Parkway Corporate Limited
Annual Report 2015

Plain-text annual report

POTASH WEST NL A.C.N. 147 346 334 Annual Report For the year ended 30 June 2015 For personal use only Potash West NL A.C.N. 147 346 334 Contents to Financial Report Corporate Directory Chairman’s Letter Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Tenement Register 2 Page No. 3 4 5 35 37 57 58 59 60 61 90 91 93 96 For personal use only Potash West NL A.C.N. 147 346 334 Corporate directory Directors: Adrian Griffin Patrick McManus Chew Wai Chuen (Appointed 26 November 2014) Natalia Streltsova (Appointed 30 June 2015) George Sakalidis (Resigned 26 November 2014) Gary Johnson (Resigned 30 June 2015) Company Secretary: Amanda Wilton-Heald (Appointed 7 November 2014) Elizabeth Hunt (Resigned 7 November 2014) Auditor: Ernst & Young Ernst & Young Building 11 Mounts Bay Road Perth WA 6000 AUSTRALIA Telephone (+61 8) 9429 2222 Facsimile (+61 8) 9429 2436 Share Registry: Advanced Share Registry 160 Stirling Highway Nedlands WA 6009 AUSTRALIA Telephone (+61 8) 9389 8033 Facsimile (+61 8) 9262 3723 Registered and Principal Office Suite 3 23 Belgravia Street Belmont WA 6104 AUSTRALIA Telephone (+61 8) 9479 5386 Facsimile (+61 8) 9475 0847 Website www.potashwest.com.au Email info@potashwest.com.au Stock Exchange Listing Potash West NL shares are listed on the Australian Securities Exchange (ASX code: PWN), OTC Pink (OTC Pink code: PWNNY) and Frankfurt Stock Exchange (Ticker: A1JH27). Solicitors Price Sierakowski Level 24, St Martin’s Tower Perth WA 6000 AUSTRALIA Telephone (+61 8) 6211 5000 Facsimile (+61 8) 6211 5055 Bankers National Australia Bank Ground Floor 100 St Georges Terrace Perth WA 6000 AUSTRALIA Telephone: (+61 8) 9441 9313 3 For personal use only Potash West NL A.C.N. 147 346 334 CHAIRMAN’S LETTER Dear Shareholder As you will be aware, Potash West controls one of the largest known greensand deposits in the world, the Dandaragan Trough (Western Australia). Locked within those greensands is abundant wealth in the form of potassium and phosphorus, two vital components of fertiliser. It is these vast quantities of very cheap feed for fertiliser production that set Potash West apart from its peers, particularly as it owns the intellectual property that is key to releasing much of that wealth. During 2015, Potash West focused much more on the Dandaragan Trough's phosphate resources, which are broadly coincident with the potash-bearing greensands. It is the close geological relationship between the phosphate and glauconite (the potassium-bearing component of the greensands) that provides Potash West with its unique opportunity – that of developing a low-cost, low-risk phosphate operation as an entry point to a higher-capital potash operation. It's a strategy that reduces overall risk for the project and advances the company's aim of producing potash from the Dandaragan Trough. We see the project as one of national importance, in that it may transform Australia from being completely dependent on potash imports to actually exporting potash to Asian nations with rapidly expanding populations. With this in mind, Potash West has doubled its phosphate resource and completed a scoping study on the production of super-phosphate from Dinner Hill, located in the northern extremities of the Dandaragan Trough. Moreover, Potash West plans to capitalise on its low-cost entry strategy with the acquisition of 55% of East Exploration Pty Ltd, owner of the South Harz project, a conventional potash (salt) mine in Germany's Thuringia province. Historically, the South Harz project has been the subject of extensive potash exploration, and this has led to the development of a robust exploration target. The project's value will be enhanced by an IPO, designed to provide Potash West with a controlling interest and upgrade the exploration target to a JORC-compliant resource. The proprietary KMax technology Potash West developed to recover potash from glauconite has evolved extensively over time, to the point that certain aspects of the process have been successfully applied to recovering lithium from mica. Potash West’s role in this groundbreaking development earned it a 21% interest in the company controlling the lithium extraction technology, now known as LMax. Rapid expansion of world for portable power applications (batteries), has created an unprecedented opportunity in that sector. lithium markets, primarily No summary of the activities of a commodity aspirant would be complete without some comment on markets. The potash market in particular has seen great changes in recent times. Historically, the industry was dominated by two marketing groups, one in Canada and the other in eastern Europe; collectively, they controlled more than 80% of global sales. The break-up of the eastern European group created turmoil in the industry, destabilising markets and reducing prices. Fortunately, the market stabilised during 2015, albeit with weaker prices. Similarly, the phosphate market is characterised by structural weaknesses within much of its resource/supply base, which is dominated by a handful of north African nations in which political intervention remains a risk. Current market conditions continue to subdue investment in exploration and development companies worldwide. Against that backdrop, Potash West has sought to diversify its fertilizer-based portfolio and in the process create new opportunities for the company. I would like to end with this observation: with the global population rapidly increasing and areas of arable land decreasing, humans cannot survive without increased agricultural productivity – and the simplest way to achieve it is the optimal application of fertiliser. Potash West is poised to take advantage of this scenario and provide economic fertiliser products to meet both Australian and Asian demand. Finally, thanks to all Potash West shareholders for their support over the last year, and to staff for helping the company achieve its objectives in such a difficult economic climate. Adrian Griffin Chairman 4 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report On 4 May 2015, Potash West NL (“Potash West” or “the Company”) has settled the final payment and increased the Company’s ownership of East Exploration Pty Ltd (“East Exploration” or the “controlled entity”) to 55%. The directors present their report on Potash West NL, and its controlled entity (the “consolidated entity”) for the year ended 30 June 2015. Directors The names and details of the Company’s directors in office during the financial year and until the date of this report are set out below, directors were in office for the entire year unless otherwise stated. Adrian Griffin was appointed as Non-executive Chairman. Patrick McManus was appointed as Managing Director. Chew Wai Chuen was appointed as Non-executive Director, effective from 26 November 2014. Natalia Streltsova was appointed as Non-executive Director, effective from 30 June 2015. George Sakalidis was appointed as Non-executive Director and resigned effective from 26 November 2014. Gary Johnson was appointed as Non-executive Director and resigned effective from 30 June 2015. Names, qualifications, experience and special responsibilities Adrian Griffin Non-Executive Chairman Adrian Griffin, an Australian-trained mining professional, has had exposure to metal mining and processing worldwide during a career spanning more than three decades. A pioneer of the lateritic nickel processing industry, he has helped develop extraction technologies for a range of minerals over the years. He is a former Chief Executive Officer of Dwyka Diamonds Limited, an AIM- and ASX-listed diamond producer, was a founding director and executive of Washington Resources Limited and also a founding director of Empire Resources Limited, Ferrum Crescent Limited and Reedy Lagoon Corporation Limited. Moreover, Mr Griffin was a founding director of ASX-listed Northern Minerals Limited, of which company he is currently a non-executive director. He is a non-executive director of Reedy Lagoon and also managing director of ASX-listed Lithium Australia NL a global developer of dispruptive lithium-from-mica opportunities.. Other listed company directorships during the last 3 years: Northern Minerals Ltd (Director June 2006 – present), Lithium Australia NL (Director February 2011 – Present) and Reedy Lagoon Corporation Limited (Director June 2014 – Present) Adrian Griffin is also a member of the Audit Committee, Remuneration and Nomination Committee. Patrick McManus Managing Director Patrick McManus has a degree in mineral processing from Leeds University and an MBA from Curtin University. A mining professional for more than 30 years, his work has taken him to many sites within Australia and overseas, including Eneabba and the Murray Basin in Australia, and Madagascar, Indonesia and the United States. During that time, Patrick has worked in operational, technical and corporate roles for RioTinto, RGC Limited and Bemax Resources Limited. He was a founding director and, from January 2007 to March 2010, managing director of ASX-listed Corvette Resources Limited. Other listed company directorships during the last 3 years: Tungsten Mining NL (Director December 2012 – January 2015) 5 For personal use onlyPotash West NL A.C.N. 147 346 334 Directors’ Report (continued) Chew Wai Chuen Non-Executive Director Mr Chew is a financial advisor with more than 15 years of industry experience, specialising in the provision of corporate and wealth management for ultra-high net worth individuals. With experience in South East Asia capital market and extensive networks of clients based in Singapore and Malaysia, Mr Chew will provide important contributions to the Board. He has successfully worked with a number of financial institutions in Singapore such as, Standard Chartered Bank, OCBC Bank and Credit Suisse Singapore. Mr Chew is now a Managing Partner with a financial advisory firm, providing personal investing planning and wealth management for high net worth individuals and has a good track record of investment into junior mining companies in Australia and South East Asia. Other listed company directorships during the last 3 years: Tungsten Mining NL (Director April 2014 – present) Natalia Streltsova Non-Executive Director Dr Natalia Streltsova is a senior executive with over 25 years’ experience in the minerals industry of which 15 years, prior to forming her own consulting business in 2014, was spent in various leadership and technical roles with major mining houses including Vale SA (formerly CVRD), BHP Billiton and WMC Resources Limited. In all of these roles, there was considerable interaction with operations to provide support as well as to identify and implement innovative projects leading to increased production and cost reduction. Dr Streltsova has a strong background in mineral processing and metallurgy with broad international experience in project, technical and business development capacities. Dr Streltsova has previously been a director on a number of Vale subsidiary boards as well as on several collaborative industry boards. She was also a Non-Executive Director on ASX listed CopperMoly Limited. Other listed company directorships during the last 3 years: CopperMoly Limited (Director September 2013 –March 2014) As at the date of this report, Natalia Streltsova is also a member of the Audit Committee and Chair of the Remuneration and Nomination Committee. Company secretary as at year end Amanda Wilton-Heald (appointed 7 November 2014) Ms Wilton-Heald is a Chartered Accountant and has more than 17 years’ experience within Australia and in the United Kingdom. That experience has included the auditing of the company financial statements of both ASX- and LSE-listed companies, an accounting role with an AIM-listed company in the UK specialising in the provision of collaboration technology, and involvement in the ASX listings of junior exploration companies, as well as the provision of corporate advisory and company secretarial services. Elizabeth Hunt (resigned 7 November 2014) 6 For personal use onlyPotash West NL A.C.N. 147 346 334 Directors’ Report (continued) Interests in the shares and options of the company and related bodies corporate As at the date of this report, the interests of the directors (including related parties) in the shares and options of the company were: Adrian Griffin Patrick McManus Chew Wai Chuen Natalia Streltsova Dividends Number of ordinary shares Number of options over ordinary shares 6,095,933 3,878,407 122,639 - 200,000 750,000 - - No dividend has been paid or declared since the start of the financial year and the directors do not recommend the payment of a dividend in respect of the financial year. Principal activities The principal activity of the entity during the financial year was the exploration for minerals, namely potash. Operating and financial review Operating results for the year The loss after income tax benefit for the year ended 30 June 2015 was $2,871,003 (2014: $1,822,505). Financial Performance Company income Loss before tax Profit/(loss) after income tax benefit Earning per share (cents) 2015 $ 62,157 (2,871,003) (2,871,003) (1.33) 2014 $ 605,096 (1,822,505) (1,822,505) (1.72) % Increase/ (Decrease) -89.73% 57.53% 57.53% -22.67% The financial position of the Company is presented in the attached Statement of Financial Position. OPERATING AND FINANCIAL REVIEW Introduction Australia Potash West NL (“Potash West” or “the Company”) has continued to advance the Dinner Hill Potash and Phosphate Deposit, located some 175km north of Perth in Western Australia, Figure 1. Dinner Hill forms part of the larger Dandaragan Trough landholding having an area of over 2,630km2. Sedimentary rocks within the trough contain glauconite, a potash rich mica, and phosphate nodules. The objective is to produce potash and phosphate fertilisers and a range of valuable by-products from the glauconite and phosphate present within the sediments of the Dandaragan Trough. A scoping study undertaken in the third quarter demonstrated significantly improved economics through integration of potash and phosphate plants. The results of this study were released to the market on 13 January 2015. 7 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) In the fourth quarter, results from previous work and drilling completed in March 2015 were used to update the Potash and Phosphate Mineral Resources for the Dinner Hill Project and released to the market on 03 June 2015. Germany In July 2014 the Company announced that it had entered into an agreement to earn a 55% interest in a conventional potash project in the South Harz region of Germany. The two licence applications having a combined area of 450km2 were granted in January 2015. A review of historical drill hole data resulted in the estimation of a very large Exploration Target, the details of which were released to the market on 04 March 2015. Dandaragan Trough Project Scoping Study – Integration of Potash and Phosphate Projects The new study confirms significant improvements in economics through integrating the Dinner Hill potash and phosphate plants. The key assumptions and outcomes are: • Processing 4.2 Mtpa to produce phosphate and potash fertilisers and Alum • Estimated average total annual cash costs of A$40/tonne of ROM ore • Estimated average total revenue of A$91/tonne of ROM ore • • NPV12% of A$652 million • Staged development allows for initial production to assist with expansion Capex IRR of 30% Previous high level studies evaluated the production of potash, alum and phosphates (ASX Announcement 10 January 2013) and the production of single superphosphate (SSP) (ASX Announcement 17 September 2013) as standalone operations. The study assumes the production of SSP in a standalone plant for the first 5 years of operation. Subsequently, the glauconite concentrate and phosphate rock will be processed in a joint facility (Integrated K-Max plant) to produce fertilisers, potassium sulfate, potassium magnesium sulfate and merchant grade phosphoric acid, as well as iron oxide and, aluminium sulfate for the remaining life of mine. The Scoping Study (+/- 35% accuracy) further demonstrates the robust nature of Potash West's Dandaragan project. The Scoping Study referred to in this report is based on low-level technical and economic assessments, and is insufficient to support estimation of Ore Reserves, to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised. Unless otherwise stated, all cashflows are in Australian dollars and are not subject to an inflation/escalation factor. The Company has concluded that it has reasonable basis for providing the forward looking statements included in this announcement. The detailed reasons for that conclusion are outlined throughout this announcement and in particular in the attached “Forward Looking and Cautionary Statements”. The synergy of combining both projects was recognised but not pursued, in 2013, as stand-alone projects were at the forefront of considerations at that time. However, as the phosphate resource lies directly above the K-Max resource, the concept of a staged production profile was clearly identified as being cost effective and viable. The Scoping Study is based upon the JORC compliant Mineral Resource quoted for the Dinner Hill phosphate deposit which includes an Indicated Resource of 120Mt at 2.8% P2O5, 3.1% K2O and 8.2% CaO (see ASX announcement 20 March 2014). 8 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) The study involves the production of SSP at a site near the Dinner Hill deposit for the first 5 years of operation. The ore will be processed through a beneficiation and acidulation plant, Figure 2. The pelletised product will be transported by road to Moora and dispatched by rail to Kwinana and / or Geraldton for local and international distribution. The study assumed using sulfuric acid sourced internationally and delivered to site from Kwinana, Western Australia. The beneficiation plant may produce a glauconite concentrate (the source of potash), which will be stockpiled for later treatment. During the fourth and fifth years of operation the Integrated K-Max plant (which will process the phosphate and potassium containing minerals), Figure 3, will be constructed and commissioned. The mining and beneficiation process will be unchanged. The integrated plant will receive glauconite containing magnetic concentrate and phosphate rock from the beneficiation plant. The Integrated K-Max plant will produce potassium sulfate (SOP), potassium magnesium sulfate (KMS), iron oxide and aluminium sulfate. A sulfur burning acid plant will be installed to generate the acid requirements for the plant. The installation of the Integrated K-Max plant allows for the production of phosphoric acid from the phosphate concentrate and phosphate contained in the magnetic concentrate. The production of phosphoric acid, as opposed to SSP, is viable due to the on-site acid plant, cheaper transportation costs and larger phosphoric acid market. 