Bathurst Resources Limited Level 12, 1 Willeston Street Wellington 6011 New Zealand +64 4 499 6830 www.bathurstresources.co.nz B A T H U R S T R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 ANNUAL REPORT 2015 Annual General Meeting of Shareholders To be held at 9.00am on Monday 23 November 2015 at the offices of Minter Ellison Rudd Watts, 125 The Terrace, Wellington 6011. All dollar amounts referred to in this report are expressed in New Zealand dollars unless otherwise noted. Contents SECTION 1 Chairman’s report ..................................................................................................4 Chief executive officer’s report .............................................................................5 Operations report .................................................................................................. 6 HSEC report ....................................................................................................... 11 Our people ...........................................................................................................13 Directors’ report ..................................................................................................15 Remuneration report ...........................................................................................20 SECTION 2 Financial report ....................................................................................................23 Consolidated income statement .................................................................24 Consolidated statement of comprehensive income ...................................25 Consolidated balance sheet .......................................................................26 Consolidated statement of changes in equity ............................................27 Consolidated statement of cash flows .......................................................28 Notes to the consolidated financial statements ..........................................29 Independent auditor’s report to the members ....................................................64 SECTION 3 Shareholder information ......................................................................................67 SECTION 4 Tenement schedule .............................................................................................72 Coal resources and reserves..............................................................................75 Corporate directory .............................................................................................80 1 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 2 Section 01 Year in review 3 Chairman’s report In my first year as chairman it has been a time of significant change for Bathurst as the company completed the period with virtually a whole new board and a new direction – to pursue a strategy of diversifying risk and to maintain a cash positive business based on our robust domestic operations in the South Island. On behalf of the board I would like to thank our management team and staff for their commitment and efforts during what has been a tough but productive year. I would also like to acknowledge those directors who resigned during the period, and to welcome our new directors – Richard Tacon, who has also taken over as chief executive officer, Russell Middleton and Peter Westerhuis. They bring extensive business and leadership experience to the board, and to the company. Finally I would like to thank our shareholders and many stakeholders for their ongoing support and look forward to a profitable year ahead. TOKO KAPEA Chairman We have implemented a series of tough measures in the interest of cost efficiencies that have seen us finish the period with a cash positive quarter – a commendable achievement during a year that witnessed record lows in commodity prices. I’m also very pleased to report that we have completed another year without a single significant health or environmental incident at any of our sites. Safety is paramount to everything we do at Bathurst, from planning and organisational activities through to every aspect of our operations. We foster a culture in which safety is the responsibility of every individual involved with any aspect of Bathurst’s operations, from board level through to employees and contractors, and anyone else who is engaged in any element of the company’s business. As we complete the transition from explorer to producer on the Australian Securities Exchange (ASX), we are moving forward with a focus on margins, not coal price, to ensure that we continue to be financially sustainable and ready to accelerate the development of our export coking coal project at a time that complements our overall business strategy, rather than relying on global pricing. Whilst the company has reported an annual net loss after tax for the year, it is particularly pleasing to see that our key business efficiency initiatives are having a real impact on the bottom line. This is demonstrated by the company reporting a positive cash flow from operations of $1 million in FY15 compared with an operating cash outflow of $16.7 million for the same period last year. 4 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Chief executive officer’s report I’m pleased to present this report – my first as chief executive officer for Bathurst. First, and foremost, we are proud to have recorded another year with no significant injuries or environmental incidents reported. Safe and sustainable operations are core Bathurst values and fundamental to the way we conduct our business. During the year we undertook extensive training for our people in risk management and health and safety to ensure that we are in compliance with the new Health and Safety in Employment Act that will come into force in early 2016. For Bathurst, this has been a year of review, with restructures across the company from board level down, and the implementation of a strategy aimed at mitigating risk and driving cost efficiencies to strengthen our cash balance. Our strategy is to continue to reduce operating costs, to increase production and to focus on achieving sustainable margins from all our operations. This is something we can control to a large extent, as opposed to focusing on global coal pricing over which we can have little impact. We have already seen the results of this with a cash positive final quarter, a reduction in mining overheads from FY14 of 40%, and a reduction in administration overheads from FY14 of 17%. Production for the year exceeded forecast at 384,000 tonnes, and we are projecting a further 17% increase in production in the coming year. During the past 18 months we have reduced employee numbers, but these were mainly corporate and project related roles; we were able to maintain the workforce at the face so we can continue to build our domestic operations. Late last year we took over the full mining operations at Takitimu from the existing contractor. This was a smooth transition whereby we took on the contractor’s site staff and hired the necessary plant. We will continue to review this operation to determine if there are more efficiencies to be gained, particularly in plant and equipment leasing. We recovered first coal at Escarpment in September 2014 and, while we have announced that we won’t be taking that project into full commercial development in the immediate future, we have made significant inroads in terms of site development so we can quickly ramp up to steady state mining when all costs align to provide an acceptable margin. At our Canterbury mine, we resumed operations following a review of the coal processing operations. We are on track to produce 60,000 tonnes of coal from Canterbury in FY16. We reviewed our permit holdings and surrendered those considered non-essential for our immediate growth based on the development requirements identified in our strategic plan. This will see significant savings in compliance costs for the company. At a corporate level, we reduced our board numbers and delisted from the NZX to achieve further cost efficiencies. Our focus for the coming year is on lowering costs, implementing further operational efficiencies and increasing margins. I take this opportunity to thank the Bathurst team for their hard work and support throughout a challenging time and look forward to a safe and profitable year ahead. RICHARD TACON Chief Executive Officer 5 Review of operations Bathurst is a New Zealand resources company. Its operations are in the South Island of New Zealand where it is established as a leading coal producer, providing energy for local industrial users and, ultimately, positioning to become an exporter of high quality metallurgical coal for steel production in Japan, India and Asia. Whilst listed on the Australian Securities Exchange, Bathurst is a New Zealand registered company, employing more than 100 staff across its operations. The company’s head office is in Wellington. Bathurst has no operations outside New Zealand. Buller Coal Project The Buller coalfield is situated on the west coast of the South Island of New Zealand. It is regarded as one of the country’s most significant fields and is particularly well known for its production of high quality, low ash and high fluidity coking coals, which are highly sought after by international steelmakers. small quantities of coal as part of the South Buller initial site construction works. The main objective at this time is to plan the mine with low operating costs and explore routes to markets that are low cost in terms of capital and operation. The intent is to design the operations to ensure a margin in the prevailing market conditions. Once this has been achieved, exporting will commence. Escarpment will be targeting an initial output of 500,000 tonnes of coking coal per annum for international steel markets. Over the life of the block, total annual production is expected to increase to around 750,000 tonnes. Cascade The operating Cascade mine forms part of the South Buller operation. The Cascade coal is a semi-soft coking coal that is being sold into the domestic market, largely for the manufacture of cement. The local cement producer has announced its intention to close its Westport operation in 2016. That timing will coincide with the depletion of the economically recoverable resource at Cascade, and it is planned for full mining operations to wind down and rehabilitation to continue until full closure obligations have been met. Bathurst is developing an export coking coal operation from its permits in the Buller coalfield. The key first stage of this project is the Escarpment mine, which is now in operation mining The next phase of development of the Escarpment Buller Coal Project will be Whareatea West, then the North Buller permits are planned to come on line as the second stage. Final consents were granted for Escarpment in October 2013 and the Authority to Enter and Operate was issued in June 2014. Preliminary site 6 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 works commenced on 1 July 2014 and first coal was recovered in September of that year. Escarpment is being worked as a joint operation with the Cascade mine. Initial roads, waste dumps and stockpile areas have been formed with a particular focus on setting up for the long term operational needs. The first stages of water management systems have been completed, including a construction water sump, pump out pipeline and temporary water treatment plant. Portable office buildings are also on site. Coal mined as part of the initial construction phase is being blended with Cascade coal for sale into local markets. The coming year will see the mine developed to a stage where it can quickly move into steady state production to meet potential export demand. Whareatea West and Coalbrookdale The next focus for development in South Buller is the Whareatea West block which is located immediately adjacent to the Escarpment permit’s western boundary. Whareatea West is an Exploration Permit. The main work completed over the last 12 months was to assess and model the vast amount of data collected in the previous five years. This had led to a consolidated view of the Denniston area rather than three discrete blocks. This work is presently at a pre-feasibility stage for the final integrated plan. Coalbrookdale is fully consented for underground mining. Development is not planned however until market conditions improve. North Buller The North Buller permits lie north of the Stockton Plateau. Preliminary analysis indicates that the low ash, higher sulphur coal from this area can be blended with South Buller coal to produce a premium product, so they will remain as the second stage of development of the export project. Domestic operations Takitimu The Takitimu mine is located at Nightcaps, north of Invercargill. Mining operations originally commenced at Nightcaps in 1881. Sub-bituminous coal from the open cut operation is railed to a number of major industrial customers in the Southland, Otago and Canterbury areas. The mine produces around 230,000 tonnes of sub-bituminous coal per annum. During the year, the coal resource in the Takitimu pit was depleted and the adjoining Coaldale block became the focus of operations. The Takitimu pit is now being progressively backfilled and rehabilitated to pasture land. Work was undertaken in 2014 to upgrade the processing facilities on site. These improvements have allowed for increased production and reduced fines’ generation. Mining operations at Takitimu were previously conducted by a contractor however, in September 2014, Bathurst took over full mining operations on site and employed all the existing site staff. The transition was seamless and enabled the company to implement better cost control over the mining operations at its largest site. New Brighton In March 2015, the company completed the acquisition of the shares in New Brighton Collieries Limited, holder of the New Brighton coal exploration permit. This permit is in close proximity to the Takitimu mine and is connected by the same rail line. It is prospective for high grade sub-bituminous coal and has potential to add substantially to the life of the company’s Southland operations. The acquisition was finalised under amended terms which saw an ongoing deferred consideration replacing the final payment of $13.25 million, preserving the company’s cash reserves. The coal from New Brighton will be sold into new and existing domestic contracts and may be considered for export at a later date. Black Diamond Subsequent to period, end an offer was made to purchase the land immediately northwest of the Coaldale block – an area known as Black Diamond. The area is prospective for high quality sub-bituminous coal and is the natural extension of Takitimu’s Coaldale operations. Mine planning is targeting first coal recovery from Black Diamond in the final quarter of 2017, to coincide with the depletion of the Coaldale block. Initial environmental consents have been lodged and an application will be submitted to extend the Takitimu mining permit to include Black Diamond. This acquisition will further underpin the development of Bathurst’s domestic coal strategy in Southland. Canterbury The Canterbury mine is an open cast mine near Coalgate which is 70 kilometres west of Christchurch. The mine produces thermal coal which is low in sulphur and ash and in high demand by the local dairy and food processing industries. It has a similar specification to the Takitimu coal. Bathurst has a contract to supply coal from the Canterbury mine to a nearby dairy processing plant. 7 Coal demand in the Canterbury area is set to grow to over 150,000 tonnes per annum in the short term with the expansion of the local food and dairy processing industries. The proximity of the mine to these markets offers a distinct freight advantage to target this growth potential. Full mining operations at Canterbury were suspended in 2014 to allow the processing operations to be reviewed and upgraded. New plant was installed and mining operations resumed in the March FY15 quarter. Production from the mine is expected to grow from around 35,000 tonnes per annum to 60,000 tonnes in the coming year and more than 75,000 tonnes by FY17. Albury The Albury project, located 40 kilometres west of Timaru, was an historic underground and open cut mine worked from the early 1900s through to the mid-1960’s. The mine produced low rank sub-bituminous coal for local sales. An initial programme of low impact exploration delivered encouraging results and a bulk sample was taken for trials to assess the suitability of the coal for energy production for local industry. The trials were positive but further exploration and development have been deferred for the current time. Exploration Exploration was again scaled back during the financial year. A total of 1,003 metres was drilled and excavated with the focus on South Buller and Nightcaps. Two rigs were operating in the Buller Coal Project areas. At Cascade, 15 holes were drilled in the pit to assist with operational short term mine planning and to obtain samples for coal quality analysis. A further 54 holes were drilled across the South Buller permits for resource definition and waste rock characterisation and to provide marketing samples. A trenching programme was undertaken at the Canterbury mine to assess near surface resources for the next mining stage and nine channel samples were excavated at Takitimu for coal quality analysis. Throughout the year, data was analysed and re-evaluated as part of a programme to upgrade Resource and Reserve reporting to comply with the new Joint Ore Reserves Committee (JORC) 2012 reporting standards. Permit surrenders During the year a review was undertaken of the company’s permit holdings in relation to its immediate development strategy. As a result of this it was considered that the compliance costs to maintain certain tenements were not warranted under the company’s business plan. This resulted in the surrender of certain exploration permits, which occurred subsequent to period end. 8 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Production Financial Production figures for Bathurst’s operating mines for the year ended 30 June 2015 are set out below. OPERATION Takitimu Cascade Escarpment Canterbury Coal TOTAL PRODUCTION (T) OVERBURDEN (BCM) 302,871 1,706,069 77,765 491,813 11,851 60,244 2,656 106,799 393,941 2,364,925 The group made a net loss after tax of $16.4 million in the period to 30 June 2015 compared with a net loss after tax of $188.9 million for the period ended 30 June 2014. Key business efficiency initiatives and tight fiscal management saw the group generate an adjusted EBITDA of $4.9 million in 2015 compared with an adjusted EBITDA of ($0.5m) for the same period last year. This result was despite a short term drop in supply to two major customers that experienced a period of reduced productivity during the year. STATUTORY LOSS AFTER TAX Add back Depreciation and amortisation Net finance costs Tax credit EBITDA Add back Fair value loss/(gain) on deferred consideration Impairment charges Loss on disposal of fixed assets Restructuring costs Adjusted EBITDA GROUP 2015 $’000 GROUP 2014 $’000 (16,406) (188,903) 14,668 14,012 1,261 (11,365) – (95,331) (477) (281,587) 615 (169,396) 1,171 449,984 1,160 2,405 10 502 4,874 (487) The Buller Coal Project is subject to movements in the The group produced a positive operating cash flow of international coking coal market, which have seen prices $1 million for the year ended 30 June 2015 compared with further reduce since 2014. As the coal price affects the potential value of the project, all assets were impaired in 2014, and this remained the case in 2015. an operating cash outflow of $16.7 million in the same period last year. This represents a significant turnaround in Bathurst’s operational performance and creates a solid platform to deliver on the group’s operational efficiency The Cascade mine was partially impaired in the current year targets in the coming year. due to a major commercial sales contract expiring in 2016. Production is planned to reduce in line with the drop in demand and rehabilitation activities will then increase. Current coal volumes and pricing are contracted. The group had $5.2 million of cash and short term deposits on hand as at 30 June 2015. Capital raising In January 2015 the company announced a restructuring of the executive management team as part of the company’s efficiency review. This followed a number of positions being made redundant early in 2014 and will ensure the business Further to the AUD$7.4 million placement in April 2014, a non-renounceable rights issue was announced to provide all shareholders with the opportunity to purchase shares at the placement price. The rights issue closed early in July 2015 remains a sustainable and right sized operation in the current with the allotment of 2,146,913 ordinary shares, raising economic environment. $0.1 million before expenses. 