Peabody Energy
Annual Report 2019

Plain-text annual report

2019 Annual Report We’ve gone digital We are excited to release a brand new online version of our digital Annual Report this year. The online version has been created to be more user friendly, allowing readers to easily move between areas of interest, and information to be presented in a more visually appealing way. We hope you enjoy the experience – you can check it out at www.2019annualreport.bathurst.co.nz 01 Year in review Chairman’s and CEO’s report Financial and operating overview Sustainability Our people Directors’ report Remuneration report 02 Financial statements Income statement Statement of comprehensive income Balance sheet Statement of changes in equity Statement of cash flows Notes to the financial statements Additional information Independent auditor’s report 03 Shareholder information Shareholder information 04 Resources and reserves Tenement schedule Coal resources and reserves Corporate directory 5 8 13 28 30 32 39 39 40 41 42 43 75 78 84 90 93 104 Record financial results NPAT $45.0m EBITDA $106.6m 2019 Highlights Maiden dividend AUD $5.1m (AU 0.3¢ per share) Excellent health and safety standards 2 Bathurst Resources Limited Annual Report 2019 01 Year in review In this section Chairman’s and CEO’s report Financial and operating overview Sustainability Section 1: Year in review 3 4 Bathurst Resources Limited Annual Report 2019 Chairman’s and CEO’s report Welcome to the 2019 Annual Report for Bathurst. Last year saw an ambitious change in our operations, and 2019 has seen us consolidate and capitalise on these bold strategic decisions. Whilst coal remains an essential part of steelmaking with no known substitute, and domestic demand for our product to fuel local industries and supplement renewable energy generation continues, we will be here to provide it. In short: business is humming at Bathurst and we are optimistic about the future. FY19: a year to be proud of It’s been another strong year at Bathurst as we continue to transition and diversify our business. All our operations are tracking very well, and we are delighted to announce our first dividend. This will see the return of AUD $5.1m to our shareholders, whose support has been instrumental in enabling the significant changes to our business over the past few years. We continue to see a future in coal and our business is significantly less risky with our diversification into coking coal (for steelmaking) in 2017. Our growth prospects are very strong because of our Buller, Rotowaro North (Ruawaro) and Crown Mountain projects – combined, they are forecast to be close to half our total production tonnage within ten years. The bottom line is that our business is reliable and repeatable – we know what we’re doing, we stay very close to our customers, and we have a unique product. And as we continue using technology and innovation to reduce our costs, we’ll keep creating opportunities to improve our margin. Strength in diversity Our strategy has changed significantly in the past few years, opening up a wider range of potential customers and markets for us. Via acquisitions made in 2017, we’ve transitioned from being a business selling coal domestically to a company with a strong export focus as well. Adaptive management and solid relationships In FY19 we continued to maximise returns from our existing domestic assets. We maintained our share of the domestic coal sales market where we enjoy excellent relationships with our large independent food manufacturing, energy generation and steelmaking customers. In addition to maximising our existing assets, we limited the risk of overcapitalisation by only seeking a new mining area where we already had a strong commercial partnership (and the costs are shared). Section 1: Year in review 5 Smarter decisions Promoting health and safety Conducting on and off-market share buy-backs helped us to consolidate our ownership structure and bolster shareholder value, and this will help us form a stable platform not only for our business as usual activities, but future expansion as well. Managing risk – and celebrating success During the year we undertook a fraud and risk survey that examined both our risk management and corporate governance practices. And we were delighted to receive the Innovation Award at the New Zealand Minerals Forum held in May 2019. The award recognised innovation in the life-of-mine planning, productivity and market improvements at our Canterbury mine. Sharing solutions As global citizens, we understand our responsibilities around climate change and what this means within New Zealand’s regulatory environment. We’ve continued to work with the government on a managed transition from coal as we look into internal operational changes, aiming for a zero carbon future. Supporting the community In the communities where we work, we’ve continued to support various local initiatives such as the Life Education Trust West Coast which educates and empowers children to embrace positive choices for a healthy mind and body. Our community sponsorships and donations also include support for the Ohai Nightcaps Junior Rugby Club, the Buller Bay Fishing Competition, and the Hororata Golf Club. This year we continued to develop our health monitoring programme. Two-thirds of our workforce have now completed the initial stage. This programme was also a finalist for the Health and Safety Initiative Award as part of the recent New Zealand Minerals Forum 2019. In addition, our training programme for leadership and supervision commenced across all sites, targeting key areas for effectively managing people to bring improvement to our health and safety results. Facing ongoing challenges The L&M Coal Holdings Limited case was heard in the Court of Appeal in August 2019 and we were pleased with the proceedings. The judgment is expected in early 2020, and based on legal advice we continue to believe we have a strong case. Ready for the road ahead Every business faces challenges – and in that regard, we’re no different. But we understand that mineral extraction and moving coal around the planet requires a unique level of commitment to environmental protection and remediation. The Emissions Trading Scheme and Resource Management Act both have the potential to add complexities to the way that we are able to operate – but we continue to seek regulatory certainty, so we understand the environment we’re working in and can plan accordingly. Optimistic about the future FY19 has been a strong and successful year for Bathurst, and looking ahead to FY20 and beyond, we’ll continue to focus on innovation, cost control and maintaining margins. We believe we’re a great business with talented people, and we are ready to take our business to the next level. 6 Bathurst Resources Limited Annual Report 2019 Toko Kapea Richard Tacon Chairman Chief Executive OfficerSection 1: Year in review 7 Financial and operating overview Focus In FY19 we really focused on strengthening and aligning our reporting and operational processes across the Bathurst and BT Mining businesses – whilst also ensuring future growth through key investments both domestically and overseas. Key Export Domestic Care + maintenance Office Distribution facility Note: Stockton, Christchurch, Rotowaro and Maramarua are 65% equity owned via BT Mining joint venture. Maramarua 0.2Mt Rotowaro 0.7Mt Stockton 1.1Mt Buller Wellington Canterbury 0.1Mt Takitimu 0.2Mt Timaru Christchurch Tonnes noted are FY19 production tonnes 8 Bathurst Resources Limited Annual Report 2019 Sales profile Sales revenue by product use* Sales revenue by product use (100 percent basis) Sales by region (Mtpa)* Sales by region (Mtpa) (100 percent basis) 0.4Mt 64% 1.2Mt 0.9Mt 7% 11% 18% 64% Steelmaking (Export) 18% Food production and other industry (NZ) 11% Steelmaking (NZ) 7% Electricity (NZ) 1.2Mt Export - Stockton 0.9Mt North Island domestic 0.4Mt South Island domestic “ Looking forward, the domestic market is stable, and we have plans in place to weather any volatility in the export coal price. Section 1: Year in review 9 Our export business Snapshot – EBITDA* $67.4m The Stockton export coking coal mine continued to benefit from strong export prices in FY19, with export pricing at an average hard coking coal price of USD $204.56. The long-term relationships acquired as part of the BT Mining acquisition have continued, with new key customer relationships being developed in the Asia and Pacific region; the majority of FY20 sales are already contracted. To reduce our export sale price exposure, we forward contract USD foreign exchange rates and coal pricing. Demand underpinned by diversity Our export coal is characterised by several unique, distinctive, and valuable properties. It has very low ash content, very low phosphorus, and it’s almost all vitrinite – making it an ideal blend improver in steelmaking. In addition, we market it on a ‘value-in-use’ basis to maximise both the sales price and value to customers. For us, our exports remain firmly underpinned by the key principle of diversity. We benefit from geographically diverse markets, customers, industries, end products, pricing structures – which all helps to reduce business risk. Current market and outlook Coking coal prices have softened over the course of the year, falling below the USD $150 per tonne threshold. This is largely attributed to domestic policies in China, the world’s top consumer and importer of coal and iron ore, and largest manufacturer of steel. Even though we don’t sell into the Chinese market directly, the global pricing is impacted by these policy changes. The expectation is that China’s government will continue to implement policies that restrict coal imports. This expectation is subject to substantial uncertainty, with the expected extent of a Chinese economic slowdown and respondent government stimulatory measures assumed to add considerable volatility to the price in the shorter term. Looking ahead The outlook for average spot prices of hard coking coal is a gradual recovery over FY20. India is expected to be the key source of import growth; combined with growing demand from emerging Asian economies and high-cost supply exiting the market, these are predicted to offset the gradual easing of demand from China. These positive indicators are expected to be partially dampened by increased exports from Australia and Russia which are impacting the seaborne market supply. Australia’s dominance of this market means weather, logistics, and other disruptions in Queensland could also potentially drive intermittent price spikes. Our domestic business Snapshot – EBITDA $39.2m North Island domestic operations – which include BT Mining corporate overheads contributed $29.0m EBITDA during the year, with the South Island domestic operations contributing $10.2m EBITDA. Our domestic business remains steady, reflecting the long-term co-operative relationships we have with all our key customers. This is unlikely to change any time soon with no alternative viable energy source in the South Island; and our North Island customers relying on our product to produce steel, as a low-cost energy source, and a necessary supplement to other forms of electricity generation. Keeping it simple – while working smarter We have secured access to good domestic reserves and will continue to maximise our domestic revenue from this base. Our long-term, fixed-price contracts will provide stable cash flows. And we’ll always limit our risk of overcapitalisation by only going into new mine areas if we have a genuine and trusted commercial partnership where the costs are shared. “ With a great product, our export strategy is also underpinned by diversity – in geography, customers, industries, end products, and pricing – which all helps us to spread our risk. *Earnings before net finance costs (including interest), tax, depreciation, amortisation, impairment, fair value movements on derivatives and deferred consideration, and movements in rehab provisioning. EBITDA noted above for Stockton and North Island domestic operations is Bathurst’s 65 percent equity share. 10 Bathurst Resources Limited Annual Report 2019 Operating highlights by site Canterbury (100 percent equity share) Rotowaro (65 percent equity share via BT Mining) Rotowaro had a solid FY19 where the partnerships we have in place continue to work well. In November 2018 we were pleased to announce the transition to owner operator and continuation of mining at Rotowaro for a further four years. This is via the development of a new resource at Waipuna West which is within Rotowaro’s current area of operations. A significant investment (approximately $20m) was made to purchase the contractor mining fleet with an extensive maintenance review of this gear also undertaken after the acquisition. A key part of this extension project was ensuring we had commercial partners supporting us; to this end we secured support from two of our key North Island customers, with major supply contracts committed for 480ktpa until 2023. Operating 70 kilometres west of Christchurch, our Canterbury mine produces low sulphur coal primarily for the dairy and food processing industries. The proximity of the mine to these markets offers a real freight advantage and helps us meet the growing demand. The receipt of the Innovation Award at the New Zealand Minerals Forum in May 2019 – recognising innovation in the life- of-mine planning, productivity and market improvements at our Canterbury site – was a positive reflection of the talented people managing this site. An exploration drilling campaign and a mine plan was tailored for the Canterbury mine’s steeply dipped, narrow coal seams. This brought the number of productive seams from three to more than 30, allowing Bathurst to meet new dairy contracts. Our innovations at Canterbury have more than quadrupled output – when we bought Canterbury Coal in 2013, the mine was producing 30,000 tonnes a year. Maramarua (65 percent equity share via BT Mining) Takitimu (100 percent equity share) Maramarua is an open cut mine located in the Waikato region of New Zealand producing a low-ash, low sulphur thermal coal for the domestic market. Successful production at Maramarua comes from a low strip ratio and well-equipped infrastructure. The mine’s key customers are in the energy, steelmaking, and dairy sectors, with stable long-term contracts in place. Stockton (65 percent equity share via BT Mining) Stockton is an open cut mine located on the West Coast producing a low-ash metallurgical coal for export – it’s a very high-value resource used as an essential component in steelmaking. Sales and production targets were met during the year. Significant investment was made in yellow goods, which are better suited to the terrain at the Stockton mine, and form part of a longer-term strategy of reducing high cost hire machinery. The long-term mine plan has been set to achieve a steady production rate of 1.2 Mtpa for the next four years, which includes both an operational as well as a marketing focus, ensuring that the coal achieved will have a reliable customer demand. Located at Nightcaps, north of Invercargill in Southland, Takitimu produces energy coal which is low in sulphur and ash – it’s in high demand from the local food processing industries that it supplies. A lot of work has gone into making the most of this site. In 2018, we began working in the Black Diamond pit which contains numerous historic underground workings. This provided a number of geophysical, technical and personnel challenges – and so we responded via: • developing bespoke procedures and systems; • acquiring the appropriate tools and equipment to make the workplace safer; • improving the health and safety training of our workforce; and • embedding and maintaining a high safety standard and positive safety culture. In short, we have effectively built a new emergency rescue team (“ERT”) at Takitimu from scratch. The ERT team development was a finalist in the Health and Safety Initiative award at the 2019 New Zealand Minerals Forum. And we’re proud of what we’ve achieved in a relatively short space of time. “ We have a diverse, strong, reliable customer base and we serve them very well with a valuable and reliable product. Section 1: Year in review 11 Record financial results* We achieved another record profit for the year, with net profit after tax of $45.0m, up from $5.5m in FY18. This reflects benefits from a full 12 months of BT Mining operations, stable domestic operations, and a strong export coal price. The prior period was also negatively impacted by one-off, non-cash fair value adjustments on our convertible notes. The uplift in NPAT was reflected in an increase in operating cashflows to $90.7m, up from $54.6m. And cash levels increased despite significant investing and financial cashflows during the year. Notable spend was on: • Mining equipment replacement at Stockton. • Investment in Rotowaro operations to extend the life of mine. • Investment in the Crown Mountain project in Canada. • Advanced waste stripping. • On and off-market share buy-backs. Future growth projects Buller (100 percent equity share) The Buller project represents several mine permits on the Denniston plateau on the West Coast of the South Island of New Zealand, that being in close proximity to the Stockton mine infrastructure assets, will enable material synergies. These include the Escarpment and Cascade mines which Bathurst previously operated, but which are now on care and maintenance (allowing them to be brought back into operation when appropriate). During the year, drilling programmes were completed in a number of key areas enabling coal washability testing to further prove up potential resources. Applications for key exploration permits were also submitted for the Denniston, Millerton fly creek and Blackburn permits. Baseline ecological surveys are also underway for areas along the possible transport corridor to the Stockton infrastructure assets. The focus for FY20 is to continue key drilling programmes and advance baseline studies. Stockton organic growth project (65 percent equity share) This project represents the potential to extend Stockton operations beyond FY28 at production levels similar to current levels. The project would include development of open cut pits within the Upper Waimangaroa permit. Rotowaro North (65 percent equity share) The Rotowaro North project is a potential extension project to the current Rotowaro mine operations. The project is at the prefeasibility stage, with the satellite pit detailed plan, economic evaluation, and updated geologic model completed. Key permit applications, project planning, and baseline report are being progressed. Crown Mountain, Canada – Canadian coking coal growth project Located in a mature mining region in British Columbia, Canada, with well-established transport infrastructure, Crown Mountain is a joint venture with Jameson Resources Limited that allows us to buy in over three stages (worth CAD $121.5m) to achieve 50:50 ownership. We have committed to two of the three funding tranches, equalling a total investment to date of CAD $11.5m. Highlights • We now hold a 20 percent equity investment in the Crown Mountain project, with the final subscription payment in Tranche One completed in October 2019. • Coal quality testing confirmed the presence of benchmark premium hard coking coal in the North pit, with the South pit confirmed as a low volatile hard coking coal. • The results from the testing being done as part of the bankable feasibility study are progressing well. • Drafting of the Application for Environmental Assessment continued to make progress with key meetings held with regulators and stakeholders. * Financial figures are consolidated 100 percent Bathurst and 65 percent equity share of BT Mining. 