9 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 1: Dandaragan Trough Location Plan 10 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 2: Phosphate process flowsheet. Figure 3: Integrated K-Max process flowsheet 11 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Annual Mineral Resource Statement as at 30 June 2015 The June 2015 resource update uses drilling carried out in 2014 and 2015 comprising an additional 90 aircore drill holes for 2732m. The resource now covers an area of some 17 km2, Figure 4. Higher grade phosphate mineralisation is continuous to the north within the area of the new drilling significantly upgrading the inventory in both tonnes and grade, compared with the phosphate resource estimate published in 2014, (ASX release 20 March 2014). These results will form the basis of pit design and mine scheduling studies carried out as part of the planned feasibility study into phosphate production at Dinner Hill, set to begin in the third quarter of 2015. The Dinner Hill Deposit has, above a cut-off grade of 1.45% P2O5, an Indicated Mineral Resource of 250Mt at 2.9% P2O5. Within this phosphate resource there is an Indicated Mineral Resource of 155Mt at 4.1% K2O and an Inferred Mineral Resource of 20Mt at 2% K2O. An additional Indicated Mineral Resource of 18Mt at 3.8% K2O occurs marginal to the phosphate resource. Dinner Hill Deposit Resource Summary1 Resource Phosphate Potash Potash resources included within the phosphate resource area Potash phosphate resource area resource outside Total Potash Resources Category Indicated Indicated Inferred Totals Indicated Indicated Inferred Totals the Tonnes (Mt) 250 P2O5 (%) 2.9 155 20 175 18 175 20 195 K2O (%) 4.1 2 3.8 3.8 4.0 2 3.8 1: Totals may differ from sum of individual items due to rounding Comparison with Previously Estimated Mineral Resources The previously reported phosphate Mineral Resource for Dinner Hill was estimated to be 120Mt at 2.79% P2O5 above a lower cut-off grade of 2.15% P2O5. The phosphate resource herein reported is 250Mt at 2.9% P2O5 above a lower cut-off grade of 1.45% P2O5. The tonnage increase of 108% is attributed to new mining studies, which indicate that lower grades can be processed, and to extensional drilling in the north of the deposit. The current potash Mineral Resource of 195Mt at 3.8% K2O compares with the previously reported 244Mt at 3.0% K2O. The reduction in tonnage reflects more recent metallurgical testwork suggesting that much of the highly oxidised mineralisation in the Poison Hill Greensand would have reduced recovery and should be excluded from the estimate. The target Molecap Greensand previously estimated at 122Mt at 4.6% K2O is now estimated to contain 175Mt at 4.2% K2O, a tonnage increase of 43% due to extensional drilling in the north of the deposit. The grade decreased by 9% due to the lower K2O encountered in the north of the area. The project tenements cover two virtually horizontal greensand formations within the Cretaceous Coolyena Group: the Poison Hill Greensand and the Molecap Greensand. Over most of the area of the deposit they are separated by the Gingin Chalk and in places are underlain by a thin pebble horizon containing phosphatic nodules. An average thickness of about 11m of surficial, mostly sandy, cover overlies the greensand units. The greensands and the chalk contain significant amounts of phosphate as grains and nodules of fluorapatite. They also contain significant potash within the mineral glauconite. Figure 5 is a section through the deposit showing the geology and summary intersections through potash and phosphate mineralisation 12 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) The cut-off grades used for both potash and phosphate are based on ongoing metallurgical and economic studies and are set at levels that ensure continuity of mineralisation throughout the deposit as shown in Figures 6 and 7. The phosphate resource is shown at a range of cut-off grades in Figure 8 and the potash resource is similarly shown in Figure 9. This indicated resource will be used to develop an optimised mining plan which will be the basis for a new scoping study model for mining Dinner Hill. Two development options will be considered: 1. Mining the phosphate rich parts of the deposit, to produce single superphosphate, for the life of the indicated resource. 2. Using the phosphate mining project as a “springboard” to generate cashflows, some of which would be used to complete the development work for the K-Max process. In this model the K-Max operation will commence ~ 5 years after the phosphate project. 13 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 4: Dinner Hill resource plan with drill hole locations 14 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 5: Dinner Hill cross section 6,668,000 Figure 6: Dinner Hill cross section 6,372,000 with potash ore blocks 15 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 7: Dinner Hill cross section 6,639,600 with phosphate ore blocks Figure 8: Grade tonnage curve for the Dinner Hill potash resource above a range of cut-off grades. 16 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 9: Grade tonnage curve for the Dinner Hill phosphate resource above a range of cut-off grades. South Harz Project Germany In July 2014, the Company announced that it had entered into an agreement to earn a 55% interest in a conventional potash project in the South Harz region of Germany. Potash West is earning 55% of East Exploration (EE) which has been granted two exploration licences, Küllstedt and Gräfentonna, covering 450km2 in the South Harz Potash field in central Germany, Figure 10. Potash mining commenced in the South Harz potash district in 1896 and potash is still being produced. Over 500 million tonnes of potash ore was extracted from the South Harz region in the 22 year period between 1970 and 1992, producing over 100 million tonnes of potash fertiliser. 17 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 10: South Harz project location EE has commissioned ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau GmbH (ERCOSPLAN) to review and summarise the results of all available geological data relating to the Küllstedt licence and to estimate an Exploration Target for the area. ERCOSPLAN has a long association with the German potash industry. In its former role as the Central Engineering Office for the East German potash mining industry, ERCOSPLAN was closely associated with exploration drilling in the South Harz region in the 1970s and 80s and has access to most of the summary exploration data. The Exploration Target for the Küllstedt licence area (released to the ASX on 04 March 2015) is tabled below. 18 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Tonnage (MMT) Küllstedt Exploration Target Grade Range % K2O Grade Range %KCl Potash (K2O) Tonnage (MMT) 1 2 3 4 4,055 – 5,141 7.2 – 25 11.8 - 41 292 – 1,285 Notes to Exploration Target 1 - The volume of the potash seam was estimated from the geological model which has been constructed using historical drillhole data. The tonnage was derived from the style of mineralisation and its characteristic density which can vary between 1.83 t/m3 and 2.32 t/m3. This amounts to a tonnage range of between 4,055 million metric tonnes and 5,141 million metric tonnes of mineralized rock. 2 - The grade range was estimated from assayed drill intersections of the potash seam which range from 7.2% to 25% K2O 3 - Conversion of assay K2O to KCl product multiply by 1.6393 4 - The tonnages of K2O were obtained by multiplying the tonnage of mineralized material with the corresponding K2O grade of the potash seam, which range from 7.2% to 25%. Accordingly, the minimum K2O tonnage is 292 million metric tonnes and the maximum K2O tonnage is 1,285 million metric tonnes. Between 1900 and 1978, 34 drill holes and three shafts were sunk from the surface within the Küllstedt Exploration Licence Area, Figure 11, of which 28 drill holes were drilled for potash exploration. An additional six drillholes were drilled, among others, for oil and gas exploration and did not necessarily fully evaluate potash horizons. ERCOSPLAN does not, at this time, have access to the detailed exploration database for many of these holes. ERCOSPLAN is confident that a more complete database will eventually be recovered from the archives of federal and local authorities. Given their long history with potash mining in the South Harz region, ERCOSPLAN is of the understanding that the historical exploration was carried out according to long established procedures that were current best practice in the German potash industry. Drill hole locations are shown in Figure 11. 19 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Figure 11: Küllstedt drill hole plan showing hole location and year of drilling start 20 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Technology Potash West owns the intellectual property regarding the K-Max process which unlocks the valuable elements that exist within the vast glauconite deposits of the Dandaragan Trough. We are applying for patents for this technology. There has been interest from other companies looking at similar deposits and the Company is investigating opportunities to licence the technology. In addition the Company has a significant (21% at the time of writing) shareholding in an exciting technology, dubbed L-Max, which shows potential as a method to extract lithium from lithium rich micas. The company that owns the technology, Lepidico Ltd, has a plan to licence the technology to development companies and the first licences have been granted, to Lithium Australia NL. Lithium is a commodity which is facing very strong demand growth, due to its use in lightweight batteries. We believe that Lepidico could develop a strong business model licencing the technology to a range of projects and receiving a royalty stream. Exploration Tenure During the year the following tenements were relinquished: E70/3100, E70/3360 and E70/4124. The decision to relinquish was based on a combination of lower prospectivity and high holding costs. A new application E70/4609 was made during the year. It is on the western margin of the Dandaragan Trough, in a similar geological setting to the Company’s Dinner Hill project. Corporate Activity The Company continued to promote the Dandaragan Trough, at local and investment market conferences. The Company was listed on the Frankfurt Stock Exchange, under the code A1JH27. We have raised $4.8M during the year, through share issues. Subsequent to year-end we have entered into a transaction to sell our 55% of East Exploration to Davenport Resources. If that progresses to completion the Company will own 29.3% of Davenport at the IPO. The transaction is expected to be completed by the end of December 2015. During the year George Sakalidis and Gary Johnson resigned as directors and were replaced by Chew Wai Chuen and Natalia Streltsova Competent Person’s Statements Dandaragan Trough Project The information in this report that relates to the estimation of the Mineral Resources is based on and fairly represents information and supporting documentation prepared by J.J.G. Doepel, who is a member of the Australasian Institute of Mining and Metallurgy. Mr. Doepel, Principal Geologist of the independent consultancy Continental Resource Management Pty Ltd, has sufficient experience relevant to the style of mineralisation and type of deposit under consideration. He is qualified as a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. This report is issued with Mr. Doepel’s consent as to the form and context in which the Mineral Resource appears. South Harz Project, Germany The information in this report that relates to Exploration Targets and Exploration Results, is based on information compiled by Andreas Jockel, a Competent Person who is a Member of a ‘Recognised Professional Organisation’ (RPO), the European Federation of Geologists, and a registered “European Geologist” (Registration Number 1018) and Dr Henry Rauche, a Competent Person who is a Member of a ‘Recognised Professional Organisation’ (RPO), the European Federation of Geologists, and a registered “European Geologist” (Registration Number 729). 21 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Andreas Jockel and Dr Henry Rauche are full-time employees of ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau mbH (ERCOSPLAN). ERCOSPLAN, Andreas Jockel and Dr Henry Rauche are not associates or affiliates of East Exploration Pty Ltd, or of any associated company. ERCOSPLAN will receive a fee for the preparation of this Report in accordance with normal professional consulting practices. This fee is not contingent on the conclusions of this Report and ERCOSPLAN, Andreas Jockel and Dr Henry Rauche will receive no other benefit for the preparation of this Report. ERCOSPLAN, Andreas Jockel and Dr Henry Rauche do not have any pecuniary or other interests that could reasonably be regarded as capable of affecting their ability to provide an unbiased opinion in relation to the Küllstedt Exploration Licence Area. ERCOSPLAN does not have, at the date of this Report, and has not had within the previous years, any shareholding in or other relationship with East Exploration Pty Ltd or the Küllstedt Exploration Licence Area and consequently considers itself to be independent of East Exploration Pty Ltd. Andreas Jockel and Dr Henry Rauche have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Andreas Jockel and Dr Henry Rauche consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. Cautionary Statement: The scoping referred to in this report is based on low-level technical and economic assessments and is insufficient to support any estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised. The use of the word “ore” in the context of this report does not support the definition of “Ore Reserves” as defined by the 2012 Edition of the ‘Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. The word ‘ore’ is used in this report to give an indication of quality and quantity of mineralized material that would be fed to the processing plant and it is not to be assumed that ‘ore ‘will provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the scoping study will be realised. Certain statements contained in this announcement, including information as to the future financial or operating performance of Potash West and its projects, are forward-looking statements. Such forward- looking statements are necessarily based upon a number of estimates and assumptions that, whilst considered reasonable by Potash West, are inherently subject to significant technical, business, economic, competitive, political and social uncertainties and contingencies; involve known and unknown risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated events or results reflected in such forward-looking statements; and may include, among other things, statements regarding targets, estimates and assumptions in respect of potash and phosphate production and prices, operating costs and results, capital expenditures, ore reserves and mineral resources and anticipated grades and recovery rates, and are or may be based on assumptions and estimates related to future technical, economic, market, political, social and other conditions. Forward-looking statements are necessarily based upon a number of estimates and assumptions related to future business, economic, market, political, social and other conditions that, while considered reasonable by Potash West, are inherently subject to significant uncertainties and contingencies Potash West disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise. The words “believe”, “expect”, “anticipate”, “indicate”, “contemplate”, “target”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule” and other similar expressions identify forward-looking statements. All forward-looking statements made in this announcement are qualified by the foregoing cautionary statements. Investors are cautioned that forward looking statements are not guarantees of future performance and accordingly investors are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainty therein. 22 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Significant changes in the state of affairs On 4 May 2015, the Company settled the final payment and increased the Company’s ownership of East Exploration Pty Ltd to 55%. Other than the above mentioned, there have been no significant changes in the state of affairs of the Company from 1 July 2014 to the date of this report. Significant events after the balance date On 6 July 2015, the Company issued 27,500,000 shares at $0.04 per share, raising $1,100,000 before costs. This is part of the $1.8 million placement announced on 25 June 2015. On 18 August 2015, the Company agreed and its controlled entity entered into a term sheet with Davenport Resources Pty Ltd (“Davenport”), a wholly owned subsidiary of Arunta Resources Limited (“Arunta”), to sell 100% of East Exploration, which is the owner of South Harz Potash project. The term sheet is subject to the completion of due diligence by both parties, entry into formal documentation by East Exploration’s shareholders for the sale of their shares, Arunta and Davenport being satisfied with any conditions imposed on the demerger of Davenport or subsequent listing of Davenport by ASX, the proposed seed capital placement and IPO capital raising by Davenport and satisfaction of ASX and regulatory requirements including Arunta Resources, Davenport and the Company shareholder approval. There have not been any matters that have arisen after balance date that have significantly affected, or may significantly affect, the operations and activities of the Company, the results of those operations, or the state of affairs of the Company in future financial years other than disclosed elsewhere in this annual report. Likely Developments and expected results The Company will continue its focus on the Dandaragan Trough and exploring opportunities to progress both the phosphate and the K-Max projects. Work has commenced on the pre-feasibility study for single superphosphate production. We will also look to advance the South Harz project, the vending of that project into a company that will list on the ASX, is in progress at this moment. . Environmental regulation and performance The Company’s activities are subject to Australian legislation relating to the protection of the environment. The Company is subject to significant environmental legal regulations in respect to its exploration and evaluation activities. There have been no known breaches of these regulations and principles. Indemnification and Insurance of directors and officers The Company has entered into deeds of access and indemnity with the officers of the Company, indemnifying them against liability incurred, including costs and expenses in successfully defending legal proceedings. The indemnity applies to a liability for costs and expenses incurred by the director or officer acting in their capacity as a director or officer. Except in the case of a liability for legal costs and expenses, it does not extend to a liability that is: (a) (b) (c) owed to the Company or a related body corporate of the Company; for a pecuniary penalty order under section 1317G or a compensation order under section 1317H or section 1317HA of the Corporations Act 2001; or owed to someone other than the Company or a related body corporate of the Company where the liability did not arise out of conduct in good faith. 23 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Indemnification and Insurance of directors and officers (continued) Similarly, the indemnity does not extend to liability for legal costs and expenses: (d) (e) (f) in defending proceedings in which the officer is found to have a liability described in paragraph (a), (b) or (c); in proceedings successfully brought by the Australian Securities and Investments Commission or a liquidator; or in connection with proceedings for relief under the Corporations Act 2001 in which the court denies the relief. During or since the financial year, the Company has paid premiums in respect of a contract insuring all the Directors and Officers. The terms of the contract prohibit the disclosure of the details of the insurance contract and premiums paid. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. Share Options As at the date of this report there were 5,042,188 (2014: 13,021,457) unissued ordinary shares under options. Option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body corporate. Non-audit services The Company may decide to employ the auditor on assignments additional to its statutory audit duties where the auditor’s expertise and experience with the Company are important. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for audits by the Corporations Act 2001. The nature and scope of each type of non-audit service provide means that auditor independence was not compromised. Details of the amounts paid or payable to the auditor, Ernst & Young, for non-audit services provided during the year are set out below. Remuneration of the auditor of the Company for: -other services; research & development tax concession. 2015 $ 17,909 17,909 2014 $ 38,072 38,072 24 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Directors’ meetings Meetings of directors held and their attendance during the financial year were as follows: Name of director: Directors’ meeting held whilst in office Directors’ meetings attended Audit Committee meetings held Audit Committee meetings attended Remuneration and Nomination Committee meetings held Remuneration and Nomination Committee meetings attended Adrian Griffin Patrick McManus George Sakalidis* Gary Johnson** Chew Wai Chuen*** Natalia Streltsova**** 6 6 2 6 4 - 6 6 1 6 4 - 2 - 1 2 1 - 2 - 1 2 1 - 2 - - 2 2 - 2 - - 2 2 - * George Sakalidis resigned as Non-executive Director, effective from 26 November 2014. ** Chew Wai Chuen was appointed as Non-executive Director, effective from 26 November 2014. *** Gary Johnson resigned as Non-executive Director, effective from 30 June 2015 **** Natalia Streltsova was appointed as Non-executive Director, effective from 30 June 2015 Remuneration Report (audited) This Remuneration Report outlines the director and executive remuneration arrangements of the Company in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purpose of this report, Key Management Personnel (KMP) of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, and includes executives of the Company. The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. Details of Key Management Personnel (i) Directors: Adrian Griffin Patrick McManus Chew Wai Chuen Natalia Streltsova George Sakalidis Gary Johnson Non-Executive Chairman Managing Director Non-Executive Director (appointed effective 26 November 2014) Non-Executive Director (appointed effective 30 June 2015) Non-Executive Director (resigned effective 26 November 2014) Non-Executive Director (resigned effective 30 June 2015) (ii) Executives: Lindsay Cahill Robert Van Der Laan Geologist Chief Financial Officer 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 high calibre executives; Link executive rewards to shareholder value. 