9 Sustainability Responsible resource use is the principle that drives all of Bathurst’s activities. This principle applies to the company’s approach to sustainable development and the management of social, environmental and economic performance. This means that everything the company does is guided by a commitment to shareholders, employees, stakeholders, local communities and, importantly, the environment. Bathurst’s commitment is backed by a significant investment in resources to ensure social and environmental impacts are managed from design and planning through to production and, eventually, rehabilitation. The company is constantly looking to improve productivity in ways that are better for the environment and safer for our people. During 2015, the company made significant progress in the review and upgrade of information technology practices to eliminate a reliance on legacy systems and to support sustainable management reporting and effective decision making. Every year, the public focus on environmental issues deepens, and the decisions people make as custodians of the world’s scarce resources grow increasingly important. At the same time the issues of local employment and regional economic development gain importance. The ultimate aim is to ensure Bathurst’s operations enable society to meet its present needs without compromising the ability of future generations to meet their needs. The company engages with stakeholders on climate change issues through relevant industry associations such as Straterra, the industry body for the New Zealand minerals sector, and New Zealand’s Sustainable Business Council. As members of these organisations Bathurst is able to interact with other companies, various stakeholders and government to develop simple and effective climate change policy and regulation. 10 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Health, safety, environment and community Bathurst has a Health, Safety, Environment and Community (HSEC) management framework to guide the company’s decisions on responsible resource use and to consider the impact of its activities. The framework was developed generally in accordance with local and international standards to enable the continual improvement of Bathurst policies, standards and procedures to minimise risk to mine workers and the environment. Health and safety People are Bathurst’s greatest asset. The company’s focus is on zero harm and it takes responsibility for the care and consideration of its employees with the goal of ensuring every employee and contractor goes home healthy and safe at the end of each day. Bathurst has an HSEC committee that meets regularly to assist the board in enabling the company to operate its businesses safely, responsibly and sustainably. Key performance indicators have been chosen to measure performance and effectiveness against specific objectives and targets. The company has embraced the new health and safety regulations for the New Zealand mining industry that came into force in December 2013. The regulations were developed in consultation with industry to bring New Zealand’s approach to mining health and safety into line with international leading practice. Richard Tacon, Bathurst’s chief executive officer, was involved in developing the regulations and Escarpment was the first new coal mine in New Zealand to operate under them. Under the transitional provisions, Bathurst’s remaining operations adopted the new regulations from January 2015. Bathurst has been reviewing and updating health and safety systems at all sites appropriate to the scale and context of the company’s operations, generally in accordance with AS/NZS 4804 occupational health and safety management systems. The system development has included: • 28 new corporate standards eg. a communication and participation standard, worker health control plan, training standard and revised risk management standard • The completion of broad brush risk assessments and site specific principal hazard risk assessments at all sites • The development of principal hazard management plans and principal control plans for all sites • The development (currently underway) of health and safety management systems for coal exploration activities that are defined as mining operations under the new legislation. This has included a collaborative approach with two other New Zealand coal companies to complete joint exploration risk assessments • The development of training implementation plans for the new system elements The outcomes being sought are the delivery of a robust reporting system, a strong safety culture and dynamic integration with other operational systems. An integral part of the new mining legislation is risk management. Bathurst recognises that risk management is not about eliminating all risks; it is about identifying and responding to risks in a way that creates value for the company and its shareholders. Bathurst’s risk strategy and risk tolerance level are continually reassessed as the company implements its development strategies. Around 30% of Bathurst’s workforce has completed risk management training. Training for the remainder of employees is planned for 2016. Additional health and safety training has included: • Health and safety leadership • Personal accountability • Emergency management Incident investigation • • Human factors • Control of energy • First aid. The new Health and Safety at Work Act will come into force for all New Zealand workplaces in April 2016. Preparation for this new act has already begun with analysis of existing systems across Bathurst’s sites to determine what modifications are required. Environment Respect for the environment is a core part of Bathurst’s business strategy – The company is committed to minimising its environmental footprint and its use of natural resources. It’s not just about mining, it’s also what is left behind. The company’s operations are conducted with deference to the impacts mining has and the need to not only rehabilitate the land that has been disturbed but also to deliver an overall net gain back to the environment. Bathurst’s environmental management approach is based on the principles of plan, do, check and act and aligns with the principles of ISO14001. This approach involves the identification, assessment and control of environmental risks across all phases of the business, from exploration through to development, operation and then closure. The company works in partnership with stakeholders to understand the challenges and opportunities of its activities, and how best to manage them. Long term planning for the management of the residual environmental impacts of mining is a fundamental issue for the industry and a stakeholder concern. In line with good industry practice, at the Escarpment mine Bathurst incorporates mine closure planning as early as possible within life of mine plans. The progressive rehabilitation of disturbed land will be an integral component of each stage 11 of the operation’s development and will be undertaken as soon as practicable to minimise closure liabilities. In the past 12 months, rehabilitation of tracts of land was completed at the Cascade and Takitimu mines based on final land use requirements. Reviews have commenced of the final landform areas for post-closure stability. Bathurst has committed to a large programme of pest control on the Denniston Plateau, where mining at the Escarpment project is underway. Under an agreement with the Department of Conservation, Bathurst will fund a $3 million biodiversity enhancement project, including weed, pest and predator control, over 4,500 hectares on and around the Denniston Plateau. Mining heritage on the plateau will also be enhanced with almost $600,000 allocated to mining preservation works. Community Bathurst cannot operate in a way that is efficient and sustainable without the support of its host communities. Wherever it operates, Bathurst works with a range of local stakeholders and businesses to deliver benefits from its operations back into those communities whilst striving to minimise any negative impacts from its activities. Bathurst has a policy of recruiting locally and encourages its workers to live locally. The company also understands the importance of keeping its neighbours informed with regular information sessions and updates. During the year Bathurst helped local groups achieve their goals by supporting a range of activities including: • Buller High School scholarship to help fund university studies Another $18 million will be spent by Bathurst in participation with the Department of Conservation, funding a 35 year pest and predator control programme over 25,000 hectares of the Heaphy River Valley in the Kahurangi National Park, to protect great spotted kiwi, kaka, blue duck and Powelliphanta snails. • Sponsorship of the Denniston Chain Grinder mountain bike event • Sponsorship of the Mount Linton Muster mountain bike race in Southland • Sponsorship of Ohai Nightcaps Junior Rugby Club • Support for the Foundation for Youth Development. 12 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Our people Craig Pilcher General Manager – Domestic Operations Craig has extensive engineering experience with both coal and oil fired steam boiler installations and maintenance, as well as refrigeration, marine, plant maintenance and general engineering. Born in South Canterbury, Craig’s first career was as an A-grade fitter and welder, undertaking regular coal and oil steam boiler installations. After working as plant engineer and construction diver at the Port of Timaru, Craig became owner and director of a South Island coal supply business in 1997, distributing coal for Solid Energy in the area. The business was bought by Eastern Corporation in 2006, and Craig joined the company as marketing manager and then operations manager, playing a key role in the establishment and growth of the Takitimu and Cascade coal mines. Craig joined Bathurst in March 2011. He is based in Timaru at Bathurst’s coal handling and distribution centre. Jason Hungerford Group Financial Controller Jason joined the Bathurst team in 2013 following the relocation of its head office to Wellington. He began his career as a chartered accountant with KPMG in Wellington prior to spending a number of years in the United Kingdom. Jason has broad sector experience across the resources, FMCG and financial services sectors, having worked in senior finance roles at Anglo American, Cadbury and Kiwibank. Jason brings a commercial outlook to the business underpinned by a strong focus on risk, governance and financial control. He holds a Bachelor of Commerce and Administration with a post graduate Diploma in Professional Accounting. Jason is a member of Chartered Accountants Australia & New Zealand. 13 Fiona Bartier General Manager – Health, Safety Environment and Community Fiona is an environmental and resource scientist who has worked in management roles for government, in research and education, for industry groups, and for a range of mining companies. Fiona spent seven years working in mining environmental research at The University of Queensland and the University of New England, where she visited and worked at more than 40 mine sites across a range of commodities. She then spent a period of time working for the Minerals Council of Australia. Before joining Bathurst, Fiona lived for ten years in mining communities in the Hunter Valley and western coalfields of New South Wales, working first as a consultant, and then within industry. She has management experience in open cut and underground operations, and brownfield and greenfield projects. Sam joined Eastern Resources Group in Brisbane as manager of corporate relations and business development, a position she held for eight years. Her role with Eastern focused on growing the company’s mining operations in New Zealand, developing existing tenements and sourcing new projects. Sam joined the Bathurst team following its acquisition of the Eastern assets and relocated to Wellington in 2011. Hamish McLauchlan General Manager – Exploration Hamish is a geologist with more than 20 years’ experience and a diverse knowledge of exploration, open cast mining, geological modelling and geotechnical engineering. Hamish was previously senior geologist at Solid Energy’s Stockton mine and has also worked extensively as an exploration and production geologist in the resources sector in New Zealand and offshore. Hamish holds a Master of Science with Honours in Engineering Geology and a Bachelor of Science majoring in Geology. He is also a member of the AusIMM. Fiona holds a Bachelor of Applied Science (Resource Hamish joined Bathurst when the Eastern assets were Science). She joined Bathurst in 2012 and is based in the acquired on March 2011 and is based in the company’s Wellington office. Westport office. Sam Aarons General Manager – Corporate Relations Sam’s background is advertising, marketing and commercial Alison Brown General Counsel Alison has over 30 years’ legal experience in private management. She worked with several major advertising law practices and as in-house counsel for commercial agencies in Melbourne before spending 14 years as a enterprises. She has specialised in mining, environmental divisional general manager for Henry Walker Eltin, a large and climate change law after a solid grounding in commercial civil and mining contracting company (now Leighton law. She has worked variously for Simpson Grierson, Minter Contractors) based initially in Darwin and then in Brisbane. Ellison Rudd Watts Lawyers and the Ministery of Foreign During this period she also served with the Royal Australian Affairs and Trade, taught law professionals, as well as being Navy Reserves as public relations officer for the Darwin general counsel for Solid Energy from 2000 to 2011. Alison Port Division. holds a Master of Laws with Honours. 14 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Directors’ report From left to right: Toko Kapea, Peter Westerhuis, Richard Tacon, Russell Middleton. Your directors present their report on the consolidated entity (the group) consisting of Bathurst Resources Limited (Bathurst) and the entities it controlled at the end of, or during, the year ended 30 June 2015. Directors The following persons were directors of Bathurst Resources Limited as at 30 June 2015. Toko Kapea Non-executive Chairman Richard Tacon Executive Director 24 March 2015 as managing director, Dave Frow resigned on 13 November 2014 as non-executive chairman and Rob Lord resigned on 13 November 2014 as non-executive director. Marshall Maine resigned as joint company secretary on 13 November 2014 and Graham Anderson resigned as joint company secretary on 25 May 2015. Russell Middleton Non-executive Director Principal activities Peter Westerhuis Non-executive Director During the year the principal continuing activities of the group consisted of: The following board members resigned during the period: • The production of coal in New Zealand, and Malcolm Macpherson resigned on 29 May 2015 as • The exploration and development of coal mining assets in non-executive chairman, Hamish Bohannan resigned on New Zealand. 15 Dividends No dividend was paid or declared during the current or prior financial year and the directors do not recommend the payment of a dividend. Environmental regulation The Bathurst group’s exploration and mining activities are subject to a range of environmental regulations which govern how the group carries out its business. These regulations are set out below. Mine development/mining activities The mining activities of the group are regulated by the following: • The resource consents granted by the relevant district and regional territorial authorities, after following the processes set out in the Resource Management Act 1991. • Mining permits issued under the Crown Minerals Act 1991 by the Minister of Energy and Resources, required to mine Crown coal. • Access arrangements, granted under the Crown Minerals Act 1991 with the relevant landowners and occupiers. For Crown-owned land managed by the Department of Conservation, these access arrangements are granted by the Minister of Conservation. For significant projects, there will be a concurrent granting with the Minister of Conservation and the Minister of Energy and Resources. • Concession agreements under the Conservation Act 1987 for land outside a permit area but owned by the Crown and managed by the Department of Conservation. • Wildlife authorities, issued under the Wildlife Act 1953 granted by the Minister of Conservation. Controls around water and air discharges that result from mining operations are governed by the conditions of the resource consents under which the particular mining activity is operating. The mining operations of Bathurst are inspected on a regular basis and no significant instances of non- compliance have been noted. To the best of the directors’ knowledge, all approved activities have been undertaken in compliance with the requirements of the Resource Management Act 1991, Crown Minerals Act 1991, Conservation Act 1987 and Wildlife Act 1953. Exploration activities To carry out exploration, the company needs to hold a relevant exploration permit (where the coal is Crown owned), relevant resource consents to permit exploration and an access arrangement with the relevant landowner. Bathurst holds, to the best of the directors’ knowledge, all relevant resource consents and has entered into all of the appropriate agreements, and has acted in accordance with those resource consents and agreements in regards to engaging in exploration activities. Hazardous substances Mining activities involve the storage and use of hazardous substances, including fuel. Bathurst must comply with the Hazardous Substances and New Organisms Act 1996 when handling hazardous materials. To the best of the directors’ knowledge, no instances of non-compliance have been noted. Emissions trading scheme The New Zealand Emissions Trading Scheme came into effect on 1 July 2010, which essentially makes Bathurst liable for greenhouse gas emissions associated with the coal it mines and sells in New Zealand and for the fugitive emissions of methane associated with that mined coal. Bathurst’s liability is based on the type and quantity of coal tonnes sold, with the cost of such being passed on to Bathurst’s customers. Bathurst’s Emissions Trading Policy can be found on the company’s website. 