12 Bathurst Resources Limited Annual Report 2019 Sustainability – what does it mean to us? Sustainable development and responsible resource use are fundamental to all that we do, spanning all phases of our business from exploration to mine closure. Basis of preparation This sustainability section reports on our sustainability performance as related to our material topics. These are the same material topics as reported against in last year’s annual report sustainability supplement. This years’ reporting is the first complete 12 month data set for all sites as acquisition of our three largest sites Stockton, Rotowaro and Maramarua occured in September 2017. For this reason, and also because the way the data is captured has been improved, prior year comparative graphs are not included. In producing this content, the Global Reporting Initiative (“GRI”) has been used as a guiding framework; however, we make no claim that this sustainability section has been prepared in accordance with GRI. Note that the content and numbers represented in this section have not been externally audited. We know that resource extraction can be a complicated and controversial business, and that we will have an impact on the environment. But it’s how we respond that matters – in the safest, most respectful, and most sustainable way possible. That’s why we are driven by a genuine commitment to provide positive outcomes for our employees, shareholders, local communities, and importantly the environment that we all share. The demand for coal Coking coal is an internationally strategic mineral – at present there is no known alternative for steel production. And steel is an integral component that underpins the goods and services of so many industries: construction, telecommunications, healthcare, agriculture, transport, utilities (water, power, energy etc), infrastructure, and more. Our West Coast coking coal resources are internationally sought after by steelmakers for their low ash, and high fluidity. And domestically, our high-quality, thermal-grade coal is used to help drive the engines of many iconic New Zealand businesses. Seeking a just transition While we understand that a move away from thermal coal (for energy) is part of the future, we wish to see a just transition to allow a suitable timeframe for customers to transfer to other viable energy sources. We will continue to manage our extraction of this finite resource in a safe and sustainable manner, taking actions to reduce our operational emissions and minimise our environmental footprint. Section 1: Year in review 13 Material topics SOCIO-ECONOMIC Stakeholder engagement SOCIO-ECONOMIC Economic performance and responsibility Engagement with stakeholders is critical for the continued success of our Company and licence to operate now and into the future. Our focus is to responsibly manage the key processes within our control – financial oversight, productivity improvements and cash costs of production. ENVIRONMENT Water management ENVIRONMENT Land use and biodiversity We aim to manage our water inputs, use and outputs to inform our management of water related risks, seeking to minimise the impact to other water users and the environment. We strive to avoid and minimise any significant impacts our operations may have on sensitive species, habitats and ecosystems. We integrate biodiversity into our business decision-making and management activities. GOVERNANCE Compliance GOVERNANCE Mine closure plans Compliance in the mining sector represents a significant risk to our business. We are continually focused on achieving positive and compliant performance outcomes. We aim to manage closure focusing on supporting the economic and social transition after mining ends, establishing a self- sustaining ecosystem and opportunities for a range of potential post-mining land uses. 14 Bathurst Resources Limited Annual Report 2019 HEALTH AND SAFETY Health and safety Our operations are focused on our people, their safety and wellbeing while mitigating operational risks and maintaining productivity. ENVIRONMENT Energy and emissions ENVIRONMENT Overburden management We continue to find new ways to use energy more efficiently in our operations. As our assets have grown in size, complexity and diversity, we recognise that energy efficiency could be measured better and ultimately improved. Managing overburden materials to create stable landforms for rehabilitation is a key focus when developing our mine plans. This includes focus on implementing controls such as characterising mineral wastes and managing site storage to limit environmental effects and minimise closure costs. GOVERNANCE Emergency preparedness We maintain emergency management plans to identify the potential for emergency situations and to test our capability to respond. Section 1: Year in review 15 16 Bathurst Resources Limited Annual Report 2019 Health and safety material topic Our commitment to safety is clear: safe hands. Good hearts. And clear minds. FY19 health snapshot: • Zero occupational health illness. • Revised our employee ‘fitness for work’ periodic health assessments (75 percent complete). • We completed over 3,500 ‘fitness for work’ drug and alcohol tests. FY19 safety snapshot: • TRIFR (total recordable injury frequency rate) = 5.0. • Three lost time injuries. • Over 3,200 hours of risk management training completed. Constant improvement and independent advice We continually check to ensure our sites operate in a safe manner – particularly by improving our safety behaviour so incidents or potential incidents can be reported quickly. As we added three new mines to the Bathurst Group in FY18, this year we have also completely reviewed our health monitoring processes. We engaged an occupational medicine physician to complete the review. As a result of this, revised occupational health monitoring and occupational exposure programmes were successfully rolled out. • Over 75,000 risk tools used. Takitimu – a deep dive In 2018, our Takitimu site began working through the Black Diamond historic underground coal mine. This provided a number of geophysical, technical and personnel challenges – and so we responded accordingly through: • Developing bespoke, risk-based health and safety procedures and systems. • Acquiring the appropriate tools and equipment to make the workplace safer. • Improving the health and safety training of our workforce. • Embedding and maintaining a high safety standard and positive safety culture. People first We are very proud to have an extremely robust, people-centric and innovative approach to health and safety. At Bathurst, we work hard to encourage a genuine health and safety mindset throughout our workforce. But what does this mean in practice? Answer: doing everything we can to encourage, improve, and enforce the right behaviours, culture, and processes across every aspect of our operations. It starts with shared responsibility We ensure that every one of our mine workers: • is always alert to their own safety; • focuses on their fitness for work; • cares about the health and safety of their colleagues; and • watches for potential safety risks at all times. Section 1: Year in review 17 Socio-economic material topics With growth comes added responsibility Economic performance and responsibility We now employ over 570 employees, with over 70 percent of our revenue coming from steelmaking customers in FY19 – our business looks very different to how it was five years ago. And as the Bathurst operations continue to expand, we must respond and react accordingly. Our operations contribute to the economic development and wealth of host communities through a number of channels, including wages and salaries paid to employees ($56.1m), taxes, royalties and fees to government ($38.2m), local procurement of goods and services ($259.0m), and support of community programmes. No ‘one size fits all’ approach Our stakeholder engagement framework identifies stakeholders at different levels of New Zealand society and the global community including our employees and contractors; local communities; industry associations; unions; government; NGOs; investors; iwi; customers; suppliers and more. We understand that as our business expands and changes, we need to find more diverse and inclusive ways to communicate and consult with different groups – from boardrooms to classrooms; from pubs to public servants; and from marae to the media – we’ll continue proactively seeking input and feedback from New Zealanders who have an interest or stake in our business. Stakeholder engagement In FY19 we have undertaken stakeholder engagement training for key site and environmental personnel. In FY20 detailed stakeholder engagement plans will be produced and implemented at all sites. This is part of our commitment to have transparent communication with external and internal stakeholders. Community investment is vital Our relationship with the communities where we operate is important to the future success of our operations. We are committed to operating in a socially responsible manner. This year our sponsorship programme included sponsorship of the following organisations: • Hororata Golf Club. • Glentunnel Volunteer Fire Brigade. • Mokihinui Ratepayers Association. • Buller Bay Fishing Competition. • Buller Rugby Club. • Nightcaps Squash Club. • Ohai Nightcaps Rugby Club. • Nightcaps Community Development Association. • Huntly College. • Huntly Squash Club. Supporting the industry We also contribute to the professional development of mining professionals through key conference sponsorships such as the New Zealand Minerals Forum and the New Zealand Branch of Australasian Institute of Mining and Metallurgy. 18 Bathurst Resources Limited Annual Report 2019 CASE STUDY Supporting the Life Education Trust We recently joined with Development West Coast, Rosco Contractors, and Grey Ford as a major sponsor of the Life Education Trust West Coast. The Life Education Trust educates and empowers children to embrace positive choices for a healthy mind and body – via a mobile classroom, equipped with sight and sound equipment to engage young New Zealanders. On the West Coast the mobile classroom travels from Haast to Karamea (over 5,000km) every year – one of the largest geographical areas in New Zealand. The classroom visits every primary school and many preschools across the Coast, which is over 3,300 kids. Section 1: Year in review 19 Environmental material topics When comparing energy consumption by operation, there are significant differences which can be accounted for by the scale of the operation and the mine life cycle stage. Stockton mine is the largest consumer of energy and Rotowaro is the second largest energy consumer. Comparison of Energy Consumption by Operation FY19 Comparison of energy consumption by operation FY19 ) J G ( n o i t p m u s n o c y g r e n E 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 n o t k c o t S o r a w o t o R a u r a m a r a M y r u b r e t n a C u m i t i k a T e t a r o p r o C Electricity Fuel The above graph excludes Escarpment, Cascade and Sullivan mines where consumption was zero. Energy use Energy consumption remains one of our largest operational inputs. An energy minimisation project commissioned in FY19 involved feasibility studies on electric trucks and solar energy on our sites – with our intention for more detailed analyses on these options in FY20. In addition, we are supporting a Government-led project assessing feasibility of a hydro scheme using mine water from the Stockton mine. Our total energy consumption is reported in terms of energy consumed (fuel and electricity) by staff and contractors. A total energy use of 1,021,490 gigajoules (“GJ”) was used at our five operational sites and corporate offices in FY19. This is approximately 33 percent higher than FY18. A significant part of this increase reflects that our three largest sites only reported ten months of energy consumption in FY18 from the date of acquisition. Overall, total waste rock stripping which drives energy consumption (diesel) increased by 29 percent with an extra 4.5 million bcm waste rock stripped in FY19 compared with FY18. This increase comes from our Stockton, Rotowaro, and Maramarua sites where we have completed extensive mine planning since acquisition to ensure we mine as sustainably as possible. When Bathurst acquired these mines, they had been operating under administration for many years, so whilst coal had been mined, waste stripping had fallen to very low levels. 94 percent of the energy consumed within our sites included fuel used for onsite transport, operations and power. The remaining six percent of energy consumed was purchased electricity. 20 Bathurst Resources Limited Annual Report 2019 Greenhouse gas emissions We participate in the Emissions Trading Scheme (ETS) where pricing of ETS is passed on to our customers as part of the product supply – and we assist our customers to source the best quality energy and the most efficient logistic pathways. Our mining projects use significant quantities of diesel fuel to extract and transport coal. Electricity consumption is required for coal processing, water treatment plants and mine management systems. In addition, our coal produced releases GHGs (fugitive emissions) and these are accounted for in the FY19 production tonnages in Scope 1 emissions (direct emissions from Bathurst- owned or controlled sources). We report our GHG emissions with reference to their source as follows: GHG emissions intensity FY19 GHG Emissions Intensity FY19 (Scope 1 & 2 Intensity/t of product coal) l a o c e n n o t / e 2 O C s e n n o T 0.080 0.070 0.060 0.050 0.040 0.030 0.020 0.010 0 n o t k c o t S o r a w o t o R a u r a m a r a M y r u b r e t n a C u m i t i k a T Our reporting of Scope 1 and Scope 2 emissions (indirect emissions from the generation of purchased energy) is consistent with GRI reporting (the Global Reporting Initiative). Accordingly, we have included carbon dioxide in our GHG emissions calculations reported as carbon dioxide equivalents. We have also accounted for minor losses in SF6 gas from electricity transformers. The total GHG emissions for Scope 1 and 2 for FY19 are 120,527 tonnes CO2e as follows: • 43 percent related to fugitive emissions of production coal. • 1 percent related to electricity. • 56 percent related to fuel consumption. The reported FY19 GHG emissions are approximately 23 percent greater than in FY18. Why the change? Because in FY18 we only reported ten months (from date of acquisition) of GHG emissions for the Stockton, Rotowaro and Maramarua mines. And also, our total waste rock stripping volumes were 29 percent greater at the five operating sites in FY19 compared with FY18. Scope 1 emissions (t/CO 2e) Scope 2 emissions (t/CO 2e) Site Stockton Rotowaro 47,525 39,158 Maramarua 12,069 Canterbury 9,283 Takitimu 10,786 Escarpment Cascade Sullivan 0 0 0 Corporate 15 1,093 431 128 0 30 0 0 0 8 Total 118,837 1,690 Section 1: Year in review 21 Overburden management Land use and biodiversity During this year, the two mine sites that disturbed potentially acid forming (“PAF”) waste rock were Stockton and Canterbury. Waste rock (bcm) disturbed in FY19 Waste Rock (bcm) disturbed in FY18 ) m c b ( d e b r u t s i d k c o r e t s a W 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 PAF NAF n o t k c o t S o r a w o t o R 3,654,772 0 a u r a m a r a M 0 y r u b r e t n a C u m i t i k a T 477,526 0 671,875 9,076,520 2,625,666 1,295,774 2,213,010 At Stockton in the Cypress pit, we have been adding lime at rates of 8 kg of lime to each tonne of PAF waste rock to minimise the production of acid mine drainage. In addition, we’ve also designed and consented a second calcium oxide dosing plant to actively treat up to 3,000 tonnes of acid a year in the St Patrick’s catchment that is predominantly acid generated from historic mine workings. This plant is planned to be operational in FY20. Our Canterbury mine actively manages their PAF rock by selectively placing and compacting the PAF rock in areas of backfill where it can be safely covered by a minimum of 5 metres of non-acid forming rock (“NAF”). This active management plan minimises oxygen and water entry into the PAF waste rock and ensures no acidic water is produced from the backfill. Small historic acidic seeps are treated via two mussel shell reactors. The use of waste mussel shells in acidic water treatment is a recycling waste initiative which saves the waste mussel shells being sent to the regional landfill. Our objective is to rehabilitate our mine sites to ensure a sustainable ecosystem is established. Currently we have several active biodiversity offset projects underway. We work with experts and stakeholders to create suitable biodiversity solutions. Our goal is always to minimise our disturbance footprint and progressively restore disturbed land to meet closure criteria in the optimal timeframe. Our approach is to avoid, minimise, mitigate and offset the impacts of our operations. How do we achieve this? • Focused mine planning (to minimise the disturbed footprint). • Soil salvaging. • Vegetation transfer where possible (which speeds up the process of ecological restoration). • Collecting and growing plants using seeds collected at site. • A robust rehabilitation management plan (to restore the habitat to close as practical to pre-mining conditions). Our overall net land disturbance this year reduced by 17 hectares. The Stockton mine has 54 percent of the total disturbed area of 1,525 hectares. Mining of the Millerton pit area in the next few years will allow a more established strip mining operation, which will allow progressive rehabilitation rates to double from the current rate of 20-25 hectares a year. Land disturbed at end of FY19 and land rehabilitated in FY19 Land disturbed and rehabilitated FY19 900 800 700 600 500 400 300 200 100 0 ) s e r a t c e h ( s u t a t s d n a L n o t k c o t S o r a w o t o R a u r a m a r a M y r u b r e t n a C u m i t i k a T e d a c s a C n a v i l l u S t n e m p r a r c s E Disturbed land remaining to be rehabilitated Land rehabilitated 22 Bathurst Resources Limited Annual Report 2019 Water management Water use intensity Based on estimates of water use, the water use intensity (measured as litres of water used per tonne of coal produced) is shown below. Sites use between 200 and 600 litres of water to produce a tonne of coal. Significant water use at the sites with large disturbed areas or close proximity to residences is related to dust suppression using water carts and sprinklers. Stockton has the highest intensity of water use which reflects the intensive use of the coal washery at Stockton (this accounts for 87 percent of the site water usage). The coal washery water is treated for acid and sediment load and is returned to the Mangatini Stream. Water use intensity at mine sites FY19 Water Use Intensity at Mine Sites FY19 d e c u d o r p l a o c f o e n n o t / s e r t i L 700 600 500 400 300 200 100 0 n o t k c o t S o r a w o t o R a u r a m a r a M y r u b r e t n a C u m i t i k a T All our mine site discharges have specific conditions related to discharge consents to protect aquatic ecology. No downstream water sources have been adversely impacted by water use at our sites in FY19. Overall water use in FY19 was 1,078 Ml. This year we installed water meters at key sites to improve our quantification of consumptive water use. Stockton water use increased from FY18 due to more coal being processed through the washery and with more accurate telemeterised flow recording. At Stockton, we also continue to treat acid mine drainage with Calcium Oxide (lime) at rates of 7,500 tonnes of acid per year to protect the aquatic ecology in the downstream Ngakawau River. And it’s proposed to increase the acid mine drainage treatment with construction of a second lime dosing water treatment plant in FY20 – this will increase mine site water treatment to greater than 10,000 tonnes per year of acid. Operational site FY19 water use (Ml/yr) Stockton Rotowaro Maramarua Canterbury Takitimu Escarpment Cascade Sullivan Corporate TOTAL 644 209 46 56 121 0 0 0 2 1,078 “ We’re always working to achieve industry best practice in managing the environmental and social impacts of our mining and processing operations. Section 1: Year in review 23 CASE STUDY OPARARA BIRD SANCTUARY – STOCKTON MINE Protecting our native birds for the future We are proud to be funding the management of the 1,000 hectare Oparara Bird Sanctuary – an environmental offset programme involving the maintenance of 900 predator traps, annual surveys on kiwi and other indigenous birds, and input from indigenous bird and predator control experts. An independent bird expert notes the Oparara Sanctuary now ‘bustles with birds’ in a way that few mainland forests do, making it a testament to the power of effective predator control and a joy for visitors to experience. Forest bird abundance Bird counts were undertaken in 2015 and 2018. The 2015 baseline counts were taken when year-round ground-based predator control started, and the 2018 counts were taken three years later. Nine of the 18 diurnal (non-nocturnal) native bird species have increased in abundance in the sanctuary since predator control began. The increases in the abundance of South Island robins, bellbirds and tuis, have been spectacular. These three species are especially vocal and their song is now a noticeable feature of the sanctuary. The increases in weka, silvereye, kereru, brown creeper, and fantail have also been significant. The bird community in the Oparara Sanctuary now rivals those on predator-free offshore islands, making Oparara one of the most intact assemblages of native birds on mainland New Zealand. “ The increase in the abundance of South Island robins, bellbirds and tuis, has been spectacular. 