25 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) Shares and options issued under the incentive plans provide an incentive to stay with the Company. At this time, shares and options issued do not have performance criteria attached. This policy is considered to be appropriate for the Company, having regard to the current state of its development. The Company does not have a policy which precludes directors and executives from entering into contracts to hedge their exposure to options or shares granted to them as remuneration. The Company also recognises that, at this stage in its development, it is most economical to have only a few employees and to draw, as appropriate, upon a pool of consultants selected by the directors on the basis of their known management, geoscientific, and engineering and other professional and technical expertise and experience. The Company will nevertheless seek to apply the principles described above to its directors and executives, whether they are employees of/or consultants to the Company. Remuneration Committee Responsibilities The Committee assesses the appropriateness of the nature and amount of remuneration of directors and senior 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 Board and executive team. Remuneration Structure In accordance with best practice corporate governance, the structure of non-executive and executive director remuneration is separate and distinct. Non-executive director 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 must be determined from time to time by shareholders of the Company in a general meeting. An amount not exceeding the amount determined is then divided between the non-executive directors. As at the date of the report, the aggregate directors’ fees for non-executive Directors has been set at an amount not exceeding $200,000 per annum (2014: $200,000 per annum). The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst non-executive directors is reviewed annually. The Board may consider advice from external consultants, as well as the fees paid to non-executive directors of comparable companies, when undertaking the annual review process. Each non-executive director receives a fee for being a director of the Company. No additional fee is paid for participating in the Audit, Remuneration and Nomination Committees. Non-executive directors are encouraged by the Board to hold shares in the Company (purchased on market and in accordance with the Company’s approved policies to ensure there is no insider trading). It is considered good governance for directors of a company to have a stake in that company. The non- executive directors of the Company may also participate in the share and option plans as described in this report. 26 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) As an incentive to employees, Directors, executive officers and consultants, the Company has adopted a scheme called the Potash West Employee Incentive Scheme (‘the Scheme’). The purpose of the Scheme is to give employees, Directors, executive officers and consultants of the Company an opportunity to subscribe for shares and/or options in the Company. The Directors consider that the Scheme will enable the Company to retain and attract skilled and experienced employees, Board members and executive officers and provide them with the motivation to participate in the future growth of the Company and, upon becoming shareholders in the Company, to participate in the Company’s profits and development. Executive director and senior management remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to:    reward executives for Company, business team and individual performance; align the interests of executives with those of shareholders; and ensure total remuneration is competitive by market standards. Structure  At this time, the cash component of remuneration paid to the Executive directors, and other senior managers is not dependent upon the satisfaction of performance conditions.  It is current policy that some executives be engaged by way of consultancy agreements with the Company, under which they receive a contract rate based upon the number of hours of service supplied to the Company. There is provision for yearly review and adjustment based on consumer price indices. Such remuneration is hence not dependent upon the achievement of specific performance conditions. This policy is considered to be appropriate for the Company, having regard to the current state of its development.  Executive directors are encouraged by the Board to hold shares in the Company (purchased on market and in accordance with the Company’s approved policies to ensure there is no insider trading). It is considered good governance for directors of a company to have a stake in that company. The Executive directors of the Company may also participate in the share and option plans as described in this report. Performance table The following table details the loss of the Company from continuing operations after income tax, together with the basic loss per share since the incorporation of the company: 2015 $ 2014 $ 2013 $ 2012 $ 2011 $ Net loss from continuing operations after income tax Basic loss per share in cents Share Price in Cents 2,871,003 1,822,505 4,193,632 3,900,096 808,723 1.33 4.9 1.72 3.6 5.85 12.0 5.76 23.0 1.08 18.0 * The Company was registered in November 2010 The options on issue are not considered dilutive for the purpose of the calculation of diluted earnings/loss per share as their conversion to ordinary shares would not decrease the net profit from continuing operations per share. Consequently, diluted earnings/loss per share is the same as basic earnings per share. 27 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) Agreements with non-executive directors The director’s fees of $90,000 per annum inclusive of superannuation requirements were paid, or due and payable to Mr Adrian Griffin. In the event of termination, there is no notice period required. The director’s fees of $50,000 per annum inclusive of superannuation requirements were paid, or due and payable to Mr George Sakalidis. In the event of termination, there is no notice period required. The director’s fees of $50,000 per annum inclusive of superannuation requirements were paid, or due and payable to Mr Gary Johnson. In the event of termination, there is no notice period required. The director’s fees of $50,000 per annum inclusive of superannuation requirements were paid, or due and payable to Mr Chew Wai Chuen. In the event of termination, there is no notice period required. The director’s fees of $50,000 per annum inclusive of superannuation requirements were paid, or due and payable to Dr Natalia Streltsova. In the event of termination, there is no notice period required. The company has also entered into a services agreement with Strategic Metallurgy Pty Ltd for the provision of Metallurgical Services. Service fees are agreed on an arm’s length transaction basis. Mr Gary Johnson is a director and shareholder of Strategic Metallurgy Pty Ltd. The company had also entered into a services agreement with Precious Capital Pte Ltd for the provision of corporate advisor services. Service fees are agreed on an arm’s length transaction basis. However, this agreement had also been terminated from December 2014. Mr Chew Wai Chuen is a director and shareholder of Precious Capital Pte Ltd. Executive director and senior management remuneration Long-Term Incentive (“LTI”) awards to executives are made under the Employee Share Plan (“ESP”) and are delivered in the form of shares. Shares granted under the ESP are released equally over 36 months, 12 months from the grant date. Agreement with Managing Director On the 6 September 2012, the Remuneration Committee recommended to increase Mr Patrick McManus’s annual salary from $250,000 inclusive of superannuation requirements to $275,000 per annum inclusive of superannuation requirement, effective from 1 July 2012. The agreement can be terminated by either party by giving three months’ notice or payment of three months’ salary in lieu of notice. Agreement with Chief Financial Officer Mr Robert Van Der Laan was appointed as Chief Financial Officer, effective on 13 May 2011. On 5 August 2011 the company entered into an agreement containing the terms and conditions under which the services of Chief Financial Officer are provided. In the event of termination, there is no notice period required. The agreement involves the payment to the Company associated with Robert Van der Laan of an hourly fee of $120 and reimbursement of expenses. The hourly rate was revised up to $130 effective from 1 July 2013. The company has also entered into an agreement with Richmond Resources Pty Ltd for the transfer of tenements. Fees are agreed on an arm’s length transaction basis. Mr Robert Van Der Laan is a director and shareholder of Richmond Resources Pty Ltd. 28 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) The company has also entered into a services agreement with Horn Resources Pty Ltd for the provision of investor relations, corporate advisory, office accommodation, accounting staff, administrative staff and exploration staff. Service fees are agreed on an arm’s length transcation basis. Mr Robert Van Der Laan is a director and shareholder of Horn Resources Pty Ltd. Agreement with Exploration Manager On 25 August 2011, the Company and a company associated with Mr Lindsay Cahill entered into an agreement containing the terms and conditions under which the services of the Mining Services Manager are provided to the Company. In the event of termination, there is no notice period required. The agreement involves the payment to the Company associated with Mr Cahill of an hourly fee of $125 and reimbursement of expenses. Directors’ Remuneration 2015 Short-term Post-employment benefits Executive Directors’ Fees $ Salary and Consulting Fees $ Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Chew Wai Chuen Natalia Streltsova Total 73,024 - - 219,952 15,885 40,537 28,602 - 158,049 - - - - 219,952 Executives’ Remuneration 2015 Superannuation Termination Share and Option Based Payments Contribution $ Benefits $ Shares Options $ $ Total $ 7,808 33,012 1,807 4,338 - 9,167 - 22,036 - 3,140 - 5,126 - - 1,250 - - - 40,719 - 46,965 - 90,000 - 275,000 20,833 - 50,000 - 29,852 - - - - 465,685 Executive Lindsay Cahill Robert Van der Laan Total Total Directors’ and Executives’ Remuneration Short-term Post-employment benefits Salary $ Consulting Superannuation Termination Contribution $ - - Benefits $ Fees $ - 65,914 - 79,365 - - - 145,279 - - Share and Option Based Payments Shares Options $ $ - - - - - - Total $ 65,914 79,365 145,279 158,049 365,231 46,965 - 40,719 - 610,964 29 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) Directors’ Remuneration 2014 Short-term Post-employment benefits Director Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Total Directors’ Fees $ Salary and Consulting Fees $ 76,982 - 42,711 42,771 162,464 - 228,315 - - 228,315 Executives’ Remuneration 2014 Superannuation Termination Share and Option Based Payments Contribution $ Benefits $ Shares Options $ $ Total $ 7,636 33,213 4,242 4,242 49,333 5,382 - 13,472 - 3,047 - 2,987 - - 24,888 - - - - - 90,000 275,000 50,000 50,000 465,000 Executive Lindsay Cahill Robert Van der Laan Total Total Directors’ and Executives’ Remuneration Short-term Post-employment benefits Consulting Superannuation Termination Contribution $ Benefits $ Share and Option Based Payments Shares Options $ $ - - - - - - - - Total $ 54,083 86,172 Salary $ - - Fees $ 54,083 86,172 - 140,255 - - - - 140,255 162,464 368,570 49,333 - 24,888 - 605,255 Incentive shares and options: Granted and vested during the year Shares There were no shares issued to key management personnel as part of the incentive plan during the year ended 30 June 2015 (2014: nil). Options There were no options granted to key management personnel as part of the incentive plan during the year ended 30 June 2015 (2014: nil). 30 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel, which including the directors and executives. (a) Share holdings of Key Management Personnel 2015 Balance at 1 July 2014 Ordinary Granted as remuneration Ordinary On Exercise of Options Ordinary Net change other Ordinary Balance at 30 June 2015 Ordinary Directors Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Chew Wai Chuen Natalia Streltsova Total Executives Lindsay Cahill Robert Van der Laan Total 5,890,297 3,384,121 1,080,600 436,097 91,389 - 10,882,504 205,636 494,286 69,465 114,973 31,250 - 915,610 - - - - - - - 3,755,082 6,786,023 10,541,105 - - - - - - Total Directors' and Executives Share holdings 21,423,609 915,610 - - - - (380,788) - - (380,788) (40,000) (255,000) (295,000) (675,788) 6,095,933 3,878,407 1,150,065 170,282 122,639 - 11,417,326 3,715,082 6,531,023 10,246,105 21,663,431 2014 Directors Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Total Executives Lindsay Cahill Robert Van der Laan Total Total Directors' and Executives Share holdings Balance at 1 July 2013 Ordinary Granted as remuneration Ordinary On Exercise of Options Net change other Ordinary Ordinary Balance at 30 June 2014 Ordinary 5,175,622 2,612,205 947,205 339,121 9,074,153 554,863 75,000 629,863 9,704,016 99,667 249,475 56,420 55,309 460,871 - - - 460,871 31 - - - - - 615,008 522,441 76,975 41,667 1,256,091 5,890,297 3,384,121 1,080,600 436,097 10,791,115 - - - 3,200,219 6,711,023 9,911,242 3,755,082 6,786,023 10,541,105 - 11,167,333 21,332,220 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) (b) Partly Paid Contributing Shares of Key Management Personnel 2015 Directors Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Chew Wai Chuen Natalia Streltsova Total Executives Lindsay Cahill Robert Van der Laan Total Balance at 1 July 2014 Partly Paid Granted as remuneration Partly Paid On Exercise of Options Net change other Partly Paid Partly Paid Balance at 30 June 2015 Partly Paid 2,895,317 1,567,323 454,705 - - - 4,917,345 - - - - - - - - - - - - - - - - - - - - - 2,895,317 1,567,323 454,705 - - - 4,917,345 1,877,542 2,823,012 4,700,554 - - - - - - - - - 1,877,542 2,823,012 4,700,554 Total Directors' and Executives Share holdings 9,617,899 - - - 9,617,899 2014 Directors Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Total Executives Lindsay Cahill Robert Van der Laan Total Balance at 1 July 2013 Partly Paid Granted as remuneration Partly Paid On Exercise of Options Net change other Partly Paid Partly Paid Balance at 30 June 2014 Partly Paid - - - - - - - - - - - - - - - 2,895,317 1,567,323 454,705 - 4,917,345 2,895,317 1,567,323 454,705 - 4,917,345 - - - - - - - - - 1,877,542 2,823,012 4,700,554 1,877,542 2,823,012 4,700,554 Total Directors' and Executives Share holdings - - - 9,617,899 9,617,899 32 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) (c) Option holdings of Key Management Personnel 2015 Directors Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Chew Wai Chuen Natalia Streltsova Total Executives Lindsay Cahill Robert Van der Laan Total Balance at 1 July 2014 Number Granted as remuneration Number Options exercised Number Net change other Number Balance at 30 June 2015 Number Not exercisable Number Exercisable Number 509,090 1,535,834 475,000 491,667 - - 3,011,591 - - - - - - - 613,637 1,754,534 2,368,171 - - - - - - - - - - - - - - (309,090) (785,834) (275,000) (291,667) - - (1,661,591) (613,637) (1,504,534) (2,118,171) (3,779,762) 200,000 750,000 200,000 200,000 - - 1,350,000 - - - - - - - 200,000 750,000 200,000 200,000 - - 1,350000 - 250,000 250,000 - - - - 250,000 250,000 1,600,000 - 1,600,000 Total Directors' and Executives Share holdings 5,379,762 - 2014 Directors Adrian Griffin Patrick McManus George Sakalidis Gary Johnson Total Executives Lindsay Cahill Robert Van der Laan Total Balance at 1 July 2013 Granted as remuneration Options exercised Net change other Balance at 30 June 2014 Not exercisable Exercisable Number Number Number Number Number Number Number 450,000 1,250,000 450,000 450,000 2,600,000 - - - - - - - - - - 59,090 285,834 25,000 41,667 411,591 509,090 1,535,834 475,000 491,667 3,011,591 - - - - - 500,000 - - - - - 500,000 - - 113,637 1,754,534 1,868,171 613,637 1,754,534 2,368,171 - - - 509,090 1,535,834 475,000 491,667 3,011,591 613,637 1,754,534 2,368,171 Total Directors' and Executives Share holdings 3,100,000 - - 2,279,762 5,379,762 - 5,379,762 33 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Report (continued) Remuneration Report (audited) (continued) (d) Other Transactions with Key Management Personnel There were no other transactions with key management personnel. End of Remuneration Report. 34 For personal use only Potash West NL A.C.N. 147 346 334 Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 36 and forms part of this report. This report is made in accordance with a resolution of directors. Patrick McManus Managing Director Perth Dated: 30 September 2015 35 For personal use onlyErnst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Auditor’s Independence Declaration to the Directors of Potash West NL In relation to our audit of the financial report of Potash West NL for the financial year ended 30 June 2015, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Robert A Kirkby Partner 30 September 2015 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation RK:MW:PotashWest:092 36 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement The Company is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve the Company has considered the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Recommendations. In line with the above, the Board has set out the way forward for the Company in its implementation of its Principles of Good Corporate Governance and Recommendations. The approach taken by the board was to set a blueprint for the Company to follow as it introduces elements of the governance process. Due to the current size of the Company and the scale of its operations it is neither practical nor economic for the adoption of all of the recommendations approved via the board charter. Where the Company has not adhered to the recommendations it has stated that fact in this Corporate Governance Statement however has set out a mandate for future compliance when the size of the Company and the scale of its operations warrants the introduction of those recommendations. Date of last review and Board approval: 14 September 2015. Principle / Recommendation Compliance Reference Commentary Principle 1: Lay solid foundations for management and oversight Recommendation 1.1 listed entity A disclose: should Yes a) b) the respective roles and responsibilities of its and board management; and matters those expressly reserved to the board and those to delegated management. Board Charter Code of Conduct, Independent Professional Advice Policy Website to discharge adequately To add value to the Company the Board has been formed so that it has effective composition, size and it commitment responsibilities and duties. Directors are appointed based on the specific skills required by the Company and on their decision-making and judgment. The Board’s role is to govern the Company rather than to manage it. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out those delegated duties. in accordance with the Company is to drive the performance of In carrying out its governance role, the main task of the the Board Company. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. The Board the successful has operations of the Company. To assist the Board carry its functions, it has developed a Code of Conduct to guide the Directors. responsibility final the for In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company. Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following. 