16 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Corporate governance Bathurst’s Corporate Governance Statement is available on the company’s website: www.bathurstresources.co.nz/ who-we-are/corporate-governance. Information on directors Mr Toko Kapea BA, LLB Non-executive Chairman Experience and expertise Mr Kapea is a Wellington based commercial lawyer, consultant and director. He is a director of Tuia Group Limited and a partner in Tuia Legal. He has worked at Chapman Tripp and in legal roles in-house at Meridian Energy, Bank of New Zealand, St. George Bank NZ and ANZ Bank. Mr Kapea also sits on the board of Ng-ati Apa Developments Limited (Wanganui-Rangitikei region). Ng-ati Apa has investments in commercial property, forestry land and farms. He is an independent committee member of the Banjima Direct Benefits Trust in Perth, Western Australia. The role involves developing funding and distribution policies for royalty payments from mining companies for the Banjima people in the Pilbara region. Mr Kapea has been a director of Parininihi ki Waitotara Incorporation (in Taranaki) and Port Nicholson Fisheries Limited. He was on the Government Review Panel relating to the Te Ture Whenua M-aori Act 1993 (M-aori Land Act) and was also the lead negotiator for Ng-ati Apa ki Rangitikei (North Island) for its direct negotiation Treaty of Waitangi claims with the Crown. Mr Kapea was appointed to the board of Bathurst as non-executive director in May 2013 and became chairman in May 2015. Other current directorships of listed companies Nil Former directorships in last three years of listed companies Nil Special responsibilities Chairman of the Remuneration and Nomination committee Member of the Audit and Risk committee Interests in shares and options 115,000 fully paid ordinary shares in Bathurst Resources Limited Mr Richard Tacon Executive Director Experience and expertise Mr Tacon has worked in a large number of roles across the coal mining industry. His first job was at Greymouth’s Liverpool State Mine, owned by the New Zealand Government. He moved to Australia to further his mining career and went on to hold several management roles in coal mines around Australia, working his way from undermanager to general manager. Mr Tacon has held senior leadership roles in the coal sector for the past decade. Mr Tacon holds first, second and third class coal mining qualifications and studied at the Otago School of Mines. He has spent 15 years as a mines rescue brigadesman, making him familiar with the principles and practice of mine safety. Mr Tacon has also completed the New Zealand Mine Incident Controller training. Mr Tacon is an ex-secretary for the Mine Managers Association of Australia and sits on the board of the New Zealand Mines Rescue Trust and Minerals West Coast. After living and working in Australia for 32 years, he returned to New Zealand to take up the position of chief operating 17 officer with Bathurst in 2012. He was appointed to the role of chief executive officer in March 2015 and was appointed to the board as executive director in April 2015. Peter Westerhuis MBA, BEng Non-executive Director Other current directorships of listed companies Nil Former directorships in last three years of listed companies Nil Special responsibilities Chief Executive Officer Member of the Health, Safety, Environment and Community committee Interests in shares and options 476,596 fully paid ordinary shares in Bathurst Resources Limited Experience and expertise Mr Westerhuis is a professional engineer with post graduate business qualifications and more than 30 years of Australian and international experience in the iron ore, gold and coal industries, the past seven years at CEO and MD level. He has successfully developed and managed large mining and processing operations including overseeing the transition from explorer to producer. Mr Westerhuis has undertaken many complex commercial negotiations for joint ventures, capital funding, contracts, litigation, product marketing and off-take agreements. He is particularly passionate about health and safety, teamwork, operational effectiveness, business improvement and project delivery. Mr Russell Middleton MBA, BBus Non-executive Director Experience and expertise Mr Middleton has more than 25 years experience in the mining and construction sectors with significant experience in mine project evaluations and the construction of new mines. Mr Westerhuis is currently consulting to resources companies in Africa and South America. More recently he was the group managing director of Guildford Coal, developer of a coking coal business in Mongolia, and the chief executive of the Ensham Joint Venture developing and operating large open cut and underground coal reserves in Queensland. Based in Sydney, he was most recently chief financial officer with Hillgrove Resources Limited, an ASX listed resources company focused on developing base and precious metals projects. He was also director and company secretary for the Hillgrove Group’s subsidiary companies. Starting his career as a public accountant, Mr Middleton has held senior management positions in accounting, commercial and planning roles. He undertook various roles with BHP before joining Shell where he was commercial manager for the construction, development and production of a major underground mine. Mr Middleton was appointed to the board in April 2015. Other current directorships of listed companies Nil He has been a director of the Queensland Resources Council and a director of the Australian Coal Association. Mr Westerhuis was appointed to the board as non-executive director in April 2015. Other current directorships of listed companies Nil Former directorships in last three years of listed companies Managing Director – Guildford Coal Limited February 2013-October 2013 Special responsibilities Chairman of the Health, Safety, Environment and Community committee Member of the Remuneration and Nomination committee Former directorships in last three years of listed companies Nil Interests in shares and options Nil Special responsibilities Chairman of the Audit and Risk committee Interests in shares and options 750,000 fully paid ordinary shares in Bathurst Resources Limited Other current directorships of listed companies Nil Former directorships in last three years of listed companies Nil 18 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Company secretary Bill Lyne Mr Lyne has a wealth of experience in the role of company secretary of public companies ranging from stock exchange listed to small private companies and ‘not-for-profit’ entities. He has operated his own business, Australian Company Secretary Service, since 1998, providing professional specialist company secretarial, corporate compliance, governance and administrative services to various clients in diverse businesses across a wide range of industries. He is currently company secretary of ASX-listed Orion Metals Limited and Jumbo Interactive Limited, of which he is also a director. Mr Lyne holds a Bachelor of Commerce degree in Economics from the University of New South Wales, is a chartered accountant, and a Fellow of the Institute of Chartered Secretaries and Administrators (UK) and Governance Institute of Australia. Mr Lyne was appointed company secretary in May 2015. 19 Remuneration report Role of the Remuneration and Nomination committee Principles used to determine the nature and amount of remuneration The Remuneration and Nomination committee (‘R&N committee’) is a subcommittee of the Bathurst board. The R&N committee is responsible for making recommendations to the board on remuneration matters such as non-executive director fees, executive remuneration for directors and other executives, and the over arching executive remuneration policy and incentive schemes. The objective of the R&N committee is to ensure that the company’s remuneration policies and structures are fair and competitive, and aligned with the long term interests of the company. The R&N committee draws on its own experience in remuneration matters and seeks advice from independent remuneration consultants. The Corporate Governance Statement provides further information on the role of the R&N committee. Non-executive directors The fees and payments the company makes to its non- executive directors reflect the level of responsibility attributed to board members and the demands that are made on the directors’ time. Non-executive directors’ fees and payments are reviewed annually by the board. The board has also considered the advice of independent remuneration consultants to ensure that non-executive directors’ fees and payments are appropriate and in line with industry standards. The fees paid to the chairman are determined independently of the fees of non-executive directors. The chairman is not present at any discussions relating to the determination of his own remuneration. Directors’ fees Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $1,000,000 per annum. The total remuneration and other benefits to directors for services in all capacities during the year ended 30 June 2015 was: DIRECTOR Mr T Kapea Mr R Middleton Mr P Westerhuis Mr R Tacon Mr D Frow Mr R Lord Mr M Macpherson Mr H Bohannan 20 SHORT TERM BENEFITS NET LOAN FORGIVENESS TERMINATION BENEFITS SHARE–BASED PAYMENTS $74,167 $10,450 $10,450 $532,854 $50,000 $25,613 $88,274 – – – – – – – TOTAL $74,167 $10,450 $10,450 – – – $81,596 $614,450 – – – $50,000 $25,613 $88,274 $564,453 $730,818* $359,037* $123,176 $1,777,484 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 *No payment was made to Mr Bohannan for net loan forgiveness or termination benefits. The termination agreement included the forgiveness of amounts due to the company, offset by severance entitlements due and accrued at the time of resignation. The following board members resigned during the period: Malcolm Macpherson resigned on 29 May 2015, Hamish Bohannan resigned on 24 March 2015, Dave Frow resigned on 13 November 2014 and Rob Lord resigned on 13 November 2014. Russell Middleton and Peter Westerhuis were appointed non- executive directors on 29 April 2015. Richard Tacon was appointed executive director on 1 April 2015. the executive on key non-financial drivers of value. Most importantly, the company ensures that its remuneration policy attracts and retains high calibre executives, who in turn add value to the company and to the shareholders. The company also believes that its remuneration policy for executives is aligned to the interests of its executives. The executive remuneration policy rewards capability and experience and reflects competitive reward for contribution to growth in shareholder wealth. The policy is transparent so it provides a clear structure for earning rewards and provides recognition for contribution. The framework provides a mix of fixed and variable pay, and a blend of short and long term incentives. As executives gain seniority with the group, the balance of this mix shifts to a higher proportion of ‘at risk’ rewards. Directors’ securities interests The executive remuneration and reward framework has The interests of directors in securities of the company as at 30 June 2015 were: two components: • Base pay and benefits, including superannuation, and • Long term incentives DIRECTOR ORDINARY SHARES PERFORMANCE RIGHTS VESTED The combination of these comprises an executive’s total Mr T Kapea Mr R Middleton Mr P Westerhuis 115,000 750,000 – – – – Mr R Tacon 381,064 95,532 Executive remuneration The objective of the group’s executive reward framework is to ensure that reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms to industry practice. The R&N committee ensures that executive pay is competitive and reasonable, as well as acceptable to shareholders. The company ensures that an executive’s remuneration is linked to that executive’s performance to ensure that the interests of the company and its executives are aligned. The R&N committee determines executive remuneration to ensure transparency and to manage capital effectively. In consultation with external remuneration consultants, the company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. The company believes that the policy for determining executives’ remuneration is aligned with shareholders’ interests because it focuses on sustained growth in shareholder wealth by pushing growth in share price and delivering constant returns on assets, as well as focusing remuneration. Base pay and benefits Executives are offered a competitive base pay that comprises the fixed component and rewards. External remuneration consultants provide analysis and advice to ensure that base pay is set to reflect the market for comparable roles. Base pay for executives is reviewed annually to ensure that the executives’ remuneration is competitive with the market. An executive’s remuneration is also reviewed on promotion. There are no guaranteed base pay increases included in any executives’ contracts. Long term incentives The Bathurst Long Term Incentive Plan (LTIP) was approved by shareholders at the 2012 Annual General Meeting and was adopted by the company on reorganisation. The purpose of the plan is to reinforce a performance focused culture by providing a long term performance based element in the total remuneration packages of certain employees (in the form of performance rights) by aligning and linking the interests of Bathurst’s leadership team and shareholders, and to attract and retain executives and key management. The plan forms part of the company’s remuneration policy and provides the company with a mechanism for driving long term performance for shareholders and the retention of executives. Performance rights granted under the plan carry no dividend or voting rights. When exercised, each performance right converts into one fully paid ordinary share. 21 Service agreements Officers’ securities interests On appointment to the board, each non-executive director enters into a service agreement with the company in the form of a letter of appointment. The letter summarises the board policies and terms, including compensation, relevant to the office of director. Remuneration and other terms of employment for the managing director and other key management personnel are also formalised in service agreements. Employees’ remuneration During the year ended 30 June 2015, 20 employees (excluding the chief executive officer) received individual remuneration over $100,000. RANGE $100,001 – $110,000 $110,001 – $120,000 $120,001 – $130,000 $130,001 – $140,000 $140,001 – $150,000 $160,001 – $170,000 $170,000 – $180,000 $230,001 – $240,000 $310,001 – $320,000 $470,001 – $480,000 # OF EMPLOYEES 3 2 3 2 1 3 2 1 2 1 The interests of the current company officers (excluding the chief executive officer) in securities of the company at 30 June 2015 were: ORDINARY SHARES PERFORMANCE RIGHTS VESTED 341,578 58,789 OFFICER Ms S Aarons Donations The company made donations totalling $14,000 to: • Fostering Kids • Foundation for Youth Development • Ohai Nightcaps Lions Club • Ohai Nightcaps Rugby Club • Buller Cycling Club • Autism New Zealand Inc. Directors’ and officers’ liability insurance The company and its subsidiaries have arranged policies of directors’ and officers’ liability insurance, which, together with a deed of indemnity, seek to ensure to the extent permitted by law that directors and officers will incur no monetary loss as a result of actions legitimately taken by them as directors and officers. This report is made in accordance with a resolution of directors. 22 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Section 02 The directors of Bathurst Resources Limited authorised these financial statements for issue on behalf of the Board RUSSELL MIDDLETON Director 25 September 2015 TOKO KAPEA Chairman 25 September 2015 Consolidated statement of comprehensive income Notes to the consolidated financial statements Independent auditor’s report to the members’ Consolidated statement of changes in equity Consolidated statement of cash flows Consolidated income statement Consolidated balance sheet Financial statements Contents Contents Page Page 64 28 29 26 25 27 24 Financial statements 23 Consolidated income statement For the year ended 30 June 2015 Revenue Less: cost of sales GROSS PROFIT/(LOSS) Other Income Depreciation Administrative and other expenses Fair value (loss)/gain on deferred consideration Loss on disposal of fixed assets Impairment losses Share of joint venture profit/(loss) Finance (cost)/income – net LOSS BEFORE INCOME TAX Income tax benefit LOSS EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY: NOTES 4 5 4 15 6 21 10 8 9 GROUP 2015 $’000 GROUP 2014 $’000 51,289 55,525 (43,908) (56,795) 7,381 (1,270) 244 172 (7,543) (2,546) (12,318) (11,103) (615) 169,396 (1,160) (10) (1,171) (449,984) 36 (254) (1,260) 11,365 (16,406) (284,234) – 95,331 (16,406) (188,903) CENTS CENTS Basic earnings per share Diluted earnings per share 25 25 (1.73) (1.73) (23.07) (23.07) The above income statement should be read in conjunction with the accompanying notes. 24 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 Consolidated statement of comprehensive income For the year ended 30 June 2015 Loss OTHER COMPREHENSIVE EXPENSE, NET OF TAX Items that may be reclassified to profit or loss GROUP 2015 $’000 GROUP 2014 $’000 (16,406) (188,903) Exchange differences on translation 58 (198) TOTAL COMPREHENSIVE LOSS FOR THE YEAR, NET OF TAX (16,348) (189,101) Total comprehensive loss attributable to the Owners of Bathurst Resources Limited (16,348) (189,101) The above statement of comprehensive income should be read in conjunction with the accompanying notes. 