24 Bathurst Resources Limited Annual Report 2019 Great spotted kiwi caught on a motion sensitive camera in the sanctuary. Kiwi abundance Kiwi abundance, as measured by call counts in the first two to three hours of darkness, did not change from 2015 to 2018. Although it should be noted that these counts index the abundance of territorial adults and do not detect chicks and juveniles. Because great spotted kiwi probably take three to five years to reach maturity, any increase in population size resulting from predator control won’t be detectable until post 2020. But the results of the 2018 survey are still encouraging. The two percent national decline in the species as a whole isn’t present in the sanctuary population – presumably because pest control operations both in and near the sanctuary have arrested it. 14 motion-sensitive cameras were established in the Oparara Sanctuary in late 2017 and these cameras are used to hopefully identify young kiwis. A population of young kiwi of around 10-15 percent of the total kiwi population would be sustainable. This work will continue – along with the predator control work and bird counts to optimise predator control efficiency – for at least another 15 years. CASE STUDY AWAROA STREAM DIVERSION – ROTOWARO MINE Our fish salvage and relocation programme A 440 metre stretch of Awaroa stream was required to be relocated during the year to allow the development of the Awaroa North West mining extension. In line with consent requirements and our environmental plans, we created a suitable fish habitat in the reconstructed stream section to minimise aquatic ecology losses. Fish salvage and relocation are standard obligations before and after the stream diversion. Two separate operations took place for the Awaroa Northwest diversion: • the initial eel trapping and relocation; and • electric fishing and trapping with relocation into the new diversion. The work was undertaken by ecologists from Wildlands Consultants and our staff over four consecutive days. The fish salvage and relocation programme found significant populations of eel, fish and koura/crayfish – demonstrating a stepwise decline over the four consecutive days of trapping. A high percentage of the fish present in the channel were recovered – with a total of 289 fish being relocated. “ We’re proud to have created a new fish habitat in the reconstructed Awaroa Stream to minimise aquatic ecology losses. Rehabilitation Civil works to reinstate the diversion channel involved preparing a low flow channel with riffle areas, main channel, floodplain and stopbanks – the maintenance and riparian planting involved 11,000 plants of multiple species being planted over an area of approximately three hectares. Waahi Whaanui blessing An invitation was accepted by Waahi Whaanui Trust to perform a cultural blessing at the stream diversion when the Awaroa stream was diverted through the new channel. Section 1: Year in review 25 26 Bathurst Resources Limited Annual Report 2019 Governance material topics What do we mean by governance? Actions for FY20 As a responsible business we are committed to effective management in all areas – which means working to achieve industry best practice in managing the environmental and social impacts of our mining and processing operations. Environmental compliance and governance Throughout our mines’ life cycles, we focus on meeting or surpassing environmental regulatory requirements to manage: • air emissions; • water quality; • water consumption; • energy use; • waste; • biodiversity; and • land use. Our corporate environmental governance is based on international standards for environmental management. And our environmental policy and supporting management system applies to all our employees and contractors. Effective complaint handling Complaints about environmental issues are recorded via complaints registers that are maintained at all sites. They are investigated via our internal incident investigation system and are only closed off when resolved. Mine closure standard During the year we developed a Decommissioning and Mine Closure Management (“Standard”) to document the requirements for the planning and execution of decommissioning and mine closure. Our Standard is designed to ensure integration with life-of-mine planning, address any residual risk issues and leave a positive legacy once mining has been completed. The overall objective of the Standard is to outline a clear, consistent, well-planned and executable process that will provide the best opportunity for us to deliver an appropriate and sustainable post-mining land use. Mine closure plans In FY20 we will develop mine closure plans for all active mine sites ensuring that they adhere to the Standard. In addition, we’ve adapted principles for all our sites from the ICMM (2019) Integrated Mine Closure: Good Practice Guideline to address: safety; physical stability; chemical stability; socio-economic transition; ecological stability; risk limitation; cost-effectiveness; and long-term care. These principles are integrated into the decommissioning and closure management plans for each of our sites. Environmental management systems audit and revision Gap analysis of our Environmental Management Systems (EMS) at all our sites has been undertaken by external consultants and rated against standard ISO 14001: Environmental Management System. This ISO standard has recently been upgraded and hence Bathurst has commissioned this audit to ensure our EMS at all sites is upgraded to support optimum environmental management and performance at our operational sites. In FY20 we have committed to improving our EMS by: • Revising the environmental policy. • Developing the Corporate EMS framework. • Updating and implementing the Site Environmental Management Plans at all sites. • Reviewing existing site environmental risk assessments and related tasks. Emergency preparedness management No matter how prepared we are there’s always a residual risk of an adverse event occurring. So we’ve developed a crisis management plan to mitigate the impacts that a significant event could have on the public, our employees and the environment. This is integrated with our site emergency response plans which are maintained and regularly tested at our mine sites. This year, we established a new emergency rescue team at the Takitimu mine and they’ve developed and tested void management skills, rope rescue, gas monitoring and compressed air breathing skills. Section 1: Year in review 27 Our people Board members Toko Kapea Non-executive Chairman Toko is a Wellington-based commercial lawyer, consultant and director at Tuia Group Limited. He has worked at Chapman Tripp and in-house at Meridian Energy, Bank of New Zealand and ANZ. He currently sits on the board of Ngāti Apa Developments Limited (Whanghanui-Rangitikei region) and is an independent committee member of the Banjima Direct Benefits Trust in Perth. Toko was on the Government Review Panel relating to the Te Ture Whenua Māori Act 1993 (Māori Land Act) and was also the lead negotiator for Ngāti Apa ki Rangitikei (North Island) for its direct negotiation Treaty of Waitangi claims with the Crown. Richard Tacon Executive Director & Chief Executive Officer Richard has worked in almost every role in coal mining since starting his career in the 1970s. Richard’s first job in the industry was at Greymouth’s Liverpool State Mine and after working in Australia for 32 years, Richard returned to Wellington, New Zealand to take up the position of Chief Operating Officer at Bathurst in 2012. He was appointed to the role of Chief Executive Officer in March 2015. Richard is the Chair of the Coal Association of New Zealand and sits on the board of the New Zealand Mines Rescue Trust and Straterra. Richard is a director of BT Mining Limited as a Bathurst representative. 28 Bathurst Resources Limited Annual Report 2019 Russell Middleton Executive Director & Chief Financial Officer Russell has over 25 years in the mining and construction sector with significant experience in mine project evaluations and the construction of new mines.. Starting his career as a public accountant, Russell has held senior management positions in accounting, commercial and planning roles. He was previously with Shell where he was Commercial Manager for the construction, development and production of a major underground mine. Russell is a director of BT Mining Limited as a Bathurst representative. He is based in Christchurch. Peter Westerhuis Non-executive Director Peter is a professional engineer with post-graduate business qualifications and over 30 years of Australian and international resources experience in the iron ore, gold and coal industries; the last ten 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, and has undertaken many complex commercial negotiations. Senior leadership team Fiona Bartier General Manager, Health, Safety, Environment and Community Sam Johnstone General Manager, Marketing and Logistics Fiona is an environmental and resource scientist who has worked in management roles for government, industry groups, and mining companies. With over 20 years experience, Fiona joined Bathurst in 2012 to manage our HSEC portfolio. Alison Brown General Counsel Alison holds a Master of Laws with Honours and has over 35 years’ legal experience. She specialises in mining, environmental and climate change law and has worked for Simpson Grierson, Minter Ellison Rudd Watts and the Minister of Foreign Affairs and Trade. Alison was previously General Counsel for Solid Energy. Carmen Dunick Group Manager, Human Resources Carmen joined Bathurst in April 2017 to manage the human resources (“HR”) function. She holds a Bachelor of Social Sciences and is a member of HRINZ. Carmen has worked in all areas of HR, with over 15 years’ experience in both the public and private sectors. Ian Harvey General Manager, Export Operations A mining engineer with over 30 years’ industry experience. Ian has held senior management and operations leadership roles, specialising in metallurgical coal market planning and resource optimisation, and mine planning and design. Ian is a member of the Australasian Institute of Mining and Metallurgy (“AusIMM”). Sam brings a wealth of experience in marketing New Zealand’s unique coal internationally, and since our investment in BT Mining in 2017, has continued to manage and add value to our domestic and export customer contracts. Sam holds a Postgraduate Master of Science majoring in Geography. Craig Pilcher General Manager, Domestic Operations Craig has over 30 years’ experience which includes a background in engineering and owner of a coal supply business. Craig joined Bathurst in 2013, working as GM Operations and GM of Marketing and Sales, briefly leaving Bathurst before returning to manage the domestic operations in July this year. He is also a director of BT Mining Limited. Damian Spring General Manager, Resource Development A mining engineer with over 25 years’ experience locally and offshore, Damian consulted to Bathurst from 2010 before joining the company in 2017 as the General Manager, Domestic Operations. In 2019, Damian moved into the newly created Resource Development position, providing key focus on growth projects. Damian is a member of AusIMM. Section 1: Year in review 29 Directors’ report 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 2019. Directors The following persons were directors of Bathurst Resources Limited as at 30 June 2019. Toko Kapea Non-executive Chairman Richard Tacon Executive Director Russell Middleton Executive Director Peter Westerhuis Non-executive Director Principal activities During the year the principal continuing activities of the Group consisted of: • the production of coal in New Zealand, and • the exploration and development of coal mining assets in New Zealand. Dividends A maiden dividend was declared on the 27 August 2019 and paid on the 23 October 2019, at a rate of AU 0.3¢ per share. Environmental regulation Our exploration and mining activities are subject to a range of environmental controls which govern how we carry out our business. These are set out below. Mine development/mining activities Mining activities are regulated by the following: • Resource consents granted by the relevant district and regional territorial authorities, after following the processes set out in the Resource Management Act 1991. • Mining licences granted originally under the Coal Mines Act 1979 and now regulated under the Crown Minerals 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 or profit à prendre granted by owners of private (i.e. non-Crown owned) coal. • Access arrangements granted by relevant landowners and occupiers granted under the Crown Minerals Act 1991. For Crown-owned land managed by the Department of Conservation, these access arrangements are granted either by the Minister of Conservation or, for significant projects, jointly by 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 that the particular mining operation is operating under. Our mining operations are inspected on a regular basis. A discharge occurred at the Canterbury mine in January 2018 and the Canterbury Regional Council laid charges in respect of this incident. The Company applied for this matter to be dealt with through the Council’s alternative environmental justice (“AEJ”) processes and was accepted by the Council and agreed remediation was completed by the Company in June this year. However, the Domestic Court has raised issues over the validity of the AEJ process and the Company has pleaded guilty to one representative charge. Sentencing is to take place on 27 November 2019, with the Company seeking a discharge without conviction. 30 Bathurst Resources Limited Annual Report 2019 Other than as disclosed, to the best of the directors’ knowledge, all mining 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, we need to hold a relevant exploration permit (where the coal is Crown owned) or consent from the mineral owner where the coal is privately owned, relevant resource consents to permit exploration, access arrangements with the relevant landowner and occupier and where wildlife is impacted a wildlife authority. To the best of the directors’ knowledge, all exploration 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.. Hazardous substances Mining activities involve the storage and use of hazardous substances, including fuel. We must comply with the Hazardous Substances and New Organisms Act 1996 and Health and Safety at Work (Hazardous Substances) Regulations 2017 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 (“NZ ETS”) came into effect from 1 July 2010, which essentially makes us liable for greenhouse gas emissions associated with the coal we mine and sell in New Zealand and for the fugitive emissions of methane associated with that mined coal. Liability is based on the type and quantity of coal tonnes sold, with the cost of such being passed on to customers. Bathurst’s Emissions Trading Policy can be found on our website. Corporate governance Bathurst’s Corporate Governance Statement is available on the Company’s website www: http://bathurst.co.nz/our-company/ corporate-governance/ Donations The company made donations totalling $34,054 to several local groups during the year including scholarships. 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. Other information on directors Directors’ securities interests Director Mr T Kapea Ordinary shares Performance rights 3,657,409 250,000 Mr R Middleton 11,528,309 2,636,364 Mr P Westerhuis 3,268,636 250,000 Mr R Tacon 14,948,027 4,009,545 The increase in ordinary shares held by directors arose from the exercise of previously issued performance rights that vested on the 1 January 2019. For further information refer to note 18 in the financial statements. Other current directorships of listed companies No directors hold other current directorships in listed companies. Former directorships of listed companies in last three years Russell Middleton was a non-executive director of Tiger Resources Limited from July 2016 to October 2016. No other directors held former directorships of listed companies in the last three years. Section 1: Year in review 31 Remuneration report Role of the Remuneration and Nomination committee The Remuneration and Nomination committee (“R&N committee”) is a subcommittee of the Bathurst Board of Directors (“Board”). The R&N committee is responsible for making recommendations to the Board on remuneration matters such as non-executive director fees, remuneration for directors and other senior executives, and the over-arching executive remuneration policy and incentive schemes. All its members are non-executive directors. The objective of the R&N committee is to ensure that the Company’s remuneration policies are fair and competitive, and aligned with the long-term interests of the Company and its shareholders. The R&N committee draws on its own experience in remuneration matters and seeks advice from independent remuneration consultants where appropriate. In FY19, the Company adopted a new Long-Term Incentive Plan (“LTIP”) (refer to the long-term incentives section for further information). This was adopted as part of a wider remuneration review which was undertaken by an external consultant, to ensure that the fixed, short-term, and long-term remuneration incentives offered to directors and senior executives were appropriate and within market expectations. There were no other material changes to the remuneration framework during the year. The corporate governance section of our website provides further information on the role of the R&N committee. Remuneration framework Non-executive directors’ fees Non-executive directors’ fees reflect the role’s level of responsibility and the demands which are made on the directors’ time and are reviewed annually by the R&N committee. Fees paid to the chairman are determined independently to the fees of other non-executive directors. Executive remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive, appropriate, promotes retention of employees, and aligns with the Company’s strategic objectives and shareholder interests. The framework provides a mix of fixed and variable short- and long-term incentives, that are measured against internal and external financial and operational metrics. This enables the ability to recognise individual achievements and results, attract and retain high calibre people, and with the focus on the long- term, align with shareholder’s interest of sustainable growth. As executives gain seniority with the Group, the balance of this mix shifts to a higher proportion of ‘at risk’ rewards. The framework has three components: • Fixed remuneration, including superannuation. • Short-term incentives. • Long-term incentives. 32 Bathurst Resources Limited Annual Report 2019 Fixed remuneration The Company offers a competitive fixed remuneration that is based on the responsibilities of the role, individual performance and experience, and current market data. External consultants provide advice to ensure the fixed remuneration component is set within market benchmarks for a comparable role. Fixed remuneration is reviewed annually, and on promotion. There are no guaranteed increases to fixed remuneration. Short-term incentives Short-term incentives (“STI”) are an at-risk component of senior executive and executive director remuneration, payable in cash on achievement of performance targets that align with the strategic pillars of the Company’s strategy. Key performance indicators are a mix of financial and operational measures. These are reviewed, and if approved, paid annually as recommended to the Board by the R&N committee. Long-term incentives (“LTI”) Bathurst’s updated LTIP was approved by shareholders at the 2018 AGM, the details of which can be found on the Company’s website. The purpose of the plan is to encourage senior executives and executive directors to share in the ownership of the Company, promoting the long-term success of the Company and alignment with shareholder interests. A number of awards may be made under the plan, consisting of: • Performance rights: these are rights to acquire shares in the Company subject to satisfying performance and service conditions. The rights are issued for a nil exercise price. • Options: options are a right to acquire shares in the Company for the payment of an exercise price determined at the grant date and subject to performance and service conditions. • Service rights: these rights to acquire shares in the company are subject to satisfying service conditions only. The rights are issued for a nil exercise price. • Deferred share awards: these are shares in the company granted in lieu of remuneration or incentives and may be subject to performance and/or service conditions. • Cash rights: these are rights to receive a cash payment on achievement of performance and/or service conditions. • Stock appreciation rights: these are rights to receive shares in the Company to the value of any share price appreciation from the grant date to the vesting date, subject to satisfying performance and/or service conditions. In FY19, the only awards given under the LTIP were performance rights to executive directors; refer to note 18 in the financial statements for further information. Section 1: Year in review 33 Directors’ remuneration The total remuneration and other benefits to directors for services in all capacities during the year ended 30 June 2019 was: Director Mr T Kapea Mr R Middleton Mr P Westerhuis Mr R Tacon Directors’ fees Fixed remuneration and STI LTI – performance rights $120,000 - $63,964 - - $536,115 - $694,935 $48,161 $228,406 $40,320 $299,372 Total $168,161 $764,521 $104,284 $994,306 Fixed remuneration and STI for both Mr Tacon and Mr Middleton are in their capacity as Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) respectively. Increases in the fixed remuneration and STI relate to the STI component, based on the performance of the Company. Employee remuneration During the year ended 30 June 2019, 29 employees (excluding the CEO and CFO) received individual remuneration over $100,000. Range 100,001 – 110,000 110,001 – 120,000 120,001 – 130,000 130,001 – 140,000 150,001 – 160,000 160,001 – 170,000 170,001 – 180,000 180,001 – 190,000 220,001 – 230,000 230,001 – 240,000 260,001 – 270,000 320,001 – 330,000 330,001 – 340,000 340,001 – 350,000 # of employees 7 3 2 4 1 2 2 1 1 2 1 1 1 1 34 Bathurst Resources Limited Annual Report 2019 Section 1: Year in review 35 36 Bathurst Resources Limited Annual Report 2019 Section 2: Financial statements 37 Financial statementsIn this sectionIncome statementStatement of comprehensive incomeBalance sheetStatement of changes in equityStatement of cash flowsNotes to the financial statementsAdditional informationIndependent auditor’s report02Contents Income statement.............................................................................................................................................................................................................................. 39 Statement of comprehensive income ................................................................................................................................................................................... 39 Balance sheet ....................................................................................................................................................................................................................................... 