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ANNUALREPORT2016
ACN 108 003 890
CONTENTS
Corporate Directory......................................................................................................................................................... 3
Company Profile............................................................................................................................................................... 4
Chairman’s Message....................................................................................................................................................... 5
Business Performance and Outlook............................................................................................................................... 6
Annual Mineral Reserves and Resources Statement ................................................................................................ 10
Directors’ Report............................................................................................................................................................ 16
Auditor’s Independence Declaration ........................................................................................................................ 35
Consolidated Statement of Profit or Loss and Other Comprehensive Income........................................................ 36
Consolidated Statement of Financial Position............................................................................................................ 37
Consolidated Statement of Changes in Equity......................................................................................................... 38
Consolidated Statement of Cash Flows........................................................................................................................ 39
Notes to the Financial Statements................................................................................................................. 40
Directors’ Declaration ................................................................................................................................................... 72
Independent Audit Report............................................................................................................................................ 73
Additional ASX Information............................................................................................................................................ 75
Tenement Schedule....................................................................................................................................................... 79
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Rey Resources Annual Report 2016
CORPORATE DIRECTORY
Directors
Ms Min Yang – Non-Executive Chairman
Mr Jin Wei – Managing Director
Mr Geoff Baker – Non-Executive Director
Mr Dachun Zhang – Independent Non-Executive Director
Dr Zhiliang Ou – Independent Non-Executive Director
Mr Louis Chien – Alternate Non-Executive Director (alternate to Min Yang)
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Company Secretary
Ms Shannon Coates
Registered Office
Suite 5, 62 Ord Street
West Perth WA 6005
Auditors
KPMG
10 Shelley Street
Sydney NSW 2000
Solicitors
Corrs Chambers Westgarth
240 St Georges Terrace
Perth WA 6000
Share Registry
Boardroom Pty Limited
Level 7, 207 Kent Street
Sydney NSW 2000
Stock Exchange
Tel: +61 8 9322 1587
Fax: +61 8 9322 5230
Tel: +61 8 9460 1666
Fax: +61 8 9460 1667
GPO Box 3993
Tel: 1300 737 760 (within Australia)
Sydney NSW 2001
Fax: 1300 653 459 (within Australia)
Tel: +61 2 9290 9600 (outside Australia)
Fax: +61 2 9279 0664 (outside Australia)
Australian Securities Exchange (ASX)
ASX Code: REY
Website
www.reyresources.com
Rey Resources Annual Report 2016
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COMPANY PROFILE
Rey Resources Limited (“Rey”, Rey Resources” or “Company”) is an ASX-listed company (ASX: REY) focused on
exploring and developing energy resources in Western Australia’s Canning Basin and Perth Basin.
Rey holds a 25% interest in two prospective Canning Basin petroleum exploration permits (EP457 and EP458)
known as the “Fitzroy Blocks” and a 50% participating interest in (and is operator of) the “Derby Block’ (EP487).
Two conventional oil wells were drilled in the Fitzroy Blocks during 2015, although neither resulted in a petroleum
discovery. The Derby Block is considered prospective for both conventional and unconventional hydrocarbons
and Rey assumed operatorship of this block in June 2016.
Rey also holds coal tenements in the Canning Basin, some contiguous with the Fitzroy Blocks, including those
hosting the Duchess Paradise coal resources and reserves.
Rey continues to investigate targets in the Perth Basin within Exploration Permit 437 (“EP 437”) in which it holds a
43.47% interest.
Rey has an experienced Board and management team, committed to continuing to develop its energy assets
to deliver maximum value to its shareholders.
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Rey Resources Annual Report 2016
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CHAIRMAN’S MESSAGE
Dear fellow Shareholder,
It is my pleasure to deliver Rey Resources’ Annual Report for the year ending 30 June 2016.
Our key focus remains our petroleum exploration business in the Canning Basin and Perth Basin.