25 FINANCIAL STATEMENTS Consolidated balance sheet As at 30 June 2015 ASSETS Current assets Cash and short term deposits Trade and other receivables Inventories Income tax receivable Other financial assets current TOTAL CURRENT ASSETS Non-current assets Property, plant and equipment Mining licences, properties, exploration and evaluation assets Other financial assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Borrowings – current Deferred consideration current Provisions – current TOTAL CURRENT LIABILITIES Non-current liabilities Trade and other payables Borrowings Deferred consideration Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY NOTES GROUP 2015 $’000 GROUP 2014 $’000 11 12 13 14 15 16 14 19 20 21 22 19 20 21 22 23 24 5,235 4,114 1,279 – 20 8,855 4,343 1,283 97 132 10,648 14,710 17,152 22,498 147 39,797 50,445 5,572 8,549 1,730 627 23,386 16,166 7,562 47,114 61,824 7,964 7,340 917 259 16,478 16,480 430 461 10,883 3,274 15,048 31,526 18,919 – 6,241 1,974 2,870 11,085 27,565 34,259 247,378 (30,872) 247,338 (31,725) (197,587) (181,354) 18,919 34,259 The above balance sheet should be read in conjunction with the accompanying notes. The directors of Bathurst Resources Limited authorised these financial statements for issue on behalf of the Board. TOKO KAPEA Chairman 25 September 2015 RUSSELL MIDDLETON Director 25 September 2015 26 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 Consolidated statement of changes in equity For the year ended 30 June 2015 CONTRIBUTED EQUITY $’000 NOTES SHARE BASED PAYMENT RESERVE $’000 FOREIGN EXCHANGE TRANSLATION RESERVE $’000 RETAINED EARNINGS $’000 RE- ORGANISATION RESERVE $’000 TOTAL EQUITY $’000 GROUP BALANCE AT 1 JULY 2013 219,623 13,942 – (301) (32,760) 200,504 Total comprehensive income Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Share based payments expense Gain from reversal of share based payments expense Transfer of share based payments reserve with exercise of options Exercise of options Lapsing of options – 23 23,327 – – – – 881 (3,672) 2,068 (2,068) 2,320 – – (7,850) 27,715 (12,709) (198) (188,903) – (189,101) – – – – – – – – – – – – 7,850 7,850 – – – – – – – 23,327 881 (3,672) – 2,320 – 22,856 BALANCE AT 30 JUNE 2014 247,338 1,233 (198) (181,354) (32,760) 34,259 BALANCE AT 1 JULY 2014 247,338 1,233 (198) (181,354) (32,760) 34,259 Total comprehensive income Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Share based payments expense Conversion of performance rights – 23 40 – – 40 BALANCE AT 30 JUNE 2015 247,378 – – 968 (173) 795 2,028 58 (16,406) – – – – – – 173 173 – – – – – (16,348) 40 968 – 1,008 (140) (197,587) (32,760) 18,919 The above statement of changes in equity should be read in conjunction with the accompanying notes. 27 FINANCIAL STATEMENTS Consolidated statement of cash flows For the year ended 30 June 2015 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest and other finance costs paid NOTES GROUP 2015 $’000 GROUP 2014 $’000 50,284 52,565 (48,721) (68,927) 161 (748) 479 (834) NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 27 976 (16,717) Cash flows from investing activities Payments for exploration & consenting expenditure Payments for mining assets (including elevated stripping) Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Deposits received from/(paid to) financial institutions NET CASH (OUTFLOW) FROM INVESTING ACTIVITIES Cash flows from financing activities Proceeds from the issue of shares Repayment of borrowings Payments for share issue costs NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effects of exchange rate changes on cash and cash equivalents (344) (4,966) (3,366) (3,052) (1,135) (4,014) 3,361 – 520 (2,062) (964) (14,094) 140 28,505 (3,139) (1,244) (99) (3,527) (3,098) 23,734 (3,086) (7,077) 5,565 12,526 (14) 116 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 11 2,465 5,565 The above statement of cash flows should be read in conjunction with the accompanying notes. 28 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 Notes to the financial statements For the year ended 30 June 2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. GENERAL INFORMATION Bathurst Resources Limited (‘Company’ or ‘Parent’ is a company domiciled in New Zealand, registered under the C. MEASUREMENT BASIS These financial statements have been prepared under the historical cost convention, except certain financial assets and liabilities (including derivative instruments) measured at fair value through profit or loss. Companies Act 1993 and is listed on the Australian Securities D. USE OF ESTIMATES AND JUDGEMENTS Exchange (‘ASX’). Bathurst Resources Limited is an FMC Reporting Entity under Part 7 of the Financial Markets Conduct Act 2013. These financial statements have been prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct Act 2013 and ASX listing rules. In accordance with the Financial Markets Conduct Act 2013 because group financial statements are prepared and presented for Bathurst Resources Limited and its subsidiaries, separate financial statements for Bathurst Resources Limited are no longer required to be presented. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities These financial statements have been approved for issue by the within the next financial year are discussed below. Board of Directors on 25 September 2015. i. Impairment The financial statements presented herewith as at and for The future recoverability of the assets recorded by the Group is the year ended 30 June 2015 comprise the Company, dependent upon a number of factors, including whether the its subsidiaries and jointly controlled entities (together referred Group decides to exploit its mine property itself or, if not, to as the ‘Group’). whether it successfully recovers the related asset through sale. The Group is principally engaged in the exploration, Factors that could impact future recoverability include the level development and production of coal. of reserves and resources, future technological changes, costs B. BASIS OF PREPARATION Statement of compliance These financial statements of the group have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). The group is a for-profit entity for the purposes of complying with NZGAAP. The consolidated financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS. The of drilling and production, production rates, future legal changes, and changes to commodity prices and foreign exchange rates. ii. Valuation of deferred consideration In valuing the deferred consideration payable under business acquisitions management uses estimates and assumptions. This includes future coal prices, discount rates, coal production, and the timing of payments. The amounts of deferred consideration are reviewed at each balance date and updated based on best available estimates and assumptions at that time. consolidated financial statements also comply with International The carrying amount of deferred consideration is set out in Financial Reporting Standards (IFRS). Note 21. These financial statements are presented in New Zealand dollars, which is the Company’s functional and presentation currency. References in these financial statements to ‘$’ and ‘NZ$’ are to New Zealand dollars. All financial information has been rounded to the nearest thousand unless otherwise stated. iii. Reserves & Resources Reserves and resources are based on information compiled by a Competent Person as defined in accordance with the Australasian Code of Mineral Resources and Ore Reserves of December 2004 (the JORC code). There are numerous uncertainties inherent in estimating reserves and assumptions that are valid at the time of estimation but that may change significantly when new information becomes available. Changes in forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status and 29 may, ultimately, result in the reserves being restated. the ability of the tax entities to satisfy certain tests at the Such changes in reserves could impact on depreciation and time the losses are recouped. There is an inherent uncertainty amortisation rates, asset carrying values and provisions in applying these judgements and a possibility that changes for rehabilitation. iv. Provision for rehabilitation In calculating the estimated future costs of rehabilitating and restoring areas disturbed in the mining process certain estimates and assumptions have been made. (Refer to Note 1(p)). The amount the Group is expected to incur to settle these future obligations includes estimates in relation to the appropriate discount rate to apply to the cash flow profile, expected mine life, application of the relevant requirements for rehabilitation, and the future expected costs of rehabilitation. in legislation will impact upon the carrying amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet. E. PRINCIPLES OF CONSOLIDATION Subsidiaries Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from Changes in the estimates and assumptions used could have the date on which control is transferred to the group. They are a material impact on the carrying value of the rehabilitation deconsolidated from the date that control ceases. provision and related asset. The provision is reviewed at each reporting date and updated based on the best available estimates and assumptions at that time. The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets The carrying amount of the rehabilitation provision is set out transferred, the liabilities incurred to the former owners of the in Note 22. v. Waste in advance Waste moved in advance is calculated with reference to the stripping ratio (waste moved over coal extracted) of the area of interest and the excess of this ratio over the estimated stripping ratio for the area of interest expected to incur over its life. Management estimates this life of mine ratio based on geological and survey models as well as reserve information for the areas of interest. The carrying amount of the waste moved in advance is set out in Note 16. vi. Taxation The Group’s accounting policy for taxation requires management judgement in relation to the application of income tax legislation. There are many transactions and calculations undertaken during the ordinary course of business where the ultimate tax determination is uncertain. The Group recognises liabilities for tax, and if appropriate taxation investigation or audit acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. Contingent consideration (deferred consideration) to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be a financial asset or financial liability is recognised in accordance with NZ IAS 39 in profit or loss as ‘fair value (loss)/gain on deferred consideration’. issues, based on whether taxation will be due and payable. The excess of the consideration transferred, the amount of any Where the taxation outcome of such matters is different from non-controlling interest in the acquiree and the acquisition-date the amount initially recorded, such difference will impact the fair value of any previous equity interest in the acquiree over the current and deferred tax position in the period in which the fair value of the identifiable net assets acquired is recorded as assessment is made. Certain deferred tax assets for deductible temporary differences and carried forward taxation losses have not been recognised. In not recognising these deferred tax assets assumptions have been made regarding the Group’s ability to generate future taxable profits. Utilisation of the tax losses also depends on goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement 30 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 Inter-company transactions, balances and unrealised gains • income and expenses for each income statement and on transactions between group companies are eliminated. statement of comprehensive income are translated at monthly Unrealised losses are also eliminated. average exchange rates (unless this is not a reasonable Joint arrangements The group applies NZ IFRS 11 to all joint arrangements. Under NZ IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Bathurst Resources Limited has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and • all resulting exchange differences are recognised in other comprehensive income. G. REVENUE RECOGNITION Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable Under the equity method of accounting, interests in joint that the economic benefits will flow to the Group and the ventures are initially recognised at cost and adjusted thereafter revenue can be reliably measured. The following specific to recognise the group’s share of the post-acquisition profits or recognition criteria must also be met before revenue is losses and movements in other comprehensive income. When recognised: the group’s share of losses in a joint venture equals or exceeds its interests in the joint venture (which includes any long term interests that, in substance, form part of the group’s net investment in the joint venture), the group does not recognise further losses, except to the extent that the group has an obligation or has made payments on behalf of the investee. F. FOREIGN CURRENCY TRANSLATION i. Sale of goods Revenue from the sale of goods is recognised when there is an executed sales agreement at the time of delivery of the goods to customer, indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required, the quantity and quality of the goods has been determined, the price is fixed and when title has passed. i. Functional and presentation currency ii. Freight income Items included in the financial statements of each of the Group’s Revenue from freight services is recognised in the accounting entities are measured using the currency of the primary period in which the services are provided. Revenue is not economic environment in which the entity operates (‘the recognised until the service has been completed. functional currency’). The consolidated financial statements are presented in New Zealand dollars, which is Bathurst Resources Limited’s functional and presentation currency. ii. Transactions and balances iii. Interest income Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest Foreign currency transactions are translated into the functional income over the relevant period using the effective interest rate, currency using the exchange rates prevailing at the dates of the which is the rate that exactly discounts estimated future cash transactions. Foreign exchange gains and losses resulting from receipts through the expected life of the financial asset to the the settlement of such transactions and from the translation at net carrying amount of the financial asset. year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or H. INCOME TAX loss, except when they are deferred in equity as qualifying cash The income tax expense or benefit for the period is the tax flow hedges and qualifying net investment hedges or are payable on the current period’s taxable income based on the attributable to part of the net investment in a foreign operation. applicable income tax rate for each jurisdiction adjusted by iii. Group companies The results and financial position of foreign operations (none of changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. which has the currency of a hyperinflationary economy) that have The current income tax charge is calculated on the basis a functional currency different from the presentation currency of the tax laws enacted or substantively enacted at the end of are translated into the presentation currency as follows: the reporting period in the countries where the company’s • assets and liabilities for each balance sheet presented subsidiaries and associates operate and generate taxable are translated at the closing rate at the date of that income. Management periodically evaluates positions taken balance sheet; in tax returns with respect to situations in which applicable tax 31 regulation is subject to interpretation. It establishes provisions of weighted average costs. Costs of purchased inventory are where appropriate on the basis of amounts expected to be paid determined after deducting rebates and discounts. Net to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. J. FINANCIAL INSTRUMENTS i. Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and other payables. at the time of the transaction affects neither accounting or Non-derivative financial instruments are recognised initially at taxable profit or loss. Deferred income tax is determined using fair value plus, for instruments not at fair value through the tax rates (and laws) that have been enacted or substantially income statement, transaction costs. Subsequent to initial enacted by the end of the reporting period and are expected to recognition non-derivative financial instruments are measured apply when the related deferred income tax asset is realised or as described below. the deferred income tax liability is settled. A financial instrument is recognised if the Group become party Deferred tax assets are recognised for deductible temporary to the contractual provisions of the instrument. Financial assets differences and unused tax losses only if it is probable that are derecognised if the Group’s contractual rights to the cash future taxable amounts will be available to utilise those flows from the financial asset expire or if the Group transfers the temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company financial asset to another party without retaining control of substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or are cancelled. is able to control the timing of the reversal of the temporary Financial assets carried at amortised cost differences and it is probable that the differences will not Loans and receivables are non-derivative financial assets with reverse in the foreseeable future. fixed or determinable payments that are not quoted in an active Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. taxation authority. Current tax assets and tax liabilities are offset Management determines the classification of its investments at where the entity has a legally enforceable right to offset and initial recognition. intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. I. INVENTORIES Loans and receivables are subsequently carried at amortised cost using the effective interest rate method. Cash and cash equivalents Cash and short term deposits in the balance sheet comprise cash at bank and on hand and short term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement cash and cash equivalents consist of cash and cash equivalents as defined Raw materials and stores, work in progress and finished goods above, net of outstanding bank overdrafts. are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to inventory on the basis Trade receivables Trade receivables are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement 32 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 within 30 days. They are presented as current assets unless K. IMPAIRMENT collection is not expected for more than 12 months after the reporting date. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value less transaction costs and subsequently measured at amortised cost using the effective interest method. Deferred Consideration The fair value of deferred consideration payments is determined at acquisition date. Subsequent changes to the fair value of the deferred consideration are recognised through the income statement. The portion of the fair value adjustment due to the time value of money (unwinding of discount) is recognised as a The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or Group of financial assets is impaired. A financial asset or a Group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Group of financial assets that can be reliably estimated. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment finance cost. For further information on deferred consideration at the end of each reporting period. refer to Note 21. Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. ii. Derivative financial instruments From time to time the Group may use derivative financial instruments to hedge its exposure to commodity risks and foreign exchange risks arising from operational and financing activities. Derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Impairment of Financial assets carried at amortised cost For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. Impairment of exploration and evaluation assets Exploration and evaluation assets are tested for impairment when either the period of the exploration right has expired or will expire in the near future, substantive expenditure on further exploration for and evaluation in the specific area is neither budgeted or planned, exploration for and evaluation in the specific area have not led to the discovery of commercially viable quantities and the Group has decided to discontinue such activities in the area or there is sufficient data to indicate that the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or sale. 33 Goodwill and intangible assets M. EXPLORATION AND EVALUATION EXPENDITURE Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets Other assets are tested for impairment whenever events or Exploration and evaluation expenditure incurred is capitalised to the extent that the expenditure is expected to be recovered through the successful development and exploitation of the area of interest, or the exploration and evaluation activities in the area of interest have not yet reached a point where such an assessment can be made. All other exploration and evaluation changes in circumstances indicate that the carrying amount may expenditure is expensed as incurred. not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. L. PROPERTY, PLANT AND EQUIPMENT All property, plant and equipment are measured at cost less depreciation and accumulated impairment losses. Cost includes Capitalised costs are accumulated in respect of each identifiable area of interest. Costs are only carried forward to the extent that tenure is current and they are expected to be recouped through the successful development of the area (or, alternatively by its sale) or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and operations in relation expenditure that is directly attributable to the acquisition of to the area are continuing. the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the expenditure will flow to the Group. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Depreciation is recognised in profit or loss on a diminishing value basis over the estimated useful lives of each item of plant, property and equipment. Leasehold improvements and certain leased plant and equipment are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives for significant items of property, plant and equipment are as follows: • Buildings • Mine infrastructure • Plant & machinery • Plant & machinery leased 25 years 3 – 8 years 2 – 25 years Units of use • Furniture, fittings and equipment 3 – 8 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 1(k)). Accumulated costs in relation to an abandoned area are written off in full against profit in the period in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. N. MINING AND DEVELOPMENT PROPERTIES Mining and development properties include the cost of acquiring and developing mining properties, licenses, mineral rights and exploration, evaluation and development expenditure carried forward relating to areas where production has commenced. These assets are amortised using the unit of production basis over the proven and probable reserves. Amortisation starts from the date when commercial production commences. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the item can be Any gain or loss on disposals of an item of property, plant and measured reliably. equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in the profit or loss. 34 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 O. WASTE IN ADVANCE Waste removed in advance costs incurred in the development of a mine are capitalised as parts of the costs of constructing the mine and subsequently amortised over life of the relevant area of interest or life of mine if appropriate (herein referred to as ‘life of mine’). Waste removal normally continues through the life of the mine. The company defers waste removal costs incurred during the production stage of its operations and discloses it within the cost of constructing the mine. The amount of waste removal costs deferred is based on the ratio obtained by dividing the volume of waste removed by the tonnage of coal mined. Waste removal costs incurred in the period are deferred to the extent that the current period ratio exceeds the life of mine ratio. Costs above the life of ore component strip ratio are deferred to waste removed in advance. The stripping activity asset is amortised on a units of production basis. The life of mine ratio is based on proven and probable reserves of the operation. Waste moved in advance costs form part of the total investment in the relevant cash generating unit, which is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. Changes to the life of mine stripping ratio are accounted for prospectively. P. PROVISIONS Provision for rehabilitation Provisions are made for site rehabilitation costs relating to areas disturbed during the mine’s operation up to reporting date but not yet rehabilitated. The provision is based on management’s best estimate of future costs of rehabilitation. When the provision is recognised, the corresponding rehabilitation costs are recognised as part of mining property and development assets. At each reporting date, the rehabilitation liability is re- measured in line with changes in the timing or amount of the costs to be incurred. Changes in the liability relating to rehabilitation of mine infrastructure and dismantling obligations are added to or deducted from the related asset. If the change in the liability results in a decrease in the liability that exceeds the carrying amount of the asset, the asset is written down to nil and the excess is recognised immediately in the income statement. If the change in the liability results in an addition to the cost of the asset, the recoverability of the new carrying value is considered. Where there is an indication that the new carrying amount is not fully recoverable, an impairment test is performed with the write down recognised in the income statement in the period in which it occurs. The net present value of the provision is calculated using an appropriate discount rate, the unwinding of the discount applied in calculating the net present value of the provision is charged to the income statement in each reporting period and is classified as a finance cost. Q. SHARE-BASED PAYMENTS Share-based compensation benefits are provided to employees via the Bathurst Resources Limited Long Term Incentive Plan and Employee Share Option Plan. The fair value of performance rights and options granted under the Bathurst Resources Limited Long Term Incentive Plan and Employee Share Option Plan is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non- market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. R. LEASES The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Finance leases, those under which a significant portion of the risks and rewards of ownership are transferred to the company, are capitalised at the lease’s inception at the fair value of the leased property, or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short term and long term payables. 35 Capitalised leased assets are depreciated over the shorter of • the weighted average number of additional ordinary shares the estimated useful life of the asset and the lease term if there that would have been outstanding assuming the conversion is no reasonable certainty that the Group will obtain ownership of all dilutive potential ordinary shares. by the end of the lease term. Operating lease payments are recognised as an expense in the income statement 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 reduction of the liability. V. SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board S. GOODS AND SERVICES TAX of Directors. Revenues, expenses and assets are recognised net of the amount of goods and services tax (‘GST’), except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authorities, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense item as applicable. Receivables and payables in the balance sheet are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement 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. T. CONTRIBUTED EQUITY W. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE Certain new standards, amendments and interpretations to existing standards have been issued that are not yet mandatory for accounting periods beginning on or after 1 July 2014. The company has not early adopted: i. NZ IFRS 9, Financial Instruments, revised NZ IFRS 9 (2014): Financial Instruments and revised NZ IFRS 9 (2013): Financial Instruments. Effective for periods beginning on or after 1 January 2018. The standard adds requirements related to the classification, measurement and derecognition of financial assets and liabilities. ii. NZ IFRS 15, Revenue from contracts with customers Effective for periods beginning on or after 1 January 2017. Ordinary shares are classified as equity. Issued and paid up The standard introduces principles for reporting cohesive and capital is recognised at the fair value of the consideration useful information to users of financial statements about the received by the company. Any transaction costs arising on nature, amount, timing, and uncertainty of revenue and cash the issue of ordinary shares are recognised directly in equity flows arising from an entity’s contracts with customers. as a reduction of the share proceeds received. U. EARNINGS PER SHARE i. Basic earnings per share The Group has not analysed the new standards, amendments or interpretations but does not expect there to be a significant impact on its consolidated financial statements. Basic earnings per share is calculated by dividing: • the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares • by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. ii. Diluted earnings per share X. STANDARDS AND INTERPRETATIONS ADOPTED DURING THE YEAR The financial information presented for the year ended 30 June 2015 has been prepared on the basis of accounting policies and methods of computation consistent with those applied in the 30 June 2014 financial statements contained within the Annual Report of Bathurst Resources Limited except for the adoption of Diluted earnings per share adjusts the figures used in the NZ IFRIC 21 ‘Levies’ which confirms that a liability to pay a levy determination of basic earnings per share to take into account: is only recognised when the activity that triggers the payment • the after income tax effect of interest and other financing occurs. The adoption of IFRIC 21 did not have a material impact costs associated with dilutive potential ordinary shares, and on the Group. 36 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 2. GOING CONCERN its assets and discharge its liabilities in the normal course In the current financial year the Group has produced a loss of of business. $16.4 million however it achieved a net cash inflow from It should be noted that a major commercial domestic sales operating activities of $1 million. The Directors have continued contract expires in 2016. The company has advanced its to adopt the going concern assumption in the preparation of the planning for when this contract expires. financial statements. This is based on the existing cash on hand, funding facilities available and budgeted trading activity for the 2016 financial year. The budget for the 2016 financial year is based on a number of key assumptions as follows: • sales into the domestic market only; • assumes no improvement in the global export coal price; • no significant operations at the Escarpment mine until such time as the export margin achieved makes the project economically viable; • current working capital facilities remain available (but undrawn) under normal commercial arrangements; • all contracted obligations are adhered to; • overheads and administration costs are incurred in line with budget; • all existing lines of financing remain. The budget does not incorporate a range of austerity measures that could be implemented to reduce the cash spend if necessary. This includes further reduction in head office staffing, complete halt to exploration activity and a deferral of future consenting costs. The Directors have considered potential uncertainties and risk mitigations in respect of the 2016 budget and these are summarised below: • geo-technical issues at one of the mining operations – mitigated through continued geo-technical reviews and best practice mine planning; further mitigation achieved by operating the Escarpment mine simultaneously with the 3. SEGMENT INFORMATION Management has determined operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The Board reviews the business from both a mine and geographic perspective and has identified two reportable segments. The Buller Coal segment relates to the mining, development and ultimate exploitation of permits under the Buller Coal management team in the Buller region of New Zealand. The Eastern Coal segment refers to the Takitimu mine and Timaru coal handling and distribution centre under the Eastern management team. The financial performance of these segments is monitored and operated separately from each other. All other operations of the Group are classified within ‘Corporate’ section of the segment note which encompasses the administration and treasury management of the Group. Assets and Liabilities have been presented net of intercompany balances. During the period, the company undertook a rationalisation of the corporate structure and a number of group entities were amalgamated into a single legal entity to achieve operational efficiencies. Whilst this has not impacted the determination of operating segments within the business, there has been a change in the nature of information provided to the chief operating decision makers. Cascade mine. Revenue is no longer presented on a segmented basis, instead • sales into the domestic market are less than budget – this is it is presented as a sales function across the Group. Total mitigated by including only contracted customers with no revenue for the year ended 30 June 2015 totalled $51.3m modelled growth assumption. (2014: $55.5m). • events outside management’s control, such as the associated cost of Health and Safety regulations – allowance has been provided for in the 2016 budget with significant work already underway. Total assets and total liabilities are reported on a group basis and are not provided internally on a segmented basis. Total assets and liabilities as at 30 June 2015 total $50.4m (30 June 2014: $61.8m) and $31.5m (30 June 2014: $27.6m) The Directors believe that based on the information available respectively. at the date of these financial statements, including the above assumptions and risks, there is a reasonable basis for continuing to adopt the going concern assumption. However, should specific assumptions not be realised there may be a material uncertainty relating to Group’s ability to continue as a going concern. In this event the entity may be unable to realise Two Bathurst customers met the reporting threshold of 10 percent of Bathurst’s operating revenue in the year to 30 June 2015. 37 SEGMENT INFORMATION PROVIDED TO THE BOARD The segment information provided to the Board for the reportable segments is as follows: GROUP – 30 JUNE 2015 LOSS BEFORE TAX Loss before tax includes: Impairment losses Depreciation and amortisation GROUP – 30 JUNE 2014 Sales revenue Interest revenue Other income TOTAL SEGMENT REVENUE Inter segment revenue BULLER COAL $’000 EASTERN COAL $’000 CORPORATE $’000 TOTAL $’000 (2,327) (3,625) (10,454) (16,406) (1,246) 218 (3,059) (11,528) (143) (81) (1,171) (14,668) BULLER COAL $’000 EASTERN COAL $’000 CORPORATE $’000 TOTAL $’000 22,649 35,491 – 58,140 437 (25) (74) 197 127 – 490 172 23,061 35,614 127 58,802 (2,615) – – – REVENUE FROM EXTERNAL CUSTOMERS 20,446 35,614 127 56,187 Total revenue per the income statement LOSS BEFORE TAX (276,994) (6,197) (1,043) (284,234) 56,187 Loss before tax includes: Impairment losses Depreciation and amortisation (449,984) – – (449,984) (6,983) (6,963) (67) (14,013) TOTAL SEGMENT ASSETS AS AT 30 JUNE 2014 18,828 36,194 6,802 61,824 TOTAL SEGMENT LIABILITIES AS AT 30 JUNE 2014 15,059 9,115 3,390 27,565 38 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 4. REVENUE Coal sales Freight SALES REVENUE Other income TOTAL REVENUE 5. COST OF SALES Raw materials, mining costs, and consumables used Freight costs Mine labour costs Amortisation expenses Changes in inventories of finished goods and work in progress TOTAL COST OF SALES 6. OTHER EXPENSES CLASSIFICATION OF OTHER EXPENSES BY NATURE: Audit fees Director fees Legal fees Consultants Employee benefit expense Rent Business development costs Share based payments expense Gain from reversal of share based payments expense Other TOTAL OTHER EXPENSES GROUP 2015 $’000 GROUP 2014 $’000 36,652 42,191 14,637 13,334 51,289 55,525 244 172 51,533 55,697 GROUP 2015 $’000 GROUP 2014 $’000 15,635 28,259 13,047 11,230 7,842 7,125 259 5,044 11,466 796 43,908 56,795 GROUP 2015 $’000 172 254 483 1,128 5,440 439 59 968 – GROUP 2014 $’000 334 501 128 1,477 6,693 389 137 881 (3,672) 3,375 4,235 12,318 11,103 39 7. REMUNERATION OF AUDITORS During the period, the following fees were paid or payable for services provided by the auditor of the parent entity: Audit and review of financial statements Tax and compliance services by auditors TOTAL REMUNERATION FOR AUDITORS 8. FINANCE (COSTS)/INCOME Interest income Deferred consideration: foreign exchange gain TOTAL FINANCE INCOME Interest expense Foreign exchange loss Provisions: unwinding of discount Deferred consideration: unwinding of discount TOTAL FINANCE COSTS FINANCE (COST)/INCOME – NET GROUP 2015 $’000 170 2 172 GROUP 2015 $’000 196 – 196 (950) (50) (262) (194) GROUP 2014 $’000 334 147 481 GROUP 2014 $’000 490 21,258 21,748 (815) (278) (167) (9,123) (1,456) (10,383) (1,260) 11,365 NOTES 21 22 21 40 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 9. INCOME TAX BENEFIT (a) Income tax benefit Current tax Deferred tax INCOME TAX BENEFIT (b) Numerical reconciliation of income tax benefit to prima facie tax payable Loss before income tax Tax at the standard New Zealand rate of 28% Tax effect of amounts that are not deductible/(assessable) in calculating taxable income: Share based payment expense Fair value gain on deferred consideration Deferred consideration: foreign exchange gain Deferred consideration: unwinding of discount Tax losses not recognised Deferred tax not recognised* Previous recognised losses unrecognised Impairment losses recognised Prior period adjustments Sundry items INCOME TAX BENEFIT * Further information relating to deferred tax is set out in Note 18. IMPUTATION CREDITS New Zealand imputation credit account CLOSING BALANCE GROUP 2015 $’000 GROUP 2014 $’000 – – – – (95,331) (95,331) (16,406) (284,234) (4,594) (79,586) 271 244 – (781) (47,415) 2,539 (17) (5,952) 1,728 7,090 2,596 22,536 – 8,316 (304) 14,640 – 76 – (2,214) (14,504) (95,331) GROUP 2015 $’000 GROUP 2014 $’000 1,061 1,072 41 10. IMPAIRMENT LOSSES Impairment of exploration and evaluation assets Impairment of mining assets Impairment of plant, property and equipment Reversal of impairment Impairment of other financial assets TOTAL IMPAIRMENT LOSSES NOTES 16 16 GROUP 2015 $’000 GROUP 2014 $’000 287 8,825 2,622 414,427 853 26,867 (6,015) 3,424 (135) – 1,171 449,984 Management has assessed the cash generating units for the Group as follows: • Eastern Coal, as the coal yard cannot generate its own cash flows independent of the mine. Eastern Coal includes Canterbury Coal, Takitimu mine and the Timaru coal yard. • Buller Coal Project, as there is a large amount of shared infrastructure between the proposed mines, necessary blending of the pit products at the same site, and the similar geographical location of the pits. • Cascade mine, as the mine has established domestic markets which allow a profitable operation without relying on the infrastructure to be built for the Buller Coal Project. Management have prepared detailed impairment models for each of the above cash generating units to determine the recoverable amount which is the higher of the value in use or fair value less cost to sell. The model is a discounted cash flow based on the Board approved operating plans for each CGU. EASTERN COAL The recoverable amount of the Eastern Coal CGU future cash flows has been assessed as higher than the carrying value therefore no impairment has been recorded as at 30 June 2015. BULLER COAL PROJECT The Buller Coal Project is subject to movements in the international coking coal market. Coking coal prices have experienced a reduction in recent years which has impacted on the potential value of the Buller Coal Project. The Buller Coal Project was fully impaired in the year ended 30 June 2014 and remains fully impaired with the exception of one block of land (see below) at 30 June 2015 with further deterioration in the global price of coking coal. $6m impairment previously recognised was reversed during the year. This primarily relates to land, buildings and other minor plant and equipment which has been disposed of. The disposal of land occurred subsequent to the year end and is discussed further in Note 31. 