits Provisions Depreciation and amortisation Sundry temporary differences Research and development tax offset Business related costs Foreign exchange Other Financial assets Lease liability Deferred tax asset not recognised Set-off of deferred tax liabilities pursuant to set-off provisions (note 22) Net deferred tax assets Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 2021 $'000 66,295 193 9,403 (1,115) 996 4,136 1,830 3 162 35 1,560 (67,042) 16,457 (16,457) - 2020 $'000 71,462 153 10,285 (1,747) 974 4,091 2,223 48 - 36 705 (74,445) 13,785 (13,785) - 16 Non-current assets - Exploration and evaluation, development and mine properties Year ended 30 June 2021 Opening net book amount Additions Assets disposed Depreciation charge Transfer from other asset class Written off to profit and loss Reversal of impairment loss Remeasurement of rehabilitation provision Closing net book amount At 30 June 2021 Gross carrying amount - at cost Accumulated amortisation and impairment Net book amount Year ended 30 June 2020 Opening net book amount Additions Assets disposed Depreciation charge Impairment loss Remeasurement of rehabilitation provision Closing net book amount At 30 June 2020 Cost or fair value Accumulated depreciation Net book amount Mine development expenditure $'000 Exploration and evaluation $'000 Mineral properties $'000 Total $'000 86,673 - - - 39,101 - 11,421 (1,143) 136,052 319,667 (183,615) 136,052 84,745 28,998 (779) (9,034) (19,938) 2,681 86,673 273,619 (186,945) 86,673 12,535 996 (7,035) - - (945) - - 5,551 5,551 - 5,551 27,763 1,732 (16,960) - - - 12,535 12,535 - 12,535 22 - - - - - 2 - 24 99,230 996 (7,035) - 39,101 (945) 11,423 (1,143) 141,627 1,795 (1,771) 24 327,013 (185,386) 141,627 29 - - (2) (5) - 22 112,537 30,730 (17,739) (9,036) (19,943) 2,681 99,230 1,795 (1,773) 22 287,948 (188,718) 99,230 2021 ANNUAL REPORT | 95Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 16 Non-current assets - Exploration and evaluation, development and mine properties (continued) The ultimate recoupment of costs carried forward for exploration and evaluation expenditure is dependent on the successful development and commercial exploitation or the sale of the respective mining areas. Refer to note 10 for further details on impairment. Refer to note 21 for details of assets pledged as security in relation to the Groups’ non-current assets. 17 Non-current assets - Financial assets (a) Financial assets at fair value through profit or loss Listed securities At beginning of year Additions Adjustments Fair value loss recognised in profit or loss At end of year (b) Financial assets at amortised cost Other financial assets 2021 $'000 12 767 316 (1,005) (66) 12 2020 $'000 767 957 - (41) (149) 767 2021 $'000 2020 $'000 221 251 At 30 June 2021, the Company had bank guarantees with a financial institution with a face value of $0.221 million (2020: $0.251 million) which were supported by cash backed deposits. 18 Current liabilities - Trade and other payables Trade payables Accrued expenses 2021 $'000 1,700 2,688 4,388 2020 $'000 1,725 1,671 3,396 Trade payables are non-interest bearing and are normally settled on 30-day terms. Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value. 19 Current liabilities - Borrowings Secured Lease Liabilities (note 21) Total secured current borrowings 2021 $'000 2020 $'000 1,445 1,445 1,827 1,827 2021 ANNUAL REPORT | 9620 Current liabilities - Provisions Employee benefits - annual leave Employee benefits - long service leave Restructuring costs Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 2021 $'000 2020 $'000 474 153 87 714 1,037 231 1,136 2,404 The current provision for long service leave includes all unconditional entitlements where employees have completed the required period of service. Where employees have not yet completed the required period of service, their entitlement is recognised as a non-current provision for long service leave. As a result of the suspension of operations at the Savannah Nickel Project a provision for restructuring costs was raised in prior financial year totalling $1.136 million. The provision was an estimate of the employee termination costs that would result from the restructure of the Group. During the current financial year a total of $1.188 million was paid on account of these costs. 21 Non-current liabilities – Borrowings Secured Lease liabilities Total secured non-current borrowings 2021 $'000 4,738 4,738 2020 $'000 5,423 5,423 Bank loans On the 3 April 2021, the Company entered into a secured loan agreement of up to US$45.0 million from Trafigura Pte Ltd. The facility has two secured tranches comprising a US$30.0 million five-year Prepayment Loan Facility (PLF) and a US$15.0 million Revolving Credit Loan Facility (RCF). The PLF has a five-year term from drawdown with interest- only repayments required in the first 12 months. Debt repayments begin in the second year and are sculpted to align with project cash flows. The RCF has an 18-month term from 1 July 2021, and has the option (at the Company’s election) to be repayable by way of a final bullet repayment of US$15.0 million at the end of the facility term. The proceeds from the facility can be used for project related expenditure and corporate purposes. Ongoing covenants are typical for a facility of this nature. Both facilities use the 3-month LIBOR as a base interest rate plus a favourable interest margin. There is no mandatory hedging requirement with either tranche. Both facilities are secured by the Savannah project assets (including mining and exploration leases), the assets of the other applicable operating subsidiary PAN Transport Pty Ltd and the shareholding held by Panoramic Resources Ltd in Savannah Nickel Mines Pty Ltd. Ongoing covenants are light and typical for a facility of this nature. Both tranches permit early repayment without penalty. All conditions precedent to first draw down were satisfied on 2 July 2021 and all registrations with respect to security were completed in June 2021. The Company anticipates drawing the PLF in the September 2021 quarter. 