40 Statement of changes in equity ................................................................................................................................................................................................ 41 Statement of cash flows ................................................................................................................................................................................................................ 42 Notes to the financial statements ........................................................................................................................................................................................... 43 Additional information ..................................................................................................................................................................................................................... 75 Independent auditor’s report ......................................................................................................................................................................................................78 Page Authorised for and on behalf of the Board of Directors: Toko Kapea Chairman 26 August 2019 Russell Middleton Executive director 26 August 2019 Bathurst Resources Limited | Financial statements 38 Bathurst Resources Limited Annual Report 2019 2 Income Statement For the year ended 30 June 2019 Revenue from contracts with customers Cost of sales Gross profit Equity accounted profit Other income Depreciation Administrative and other expenses Fair value gain on deferred consideration Gain/(loss) on disposal of fixed assets Impairment losses Operating profit before tax Fair value movement on derivatives Fair value movement on borrowings Finance cost Finance income Profit before income tax Income tax benefit Profit after tax Earnings per share: Basic profit per share Diluted profit per share Notes 3 4 2019 $’000 52,744 2018 $’000 47,817 (38,655) (33,487) 14,089 14,330 13 45,300 42,961 38 213 10 5 15 (c) 8 6 6 7 19 19 (2,624) (8,499) 41 3 - (2,431) (8,517) 102 (21) (1,630) 48,348 45,007 - - (27,687) (4,434) (3,545) (7,487) 157 149 44,960 5,548 - - 44,960 5,548 Cents Cents 2.83 2.57 0.40 0.40 Statement of comprehensive income For the year ended 30 June 2019 Profit after tax Other comprehensive income (“OCI”) Items that may be reclassified to profit or loss: Exchange differences on translation of foreign operations Share of BT Mining FX hedging through OCI Comprehensive income 44,960 5,548 79 (513) 13 5 - 44,526 5,553 Bathurst Resources Limited | Financial statements Section 2: Financial statements 39 3 Balance sheet As at 30 June 2019 Cash and cash equivalents Restricted short-term deposits Trade and other receivables Inventories New Zealand emission units Other financial assets Total current assets Property, plant and equipment Mining assets Interest in joint ventures Crown indemnity Other financial assets Total non-current assets TOTAL ASSETS Trade and other payables Borrowings Deferred consideration Rehabilitation provisions Total current liabilities Borrowings Deferred consideration Rehabilitation provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS Contributed equity Debt instruments equity component Reserves Accumulated losses EQUITY For and on behalf of the Board of Directors: Notes 9 (a) 10 11 13 16 15 (a) 15 (b) 15 (c) 16 15 (b) 15 (c) 16 17 17 18 2019 $’000 20,005 4,030 4,018 1,560 1,428 - 31,041 17,239 29,783 80,828 371 139 2018 $’000 20,179 4,037 3,903 1,226 396 25 29,766 17,521 26,307 45,436 351 114 128,360 89,729 159,401 119,495 7,079 14,214 1,035 1,328 5,735 1,895 1,258 1,160 23,656 10,048 9,297 5,774 4,347 27,883 6,350 4,768 19,418 39,001 43,074 49,049 116,327 286,277 70,446 263,179 22,824 43,788 (33,050) (31,837) (159,724) (204,684) 116,327 70,446 Toko Kapea Chairman 26 August 2019 Russell Middleton Executive Director 26 August 2019 40 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 4 Statement of changes in equity For the year ended 30 June 2019 Contributed equity $’000 249,092 - 1 July 2017 Comprehensive profit Contributions of equity 14,087 Share-based payments 30 June 2018 Comprehensive profit - 263,179 - Debt instruments equity component $’000 - - 43,788 - 43,788 - Contributions of equity 25,780 (20,964) Share-based payments Share buy-backs Vesting of performance rights - (4,225) 1,543 - - - Share- based payments Foreign exchange/ hedging Retained earnings Reorganisation reserve Total equity $’000 $’000 $’000 $’000 $’000 278 (154) (210,232) (32,760) 6,224 - - 794 1,072 - - 764 - (1,543) 5 - - 5,548 - - - - - 5,553 57,875 794 (149) (204,684) (32,760) 70,446 (434) 44,960 - - - - - - - - - - - - - 44,526 4,816 764 (4,225) - 30 June 2019 286,277 22,824 293 (583) (159,724) (32,760) 116,327 Bathurst Resources Limited | Financial statements Section 2: Financial statements 41 5 Statement of cash flows For the year ended 30 June 2019 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Dividend from BT Mining Net cash inflow from operating activities Cash flows from investing activities Exploration and consenting expenditure Mining assets (including capitalised waste moved in advance) Property, plant and equipment purchases Proceeds from disposal of property, plant and equipment Deferred consideration Investment in BT Mining BT Mining repayment of loan to BRL Investment in NWP Coal Canada Limited Other Net cash outflow from investing activities Cash flows from financing activities Proceeds from borrowings Interest received Interest on finance leases and other finance costs paid Repayment of finance leases Interest on debt instruments Share buy-backs Net cash outflow from financing activities Net decrease in cash Cash and cash equivalents at the beginning of the year Restricted short-term deposits at the beginning of the year Total cash at the end of the year Notes 2019 $’000 2018 $’000 52,741 47,934 (41,944) (39,726) 13 20 19,500 30,297 13,000 21,208 13 13 13 (370) (8,307) (2,342) 3 (292) (8,581) (3,382) - (1,161) (903) - - (21,044) 9,084 (10,105) 22 - 58 (22,260) (25,060) - 130 (264) (1,721) (2,138) (4,225) 732 195 (283) (2,240) (3,036) - (8,218) (4,632) (181) (8,484) 20,179 4,037 28,892 3,808 24,035 24,216 42 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 6 Notes to the financial statements For the year ended 30 June 2019 1. About our financial statements General information Bathurst Resources Limited (“Company” or “Parent” or “BRL”) is a company incorporated and domiciled in New Zealand, registered under the Companies Act 1993 and listed on the Australian Securities Exchange (“ASX”). These financial statements have been prepared in accordance with the ASX listing rules. The financial statements presented as at and for the year ended 30 June 2019 comprise the Company and its subsidiaries (together referred to as the “Group”). The Group is principally engaged in the exploration, development and production of coal. In 2019, the content and structure of the financial statements was reviewed. This review has resulted in the following changes: • • information about significant accounting policies and key judgements and estimates have been relocated to sit within the relevant notes to the financial statements; and removal of immaterial disclosures. These financial statements have been approved for issue by the Board of Directors on 26 August 2019. Basis of preparation These Group financial statements 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 NZ GAAP. 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 financial statements also comply with International Financial Reporting Standards (IFRS). 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. Measurement basis These financial statements have been prepared on a going concern basis under the historical cost convention, except for certain financial assets and liabilities which are measured at fair value through profit or loss. 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 statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Key judgements and estimates In the process of applying the Group’s accounting policies, management have made a number of judgements and applied estimates and assumptions about future events. These are noted below and/or detailed within the following relevant notes to the financial statements: • Note 8 Impairment • Note 11 Mining assets • Note 15 (c) Deferred consideration • Note 16 Rehabilitation provisions • Note 17 Equity Bathurst Resources Limited | Financial statements Section 2: Financial statements 43 7 Notes to the financial statements For the year ended 30 June 2019 1. About our financial statements continued Key judgements and estimates continued Reserves and 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 2012 (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 may, ultimately, result in the reserves being restated. Such changes in reserves could impact on depreciation and amortisation rates, asset carrying values, provisions for rehabilitation, and deferred consideration. Foreign currency translation Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement and statement of comprehensive income are translated at monthly average exchange rates (unless this is not a reasonable 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. New accounting standards not yet effective At the date of authorisation of the financial statements, NZ IFRS 16 Leases was on issue but not yet effective. The standard eliminates the distinction between operating and finance leases. A formal impact assessment is yet to be undertaken however this standard is not expected to have a material impact. The Group does not intend to apply this standard until its effective date which is the financial year ending 30 June 2020. Standards and interpretations adopted during the year The financial information presented for the year ended 30 June 2019 has been prepared using accounting policies consistent with those applied in the 30 June 2018 financial statements, except for the application of two new accounting standards, as detailed below. These were adopted with effect from 1 July 2018 without restatement, and in accordance with the transition requirements. NZ IFRS 9 (“NZ IFRS 9”) – Financial Instruments This standard replaces NZ IAS 39 Financial Instruments: Recognition and Measurement. It introduces a forward-looking expected credit loss impairment model, changes to the classification and measurement of financial assets, as well as how hedge accounting can be applied. The only impact on the Group on adoption of this standard was a change in classification terminology on its financial assets and some increased disclosures. There was no financial impact. NZ IFRS 15 (“NZ IFRS 15”) – Revenue from contracts with customers This standard details a comprehensive principles based approach on how to recognise revenue from contracts with customers. The Group reviewed its contracts with customers regarding the sale of coal and freight and ash disposal services and determined that there was no financial impact on the adoption of this standard. Increased disclosures are required, refer note 3. 44 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 8 Notes to the financial statements For the year ended 30 June 2019 2. Segment information The operating segments reported on are: • Export – 100 percent of BT Mining’s export mine (Stockton). • Domestic - BRL’s eastern South Island domestic operations and 100 percent of the BT Mining North Island domestic mines. • Corporate – BRL corporate overheads and Buller Coal Project, and 100 percent of BT Mining corporate overheads. A reconciliation to profit after tax per BRL’s Income Statement is provided via the elimination of BT Mining column. Total assets and total liabilities are reported on a group basis, as with tax expense. Three BRL customers met the reporting threshold of 10 percent of BRL’s operating revenue in the year to 30 June 2019, contributing $18.8m, $8.2m and $6.6m (2018: three customers, $17.8m, $6.4m and $6.3m). Year ended 30 June 2019 $’000 $’000 $’000 $’000 Export Domestic Corporate Total Eliminate BT Mining $’000 Total BRL1 $’000 Revenue from contracts with customers 265,858 146,986 - 412,844 (360,100) 52,744 EBITDA2 Equity accounted profit 103,647 70,245 (15,352) 158,540 (148,345) 10,195 - - - - - 45,300 Operating profit before tax 78,412 47,060 (15,340) 110,132 (107,084) 48,348 Fair value on derivatives Net finance costs Income tax expense Comprehensive income Depreciation & amortisation Year ended 30 June 2018 - - (3,439) (672) (616) (4,965) (3,439) (6,253) 3,439 2,865 - - (31,088) (31,088) 31,088 - (3,388) - 77,740 46,444 (55,266) 68,918 (69,692) 44,526 11,827 22,575 301 34,703 (27,794) 6,909 Revenue from contracts with customers 218,579 122,588 467 341,634 (293,455) 48,179 EBITDA Equity accounted profit 105,001 50,865 (16,217) 139,649 (131,190) - - - - - 8,459 42,961 Operating profit before tax 98,437 38,718 (26,033) 111,122 (109,076) 45,007 Fair value movements Net finance costs Income tax expense Comprehensive income Depreciation & amortisation Accounting policy - - (32,121) (32,121) (782) (1,416) (13,159) (15,357) - - (35,281) (35,281) - 8,019 35,281 97,655 37,302 (106,271) 28,686 (66,094) 6,083 10,678 130 16,891 (12,006) (32,121) (7,338) - 5,553 4,885 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 of Directors. 1 Total BRL operating profit and comprehensive income does not equal the sum of Total BRL minus elimination of BT Mining, as the Company’s 65 percent of BT Mining’s profit is added back. 2 Earnings before net finance costs (including interest), tax, depreciation, amortisation, impairment, fair value movement on deferred consideration and rehabilitation provisions. Bathurst Resources Limited | Financial statements Section 2: Financial statements 45 9 Notes to the financial statements For the year ended 30 June 2019 3. Revenue from contracts with customers Coal sales Freight and ash disposal revenue Sales revenue from contracts with customers 2019 $’000 38,186 14,558 2018 $’000 35,831 11,986 52,744 47,817 Accounting policy Revenue from contracts with customers is recognised at a point in time, when satisfaction of the performance obligation(s) in a signed customer contract is achieved, signifying when control has passed to the customer. Performance obligations The Group has one key performance obligation across all customer contracts – that to supply (and deliver where relevant) coal. Because of when control transfers to the customer (on delivery if freight is included as a service, on arrival at the collection point if not), freight forms part of the same performance obligation as the supply of coal. Satisfaction of the performance obligation is assumed at the time of delivery or arrival at the collection point, whichever is relevant. There are no unsatisfied performance obligations. Determination of the transaction price The value at which revenue is recorded is the stand alone selling price for the good/service provided. Each contract notes a separate price for coal, and freight delivery/ash disposal where relevant. Some customer contracts allow for limited remediations in the instance of the Company providing non-specification coal (either at the option of the customer or BRL). These instances are very rare and in almost all cases are rectified in the month that the non-specification occurs. As such the best estimate of the final consideration to be received is the invoiced amount as based on the transaction prices in the customer contract. 4. 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 9,739 14,186 10,647 4,285 (202) 7,939 12,494 9,729 2,454 871 38,655 33,487 46 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 10 Notes to the financial statements For the year ended 30 June 2019 5. Administrative and other expenses Administrative and other expenses include the following items: Remuneration of auditors Directors fees Legal fees Consultants Employee benefit expense Rent Share-based payments 6. Net finance costs Interest income Total finance income Success fee Interest expense Interest expense on debt instruments Realised foreign exchange loss Unrealised foreign exchange loss on debt instruments Rehabilitation provisions unwinding of discount Deferred consideration unwinding of discount Total finance costs Total net finance costs Notes 2019 $’000 2018 $’000 176 208 1,213 841 2,181 366 764 157 157 - (359) 163 196 2,131 933 1,650 287 794 149 149 (854) (458) (2,094) (3,396) (42) (62) (365) (623) (87) (1,764) (255) (673) (3,545) (7,487) (3,388) (7,338) 16 15 (c) Bathurst Resources Limited | Financial statements Section 2: Financial statements 47 11 Notes to the financial statements For the year ended 30 June 2019 7. Income tax benefit (a) Income tax benefit Current tax Deferred tax Income tax benefit Reconciliation of income tax benefit to tax payable Profit before income tax Tax at the standard New Zealand rate of 28 percent Tax effects of amounts not assessable in calculating taxable income: Share of BT Mining profit Dividend from BT Mining Fair value movement on derivatives and borrowings Other permanent adjustments Tax losses not recognised Other deferred tax movements Income tax benefit Further information relating to deferred tax is set out in note 14. (b) Imputation credits Opening balance imputation credit account Imputation credits attached to dividends and other items Imputation credits available for use in future periods 2019 $’000 2018 $’000 (2,594) (2,108) 2,594 2,108 - - 44,960 12,589 5,548 1,554 (12,684) (12,029) 7,583 - 7,243 - 5,056 8,994 1,717 13 (245) (5,305) - 5,055 7,607 12,662 - - 5,055 5,055 Accounting policy The income tax expense or benefit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for New Zealand adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 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. 48 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 12 Notes to the financial statements For the year ended 30 June 2019 8. Impairment Impairment of exploration and evaluation assets Impairment of mining assets Total impairment losses Notes 2019 $’000 11 11 - - - 2018 $’000 630 1,000 1,630 Management has assessed the cash-generating units (“CGU”) for the Group as follows: • Bathurst domestic coal, as the Timaru coal yard cannot generate its own cash flows independent of the mines. This includes the Canterbury mine, 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 when in operation had established domestic markets which allowed a profitable operation without relying on infrastructure to be built for the Buller Coal project. Management assessed each CGU for indicators of impairment, or indicators that previously recognised impairment losses may no longer be relevant, where appropriate. Bathurst domestic coal It was considered whether there is any operating, regulatory, or market factors that indicate impairment of this CGU. This CGU continues to be profitable and operate as expected. It was concluded that there were no indicators of impairment present at 30 June 2019. Buller Coal project The Buller Coal project was previously fully impaired in the year ended 30 June 2015. The Buller Coal project has remained on care and maintenance and management has no immediate plans to reinstate the project. The CGU remains fully impaired at 30 June 2019. Cascade mine The Cascade mine was placed on care and maintenance during the year ended 30 June 2016 and remains on care and maintenance at 30 June 2019. Accounting policy For non-financial assets, 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). Exploration and evaluation and mining assets, as well as property, plant and equipment are assessed for impairment collectively as part of their respective cash- generating units. Non-financial assets that have been previously impaired are reviewed for possible reversal of the impairment at the end of each reporting period. Key judgements and estimates The future recoverability of the non-financial assets recorded by the Group is dependent upon a number of factors, including whether the Group decides to exploit its mine property itself or, if not, whether it successfully recovers the related asset through sale. Factors that could impact future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal and regulatory changes, and changes to commodity prices and foreign exchange rates. These factors impact both an assessment of whether impairment should be recognised, as well as if there are indicators that previously recognised impairment should be reversed. Bathurst Resources Limited | Financial statements Section 2: Financial statements 49 13 Notes to the financial statements For the year ended 30 June 2019 9. Financial assets (a) Trade and other receivables Trade receivables from contracts with customers Less: provision on receivable from joint venture Bathurst Industrial Coal Limited Receivable from BT Mining Other receivables and prepayments Total trade and other receivables 2019 $’000 3,384 2018 $’000 3,926 (500) (500) 714 420 250 227 4,018 3,903 Trade receivables from contracts with customers (“trade receivables”) are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are generally due for settlement within 20 to 30 days and as such classified as current. There are no contract assets (accrued revenue) relating to contracts with customers. Accounting policy Initial recognition and measurement The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables for which the Group has applied the practical expedient are measured at the transaction price determined under NZ IFRS 15. A financial asset is recognised when the Group becomes party to the contractual provisions of the instrument. Subsequent measurement Financial assets under NZ IFRS 9 are subsequently classified to reflect the business model in which assets are managed and their contractual cash flow characteristics, as follows: • Amortised cost: where the business model is to hold the financial assets in order to collect contractual cash flows and those cash flows represent solely payments of principal and interest. • Fair value through other comprehensive income: where the business model is to both collect contractual cash flows and sell financial assets and the cash flows represent solely payments of principal and interest. • Fair value through profit or loss: if the asset is held for trading or if the cash flows of the asset do not solely represent payments of principal and interest. Financial assets at amortised cost This is the only relevant financial asset category for the Group. The Group’s financial assets subsequently measured at amortised cost consist of: • Cash and cash equivalents and restricted short-term deposits. • Trade receivables from contracts with customers and related party receivables (within trade and other receivables). • Other financial assets. • Crown indemnity (refer note 16 for further information). Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. For information on credit risk and impairment, refer to note 21. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. Derecognition Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial asset expire or if the Group transfers the financial asset to another party without retaining control of the asset. Cash and cash equivalents and restricted short-term deposits • Cash and cash equivalents comprise cash at bank and on hand and short-term deposits with an original maturity of three months or less. Restricted cash deposits are sureties held backing provisions for rehabilitation. 50 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 14 Notes to the financial statements For the year ended 30 June 2019 10. Property, plant and equipment Freehold land Buildings Mine infrastructure Plant & machinery $’000 $’000 Year ended 30 June 2019 Opening net book value $’000 2,328 Additions Transfers Depreciation - - - Closing net book value 2,328 688 95 345 (217) 911 Furniture and fittings $’000 435 47 218 (111) 589 Work in progress Total $’000 $’000 628 17,521 1,870 2,342 (2,013) - - (2,624) 485 17,239 $’000 13,176 330 1,333 266 - 117 (244) (2,052) 139 12,787 As at 30 June 2019 Cost Accumulated depreciation and impairment 15,785 6,417 2,913 29,617 2,868 12,609 70,209 (13,457) (5,506) (2,774) (16,830) (2,279) (12,124) (52,970) Closing net book value 2,328 911 139 12,787 589 485 17,239 Year ended 30 June 2018 Opening net book value Additions Transfers Depreciation Disposals 1,928 400 - - - Closing net book value 2,328 756 40 6 (110) (4) 688 180 5 102 (21) - 10,496 4,447 444 (2,180) (31) 266 13,176 185 172 200 (120) (2) 435 780 640 (752) 14,325 5,704 - - (2,431) (40) (77) 628 17,521 As at 30 June 2018 Cost Accumulated depreciation and impairment 15,785 5,977 2,796 27,954 2,603 12,752 67,867 (13,457) (5,289) (2,530) (14,778) (2,168) (12,124) (50,346) Closing net book value 2,328 688 266 13,176 435 628 17,521 Included in plant and machinery above are the following amounts where the Group is a lessee under a finance lease: Cost Accumulated depreciation Net book value 2019 $’000 8,133 2018 $’000 7,934 (3,211) (2,094) 4,922 5,840 Bathurst Resources Limited | Financial statements Section 2: Financial statements 51 15 Notes to the financial statements For the year ended 30 June 2019 10. Property, plant and equipment continued Accounting policy 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. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership 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. Property, plant and equipment All property, plant and equipment are measured at cost less depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of 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 over the estimated useful lives of each item of property, plant 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 and machinery – Plant and machinery leased – Furniture, fittings and equipment 10 - 25 years 3 – 8 years 2 – 25 years Units of use 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. Any gain or loss on disposals of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. 52 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 16 Notes to the financial statements For the year ended 30 June 2019 11. Mining assets Exploration and evaluation assets Opening balance Expenditure capitalised Impairment recognised Transfer to mining licences and property assets Total exploration and evaluation assets Mining licences/permits and property assets Opening balance Expenditure capitalised Transfer from exploration and evaluation assets Amortisation Impairment recognised Abandonment provision movement Waste moved in advance capitalised Total mining licences/permits and property assets Total mining assets Accounting policy Exploration and evaluation 2019 $’000 312 368 - - 2018 $’000 2,022 295 (630) (1,375) 680 312 25,995 18,592 1,209 - 301 1,375 (4,285) (2,426) - (1,000) (915) 7,099 876 8,277 29,103 25,995 29,783 26,307 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 expenditure is expensed as incurred. 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 to the area are continuing. 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. Bathurst Resources Limited | Financial statements Section 2: Financial statements 53 17 Notes to the financial statements For the year ended 30 June 2019 11. Mining assets continued Accounting policy continued Mining licences/permits and properties Mining licences/permits and development properties include the cost of acquiring and developing mining properties, licences, 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 asset’s 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 measured reliably. Waste moved 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. Waste removal normally continues through the life of the mine. The Group defers waste removal costs incurred during the production stage of its operations and discloses them 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. Key judgements and estimates 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. 54 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 18 Notes to the financial statements For the year ended 30 June 2019 12. 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 Limited Buller Coal Limited Bathurst Coal Limited New Brighton Collieries Limited Bathurst Resources (Canada) Limited Equity holding Country of incorporation Australia New Zealand New Zealand New Zealand New Zealand New Zealand Canada Class of shares Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 2019 % 100 100 100 100 100 100 100 2018 % 100 100 100 100 100 100 100 All subsidiary companies have a balance date of 30 June, and are involved in the coal industry. All subsidiaries have a functional currency of New Zealand dollars except for BR Coal Pty Ltd (Australian dollars) and Bathurst Resources (Canada) Limited (Canadian dollars). Bathurst Resources (Canada) Limited was incorporated in June 2018 and is the entity via which the Company invests in joint venture NWP Coal Canada Limited – for further information refer to note 13. Accounting policy 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 Company and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. 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 transferred, the liabilities incurred to the former owners of the 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 are recognised in accordance with NZ IAS 39 in profit or loss as ‘fair value (loss)/gain on deferred consideration’. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition- date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as 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. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Bathurst Resources Limited | Financial statements Section 2: Financial statements 55 19 Notes to the financial statements For the year ended 30 June 2019 13. Interest in joint ventures Interest in BT Mining Limited (“BT Mining”) Interest in NWP Coal Canada Limited (“NWP”) Total interest in joint ventures BT Mining Limited (“BT Mining”) (a) Balances held in BT Mining Equity investment Share of retained earnings net of dividends received Total interest in BT Mining Opening balance Increase in loan to BT Mining Receipt of loan repayment Receipt of dividend Share of BT Mining profit Share of BT Mining FX hedging through OCI Closing balance 2019 $’000 70,723 10,105 2018 $’000 45,436 - 80,828 45,436 16,250 54,473 16,250 29,186 70,723 45,436 45,436 - - 3,515 21,044 (9,084) (19,500) (13,000) 45,300 42,961 (513) - 70,723 45,436 BRL holds a 65 percent shareholding in BT Mining, which owns the mining permits and licences as well as the mining assets at the following mine sites: • Buller Plateau operating assets of the Stockton mine in the South Island; and • Rotowaro mine, Maramarua mine and certain assets at Huntly West mine located in the North Island. BRL considers BT Mining to be a joint venture. This is because unanimous approval is required on activities that significantly affect BT Mining’s operations. As such the investment in BT Mining is accounted for using the equity method. For an unaudited proportionate consolidation presentation of BRL and BT Mining, refer to the additional information section of these financial statements, after the notes to the financial statements. 56 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 20 Notes to the financial statements For the year ended 30 June 2019 13. Interest in joint ventures continued BT Mining continued (b) BT Mining balance sheet Cash Trade and other receivables Inventories New Zealand emission units Current assets Property, plant and equipment Mining assets Crown indemnity Other financial assets Deferred tax asset Non-current assets TOTAL ASSETS Trade and other payables Tax payable Borrowings Derivative liabilities Deferred consideration Provisions Current liabilities Borrowings Deferred consideration Provisions Non-current liabilities TOTAL LIABILITIES NET ASSETS Share capital Reserves Retained earnings net of dividends paid EQUITY Reconciliation to BRL’s interest in BT Mining Share of share capital Share of retained earnings net of dividends paid BRL’s interest in BT Mining 2019 $’000 22,283 46,749 32,694 2,975 2018 $’000 7,780 48,176 35,348 1,243 104,701 92,547 72,976 41,961 53,993 742 2,041 41,454 27,273 53,399 - 1,646 171,713 123,772 276,414 216,319 26,854 24,894 2,970 789 12,932 6,447 28,526 19,048 - 3,348 11,900 882 74,886 63,704 6,876 12,806 73,042 - 15,100 67,614 92,724 82,714 167,610 146,418 108,804 25,000 69,901 25,000 (789) - 84,593 44,901 108,804 69,901 16,250 54,473 16,250 29,186 70,723 45,436 Bathurst Resources Limited | Financial statements Section 2: Financial statements 57 21 Notes to the financial statements For the year ended 30 June 2019 13. Interest in joint ventures continued NWP On 12 July 2018 BRL secured a joint venture agreement with Jameson Resources Limited (“Jameson”), investing in Jameson’s Canadian subsidiary, NWP. The investment was done via a wholly owned subsidiary of BRL set up for this purpose (Bathurst Resources (Canada) Limited) which is incorporated in Canada and has a functional currency of CAD. NWP’s key asset is the Crown Mountain coking coal project (“Crown Mountain”). The Crown Mountain project consists of coal tenure licences located in the Elk Valley coal field in south eastern British Columbia, Canada. The joint venture agreement structures BRL’s investment in NWP into stages. Further investments are at the sole discretion of BRL. Investment Initial investment Tranche one Tranche two Total Amount Ownership Use of proceeds CAD $4.0m CAD $7.5m CAD $110.m CAD $121.5m 8% 12% 30% 50% Exploration programme Bankable feasibility study Construction As above Status Complete In progress Not started The total amount of NZD $10.1m (CAD $8.9m) invested at 30 June 2019 represents the initial investment (CAD $4.0m) issued in exchange for common ordinary shares in NWP, as well as a further CAD $4.9m as part of tranche one, issued in exchange for preference shares in NWP. The CAD $4.9m investment in exchange for preference shares is done on a cash call basis at the request of NWP. If BRL exercises the tranche one option, further investment required will equal CAD $7.5m minus funds invested in the preference shares, when the preference shares will automatically convert to ordinary shares on a 1:1 basis. The preference shares have the same rights as ordinary shares and are issued at the same value as the ordinary shares, with the sole difference that they have a liquidity preference ranking above ordinary shares. Because the preference shares are in substance the same as ordinary shares, giving BRL access to the returns associated with the joint venture, these have been accounted for in the same way as the ordinary shares. BRL considers NWP to be a joint venture with Jameson. This is because unanimous approval is required on activities that significantly affect NWP’s operations. As such the investment in NWP is accounted for using the equity method. (a) NWP summarised financial information Cash Other current assets Exploration and evaluation assets Other non-current assets TOTAL ASSETS Current liabilities Non-current financial liabilities TOTAL LIABILITIES Issued capital Accumulated losses TOTAL EQUITY 2019 $’000 1,054 286 23,270 1,270 25,880 352 1,941 2,293 25,604 (2,017) 23,587 Bathurst Industrial Coal Limited The Company holds a 50 percent shareholding in Bathurst Industrial Coal Limited. This venture has ceased to operate and it is intended that this entity will be wound up. 58 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 22 Notes to the financial statements For the year ended 30 June 2019 13. Interest in joint ventures continued Accounting policy Joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Company has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interest 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. 14. Deferred tax Temporary differences attributable to: Tax losses Employee benefits Provisions Mining licences Exploration and evaluation expenditure Property, plant and equipment Waste moved in advance Other Total deferred tax assets Waste moved in advance Other Total deferred tax liabilities Net deferred tax asset not recognised Net deferred tax asset 2019 $’000 12,449 285 1,772 2018 $’000 13,819 257 803 16,695 16,984 2,656 6,624 2,027 436 548 8,086 - - 42,944 40,497 - (3) (3) (787) - (787) (42,941) (39,710) - - The Group has not recognised a net deferred tax asset on the basis that it is not probable these losses will be utilised in the near future. Accounting policy 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 financial statements. 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 at the time of the transaction affects neither accounting or taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Bathurst Resources Limited | Financial statements Section 2: Financial statements 59 23 Notes to the financial statements For the year ended 30 June 2019 15. Financial liabilities (a) Trade and other payables Current Trade payables Accruals Employee benefit payable Interest payable Other payables Total trade and other payables 2019 $’000 2018 $’000 2,316 2,688 1,183 723 169 1,566 1,703 1,238 922 306 7,079 5,735 Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. (b) Borrowings Current Secured Lease liabilities Subordinated bonds Bank borrowings backing property, plant and equipment Unsecured Convertible notes Total current borrowings Non-current Secured Lease liabilities Bank borrowings backing property, plant and equipment Subordinated bonds Unsecured Convertible notes Total non-current borrowings Total borrowings 1,418 11,790 287 1,654 - 241 719 - 14,214 1,895 2,470 - - 3,714 287 11,689 6,827 12,193 9,297 27,883 23,511 29,778 60 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 24 Notes to the financial statements For the year ended 30 June 2019 15. Financial liabilities continued (b) Borrowings continued A summary of key details of the Company’s debt instruments (excluding lease liabilities) is as follows: Instrument Convertible notes Convertible notes Subordinated bonds Denomination currency Face value Coupon rate Issue date Maturity date NZD NZD USD $m $0.7m $7.0m $7.9m % 8% 8% 10% 22/07/2016 22/07/2019 1/02/2017 1/02/2017 1/02/2021 1/02/2020 Per note conversion # shares 45,455 26,667 n/a 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. During the year, 2,857 of the July 2016 convertible notes issue (face value $3.3m), and 1,400 of the February 2017 convertible notes issue (face value $1.6m), were converted to shares at the election of the note holders. For further details refer to note 17. Convertible notes Conversion • July 2016 issue - can be converted into ordinary shares at the election of the holder any time until 10 days prior to maturity date. • February 2017 issue - can be converted into ordinary shares at the election of the holder any time until 10 days before maturity date. Ranking The convertible notes rank equally with all other present and future unsecured obligations except for obligations accorded preference by mandatory provisions of applicable law. Any shares issued on conversion will rank equally with all other ordinary shares. Subordinated bonds Redemption The Company is entitled to elect early redemption at any time after the sale and purchase agreement of BT Mining becoming unconditional and after the 1 February 2019. If the bonds are redeemed early the Company must pay 104 percent of the issue price. Ranking The bonds rank equally with existing and future bonds and without priority or preference amongst themselves. The bonds are formally secured by the Company’s share ownership in BT Mining. Technical breach There was a technical breach to the bond terms during the year. The required majority approval by the bond holders for the share buy- backs scheme that commenced in October 2018 was received retrospectively at the AGM in November 2018. This means a majority of bond holders can elect these bonds to be repaid before the maturity date. Bathurst Resources Limited | Financial statements Section 2: Financial statements 61 25 Notes to the financial statements For the year ended 30 June 2019 15. Financial liabilities continued (c) Deferred consideration Current Acquisition of subsidiary Non-current Acquisition of subsidiary Total deferred consideration Opening balance Unwinding of discount Fair value adjustment Consideration paid during the year Closing balance 2019 $’000 2018 $’000 1,035 1,258 5,774 6,809 7,608 623 (41) (1,381) 6,350 7,608 7,928 673 (102) (891) 6,809 7,608 Buller Coal project BRL acquired Buller Coal Limited (formerly L&M Coal Limited) in November 2010 and the sale and purchase agreement contained an element of deferred consideration. The deferred consideration comprised cash consideration and/or royalties on coal sold and the issue of performance shares. The deferred cash consideration is made up of two payments of USD $40m (performance payments). The first being payable upon 25,000 tonnes of coal being shipped from the Buller Coal project, the second payable upon 1 million tonnes of coal being shipped from the Buller Coal project. BRL has the option to defer cash payment of the performance payments and elect to submit a higher royalty 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 in the valuation and recognition of deferred consideration. Bathurst has and will continue to remit royalty payments to L&M Coal Holdings (the vendor) on all Escarpment coal sold as required by the Royalty Deed and this includes ongoing sales from stockpiles. Further information is included in note 23 (d). 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 Group’s weighted average cost of capital (“WACC”) and production profile at a set rate per tonne of coal produced. Sensitivity analysis on impact to profit based on changes to key inputs to the estimation of the deferrred consideration liability is as follows: Key input Discount rate Production levels Change in input 2 percent 5 percent 2019 2018 Increase in estimate $’m Decrease in estimate $’m Increase in estimate $’m Decrease in estimate $’m 0.1 0.0 (0.2) 0.0 0.1 (0.1) (0.1) 0.1 62 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 26 Notes to the financial statements For the year ended 30 June 2019 15. Financial liabilities continued (c) Deferred consideration continued New Brighton Collieries Limited The Company completed the acquisition of New Brighton Collieries Limited on 10 March 2015. 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 Group’s WACC, projected production profile, and forecast domestic coal prices. These are based on the Group’s forecasts which are approved by the Board of Directors. Sensitivity analysis on impact to profit based on changes to key inputs to the estimation of the deferrred consideration liability is as follows: Key input Discount rate Production levels Coal prices Change in input 2 percent 5 percent $5 per tonne 2019 2018 Increase in estimate $’m Decrease in estimate $’m Increase in estimate $’m Decrease in estimate $’m 0.4 (0.2) (0.2) (0.4) 0.2 0.2 0.5 (0.3) (0.3) (0.5) 0.3 0.3 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). (d) Fair value measurements The fair value of the Group’s debt instruments is noted below: Instrument Subordinated bonds Convertible notes 2019 2018 Fair value $’000 Carrying value $’000 Fair value $’000 Carrying value $’000 12,309 7,858 11,790 7,546 12,175 12,652 11,689 12,193 All other financial assets and liabilities (except where specifically noted) have a carrying value that is equivalent to their fair value. Accounting policy Initial recognition and measurement All financial liabilities are recognised initially at fair value and, in the case of borrowings and trade and other payables, net of directly attributable transaction costs. Subsequent measurement Subsequent measurement of financial liabilities under NZ IFRS 9 is at amortised cost, unless eligible to opt to designate a financial liability at fair value through profit or loss, or other specific exceptions apply. The Group’s financial liabilities fall within two measurement categories: trade and other payables and borrowings at amortised cost, and deferred consideration at fair value through profit or loss. Financial liabilities at amortised cost Trade and other payables and borrowings are subsequently measured at amortised cost using the effective interest rate method (“EIR”). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. Borrowings denominated in foreign currency are re-translated at each reporting period to account for unrealised foreign exchange movements. Bathurst Resources Limited | Financial statements Section 2: Financial statements 63 27 Notes to the financial statements For the year ended 30 June 2019 15. Financial liabilities continued Accounting policy continued Financial liabilities at amortised cost The fair value of the liability portion of the convertible notes was determined using a market interest rate for an equivalent non-convertible bond at the issue date. The remainder of the proceeds was allocated to the conversion option and recognised in equity as debt instruments equity component, and is not subsequently remeasured. Refer to note 17. Fair value through profit or loss Deferred consideration is subsequently measured at fair value through profit or loss, as IFRS 9 denotes the measurement requirements of IFRS 3 Business combinations applies. 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 finance cost. Financial liabilities 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. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. Fair value Fair value is the price that would be received from the sale of an asset or paid to transfer a liability in a transaction between active market participants or in its absence, the most advantageous market to which the Group has access to at the reporting date. The fair value of a financial liability reflects its non-performance risk. When available, fair value is measured using the quoted price in an active market. A market is active if transactions take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. The following fair value hierarchy, as set out in NZ IFRS 13: Fair Value Measurement, has been used to categorise the inputs to valuation techniques used to measure the financial assets and financial liabilities which are carried at fair value: a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) b) 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 c) 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 fair value is deferred consideration which is valued at a fair value hierarchy of level 3. The fair value of debt instruments disclosed has been valued at a fair value hierarchy of level 2. Key judgements and estimates In valuing the deferred consideration payable under business acquisitions management uses estimates and assumptions. These include 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. 64 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 28 Notes to the financial statements For the year ended 30 June 2019 16. Rehabilitation provisions Current Non-current Total provisions Rehabilitation provision movement: Opening balance Change recognised in the mining and property asset Unwinding of discount Recognition/movement in Crown indemnity on Sullivan permit Movement in provision recognised in the income statement 2019 $’000 1,328 4,347 5,675 5,928 (915) 365 20 277 2018 $’000 1,160 4,768 5,928 3,985 905 255 351 432 Closing balance 5,675 5,928 Accounting policy 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. A reasonable change in discount rate assumptions would not have a material impact on the provision. Key judgements and estimates In calculating the estimated future costs of rehabilitating and restoring areas disturbed in the mining process certain estimates and assumptions have been made. 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. Changes in the estimates and assumptions used could have a material impact on the carrying value of the rehabilitation provision. The provision is reviewed at each reporting date and updated based on the best available estimates and assumptions at that time. Bathurst Resources Limited | Financial statements Section 2: Financial statements 65 29 Notes to the financial statements For the year ended 30 June 2019 17. Equity (a) Ordinary fully paid shares Opening balance Issue of shares from conversion of convertible notes Issue of shares from vesting of performance rights 18 Cancellation of shares from buy-backs Issue of shares from conversion of RCPS Closing balance Note 2019 Number of shares ’000 2018 Number of shares ’000 1,513,164 167,198 16,131 (31,316) - 1,665,177 986,028 13,318 - - 513,818 1,513,164 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. Convertible notes conversions During the year, 2,857 of the July 2016 issue of convertible notes were converted to shares at the option of the note holder, at $1,150 per note and 2.53¢ per share (June 2018: 293 notes). 1,400 of the February 2017 convertible notes issue were also converted at the request of the note holder, at $1,150 per note and 4.3125¢ per share. Share buy-backs There were two share buy-back schemes implemented during the year. The first was an on-market share buy-back facility, allowing the Company to purchase up to 75m of its own shares. At 30 June 2019, 30.5m shares had been bought back at an average price of AU 12.8¢ per share. An off-market minimum holding buyback facility was also offered to shareholders who held unmarketable parcels of shares as defined by the Australian Stock Exchange, which is a shareholder who has a holding valued at less than AUD $500. Of the 757 eligible shareholders, 555 participated in the facility, with the Company buying back 0.8m shares at a price of AU 14.5¢ per share. (b) Contributed equity Opening balance Issue of shares from conversion of convertible notes Issue of shares from conversion of RCPS Issue of shares from vesting of performance rights Share buy-backs Closing balance $’000 263,179 25,780 - 1,543 (4,225) $’000 249,092 1,982 12,105 - - 286,277 263,179 The value transferred to equity on conversion of the convertible notes was the proportional value of the amortised cost of the underlying borrowings and the fair value of the conversion option (debt instruments equity component). (c) Debt instruments equity component Opening balance Conversion option of convertible notes recognised as equity Transfer to contributed equity on conversion of convertible notes Closing balance 43,788 - (20,964) 22,824 - 43,788 - 43,788 66 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 30 Notes to the financial statements For the year ended 30 June 2019 17. Equity continued Accounting policy Ordinary shares are classified as equity. Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. Key judgements and estimates The Group has made a judgement that the conversion feature of the convertible notes should be classified as equity. This judgement was made on the basis that the conversion feature satisfies the equity classification test of converting a fixed amount of debt principal to a fixed quantity of the Group’s own shares (the ‘fixed for fixed’ test). Because of this classification the value attributed to the conversion feature is not subsequently remeasured after initial recognition through profit or loss. The value recognised was independently determined using a Black Scholes Model for the convertible notes that takes into account the exercise price, the term of the conversion option, the current share price and expected price volatility of the underlying share, the expected dividend yield, and the risk free interest rate for the term of the conversion option. 18. Reserves Share-based payment reserve Foreign exchange translation reserve Share of BT Mining FX hedging through OCI Reorganisation reserve Total reserves Nature and purpose of reserves 2019 $’000 293 (70) (513) (32,760) (33,050) 2018 $’000 1,072 (149) - (32,760) (31,837) Share-based payment reserve The share-based payment reserve is used to recognise the fair value of performance rights issued. Some performance rights vested during the year with shares issued; the value pertaining to these performance rights were transferred to contributed equity. 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. Share of BT Mining FX hedging through OCI The value booked represents 65 percent equity share of the fair value movement on FX hedging in BT Mining that is put through other comprehensive income. 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 28 June 2013. A reorganisation reserve was created, which reflects the previous retained losses of subsidiaries. Bathurst Resources Limited | Financial statements Section 2: Financial statements 67 31 Notes to the financial statements For the year ended 30 June 2019 18. Reserves continued Details on share-based payments Grant date Vesting date Transaction Performance Rights Opening balance 000s Issued Vested 000s 000s Closing balance 000s 6 February 17 31 December 18 11,500 Completion performance rights 21 December 17 31 December 18 1,981 Retention performance rights 3 April 18 31 December 18 2,650 Director performance rights 20 December 2018 31 March 2020 LTIP performance rights 28 December 2018 30 January 2022 - - 16,131 - - - 2,555 4,591 7,146 (11,500) (1,981) (2,650) - - (16,131) - - - 2,555 4,591 7,146 The transaction, completion and retention performance rights were converted to shares for nil consideration on the 30 January 2019, with the closing market rate of BRL shares on this date at AU 0.12¢ per share. Transaction performance rights Transaction performance rights were issued to certain key executives during the year, conditional on the successful signing of a sale and purchase agreement for the acquisition of certain Solid Energy mine site assets via the Company’s joint venture vehicle, BT Mining. These form part of the Group’s overall retention strategy, and recognises their instrumental roles in relation to the negotiation and signing of the contract. These were approved by shareholders at the 2016 AGM. Completion performance rights Completion performance rights were issued to executive directors in recognition of the completion of the sale and purchase agreement for the acquisition of certain assets from Solid Energy, and the close and transition of those assets. These form part of the Group’s overall retention strategy and recognises their instrumental roles in relation to the successful completion of the acquisition. These were approved by shareholders at the 2017 AGM. Retention performance rights Retention performance rights were issued to senior executives in recognition of the successful close and transition of certain assets from Solid Energy to the Company. These form part of the Group’s overall retention strategy and were approved by the Board. Director performance rights Director performance rights were issued to directors in recognition of past performance of the Company, in particular a 67 percent increase in the Company’s share price in FY18. These were approved by shareholders at the 2018 AGM. These have a nil issue and exercise price and are convertible into fully paid ordinary shares on a 1:1 basis. Vesting is dependent on the holders remaining in employment until the vesting date. 68 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 32 Notes to the financial statements For the year ended 30 June 2019 18. Reserves continued Details on share-based payments continued Long term incentive plan (“LTIP”) performance rights LTIP performance rights were issued to executive directors as part of the new LTIP approved at the 2018 AGM. These rights were issued as an incentive for the future performance of these directors. The rights were approved at the 2018 AGM. These have a nil issue and exercise price and are convertible into fully paid ordinary shares on a 1:1 basis. Performance requirements include continuous employment with BRL until 15 October 2021, and BRL achieving a total shareholder return compound annual growth rate for the period 1 July 2018 to and including 30 June 2021 of between 10 percent to 15 percent. Accounting policy Share-based compensation benefits are provided to employees via the Bathurst Resources Limited LTIP. The fair value of performance rights granted under the Bathurst Resources Limited LTIP 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 rights 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 rights 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 Company revises its estimates of the number of rights 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. Performance rights granted carry no dividend or voting rights. When exercised each performance right converts into one fully paid ordinary share. The exercise price of all performance rights is nil. 19. Earnings per share (a) Earnings per share (“EPS”) Basic EPS Diluted EPS (b) Reconciliation of earnings used in calculation Earnings used to calculate basic EPS – net profit after tax Interest expense on convertible notes Earnings used in calculation of diluted EPS (c) Weighted average number of shares Weighted average shares used in calculation of basic EPS Dilutive potential ordinary shares (performance rights and convertible notes) Weighted average shares used in calculation of diluted EPS 2019 Cents 2.83 2.57 $’000 44,960 926 45,886 2018 Cents 0.40 0.40 $’000 5,548 - 5,548 Number of shares 000s 1,587,049 198,267 1,785,316 Number of shares 000s 1,399,047 - 1,399,047 At 30 June 2018, basic and diluted EPS were the same as the potential ordinary shares from the convertible notes and performance rights were anti-dilutive. Bathurst Resources Limited | Financial statements Section 2: Financial statements 69 33 Notes to the financial statements For the year ended 30 June 2019 19. Earnings per share continued Accounting policy Basic earnings per share Basic earnings per share is calculated by dividing: • • the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. 20. Reconciliation of profit to operating cash flows Profit before income tax Dividend received from BT Mining Non-cash items: Unrealised FX movements Depreciation and amortisation Share of BT Mining profit Rehab provision movement and discount unwinds Fair value movements on derivatives Fair value movements on borrowings Unwinding of discount rate and fair value adjustment on deferred consideration Share-based payment expense Impairment Other Non-operating items: (Gain)/loss on sale of property, plant and equipment Interest on debt instruments Other Movement in working capital Cash flow from operating activities 2019 $’000 44,960 19,500 13 6,909 2018 $’000 5,548 13,000 1,767 4,885 (45,300) (42,961) 563 - - 582 764 - - (3) 2,096 146 67 741 27,687 4,434 571 794 1,630 75 21 3,396 111 (491) 30,297 21,208 70 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 34 Notes to the financial statements For the year ended 30 June 2019 21. 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 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. Market risk 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. The Group had minimal operating exposure to foreign currency risk at the end of the reporting period. The Group assesses potential foreign currency exposures by assessing the impact of movement in the FX rate on profit, as follows: Debt instrument Currency and face value Subordinated bonds USD $7.9m 2019 +3% $’000 344 2018 +3% $’000 341 2019 -3% $’000 (365) 2018 -3% $’000 (362) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. A material risk of credit risk arises from cash and cash equivalents, restricted short-term deposits, trade receivables from contracts with customers, and related party receivables. Risk management 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. The credit risk on cash and cash equivalents and restricted short-term deposits is limited because the Group only banks with counterparties that have credit ratings of AA- or higher. The Group’s maximum exposure to credit risk for trade receivables from contracts with customers and loans to related parties is their carrying value. The Group has long standing relationships with all its key customers and historically has experienced very low to nil defaults on its trade receivables. Impairment The Group’s financial assets are subject to having their impairment assessed against the IFRS 9 forward looking expected credit loss model. The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The group applies the NZ IFRS 9 simplified approach to measuring expected credit losses for trade receivables on contracts with customers, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. The assessed impairment loss for all financial assets was immaterial at 30 June 2019. There were no indicators that credit risk on financial assets had increased significantly since initial recognition, nor does the Group hold any financial assets that are considered to be credit- impaired (excluding a historical intercompany receivable which has been specifically provided for). Bathurst Resources Limited | Financial statements Section 2: Financial statements 71 35 Notes to the financial statements For the year ended 30 June 2019 21. Financial risk management continued 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 non-derivative 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. 30 June 2019 Trade and other payables Borrowings Finance leases Deferred consideration Total 30 June 2018 Trade and other payables Borrowings Finance leases Deferred consideration Total Less than 6 months 6 - 12 months Between 1 – 2 years Between 2 – 5 years Over 5 years $’000 7,079 854 1,332 503 9,768 5,803 1,100 1,057 636 8,596 $’000 $’000 $’000 $’000 - 12,561 1,077 503 14,141 - 1,082 1,057 636 2,775 - 6,745 1,207 952 8,904 - 17,130 2,345 1,226 - - 943 3,026 3,969 - 9,033 1,906 3,775 20,701 14,714 - - - 4,282 4,282 - - - 4,786 4,786 Total contractual flows $’000 7,079 20,160 4,559 9,266 41,064 5,803 28,345 6,365 11,059 51,572 Borrowings in the above table represent the underlying contractual commitments on the USD denominated Subordinated Bonds and NZD convertible notes. The convertible notes have the option to convert to equity, so future principal repayments may not occur. The subsequent to balance sheet date conversions of convertible notes disclosed in note 24 have been excluded from the above. Total contractual cash flows on finance leases equal minimum lease payments plus interest. Capital management The Group’s capital includes contributed equity, reserves, and retained earnings. The Board’s policy is to maintain a strong capital base to maintain investor, creditor, and market confidence and to sustain the future development of the business. There were no changes to the Company’s approach to capital management during the year. 72 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 36 Notes to the financial statements For the year ended 30 June 2019 21. Financial risk management continued Financial instruments by category Financial assets Amortised cost Cash and cash equivalents Restricted short-term deposits Trade and other receivables Other financial assets Crown Indemnity Total financial assets Financial liabilities Amortised cost Trade and other payables Borrowings Fair Value Deferred consideration Total financial liabilities 22. Key management personnel Key management personnel are the senior leadership team and directors (executive and non-executive) of the Group. Key management personnel compensation 30 June 2019 Management Non-executive directors Total 30 June 2018 Management Non-executive directors Total Short-term benefits $’000 Share-based payments $’000 2,387 184 2,571 2,172 196 2,368 676 88 764 684 110 794 2019 $’000 20,005 4,030 4,018 139 371 2018 $’000 20,179 4,037 3,903 139 351 28,563 28,609 7,079 23,511 6,809 37,399 5,803 29,778 7,608 43,189 Total $’000 3,063 272 3,335 2,856 306 3,162 Bathurst Resources Limited | Financial statements Section 2: Financial statements 73 37 Notes to the financial statements For the year ended 30 June 2019 23. Commitments and contingent liabilities (a) Capital commitments There was no capital expenditure contracted for at the reporting date but not recognised as a liability (2018: nil). (b) Lease commitments Non-cancellable operating leases The Group leases various offices, accommodations, and equipment under non-cancellable operating leases expiring within one to five years. The leases have varying terms, escalation clauses and renewal rights. Commitments for non-cancellable minimum lease payments are payable as follows: Within one year Later than one year but not later than five years Total lease commitments 2019 $’000 270 367 637 2018 $’000 287 608 895 Finance leases The Group leases various plant and equipment expiring within one to five years. Refer to note 21 for further information. (c) Exploration expenditure commitments 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 On 23 December 2016 BRL announced that L&M Coal Holdings Limited had filed legal proceedings in the High Court of New Zealand in relation to an alleged breach of the first USD $40m performance payment described in note 15 (c). On 20 August 2018 BRL advised that it received an unfavourable judgment from the High Court on this matter. The High Court held that the first performance payment had been triggered as royalties were not being paid on a reasonable level (undefined by the Court) of production. BRL lodged an appeal to the Court of Appeal against this decision, which was heard in court on 21 to 23 August 2019. BRL continues to believe that it is more likely than not that it will be successful in the Court of Appeal. A judgment is expected from the Court of Appeal in early 2020. Notwithstanding this, should BRL ultimately be unsuccessful, directors have considered options to fund payment and are of the view that BRL would be able to do so. 24. Events after the reporting period Other than as disclosed there are no other material events that occurred subsequent to reporting date, that require recognition of, or additional disclosure in these financial statements. Conversion of convertible notes The remaining July 2016 issue of convertible notes matured on the 22 July 2019 (original maturity date). It was requested by the note holder that these were converted to shares, resulting in the issue of 28.5m shares. The remaining balance sitting in borrowings and debt instrument equity component relating to this notes issue has subsequently been transferred to contributed equity. 