Our interest in the Fitzroy Blocks straddles the continuation of the Ungani Trend and during the year we
participated in the drilling of two exploration wells on the trend during the year, Victory-1 and Senagi-1.
Unfortunately neither of these delivered a petroleum discovery but the information gained from the wells is
developing the future strategy for exploration on the trend.
Following our acquisition of a 50% interest in EP 487, the Derby Block, in 2015, we eventually achieved
operatorship in June 2016. Since that date, we have reviewed the available geological information and
proposed further seismic acquisition in late 2016, prior to drilling in 2017.
As operator of the Derby Block, we are now well positioned to consider farmouts to support the proposed 2017
drilling campaign.
The outlook for development of the Duchess Paradise coal deposit remained challenging during the 2016
financial year, but a recent upturn in coal prices may represent an early sign that the business environment
is turning. We continue to maintain the prospect in good standing pending further evidence of improving
demand circumstances for the project.
I would like to thank all Shareholders for their support, and welcome those who joined during the year.
I also thank our staff and management team for their work over the past year and I look forward to that
continuing over the next twelve months.
r
o
Non-Executive ChairmanF
Min Yang
Rey Resources Annual Report 2016
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BUSINESS PERFORMANCE AND OUTLOOK
OIL & GAS
Canning Basin – the Fitzroy Blocks
Equity interests in the Fitzroy Blocks (EP457 and EP458) are:
Rey
Buru
Diamond Resources (Fitzroy)
25%
(including 10% free carried to production)
37.5% (operator)
37.5% (subsidiary of Mitsubishi Corporation)
Rey’s contribution to expenditure for the Fitzroy Blocks is 16.7% (as 10% of its interest is free-carried to
production). The Fitzroy Blocks (comprising a combined area in excess of 10,000 km2) are located over parts of
the southern flank of the Fitzroy Graben. The Fitzroy Blocks straddle three major trends:
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• the Ungani conventional oil trend (“Ungani Trend”);
• the Laurel Basin-Centred Gas Accumulation, conventional and unconventional gas; and
• the Goldwyer oil and gas unconventional shale.
The Ungani Trend includes identified leads and prospects in an area of prospectivity of at least 120 kilometres
by 40 kilometres (over one million acres or 4,800km2). This extends diagonally, NW-SE, across the Fitzroy Blocks.
The conventional dolomite reservoir oil discovery by Buru in 2011 at Ungani (located 15 kilometres northwest
of EP457) on the trend running through the Fitzroy Blocks is a significant regional discovery event. Commercial
production was established by Buru at Ungani in mid-2015.
Although Prospective (recoverable) Resources of the Laurel Formation within the Fitzroy Blocks have not been
assessed by drilling to date, the formation extends across part of the Fitzroy Blocks. A wet gas accumulation
has been identified immediately east of the Fitzroy Blocks which has the characteristics of a Basin-Centred Gas
Accumulation.
The Goldwyer Shale Formation is characterised as a thick, regionally extensive organic rich “Bakken” shale
analogue. The play type is regarded as highly prospective and clearly extends across part of the Fitzroy Blocks,
although is believed to be at considerable depth.
The joint venture drilled two exploration wells during the year.
Exploration well Victory-1 was spudded on 9 September 2015 in EP457, 185 km east of Broome and 85 km
southeast of Buru Energy’s producing Ungani Oilfield. The well was drilled with Atlas Rig 2 to the programmed
total depth of 2,600 metres.
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Rey Resources Annual Report 2016
At a depth of 1,945 metres complete lost circulation was encountered with high and erratic drilling rates
similar to those encountered elsewhere by the Operator in the Ungani Dolomite. The drilling system was then
switched to a managed pressure system but complete losses continued to a depth of 2,600 metres where logs
were attempted to be run. Logs were initially unable to be obtained deeper than approximately 2,030 metres
due to hole conditions and several further attempts were made to log the lower part of the hole below the lost
circulation zone with no success. The difficulties in acquiring the logs were principally due to a well-developed
shale section below the zone of lost circulation. During these logging operations, further problems with the
casing were encountered. After considering the options for remedying the issue, and the associated costs, it
was agreed by the joint venture to plug and abandon the well bore, meaning that a flow test of the horizon
where circulation was lost was not operationally achievable. Abandonment was undertaken in accordance
with all regulations and oil field practice to ensure all formations were effectively isolated.