37 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 1: Lay solid foundations for management and oversight (continued) Recommendation 1.1 (continued) • Leadership of the Organisation: overseeing the Company and establishing codes that reflect the values of the Company and guide the conduct of the Board. • Strategy Formulation: to set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company. • Overseeing Planning Activities: the development of the Company’s strategic plan and policy Compliance the development of • Shareholder Liaison: the price or value of ensuring effective communications with shareholders through an and communications appropriate promoting participation at general meetings of the Company as well as ensuring timely and balanced disclosures of all material information concerning the Company that a reasonable person would expect to have a material effect the entity’s on securities. • Monitoring, Risk Management: the Company’s risk management, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Company. • Company Finances: approving expenses and approving acquisitions, and monitoring divestitures and financial and other reporting the along with ensuring Company’s financial and other reporting. reviewing the performance of Executive Officers and senior monitoring management in their implementation of the Company’s strategy. performance • Human integrity of Resources: the the of reviewing to ensure the effectiveness of • Ensuring the Health, Safety and Well-Being of Employees: in conjunction with the senior management team, developing, overseeing and the Company’s occupational health and safety systems the well-being of all employees. • Delegation delegating appropriate powers to the Managing Director to day-to-day management of the Company and establishing and determining the powers and functions of the Committees of the Board. of Authority: effective ensure the • Monitoring the effectiveness of the Company’s corporate governance practices. 38 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 1: Lay solid foundations for management and oversight (continued) Recommendation 1.1 (continued) Recommendation 1.2 A listed entity should: a) undertake appropriate checks before appointing a or putting person, forward to security holders a candidate for election, as a director; and security b) provide with all holders information material in possession its relevant to a decision on whether or not to elect or re- elect a director. Yes, however the full information of new Directors for election was not included in all notices of meeting but will be included in future notices of meeting Full details of the Board’s and Company Secretary’s roles and responsibilities are contained in the Board Charter. The Board collectively and each Director has the right to seek independent professional advice at the Company’s expense, up to specified limits, (that limit is currently set at $2,000), to assist them to carry out their responsibilities. Director Selection Procedure Website the specific Directors are appointed based on governance skills required by the Company. Given the size of the Company and the business that it operates, the Company aims at all times to have at least one Director with experience appropriate to the Company’s operations. The Company’s current Directors all have relevant experience in the operations. In addition, Directors should have the relevant blend of personal experience in: • Accounting and financial management; and • Director-level business experience. Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a Director of the Company. to for the Board, is also given In determining candidates the Nomination Committee follows a prescribed process whereby it evaluates the mix of skills, experience and expertise of the existing Board. In particular, the Nomination Committee is to identify the particular skills that will best increase the Board's effectiveness. the balance of Consideration independent directors. Potential candidates are identified and, if relevant, the Nomination Committee (or equivalent) recommends an appropriate candidate for appointment to the Board. Any appointment made by the Board is subject to ratification by shareholders at the next general meeting. Each Non-Executive Director has a written agreement with the Company that covers all aspects of their appointment including term, remuneration, disclosure of interests that may affect independence, guidance on complying with the Company’s corporate governance policies and the right to seek independent advice, indemnity and insurance arrangements, rights of access to the Company’s information and ongoing confidentiality obligations as well as roles on the Company’s committees. time commitment required, 39 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 1: Lay solid foundations for management and oversight (continued) Recommendation 1.2 (continued) Recommendation 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. Yes Kept at registered office, Independent Professional Advice Policy Each executive director’s agreement with the Company includes the same details as the non- executive directors’ agreements but also includes a and position termination clauses. description, hierarchy reporting is responsible The Nomination Committee for implementing a program to identify, assess and enhance Director competencies. In addition, the Nomination Committee puts in place succession plans to ensure an appropriate mix of skills, experience, expertise and diversity are maintained on the Board. The Company has entered into an agreement with each director setting out their appointment. terms of the term, including Each non-executive director has a written agreement with the Company that covers all aspects of their appointment time commitment required, remuneration, disclosure of interests that may affect independence, guidance on complying with the Company’s corporate governance policies and the right to seek independent advice, indemnity and insurance arrangements, rights of access to the Company’s information and ongoing confidentiality obligations as well as roles on the Company’s committees. Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a Director of the Company. Yes Board Charter Website Full details of the Board’s and Company Secretary’s roles and responsibilities are contained in the Board Charter. Recommendation 1.4 The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. 40 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 1: Lay solid foundations for management and oversight (continued) Recommendation 1.5 of to A listed entity should: a) have a diversity policy includes which requirements for the board or a relevant the committee set board measurable for objectives gender achieving diversity to assess annually both the objectives and the entity’s progress in achieving them; and b) disclose that policy or a summary of it; and Yes Diversity Policy Website The Company recognises and respects the value of diversity at all levels of the organisation. The Company to setting measurable objectives for attracting and engaging women at the Board level, in senior management and across the whole organisation. is committed The Diversity Policy was re-adopted during the year and the Company set the following objectives for the employment of women: • • • to the Board – 25% by 2016 to senior management – no target set to the organisation as a whole – 30% by 2016 As at the date of this report, the Company has the following proportion of women appointed: • • • to the Board – 25% to senior management (including Company Secretary) – 33% to the organisation as a whole – 22% that The Company recognises the mining and exploration industry is intrinsically male dominated in many of the operational sectors and the pool of women with appropriate skills will be limited in some instances. The Company recognises that diversity extends to matters of age, disability, ethnicity, marital/family status, religious/cultural background and sexual orientation. the Company will seek to identify suitable candidates for positions from a diverse pool. The addition of Chew Wai Chuen to the Board provides a different cultural view to the operations of the Company. Where possible, 41 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 1: Lay solid foundations for management and oversight (continued) Recommendation 1.5 (continued) c) disclose as at the the end each of reporting period the measurable for objectives achieving gender diversity set by the board or a relevant committee of the board in accordance entity’s with diversity policy and its progress towards achieving them, and either: respective the 1) proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has “senior defined for executive” these purposes); or if the entity is a “relevant employer” under the Workplace Gender Equality the entity’s Act, recent most “Gender Equality Indicators”, as in and defined published under that Act. 2) 42 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 1: Lay solid foundations for management and oversight (continued) Yes Board, Committee & Individuals Performance Evaluation Procedure Website It is the policy of the Board to conduct evaluation of its performance. The objective of this evaluation is to provide best practice corporate governance to the Company. During the financial year an evaluation of the performance of the Board and its members was not formally carried out. However, a general review of the Board and senior executives has occurred on an on-going basis to ensure that structures suitable to the Company's status as a listed entity are in place. Recommendation 1.6: A listed entity should: a) have and disclose a for process periodically evaluating the performance of its the board, and committees directors; individual and b) disclose, relation reporting to each period, whether a performance was evaluation the undertaken in reporting period in accordance with that process. in Recommendation 1.7: Board, Committee & Individuals Performance Evaluation Procedure Website It is the policy of the Board to conduct evaluation of individuals’ performance. The objective of this evaluation is to provide best practice corporate governance to the Company. During the financial year an evaluation of the individuals was not formally carried out. However, a general review of the individuals has occurred on an on-going basis to ensure that structures suitable to the Company's status as a listed entity are in place. the performance of A listed entity should: a) have and disclose a Yes process for periodically evaluating the performance of its senior executives; and b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. 43 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 2: Structure the board to add value Recommendation 2.1 listed The board of a entity should: a) have a nomination committee which: 1) has at least three members, a majority of whom independent are directors; and is chaired by an independent director, disclose: the charter of the committee; the members of committee; the and and 4) 3) 2) b) 5) as at the end of reporting each the period, number of times committee the met throughout the period and the individual attendances of the members at those meetings; or if it does not have a nomination committee, disclose the fact and that processes it employs board to address issues succession and that to ensure the the board has appropriate balance of skills, knowledge, experience, and independence diversity to enable it its to discharge and duties responsibilities effectively. year end, of The role of the Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring an appropriate mix of skills are present in Directors on the Board at all times. At the the Nomination Committee consisted three Non-Executive directors, being Natalia Streltsova, Adrian Griffin and Chew the Company Secretary. The Wai Chuen and is Natalia Chair of Streltsova, an The Nomination Committee met once during the year and all members at the time were present. the Nomination Committee independent director. including The responsibilities of the Nomination Committee include devising criteria for Board membership, regularly reviewing the need for various skills and experience on the Board and identifying specific individuals for nomination as Directors for review by the Board. The Nomination Committee also oversees management the succession plans Managing Director and his/her direct reports and evaluate the Board’s performance and make recommendations for the appointment and removal of Directors. remuneration, expectations, terms, the procedures for dealing with conflicts of interest and the availability of independent professional advice are clearly understood by all Directors, who are experienced public company Directors. The Board collectively and each Director has the right to seek independent professional advice at the Company’s expense, up to specified limits, (that limit is currently set at $2,000), to assist them to carry out their responsibilities. Matters such as Yes Nomination Committee Charter, Independent Professional Advice Policy Website 44 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 2: Structure the board to add value (continued) Recommendation 2.2 listed entity should A have and disclose a board skills matrix setting out the mix of skills and diversity the board currently has or is looking to its achieve membership. that in Recommendation 2.3 listed entity should A disclose: a) of the names of the directors considered by the board to be independent directors; if a director has an position, interest, or association relationship the type described in Box 2.3 but the board is of the opinion that it not does compromise the independence of the the nature director, interest, the of position, association in relationship or an and question explanation of why the board is of that opinion; and the length of service of each director. b) c) Yes Internal management document The Company has reviewed the skill set of its Board to determine where the skills lie and any relevant gaps in skills shortages. The Company is working towards filling these gaps through professional development initiatives as well as seeking to identify suitable Board candidates for positions from a diverse pool. Yes Board Charter, Independence of Directors Assessment Website The Company recognises the importance of Non- Executive Directors and the external perspective and advice that Non-Executive Directors can offer. An Independent Director: 1. 2. is a Non-Executive Director and; is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company; 3. within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment; 4. within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provided; is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; 5. 6. has no material contractual relationship with the Company or other group member other than as a Director of the Company; 7. has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and 45 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 2: Structure the board to add value (continued) Recommendation 2.3 (continued) 8. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company. Materiality for the purposes of points 1 to 8 above is determined on the basis of both quantitative and qualitative aspects with regard to the independence of Directors. An amount over 5% of the Company’s expenditure or 10% of the particular directors annual gross income is considered to be material. A period of more than six years as a Director would assessing be independence. considered material when Adrian Griffin (appointed 12 November 2010) is a the Non-Executive Director and Chairman of Company and meets the Company’s criteria for independence. Although Adrian Griffin has entered into a profit á prendre re mineral interest rights with to be the Company, he independent as the agreement is not considered to be material as is insignificant to both parties. His experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on in his position as Chairman. the proportion vended is still considered the Board and in Chew Wai Chuen (appointed 26 November 2014) is a Non-Executive Director of the Company and meets the Company’s criteria for independence. His experience and knowledge of the Company makes is his contribution appropriate for him to remain on the Board and in his position as a Non-Executive Director. the Board such that to it Natalia Streltsova (appointed 30 June 2015) is a Non-Executive Director of the Company and meets the Company’s criteria for independence. Her experience and knowledge of the Company makes is her contribution appropriate for her to remain on the Board and in his position as a Non-Executive Director. the Board such that to it Patrick McManus (appointed 23 November 2010) is an Executive Director of the Company and does not meet the Company’s criteria for independence. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board. 46 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 2: Structure the board to add value (continued) Recommendation 2.4 A majority of the board of a listed entity should be independent directors. Yes Independence of Directors Assessment Website The Board has a majority of Directors who are independent. Recommendation 2.5 The chair of the board of a listed entity should be independent director an and, in particular, should not be the same person as the CEO of the entity. Recommendation 2.6 Yes Independence of Directors Assessment Website The Chairperson is an independent Director who is not the CEO / Managing Director. It is the policy of the Company that each new Director undergoes an induction process in which they are given a full briefing on the Company. Where possible this includes meetings with key executives, tours of the premises, an induction package and presentations. Information conveyed to new Directors include: • • • • as conduct details of the roles and responsibilities of a Director; formal policies on Director appointment as contribution well expectations; a copy of the Corporate Governance Statement, Charters, Policies and Memos and a copy of the Constitution of the Company. and In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. The Board has implemented an Ongoing Education Framework. for A listed entity should have a program inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge to perform role as directors effectively. needed their Yes Director Induction Program, Ongoing Education Framework Website 47 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 3: Act ethically and responsibly Recommendation 3. a A listed entity should: code a) have for conduct directors, executives employees; and b) disclose that code or a summary of it. of its senior and Yes Code of Conduct Website As part of its commitment to recognising the legitimate interests of stakeholders, the Company has established a Code of Conduct to guide compliance with legal and other obligations to legitimate stakeholders. These stakeholders include employees, government authorities, creditors and the community as whole. customers, clients, Principle 4: Safeguard integrity in corporate reporting Recommendation 4.1 The board of a listed entity should: (a) have committee an which: a) has at audit all are least three of members, non- whom directors executive and a majority of whom are independent directors; and 1) is chaired by an independent director, who not the board, and disclose: 2) is the chair of the charter of the committee; the relevant qualifications and 4) experience of the members of the committee; and in relation to each reporting period, of the number the times committee met the throughout the period and individual attendances of the members at those meetings; or 3) 5) relevant Directors During the reporting year, the Audit and Risk Committee consisted of Natalia Streltsova, Adrian are Griffin and Chew Wai Chuen who independent with Non-Executive experience to being a member of the Audit and Risk Committee. Natalia Streltsova is a graduate of AICD. She has had experience with audit and financial compliance as part of her companies. responsibilities Adrian Griffin’s financial experience is limited to practical application as a director of a number of private and public companies over a period of 30 years. Chew Wai Chuen is a Qualified Chartered Financial Planner, holding BBA and MBA qualifications. He has had experience with financial compliance as part of his engagement with various companies. various with The Audit and Risk Committee met once during the year and all members at the time were present. as appoint Barry Woodhouse As of 24 September 2015, the Board has resolved to the Independent Chairman of the Audit and Risk Committee. Mr Woodhouse is a CPA and a Fellow of Governance Institute of Australia and has more than 27 years’ experience in the junior mineral exploration, mineral production, mining services and manufacturing sectors in both private and public companies in Australian and foreign jurisdictions. The Board also resolved that Chew Wai Chuen is no longer a member of the Audit and Risk Committee. Yes Audit and Risk Committee Charter Website 48 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 4: Safeguard integrity in corporate reporting (continued) Recommendation 4.1 (continued) b) of that if it does not have an committee, audit disclose fact and the processes it employs that independently verify and safeguard the its integrity corporate reporting, the including the processes appointment and the removal external auditor and the the rotation of audit engagement partner. for of Recommendation 4.2 the that that, listed The board of a it entity should, before approves entity’s financial statements for a financial period, receive from its C E O and CFO a in declaration their financial opinion, the records of the entity have been properly maintained and financial the statements comply with appropriate the accounting standards and give a true and fair financial the view of position and performance of the entity and that the opinion has been formed on the basis of a sound system risk management and internal control which is operating effectively. of to the Board The Managing Director and the Chief Financial Officer provide a declaration in accordance with section 295A of the Corporations Act for each financial report and assure the Board that such declaration is founded on a sound system of risk management and internal control and that the in all material is operating effectively system respects in relation to financial reporting risks. Yes Kept at registered office 49 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 4: Safeguard integrity in corporate reporting (continued) Recommendation 4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Yes AGM The external auditor is invited to attend every AGM for the purpose of answering questions from security holders relevant to the audit. Principle 5: Make timely and balanced disclosure Recommendation 5.1 A listed entity should: a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and b) disclose that policy or a summary of it. Yes Continuous Disclosure Policy Website The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with the Company immediately notifies the ASX of information: the ASX Listing Rules the price or value of 1. concerning the Company that a reasonable person would expect to have a material the effect on Company’s securities; and that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities. 