13.3m shares were also issued on 12 August 2019 on the conversion of 500 of the February 2017 issue of convertible notes (face value of debt $0.6m), at the request of the note holder. Dividend The Board approved a dividend on 26 August 2019, which will be payable on 23 October 2019. The dividend is payable at AU 0.3¢ per share, amounting to a total dividend payment of AUD $5.1m based on current issued shares. These financial statements do not reflect this dividend, the dividend will be accounted for in equity as an adjustment to retained earnings in the financial year ending 30 June 2020. Share buy-backs The Board approved a 12-month extension to the on-market share buy-back facility which was originally announced on 28 August 2018. The facility will now end on the 28 August 2020; no other details have changed. At the date of these financial statements, there were 44.5m shares able to be bought back. Bathurst Resources Limited | Financial statements 38 74 Bathurst Resources Limited Annual Report 2019 Additional information For the year ended 30 June 2019 Unaudited proportionate consolidation of Bathurst and BT Mining operations The following income statement, balance sheet and cash flow represent 100 percent of Bathurst operations, and 65 percent of BT Mining operations. This presentation does not reflect reporting under NZ GAAP or NZ IFRS, but is intended to show a combined operating view of the two businesses for information purposes only. Prior period comparatives only include ten months of operations, as BT Mining began operating on 1 September 2017. Consolidated income statement Revenue from contracts with customers Realised FX and coal price hedging Less: cost of sales Gross profit Other income Depreciation Administrative and other expenses Fair value on deferred consideration Gain on disposal of fixed assets Impairment losses Operating profit before tax Fair value movement on derivatives Fair value movement on borrowings Finance cost Finance income Profit before income tax Income tax expense Profit after tax 2019 $’000 2018 $’000 286,809 237,083 (5,303) - (173,509) (133,981) 107,997 103,102 254 (9,838) (19,180) (6,584) 3 - 72,652 (2,235) - (5,704) 454 1,486 (6,545) (17,855) (5,684) 71 (1,630) 72,945 (27,687) (4,434) (12,699) 356 65,167 28,481 (20,207) (22,933) 44,960 5,548 Bathurst Resources Limited | Financial statements Section 2: Financial statements 75 39 Additional information For the year ended 30 June 2019 Consolidated balance sheet Cash and cash equivalents Restricted short-term deposits Trade and other receivables Inventories New Zealand emission units Other financial assets Total current assets Property, plant and equipment (“PPE”) Mining assets Crown indemnity Deferred tax asset Interest in joint ventures Other financial assets Total non-current assets TOTAL ASSETS Trade and other payables Tax payable Borrowings Derivative liabilities Deferred consideration Provisions Total current liabilities Borrowings Deferred consideration Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS Contributed equity Debt instruments equity component Reserves Retained earnings net of dividends EQUITY 2019 $’000 34,489 4,030 34,405 22,812 3,362 - 99,098 64,673 57,058 35,466 1,327 10,105 621 2018 $’000 25,236 4,037 35,217 24,203 1,204 25 89,922 44,466 44,034 35,060 1,070 - 114 169,250 268,348 124,744 214,666 24,534 16,181 16,145 513 9,441 5,519 72,333 13,766 14,098 51,824 79,688 24,277 12,381 1,895 2,176 8,993 1,733 51,455 27,883 16,165 48,717 92,765 152,021 144,220 116,327 286,277 22,824 70,446 263,179 43,788 (33,050) (31,837) (159,724) (204,684) 116,327 70,446 76 Bathurst Resources Limited Annual Report 2019 Bathurst Resources Limited | Financial statements 40 Additional information For the year ended 30 June 2019 Consolidated cash flow Cash flows from operating activities Receipts from customers Payments to suppliers and employees Taxes paid Net inflow from operating activities Cash flows from investing activities Exploration and evaluation expenditure Mining assets (incl. elevated stripping) PPE purchases Proceeds from disposal of PPE Payment of deferred consideration BT Mining repayment of loan to BRL Investment in NWP Other Net outflow from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Interest on debt instruments Interest received Interest paid Finance facility fees Share buy-backs Net outflow from financing activities Net increase in cash and cash equivalents Opening cash and cash equivalents including restricted short-term deposits Closing cash and cash equivalents 2019 $’000 2018 $’000 286,293 209,945 (178,992) (143,755) (16,597) (11,621) 90,704 54,569 (703) (337) (28,517) (21,696) (30,046) (30,666) 186 (9,863) - (10,105) 22 92 (5,159) 4,290 - 57 (79,026) (53,419) 6,955 (2,670) (2,138) 427 (697) (84) (4,225) (2,432) 9,246 29,273 38,519 20,070 (21,578) (3,036) 402 (555) (150) - (4,847) (3,697) 32,970 29,273 Bathurst Resources Limited | Financial statements Section 2: Financial statements 77 41 78 Bathurst Resources Limited Annual Report 2019 © 2019 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Independent auditor’s report To the shareholders of Bathurst Resources Limited Report on the audit of the consolidated financial statements Opinion In our opinion, the accompanying consolidated financial statements of Bathurst Resources Limited (the ’Company’) and its subsidiaries (the 'Group') on pages 39 to 74: i.present fairly in all material respects the Group’sfinancial position as at 30 June 2019 and its financial performance and cash flows for the year ended on that date; and ii.comply with New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards. We have audited the accompanying consolidated financial statements which comprise: — the consolidated statement of financial position as at 30 June 2019; — the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended; and — notes, including a summary of significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the consolidated financial statements section of our report. Other than in our capacity as auditor we have no relationship with, or interests in, the Group. Emphasis of matter – Contingent liabilities We draw attention to Note 23(d) to the consolidated financial statements which discloses the unfavourable judgment received in relation to legal proceedings in the High Court of New Zealand filed by L&M Coal Holdings Limited. The Group had its appeal heard in the Court of Appeal during the week ending 23 August 2019 and the decision remains outstanding. No liability has been recognised as at 30 June 2019 based on legal advice that it is more likely than not that the Group will be successful in the Court of Appeal. Section 2: Financial statements 79 Materiality The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements as a whole was set at $2,000,000 determined with reference to a benchmark of the Group’s profit before tax from continuing operations. We chose the benchmark because, in our view, this is a key measure of the Group’s performance. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements The key audit matter How the matter was addressed in our audit Deferred consideration Refer to Note 15(c) to the financial statements. The fair value of the deferred consideration in respect of previous mine acquisitions was $6.8 million as at 30 June 2019. The equity accounted joint venture BT Mining Limited includes deferred consideration of $25.7 million. Significant judgement is applied by in relation to key inputs into the discounted cash flow models (models) to estimate the fair value of deferred consideration. Key inputs include estimated coal production levels, future coal prices, the timing of cash flows and a discount rate based on the risk free rate plus a mine-specific risk premium to reflect the risk that is not incorporated into the estimated cash flows. This was an area of audit focus because of the estimation uncertainties and significant judgements applied by management in estimating future coal prices, production levels and timing of cash flows and the sensitivities to be disclosed. Our audit procedures over management’s calculation of its estimate of the future deferred consideration payable included the following: — Sighting the sale and purchase agreements and agreeing the terms of the deferred consideration obligations related to each mine. — Testing the mathematical accuracy of the models used by Management to calculate the estimated future deferred consideration payable. — Comparing the forecasted coal production to operational data and reserve estimates prepared by the Group’s internal reserve engineering experts. — Assessing management’s production forecasting accuracy by comparing forecast results to actual results. — Comparing the forecast coal price assumption with current prices charged to the Company’s largest customers and a growth rate based on historic growth rates and external forecast coal prices. — Performing sensitivity analysis on the key estimates and assumptions, including the forecast coal price and estimated production. — Assessing whether the Group’s disclosures in relation to deferred consideration and the sensitivities of key assumptions were appropriate in the financial statements. 80 Bathurst Resources Limited Annual Report 2019 The key audit matter How the matter was addressed in our audit Revenue recognition Refer to Note 3 to the financial statements For the year ended 30 June 2019 the Group has adopted NZ IFRS 15 Revenue from Contracts with Customers (‘NZ IFRS 15’). The adoption of this accounting standard could have impacted how the Group recognises revenue. Our focus has been on ensuring that the treatment of each product offering under the agreements are appropriately accounted for and disclosed within the financial statements. The other area of focus was on the treatment of revenue across a range of customers as each customer has an individual contract. This was an area of audit focus as the application of a new standard requires judgement as does the process to conclude on the treatment of each contact. Our audit procedures over management’s assessment of the impact of NZ IFRS 15 included: — Understanding and assessing management’s process for identifying revenue streams and contracts that require assessment. — Verifying a sample of contracts that management completed an assessment of and assessing if we concurred with management’s conclusion. — Verifying a sample of contracts that management had not tested and assessing that their treatment should be consistent with the contracts management did test. Other information The Directors, on behalf of the Group, are responsible for the other information included in the entity’s annual report. Other information included in the annual report includes the Chairman’s and Chief Executive’s report, and operational and financial reviews. Our opinion on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion thereon. The annual report is expected to be made available to us after the date of this independent auditor’s report. Our responsibility is to read the annual report when it becomes available and consider whether the other information it contains is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the audit, or otherwise appear misstated. If so, we are required to report such matters to the Directors. Use of this independent auditor’s report This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might state to the shareholders those matters we are required to state to them in the independent auditor’s 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 shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed. Section 2: Financial statements 81 Responsibilities of the Directors for the consolidated financial statements The Directors, on behalf of the Group, are responsible for: — the preparation and fair presentation of the consolidated financial statements in accordance with generally accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards) and International Financial Reporting Standards; — implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is fairly presented and free from material misstatement, whether due to fraud or error; and — assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated financial statements Our objective is: — to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error; and — to issue an independent auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs NZ will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (XRB) website at: http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/ This description forms part of our independent auditor’s report. The engagement partner on the audit resulting in this independent auditor's report is David Gates. For and on behalf of KPMG Wellington 26 August 2019 82 Bathurst Resources Limited Annual Report 2019 Section 3: Shareholder information 83 Shareholder informationIn this sectionShareholder information03Shareholder information Additional information required by the Australian Securities Exchange and not shown elsewhere in the annual report, current as at 30 September 2019. Stock exchange quotation Shares are quoted on the ASX under the code “BRL”. Classes of securities The following equity securities are on issue: Quoted Ordinary shares, each fully paid 1,706,964,431 2,677 Number on issue Number of holders Unquoted Convertible notes of NZD $1,150 converting to 26,667 shares per note, maturing 1 February 2021 Director performance rights exercisable at $nil, vesting 31 March 2020 LTIP performance rights exercisable at $nil, vesting 30 January 2022 5,600 2,555,000 4,590,909 8 4 2 Voting rights Only holders of ordinary shares have voting rights. These are set out in Clause 21.5 of the Company’s constitution and are summarised as follows: • Where voting is by show of hands or by voice, every shareholder present in person of by proxy or representative has one vote. • On a poll every shareholder present in person or by representative has, in respect of each fully paid share held by that shareholder, one vote. Holders of convertible notes and performance rights have no voting rights until the instruments are converted/exercised into ordinary shares. 84 Bathurst Resources Limited Annual Report 2019 Restricted securities There are no restricted securities or securities subject to voluntary escrow. On-market share buy-backs An on-market share buy-back was announced on 28 August 2018, approving the buy-back of up to 75.0 million shares, representing approximately 4.70 percent of the shares on issue at that date. The duration of the buy-back was extended on the 27 August 2019 for a further 12 months, now ending on 28 August 2020. Up to and including 30 September 2019, 30.5 million shares had been bought back. Distribution of quoted equity securities Holding range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over TOTAL Total shareholders Ordinary shares 169 287 476 1,253 492 2,677 14,075 1,228,408 3,980,177 50,248,068 1,651,493,703 1,706,964,431 There are 478 shareholders holding less than a marketable parcel of ordinary shares as determined by the ASX (parcels valued at AUD $500 or less) based on the closing price of AU 9.5¢ per share. Substantial holders The Company’s record of substantial shareholdings (5 percent or more) based on notices from shareholders: Republic Investment Management Pte Limited (“RIM”) Talley’s Group Limited Asian Dragon Acquisitions Limited Number held 400,578,041 206,593,060 106,716,841 Percentage of issued shares 23.5% 12.1% 6.3% Approval was given by shareholders at the November 2018 AGM with specific respect to the Takeovers Code (New Zealand) for RIM to hold more than 20 percent of the Company’s shares, as a result of the on-market share buy-back and the conversion of convertible notes held by RIM. RIM at the date of this report still hold 500 of the convertible notes disclosed on the previous page, which if converted will convert into 13,333,333 ordinary shares. This would give RIM a maximum holding of 24.1 percent of the voting rights, based on current issued shares. Section 3: Shareholder information 85 Corporate governance statement The Corporate Governance Statement is available on the Company’s website at www.bathurst.co.nz Top 20 shareholders Shareholding name HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited JP Morgan Nominees Australia Limited Chng Seng Chye BNP Paribas Nominees Pty Limited Teo Peng Kwang Armada Trading Pty Ltd AFE Investments Pty Limited Ang Poon Liat National Nominees Limited John McCallum Karamjit Singh Narula Richard Tacon Rich Trend Ventures Limited BNP Paribas Noms Pty Ltd DBS Vickers Securities (Singapore) Pte Ltd San Tiong Ng Chow Shook Lin Invia Custodian Pty Limited Treadstone Resource Partners Pty Ltd 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Total top 20 shareholders Total remaining shareholders Number of shares held 519,392,413 279,331,950 118,202,936 91,878,788 78,976,185 38,932,124 29,114,272 27,888,773 22,002,727 21,070,259 20,392,966 18,181,818 14,948,027 13,333,333 12,993,384 11,363,636 10,000,000 9,090,909 9,045,454 7,272,727 1,353,412,681 353,551,750 Percentage of issued shares 30.43 16.36 6.92 5.38 4.63 2.28 1.71 1.63 1.29 1.23 1.19 1.07 0.88 0.78 0.76 0.67 0.59 0.53 0.53 0.43 79.29 20.71 86 Bathurst Resources Limited Annual Report 2019 Section 3: Shareholder information 87 88 Bathurst Resources Limited Annual Report 2019 Section 4: Resources and reserves 89 Resources and reservesIn this sectionTenement scheduleCoal resources and reserves04Tenement schedule At 30 June 2019 Permit ID Location (region) Minerals Permit type Permit operator Bathurst interest 60194 60146 56233 56220 54846 53614 52937 51279 51260 41821 41810 41456 41455 41372 41332 41274 40698 40628 Canterbury Waikato West Coast Waikato Canterbury Southland West Coast West Coast Southland Waikato West Coast West Coast West Coast Canterbury West Coast West Coast Waikato West Coast 40625 Southland Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Exploration Permit Bathurst Coal Limited Exploration Permit BT Mining Limited Mining Permit Buller Coal Limited Exploration Permit BT Mining Limited Exploration Permit Bathurst Coal Limited Mining Permit Bathurst Coal Limited Mining Permit BT Mining Limited Mining Permit Buller Coal Limited Exploration Permit Bathurst Coal Limited Mining Permit BT Mining Limited Mining Permit BT Mining Limited Mining Permit Buller Coal Limited Mining Permit Bathurst Coal Limited Mining Permit Bathurst Coal Limited Mining Permit Buller Coal Limited Mining Permit Buller Coal Limited Exploration Permit BT Mining Limited Exploration Permit Buller Coal Limited Exploration Permit New Brighton Collieries Limited 100% 65% 100% 65% 100% 100% 65% 100% 100% 65% 65% 100% 100% 100% 100% 100% 65% 100% 100% 90 Bathurst Resources Limited Annual Report 2019 Permit ID Location (region) Minerals Permit type Permit operator Bathurst interest 40591 37161 West Coast West Coast 3716101 West Coast 3716102 West Coast 3716103 West Coast 3716104 West Coast 37155 Waikato 3715501 Waikato 37153 Waikato 3715301 Waikato 37150 West Coast 3715002 West Coast 3715003 West Coast Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Coal Exploration Permit Bathurst Coal Limited Coal Mining Licence Bathurst Coal Limited Ancillary Coal Mining Licence Ancillary Coal Mining Licence Ancillary Coal Mining Licence Ancillary Coal Mining Licence Bathurst Coal Limited Bathurst Coal Limited 100% Bathurst Coal Limited 100% Bathurst Coal Limited 100% Coal Mining Licence BT Mining Limited Ancillary Coal Mining Licence BT Mining Limited Coal Mining Licence BT Mining Limited Ancillary Coal Mining Licence BT Mining Limited Coal Mining Licence BT Mining Limited Ancillary Coal Mining Licence Ancillary Coal Mining Licence BT Mining Limited BT Mining Limited 100% 100% 100% 65% 65% 65% 65% 65% 65% 65% 100% 65% 60321 60422 West Coast Minerals Exploration Permit Bathurst Coal Limited Waikato Coal Coal Mining Permit BT Mining Limited Section 4: Resources and reserves 91 Bathurst Resources permitting changes 1 July 2018 – 30 June 2019 Permit applications in past twelve months Permit ID Permit type Operator Location (region) Applied date Permit name Bathurst interest 56233 Mining Permit Buller Coal Limited West Coast 13/12/2018 Coal Creek 100% 60520 Exploration Permit Buller Coal Limited West Coast 15/2/2019 Denniston 100% 60521 