100 line-km of 2D seismic data was also acquired in EP457 during the year over prospects Rafael, Wright
and Victory.
The Senagi-1 conventional exploration well was spudded on 15 October 2015 in EP 458, 240 km southeast of
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Broome and 144 km southeast of Buru Energy’s Ungani Oilfield. Senagi-1 was drilled with the DDH1 Rig#31
(with Buru as Operator) and was drilled to a total depth of 1,045 metres. The well targeted conventional
oil and gas in the Lower Laurel (Ungani Dolomite) and Devonian-aged (Nullara) carbonates. A total of
286m of continuous core was cut, with 97% recovered. A thin interval with vugular porosity with oil shows
was observed in core however, the shows were interpreted to be residual. Valuable data was obtained
which will assist with correlation of core and image logs over the very well developed vugular dolomite
reservoir section. This correlation will provide more certainty in the interpretation of the dolomite reservoirs
encountered in future wells. Wireline logs were obtained and the well was plugged and abandoned. All of
the data from the well is being analysed by the joint venture to ensure the highest chance of success of the
other prospects in the area.
In advance of the six year permit anniversary in October 2016 and compulsory relinquishment of 50% of the
area of the two exploration licences, the joint venture applied for a five year extension of the licences with a
50% area reduction, in July 2016.
Canning Basin – the Derby Block
In June 2015, the Company’s wholly owned subsidiary Rey Lennard Shelf Pty Ltd (“RLS”) completed the
acquisition of a 50% participating interest in petroleum exploration permit EP487 (“the Derby Block”) from
Backreef Oil Pty Ltd (“Backreef”). The Company has also entered into a Joint Venture Agreement (“JOA”) with
Oil Basins Limited (“Oil Basins”) (ASX: OBL), holder of the remaining 50% interest and permit Operator, for the
operation of exploration programmes on the Derby Block, located in the Canning Basin of Western Australia.
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Rey Resources Annual Report 2016
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The Derby Block is a large exploration permit of approximately 5,000 km2 that was in March 2014. It occurs to
the north of Rey’s interests in the Fitzroy Blocks. The Derby Block is considered to be predominantly a Wet Laurel
Basin Centred Gas play (“BCG”) which is regionally extensive throughout the Canning Basin and has been the
subject of exploration in the Canning Basin by other parties in 2015, resulting in encouraging flow tests by Buru
Energy at Valhalla and Asgard (please refer various BRU ASX releases including releases dated 20 January 2016
and 18 April 2016).
Prospective Resources
the Table below.
Gas in place
Recoverable Gas
Recoverable Condensate
Recoverable BOE
A new (preliminary) estimate of the gross prospective potential recoverable resource estimate (Tcf gas
recoverable) of the BCG play in the Derby Block (onshore portion) was provided by Oil Basins (OBL ASX release
dated 15 January 2016 and an update on 14 April 2016). The Company’s 50% interest in these Prospective
Potential Recoverable Resources (unrisked, probabilistic estimate) of the Derby Block BCG play is provided in
Prospective Potential Recoverable Resources SPE PRMS (2011)6
Tcf3
Tcf3
MMbbl4
MMBOE5
P901
28.5
4.3
101.9
791.5
P501
71.1
12.3
307
P102
173.3
35.6
908
2,289.5
6,634.0
Rey Resources’ 50% attributable interest in the gross prospective potential recoverable resources estimate of the Laurel BCG
in EP487 (estimate prepared by 3D-GEO January 2016).