2021 ANNUAL REPORT | 97Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 21 Non-current liabilities – Borrowings (continued) Lease liabilities In the 2021 financial year, lease liabilities had an average term of 5.5 years (2020: 6 years). Lease liabilities As at 30 June 2020 Additions Interest expense Payments Adjustments As at 30 June 2021 As at 30 June 2019 On adoption of AASB 16 - 1 July 2019 As at 1 July 2019 (restated) Additions Interest expense Payments Derecognised As at 30 June 2020 Non-interest bearing liabilities include trade and other payables and are generally settled on 30-day terms. (a) Changes in liabilities arising from financing activities 1 July 2020 Repayments (Principal and Interest) Other non-cash movements 30 June 2021 30 June 2019 On adoption of AASB16 - 1 July 2019 Proceeds - drawdowns New Leases Repayments - principal and Interest Share-based payment Disposals Other non-cash movements 30 June 2020 Lease liabilities $'000 7,251 (1,004) (64) 6,183 Bank loans $'000 Related party loans $'000 Lease liabilities $'000 40,259 - 10,000 - (54,313) - - 4,053 - - - 18,500 - (18,823) (456) - 779 - 6,738 10,250 - 26,441 (6,103) - (31,229) 1,154 7,251 The other non-cash movements include the effect of accrued interest and various other adjustments. Total $000 7,251 - 167 (1,171) (64) 6,183 6,738 10,250 16,988 26,441 1,154 (6,103) (31,229) 7,251 Total $'000 7,251 (1,004) (64) 6,183 Total $'000 46,997 10,250 28,500 26,441 (79,239) (456) (31,229) 5,986 7,251 2021 ANNUAL REPORT | 9822 Non-current liabilities - Deferred tax liabilities The balance comprises temporary differences attributable to: Inventories Rehabilitation asset Exploration and evaluation, development expenditure and mine properties Accrued income Financial assets Financial assets Set-off of deferred tax liabilities pursuant to set-off provisions (note 15) Net deferred tax liabilities 23 Non-current liabilities - Provisions Employee benefits - long service leave Rehabilitation Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 2021 $'000 2020 $'000 2,955 2,862 2,038 1,482 8,790 10,862 2 2 1,470 1,248 - - 13,785 16,457 (16,457) (13,785) - - 2021 $'000 2020 $'000 10 23,556 23,566 - 24,498 24,498 The provision for rehabilitation represents the discounted value of the present obligation to restore, dismantle and rehabilitate certain items of property, plant and equipment and to rehabilitate exploration and mining leases. The discounted value reflects a combination of management’s assessment of the nature and extent of the work required, estimates of the future cost of performing the work required, the expected timing of cash flows and the discount rate applied. Changes to one or more of these assumptions is likely to result in a change to the carrying value of the provision and the related asset or a change to profit and loss in accordance with the Group’s accounting policy stated in note 1. (a) Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below: Rehabilitation Carrying amount at start of year - accretion interest on unwinding of discount - (reduction)/additional provision charged - reversal on sale of subsidiary Carrying amount at end of year 24 Contributed equity (a) Share capital Ordinary shares Ordinary shares - fully paid 2021 $'000 2020 $'000 24,498 201 (1,143) - 23,556 31,534 449 2,681 (10,166) 24,498 2021 Shares 2020 Shares 2021 $'000 2020 $'000 2,050,914,004 2,050,914,004 353,550 353,550 2021 ANNUAL REPORT | 9924 Contributed equity (continued) (b) Movements in ordinary share capital Date Details Opening balance 2 June 2020 17 January 2020 30 September 2019 Entitlement Share Issue Entitlement Share Issue 16 December 2019 Entitlement Share Issue Placement Share Issue Entitlement Share Issue Entitlement Share Issue Transaction costs, net of tax Balance 30 June 2020 10 June 2020 2 June 2020 Date 30 June 2021 Details Opening balance Balance (c) Ordinary shares Notes to the consolidated financial statements 30 June 2021 (CONTINUED) Number of shares Issue price 553,582,471 100,653,238 12,981,951 95,912,707 410,182,572 331,811,671 545,789,394 - 2,050,914,004 $0.28 $0.30 $0.30 $0.07 $0.07 $0.07 Number of shares Issue price 2,050,914,004 2,050,914,004 - - $'000 210,109 28,183 3,895 28,774 28,713 23,227 38,205 (7,554) 353,550 $'000 353,550 353,550 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. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. (d) Capital management When managing capital, management's 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. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management are constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt or provide capital to pursue other investments. The Group is not subject to any externally imposed capital requirements. 25 Reserves (a) Share-based payments Share based payments (b) (i) Nature and purpose of reserves Share-based payments reserve 2021 $'000 22,476 22,476 2020 $'000 22,172 22,172 The share-based payments reserve is used to record the value of share-based payments provided to employees as part of their remuneration. The reserve is also used to record share-based payments provided to third parties as part of the consideration for services provided or for assets acquired. 2021 ANNUAL REPORT | 100Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 26 Dividends (a) Ordinary shares No final dividend was paid for the year ended 30 June 2021 (30 June 2020: Nil). (b) Dividends not recognised at the end of the reporting period No dividend has been declared since the end of the reporting period. (c) Franking credits Franking credits available for subsequent reporting periods The tax rate at which paid dividends have been franked is 30% (2020: 30%). 27 Remuneration of auditors Fees paid or payable to Ernst & Young (Australia) for: Auditing the statutory financial report for the Group and Review of the half year statutory financial report space Fees for other assurance and agreed-upon-procedures services under other legislation or contractual arrangements where there is discretion as to whether the service is provided by the auditor or another firm: Fees for other services: Tax compliance and consulting services Subtotal other services Total fees to Ernst & Young (Australia) Fees paid or payable to other overseas member firms of Ernst & Young for: Fees for other services: Tax consulting Total fees to Ernst & Young (Australia) and overseas member firms of Ernst & Young 2021 $'000 10,503 2020 $'000 10,503 2021 $ 2020 $ 122,000 230,000 - 34,000 49,638 49,638 171,638 104,173 138,173 368,173 - 32,904 171,638 401,077 Other services provided by the auditor during the current financial year predominately comprised the following: • • • • • • the preparation and lodgement of the Group tax return; the review and lodgement of the Group fringe benefits tax return; provision of taxation advice for the sale of Panton Sill Pty Ltd; provision of taxation advice with respect to the US$45 million Trafigura Pte Ltd debt facility; taxation advice in relation to the disposal of a foreign subsidiary, Panoramic PGMs (Canada) Limited; and other minor advisory and consulting services. The Audit and Governance Committee closely monitors non-audit services provided by the auditor or affiliate firms to ensure the selection of the service provider and the scope of the services provided are appropriate and do not have the potential to compromise auditor independence. 2021 ANNUAL REPORT | 101Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 28 Guarantees and contingencies (a) Guarantees At 30 June 2021, the Company had bank guarantees with a financial institution with a face value of $0.221 million (2020: $0.251 million). Certain entities in the Group have entered into a Deed of Cross Guarantee in relation to certain liabilities and indebtedness. (b) Contingent assets The Group had no contingent assets at 30 June 2021. (c) Contingent liabilities The Group had no contingent liabilities at 30 June 2021. 