Exploration Permit Buller Coal Limited West Coast 15/2/2019 Millerton-Fly Creek 100% 60522 Exploration Permit Buller Coal Limited West Coast 15/2/2019 Blackburn 100% Permits granted in past 12 months Permit ID Permit type Operator Location (region) Applied date Permit name Bathurst interest 60422 Mining Permit BT Mining Limited Waikato 4/7/2018 Awaroa West 65% 60321 Exploration Permit Bathurst Coal Limited West Coast 7/10/2018 Denniston Gold 100% Full Surrender Permit ID Permit type Operator Location (region) Permit name Bathurst interest Exploration Permit Bathurst Coal Limited Wellington West Coast Mining Permit Buller Coal Limited Rapid Stream West Coast 100% 100% 60047 55401 Expired None 92 Bathurst Resources Limited Annual Report 2019 Coal resources and reserves Resources Table 1 – Resource tonnes l a r e n m i t s r u h t a B p i h s r e n w o d e r u s a e M 9 1 0 2 ) t M ( e c r u o s e r d e r u s a e M 8 1 0 2 ) t M ( e c r u o s e r ) t M ( e g n a h C d e t a c i d n I 9 1 0 2 ) t M ( e c r u o s e r d e t a c i d n I 8 1 0 2 ) t M ( e c r u o s e r ) t M ( e g n a h C d e r r e f n I 9 1 0 2 ) t M ( e c r u o s e r d e r r e f n I 8 1 0 2 ) t M ( e c r u o s e r ) t M ( e g n a h C ) t M ( e c r u o s e r l a t o T 9 1 0 2 ) t M ( e c r u o s e r l a t o T 8 1 0 2 ) t M ( e g n a h C 100% 3.4 3.4 0.0 2.2 2.2 0.0 1.1 1.1 0.0 6.7 6.7 0.0 100% 0.5 0.5 0.0 0.6 0.6 0.0 0.3 0.3 0.0 1.4 1.4 0.0 100% 6.2 6.2 0.0 3.1 3.1 0.0 1.6 1.6 0.0 10.9 10.9 0.0 100% 0.0 0.0 0.0 3.4 3.4 0.0 4.7 4.7 0.0 8.1 8.1 0.0 100% 7.9 7.9 0.0 11.2 11.2 0.0 4.8 4.8 0.0 23.9 23.9 0.0 100% 2.7 2.7 0.0 5.1 5.1 0.0 4.1 4.1 0.0 11.9 11.9 0.0 100% 20.7 20.7 0.0 25.6 25.6 0.0 16.6 16.6 0.0 62.9 62.9 0.0 65% 1.0 0.9 0.1 9.7 10.2 (0.5) 7.3 7.5 (0.2) 18.0 18.6 (0.6) 65% 0.8 0.5 0.3 12.9 13.2 (0.3) 32.8 33.4 (0.6) 46.5 47.1 (0.6) 65% 0.1 0.1 0.0 1.2 1.0 0.2 1.3 1.4 (0.1) 2.6 2.5 0.1 Area Escarpment (1) Cascade (1) Deep Creek (1 & 3) Coalbrookdale (1) Whareatea West (1) Sullivan (1) South Buller Totals (6) Stockton (2, 4 & 5) Upper Waimangaroa (Met) (2, 4 & 5) Upper Waimangaroa (Thermal) (2, 4 & 5) Stockton Totals 65% 1.9 1.5 0.4 23.8 24.4 (0.6) 41.4 42.3 (0.9) 67.1 68.2 (1.1) Section 4: Resources and reserves 93 Resources (continued) Table 1 – Resource tonnes continued l a r e n m i t s r u h t a B p i h s r e n w O d e r u s a e M 9 1 0 2 ) t M ( e c r u o s e r d e r u s a e M 8 1 0 2 ) t M ( e c r u o s e r ) t M ( e g n a h C d e t a c i d n I 9 1 0 2 ) t M ( e c r u o s e r d e t a c i d n I 8 1 0 2 ) t M ( e c r u o s e r ) t M ( e g n a h C d e r r e f n I 9 1 0 2 ) t M ( e c r u o s e r d e r r e f n I 8 1 0 2 ) t M ( e c r u o s e r ) t M ( e g n a h C ) t M ( e c r u o s e r l a t o T 9 1 0 2 ) t M ( e c r u o s e r l a t o T 8 1 0 2 ) t M ( e g n a h C 100% 0.0 0.0 0.0 1.9 1.9 0.0 3.6 3.6 0.0 5.5 5.5 0.0 100% 2.4 2.4 0.0 7.3 7.3 0.0 10.9 10.9 0.0 20.6 20.6 0.0 100% 0.0 0.0 0.0 5.8 5.8 0.0 14.1 14.1 0.0 19.9 19.9 0.0 100% 2.4 2.4 0.0 15.0 15.0 0.0 28.6 28.6 0.0 46.0 46.0 0.0 25.0 24.6 0.4 64.4 65.0 (0.6) 86.6 87.5 (0.9) 176.0 177.1 (1.1) 100% 0.3 0.9 (0.6) 2.1 1.6 0.5 0.3 0.2 0.1 2.7 2.7 (0.0) 100% 0.2 0.2 0.0 0.2 0.4 (0.2) 0.2 1.3 (1.1) 0.6 1.9 (1.3) 100% 0.0 0.0 0.0 0.7 0.7 0.0 0.1 0.1 0.0 0.8 0.8 0.0 100% 1.0 1.4 (0.4) 1.3 2.5 (1.2) 1.0 3.2 (2.2) 3.3 7.1 (3.8) 100% 1.5 2.5 (1.0) 4.3 5.2 (0.9) 1.6 4.8 (3.2) 7.4 12.5 (5.1) 65% 0.6 2.4 (1.8) 1.8 5.0 (3.2) 0.4 1.5 (1.1) 2.8 8.9 (6.1) 65% 0.5 0.0 0.5 3.8 0.0 3.8 0.1 0.0 0.1 4.4 0.0 4.4 65% 2.4 1.7 0.7 0.2 1.5 (1.3) 0.0 0.0 0.0 2.6 3.2 (0.6) 65% 3.5 4.1 (0.6) 5.8 6.5 (0.7) 0.5 1.5 (1.0) 9.8 12.1 (2.3) Area Millerton North (1 & 3) North Buller (1 & 3) Blackburn (1 & 3) North Buller Totals (6) Buller Coal Project Totals Takitimu (1 & 4) New Brighton (1 & 8) Albury (1 & 10) Canterbury Coal (1, 4, 9 & 11) Southland/ Canterbury Totals (6) Rotowaro (2, 4, 5 & 11) Rotowaro North (7) Maramarua (4, 5, 8 & 12) North Island (6) Totals Total 30.0 31.2 (1.2) 74.5 76.7 (2.2) 88.7 93.8 (5.1) 193.2 201.7 (8.5) 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”). The measured and indicated mineral resources are inclusive of those mineral reserves modified to produce the ore reserves. Rounding of tonnes as required by reporting guidelines may result in summation differences between tonnes and coal quality. All resources quoted are reported as of 30 June 2019. 1 Resource tonnages have been calculated using a density value calculated using approximated in-ground moisture values (Preston and Sanders method) and as such tonnages quoted in this report are wet tonnes (unless stipulated otherwise). All coal qualities quoted are on an Air-Dried Basis. 2 Stockton, Upper Waimangaroa and Maramarua density values are based on air-dried ash density regressions. Stockton, Upper Waimangaroa, Rotowaro and Maramarua are reported on an air-dried basis. 94 Bathurst Resources Limited Annual Report 2019 Table 1 – Resource tonnes continued 3 No additional work has been undertaken on the coal resources for Deep Creek, Millerton North and Blackburn 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. 4 Resources were depleted by mining. 5 Stockton, Upper Waimangaroa, Rotowaro, Rotowaro North and Maramarua are owned by BT Mining Limited with Bathurst holding a 65 percent equity share. 6 South Buller, North Buller, Sullivan, Southland and Canterbury resources are 100 percent Bathurst Resources Limited ownership. 7 New resource. 8 Significant updates to geological model combined with a review of potential economic recovery. 9 Changes are due to an updated geology model (with updated historic extraction factors), mining depletion, and a review of potentially recoverable resources. 10 Mining depletion and a review of coal available with reasonable prospects of eventual economic extraction. 11 Mining depletion and back filling against previously mined highwalls has required the review of potentially recoverable resources. 12 Density is based on a fixed 1.3 tonnes per cubic metre due to insufficient data to support air dried ash density regression. Table 2 – Average coal quality – measured p i h s r e n w O t s r u h t a B l a r e n m i d e r u s a e M e c r u o s e r ) t M ( % h s A ) D A ( % r u h p l u S ) D A ( % r e t t a m e l i t a l o V ) D A ( % n o b r a c d e x i F ) D A ( t n e r e h n I e r u t s i o m e r u t s i o m u t i s n I Area Escarpment Cascade Deep Creek Coalbrookdale 100% 100% 100% 100% Whareatea West 100% Sullivan Stockton Upper Waimangaroa (Met) Upper Waimangaroa (Thermal) Millerton North North Buller Blackburn Takitimu New Brighton Albury 100% 65% 65% 65% 100% 100% 100% 100% 100% 100% Canterbury Coal 100% Rotowaro Rotowaro North Maramarua 65% 65% 65% 3.4 0.5 6.2 0.0 7.9 2.7 1.0 0.8 0.1 0.0 2.4 0.0 0.3 0.2 0.0 1.0 0.6 0.5 2.4 16.8 15.5 11.0 - 24.9 13.8 7.9 4.3 10.8 - 8.6 - 12.5 10.3 - 9.6 4.5 7.2 5.9 0.7 1.7 2.5 - 0.8 1.1 2.5 2.0 1.8 - 4.7 - 0.3 0.4 - 0.9 0.3 0.3 0.2 33.0 39.3 32.9 - 24.0 32.1 30.9 49.3 42.6 53.9 - 50.4 52.9 60.2 39.0 53.4 N S C 7.0 4.5 - - 7.0 7.0 7.6 5.2 36.9 48.1 3.5 - - 43.1 45.4 - 35.5 35.0 - 35.0 35.0 36.2 37.5 - 37.2 41.2 - 37.2 46.1 43.5 38.8 - 4.5 - N/A N/A - N/A N/A N/A N/A 1.0 2.6 2.2 - 0.6 1.2 1.0 3.4 4.1 - 2.9 - 14.8 13.5 - 18.2 14.4 13.1 17.8 ) D A ( e u l a v c i f i r o l a C 28.6 30.8 29.7 - 26.5 29.7 32.6 30.7 29.2 - 5.6 7.6 5.2 - 6.3 6.6 - - - - 11.4 29.7 - 24.8 20.6 - 26.7 - - - - 20.8 22.6 - 21.1 22.7 23.9 22.3 Section 4: Resources and reserves 95 % r u h p l u S ) D A ( % r e t t a m e l i t a l o V ) D A ( % n o b r a c d e x i F ) D A ( 34.9 38.3 34.7 35.9 22.3 30.6 36.4 51.4 44.5 53.6 50.4 48.5 53.0 56.2 39.0 53.4 N S C 7.5 4.0 - 5.0 6.0 7.0 7.9 5.2 37.7 50.0 1.8 36.9 42.6 42.1 35.2 35.0 30.9 35.1 35.5 35.9 37.0 52.4 46.3 51.8 37.8 39.7 24.5 37.4 44.9 45.5 36.1 10.0 5.0 6.0 N/A N/A N/A N/A N/A N/A N/A 1.2 1.8 2.7 1.8 1.1 1.2 3.4 2.0 3.1 4.9 5.1 4.3 0.3 0.4 1.0 0.9 0.3 0.2 0.2 t n e r e h n I e r u t s i o m e r u t s i o m u t i s n I ) D A ( e u l a v c i f i r o l a C 1.2 2.4 2.0 1.7 0.7 1.2 1.2 3.4 4.0 1.0 2.3 2.2 15.8 14.7 37.4 18.1 14.4 12.2 18.0 5.5 8.0 4.8 5.6 6.3 6.6 - - - 6.1 9.4 10.1 25.4 21.3 41.2 26.7 - - - 30.0 29.3 30.3 29.8 25.0 29.3 33.2 30.7 28.6 31.1 30.0 30.4 21.0 22.4 15.6 21.2 23.4 24.3 21.8 Resources (continued) Table 3 – Average coal quality – indicated t s r u h t a B l a r e n m i p i h s r e n w o d e t a c i d n I e c r u o s e r ) t M ( 100% 100% 100% 100% 100% 100% 65% 2.2 0.6 3.1 3.4 11.2 5.1 9.7 % h s A ) D A ( 12.6 14.8 9.7 12.0 28.5 15.3 6.1 65% 12.9 4.3 65% 100% 100% 100% 100% 100% 100% 100% 65% 65% 65% 1.2 1.9 7.3 5.8 2.1 0.2 0.7 1.3 1.8 3.8 0.2 8.3 9.7 8.8 3.9 11.2 10.6 7.2 9.4 5.2 6.4 8.8 Area Escarpment Cascade Deep Creek Coalbrookdale Whareatea West Sullivan Stockton Upper Waimangaroa (Met) Upper Waimangaroa (Thermal) Millerton North North Buller Blackburn Takitimu New Brighton Albury Canterbury Coal Rotowaro Rotowaro North Maramarua 96 Bathurst Resources Limited Annual Report 2019 Table 4 – Average coal quality – inferred t s r u h t a B l a r e n m i p i h s r e n w o d e r r e f n I e c r u o s e r ) t M ( 100% 100% 100% 100% 100% 100% 65% 1.1 0.3 1.6 4.7 4.8 4.1 7.3 % h s A ) D A ( 12.5 16.5 10.1 12.7 29.5 16.0 5.4 65% 32.8 5.8 65% 1.3 6.8 100% 100% 100% 100% 100% 100% 100% 65% 65% 65% 3.6 10.9 14.1 0.3 0.2 0.1 1.0 0.4 0.1 0.0 12.0 9.9 6.4 13.5 10.7 7.3 9.9 5.4 6.0 - Area Escarpment Cascade Deep Creek Coalbrookdale Whareatea West Sullivan Stockton Upper Waimangaroa (Met) Upper Waimangaroa (Thermal) Millerton North North Buller Blackburn Takitimu New Brighton Albury Canterbury Coal Rotowaro Rotowaro North Maramarua % r u h p l u S ) D A ( % r e t t a m e l i t a l o V ) D A ( % n o b r a c d e x i F ) D A ( 35.2 36.7 29.7 35.7 22.0 30.5 35.6 51.0 44.7 57.8 49.8 47.8 52.3 57.7 38.7 52.4 N S C 7.0 4.0 - 5.0 6.0 6.5 7.5 4.6 35.2 50.1 2.8 35.3 45.6 41.8 36.4 34.5 30.2 35.1 35.2 35.8 - 51.6 42.3 49.5 34.5 40.3 23.4 37.3 44.6 46.4 - 9.0 5.0 6.0 N/A N/A N/A N/A N/A N/A N/A 1.6 2.2 2.4 1.8 0.9 1.1 3.4 2.0 1.7 5.5 5.1 4.8 0.3 0.4 0.8 1.0 0.3 0.2 - t n e r e h n I e r u t s i o m e r u t s i o m u t i S n I ) D A ( e u l a v c i f i r o l a C 1.3 2.1 2.4 1.8 0.7 1.2 1.3 3.6 5.8 1.1 2.2 2.3 15.6 14.5 39.1 17.7 14.7 11.7 - 5.4 6.7 7.1 5.7 6.4 6.5 - - - 7.2 9.6 11.2 25.3 21.2 43.1 26.6 - - - 29.9 27.6 29.7 29.5 24.5 29.1 33.4 30.4 27.9 30.2 29.5 30.1 20.6 22.4 15.6 21.2 22.6 24.5 - Section 4: Resources and reserves 97 Reserves Table 5 – Coal reserves (ROM) tonnes ROM coal area Escarpment Domestic (A, C, F & I) Escarpment Export (A, C, F & I) Whareatea West (A, C, F & I) Stockton (B, C, E & H) Upper Waimangaroa (Met) (B, C, E & H) Takitimu (A, C, F, G & I) Canterbury Coal (A, C, F, H & I) Rotowaro (B, C, E & H) Maramarua (B, C, E & J) Total Bathurst mineral ownership Proved (Mt) Probable (Mt) Total (Mt) 2019 2018 Change 2019 2018 Change 2019 2018 Change 100% 0.2 0.2 0.0 0.1 0.1 0.0 0.3 0.3 0.0 100% 2.3 2.3 0.0 0.5 0.5 0.0 2.8 2.8 0.0 100% 0.0 0.0 0.0 15.8 15.8 0.0 15.8 15.8 0.0 65% 0.7 0.7 0.0 5.9 7.2 (1.3) 6.6 7.9 (1.3) 65% 0.8 0.5 0.3 2.5 2.8 (0.3) 3.3 3.3 0.0 100% 0.1 0.4 (0.3) 1.2 1.1 0.1 1.3 1.5 (0.2) 100% 0.6 0.6 0.0 0.7 0.8 (0.1) 1.3 1.4 (0.1) 65% 65% 0.5 0.6 (0.1) 1.4 1.9 (0.5) 1.9 2.5 (0.6) 2.4 7.6 1.5 6.8 0.9 0.8 0.1 1.4 (1.3) 2.5 2.9 (0.4) 28.2 31.6 (3.4) 35.8 38.4 (2.6) 98 Bathurst Resources Limited Annual Report 2019 Table 6 – Marketable coal reserves tonnes Product coal area Bathurst mineral ownership Proved (Mt) Probable (Mt) Total (Mt) 2019 2018 Change 2019 2018 Change 2019 2018 Change Escarpment Domestic (A, C, F & I) Escarpment Export (A, C, F & I) Whareatea West (A, C, F & I) Stockton (B, C, E & H) Upper Waimangaroa (Met) (B, C, E & H) Takitimu (C, D, F, G & K) Canterbury Coal (C, D, F, H & K) Rotowaro (B, C, D, E & K) Maramarua (B, C, D, E, J & K) Total 100% 0.2 0.2 0.0 0.1 0.1 0.0 0.3 0.3 0.0 100% 1.9 1.9 0.0 0.4 0.4 0.0 2.3 2.3 0.0 100% 0.0 0.0 0.0 9.9 9.9 0.0 9.9 9.9 0.0 65% 0.6 0.6 0.0 4.6 5.7 (1.1) 5.2 6.2 (1.0) 65% 0.7 0.5 0.2 2.3 2.6 (0.3) 3.0 3.1 (0.1) 100% 0.1 0.3 (0.2) 1.1 1.0 0.1 1.2 1.3 (0.1) 100% 0.6 0.6 0.0 0.6 0.7 (0.1) 1.2 1.3 (0.1) 65% 65% 0.4 0.6 (0.2) 1.3 1.7 (0.4) 1.7 2.3 (0.6) 2.3 6.8 1.4 6.1 0.9 0.7 0.1 1.3 (1.2) 2.4 2.8 (0.4) 20.4 23.4 (3.0) 27.2 29.5 (2.3) Section 4: Resources and reserves 99 Reserves (continued) Table 7 – Marketable coal reserves – proved and probable average quality Proved marketable Probable marketable Bathurst mineral ownership ) t M ( ) % ( h s A ) % ( r u h p l u S ) % ( M V N S C ) g K / J M ( V C ) % ( h s A ) t M ( ) % ( r u h p l u S ) % ( M V N S C ) g K / J M ( V C 100% 0.2 12.9 1.9 35.0 6.8 28.9 0.1 14.5 1.5 34.0 6.1 28.4 Deposit Escarpment Domestic (A, C, F & I) Escarpment Export (A, C, F & I) 100% 1.9 8.9 0.5 35.1 8.5 31.3 0.4 7.1 0.6 36.4 8.5 32.0 Whareatea West (A, C, F & I) Stockton (B, C, E & H) Upper Waimangaroa (Met) (B, C, E & H) Takitimu (C, D, F, G & K) Canterbury Coal (C, D, F, H &K) Rotowaro (B, C, D, E & K) Maramarua (B, C, D, E, J & K) 100% - - - - - - 9.9 12.1 0.9 26.0 9.5 31.9 65% 0.6 4.8 2.3 31.0 8.0 33.8 4.6 3.8 3.1 36.0 8.0 34.2 65% 0.7 3.1 0.9 38.0 4.5 31.1 2.3 2.7 1.3 37.9 4.5 31.3 100% 0.1 7.9 0.3 36.1 N/A 21.9 1.1 6.2 0.2 36.4 N/A 22.3 100% 0.6 9.5 0.8 35.2 N/A 21.3 0.6 9.2 0.9 35.4 N/A 21.4 65% 65% 0.4 5.1 0.3 34.7 N/A 24.0 1.3 5.6 0.3 35.4 N/A 23.9 2.3 5.9 0.2 37.5 N/A 22.3 0.1 8.3 0.2 37.4 N/A 21.6 100 Bathurst Resources Limited Annual Report 2019 Table 8 – Marketable coal reserve – total average quality Deposit Bathurst mineral ownership Escarpment Domestic (A, C, F & I) 100% Escarpment Export (A, C, F & I) Whareatea West (A, C, F & I) Stockton (B, C, E & H) Upper Waimangaroa (Met) (B, C, E & H) Takitimu (A, C, F, G & I) Canterbury Coal (A, C, F, H 7 I) Rotowaro (B, C, E & H) Maramarua (B, C, E & J) 100% 100% 65% 65% 100% 100% 65% 65% Coal type Mining method ) t M ( Total marketable ) % ( h s A r u h p l u S ) % ( ) % ( M V N S C V C Thermal Open Pit 0.3 13.4 1.8 34.7 6.6 28.7 Met Met Met Met Open Pit 2.3 8.6 0.5 35.3 8.5 31.4 Open Pit 9.9 12.1 0.9 26.0 9.5 31.9 Open Pit 5.2 3.9 3.0 35.5 8.0 34.1 Open Pit 3.0 2.8 1.2 37.9 4.5 31.2 Thermal Open Pit 1.2 6.4 0.2 36.3 N/A 22.3 Thermal Open Pit 1.2 9.3 0.8 35.3 N/A 21.4 Thermal Open Pit 1.7 5.5 0.3 35.2 N/A 23.9 Thermal Open Pit 2.4 6.0 0.2 37.5 N/A 22.3 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”). The measured and indicated mineral resources are inclusive of ore reserves. Rounding of tonnes as required by reporting guidelines may result in summation differences between tonnes and coal quality. All ore reserves quoted are reported as of 30 June 2019. A 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. B Stockton, Upper Waimangaroa, Rotowaro and Maramarua density values are based on air-dried ash density regressions. C Coal reserve (Run of Mine (ROM) tonnes), include consideration of standard mining factors (JORC Code 2012). D ROM coal reserves are reported at a moisture content that is based on long-term average coal production data and as such all tonnages quoted in this report are wet tonnes. E Stockton, Upper Waimangaroa, Rotowaro and Maramarua are owned by BT Mining Limited in which Bathurst has a 65% equity share. F Escarpment Domestic reserves, Escarpment Export reserves, Whareatea West reserves, Takitimu reserves and Canterbury Coal reserves are 100 percent Bathurst Resources Limited ownership. G Decrease in coal reserves due to mining depletion offset against increased tonnage from a revised geological model. H Decrease in coal reserves due to mining depletion. I 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 percent for Escarpment Export and Whareatea West, 5 – 8 percent at Escarpment Domestic) for sale after the 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. J Decrease in coal reserves due to mining depletion and reduction in underlying resources. K Marketable reserves are based on reconciled yields from ROM reserves. Marketable coal reserves are reported at a product specific moisture content based on tong term average coal production data and as such all tonnages quoted in this report are wet tonnes. Section 4: Resources and reserves 101 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 tables. Further resource and reserve information can be found on the Company’s website at www.bathurst.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 2019 Annual Report have been reviewed by qualified internal and external Competent Persons, and internal management, prior to their inclusion. 102 Bathurst Resources Limited Annual Report 2019 Competent person statements The information on this report that relates to mineral resources for Deep Creek and the mineral reserves for Escarpment Export, Stockton, Upper Waimangaroa 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 Chartered Professional and member of the Australasian Institute of Mining and Metallurgy and member of Professional Engineers and Geoscientists of British Columbia, Canada. Ms Bonham-Carter has a BSc Engineering (Mining) (Hons) from the Queen’s University, Canada. Ms 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 Edition and 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Ms 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 Domestic, Escarpment Export, Cascade, Albury, Coalbrookdale, Whareatea West, Millerton North, North Buller, Blackburn, Takitimu, Canterbury Coal, New Brighton, Rotowaro, Rotowaro North, Sullivan and Maramarua 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 BSc and MSc (Hons) majoring in geology from the University of Canterbury. Mr McLauchlan 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 Edition 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 report of the matters based on his 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 Stockton and Upper Waimangaroa is based on information compiled by Mark Lionnet as a Competent Person who is a full time employee of BT Mining Limited and is a member of the Australasian Institute of Mining and Metallurgy. Mr Lionnet has a BSc (Hons) majoring in geology from the University of Witwatersrand. Mr Lionnet 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’. Mr Lionnet consents to the inclusion in this report of the matters based on his information in the form and context in which it appears above. The information on this report that relates to mineral reserves for Escarpment Domestic, Takitimu, Canterbury and Maramarua is based on information compiled by Terry Moynihan who is a full time employee of Bathurst Resources Limited and is a member of the Australasian Institute of Mining and Metallurgy. Mr. Moynihan has a Bachelor of Technology (Mining) from the Otago School of Mines. 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 Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Moynihan consents to the inclusion in this report of the matters based on his information in the form and context in which it appears above. The information on this report that relates to mineral reserves at Rotowaro is based on information compiled by Martin Bourke who is a full time employee of BT Mining Limited and is a member of the Australasian Institute of Mining and Metallurgy. Mr Bourke has a Bachelor of Engineering (Mining) from University of Auckland and BSc (Chemistry) from Massey University. Mr Bourke 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’. Mr Bourke consents to the inclusion in this report of the matters based on his information in the form and context in which it appears above. Section 4: Resources and reserves 103 Corporate directory Directors Toko Kapea Non–executive Chairman Peter Westerhuis Non-executive Director Richard Tacon Executive Director and Chief Executive Officer Russell Middleton Executive Director and Chief Financial Officer Company secretary Bill Lyne New Zealand company number 4382538 New Zealand business number 9429030288560 Australian registered business number 164 306 905 Registered office Level 12, 1 Willeston Street Wellington 6011 New Zealand Phone: +64 4 499 6830 Australian registered office 23A Marney Street, Chapel Hill, Queensland 4069 Australia Phone: +61 4 1887 4175 104 Bathurst Resources Limited Annual Report 2019 Share registry Computershare Investor Services Limited 159 Hurstmere Road Takapuna Central 0622 New Zealand Phone: +64 9 488 8700 60 Carrington Street Sydney NSW 2000 Phone: +61 3 9415 4000 Auditor KPMG 10 Customhouse Quay PO Box 996 Wellington 6140 New Zealand Solicitor Minter Ellison Rudd Watts Lawyers 125 The Terrace Wellington 6011 New Zealand Lane Neave 141 Cambridge Terrace Christchurch 8013 New Zealand Banker ANZ Bank New Zealand Limited Stock exchange listing Bathurst Resources Limited shares are listed on the Australian Securities Exchange (ASX) under the code BRL Website address www.bathurst.co.nz Disclaimer This report has been prepared by Bathurst Resources Limited. Information contained in this report is current as at 30 June 2019 or as otherwise noted in the report. This report is provided for information purposes only and has been prepared without taking account of any particular reader's financial situation or objectives. Nothing contained in this report constitutes investment, tax, legal or other advice. Accordingly, readers should, before acting on any information in this report, consider its appropriateness, having regard to their objectives, financial situation and needs, and seek the assurance of their financial advisor or other licensed professional before making any investment decision. This report does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for purchase or sale of any security, nor does it form the basis of any contract or commitment. Bathurst Resources Limited Level 12, 1 Willeston Street Wellington 6011 New Zealand +64 4 499 6830 www.bathurst.co.nz 106 Bathurst Resources Limited Annual Report 2019 

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