1. P90 and P50 estimates consider the Laurel section between 2,500-5,000m.
2. P10 estimates assume an additional 10% of Laurel section.
3. Tcf- trillion cubic feet.
4. MMbbl- million barrels.
5. MMBOE- million barrels oil equivalent.
6. SPE PRMS (2011) - Society of Petroleum Engineers Petroleum Resource Management System (2011).
Prospective resources are the estimated quantities of petroleum that may be potentially recovered by the
application of a future development project and relate to undiscovered accumulations. These estimates have
both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is
required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
On 3 February 2016, the Department of Mines and Petroleum of Western Australia approved a variation to
the Year 2 work program. Well site locations have been proposed by Oil Basins for consideration by the Joint
Venture for drilling in 2016, in satisfaction of the EP487 Year 2 permit conditions.
On 12 February 2016, Rey announced that it and RLS had commenced legal proceedings against Oil Basins
in the Supreme Court of Western Australia seeking orders that Oil Basins resign as the Operator of EP487
in accordance with the terms of the Joint Operating Agreement between Rey, RLS and Oil Basins. The
proceedings were heard in the Western Australian Supreme Court on 25 May 2016. On 26 May 2016, the
Supreme Court ruled in favour of the Company and Oil Basins was ordered to immediately resign as operator.
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Rey Resources Annual Report 2016
Since assuming operatorship, the Company has reviewed the status of the work completed on the permit to
date in the context of the regional setting. The study concluded that the original proposed well sites needed
further de-risking as well as proposing new well sites that may be more favourable. A 2D seismic acquisition
survey is planned to occur in the final quarter of 2016.
As a consequence of requiring additional work on the proposed well sites a suspension of the workplan and
extension of title was requested from DMP in August 2016.
Perth Basin
interests in the licence are as follows:
Rey farmed into EP437 during 2014 through funding the drilling of exploration well Dunnart-2. The beneficial
Rey (Rey Oil and Gas Perth Pty Ltd)
Key Petroleum Limited (Key Petroleum (Australia) Pty Ltd) (Operator)
Pilot Energy Limited
43.47%
43.47%
13.06%
The Joint Venture has identified at least ten prospects and leads on the licence. Additional mapping of the
Wye area was conducted in light of results from the Waitsia gas discovery to the south of EP437 by AWE
Limited. The Wye area consists of several fault bounded structures defined by vintage 2D seismic including a
section of High Cliff sandstone encountered further south at the Dongara and Waitsia fields some 40 kilometres
to the southeast in the Perth Basin.
The Joint Venture is reviewing the prospects, particularly the Wye Knot prospect and is undertaking
petrophysical studies as part of preplanning for an exploration well in 2017.
COAL
The Duchess Paradise Coal Project (“Duchess Paradise Project”) is a proposed bituminous thermal coal
operation of up to 2.5 million tonnes per annum in the Canning Basin, north Western Australia. A Definitive
Feasibility Study (“DFS”) of the Project was completed in June 2011.
In April 2015 the environmental assessment of the proposed Duchess Paradise Project by the Western Australian
Environmental Protection Authority (EPA) was placed on hold by agreement between Rey and the EPA.
In August 2016, Rey informed the EPA that it considered the assessment of the proposed project should be
withdrawn pending an improvement in economic conditions impacting Duchess Paradise.
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Rey Resources Annual Report 2016
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ANNUAL MINERAL RESERVES AND
RESOURCES STATEMENT
The current Reserves and Resources Statement for the Duchess Paradise Project, located in the Canning Basin,
Western Australia, is shown in Tables 1 to 3 below.