29 Commitments (a) Exploration and mining lease expenditure commitments In order to maintain current rights of tenure to exploration and mining tenements, the Group will be required to outlay the amounts disclosed in the table below. These amounts are discretionary, however if the expenditure commitments are not met then the associated exploration and mining leases may be relinquished. Mineral tenements expenditure commitments Not later than one year Later than one year but not later than five years Later than five years 30 Related party transactions 2021 $'000 2020 $'000 519 2,082 1,176 3,777 764 3,235 2,302 6,301 (a) Compensation of Directors and key management personnel of the Group The following persons were Directors or Key management personnel of the Group during the current financial year: N L Cernotta V Rajasooriar P R Sullivan R J Hayward G Swaby G Dyker M Ball Chair (Non-Executive) Managing Director Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) Chief Financial Officer (appointed 5 October 2020) Chief Financial Officer (ceased employment 30 September 2020) The aggregate compensation made to directors and other members of KMP of the Group is set out below: Short term employee benefits Post employment benefits Long term benefits Termination benefits Share-based payments 2021 $'000 1,681 89 67 82 263 2,182 2020 $'000 2,127 182 78 682 682 3,069 2021 ANNUAL REPORT | 102Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 30 Related party transactions (continued) (a) Compensation of Directors and key management personnel of the Group (continued) The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to Directors and KMP. There were no other persons employed by, or contracted to, the Group during the financial year, having responsibility for planning, directing and controlling the activities of the Group, either directly or indirectly. (b) Transactions with other related parties who had significant influence over the group On 30 March 2020, the Company agreed to sell its remaining interest in Horizon Gold Limited (a former wholly owned subsidiary of the Company) to sophisticated and professional investors, including significant shareholder and related party Zeta Resources Limited. Zeta acquired 17,183,580 of the 18,793,580 shares sold to fully dispose of the Company’s interests in Horizon. The balance receivable from Zeta of $3.437 million was received in early July 2020. The sale to Zeta was subject to shareholder approval which was obtained on 29 June 2020. Other than the transactions detailed above, there have been no other transactions with parties related to the consolidated entity in the financial year ended 30 June 2021. 31 Subsidiaries and transactions with non-controlling interests (a) Significant investments in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in accordance with the accounting policy described in note 1(g): Name of entity Country of incorporation Class of shares Savannah Nickel Mines Pty Ltd PAN Transport Pty Ltd Pindan Exploration Company Pty Ltd Panton Sill Pty Ltd Mt Henry Gold Pty Ltd Mt Henry Mine Pty Ltd Magma Metals Pty Limited Australia Australia Australia Australia Australia Australia Australia Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Equity holding 2021 % 100 100 100 - 100 100 100 2020 % 100 100 100 100 100 100 100 Refer to note 4 for details in relation to the sale of Panton Sill Pty Ltd which completed during the period. Refer to note 32 for details on Deed of Cross Guarantee signed between Savannah Nickel Mines Pty Ltd and Panoramic Resources Limited. (b) Non-controlling interests (NCI) In December 2016, the Company divested an interest in Horizon Gold Limited by way of an initial public offering (IPO) and listing of the subsidiary, on the Australian Securities Exchange (ASX). On 18 February 2020, the Company sold 20,237,037 shares in Horizon to significant shareholder and related party Zeta Resources Limited. The sale reduced the Company’s interest from 51% to approximately 24.6% resulting in a loss of control and deconsolidation of the balance of Horizon from the Group in the prior financial year. On 30 March 2020, the Company agreed to sell its remaining interest in Horizon to sophisticated and professional investors, including Zeta Resources Limited. Zeta acquired 17,183,580 of the 18,793,580 shares sold to fully dispose of the Company’s interests in Horizon. The balance receivable from Zeta of $3.437 million was received in early July 2020. The sale to Zeta was subject to shareholder approval which was obtained on 29 June 2020. There were no transactions involving non-controlling interests during the financial year ended 30 June 2021. Horizon Gold Limited was fully divested at 30 June 2020 and was deconsolidated from the Group at that balance sheet date. 2021 ANNUAL REPORT | 103 Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 32 Deed of cross guarantee Pursuant to ASIC Corporations (wholly owned companies) Instrument 2016/785, relief has been granted to Savannah Nickel Mines Pty Ltd from the Corporations Act 2001 requirements for preparation, audit and lodgement of its financial report. As a condition of the ASIC Corporations (wholly owned companies) Instrument 2016/785, Panoramic Resources Limited and Savannah Nickel Mines Pty Ltd (the "Closed Group"), entered into a Deed of Cross Guarantee on 29 June 2005. The effect of the deed is that Panoramic Resources Limited has guaranteed to pay any deficiency in the event of winding up of its controlled entity or if it does not meet its obligation under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entity has also given a similar guarantee in the event that Panoramic Resources Limited is wound up or it does not meet its obligation under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. As at reporting date, the "Closed Group" comprised of Panoramic Resources Limited and Savannah Nickel Mines Pty Ltd. The entities outside of the Closed Group are dormant. The consolidated results of the Closed Group are therefore reflective of the consolidated financial results for the Panoramic Group. 33 Events occurring after the reporting period The following events occurred after the end of the financial year. On 2 July 2021, all conditions precedent were satisfied for the US$45 million secured loan facility with Trafigura including the registration of security interests. On 8 July 2021 the four-year underground mining contract with Barminco was executed. The contract value is approximately $280 million. Underground mining activities also commenced at the Savanah Nickel Project. On 30 July 2021 the three-year Operating and Maintenance Agreement was executed with Primero Group Pty Ltd. The contract value is approximately $34 million. Primero commenced initial mobilisation to the Savannah site in August 2020. In the interval between the end of the financial year and the date of this report, other than as disclosed above, there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years. 