2. Principle 6: Respect the rights of security holders Recommendation 6.1 listed entity should A provide information about itself and its governance its to website. investors via Yes Website Disclosure Policy Website The Company’s website includes the following: • Corporate Governance policies, procedures, charters, programs, assessments, codes and frameworks • Names and biographical details of each of its directors and senior executives • Constitution • Copies of annual, half yearly and quarterly reports ASX announcements • • Copies of notices of meetings of security holders • Media releases • Overview of the Company’s current business, structure and history 50 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 6: Respect the rights of security holders (continued) Recommendation 6.1 (continued) • Details of upcoming meetings of security holders • Summary of the terms of the securities on issue • Historical market price information of the securities on issue • Contact details for the share registry and media enquiries • Share registry key security holder forms Recommendation 6.2 A listed entity should design and implement an relations investor facilitate program two-way effective communication with investors. to Yes Shareholder Communication Policy, Social Media Policy Website Recommendation 6.3 A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. Yes Shareholder Communication Policy Website 51 The Company its shareholders and to facilitate the effective exercise of those rights the Company is committed to: rights of respects the • through effectively with communicating shareholders the market via ASX, information mailed to shareholders and the general meetings of the Company; releases to • • giving shareholders ready access the Company and to balanced and understandable information about corporate proposals; requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report of future Annual Reports. The Company also makes available a telephone number and email address for shareholders to make enquiries of the Company. the respects rights of The Company its shareholders and to facilitate the effective exercise of those rights the Company is committed to making it easy for shareholders to participate in The shareholder meetings of the Company. Company also makes available a telephone number and email address for shareholders to make enquiries of the Company. For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 6: Respect the rights of security holders (continued) Recommendation 6.4 holders to A listed entity should give the security receive option from communications send and to, communications the its security entity and registry electronically. Yes Shareholder Communication Policy Website Shareholders are regularly given the opportunity to receive communications electronically. Principle 7: Recognise and manage risk Recommendation 7.1 The Board has not established a separate Risk Committee, and therefore it is not structured in accordance with Recommendation 7.1. Given the current size and composition of the Board, the Board believes that there would be no efficiencies gained by establishing a separate Risk Committee. Accordingly, the Board performs the role of Risk Committee. Items that are usually required to be discussed by a Risk Committee are discussed at a separate meeting when required. When the Board convenes as the Risk Committee it carries out those functions which are delegated to it in the Company’s Risk Committee Charter. The Board deals with any conflicts of interest that may occur when convening the Risk Committee by ensuring that the Director with conflicting interests is not party to the relevant discussions. the capacity of in The Board as a whole did not meet as the Risk Committee during the year. Risk identification and risk management discussions occurred at several Board meetings throughout the year. To assist the Board to fulfil its function as the Risk Committee, the Company has adopted a Risk Management Policy. No Risk Management Policy Website listed The board of a entity should: a) have a committee or committees to oversee risk, each of which: 1) has at least three members, a majority of whom independent are directors; and is chaired by an independent director, disclose: the charter of the committee; the members of committee; the and and 3) 2) 4) 5) as at the end of reporting each the period, number of times committee the met throughout the period and the individual of attendances the members at those meetings; or 52 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 7: Recognise and manage risk (continued) Recommendation 7.1 (continued) b) that if it does not have a risk committee or that committees (a) above, satisfy disclose fact and the processes it for employs the overseeing entity’s risk management framework. Recommendation 7.2 or board The a committee of the board should: a) the entity’s review management risk least framework at annually to satisfy itself that it continues to be sound; and in relation disclose, reporting to each period, whether such a review has taken place. Yes Risk Management Policy Website The Company’s Risk Management Policy states that the Board as a whole is responsible for the oversight of the Company’s risk management and control the The objectives of Company’s Risk Management Strategy are to: framework. • • • • identify risks to the Company; balance risk to reward; ensure regulatory compliance is achieved; and ensure senior executives, the Board and investors understand the risk profile of the Company. The Board monitors arrangements including: risk through various • regular Board meetings; • share price monitoring; • market monitoring; and • regular review of financial position and operations. is considered a sound strategy The Company has developed a Risk Register in order to assist with the risk management of the Company. The Company’s Risk Management Policy for addressing and managing risk. During the year, management regularly reported to the Board on the following categories of risks affecting the Company as part of the Company’s systems and processes for managing material business risks: operational, financial reporting, sovereignty and market-related risks. 53 For personal use onlyPotash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 7: Recognise and manage risk (continued) Recommendation 7.2 (continued) risk management The Board is responsible for the oversight of the and Company’s control framework. Responsibility for control and risk management is delegated to the appropriate level of management within the Company with the Managing Director and Chief Financial Officer (or equivalent) having ultimate responsibility to the the risk management and control Board framework. Arrangements put in place by the Board to monitor risk management include: for • regular reporting to the Board in respect of operations and the financial position of the Company; • where appropriate the appointment of appropriately skilled consultants to provide independent assessment of operational results, proposals and activities; and Use of a management. risk register to assist with risk Recommendation 7.3 b) listed entity should A disclose: a) if it has an internal audit function, how the is function structured and what role it performs; or if it does not have an audit internal function, fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. that which overseeing When the Audit and Risk Committee convenes it carries out those functions which are delegated to it in the Company’s Audit and Risk Committee Charter the include establishment and implementation by management of a system for identifying, assessing, monitoring the and managing material Company, which includes the Company’s internal compliance and control systems.. Due to the nature and size of the Company's operations, and the Company’s ability to derive substantially all of the benefits of an internal audit function, the expense of an independent internal auditor is not considered to be appropriate. independent throughout risk No Audit and Risk Committee Charter Website 54 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 7: Recognise and manage risk (continued) Recommendation 7.4 A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. Yes Corporate Governance Statement The Company has considered its economic, environmental and social sustainability risks by way of internal review and has concluded that it is not subject to material economic, environmental and social sustainability risks. Principle 8: Remunerate fairly and responsibly Recommendation 8.1 listed The board of a entity should: a) have a remuneration committee which: 1) has at least three members, a majority of whom independent are directors; and is chaired by an independent director, and disclose: the charter of the committee; the members of committee; the and 3) 4) 2) 5) as at the end of reporting each period, the number of times committee the throughout met the period and individual the attendances of the members at those meetings; or of The the responsibilities The role of the Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of establishing appropriate remuneration levels and incentive policies for employees. During the year, the Remuneration Committee consisted of three Non-Executive Directors, being Natalia Streltsova, Adrian Griffin and Chew Wai Chuen and The Chair of the Company Secretary. the is Natalia Streltsova, Remuneration Committee an The Remuneration independent director. Committee met once during the financial year time were ended and all members at present. the Remuneration Committee include setting policies for senior officers’ remuneration, setting the terms and conditions of employment for the Managing Director, reviewing and making recommendations to the Board on the Company’s incentive schemes and superannuation arrangements, reviewing the remuneration of both Executive and Non-Executive Directors, recommendations for remuneration by gender and making recommendations on any proposed changes and undertaking reviews of the Managing Director’s performance, including, setting with the Managing Director goals and reviewing progress in achieving those goals. The Board collectively and each Director has the right to seek independent professional advice at the Company’s expense, up to specified limits, (that limit is currently set at $2,000), to assist them to carry out their responsibilities. Yes Remuneration Committee Charter, Independent Professional Advice Policy Website 55 For personal use only Potash West NL A.C.N. 147 346 334 Corporate Governance Statement (continued) Principle / Recommendation Compliance Reference Commentary Principle 8: Remunerate fairly and responsibly (continued) Recommendation 8.1 (continued) b) if it does not have a remuneration committee, disclose the fact and that processes it for setting employs and the level composition of for remuneration directors and senior and executives ensuring that such is remuneration appropriate and not excessive. Recommendation 8.2 and listed entity should A its separately disclose practices policies the regarding remuneration of non- executive directors and of remuneration the executive directors and other senior executives. Recommendation 8.3 A listed entity which has equity-based an scheme remuneration should: a) have a policy on whether participants are permitted to into enter transactions through (whether of the or derivatives otherwise) which limit the economic risk of participating in the scheme; and b) disclose that policy or a summary of it. use As of 24 September 2015, the Board has resolved that Chew Wai Chuen is no longer a member of the Remuneration Committee. Yes Remuneration Policy Website Non-Executive Directors are to be paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non- Executive Directors. Managing Director remuneration is set by the Board with the executive director in question not present. Full details regarding the remuneration of Directors has been included in the Remuneration Report within the Annual Report. Executives and Non-Executive Directors are prohibited transactions or arrangements which limit the economic risk of participating in unvested entitlements. from entering into Yes Remuneration Policy Website 56 For personal use onlyPotash West NL A.C.N. 147 346 334 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 For the year ended 30 June 2015 For the year ended 30 June 2014 Note $ $ INCOME FROM CONTINUING ACTIVITIES Geological services Administrative services Interest Government grant TOTAL INCOME EXPENSES Administration Depreciation Equity based payments Exploration Legal Occupancy Remuneration (excluding share based payments) Share of net losses of associates 19 - 38,147 24,010 - 62,157 743,853 15,026 341,635 685,806 72,069 62,000 662,764 350,007 660 35,595 10,120 558,721 605,096 735,642 20,719 67,735 777,352 57,750 71,000 697,402 - LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX (2,871,003) (1,822,505) INCOME TAX BENEFIT 4 - - NET LOSS FOR THE YEAR OTHER COMPREHENSIVE INCOME (2,871,003) - (1,822,505) - TOTAL COMPREHENSIVE LOSS FOR THE YEAR LOSS FOR THE YEAR ATTRIBUTABLE TO: Members of the controlling entity Non controlling interest TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Members of the controlling entity Non controlling interest (2,871,003) (1,822,505) (2,859,357) (11,646) (2,871,003) (2,859,357) (11,646) (2,871,003) - - - - - - Basic and diluted loss per share (cents per share) 7 1.33 1.72 The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 57 For personal use only Potash West NL A.C.N. 147 346 334 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other assets Total Current Assets NON CURRENT ASSETS Exploration and evaluation Investment in associate Financial assets Plant and equipment Total Non Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY As at 30 June 2015 $ As at 30 June 2014 $ Note 8 9 10 11 12 13 14 15 16 17 18 1,542,256 75,638 13,860 1,631,754 2,500,000 - 75,000 53,513 2,628,513 4,260,267 390,327 60,210 450,537 450,537 164,270 48,133 18,804 231,207 2,500,000 100,000 - 65,580 2,665,580 2,896,787 297,490 46,281 343,771 343,771 3,809,730 2,553,016 16,718,598 687,091 (13,595,959) 3,809,730 12,754,631 523,341 (10,724,956) 2,553,016 The consolidated statement of financial position should be read in conjunction with the accompanying notes. 58 For personal use only Potash West NL A.C.N. 147 346 334 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Issued Capital Accumul ated Losses Share and Option Based Payment Reserve Total $ $ $ $ At 1 July 2013 Note Opening Balance 11,725,227 (8,902,451) 455,606 3,278,382 Loss for the year Other comprehensive income (net of tax) Total comprehensive loss for the year (net of tax) Transactions with owners in their capacity as owners: Shares issued Share issue transaction costs Share and option based payments Balance at 30 June 2014 Balance at 1 July 2014 Loss for the year Other comprehensive income (net of tax) Total comprehensive loss for the year (net of tax) Transactions with owners in their capacity as owners: Shares issued Share issued transaction costs Share and option based payments Balance as at 30 June 2015 - - - (1,822,505) - (1,822,505) 1,204,395 (116,807) 19 - - - - - - - - - (1,822,505) - (1,822,505) 1,204,395 (116,807) 9,552 9,552 12,812,815 (10,724,956) 465,158 2,553,017 12,812,815 (10,724,956) 465,158 2,553,017 - - - (2,871,003) - (2,871,003) - - - (2,871,003) - (2,871,003) 4,283,160 (319,194) 19 - - - - 4,283,160 - (319,194) 163,750 163,750 16,776,781 (13,595,959) 628,908 3,809,730 The consolidated statement of changes in equity should be read in conjunction with the accompanying condensed notes. 59 For personal use only Potash West NL A.C.N. 147 346 334 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 OPERATING ACTIVITIES Payments to suppliers and employees Government grant received R&D tax rebate Interest received NET CASH FLOWS USED IN OPERATING ACTIVITIES INVESTING ACTIVITIES Purchase of plant and equipment Payment for equity investments NET CASH FLOWS USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Proceeds from issue of shares Share issue costs NET CASH FLOWS FROM FINANCING ACTIVITIES For the year ended 30 June 2015 For the year ended 30 June 2014 Note $ $ (2,420,853) - - 24,010 (2,396,843) (2,491,516) 11,139 547,582 10,120 (1,922,676) 23 - (75,000) (75,000) - (100,000) (100,000) 4,100,278 (250,445) 3,849,833 1,146,211 (116,807) 1,029,404 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 1,377,990 (993,272) 164,270 1,157,541 8 1,542,260 164,270 The consolidated statement of cash flows should be read in conjunction with the accompanying notes. 60 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements Note 1: Corporate information In March 2014, Potash West entered into an agreement with RL Holdings Pty Ltd and Lufgan Nominees Pty Ltd, which allows the Company to earn up to a 55% interest in East Exploration, which holds a potash project in Germany. The Company has subscribed the shares in East Exploration in different tranches and on 4 May 2015, the Company has settled the final payment and increased the its ownership of East Exploration to 55%. To this effect, the financial statements of Potash West and East Exploration are consolidated for reporting purposes. The financial report of Potash West NL for the year ended 30 June 2015 was authorised for issue in accordance with a resolution of directors on 30 September 2015. Potash West NL is a company limited by shares incorporated in Australia the shares of which are publicly traded on the Australian Securities Exchange (ASX), OTC Pink and the Frankfurt Stock Exchange. East Exploration Pty Ltd is a privately owned propriety company limited by shares incorporated in Australia. The nature of operations and principal activities of the Consolidated Entity are described in the directors’ report. Note 2: Statement of significant accounting policies (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, Accounting Standards and Interpretations and complies with other requirements of the law. Potash West NL is a for-profit entity for the purpose of preparing the financial statements. The accounting policies detailed below have been consistently throughout the year presented unless otherwise stated. The financial report has also been prepared on a historical cost basis. Cost is based on the fair values of the consideration given in exchange for assets. The financial report is presented in Australian dollars. The company is a listed public company, incorporated in Australia and operating in Australia. The entity’s principal activities are mineral exploration. (b) Adoption of new and revised standards The Company has adopted the following new and amended Australian Accounting Standard and AASB Interpretations for the reporting year ended 30 June 2015: Reference Title AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement. Application date of standard Application date for Group 1 January 2014 1 July 2014 61 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (b) Adoption of new and revised standards (continued) Reference Title Interpretation 21 AASB 2013-3 AASB 2013-4 AASB 2013-5 AASB 2013-7 AASB 1031 Levies This Interpretation confirms that a liability to pay a levy is only recognised when the activity that triggers the payment occurs. Applying the going concern assumption does not create a constructive obligation. Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets. The amendments include the requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting [AASB 139] AASB 2013-4 amends AASB 139 to permit the continuation of hedge accounting in specified circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations. Amendments to Australian Accounting Standards – Investment Entities [AASB 1, AASB 3, AASB 7, AASB 10, AASB 12, AASB 107, AASB 112, AASB 124, AASB 127, AASB 132, AASB 134 & AASB 139] These amendments define an investment entity and require that, with limited exceptions, an investment entity does not consolidate its subsidiaries or apply AASB 3 Business Combinations when it obtains control of another entity. These amendments require an investment entity to measure unconsolidated subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. These amendments also introduce new disclosure requirements for investment entities to AASB 12 and AASB 127. Amendments to AASB 1038 arising from AASB 10 in relation to consolidation and interests of policyholders [AASB 1038] AASB 2013-7 removes the specific requirements in relation to consolidation from AASB 1038, which leaves AASB 10 as the sole source of consolidation requirements applicable to life insurance entities. Materiality The revised AASB 1031 is an interim standard that cross- references to other Standards and the Framework (issued December 2013) that contain guidance on materiality. AASB 1031 will be withdrawn when references to AASB 1031 in all Standards and Interpretations have been removed. AASB 2014-1 Part C issued in June 2014 makes amendments to eight Australian Accounting Standards to delete their references to AASB 1031. The amendments are effective from 1 July 2014*. 62 Application date of standard Application date for Group 1 January 2014 1 July 2014 1 January 2014 1 July 2014 1 January 2014 1 July 2014 1 January 2014 1 July 2014 1 January 2014 1 July 2014 1 January 2014 1 July 2014 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Application date of standard Application date for Group ^ ^ 1 July 2014 1 July 2014 Note 2: Statement of significant accounting policies (continued) (b) Adoption of new and revised standards (continued) Reference Title AASB 2013-9 AASB 2014-1 Part A -Annual Improvements 2010–2012 Cycle Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments The Standard contains three main parts and makes amendments to a number of Standards and Interpretations. Part A of AASB 2013-9 makes consequential amendments arising from the issuance of AASB CF 2013-1. Part B makes amendments to particular Australian Accounting Standards to delete references to AASB 1031 and also makes minor editorial amendments to various other standards. Part C makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6 Hedge Accounting into AASB 9 Financial Instruments. AASB 2014-1 Part A: This standard sets out amendments to Australian Accounting Standards arising from the issuance by the International Accounting Standards Board (IASB) of International Financial Reporting Standards (IFRSs) Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle. Annual Improvements to IFRSs 2010–2012 Cycle addresses the following items: ► AASB 2 - Clarifies the definition of 'vesting conditions' and 'market condition' and introduces the definition of 'performance condition' and 'service condition'. ► AASB 3 - Clarifies the classification requirements for contingent consideration in a business combination by removing all references to AASB 137. ► AASB 8 - Requires entities to disclose factors used to identify the entity's reportable segments when operating segments have been aggregated. An entity is also required to provide a reconciliation of total reportable segment assets to the entity's total assets. ► AASB 116 & AASB 138 - Clarifies that the determination of accumulated depreciation does not depend on the selection of the valuation technique and that it is calculated as the difference between the gross and net carrying amounts. AASB 124 - Defines a management entity providing KMP services as a related party of the reporting entity. The amendments added an exemption from the detailed disclosure requirements in paragraph 17 of AASB 124 Related Party Disclosures for KMP services provided by a management entity. Payments made to a management entity in respect of KMP services should be separately disclosed. 63 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Application date of standard Application date for Group 1 July 2014 1 July 2014 1 July 2014 1 July 2014 1 July 2014 1 July 2014 Note 2: Statement of significant accounting policies (continued) (b) Adoption of new and revised standards (continued) Reference Title AASB 2014-1 Part A -Annual Improvements 2011–2013 Cycle Amendments to Australian Accounting Standards - Part B Defined Benefit Plans: Employee Contributions (Amendments to AASB 119) Amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2 Disclosure Requirements [AASB 1053] Annual Improvements to IFRSs 2011–2013 Cycle addresses the following items: ► AASB 13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all contracts within the scope of AASB 139 or AASB 9, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in AASB 132. AASB 140 - Clarifies that judgment is needed to determine whether an acquisition of investment property is solely the acquisition of an investment property or whether it is the acquisition of a group of assets or a business combination in the scope of AASB 3 that includes an investment property. That judgment is based on guidance in AASB 3. AASB 2014-Part B makes amendments in relation to the requirements for contributions from employees or third parties that are set out in the formal terms of the benefit plan and linked to service. The amendments clarify that if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the related service is rendered, instead of attributing the contributions to the periods of service. The Standard makes amendments to AASB 1053 Application of Tiers of Australian Accounting Standards to: • clarify that AASB 1053 relates only to general purpose financial statements; • make AASB 1053 consistent with the availability of the AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors option in AASB 1 First-time Adoption of Australian Accounting Standards; • clarify certain circumstances in which an entity applying Tier 2 reporting requirements can apply the AASB 108 option in AASB 1; permit an entity applying Tier 2 reporting requirements for the first time to do so directly using the requirements in AASB 108 (rather that applying AASB 1) when, and only when, the entity had not applied, or only selectively applied, applicable recognition and measurement requirements in its most recent previous annual special purpose financial statements; and specify certain disclosure requirements when an entity resumes the application of Tier 2 reporting requirements. ^ The application dates of AASB 2013-9 are as follows: Application date for the Group: period ending 30 June 2014 Part A – periods ending on or after 20 Dec 2013 Part B - periods beginning on or after 1 January 2014 Application date for the Group: period beginning 1 July 2014 Part C - reporting periods beginning on or after 1 January 2015 Application date for the Group: period beginning 1 July 2015 The adoption of these new and revised standards has not resulted in any significant changes to the Company's accounting policies or to the amounts reported for the current or prior periods. 64 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (b) Adoption of new and revised standards (continued) Accounting Standards and Interpretations issued but not yet effective: Reference Title Application date of standard Application date for Group AASB 9 Financial Instruments 1 January 2018 1 July 2018 AASB 2014-3 AASB 2014-4 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations [AASB 1 & AASB 11] Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to AASB 116 and AASB 138) 1 January 2016 1 July 2016 1 January 2016 1 July 2016 AASB 15 Revenue from Contracts with Customers 1 January 2017 1 July 2017 AASB 2014-9 AASB 2014-10 AASB 2015-1 AASB 2015-2 AASB 2015-3 AASB 2015-4 AASB 2015-5 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements 1 January 2016 1 July 2016 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012–2014 Cycle Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 1 January 2016 1 July 2016 1 January 2016 1 July 2016 1 January 2016 1 July 2016 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality 1 July 2015 1 July 2015 Amendments to Australian Accounting Standards – Financial Reporting Requirements for Australian Groups with a Foreign Parent Amendments to Australian Accounting Standards – Investment Entities: Applying the Consolidation Exception 1 July 2015 1 July 2015 1 July 2015 1 July 2015 The impact of the above new and revised standards is yet to be determined. (c) Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS). (d) Critical accounting estimates and judgements The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. 65 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (d) Critical accounting estimates and judgements (continued) The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the year in which the estimate is revised if it affects only that year or in the year of the revision and future years if the revision affects both current and future years. Share-based payment transactions The Company measures the share-based payment transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 18. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only when management considers that it is probable that sufficient future tax profits will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits over the next two years together with future tax planning strategies. Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Company decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. (e) Share-based payment transactions Employees (including senior executives) of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity- settled transactions). The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in equity based payments expense (Note 18). No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting are conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. When the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. 66 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (e) Share-based payment transactions (continued) When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non- vesting conditions within the control of either the entity or the employee are not met. 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 awards are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further details are given in Note 7). (f) Going concern This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business. The Company has incurred a net loss for the year ended 30 June 2015 of $2,871,003 (2014: $1,822,505) and experienced net cash outflows from operating activities of $2,396,843 (2014: $1,922,676). At the end of the reporting year, the Directors recognise the need to raise additional funds via equity raising to fund future planned exploration activities. The Directors have reviewed the Company’s financial position and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Company will be successful in securing additional funds through the equity issue. Should the Company not achieve the matters set out above, there is significant uncertainty whether the Company will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The financial report does not contain any adjustments relating to the recoverability and classification of recorded assets or to the amounts or classification of recorded assets or liabilities that might be necessary should the Company not be able to continue as a going concern. (g) Exploration and evaluation expenditure Exploration and evaluation costs are written off in the year they are incurred apart from acquisition costs which are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Where an area of interest is abandoned or the directors decide that it is not commercial, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. 67 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (h) Plant & equipment Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: Plant and equipment – over two to 15 years 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. 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. If any indication exists of impairment and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater of fair value less costs to sell 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. Derecognition An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income in the period the item is derecognised. (i) Income tax Current tax assets and liabilities for the current year and prior periods are measured at amounts expected to be recovered from or paid to the taxation authorities based on the current year’s taxable income. The tax rates and tax laws used for computations are enacted or substantively enacted by the balance date. Deferred income tax is provided on all temporary differences at balance 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 goodwill 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. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits 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. The carrying amount of deferred income tax assets is reviewed at each balance 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. 68 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (i) Income tax (continued) Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. 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 date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of comprehensive income. 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. (j) GST Revenues, expenses and assets are recognised net of the amount of GST except: • where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (k) Provisions and employee benefits Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company 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 statement of comprehensive income net of any reimbursement. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance date. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. 69 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (k) Provisions and employee benefits (continued) Employee leave benefits i. Wages and salaries, annual leave and sick leave Liabilities for wages and salaries including non-monetary benefits, annual leave and accumulating sick leave due to be settled within 12 months of the reporting date are recognised in provisions in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. ii. Long service leave The liability for long service leave is recognised 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 the 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 on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (l) Cash and cash equivalents Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (m) Receivables Receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less an allowance for any uncollectible amounts. Collectability or receivables are reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified. An allowance for doubtful debts is raised when there is objective evidence that the Company will not be able to collect the debt. (n) Prepayments Prepayment for goods and services which are to be provided in future years are recognised as prepayments. Prepayments are recorded in the other assets in the balance sheet. (o) Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest Income Income is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. 70 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (o) Revenue recognition (continued) Fee Income Revenue from geological services provided is recognised as the services are rendered, the revenue and the costs incurred or to be incurred in respect of the transactions can be measured reliably and the economic benefits associated with the transaction will flow to the Company. 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 over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset. When the Company receives non-monetary grants, the asset and the grant are recorded gross at nominal amounts and released to the income statement over the expected useful life and pattern of consumption of the benefit of the underlying asset by equal annual instalments. When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional government grants. (p) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (q) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. (r) Earnings per share Basic earnings per share is calculated as net profit attributable to members of the Company adjusted to exclude any costs of servicing equity (other than dividends) divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the Company adjusted for: • • costs of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; • divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (s) Investments and other financial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to- maturity investments, or available-for-sale financial assets. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Company determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. 71 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (s) Investments and other financial assets (continued) (i) Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Company has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Investments that are intended to be held-to maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit and loss when the investment are derecognised or impaired, as well as through the amortisation process. (ii)Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit and loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. (t) Impairment of financial assets The Company assesses at each balance date whether a financial asset or group of financial assets is impaired. Available-for-sale investments If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost and its current fair value, less any impairment loss previously recognised in profit and loss, is transferred from equity to the statement of comprehensive income. Reversals of impairment losses for equity instruments classified as available-for-sale are not recognised in profit. Reversals of impairment losses for debt instruments are reversed through profit and loss if the increase in an instrument’s fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss. (u) Leases Operating Lease payments are recognised as an operating expense in the statement of comprehensive income on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and the reduction of the liability. (v) Investment in associate The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date. The consolidated statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. 72 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 2: Statement of significant accounting policies (continued) (v) Investment in associate (continued) The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognises the loss as ‘Share of profit of an associate’ in the statement of profit or loss. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. (w) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. The comparative figures are for the Company only as it acquired the controlled entity during the year ended 30 June 2015. Note 3: Segment information The Company has based its operating segment on the internal reports that are reviewed and used by the executive management team (“Chief Operating Decision Makers”) in assessing performance and in determining the allocation of resources. The Company currently does not have production and is only involved in exploration. As a consequence, activities in the operating segment are identified by management based on the manner in which resources are allocated, the nature of the resources provided and the identity of the manager and country of expenditure. Information is reviewed on a whole of entity basis. Based on these criteria the Company has only one operating segment, being exploration, and the segment operations and results are reported internally based on the accounting policies as described in Note 2 for the computation of the Company’s results presented in this set of financial statements. 73 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 4: Income tax (a) Income tax expense/(benefit) Current tax Deferred tax Adjustments for current tax of prior years Total tax expense/(benefit) 2015 $ 2014 $ - - - - - - - - (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense (2,871,003) (1,822,505) Prima facie tax benefit at the Australian tax rate of 30% (861,300) (546,751) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Share based payment Non-deductible expenses Non-assessable income Capital raising costs deductible Deferred tax assets not brought to account Income tax expense/(benefit) (c) Deferred tax assets Accrued expenses Business related deduction Employee entitlement provisions Tax losses Deferred tax asset not recognised Offset against deferred tax liabilities Net deferred tax assets (d) Deferred tax liabilities Exploration tenement Offset against deferred tax assets Net deferred tax liabilities 74 102,491 6,370 - - 752,441 - 9,380 163,991 23,509 3,401,294 3,598,175 (2,848,175) 750,000 (750,000) - 750,000 750,000 (750,000) - - 7,366 (164,275) (35,042) 738,702 - 7,500 - 13,884 3,920,326 3,941,710 (3,191,710) 750,000 (750,000) - 750,000 750,000 (750,000) - For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 5: Directors’ and Executives’ remuneration Short-term employee benefits Post-employment benefits Termination benefits Share-based payment Total compensation Note 6: Auditor’s remuneration Remuneration of the auditor of the Company for: - auditing or reviewing the financial report - research & development tax concession - tax agent Note 7: Earnings per share Basic loss per share (cents per share) Diluted loss per share (cents per share) Net loss Loss used in calculating basic and diluted loss per share 2015 $ 2014 $ 523,280 46,965 531,034 49,333 - - 40,719 24,888 610,964 605,255 2015 $ 2014 $ 42,745 17,909 - 60,654 42,745 33,440 4,632 80,817 2015 $ 1.33 1.33 (2,871,003) (2,871,003) 2014 $ 1.72 1.72 (1,822,505) (1,822,505) Number Number Weighted average number of ordinary shares used in the calculation of basic and diluted (loss)/earnings per share 215,683,626 106,144,476 During the year there were no listed or key management personnel options exercised. The options issued under Employee Option Plan (EOP) are not considered dilutive for the purpose of the calculation of diluted earnings/loss per share as their conversion to ordinary shares would not decrease the net profit from continuing operations per share. Consequently, diluted earnings/loss per share is the same as basic earnings per share. Subsequent to the reporting date, the Company undertook a capital raising, raising a total of $1.8 million before costs at $0.04 per share. As of the reporting date, the company has received $379,000 and a further $721,000 was received subsequent to 30 June 2015. A total of 27,500,000 ordinary shares have been issued as a result of the capital raising and that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements. 75 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 8: Cash and cash equivalents Cash at bank and on hand Reconciliation of cash and cash equivalents 30-Jun-15 $ 1,542,256 1,542,256 30-Jun-14 $ 164,270 164,270 Cash at the end of financial period is shown in the Statement of Cash Flows is reconciled to items in the Statement of Financial Position as follows: Cash and cash equivalents 1,542,256 164,270 Note 9: Trade and other receivables Trade debtors GST Receivables 30-Jun-15 $ 30-Jun-14 $ 37,924 37,714 75,638 14,837 33,296 48,133 (i) Non-trade debtors are non-interest bearing and are generally on 30-90 days terms. The carrying amounts of these receivables represent fair value and are not considered to be impaired. Note 10: Other assets Prepayments Note 11: Exploration expenditure Acquisition of mineral rights - Dandaragan Trough tenements 30-Jun-15 $ 30-Jun-14 $ 13,860 13,860 18,804 18,804 30-Jun-15 $ 30-Jun-14 $ 2,500,000 2,500,000 2,500,000 2,500,000 The ultimate recoupment of acquisition costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or scale of the respective ar 76 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 12: Investment in associate Opening Balance 30-Jun-15 $ 100,000 30-Jun-14 $ 100,000 Further investment - East Exploration Pty Ltd Further investment - East Exploration Pty Ltd Further investment - East Exploration Pty Ltd Further investment - East Exploration Pty Ltd Share of associated company's losses after income tax 50,000 50,000 100,000 50,007 (350,007) - - - - - Balance at the end of the financial year - 100,000 On 7 May 2015, the investment in East Exploration Pty Ltd ceased to be an associate when the Company acquired a 55% interest in East Exploration Pty Ltd. The investment is now treated as a subsidiary. Refer to note 25 for details. Note 13: Financial assets Investment – Lepidico 30-Jun-15 $ 30-Jun-14 $ 75,000 75,000 - - During the year, the Company subscribed to shares in Lepidico Ltd, a technology developer which has developed a process of extracting Lithium from Lithium bearing micas. Note 14: Plant and equipment At 30 June 2014 Cost Accumulate depreciation Closing net carrying value Year ended 30 June 2015 Office Equipment $ Plant and Equipment $ Computer Software $ Total $ 16,078 (9,581) 6,497 72,835 (34,756) 42,451 (21,447) 38,079 21,004 131,364 (65,784) 65,580 Opening net carrying value Additions Depreciation charge for the year 6,497 2,959 (2,185) 38,079 - (7,604) 21,004 - (5,237) 65,580 2,959 (15,026) Closing net carrying value 7,271 30,475 15,767 53,513 77 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 15: Trade and other payables Current Unsecured liabilities Trade payables Ageing Analysis 30 June 2015 Financial assets Trade and other receivables Financial liabilities Trade and other payables Loans and borrowings Net Maturity 30 June 2014 Financial assets Trade and other receivables Financial liabilities Trade and other payables Loans and borrowings 30-Jun-15 $ 30-Jun-14 $ 390,327 390,327 297,490 297,490 Current 90 - 120 Days 120 - 180 Days 180 + Days Total 75,638 390,327 - (314,690) - - - - - - - - - 75,638 - 390,327 - - - (314,690) Current 90 - 120 Days 120 - 180 Days 180 + Days Total 46,525 1,608 297,490 - - - - - - - - 48,133 - 297,490 - - - (249,357) Net Maturity (250,965) 1,608 Due to short term nature of these payables, their carrying value is assumed to approximate their fair value. Note 16: Provisions Employee benefits 30-Jun-15 $ 30-Jun-14 $ 60,210 60,210 46,281 46,281 78 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 17: Contributed equity 30-Jun-15 30-Jun-14 No. $ No. $ Ordinary shares - fully paid Contributing Shares - partly paid 200,929,615 35,960,024 17,111,805 - 113,806,148 35,960,024 13,047,840 - 236,889,639 17,111,805 149,766,172 13,047,840 Effective 1 July 1998, the corporation legislation abolished the concepts of authorised capital and par value shares. Accordingly, the Company does not have authorised capital or par value in respect of its issued shares. Fully paid ordinary shares carry one vote per share and carry the rights to dividends. When managing capital (which is defined as the Company's total equity amounting $3,809,730, (2014: $2,553,016), the Board'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. The Board also aims to maintain a capital structure that ensures the lowest cost of capital available for future exploration and development activity. The Company is not subject to any externally imposed capital requirements. Movements in ordinary shares on issue of the legal parent are: At the beginning of reporting year Issue of 2,000,000 shares via private share placement Issue of 8,174,790 shares via non-renounceable entitlement issue Issue of 10,649,423 shares via non-renounceable entitlement shortfall issue Issue of 460,871 shares to directors and senior management via remuneration sacrifice share plan Issue of 500,000 shares to consultant in lieu of services provided Issue of 23,607,857 shares via private share placement Issue of 56,400,000 shares via private share placement Issue of 1,250,000 shares to consultant in lieu of services provided Issue of 1,000,000 shares to acquire exploration license Issue of 250,000 shares to consultant in lieu of services provided Issue of 1,600,000 shares via private share placement Issue of 2,000,000 shares to consultant via employees share plan Isuse of 100,000 shares to transfer the tenements Issue of 390,045 shares to directors and senior management via remuneration sacrifice share plan Issue of 473,402 shares to directors and senior management via remuneration sacrifice share plan Issue of 20,913 shares to directors and senior management via remuneration sacrifice share plan Issue of 31,250 shares to directors and senior management via remuneration sacrifice share plan Shares to be issued via private share placement Shares to be issued under the director and senior management fee and remuneration sacrifice share plan Note 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 17.9 17.1 17.11 17.12 17.13 17.14 17.15 17.16 17.17 17.20 17.21 Reserved shares At the end of the reporting year 79 2015 Number 2014 Number 113,806,148 92,021,064 2,000,000 8,174,790 10,649,423 460,871 500,000 23,607,857 56,400,000 1,250,000 1,000,000 250,000 1,600,000 2,000,000 100,000 390,045 473,402 20,913 31,250 9,475,000 600,440 211,005,055 113,806,148 (3,150,000) (1,150,000) 207,855,055 112,656,148 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 17: Contributed equity (continued) Movements in ordinary shares on issue of the legal parent are (continued): At the beginning of reporting year Issue of 2,000,000 shares via private share placement Issue of 8,174,790 shares via non-renounceable entitlement issue Issue of 10,649,423 shares via non-renounceable entitlement shortfall issue Issue of 460,871 shares to directors and senior management via remuneration sacrifice share plan Issue of 500,000 shares to consultant in lieu of services provided Shares to be issued to Steda Nominees Pty Ltd via private share placement Shares to be issued under the director and senior management fee and remuneration sacrifice share plan Issue of 23,607,857 shares via private share placement Issue of 56,400,000 shares via private share placement Issue of 1,250,000 shares to consultant in lieu of services provided Issue of 1,000,000 shares to acquire exploration license Issue of 250,000 shares to consultant in lieu of services provided Issue of 1,600,000 shares via private share placement Issue of 2,000,000 shares to consultant via employees share plan Isuse of 100,000 shares to transfer the tenements Issue of 390,045 shares to directors and senior management via remuneration sacrifice share plan Issue of 473,402 shares to directors and senior management via remuneration sacrifice share plan Issue of 20,913 shares to directors and senior management via remuneration sacrifice share plan Issue of 31,250 shares to directors and senior management via remuneration sacrifice share plan Shares to be issued via private share placement Shares to be issued under the director and senior management fee and remuneration sacrifice share plan Equity raising costs Note 17.1 17.2 17.3 17.4 17.5 17.18 17.19 17.6 17.7 17.8 17.9 17.10 17.11 17.12 17.13 17.14 17.15 17.16 17.17 17.20 17.21 17.22 Reserved shares At the end of the reporting year 2015 $ 2014 $ 13,047,840 11,960,253 200,000 408,740 532,471 24,887 25,000 5,000 8,296 821,275 2,820,000 43,750 50,000 12,500 80,000 100,000 5,000 15,903 21,303 1,004 1,250 379,000 32,175 (319,194) (116,807) 17,111,806 13,047,840 (335,025) (235,025) 16,776,781 12,812,815 80 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 17: Contributed equity (continued) Movements in partly paid contributing shares on issue of the legal parent are: Note 2015 Number 2014 Number At the beginning of reporting year 35,960,024 - Issue of 35,960,024 partly paid contributing shares pursuant to non- renounceable entitlement issue 17.23 At the end of the reporting year - 35,960,024 35,960,024 35,960,024 Outstanding amount per partly paid contributing share at 30 June 2015 is $0.049 (2014: $0.049). The partly paid contributing share are issued with 35,960,024 outstanding calls of 4.9 cents each. The dates for the future calls are not before 30 June 2015. The partly paid contributing share carry a right to a dividend on the same basis as holders of Ordinary Shares. Partly paid contributing shares carry the right to vote in proportion which the amount paid (not credited) bears to the total amounts paid and payable (excluding amounts credited). The company has the power to forfeit any shares where the call remains unpaid 14 days after the call was payable. The company must then offer the shares forfeited for public auction within six weeks of the call becoming payable. 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 17.9 The issue of 2,000,000 shares at $0.10 per share via private share placement. The issue of 8,174,790 shares to existing shareholders at $0.05 per share via non-renounceable entitlement issue. The issue of 10,649,423 shares to existing shareholders at $0.05 per share via non-renounceable entitlement shortfall issue. The issue of 460,871 shares to directors and senior management at $0.054 per share via director fee and remuneration sacrifice share plan. The issue of 500,000 shares to consultant at $0.05 per share in lieu of services provided. The issue of 23,607,857 shares at $0.035 per share via private share placement. The issue of 56,400,000 shares at $0.05 per share via private share placement. The issue of 1,250,000 shares to consultant at $0.035 per share in lieu of services provided. The issue of 1,000,000 shares to Dempsey Minerals Ltd and Fyfehill at $0.05 per share for exploration license. 17.10 The issue of 250,000 shares to General Resources GmbH at $0.05 per share in lieu of services provided 17.11 The issue of 1,600,000 shares at $0.05 per share via private share placement. 17.12 The issue of 2,000,000 shares to consultants at $0.05 per share. 17.13 The issue of 100,000 shares to Richmond Resources Pty Ltd at $0.05 per share for transferring the tenements. 17.14 The issue of 390,045 shares to directors and senior management via director fee and remuneration sacrifice share plan at $0.044 per share. 17.15 The issue of 473,402 shares to directors and senior management via director fee and remuneration sacrifice share plan at $0.0455 per share. 17.16 The issue of 20,913 shares to directors and senior management via director fee and remuneration sacrifice share plan at $0.048 per share. 17.17 The issue of 31,250 shares to directors and senior management via director fee and remuneration sacrifice share plan at $0.04 per share. 17.18 Shares to be issued to Steda Nominees Pty Ltd at $0.05 per share via private share placement. 17.19 Shares to be issued to directors and senior management via director fee and remuneration sacrifice share plan. Shares have not yet been issued, with the number of shares to be determined at issue date, dependent on the market share price. 81 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 17: Contributed equity (continued) 17.20 Shares to be issued to subscribers at $0.04 per share via private share placement. 17.21 Shares to be issued to directors and senior management via director fee and remuneration sacrifice share plan. Shares have not yet been issued, with the number of shares to be determined at issue date, dependent on the market share price. 17.22 For the year 2015, the payment of costs incurred by the Company in relation to equity raising and listing of the Company's shares and of $319,194 (2014: $116,807). 17.23 The issue of 35,960,024 partly paid contributing shares pursuant to non-renounceable entitlement bonus issue. Note 18: Share based payment reserve Note 30-Jun-15 Number 30-Jun-14 Number At the beginning of reporting year 4,950,000 4,450,000 Issue of 500,000 options for option based payment Issue of 429,688 options for option based payment Issue of 1,562,500 options for option based payment Issue of 2,000,000 reserve shares treated as in substance options 18.1 18.2 18.3 17.12 429,688 1,562,500 2,000,000 500,000 - - - At the end of the reporting year 8,942,188 4,950,000 Note 30-Jun-15 $ 30-Jun-14 $ At the beginning of reporting year 523,341 455,606 Amount expensed for options issued to consultant. 500,000 options with exercise price of $0.15 Amount expensed for options issued to consultant. 429,688 options with exercise price of $0.087 Amount expensed for options issued to consultant. 1,562,500 options with exercise price of $0.087 Amount expensed for shares (in substance options) issued to consultant in lieu of services provided. 2,000,000 share at $0.05 per share 18.1 18.2 18.3 17.12 - 9,552 13,750 50,000 100,000 - - - At the end of the reporting year 628,908 465,158 18.1 The issue of 500,000 $0.15 options exercisable on or before 7 February 2017 on 6 February 2014 to consultant. Please refer to Note 18 for further explanation. 18.2 The issue of 429,688 $0.087 options exercisable on or before 6 November 2017 on 6 November 2014 to consultant. Please refer to Note 18 for further explanation. 18.3 The issue of 1,562,500 $0.087 options exercisable on or before 6 November 2017 on 6 November 2014 to consultant. Please refer to Note 18 for further explanation. 82 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 19: Equity based payments Expenses arising from share-based payment and option-based payment transactions Total expenses arising from share-based payment transactions recognised during the year were as follows: Options issued in consideration for services. See note 18.2 and 18.3 Shares issued under the director and senior management fee and remuneration sacrifice share plan. See note 17.4, 17.19, 17.14, 17.15, 17.16, 17.17 and 17.21. Shares issued in consideration of services. See note 17.8, 17.9, 17.10 and 17.12. 