42 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 CASCADE MINE Cascade mine has recorded a partial impairment in the year ended 30 June 2015, due to a major commercial sales contract expiring in 2016 which impacts upon production forecasts. The partial impairment results in the mine assets being held at fair value (fair value hierarchy level 3). ASSUMPTIONS The sales price per tonne used in the valuation models has been based on current contractual arrangements. Production levels have been based on the Board approved operating plan which, for Cascade, sees production wind down in the last quarter of 2016. As the majority of all production is matched to contracted sales, the sensitivity of pricing movements for non-contracted volumes is immaterial. The discount rate is required to reflect the time value of money as well as the asset risk profile. The model assumes a post-tax rate of 11.19% (2014: 11:07%). The recoverable value has been determined using discounted cash flows under the fair value less costs to sell methodology. 11. CASH AND SHORT TERM DEPOSITS Cash at bank and on hand Cash and cash equivalents Short term deposits* TOTAL CASH AND SHORT TERM DEPOSITS GROUP 2015 $’000 2,465 2,465 2,770 5,235 GROUP 2014 $’000 5,565 5,565 3,290 8,855 * Short term deposits include restricted term deposits held with ANZ and Westpac in relation to security held against performance bonds. 12. TRADE AND OTHER RECEIVABLES Trade receivables Less: provision for impairment of receivables Loans to key management personnel* Interest receivable Prepayments Other receivables** TOTAL TRADE AND OTHER RECEIVABLES GROUP 2015 $’000 4,667 (785) GROUP 2014 $’000 2,816 – 3,882 2,816 – 27 93 112 4,114 510 356 78 583 4,343 * Further information relating to loans to key management personnel is set out in Note 29. ** Other receivables in 2014 included a receivable from Mr Bohannan relating to the exercise of 5,000,000 options in October 2013. 43 13. INVENTORIES Raw materials and stores Finished goods* Other TOTAL INVENTORIES * Finished goods are recorded at the lower of cost and net realisable value as per Note 1(i). 14. OTHER FINANCIAL ASSETS Current Advances to third parties Other Non-current Security bonds and deposits Advances to third parties Other TOTAL FINANCIAL ASSETS GROUP 2015 $’000 332 824 123 GROUP 2014 $’000 425 773 85 1,279 1,283 GROUP 2015 $’000 GROUP 2014 $’000 20 – 20 147 – – 82 50 132 2,182 3,826 1,554 167 7,694 Security bonds and deposits have been provided to third parties in relation to rental properties and mine/permit access arrangements. 44 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 15. PROPERTY, PLANT AND EQUIPMENT FREEHOLD LAND $’000 BUILDINGS $’000 MINE INFRA- STRUCTURE $’000 PLANT & MACHINERY $’000 FURNITURE, FITTINGS AND EQUIPMENT $’000 OTHER $’000 WORK IN PROGRESS $’000 TOTAL $’000 GROUP – 30 JUNE 2015 Opening cost 22,528 6,478 3,561 14,330 2,060 508 11,435 60,900 Additions Disposals 327 (4,447) 165 – – – 310 (6) 105 – 50 – 288 (178) 1,245 (4,631) CLOSING COST 18,408 6,643 3,561 14,634 2,165 558 11,545 57,514 Opening accumulated depreciation Depreciation Impairment Disposals CLOSING ACCUMULATED DEPRECIATION CLOSING NET BOOK VALUE (10,553) (5,660) (931) (7,377) (1,424) (231) (11,338) (37,514) (4,800) 5,048 – (73) (18) – (44) (75) – (2,423) (361) (5) (163) (10) – (40) (62) – (7,543) 4,700 (5) 178 – (10,305) (5,751) (1,050) (10,166) (1,597) (333) (11,160) (40,362) 8,103 892 2,511 4,468 568 225 385 17,152 GROUP – 30 JUNE 2014 Opening cost 16,745 6,477 3,423 13,670 1,969 575 10,188 53,046 Additions Disposals 5,783 – 2 – 138 – 716 (55) 105 (14) 65 3,915 10,723 (131) (2,668) (2,869) CLOSING COST 22,528 6,478 3,561 14,330 2,060 508 11,435 60,900 Opening accumulated depreciation (759) (257) (647) (5,345) (830) (293) – (8,131) Depreciation (80) (69) (284) (1,551) (624) Impairment (9,714) (5,334) Disposals – – – – (481) – – 30 62 – – – (2,546) (11,338) (26,867) – 30 CLOSING ACCUMULATED DEPRECIATION CLOSING NET BOOK VALUE (10,553) (5,660) (931) (7,377) (1,424) (231) (11,338) (37,514) 11,975 818 2,630 6,953 636 277 97 23,386 45 16. MINING LICENCES, PROPERTIES, EXPLORATION, AND EVALUATION ASSETS EXPLORATION AND EVALUATION ASSETS Opening balance Expenditure capitalised Written off exploration and evaluation assets Impairment recognised Transfer to mining licences and property assets TOTAL EXPLORATION AND EVALUATION ASSETS MINING LICENCES AND PROPERTY ASSETS Opening balance Expenditure capitalised Amortisation Abandonment provision movement Waste moved in advance capitalised Impairment recognised Transfer from exploration and evaluation assets TOTAL MINING LICENCES AND PROPERTY ASSETS TOTAL MINING LICENCES, PROPERTY, EXPLORATION AND EVALUATION ASSETS GROUP 2015 $’000 GROUP 2014 $’000 589 348 – 31,377 3,521 (21) (287) (8,825) – (25,463) 650 589 15,577 393,636 13,941 6,091 (7,125) (9,064) 594 1,483 194 13,684 (2,622) (414,427) – 25,463 21,848 15,577 22,498 16,166 46 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 17. INVESTMENT IN SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries. NAME OF ENTITY BR Coal Pty Limited Bathurst New Zealand Limited Bathurst Coal Holdings Limited1 Buller Coal Limited Bathurst Coal Limited2 Cascade Coal Limited Sommervilles Land Holdings Limited Canterbury Coal Limited Cascade East Limited Takitimu Coal Limited Rochfort Coal Limited Eastern Coal Supplies Limited New Brighton Collieries Limited COUNTRY OF INCORPORATION CLASS OF SHARES EQUITY HOLDING 2015 % EQUITY HOLDING 2014 % Australia New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 – – – – – – – 100 100 100 100 100 100 100 100 100 100 100 100 100 – 1 During the period, Bathurst Coal Limited changed its name to Bathurst Coal Holdings Limited 2 During the period Eastern Coal Limited changed its name to Bathurst Coal Limited and amalgamated with Cascade Coal limited, Sommervilles Land Holdings Limited, Canterbury Coal Limited, Cascade East Limited, Takitimu Coal Limited, Rochfort Coal Limited and Eastern Coal Supplies Limited. All subsidiary companies have a balance date of 30 June, are predominantly involved in the coal industry and have a functional currency of New Zealand dollars with the exception of BR Coal Pty Ltd. BR Coal Pty Ltd has a functional currency of Australian dollars. During the period, the company acquired 100% of the ordinary shares in New Brighton Collieries Limited. 47 18. DEFERRED TAX ASSET/(LIABILITIES) The balance comprises temporary differences attributable to: Tax losses Employee benefits Provisions Mining licences Exploration and evaluation expenditure Property, plant and equipment TOTAL DEFERRED TAX ASSETS Waste moved in advance TOTAL DEFERRED TAX LIABILITIES GROUP 2015 $’000 GROUP 2014 $’000 15,791 15,406 244 1,311 200 1,156 16,195 15,545 1,614 7,442 1,630 7,288 42,597 41,225 (1,654) (3,283) (1,654) (3,283) Net deferred tax asset not recognised (40,943) (37,942) NET DEFERRED TAX ASSET/(LIABILITY) – – Movement Opening balance Deferred tax benefit NET DEFERRED TAX ASSET/(LIABILITY) GROUP 2015 $’000 GROUP 2014 $’000 – – – (95,331) 95,331 – The Group has not recognised a net deferred tax asset of $40.9m (2014: $37.9m) on the basis that it is not probable these losses will be utilised in the foreseeable future. 48 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 19. TRADE AND OTHER PAYABLES CURRENT Trade payables Accruals Employee benefit payable Other payables NON-CURRENT Other payables TOTAL TRADE AND OTHER PAYABLES 20. BORROWINGS CURRENT Secured Bank loans Property loans Lease liabilities NON-CURRENT Secured Bank loans Property loans Lease liabilities GROUP 2015 $’000 2,597 1,580 1,070 325 5,572 430 6,002 GROUP 2014 $’000 3,827 2,987 857 293 7,964 – 7,964 GROUP 2015 $’000 GROUP 2014 $’000 2,471 5,865 213 8,549 363 – 98 461 5,771 1,290 279 7,340 484 5,625 132 6,241 TOTAL BORROWINGS 9,010 13,581 Included above is a finance facility with Westpac New Zealand Limited for the acquisition of a new mining fleet. The total amount available and drawn on that facility as at 30 June 2015 was $2 million (2014:$3 million). The current term of the facility is five years which is reviewed annually by Westpac New Zealand Limited and may be terminated at any time. The facility is a fixed rate, New Zealand dollar denominated loan which is carried at amortised cost. The facility does not impact on the entity’s exposure to foreign exchange and interest rate risk. The Group also has with Westpac New Zealand Limited a term loan of $0.7 million (2014:$1.1 million), finance lease facilities $0.3 million (2014:$0.2 million), and bank overdraft facilities which were unused at 30 June 2015 and 2014. These facilities have various covenants in place. A portion of finance leases and bank loans with Westpac New Zealand Limited have been classified as non-current. 49 A. SECURITY The bank loans are secured by an all obligations General Security Agreement given by Bathurst Coal Limited under which the company grants to the bank a first ranking security interest over all its present and future acquired property (including proceeds) and a first ranking security interest over any of the company’s assets. In addition to this, the bank has a registered first and exclusive mortgage over the property and coal handling facility at Timaru. Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. CURRENT General Security Agreement Cash and cash equivalents Receivables Inventories TOTAL CURRENT ASSETS PLEDGED AS SECURITY NON-CURRENT First and exclusive mortgage Freehold land and buildings Finance lease Plant and equipment General Security Agreement Plant and equipment TOTAL NON-CURRENT ASSETS PLEDGED AS SECURITY TOTAL ASSETS PLEDGED AS SECURITY B. FAIR VALUE The carrying value of borrowings has been assessed as the fair value. C. FINANCE LEASES LIABILITIES Finance lease liabilities are payable as follows. GROUP 2015 $’000 GROUP 2014 $’000 54 72 1,215 1,341 3,674 3,348 1,283 8,305 1,133 1,097 426 132 9,941 21,352 11,500 22,581 12,841 30,886 FUTURE MINIMUM LEASE PAYMENTS 2015 $’000 INTEREST 2015 $’000 PRESENT VALUE OF MINIMUM LEASE PAYMENTS 2015 $’000 FUTURE MINIMUM LEASE PAYMENTS 2014 $’000 PRESENT VALUE OF MINIMUM LEASE PAYMENTS 2014 $’000 INTEREST 2014 $’000 231 112 – 343 18 14 – 32 213 98 – 311 310 141 – 451 31 9 – 40 279 132 – 411 GROUP Less than one year Between one and five years More than five years 50 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 21. DEFERRED CONSIDERATION Current Acquisition of subsidiary deferred consideration 1,730 917 GROUP 2015 $’000 GROUP 2014 $’000 Non-current Acquisition of subsidiary deferred consideration TOTAL DEFERRED CONSIDERATION Movement Opening balance Unwinding of discount Foreign exchange (gain)/loss Fair value adjustment to deferred consideration Addition upon acquisition of Canterbury Coal Limited Addition upon acquisition of New Brighton Collieries Limited Consideration paid during the period CLOSING BALANCE 10,883 12,613 1,974 2,891 2,891 183,856 194 9,123 – (21,258) 615 (169,396) – 566 9,103 (190) – – 12,613 2,891 A. DETAILS ON DEFERRED CONSIDERATION – BULLER COAL PROJECT Model inputs The fair value of the future royalty payments is estimated using a discount rate, as deferred consideration is payable in US$ for export sales, the discount rate is comprised of the 10 year US Government Bond rate plus a risk premium – 1% for performance payments and 4.5% for royalties. The Board approved production profile is applied and consensus coal prices used. Any royalties payable in USD for export sales are then converted to NZD using the latest spot rate. Royalties for sales made in NZD are payable in NZD. Unwinding of discount The unwinding of discount adjustment relates to the fair value impact on the deferred consideration calculation of the time value of money. Deferred consideration The acquisition of Buller Coal Limited (formerly L&M Coal Limited) in November 2010 contained two components of deferred consideration, cash and royalties. Deferred cash consideration The deferred cash consideration is made up of two payments of US$40,000,000 (performance payments), the first being payable upon 25,000 tonnes of coal being shipped from the Buller Coal Project and the second payable upon 1 million tonnes of coal being shipped from the Buller Coal Project. The potential undiscounted amount of all future cash payments that the Group could be required to make under these arrangements is between US$nil and US$80,000,000. The deferred cash consideration is valued at each reporting date based on expected timing of the cash payment and an appropriate discount rate. Revaluations are recognised in the income statement. Bathurst has the option to defer the cash payment of the performance payments. If the performance payments are deferred by Bathurst a higher royalty rate is payable by Bathurst on coal sold from the respective permit areas, until such time the performance payments are made. The option to pay a higher royalty rate has been assumed. 51 Royalties As part of the consideration Bathurst was party to a royalty agreement with L&M Coal Holdings Limited. The amounts that are payable in the future under this royalty agreement are recognised as part of the consideration paid for Buller Coal Limited. The fair value of the future royalty payments is estimated using an appropriate discount rate, production profile, and forecasted US dollar coal prices (estimated using forecasts from leading investment banks). Revaluations are recognised in the income statement. Foreign exchange Both elements of the deferred consideration are denominated in US dollars and as such are exposed to movements in foreign exchange rates (notably New Zealand dollar / US dollar rates) with the effect of changes in the foreign exchange rates being recognised in the income statement in the period the change occurs. Refer to note 28 for discussion on the sensitivity of the income statement to fluctuations in the New Zealand dollar / US dollar exchange rate. The deferred consideration only becomes payable upon sales targets being achieved and as such is considered to be naturally hedged against US dollar sales receipts expected at the time the deferred consideration falls due. Payment timing The construction coal being mined has triggered the performance payments and royalties are now being paid, as such a component of deferred consideration is classified as current at 30 June 2015. Security Pursuant to a deed of guarantee and security the two performance payments of US$40 million included in the deferred consideration above are secured by way of a first-ranking security interest in all of Buller Coal Limited’s present and future assets (and present and future rights, title and interest in any assets). In addition to this, Buller Coal Limited has guaranteed the payment of all amounts under the Sale and Purchase Agreement with L&M Coal Holdings Limited. B. DETAILS ON DEFERRED CONSIDERATION – CANTERBURY COAL LIMITED The acquisition of Canterbury Coal Limited in November 2013 contained a royalty agreement. The amounts that are payable in the future under this royalty agreement are required, to be recognised as part of the consideration paid for Canterbury Coal Limited. The fair value of the future royalty payments is estimated using a discount rate based upon the latest New Zealand 10 year government bond rate, production profile, and forecasted domestic coal prices. C. DETAILS ON DEFERRED CONSIDERATION – NEW BRIGHTON COLLIERIES LIMITED On 10 March 2015, the company announced that it had completed the acquisition of New Brighton Collieries Limited under amended terms. The acquisition was initially announced on 28 February 2012 with the principal asset of New Brighton Collieries Limited being coal exploration permit 40625. Under the amended terms the balance due on settlement is to be satisfied by an ongoing royalty based on mine gate sales revenue. The fair value of the future royalty payments is estimated using a discount rate based upon the latest New Zealand 10 year government bond rate, projected production profile, and forecast domestic coal prices. A 1% increase or decrease in the discount rate used would decrease or increase the deferred consideration balance by $0.5m and $0.6m, respectively. Security Pursuant to a deed of guarantee and security the deferred consideration is secured by way of a first-ranking security interest in all of New Brighton Collieries Limited’s present and future assets (and present and future rights, title and interest in any assets). Deferred consideration liabilities have been categorised as level 3 under the fair value hierarchy. 52 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 22. PROVISIONS Current Rehabilitation Restructuring provision Non-current Rehabilitation TOTAL PROVISIONS Rehabilitation provision movement Opening balance Change recognised in the mining and property asset Change due to passage of time (unwinding of discount) Other changes recognised in the income statement CLOSING BALANCE Rehabilitation provision GROUP 2015 $’000 GROUP 2014 $’000 247 380 627 3,274 3,901 3,129 594 262 (464) 3,521 259 – 259 2,870 3,129 2,784 194 167 (16) 3,129 Provision is made for the future rehabilitation of areas disturbed in the mining process. Management estimates the provision based on expected levels of rehabilitation, areas disturbed and an appropriate discount rate. Restructuring provision Provision has been made for planned changes to the company’s management structure. A detailed formal plan is in place and an announcement has been made to those affected. 