2021 ANNUAL REPORT | 10434 Reconciliation of profit/(loss) for the year to net cash inflow/outflow from operating activities Notes to the consolidated financial statements 30 June 2021 (CONTINUED) Profit/(Loss) before tax for the year Depreciation and amortisation (Gain)/loss on disposal of plant and machinery Property, plant and equipment written off Impairment loss Reversal of impairment of assets Interest income Unrealised loss on foreign currency exchange Exploration and evaluation written off Share based payments Gain on sale of investments Gain on sale of subsidiary Stock obsolescence provision Finance cost Change in operating assets and liabilities: Decrease in trade debtors and others (Increase)/decrease in prepayments Decrease in trade creditors (Increase)/decrease in inventories Decrease in provisions Net cash outflow from operating activities 35 (Loss)/earnings per share (a) Basic loss per share From continuing operations attributable to the ordinary equity holders of the Company Total basic loss per share attributable to the ordinary equity holders of the Company (b) Diluted loss per share From continuing operations attributable to the ordinary equity holders of the Company Total diluted loss per share attributable to the ordinary equity holders of the Company 2021 $'000 2020 $'000 295 5,028 (22) 648 - (14,187) (403) 127 945 304 (870) (7,659) - 422 1,071 (622) (309) (557) (1,635) (17,424) (87,888) 18,436 (1,108) - 32,948 (5,886) (168) 203 - - 190 (3,812) 6,619 1,325 15,512 481 (18,596) 8,415 (323) (33,652) 2021 Cents 2020 Cents 0.0 0.0 (8.8) (8.8) 2021 Cents 2020 Cents 0.0 0.0 (8.8) (8.8) 2021 ANNUAL REPORT | 105 35 (Loss)/earnings per share (continued) (c) Reconciliation of profit/(loss) used in calculating earnings/(loss) per share Notes to the consolidated financial statements 30 June 2021 (CONTINUED) Basic earnings/(loss) per share Profit/(loss) from continuing operations Earnings/(loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings/(loss) per share Diluted earnings/(loss) per share Profit/(loss) from continuing operations Profit/(loss) attributable to the ordinary equity holders of the Company used in calculating diluted earnings/(loss) per share (d) Weighted average number of shares used as denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 2021 $'000 2020 $'000 295 (87,366) 295 (87,366) 295 295 (87,366) (87,366) 2021 Number 2020 Number 2,050,914,004 998,645,156 The weighted average number of ordinary shares used in the denominator in calculating diluted (loss)/earnings per share is not materially different to that used to calculated basic (loss)/earnings per share. There are 11,434,302 performance rights on issue at 30 June 2021 (2020: nil). There were 28,520,525 options on issue at 30 June 2021 (2020: 28,520,525) which were anti-dilutive and therefore not taken into account when calculating the weighted average number of shares. 36 Share-based payments (a) Options over unissued shares During the financial year no options over unissued shares were issued by the Company (2020: 28,520,525). The table below shows a reconciliation of the movement of options over unissued shares during the period including weighted average exercise price (“WAEP”). Options outstanding at the start of the year Options issued during the year Options exercised during the year 30 June 2021 No. 28,520,525 - - Options outstanding at the end of the year 28,520,525 The terms of the unissued ordinary options at 30 June 2021 are as follows WAEP $0.16 $0.00 $0.00 $0.16 30 June 2020 No. - 28,520,525 - 28,520,525 WAEP $0.00 $0.16 $0.00 $0.16 Number of options Exercise price 28,520,525 $0.16 Expiry date 30 June 2023 No options have been granted subsequent to the reporting date and to the date of signing this report. 2021 ANNUAL REPORT | 106Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 36 Share-based payments (continued) (a) Options over Unissued shares (continued) On 29 June 2020, the Company’s shareholders approved the issue of 28,520,525 options to Zeta Resources Limited. The issue formed part of the consideration to arrange a $8.0 million unsecured subordinated loan from Zeta Resources Limited in the prior financial year. The Options have an expiry of 3 years from date of issue and a strike price of $0.16 per Panoramic share. An expense of $0.456 million was recorded in the prior financial year in relation to the options issued. The options have an expiry of 3 years from date of issue and a strike price of $0.16 per Panoramic share. The options were valued using the Black and Scholes options valuation methodology using an implied volatility of 66.6% and a risk free rate of 0.24%. (b) Employee Share Plan The Company’s shareholders approved the “Incentive Options & Performance Rights Plan” (“2018 ES Plan”) at the 2018 Annual General Meeting on 21 November 2018. Plan was approved for a three-year period. Under the 2018 ES Plan, eligible participants are able to be granted Options and/or Performance Rights (collectively defined as “Awards”). Notwithstanding that the 2018 ES Plan includes the offer and granting of Options, in its discretion, the Remuneration Committee has determined that the grant of performance rights is the preferred LTI reward vehicle. During the financial year 14,670,146 performance rights (30 June 2020: nil) were issued to employees (includes the rights issued to Mr Rajasooriar as noted in the section below), pursuant to the terms of the 2018 ES Plan. These performance rights vest on the measurement date and comprise tranches A and B in the table below. Included in the above issue, is 3,235,844 performance rights that were forfeited and cancelled in September 2020 following the resignation of Mr Michael Ball, the former Chief Financial Officer. A further 1,164,033 performance rights, included in the above issue, were forfeited in July 2021 following the retirement of the Company’s geology manager Mr John Hicks. On 17 November 2020, upon approval by the shareholders, the Company issued 7,416,488 performance rights to Mr Victor Rajasooriar (Managing Director & CEO) as per the terms of his Executive Services Agreement and pursuant to the terms of the 2018 ES Plan. These performance rights vest on the measurement date and comprise tranches C and D in the table below. The performance conditions that the Board has determined will apply to the Performance Rights are summarised below: Tranche Amount A 1,813,415 Weighting 25% of the Performance Rights B 5,440,244 75% of the Performance Rights C 1,854,122 25% of the Performance Rights D 5,562,366 75% of the Performance Rights Performance Conditions ATSR performance. Performance rights vest on a pro-rata scale from 25% to 100% for ATSR performance between 5% and 15%. (measured over the 3 year period to 30 June 2023) RTSR performance relative to a defined peer group. Performance rights vest on a stepwise basis from 25% to 100% for RTSR performance between 50th and 75th percentile. (measured over the 3 year period to 30 June 2023) ATSR performance. Performance rights vest on a pro-rata scale from 25% to 100% for ATSR performance between 5% and 15%. (measured over the 3 year period to 30 June 2023) RTSR performance relative to a defined peer group. Performance rights vest on a stepwise basis from 25% to 100% for RTSR performance between 50th