30-Jun-15 $ 63,750 30-Jun-14 $ 9,552 71,635 33,183 206,250 25,000 341,635 67,735 During 2015 financial year, 1,992,188 options were issued to consultant as part of the fees paid to consultants for capital raising. The fair value of options granted under this plan is calculated using 5-day VWAP plus a 50% premium prior to the issue and the term of the options is 3 years. On 20 October 2014, the Company issued 1,250,000 shares at $0.035 per share and further 1,000,000 shares and 250,000 shares at $0.05 per share to consultants in lieu of cash payments for services provided. This issue has been approved by shareholders at the 2014 AGM. On 7 January 2015, the Company issued 2,000,000 shares (in substance options) to consultants under the Employee Share Plan ("ESP"). The fair value of the shares issued is at market value $0.05 per share. Under the Management fee and remuneration sacrifice share plan, the eligible directors and senior management of the Company may elect to sacrifice part of their directors’ fees or consulting fees to acquire Shares in the Company. Under the Plan, the relevant directors and senior management will receive the remainder of their directors’ fees or consulting fees in cash. As such, the Shares will be issued for nil cash consideration and will be valued at market fair value. The Plan has been approved by the shareholders during 2013 AGM. The associated shares for the sacrificed amount up to March 2015 have been issued to the directors who have elected to sacrifice part of their directors fees, with remaining associated shares to be issued in next financial year. During the 2014 financial year, 500,000 options were issued to consultants under the Employee Option Plan (EOP). The fair value of options granted under the EOP is estimated at the date of grant using a Black-Scholes option pricing methodology, taking into account the terms and services were valued at the market price at the date of issue as the value of the services received could not be reliably measured. Options issued during the period vested at grant date. On 8 April 2014 and 20 June 2014, a total of 500,000 shares were issued to consultants in lieu of services provided to the Company at a market value, $0.05 per share. The fair value of the shares and options granted for the year ended 30 June 2015 was estimated on the date of grant using the following assumptions: Dividend yield (%) Expected volatility* (%) Risk-free interest rate (%) Expected life (years) Share price ($) 30-Jun-15 Nil 75 2 3 See below tables: 30-Jun-14 Nil 75 2.5 3 See below tables: 83 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 19: Equity based payments (continued) Share-based payment plans Outstanding at 1 July Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at 30 June Exercisable at 30 June Share-based payment plans (to consultants) Outstanding at 1 July Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at 30 June Exercisable at 30 June Option-based payment plans Outstanding at 1 July Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at 30 June Exercisable at 30 June 2015 Number 2,110,871 915,610 - - - 3,026,481 - 2015 WAEP $0.1348 $0.0431 - - - $0.1071 - 2014 Number 1,150,000 960,871 - - - 2,110,871 - 2014 WAEP $0.2040 $0.0500 - - - $0.1348 - 2015 Number 2015 WAEP 2014 Number 2014 WAEP - - 4,500,000 - - - 4,500,000 - $0.0458 - - - $0.0458 - - - - - - - - - - - - - - - 2015 Number 2,600,000 2015 WAEP $0.3189 - - (1,250,000) - - $0.2800 2014 Number 2,600,000 - - - - 2014 WAEP $0.3189 - - - - 1,350,000 $0.3549 2,600,000 $0.3189 - - - - * Volatility was determined using considered judgement as to the volatility of the share price over the vesting period. Option-based payments (to consultants) Outstanding at 1 July Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at 30 June Exercisable at 30 June 2015 Number 1,200,000 1,992,188 - 2015 WAEP $0.2708 $0.0870 - (500,000) 2,692,188 - $0.3000 $0.1294 - 2014 Number 700,000 500,000 - - - 1,200,000 - 2014 WAEP $0.357 $0.150 - - - $0.2708 - 84 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 20: Commitments (i) The Company has certain obligations with respect to tenements and minimum expenditure requirements on areas, as follows: Within 1 year 1 to 2 years Total 30-Jun-15 $ 930,500 930,500 1,861,000 30-Jun-14 $ 1,000,500 1,000,500 2,001,000 The commitments may vary depending upon additions or relinquishments of the tenements, as well as farm-out agreements. The above figures are based on the mines department Emits reports as at 30 June 2015. These figures are adjusted at the anniversary date of each tenement and therefore the total can change on a monthly basis. (ii) Mr Patrick McManus was appointed as Managing Director on 23 November 2010. Pursuant to a revised agreement dated 23 November 2010, his reviewed salary is set at $275,000 per annum inclusive of 9.25% superannuation effective from 1 July 2013. The agreement can be terminated by either party by giving three months' notice or payment of three months' salary in lieu of notice being $68,750. Note 21: Contingent liabilities There are no contingent liabilities as at 30 June 2015 (2014: Nil). Note 22: Related party transactions Consulting fees were paid to Strategic Metallurgy Pty Ltd, a company of which Gary Johnson is a director and shareholder Corporate advisory fees and options were paid and issued to Precious Capital Pte Ltd, a company of which Chew Wai Chuen is a director and shareholder The issue of 100,000 shares to Richmond Resources Pty Ltd, a company of which Robert Van der Laan is a director and shareholder, at $0.05 per share for transferring the tenements. Fees were paid to Horn Resources Pty Ltd, a company of which Robert Van der Laan is a director and shareholder. Fees included investor relations, corporate advisory, office accommodation, accounting staff (excluding fees directly related to Robert Van der Laan), administrative staff and exploration staff. 30-Jun-15 $ 30-Jun-14 $ 157,270 340,785 196,300 57,600 5,000 - 337,769 696,339 409,093 807,478 The Company issued 15,000,000 shares to Barclay Wells Ltd for the Contingent Entitlement shares in 2011 year (Nil: 2015 year). The Contingent Entitlement share Trustee has entered into a declaration of trust under which it declares that it holds the Contingent Entitlement shares on trust for certain shareholders of the Company (‘Eligible Beneficiaries’), being those shareholders who hold at least 10,000 shares in the Company as the Listing Date and who hold at least one shares in the Company on the first Business Day following the date that all shares in respect of which the ASX imposes restrictions as a condition to the listing cease to e restricted securities (‘the Entitlement Date’). These shares are held in Share Plan Trust on behalf of the Company and accounted for as reserve shares with nil value. 85 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 22: Related party transactions (continued) During the prior year, the 15,000,000 Contingent Entitlement shares were transferred from the Share Plan Trust to the Eligible Beneficiaries accordingly. As at the date of this report , there were total 3,150,000 shares issued under the Employee Share Plan (ESP) accounted for as in-substance options (2014: 1,150,000 shares). The Company has provided each employee with a Resource Loan up to the amount payable in respect of the shares. The employee must repay the Loan in full prior to expiry of the Loan Term but may elect to repay the Loan Amount in respect of any or all of the Plan Shares at any time prior to expiry of the Loan Term. Note 23: Cash flow information 30-Jun-15 $ 30-Jun-14 $ Reconciliation of cash flow from operations with (loss)/profit from ordinary activities after income tax Loss from ordinary activities after income tax Share of associates loss Depreciation and amortisation Expenses settled via equity issues Changes in assets and liabilities (Increase)/decrease in receivables Increase/(decrease) in payables Increase/(decrease) in provisions Cash flows from operations (2,871,003) 350,000 15,026 338,887 (1,822,505) - 20,719 67,735 (22,560) (221,122) 13,929 (2,396,843) 49,957 (250,576) 11,994 (1,922,676) Note 24: Financial risk management objectives and policies The Company’s principal financial instruments comprise cash and short term deposits. The main purpose of the financial instruments is to finance the Company’s operations. The Company also has other financial instruments such as trade debtors and creditors which arise directly from its operations. The main risks arising from the Group’s financial instruments are interest rate risk and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below: Interest Rate Risk (a) The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out in the following table. Also included is the effect on profit and equity after tax if interest rates at that date had been 10% higher or lower with all other variables held constant as a sensitivity analysis. The Group has not entered into any hedging activities to manage interest rate risk. In regard to its interest rate risk, the Group continuously analyses its exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative investments and the mix of fixed and variable interest rates. 86 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 24: Financial risk management objectives and policies (continued) Weighted Average Effective Interest Rate % Floating Interest Rate $ Fixed Interest Rate $ Non Interest Bearing $ Interest Rate Risk Sensitivity -10% 10% Total $ Profit Equity Profit Equity $ $ $ $ 1.50 2015 Financial Assets Cash Receivables Total Financial Assets Financial Liabilities Trade creditors Total Financial Liabilities 1,115,395 - 1,115,395 426,862 75,638 1,542,257 - - 75,638 - 502,500 1,617,895 -1,171 -1,171 1,171 1,171 - - - - 390,327 390,327 390,327 390,327 Weighted Average Effective Interest Rate % Floating Interest Rate $ Fixed Interest Rate $ Non Interest Bearing $ Interest Rate Risk Sensitivity Total $ -10% Profit Equity 10% Profit Equity $ $ $ $ 2014 Financial Assets Cash Receivables Total Financial Assets Financial Liabilities Trade creditors Total Financial Liabilities 2.35 92,968 - 92,968 - - - - - - - 71,302 164,270 -153 -153 153 153 48,133 48,133 119,435 212,403 297,490 297,490 297,490 297,490 A sensitivity of 10% (2014: 10%) has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. A -10% sensitivity would move short term interest rates at 30 June 2015 from around 1.50% to 1.35% (2014: 2.35% to 2.12%) representing a 15.0 basis points (2014: 23.5 basis points) downwards shift, which is 10.5 basis points (2014: 16.5 basis points) net of tax. Based on the sensitivity analysis only interest revenue from variable rate deposits and cash balances is impacted resulting in a decrease or increase in overall income. Liquidity Risk (a) The Company manages liquidity risk by maintaining sufficient cash reserves and marketable securities required to meet the current exploration and administration commitments, through the continuous monitoring of actual cash flows. All payables are due within 30 days, which is consistent with the prior year. Fair Values (b) For financial assets and liabilities, the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form. 87 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 24: Financial risk management objectives and policies (continued) (d) Credit Risk Credit risk arises in the event that counterparty will not meet its obligations under a financial instrument leading to financial losses. The Company is exposed to credit risk from its operating activities, financing activities including deposits with banks. The credit risk control procedures adopted by the Company is to assess the credit quality of the institution with whom funds are deposited or invested, taking into account its financial position and past experiences. The maximum exposure to credit risk on financial assets of the Company which have been recognised on the statement of financial position is generally limited to the carrying amount. Cash is maintained with National Australia Bank. Note 25: Controlled entity Potash West NL is the ultimate parent entity of the consolidated group. The following was a controlled entity at the balance date and has been included in the consolidated financial statements. All shares held are ordinary shares. Name East Exploration Pty Ltd (i) Country of Incorporation Australia Percentage Interest Held % 2015 55% Date Acquired/Incorporated 7 May 2015 (i) On 24 April 2014, the Company entered into an agreement with Lufgan Nominees Pty Ltd and RL Holdings Pty Ltd to set up a new company called East Exploration Pty Ltd to acquire exploration permits in respect of the tenements and developing the tenements in Germany, which is the principal place of business. Upon signing of the Heads of Agreement, the Company agrees to subscribe 300,000 shares at $1.00 per share and further 66,666 shares at $0.0001 per share to acquire a total of up to 55% of East Exploration ("acquisition"). On 7 May 2015, the Company settled the final payment of $50,000 and completed the acquisition. As at 30 June 2015, there are no commitment or contingent liabilities in respect of the controlled entity. 88 For personal use only Potash West NL A.C.N. 147 346 334 Notes to Financial Statements (continued) Note 26: Parent entity disclosure Assets Current assets Non current assets Total Assets Liabilities Current liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Income/(Loss) for the year Other comprehensive income Total comprehensive income for the financial year Note 27: Subsequent events Parent 30-Jun-15 Parent 30-Jun-14 1,624,717 2,628,513 4,253,230 231,207 2,665,580 2,896,787 450,537 450,537 343,771 343,771 3,802,693 2,553,016 16,540,712 864,977 (13,602,996) 3,802,693 12,754,631 523,341 (10,724,956) 2,553,016 Parent 30-Jun-15 Parent 30-Jun-14 (2,778,040) - (1,822,505) - (2,778,040) (1,822,505) On 6 July 2015, the Company issued 27,500,000 shares at $0.04 per share, raising $1,100,000 before costs. This is part of the $1.8 million placement announced on 25 June 2015. On 18 August 2015, the Company agreed and its controlled entity entered into a term sheet with Davenport Resources Pty Ltd (“Davenport”), a wholly owned subsidiary of Arunta Resources Limited (“Arunta”), to sell 100% of East Exploration, which is the owner of South Harz Potash project. The term sheet is subject to the completion of due diligence by both parties, entry into formal documentation by East Exploration’s shareholders for the sale of their shares, Arunta and Davenport being satisfied with any conditions imposed on the demerger of Davenport or subsequent listing of Davenport by ASX, the proposed seed capital placement and IPO capital raising by Davenport and satisfaction of ASX and regulatory requirements including Arunta Resources, Davenport and the Company shareholder approval. There have not been any matters that have arisen after balance date that have significantly affected, or may significantly affect, the operations and activities of the Company, the results of those operations, or the state of affairs of the Company in future financial years other than disclosed elsewhere in this annual report. 89 For personal use only Potash West NL A.C.N. 147 346 334 Directors’ Declaration In the opinion of the directors of Potash West NL: (a) the financial statements and notes set out on pages 57 to 89 are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the financial position of the Company as at 30 June 2015 and of its performance, as represented by the results of its operations and its cash flows, for the year ended on that date; and complying with Accounting Standards in Australia and the Corporations Regulations 2001; the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2(c); and subject to the matters discussed in Note 2(f), there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (b) (c) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the year ending 30 June 2015. This declaration is made in accordance with a resolution of the directors. Patrick McManus Managing Director Perth Dated: 30 September 2015 90 For personal use onlyErnst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Independent auditor's report to the members of Potash West NL Report on the financial report We have audited the accompanying financial report of Potash West NL, which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company Potash West NL and the entities it controlled at the year's end or from time to time during the financial year. Directors' responsibility 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 controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor's responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation of the financial report that gives a true and fair view 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 entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 91 RK:MW:PotashWest:091 For personal use onlyOpinion In our opinion: a. the financial report of Potash West NL is in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2. Emphasis of Matter Without qualifying our opinion, we draw attention to Note 2 (f) in the financial report which describes the principal conditions that raise doubt about the company’s ability to continue as a going concern. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business. Report on the remuneration report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2015. 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. Opinion In our opinion, the Remuneration Report of Potash West NL for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001. Ernst & Young Robert A Kirkby Partner Perth 30 September 2015 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 92 RK:MW:PotashWest:091 For personal use onlyPotash West NL A.C.N. 147 346 334 Shareholder Information Distribution schedules of shareholders and statements of voting rights are set out in Table 1, whilst the Company’s top twenty shareholders and option holders are shown in Tables 2, 3 and 4. Substantial shareholder notices that have been received by the Company are set out in Table 5. Table 1 Shareholder spread as at 11 September 2015 Ordinary shares, with right to attend meetings and vote personally or by proxy, through show of hands and, if required, by ballot (one vote for each share) Spread of Holdings No. Holders PWN No. Holders PWNCA 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001 - and over 104 232 202 900 260 30 129 139 279 51 Total number of holders of securities Total number of securities 1,698 229,679,615 628 35,960,024 Table 2 Top twenty shareholders as at 11 September 2015 Shareholder No. Shares Percentage 1 Citicorp Nominees Pty Limited 2 Yap Thai Choy 3 HSBC Custody Nominees (Australia) Limited 4 UOB Kay Hian Private Limited 5 Mr Dennis Bell 6 Mr Robert Peter Van Der Laan 7 Mr Adrian Christopher Griffin 8 Mr John Stephen Bladon Millward 9 Torbinup Resources Pty Ltd 10 Potash West NL 11 Mr Patrick Bernard Mc Manus & Mrs Vivienne Edwina Mc Manus 12 Gilpin Park Pty Ltd 13 Flourish Super Pty Ltd 14 Davsms Investments Pty Ltd 15 Dr Tack-Shin Lee 16 SBI Investments (PR) LLC 17 Philip Anthony Feitelson 18 Sept Rogues Ltd 19 Mr Brett James Smith & Mrs Lynne Smith 20 Nutsville Pty Ltd 37,953,438 12,000,000 11,407,857 9,549,745 5,957,143 5,867,645 5,077,045 3,687,814 3,518,057 3,150,000 3,107,230 2,855,000 2,500,000 2,175,000 2,120,229 2,108,348 2,000,000 1,827,781 1,600,000 16.525 5.225 4.967 4.158 2.594 2.555 2.210 1.606 1.532 1.371 1.353 1.243 1.088 0.947 0.923 0.918 0.871 0.796 0.697 1,500,000 119,962,332 0.653 52.230 93 For personal use only Potash West NL A.C.N. 147 346 334 Shareholder Information (continued) Table 3 Top twenty partly paid shareholders as at 11 September 2015 Shareholder No. Shares Percentage 1 HSBC Custody Nominees (Australia) Limited 2 Mr Robert Peter Van Der Laan 3 Mr Adrian Christopher Griffin 4 Mr John Stephen Bladon Millward 5 Torbinup Resources Pty Ltd 6 Roberin Pty Ltd 7 Mr Mohan Singh Nandha 8 Sept Rogues Ltd 9 Mrs Anjana Nandha 10 Richmond Resources Pty Ltd 11 National Nominees Limited 12 Mr Frederick Denis L’Aime 13 Potash West NL 14 Ossart Holdings Pty Ltd 15 Citicorp Nominees Pty Limited 16 Mr Bruno Carraro & Mrs Giuseppina Carraro 17 Nutsville Pty Ltd 18 First Investment Partners 19 Mr Brent Arthur Cotsworth 20 Mr Adrian Christopher Griffin Table 4 Top twenty option holders as at 11 September 2015 2,869,345 2,598,823 2,575,931 1,863,907 1,779,029 1,553,615 1,072,541 913,891 911,091 697,917 655,817 591,499 575,000 494,556 479,241 415,422 400,000 350,000 295,376 260,310 21,353,311 7.979 7.227 7.163 5.183 4.947 4.320 2.983 2.541 2.534 1.941 1.824 1.645 1.599 1.375 1,333 1.555 1.112 0.973 0.821 0.724 59.381 Optionholder Nil No. Options - Percentage - Table 5 Substantial shareholders as at 11 September 2015 Shareholder Nil Voting Rights No. of shares Percentage - - The voting rights attached to each class of equity securities are set out below. (a) Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. 94 For personal use only Potash West NL A.C.N. 147 346 334 Shareholder Information (continued) Unlisted options as at 30 June 2015 Details of unlisted option holders are as follow: Class of unlisted options No. Options Options exercisable at $0.40 on or before 8 September 2016 Holders of more than 20% of this class Options exercisable at $0.60 on or before 8 September 2016 Holders of more than 20% of this class 100,000 1 100,000 1 Options exercisable at $0.355 on or before 13 November 2015 1,350,000 Holders of more than 20% of this class 1 Options exercisable at $0.13 on or before 25 October 2015 1,000,000 Holders of more than 20% of this class 2 Options exercisable at $0.15 on or before 7 February 2017 500,000 Holders of more than 20% of this class 1 Options exercisable at $0.087 on or before 6 November 2017 1,992,188 Holders of more than 20% of this class 2 95 For personal use only Potash West NL A.C.N. 147 346 334 Tenement Register Tenements (Australia) as at 6 August 2015 Tenements Name Project Holder Details Bell E70/3418 Image Resources NL 100% Mineral Rights for Potash Dinner Hill E70/3987 Richmond Resources Pty Ltd 100% Mineral Rights for Potash Dalaroo North E70/3988 Richmond Resources Pty Ltd 100% Mineral Rights for Potash Daraloo South E70/3989 Richmond Resources Pty Ltd 100% Mineral Rights for Potash Mogumber E70/4124 Potash West NL Pending Jam Hill Bald Hill E70/4137 Potash West NL 100% Mineral Rights for Potash E70/4138 Potash West NL 100% Mineral Rights for Potash Ingra Hills E70/4139 Potash West NL 100% Mineral Rights for Potash Watheroo E70/4471 Potash West NL 100% Mineral Rights for Potash Dandaragan E70/4609 Potash West NL 100% Mineral Rights for Potash Dandaragan E70/4687 Potash West NL Pending 96 For personal use only