23. CONTRIBUTED EQUITY Ordinary fully paid shares Movement Opening balance Issue of shares* Exercise of options and conversion of performance rights** CLOSING BALANCE GROUP 2015 NUMBER OF SHARES 000S GROUP 2014 NUMBER OF SHARES 000S 947,828 944,932 947,828 944,932 944,932 699,248 2,146 232,397 750 13,287 947,828 944,932 * In July 2014 the Company completed a non-renounceable rights issue resulting in the issue of 2,146,913 shares. The rights issue followed a share placement to institutional, sophisticated and professional investors, in April 2014. ** Further information is set out in Note 26. 53 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held. Every ordinary share is entitled to one vote. 24. RESERVES Share based payment reserve Foreign exchange translation reserve Re-organisation reserve TOTAL RESERVES NATURE AND PURPOSE OF RESERVES Share based payment reserve GROUP 2015 $’000 2,028 (140) GROUP 2014 $’000 1,233 (198) (32,760) (32,760) (30,872) (31,725) The share based payment reserve is used to recognise the fair value of performance rights issued. Foreign exchange translation reserve Exchange differences arising on translation of companies within the Group with a different functional currency to New Zealand dollars are taken to the foreign currency translation reserve. The reserve is recognised in the income statement when the investment is disposed of. Reorganisation reserve Bathurst Resources Limited was incorporated on 27 March 2013. A scheme of arrangement between Bathurst Resources Limited and its shareholders resulted in Bathurst Resources (New Zealand) Limited becoming the new ultimate parent company of the Group on 28th June 2013. In accordance with the Financial Reporting Act 1993, these Group financial statements can only include subsidiary companies results from the date of reorganisation, and therefore in arriving at a closing consolidated Balance Sheet, a reorganisation reserve has been created which reflects the previous retained losses of subsidiaries. 54 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 25. EARNINGS PER SHARE (a) Basic earnings per share GROUP 2015 CENTS GROUP 2014 CENTS Total basic earnings per share attributable to the ordinary equity holders of the company (1.73) (23.07) (b) Diluted earnings per share Total diluted earnings per share attributable to the ordinary equity holders of the company (1.73) (23.07) (c) Reconciliation of earnings used in calculating earnings per share Earnings used in the calculation of basic and dilutive Earnings per share: Earnings from continued operations TOTAL EARNINGS $’000 $’000 (16,406) (188,903) (16,406) (188,903) NUMBER OF SHARES 000S NUMBER OF SHARES 000S (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares during the period used in the calculation of basic and dilutive earnings per share 947,657 818,913 Adjustments for calculation of diluted earnings per share: Options and performance rights Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 154 12,222 947,812 831,135 26. SHARE-BASED PAYMENTS A. EMPLOYEE SHARE OPTION PLAN The Bathurst Resources Limited Employee Share Option Plan (“ESOP”) was approved by shareholders at the 2010 AGM. The ESOP was designed to provide directors, senior executives, employees, and consultants with an opportunity to participate in the company’s future growth and gives them an incentive to contribute to that growth. Under the plan, participants were granted units in the ESOP Trust, some of which only vest upon the shipment of the first 25,000 tonnes from the Buller Coal Project. Participation in the ESOP was at the Board’s discretion. A number of senior executives were granted units in the Bathurst Resources Limited Employee Share Option Plan. The remaining options were forfeited in August and December 2014. 55 OPTIONS (ESOP) GRANT DATE EXPIRY DATE 26-Aug-12 1-Sep-12 20-Dec-12 29-Aug-14 29-Aug-14 19-Dec-14 Weighted average exercise price (cents) EXERCISE PRICE AUD CENTS 38.0 38.0 38.0 OUTSTANDING AT THE BEGINNING OF THE PERIOD 000S 1,000 1,000 2,000 4,000 AUD38.00 GRANTED DURING THE PERIOD 000S FORFEITED DURING THE PERIOD 000S EXERCIS- ABLE AT THE END OF THE PERIOD 000S – – – – – (1,000) (1,000) (2,000) (4,000) AUD 38.00 – – – – * share options were issued with an Australian dollar exercise price. B. EMPLOYEE LONG TERM INCENTIVE PLAN The Bathurst Resources Limited Long Term Incentive Plan (LTIP) was approved by Shareholders at the 2012 AGM. The purpose of the plan is to reinforce a performance focused culture by providing a long term performance based element to the total remuneration packages of certain employees, by aligning and linking the interests of Bathurst’s leadership team and Shareholders, and to attract and retain executives and key management. The plan forms part of the Company’s remuneration policy and provides the Company with a mechanism for driving long term performance for Shareholders and retention of executives. Performance rights granted under the plan carry no dividend or voting rights. When exercised each performance right converts into one fully paid ordinary share. Share based payments are recognised based on the fair value of Performance Share Rights (‘PSRs’) offered to eligible participants at the grant date. The fair value at issue date is determined using the following methodology; the price path of Bathurst shares is modelled using the Monte Carlo simulation, the total number of Bathurst PSRs that will vest to participants is calculated then the payoff to participants is calculated and discounted back to present value today. The assessed fair value (for NZ IFRS 2 purposes) at issue date of share options issued during the year ended 30 June 2013 is summarised in the table below. No performance rights were granted in 2014 or 2015. 56 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 Performance Rights (LTIP) GRANT DATE VESTING DATE 8-Feb-13 27-Mar-13 31-Mar-13 13-Jun-13 22-Nov-13 29-Nov-13 3-Dec-13 5-Dec-13 30-Jun-15 30-Jun-15 30-Jun-15 30-Jun-15 30-Jun-16 30-Jun-16 30-Jun-16 30-Jun-16 No options were granted during the period. OUTSTANDING AT THE BE- GINNING OF THE PERIOD 000S FORFEITED DURING THE PERIOD 000S EXERCISED DURING THE PERIOD 000S OUTSTANDING AT THE END OF THE PERIOD 000S EXERCIS- ABLE AT THE END OF THE PERIOD 000S 294 309 367 1,389 692 1,846 1,200 1,662 (235) – (294) (926) (692) (1,846) (1,200) (1,662) (59) (155) (73) (463) – – – – – 154 – 154 – – – – – – – – – – – – 7,759 (6,855) (750) 154 154 27. RECONCILIATION OF LOSS BEFORE INCOME TAX TO NET CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation Depreciation and amortisation expense Loss on disposal of property, plant and equipment Share based payments expense Gain from reversal of share based payments expense Fair value adjustment to deferred consideration Foreign exchange (gain) on deferred consideration Impairment losses Unwinding of discount Waste moved in advance capitalised Unwinding of rehabilitation asset Other non-cash items Change in working capital assets CASH FLOW FROM OPERATING ACTIVITIES GROUP 2015 $’000 GROUP 2014 $’000 (16,406) (284,234) 14,668 13,776 1,160 968 – – 881 (3,672) 615 (169,396) – (21,258) 1,171 449,984 194 9,123 (1,483) (13,684) 262 164 (337) 167 685 911 976 (16,717) 57 28. FINANCIAL RISK MANAGEMENT The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk. Risk management is carried out by the management team under policies approved by the Board of directors. Management identifies and evaluates financial risks on a regular basis. A. MARKET RISK i. Foreign exchange risk Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not New Zealand dollars. The risk is measured using sensitivity analysis and cash flow forecasting. Once the Group commences export sales, it becomes exposed to foreign exchange movements, this primarily relates to deferred consideration which is denominated in USD for export coal sales of coal sourced from the permits acquired from L&M Coal Holdings Limited. The Group had no exposure to foreign currency risk at the end of the reporting period. B. CREDIT RISK Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral where appropriate as a means of minimising the risk of financial defaults. Financial instruments which potentially subject the Group to credit risk consist primarily of cash and cash equivalents as well as credit exposures to our customers, including outstanding receivables. The credit risk on liquid funds is limited because the counterparties are banks with credit ratings of AA-, with funds required to be invested with a range of separate counterparties. The Group’s maximum exposure to credit risk for trade and other receivables is its carrying value. C. LIQUIDITY RISK Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements on an ongoing basis. Maturities of financial liabilities The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. 58 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 Contractual maturities of the Group’s non-derivative financial liabilities were as follows: LESS THAN 6 MONTHS $’000 6 – 12 MONTHS $’000 BETWEEN 1 AND 2 YEARS $’000 BETWEEN 2 AND 5 YEARS $’000 OVER 5 YEARS $’000 TOTAL CON- TRACTUAL CASH FLOWS $’000 CARRYING VALUE $’000 GROUP – 30 JUNE 2015 Trade and other payables Borrowings (excl finance leases) Finance leases Deferred consideration 5,429 6,927 182 969 143 713 49 761 TOTAL 13,507 1,666 143 1,375 105 1,518 3,141 287 109 7 4,722 5,125 – – – 6,002 9,124 6,002 8,699 343 311 10,461 18,431 12,613 10,461 33,900 27,625 GROUP – 30 JUNE 2014 Trade and other payables Borrowings (excl finance leases) Finance leases Deferred consideration 7,964 6,808 176 – – – 835 6,302 134 917 141 2,377 TOTAL 14,948 1,886 8,820 At 30 June 2015 the Group had no derivatives to settle (2014: nil). D. CAPITAL MANAGEMENT – – – – – – – – – – 7,964 7,964 13,945 13,170 451 411 3,294 2,891 25,654 24,436 The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence and to sustain the future development of the business. Given the stage of the company’s development there are no formal targets set for return on capital. There were no changes to the company’s approach to capital management during the year. The company is not subject to externally imposed capital requirements. E. FAIR VALUE MEASUREMENTS The fair value of assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. Fair value measurements by level of the following fair value measurement hierarchy: • Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) • Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and • Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The Group’s only financial asset or liability measured at a fair value hierarchy of level 3 is deferred consideration. This is discussed further in Note 21. 59 F. FINANCIAL INSTRUMENTS BY CATEGORY FINANCIAL ASSETS Loans and receivables Cash and short term deposits Trade and other receivables Other financial assets TOTAL FINANCIAL LIABILITIES Amortised cost Trade and other payables Borrowings Fair value Deferred consideration TOTAL GROUP 2015 $’000 GROUP 2014 $’000 5,235 4,021 167 8,855 4,343 7,694 9,423 20,892 6,002 9,010 7,964 13,581 12,613 2,891 27,625 24,436 29. RELATED PARTY TRANSACTIONS A. PARENT ENTITY The parent entity within the Group is Bathurst Resources Limited. B. SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the subsidiaries listed in Note 17. 60 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 C. KEY MANAGEMENT PERSONNEL Key personnel are all the management and directors (executive and non-executive) of the Group. Key management personnel compensation Key management personnel compensation for the years ended 30 June 2015 is set out below GROUP – 30 JUNE 2015 Management Directors TOTAL GROUP – 30 JUNE 2014 Management Directors TOTAL SHORT TERM BENEFITS $000’S SHARE BASED PAYMENTS $000’S TERMINATION BENEFITS $000’S 1,696 259 1,955 303 – 303 1,485 – 1,485 SHORT TERM BENEFITS $000’S SHARE BASED PAYMENTS $000’S POST– EMPLOYMENT BENEFITS $000’S 2,890 501 3,391 748 – 748 4 – 4 TOTAL $000’S 3,484 259 3,743 TOTAL $000’S 3,642 501 4,143 Other transactions or loans with key management personnel Details of loans made to directors of Bathurst Resources Limited and other key management personnel of the Group, including their personally related parties are set out below. Aggregates of loans to key management personnel Opening Balance Interest charged Loan (settled)/advanced CLOSING BALANCE Individuals with loans above $100,000 at the end of the period H Bohannan TOTAL GROUP 2015 $’000 GROUP 2014 $’000 510 20 (530) – – – 451 – 59 510 510 510 Mr Bohannan resigned from the company on 24th March 2015. Loans and other receivables due from Mr Bohannan were settled via termination arrangements. The Group entered into a joint venture in August 2013 with Johnson Bros Transport to operate a coal yard in Rolleston. These financial statements include coal sales to the joint venture totalling $2.1m (2014: $2.5m). 61 30. COMMITMENTS AND CONTINGENT LIABILITIES A. CAPITAL COMMITMENTS Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Within one year Later than one year but not later than five years Later than five years Property, plant and equipment Within one year Later than one year but not later than five years Later than five years Mining licences and properties TOTAL CAPITAL COMMITMENTS B. LEASE COMMITMENTS i. Non-cancellable operating leases GROUP 2015 $’000 – – – – – – – – – GROUP 2014 $’000 410 – – 410 4,328 3,059 – 7,387 7,797 The Group leases various offices, accommodations, and equipment under non-cancellable operating leases expiring within one to six years. The leases have varying terms, escalation clauses and renewal rights. Lease commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years TOTAL LEASE COMMITMENTS GROUP 2015 $’000 GROUP 2014 $’000 240 263 – 503 316 333 – 649 During the year ended 30 June 2015 $0.2m (2014: $0.4m) was recognised as an expense in the income statement in respect of operating leases. 62 Notes to the financial statements continued For the year ended 30 June 2015BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 ii. Finance leases The Group leases various plant and equipment expiring within one to four years. Commitments in relation to finance leases are payable as follows: Within one year Later than one year but not later than five years Later than five years MINIMUM LEASE PAYMENTS Future finance charges FINANCE LEASE LIABILITY The present value of finance lease liabilities is as follows: Within one year Later than one year but not later than five years Later than five years GROUP 2015 $’000 GROUP 2014 $’000 234 109 – 343 (32) 311 213 98 – 310 141 – 451 (40) 411 279 132 – MINIMUM LEASE PAYMENTS 311 411 C. EXPLORATION EXPENDITURE COMMITMENTS In order to maintain the various permits in which the Group is involved the Group has ongoing operational expenditure as part of its normal operations. The actual costs will be dependent on a number of factors including final scope and timing of operations. D. CONTINGENT ASSETS AND LIABILITIES As at 30 June 2015 the Group had no contingent assets or liabilities (2014: nil). 31. EVENTS OCCURRING AFTER THE REPORTING PERIOD Subsequent to the period end, a parcel of land was disposed for $5.375m. The asset was disposed with proceeds used in settlement of a loan held over the original purchase totalling $5.375m. The loan is included within current borrowings in these financial statements. There are no other material events that occurred subsequent to reporting date, that require recognition of, or additional disclosure in these financial statements. 63 Independent Auditors’ Report to the shareholders of Bathurst Resources Limited Report on the Financial Statements We have audited the Group financial statements of Bathurst Resources Limited (“the Company”) on pages 24 to 63, which comprise the balance sheet as at 30 June 2015, the income statement, statement of changes in equity and statement of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for the Group. The Group comprises the Company and the entities it controlled at 30 June 2015 or from time to time during the financial year. Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. We are independent of the Group. Other than in our capacity as auditors and providers of other related assurance services we have no relationship with, or interests in, the Group. 64 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 2 Independent Auditors’ Report to the shareholders of Bathurst Resources Limited Opinion In our opinion, the financial statements on pages 24 to 63, present fairly, in all material respects, the financial position of the Group as at 30 June 2015, and its financial performance and cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards. Emphasis of matter Without modifying our opinion, we draw attention to Note 2 in the financial statements which states that there are uncertainties in achieving the future cash flow forecasts. This indicates the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern. Restriction on Use of our Report This report is made solely to the Company’s shareholders, as a body, in accordance with the Companies Act 1993. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed. Chartered Accountants 25 September 2015 Wellington 65 66 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 1 Section 03 Shareholder information 67 Shareholder information The shareholder information set out below was applicable as at 25 September 2015. A Distribution of equity securities Analysis of numbers of equity security holders by size of holding: HOLDING 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over TOTAL TOTAL HOLDERS ORDINARY SHARES 335 671 517 1,935 869 59,900 1,790,171 3,440,082 61,596,002 888,096,600 4,327 954,982,755 On 25 September 2015 there were 2,776 holders of less than a marketable parcel of ordinary shares as determined by the ASX (under A$500 in value). B Equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of quoted equity securities are listed below: ORDINARY SHARES NAME HSBC Custody Nominees (Australia) Limited Bell Potter Nominees LimitedBerne NO 132 Nominees Pty Limited <608725 A/C> JP Morgan Nominees Australia Limited ABN Amro Clearing Sydney Nominees Pty Limited Robert James Griffiths & Jean Darling Griffiths Merrill Lynch (Australia) Nominees Pty Limited Citicorp Nominees Pty Limited Brispot Nominees Pty Limited Peter Alfred Bradfield Marshall Maine Forsyth Barr Custodians Limited Trinity Management Pty Limited Avanteos Investments Limited <2477966 DNR A/C> JBWere (NZ) Nominees Limited Karen Aviva Schumer & Gary Leon Lewis Big Art Investments Pty Ltd Jarden Custodians Limited Bruce Drummond & Judith Drummond ASB Nominees Limited <317485 ML A/C> TOTAL 68 NUMBER HELD 320,657,751 34,553,255 27,888,773 20,724,818 17,643,762 15,000,000 13,785,437 11,254,548 8,156,261 7,149,320 7,117,578 6,719,328 6,500,000 5,336,766 5,235,000 4,500,000 4,000,000 3,873,526 3,750,000 3,730,000 PERCENTAGE OF ISSUED SHARES 33.57 3.61 2.92 2.17 1.84 1.57 1.44 1.17 0.85 0.74 0.74 0.7 0.68 0.55 0.54 0.47 0.41 0.4 0.39 0.39 527,576,123 55.15 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 3 C Substantial holders Substantial holders in the company as of 25 September 2015 are set out below: Republic Investment Management Pte Limited Asian Dragon Acquisitions Limited D Voting rights NUMBER HELD 165,481,753 57,323,965 PERCENTAGE OF ISSUED SHARES 17.32% 6.00% The voting rights attached to each class of equity securities are set out below: i. 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. ii. Options No voting rights. E On-market buy-back The company has no on-market buy-back on offer. 