and 75th percentile. (measured over the 3 year period to 30 June 2023) The performance rights included in the above table do not include adjustments for the rights forfeited during the year. 2021 ANNUAL REPORT | 107Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 36 Share-based payments (continued) (b) Employee Share Plan (continued) The fair value of the performance rights granted were determined using Monte Carlo simulation, a review of historical share price volatility and correlation of the share price of the Company to its Peer Group. The table below details the terms and conditions of the grant and the assumptions used in estimating fair value: Item Grant date Number of ATSR rights Number of RTSR rights Value of underlying security at grant date Fair value per ATSR Right Total ATSR Expense for the period Fair value per RTSR Right Total RTSR Expense for the period Dividend yield Risk free rate Volatility Performance period(years) Commencement of measurement period Test date Remaining performance period (years) Maximum expense amount to be recognised in future period 11 September 2020 1,329,187 3,987,561 $0.081 $0.059 $9,049 $0.057 $27,560 0% 0.47% 80% 3.0 1 July 2020 30 June 2023 2.0 $43,292 21 October 2020 484,228 1,452,683 $0.100 $0.070 $8,109 $0.072 $25,023 0% 0.30% 80% 3.0 1 July 2020 30 June 2023 2.0 $101,198 17 November 2020 1,854,122 5,562,366 $0.095 $0.111 $52,008 $0.107 $150,403 0% 0.175% 80% 3.0 1 July 2020 30 June 2023 2.0 $574,942 The movement in weighted average fair value (“WAFV”) is shown in the table below: Rights outstanding at the start of the year Rights issued during the year Rights vested during the year Rights lapsed during the year Rights forfeited during the year Rights outstanding at the end of the year 30 June 2020 No. - 14,670,146 - - (3,235,844) 11,434,302 WAFV - $0.07 - - $0.06 $0.07 30 June 2020 No. WAFV - - - - - - - - - - - - At 30 June 2021, there were no rights that had vested during the year and were unissued at year end. At 30 June 2020 there were no rights on issue. The weighted average remaining contractual life of performance rights outstanding at the end of the period was 2 years (2020: nil). (c) Expenses arising from share-based payment transactions with employees The cost of equity-settled transactions is recognised, together with the corresponding increase in reserve, over the period in which performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the performance right (‘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 performance rights that, in opinion of the directors of the consolidated entity, 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 performance rights that do not ultimately vest, except for performance rights where vesting is conditional upon a market condition. The dilutive effect, if any, of outstanding performance rights is not reflected as additional share dilution in the computation of earnings per share. Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were $0.304 million (2020: nil). 2021 ANNUAL REPORT | 10837 Parent entity financial information (a) Summary financial information The individual financial statements for the Parent entity show the following aggregate amounts Notes to the consolidated financial statements 30 June 2021 (CONTINUED) Balance sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Shareholders' equity Contributed equity Reserves Accumulated losses Capital and reserves attributable to owners of Panoramic Resources Limited Loss for the year Total comprehensive (loss)/income (b) Guarantees entered into by the parent entity The parent entity has given financial guarantees in respect of: (i) leases of subsidiaries amounting to $6.183 million (2020: $28.107 million); and (ii) the Group had no drawn bank facilities as at 30 June 2021 (2020: nil). 2021 $'000 2020 $'000 23,114 144,651 167,764 1,998 4 2,002 34,785 125,174 159,959 1,556 218 1,774 353,550 22,476 (210,264) 165,763 353,550 13,391 (208,756) 158,185 (1,508) (1,508) 22,320 22,320 No liability was recognised by the parent entity or the consolidated entity in relation to these guarantees, as the fair value of the guarantees was immaterial. There are cross guarantees given by Panoramic Resources Limited and Savannah Nickel Mines Pty Ltd as described in note 32. No deficiencies of assets exist in either of these companies. No liability was recognised by the parent entity or the Group in relation to the cross guarantees. (c) Contingent liabilities of the parent entity The parent entity and Group had contingent liabilities at 30 June 2021 in respect of bank guarantees put in place with a financial institution with a face value of $0.221 million (2020: $0.251 million). 38 Financial risk management The Group’s principal financial instruments comprise receivables, payables, leases, borrowings, cash and derivatives. The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security. The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for the identification and control of financial risks rests with the Audit and Governance Committee under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below, including the setting of limits for hedging cover of commodity prices, foreign currency and interest rate risk, credit allowances and future cash flow forecast projections. 2021 ANNUAL REPORT | 109Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 38 Financial risk management (continued) (a) Foreign currency exchange rate risk The Group has transactional currency exposures. Such exposure arises from sales or purchases in a currency other than the entity’s functional currency. There were no concentrate sales during the financial year as the Group’s Nickel operation remained on care and maintenance. For the year ended 30 June 2020, 100% of the Group’s sales were denominated in United States Dollars ("USD"). Most of the costs of the Group are denominated in Australian Dollars ("AUD"). The Group’s functional currency is Australian Dollars. The Group’s income statement and balance sheet can be affected significantly by movements in the AUD/USD exchange rate. The Group seeks to mitigate the effects of its net foreign currency exposure by using derivative instruments, principally forward foreign currency exchange rate contracts and put and call options. It is the Group’s policy to, where practical, enter into derivative instruments to hedge foreign currency exposures once the likelihood of such exposures are highly probable, and to negotiate the terms of the hedge derivatives to exactly match the terms of the hedged items to maximise hedge effectiveness. The Group will follow its current policy of matching and hedging up to 80% of sales revenues in USD, where practical. As at 30 June 2021, the Group had the following exposure to foreign currency. Trade receivables (USD) Other receivables (CAD) Net exposure Sensitivity 2021 $'000 - 2,769 2,769 2020 $'000 2,417 6,697 9,114 The following sensitivities are based on the foreign currency risk exposures in existence at the balance sheet date. USD: The +/- 10% (2020: +/- 10%) sensitivity is based on reasonably possible changes, over a financial year, using an observed range of actual historical rates, for the AUD to the USD, for the preceding 5 years and management's expectation of future movements. As at 30 June 2021, the Group had no USD currency risk exposures. CAD: The +/- 10% (2020: +/- 10%) sensitivity is based on reasonably possible changes, over a financial year, using an observed range of actual historical rates, for the AUD to the CAD, for the preceding 5 years and management's expectation of future movements. At 30 June 2021, there was no material exposure to foreign currency exchange rate risk. Management believes the balance sheet date risk exposures are a representative estimate of the risk inherent in the financial instruments. (b) Interest rate risk The Group has put in place a Cash Management Policy to ensure that excess cash holdings are invested with a range of institutions that have sufficient financial strength to ensure the security of the investments. The Group policy is to reduce and manage cash flow interest rate risk by ensuring a timely reduction in debt obligations through scheduled debt repayments and non-scheduled debt repayments when excess cash is available. The Group has no material exposure at 30 June 2021. Deposits at call Cash restricted or pledged 2021 2020 Weighted average interest rate % 0.2% 0.6% Weighted average interest rate % 0.7% 1% Balance $'000 24,237 221 24,458 Balance $'000 31,164 251 31,415 2021 ANNUAL REPORT | 110Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 38 Financial risk management (continued) (c) Fair value measurements The fair value of financial assets and financial liabilities must be estimated for recognition and measurement and for disclosure purposes. Disclosure of fair value measurements is by level of the following fair value measurement hierarchy: (a) (b) (c) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable (level 2), and valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable (level 3). The following table presents the fair value measurement hierarchy of the Group's assets and liabilities at 30 June 2021 and 30 June 2020. At 30 June 2021 Assets Financial assets at fair value through profit or loss: - Equity securities Financial assets measured at fair value: Total assets At 30 June 2020 Assets Financial assets at fair value through profit or loss: - Equity securities - Trade receivables Financial assets measured at fair value: Total assets Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 12 12 - - - - Level 1 $'000 Level 2 $'000 Level 3 $'000 767 - 767 - 2,417 2,417 - - - 12 12 Total $'000 767 2,417 3,184 The fair values of trade receivables classified as financial assets at fair value through profit or loss are determined using market observable inputs sourced from the London Metal Exchange pricing index. These instruments are included in level 2. 2021 ANNUAL REPORT | 111Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 38 Financial risk management (continued) (c) Fair value measurements (continued) The fair value of derivative financial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. These techniques include comparing contracted rates to market rates with the same length of maturity to determine the value of forward contracts and use of option pricing models to value put options. These instruments are included in level 2. In the circumstances where a valuation technique for these instruments is based on significant unobservable inputs, such instruments are included in level 3. (d) Commodity Price Risk The Group's exposure to nickel prices was very high as approximately 80-85% of total revenue came from sale of nickel. Nickel was sold on the basis of nickel prices quoted on the London Metal Exchange. Going forward, as the Group expects to resume nickel sale the profit and loss and balance sheet can be affected significantly by movements in nickel prices on the London Metal Exchange. The Group seeks to mitigate the effect of its nickel prices exposure by using derivative instruments, principally forward sales contracts and put and call options. The limits of hedging are set by the Board. For the financial year ending 30 June 2021, the Group was not materially exposed to commodity price risk movements as no concentrate sales were made during the year. The Group had no derivative instrument transactions during the year. (e) Credit risk Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables and derivative instruments. The Group’s maximum exposure to credit risk at reporting date is in relation to each class of recognised financial assets, other than derivatives. The carrying amounts of these assets are as indicated in the balance sheet. In relation to derivative financial instruments, credit risk arises from the potential failure of counterparties to meet their obligations under the contract or arrangement. The Group‘s maximum credit risk exposure in relation to net settled derivatives is the total mark to market gain, should counterparts not honour their obligations. In the case of gross-settled derivatives, the maximum exposure is the notional value. Gross-settled derivatives are held with financial institutions with sound credit rating. As at 30 June 2021, the Group had no derivative financial instruments. At 30 June 2020, the Group had a concentration of credit risk in that it depended on one major customer for a significant volume of revenue. As at 30 June 2021, there were no receivables due from the offtake counterparty. Under the Group's risk management framework, each customer is analysed individually for creditworthiness on an ongoing basis in order to minimise the risk of default. The Group believes that its customers are of sound creditworthiness as evidenced by the compliance with the off-take agreement's payment terms over the life of each project. Refer to notes 7 and 8 for disclosures in relation to expected credit losses on financial assets carried at amortised cost. 2021 ANNUAL REPORT | 112Notes to the consolidated financial statements 30 June 2021 (CONTINUED) 38 Financial risk management (continued) (f) Equity price risk During the financial year ended 30 June 2021, the Group disposed of all share investments held in listed entities. In the prior financial year, the Group was exposed to equity securities price risk. The fair value of these investments was based on quoted market prices. The Group was not exposed to material movement in equity risk exposures during the financial year ended 30 June 2021. (g) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding when necessary and the ability to close-out market positions. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans (when required), leases and committed available credit lines. The Group regularly monitors rolling forecasts of liquidity on the basis of expected cash flows. The Group has put in place a Group Cash Management Policy to ensure that excess cash holdings are invested with a range of institutions that have sufficient financial strength to ensure the security of the investment. This policy is reviewed and approved by the Board on a regular basis. When bank loans are used the Group’s policy is to reduce and manage cash flow interest rate risk by ensuring a timely reduction in debt obligations through scheduled debt repayments and non-scheduled debt repayments when excess cash is available. Maturities of financial liabilities The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Contractual maturities of financial liabilities At 30 June 2021 Trade payables Lease liabilities Total Contractual maturities of financial liabilities At 30 June 2020 Trade payables Lease liabilities Total Less than 1 year Between 1 and 5 years Over 5 years Total contractual cash flows Carrying amount (assets)/ liabilities $'000 $'000 $'000 $'000 $'000 4,388 1,775 6,163 - 3,835 3,835 - 1,711 1,711 4,388 7,321 4,388 6,183 11,709 10,571 Less than 1 year $'000 Between 1 and 5 years $'000 Over 5 years $'000 Total contractual cash flows $'000 Carrying amount (assets)/ liabilities $'000 3,396 1,328 4,724 - 4,885 4,885 - 2,312 2,312 3,396 8,525 3,396 7,251 11,921 10,647 2021 ANNUAL REPORT | 113Additional ASX Information As at 1 September 2021 Stock Exchange Listing Panoramic Resources Limited’s shares are listed on the Australian Securities Exchange Limited (ASX). The Company’s ASX code is PAN. Listing of Top 20 Shareholders As at 1 September 2021 Number of Shares Held Percentage of Shares Held % BNP Paribas Nominees Pty Ltd Six Sis Ltd 84,831,633 1. 2. 3. 4. 5. 6. 7. 8. 9. Name of Registered Shareholder Western Areas Limited HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Pty Limited Citicorp Nominees Pty Limited Zeta Resources Limited UBS Nominees Pty Ltd National Nominees Limited Sandhurst Trustees Ltd 10. BNP Paribas Nominees Pty Ltd ACF Clearstream 11. Zero Nominees Pty Ltd 12. 13. Cs Third Nominees Pty Limited BNP Paribas Nominees Pty Ltd 14. Sacavic Pty Ltd 15. BNP Paribas Noms Pty Ltd 16. 17. CS Fourth Nominees Pty Limited Neweconomy Com Au Nominees Pty Limited <900 Account> 18. Colenew Pty Limited 19. HSBC Custody Nominees (Australia) Limited 20. Mr Kenneth Joseph Hall TOTAL 408,131,660 248,941,310 231,655,237 92,417,142 77,982,292 71,549,721 66,462,496 38,154,241 32,798,744 23,067,522 21,579,435 14,295,347 11,631,625 11,241,885 8,874,833 7,353,376 7,256,407 6,071,630 5,500,000 1,469,796,536 19.90 12.14 11.30 4.51 4.14 3.80 3.49 3.24 1.86 1.60 1.12 1.05 0.70 0.57 0.55 0.43 0.36 0.35 0.30 0.27 71.67 As at 1 September 2021, there were 7,385 holders of 2,050,914,004 fully paid ordinary shares of the Company (ASX:PAN). As at 1 September 2021, the number of parcels of shares with a value of less than $500 was 687. 2021 ANNUAL REPORT | 114 Additional Shareholder Information As at 1 September 2021 Unquoted Securities The number of unquoted securities on issue as at 1 September 2021 is as follows: Unquoted Security Options exercisable at $0.16 on or before 30 June 2023 Performance Rights Number on Issue 28,520,525 10,270,269 Distribution schedule and number of holders of equity securities As at 1 September 2021 Issued Securities 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Total Fully Paid Ordinary Shares (ASX:PAN) Options exercisable at $0.16 on or before 30 June 2023 Performance Rights 251 1,511 1,229 3,311 1,083 7,385 - - - - - - - - 1 3 1 3 Holder Details of Unquoted Securities Unquoted security holders that hold more than 20% of a given class of unquoted securities as at 1 September 2021 other than the performance rights which were issued under an employee incentive scheme are as follows: Unquoted Security Holder Number Held Options exercisable at $0.16 on or before 30 June 2023 Zeta Resources Limited 28,520,525 Substantial Shareholders Substantial shareholders in Panoramic Resources Limited and the number of equity securities over which the substantial shareholder has a relevant interest as disclosed in substantial holding notices provided to the Company are listed below: Name of Substantial Shareholder Total Number of Voting Shares in which the Substantial Shareholder and its Associates Hold a Relevant Interest Percentage of Total Number of Voting Shares (%) Date of Notice Western Areas Limited 299,519,797 19.9% 2 June 2020 Zeta Resources Limited 340,377,448 16.60% 23 November 2020 Voting Rights All fully paid ordinary shares carry one vote per ordinary share without restriction. Unquoted options and performance rights have no voting rights. Voting rights will be attached to the issued fully paid ordinary shares when options and/or performance rights have been exercised/vested. Corporate Governance The Board of Panoramic Resources Limited is committed to achieving and demonstrating the highest standards of Corporate Governance. The Board is responsible to its Shareholders for the performance of the Company and seeks to communicate extensively with Shareholders. The Board believes that sound Corporate Governance practices will assist in the creation of Shareholder wealth and provide accountability. 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://panoramicresources.com/corporate-governance/. 2021 ANNUAL REPORT | 115Mineral Resources and Ore Reserves Nickel-Copper-Cobalt Mineral Resources as at 30 June 2021 Resource Metal Resource Date Measured Indicated Inferred Total Tonnes (%) Tonnes (%) Tonnes (%) Tonnes (%) Metal Tonnes Savannah Above 900F 0 Savannah Below 900F Savannah North N Nickel Copper Cobalt Nickel Copper Cobalt Nickel Copper Cobalt Nickel Copper Cobalt Apr-20 1,010,000 Jun-15 - Apr-20 1,885,000 565,000 780,000 1.44 0.80 0.07 - - - 1.48 6,117,000 0.65 0.11 - 125,000 1.77 1.44 0.08 1.64 0.75 0.09 1.60 2,972,000 0.71 0.11 1,575,000 905,000 10,974,000 - - - 1.72 1.49 0.53 0.09 24,500 16,200 1,200 14,900 6,900 900 170,400 71,100 11,600 1.56 1.03 0.07 1.65 0.76 0.10 1.55 0.65 0.11 1.56 209,800 0.70 94,200 13,700 0.10 Total Savannah Project *Mineral Resource estimates have been rounded to the nearest 1,000t, 0.01% Metal grade and 100t of metal 13,454,000 Qualifying Statements and Notes: In the period since the Mineral Resource and Ore Reserve was reported in 2020 Annual Report, operations at Savannah were temporarily suspended and no new updates to either the Mineral Resource or Ore Reserve for the Project were completed in this time. Therefore, both the Mineral Resource and Ore Reserve estimates reported herein the 2021 Annual Report remain unchanged from that reported in 2020. Figures have been rounded and therefore may not add up exactly to the reported totals. All Mineral Resources are inclusive of Ore Reserves. Mineral Resource cut-off grade is 0.50% Ni. Cross references to previous Company ASX announcements: Refer to ASX announcement of 22July 2021 titled “Savannah 2021 Mineral Resource & Reserve Statement” Savannah (above 900F) – refer to ASX announcement of 30 September 2019, titled "Mineral Resources and Ore Reserves at 30 June 2019” Savannah (below 900F) – refer to ASX announcement of 30 September 2015, titled "Mineral Resources and Ore Reserves at 30 June 2015” Savannah North – refer to ASX announcement of 24 August 2016, titled “Major Resource Upgrade for Savannah