69 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 4 70 Section 04 Resources and reserves 71 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 4 Tenement schedule PERMIT ID LOCATION (REGION) MINERALS PERMIT TYPE PERMIT OPERATOR BATHURST INTEREST 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% West Coast Minerals Mining Permit Buller Coal Limited Waikato Otago Coal Coal Exploration Permit Buller Coal Limited Prospecting Permit Bathurst Coal Limited West Coast Coal, Limestone Exploration Permit Buller Coal Limited Tasman Otago Canterbury Waikato Coal Coal Coal Coal Exploration Permit Buller Coal Limited Exploration Permit Bathurst Coal Limited Exploration Permit Bathurst Coal Limited Exploration Permit Buller Coal Limited West Coast Minerals Prospecting Permit Buller Coal Limited West Coast West Coast West Coast Coal Coal Coal Exploration Permit Buller Coal Limited Exploration Permit Buller Coal Limited Exploration Permit Buller Coal Limited West Coast Coal, Limestone Exploration Permit Buller Coal Limited Southland West Coast Canterbury West Coast West Coast Southland West Coast West Coast West Coast Southland West Coast West Coast West Coast Canterbury West Coast West Coast Coal Gold Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Mining Permit Bathurst Coal Limited Exploration Permit Buller Coal Limited Prospecting Permit Bathurst Coal Limited Exploration Permit Buller Coal Limited Mining Permit Buller Coal Limited Exploration Permit Bathurst Coal Limited Exploration Permit Buller Coal Limited Exploration Permit Buller Coal Limited Exploration Permit Buller Coal Limited Exploration Permit New Brighton Collieries Limited 100% Exploration Permit Bathurst Coal Limited Mining Permit Bathurst Coal Limited Mining Permit Buller Coal Limited Mining Permit Bathurst Coal Limited Mining Permit Buller Coal Limited Mining Permit Buller Coal Limited 100% 100% 100% 100% 100% 100% 55401 55199 54935 54590 54512 54933 54846 54389 54896 54505 54658 54031 53756 53614 52713 52484 52147 51279 51260 51212 51078 40628 40625 40591 41455 41456 41372 41274 41332 72 Permits granted in the past twelve months PERMIT ID PERMIT TYPE PERMIT OPERATOR MINERALS LOCATION (REGION) GRANTED DATE OPERATION NAME 55401 Mining Permit Buller Coal Limited (100%) Minerals West Coast Region 13/01/2015 Rapid Stream 55199 Exploration Permit Buller Coal Limited Coal Waikato Region 17/11/2014 Mangapehi (100%) Change of conditions PERMIT ID PERMIT TYPE OPERATOR OPERATION NAME LOCATION (REGION) 51212 54658 Exploration Permit Buller Coal Limited Moody Creek West Coast Region Exploration Permit Buller Coal Limited North Reefton West Coast Region Extension of duration PERMIT ID PERMIT TYPE OPERATOR OPERATION NAME LOCATION (REGION) PERMIT EXTENSION (YEARS) PERMIT EXTENSION (MONTHS) AREA REDUCTION AREA REDUCTION (UNITS) 40625 51212 52713 Exploration Permit Ohai New Brighton Collieries Limited Southland Region 4 0 0.000 Ha Exploration Permit Buller Coal Limited Exploration Permit Buller Coal Limited Moody Creek West Coast 5 0 102.288 Ha Region West Coast Region 5 0 363.569 Ha Extension of land PERMIT ID PERMIT TYPE OPERATOR OPERATION NAME LOCATION (REGION) AREA EXTENSION AREA EXTENSION (UNITS) 54658 Exploration Permit Buller Coal Limited North Reefton West Coast Region 139.513 Ha Partial surrender PERMIT ID PERMIT TYPE OPERATOR OPERATION NAME LOCATION (REGION) AREA REDUCTION AREA REDUCTION (UNITS) 54658 Exploration Permit Buller Coal Limited North Reefton West Coast Region 5988.561 Ha Correction of error PERMIT ID PERMIT TYPE OPERATOR OPERATION NAME LOCATION (REGION) 52147 54658 Exploration Permit Buller Coal Limited West Coast Region Exploration Permit Buller Coal Limited North Reefton West Coast Region 73 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 4 Full surrender PERMIT ID PERMIT TYPE OPERATOR OPERATION NAME LOCATION (REGION) 51258 53047 54507 Exploration Permit Buller Coal Limited West Coast Region Exploration Permit Buller Coal Limited Charleston West Coast Region Exploration Permit Buller Coal Limited Rocklands West Coast Region Name change PERMIT ID PERMIT TYPE OPERATOR OPERATION NAME LOCATION (REGION) 40591 41372 41455 51260 52484 53614 54846 54933 54935 Exploration Permit Bathurst Coal Limited Whareatea West Coast Region Mining Permit Mining Permit Bathurst Coal Limited Malvern Hills Canterbury Region Bathurst Coal Limited Cascade Creek West Coast Region Exploration Permit Bathurst Coal Limited Ohai Prospecting Permit Bathurst Coal Limited Mining Permit Bathurst Coal Limited Coaldale Exploration Permit Bathurst Coal Limited Albury Exploration Permit Bathurst Coal Limited Home Hills Prospecting Permit Bathurst Coal Limited Waitaki Southland Region Canterbury Region Southland Region Canterbury Region Otago Region Otago Region 74 Coal resources and reserves RESOURCES Table 1 – Resource tonnes1 D E R U S A E M 5 1 0 2 ) T M ( E C R U O S E R 3.1 0.6 6.2 0.0 7.6 D E R U S A E M 4 1 0 2 ) T M ( E C R U O S E R 3.1 0.7 6.2 0.0 7.7 17.6 17.7 0.0 2.4 0.0 2.4 0.0 2.4 0.0 2.4 ) T M ( E G N A H C 0.0 -0.1 0.0 0.0 -0.1 -0.1 0.0 0.0 0.0 D E T A C D N I I 5 1 0 2 ) T M ( E C R U O S E R 2.2 0.6 3.1 3.8 D E T A C D N I I 4 1 0 2 ) T M ( E C R U O S E R 2.2 0.6 3.1 3.4 10.8 10.7 ) T M ( E G N A H C 0.0 0.0 0.0 0.4 0.1 D E R R E F N I 5 1 0 2 ) T M ( E C R U O S E R 1.0 0.3 1.6 5.4 4.9 D E R R E F N I 4 1 0 2 ) T M ( E C R U O S E R 1.0 0.3 1.6 5.1 4.7 ) T M ( E G N A H C 0.0 0.0 0.0 0.3 0.2 ) T M ( E C R U O S E R L A T O T 5 1 0 2 6.3 1.5 ) T M ( E C R U O S E R L A T O T 4 1 0 2 6.3 1.6 10.9 10.9 9.2 8.5 23.3 23.1 20.5 20.0 0.5 13.2 12.7 0.5 51.3 50.4 1.9 7.3 5.8 1.9 7.3 5.8 0.0 0.0 0.0 3.6 3.6 10.9 10.9 14.1 14.1 0.0 0.0 0.0 5.5 5.5 20.6 20.6 19.9 19.9 0.0 15.0 15.0 0.0 28.6 28.6 0.0 46.0 46.0 ) T M ( E G N A H C 0.0 -0.1 0.0 0.7 0.2 0.9 0.0 0.0 0.0 0.0 20.0 20.1 -0.1 35.5 35.0 0.5 41.8 41.3 0.5 97.3 96.4 0.9 1.6 0.0 0.3 1.9 1.2 0.0 0.0 1.2 0.4 0.0 0.3 0.7 1.7 0.7 0.5 2.9 1.7 0.7 0.9 3.3 0.0 0.0 -0.4 -0.4 1.3 3.5 1.3 6.1 1.9 3.5 2.4 7.8 -0.6 0.0 -1.1 4.6 4.2 2.1 4.8 4.2 3.3 -1.7 10.9 12.3 -0.2 0.0 -1.2 -1.4 AREA Escarpment2 Cascade3 Deep Creek4 Coalbrookdale Whareatea West South Buller Totals Millerton North4 North Buller4 Blackburn4 North Buller Totals Buller Coal Project Totals Takitimu5 New Brighton4 Canterbury Coal6 Southland/ Canterbury Totals TOTAL 21.9 21.3 0.6 38.4 38.3 0.1 47.9 49.1 -1.2 108.2 108.7 -0.5 Note All Resources and Reserves quoted in this release are reported in terms as defined in the 2004 and 2012 Editions of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (‘JORC’). All Resources quoted are reported as 30 October 2015 ASX Release – ‘Update on Resources and Reserves’. 1 The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore Reserves. Resource tonnages have been calculated using a density value calculated using approximated in-ground moisture values (Preston and Sanders method) and, as such, all tonnages quoted in this report are wet tonnes. All Coal Qualities quoted are on an Air Dried Basis. 2 Escarpment Resources were depleted by mining. Further Resources were identified due to additional drilling and an updated geological model. 3 Cascade Resources were depleted by mining. 4 No additional work was undertaken on the coal resources for Deep Creek, Millerton North, North Buller, Blackburn and New Brighton since originally reported. This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. In 2014 the Takitimu Resources were reported in two units ‘Coaldale’ and ‘Ohai’. These were combined into the Takitimu area in 2015 as the Ohai area reported is contiguous with the Coaldale block of the Takitimu mine, and is covered by existing mining tenements. 6 Additional drilling and a revision of the geological model resulted in a greater understanding of the coal resource and, consequently, 5 an overall decrease in the Resource tonnage. 75 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 4 Table 2 – Average coal quality – Measured AREA Escarpment Cascade Deep Creek Coalbrookdale Whareatea West Millerton North North Buller Blackburn Takitimu New Brighton Canterbury Coal MEASURED RESOURCE (MT) ASH% (AD) VOLATILE MATTER % (AD) FIXED CAR- BON % (AD) SULPHUR % (AD) CSN INHERENT MOISTURE IN SITU MOISTURE CALORIFIC VALUE (AD) 3.1 0.6 6.2 0.3 7.6 – 2.4 – 1.0 – 0.3 18.5 15.5 11.0 14.9 23.0 – 8.6 – 11.0 – 8.2 32.8 39.3 32.9 39.2 24.2 – 47.8 42.6 53.9 43.2 52.2 – 43.1 45.4 – 37.1 – 36.0 – 35.9 – 40.3 0.6 1.7 2.5 1.6 0.8 – 4.7 – 0.6 – 0.8 7.0 4.5 – 4.0 7.0 – 4.5 – N/A N/A N/A 0.9 2.6 2.2 2.7 0.6 – 2.9 – 16.1 – 15.6 5.5 7.6 5.2 7.6 6.3 – 11.4 – 25.5 – 28.5 30.8 29.7 29.7 26.8 – 29.7 – 21.6 – 24.7 22.3 Table 3 – Average coal quality – Indicated AREA Escarpment Cascade Deep Creek Coalbrookdale Whareatea West Millerton North North Buller Blackburn Takitimu New Brighton Canterbury Coal INDICATED RESOURCE (MT) ASH% (AD) VOLATILE MATTER % (AD) FIXED CARBON % (AD) SULPHUR % (AD) CSN INHERENT MOISTURE IN SITU MOISTURE CALORIFIC VALUE (AD) 2.2 0.6 3.1 3.8 10.8 1.9 7.3 5.8 1.6 0.7 0.5 18.5 14.8 9.7 18.4 22.1 9.7 8.8 3.9 9.2 10.1 8.4 35.1 38.3 34.7 36.3 22.7 36.9 42.6 42.1 35.6 39.5 35.6 45.2 44.5 53.6 43.5 54.5 52.4 46.3 51.8 38.5 33.6 40.7 0.9 1.8 2.7 1.4 0.9 4.9 5.1 4.3 0.3 0.5 0.8 7.5 4.0 – 5.0 6.5 10.0 5.0 6.0 N/A N/A N/A 1.1 2.4 2.0 1.8 0.6 1.0 2.3 2.2 16.7 16.8 15.3 5.1 8.0 4.8 6.1 6.3 6.1 9.4 10.1 26.1 17.9 24.9 30.5 29.3 30.3 30.0 25.6 31.1 30.0 30.4 21.5 23.0 22.4 76 Table 4 – Average coal quality – Inferred AREA Escarpment Cascade Deep Creek Coalbrookdale Whareatea West Millerton North North Buller Blackburn Takitimu New Brighton Canterbury Coal INFERRED RESOURCE (MT) ASH% (AD) VOLATILE MATTER % (AD) FIXED CARBON % (AD) SULPHUR % (AD) CSN INHERENT MOISTURE IN SITU MOISTURE CALORIFIC VALUE (AD) 1.0 0.3 1.6 5.4 4.9 3.6 10.9 14.1 1.3 3.5 1.3 18.3 16.5 10.1 16.4 21.7 12.0 9.9 6.4 9.7 8.9 8.5 35.3 36.7 29.7 35.2 21.3 35.3 45.6 41.8 35.1 40.0 35.3 45.0 44.7 57.8 46.7 56.3 51.6 42.3 49.5 38.6 34.9 39.9 1.2 2.2 2.4 1.5 0.9 5.5 5.1 4.8 0.3 0.4 0.8 7.0 4.0 – 5.0 6.0 9.0 5.0 6.0 N/A N/A N/A 1.4 2.1 2.4 1.7 0.7 1.1 2.2 2.3 16.6 16.2 16.3 5.2 6.7 7.1 5.5 6.3 7.2 9.6 11.2 25.9 17.8 25.5 30.2 27.6 29.7 29.1 24.6 30.2 29.5 30.1 21.2 23.2 22.0 RESERVES7 Table 5 – Coal Reserves (ROM8) tonnes ROM COAL AREA Escarpment Domestic9 Escarpment Export9 Cascade10 Deep Creek11 Coalbrookdale Whareatea West Takitimu TOTAL PROVED (MT) PROBABLE (MT) TOTAL (MT) 2015 2014 CHANGE 2015 2014 CHANGE 2015 2014 CHANGE 1.9 -1.2 4.9 -1.9 0.0 2.3 0.0 0.0 0.0 0.0 0.5 2.8 3.0 -0.7 0.2 5.8 0.0 7.9 0.0 -0.2 -5.8 0.0 -7.9 0.5 16.9 -14.1 0.2 0.5 0.0 0.0 0.0 15.8 0.8 17.3 -0.2 -2.7 -2.2 5.3 0.8 0.2 2.7 2.2 10.5 0.0 17.5 3.0 0.0 0.0 0.0 0.4 8.5 2.2 15.8 18.4 1.3 0.0 -0.4 -8.5 -2.2 -2.6 1.3 -0.2 20.1 34.4 -14.3 Table 6 – Marketable Coal Reserves14 tonnes AREA 2015 2014 CHANGE 2015 2014 CHANGE 2015 2014 CHANGE PROVED (MT) PROBABLE (MT) TOTAL (MT) Escarpment Domestic9 Escarpment Export9 Cascade10 Deep Creek11 Coalbrookdale11 Whareatea West12 Takitimu13 TOTAL 0.0 1.9 0.0 0.0 0.0 0.0 0.5 2.4 -0.5 0.2 5.1 0.0 5.4 0.0 -0.2 -5.1 0.0 -5.4 0.5 0.2 0.4 0.0 0.0 0.0 9.9 0.7 1.5 -0.9 2.59 3.9 -1.4 0.2 2.4 1.7 6.2 0.0 -0.2 -2.4 -1.7 3.7 0.7 0.0 0.0 0.0 9.9 1.2 0.4 7.5 1.7 11.6 0.0 -0.4 -7.5 -1.7 -1.7 1.2 2.4 13.1 -10.7 11.2 12.0 -0.8 13.6 25.1 -11.5 77 BATHURST RESOURCES LIMITED ANNUAL REPORT 2015 / SECTION 4 Table 7 – Marketable Coal Reserves – Proved and Probable Average Quality DEPOSIT8,9, 12,13,14 PROVED MARKETABLE14 PROBABLE MARKETABLE14 Escarpment Export Whareatea West Escarpment Domestic Takitimu13 (MT) ASH (%) SULPHUR (%) VM (%) CSN (#) CV (MJ/KG) (MT) ASH (%) SULPHUR (%) VM (%) CSN (#) CV (MJ/KG) 1.9 N/A N/A 8.9 N/A N/A 0.5 35.1 8.5 31.3 N/A N/A N/A N/A N/A N/A N/A N/A 0.4 9.9 0.2 7.1 12.1 11.0 0.6 0.9 1.5 36.4 26.0 35.9 8.5 9.5 7.0 32.0 31.9 29.1 0.5 9.2 0.5 37.2 N/A 20.9 0.7 8.6 0.3 36.1 N/A 21.0 Table 8 – Marketable Coal Reserve – Total Average Quality DEPOSIT8,12,13,14 COAL TYPE MINING METHOD TOTAL MARKETABLE14 ASH (%) SULPHUR (%) VM (%) CSN (#) CV (MJ/KG) Escarpment Export Whareatea West Met Met Open Pit Open Pit Escarpment Domestic Thermal Open Pit Takitimu Thermal Open Pit 2.3 9.9 0.2 1.2 8.6 12.1 11.0 7.9 0.5 0.9 1.5 0.5 35.3 26.0 35.9 36.7 8.5 9.5 7.0 N/A 31.4 31.9 29.1 21.0 Note All Reserves quoted in this release are reported in terms as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (‘JORC’). All Reserves quoted are reported as 30 October 2015 ASX Release – ‘Update on Resources and Reserves’. 7 The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore Reserves. Reserve tonnages have been calculated using a density value calculated using approximated in-ground moisture values (Preston and Sanders method) and, as such, reserve tonnages quoted in this report are wet tonnes. All Coal Qualities quoted are on an Air Dried Basis. 8 Coal Reserve estimates (Run of Mine (ROM) tonnes), include consideration of standard modifying factors (JORC Code 2012). 9 Escarpment mine is split into Domestic and Export Reserves for reporting in 2015. Note: Domestic tonnes are included in the Export recorded total change in the table above. Decrease in the Export Reserves is based on a revised mine plan and economics. 10 Reserves at Cascade were depleted due to mining operations and reassessment of potential mining operations. 11 Removal of Coal Reserves for Deep Creek and Coalbrookdale due to revised economics. 12 Decrease in Coal Reserves for Whareatea West due to revised mining plans and economics. 13 New Reserve defined 2015. 14 Marketable Reserves are based on geologic modelling of the anticipated yield from ROM Reserves. Total Marketable Coal Reserves are reported at a product specific moisture content (10–12% for Escarpment Export and Whareatea West, 5-8% at Escarpment Domestic and 22-23% at Takitimu) and at an air-dried quality basis, for sale after beneficiation of the Total Coal Reserves, converted using ASTM D3180 ISO 1170. Reserve tonnages have been calculated using a density value calculated using approximated in-ground moisture values (Preston and Sanders method) and, as such, all tonnages quoted in this report are wet tonnes. All coal qualities quoted are on an Air Dried Basis. 78 Resource quality The company is not aware of any information to indicate that the quality of the identified Resources will fall outside the range of specifications for Reserves as indicated in the above table. Further Resource and Reserve information can be found on the company’s website at www.bathurstresources.co.nz Mineral Resource and Ore Reserves governance and estimation process Resources and Reserves are estimated by internal and external personnel, suitably qualified as Competent Persons under the Australasian Institute of Mining and Metallurgy, reporting in accordance with the requirements of the JORC code, industry standards and internal guidelines. All Resource estimates and supporting documentation are reviewed by a Competent Person either employed directly by Bathurst or employed as an external consultant. If there is a material change in an estimate of a Resource, or if the estimate is an inaugural resource, the estimate and all relevant supporting documentation is further reviewed by an external suitably qualified Competent Person. All Reserve estimates are prepared in conjunction with pre-feasibility, feasibility and life of mine studies which consider all material factors. All Resource and Reserve estimates are then further reviewed by suitably qualified internal management. The Resources and Reserves statements included in Bathurst’s 2015 Annual Report have been reviewed by qualified internal and external Competent Persons and internal management prior to their inclusion. Competent Person statements The information on this report that relates to Mineral Resources for Deep Creek and the Mineral Reserves for Escarpment Export and Whareatea West is based on information compiled by Sue Bonham-Carter who is a full time employee of Golder Associates (NZ) Ltd and is a Member of the Australasian Institute of Mining and Metallurgy. Sue Bonham-Carter has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2004 and 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Sue Bonham-Carter consents to the inclusion in this report of the matters based on her information in the form and context in which it appears above. The information in this report that relates to Exploration Results and Mineral Resources for Escarpment, Cascade, RESOURCES AND RESERVES Coalbrookdale, Whareatea West, Millerton North, North Buller, Blackburn, Takitimu, Canterbury Coal and New Brighton is based on information compiled by Hamish McLauchlan as a Competent Person who is a full time employee of Bathurst Resources Limited and is a Member of the Australasian Institute of Mining and Metallurgy. Mr. McLauchlan has a B.Sc and M.Sc (Hons) majoring in geology from the University of Canterbury, and has had 19 years of experience in the mineral resource industry in New Zealand and offshore. He has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 and 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr McLauchlan consents to the inclusion in this presentation of the matters based on his information in the form and context in which it appears above. This presentation accurately reflects the information compiled by the Competent Person. The information on this report that relates to Mineral Resources and Reserves for Takitimu is based on information compiled by Damian Spring who is a full time employee of Premier Mining Consultants Ltd and is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy. Mr. Spring has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. The information on this report that relates to Mineral Resources and Reserves for Escarpment Domestic is based on information compiled by Terry Moynihan who is a full time employee of Core Mining Consultants Ltd and is a Member of the Australasian Institute of Mining and Metallurgy. Mr. Moynihan has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Pperson as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. 79 Corporate directory Directors Toko Kapea, Non-executive Chairman Richard Tacon, Executive Director Russell Middleton, Non-executive Director Peter Westerhuis, Non-executive Director Company secretary Bill Lyne Registered office Level 12, 1 Willeston Street Wellington 6011 New Zealand +64 4 499 6830 Auditor PricewaterhouseCoopers 113-119 The Terrace Wellington 6011 New Zealand Solicitor Minter Ellison Rudd Watts 125 The Terrace Wellington 6011 New Zealand Banker Westpac Banking Corporation Australian registered office Stock exchange listing 5/54 Kersley Road, Kenmore, Qld 4069 Australia +61 7 3378 7673 Share registry Computershare Investor Services Limited 159 Hurstmere Rd Takapuna Central 0622 New Zealand Bathurst Resources Limited shares are listed on the Australian Securities Exchange under the code BRL Website address www.bathurstresources.co.nz New Zealand company number 4382538 80 Annual General Meeting of Shareholders To be held at 9.00am on Monday 23 November 2015 at the offices of Minter Ellison Rudd Watts, 125 The Terrace, Wellington 6011. All dollar amounts referred to in this report are expressed in New Zealand dollars unless otherwise noted. Bathurst Resources Limited Level 12, 1 Willeston Street Wellington 6011 New Zealand +64 4 499 6830 www.bathurstresources.co.nz B A T H U R S T R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 1 5 ANNUAL REPORT 2015