North” No New Information or Data The Mineral Resource estimate tabled above for Savannah (below 900F), have been previously reported and the relevant market announcements cross referenced. Except where stated otherwise, the Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcements and, in the case of estimate of Mineral Resources, that all material assumptions and technical parameters underpinning the estimate in the relevant market announcement continue to apply and have not materially changed. Ni Equivalent References References to Ni equivalent contained metal in Mineral Resources and Ore Reserves is based on assumed metal prices as noted in footnotes and calculated using the formula Ni Eq kt = [(Ni grade * Ni price + Cu kt * Cu price + Co kt * Co price) * Total Mineral Resource Tonnes] / Ni price. Ni equivalent grade % in Mineral Resources are calculated on the formula Ni Eq % = Ni Eq kt / Total Mineral Resource tonnes. It is the Company’s opinion that all elements included in the metal equivalent calculation have a reasonable potential of being recovered and sold. Metallurgical recoveries for all metals are assumed to be equal. 2021 ANNUAL REPORT | 116 Mineral Resources and Ore Reserves Nickel-Copper-Cobalt Ore Reserves as at 30 June 2021 Ore Reserve Metal Proved Probable Total Tonnes (%) Tonnes (%) Tonnes (%) Metal Tonnes Savannah Nickel 1,233,000 0.95 - Copper Cobalt 0.66 0.05 - - - 1,233,000 0.95 11,700 0.66 0.05 8,100 600 Savannah North Nickel 1,795,000 1.21 5,246,000 1.28 7,041,000 1.28 90,100 Copper Cobalt 0.54 0.09 0.57 0.09 0.57 40,400 0.09 6,400 Total Nickel 3,028,000 1.10 5,246,000 1.28 8,274,000 1.23 101,800 Copper Cobalt 0.59 0.07 0.57 0.09 0.59 48,500 0.08 7,000 *Calculations have been rounded to the nearest 1,000t of ore, 0.01% Metal grade and 100t of metal Qualifying Statements and Notes: Calculations have been rounded to the nearest 1,000t of ore, 0.01% Metal grade and 100t of metal .. . .. Savannah and Savannah North Ore Reserve average cut-off (NSR) of $135/t. Key Assumptions Cut-Off Grade The Mineral Resource block model was updated with a block value field (Net Smelter Return (NSR) $/t) after consideration of the contained metal, payability, concentrate transport cost, and WA state government and traditional owner royalties. Cut-off grades were calculated as a dollar per ore tonne, based on the forecast operating costs in the financial model. Economic analysis is carried out for each planned stope and only stopes with a positive return are included in the Ore Reserve. Cross references to previous Company ASX announcements: Refer to ASX announcement of 22July 2021 entitled “Savannah 2021 Mineral Resource & Reserve Statement” Refer to ASX announcement of 31 July 2020 entitled “Updated Savannah Ore Reserve and Mine Plan” Competent Person Statement The information that relates to Ore Reserves for Savannah and Savannah North is based on information compiled by or reviewed by Shane McLeay. Mr McLeay is a fellow of the Australasian Institute of Mining and Metallurgy (AusIMM) and is a Principal Mining Engineer and full-time employee of Entech Consulting based in Perth, Western Australia. The aforementioned has sufficient experience that is relevant to the style of mineralisation and type of target/deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr McLeay consents to the inclusion in the release of the matters based on the information in the form and context in which it appears. 2021 ANNUAL REPORT | 117SCHEDULE OF MINING TENEMENTS As at 30 June 2021 Project Tenement Status Current Area Equity Tenement Manager Panoramic Commitment Current Registered Holders East Kimberley - 100% East Kimberley - 100% East Kimberley - 100% East Kimberley - Keller Creek JV E80/4880 Live 21 BL 100% PAN 100% of Commit, Rents & Rates Pindan Exploration Company Pty Ltd E80/5131 Live 5 BL 100% PAN 100% of Commit, Rents & Rates Pindan Exploration Company Pty Ltd E80/5238 Live 14 BL 100% PAN 100% of Commit, Rents & Rates Pindan Exploration Company Pty Ltd E80/4834 Live 9 BL 80% - Ora Gold 20% free carried interest Savannah L80/64 Live 311 HA 100% Savannah M80/179 Live 241.85 HA 100% Savannah M80/180 Live 960.3 HA 100% Savannah M80/181 Live 960 HA 100% Savannah M80/182 Live 589.4 HA 100% Savannah M80/183 Live 967.05 HA 100% Savannah - Copernicus Savannah - Copernicus Savannah - Copernicus L80/52 Live 140.3129 HA 100% PAN L80/86 Live 0.04 HA 100% PAN M80/540 Live 128.85 HA 100% PAN PAN PAN PAN PAN PAN PAN PAN 100% of Commit, Rents & Rates Pindan Exploration Company Pty Ltd (80%) Ora Gold Limited (20%) 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd 100% of Commit, Rents & Rates Savannah Nickel Mines Pty Ltd Laverton - Focus M38/101 Live 583.15 HA 100% Ni-Cu-PGM rights only Focus Nil Focus Minerals (Laverton) Pty Limited Laverton - Focus M38/159 Live 597.15 HA 100% Ni-Cu-PGM rights only Focus Nil Focus Minerals (Laverton) Pty Limited Laverton - Focus M38/342 Live 316.25 HA 100% Ni-Cu-PGM rights only Focus Nil Focus Minerals (Laverton) Pty Limited Laverton - Focus M38/363 Live 5.245 HA 100% Ni-Cu-PGM rights only Focus Nil Focus Minerals (Laverton) Pty Limited Laverton - Focus M38/364 Live 18.375 HA 100% Ni-Cu-PGM rights only Focus Nil Focus Minerals (Laverton) Pty Limited Laverton - Focus M38/37 Live 650 HA 100% Ni-Cu-PGM rights only Focus Nil Focus Minerals (Laverton) Pty Limited Laverton - Focus M38/38 Live 280.05 HA Laverton - Focus M38/49 Live 945.05 HA Laverton - Focus M38/535 Live 464.55 HA Laverton - Focus M38/693 Live 48.2176 HA 100% Ni-Cu-PGM rights only 100% Ni-Cu-PGM rights only 100% Ni-Cu-PGM rights only 100% Ni-Cu-PGM rights only Focus Focus Nil Nil Focus Nil Focus Nil Focus Minerals (Laverton) Pty Limited Focus Minerals (Laverton) Pty Limited Focus Minerals (Laverton) Pty Limited Focus Minerals (Laverton) Pty Limited 2021 ANNUAL REPORT | 118Corporate Directory BOARD OF DIRECTORS REGISTERED OFFICE Nicholas Cernotta Non-Executive Chair of the Board Victor Rajasooriar Managing Director & CEO Peter Sullivan Non-Executive Director Rebecca Hayward Non-Executive Director Gillian Swaby Non-Executive Director MANAGEMENT Grant Dyker Chief Financial Officer Susan Park Company Secretary Level 9, 553 Hay Street Perth, Western Australia, 6000 T: +61 8 6374 1700 F: +61 8 9421 1008 W: www.panoramicresources.com AUSTRALIAN BUSINESS NUMBER 47 095 792 288 AUDITOR Ernst & Young Ernst & Young Building 11 Mounts Bay Road Perth, Western Australia, 6000 BANKER National Australia Bank 100 St Georges Terrace Perth, Western Australia, 6000 SHARE REGISTRY Computershare Investor Services 172 St Georges Terrace Perth, Western Australia, 6000 TAX ADVISOR Ernst & Young Ernst & Young Building 11 Mounts Bay Road Perth, Western Australia, 6000 2021 ANNUAL REPORT | 119Panoramic Perth Office: Telephone: +61 8 6374 1700 Savannah Project Office: Panoramic Resources Limited Level 9, 553 Hay Street Perth WA 6000 Email: info@panres.com Savannah Nickel Mines Pty Ltd panoramicresources.com PMB 19 ABN: 47 095 792 288 Kununurra WA 6743 Telephone: +61 8 6103 2399

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