Table 1: P1-seam Reserves Estimates for Proposed Duchess Paradise Mine Plan – October 2014 (JORC 2012 Code)
Mining Type
Reserves (ROM Tonnes) 1
Slot Excavation
Highwall Mining
Total
Marketable Cleaned Tonnes (ar) 2, 3
Slot Excavation
Highwall Mining
Total
Proved
Probable
Total
2,016,000
18,427,000
20,442,000
1,363,000
12,480,000
13,843,000
495,000
5,333,000
5,828,000
334,000
3,612,000
3,947,000
2,510,000
23,760,000
26,270,000
1,697,000
16,093,000
17,790,000 4
1. (ROM) run of mine.
2. (ar) as received.
3. Average Mine Recoveries and Yields to generate Marketable Cleaned Coal tonnages is presented in Table below. A&B Mylec calculated
a 67.3 percent wet yield based on coal quality data from 60 cored holes and seam thickness data from 380 available drill holes, as
reported in the A&B Mylec 2011 DFS report (Including 2011 DFS report Addendum). The stated seam thickness data was supplied by
Marshal Miller & Associates (now Cardno) for use in the 2011 DFS report Addendum. No further works has been completed by A&B Mylec
since the completion of these 2011 works. Marshall Miller & Associates supplemented the thickness database with the available drill holes
(385 holes) to derive a weighted average 67.7% wet yield.
4. An additional 2.7 million marketable cleaned tonnes (ar) derived from inferred resource are included in the mine plan, which totals 20.5
million tonnes (ar).
Table 2: P1-seam Marketable Cleaned Coal Estimate Derivation Factors – October 2014 (JORC 2012 Code)
Type
Slot Excavation
Highwall Mining
Total
Average Mine
Recovery (%)
Total Run of Mine
Coal (ar) 1 (Mt) 2
Wet Yield based on Expected
Total Moisture (%) 3
Marketable Cleaned Coal 4
(ar)1 @ 17.3 % Total Moisture (Mt) 2
95
51
2.5
23.8
26.3
67.6
67.7
67.7 3
1.7
16.1
17.8
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1. (ar) as received.
2. (Mt) million tonnes.
3. A&B Mylec calculated a 67.3 percent wet yield based on coal quality data from 60 cored holes and seam thickness data from 380
available drill holes, as reported in the A&B Mylec 2011 DFS report (Including 2011 DFS report Addendum). The stated seam thickness
data was supplied by Marshal Miller & Associates (now Cardno) for use in the 2011 DFS report Addendum. No further works has been
completed by A&B Mylec since the completion of these 2011 works. Marshall Miller & Associates supplemented the thickness database
with the available drill holes (385 holes) to derive a weighted average 67.7% wet yield.
4. an additional 2.7 million marketable cleaned tonnes (ar) derived from Inferred Resources are included in the mine plan, which totals 20.5
million marketable cleaned tonnes (ar).
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Rey Resources Annual Report 2016
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Reserves are included in the following Resources Statement.
Table 3: Duchess Paradise P1-seam Resources - October 2014 (JORC 2012 Code)
Duchess Paradise Resources Estimate (in-place, with in situ moisture) Million Tonnes
Measured
Indicated
Inferred (Interpolated)
Inferred (Extrapolated)
Total Inferred 1
60.2
78.5
51.3
115.7
167.1
Total
305.8
1. Difference in Total Inferred Resources due to rounding
For further information on the above summary Reserves and Resources estimates, please refer to the
Company’s ASX announcement dated 28 October 2014.
Material Changes and Reserves and Resources Statement Comparison
The Company reviews its Mineral Reserves and Resources at least annually in accordance with ASX Listing Rule
5.21. The date of reporting is post-30 June each year to coincide with the release of this Annual Report. If there
are any material changes to its Reserves and Resources over the course of the year, the Company is required
to promptly report these changes as they occur.
Rey has undertaken an annual review for the year ended 30 June 2016, which was conducted by Cardno Inc.
The historical factors were examined and found not to have materially changed the Reserves and Resources
of Duchess Paradise P1-seam from the time they were first reported to ASX on 28 October 2014 (at which time
the Reserves and Resources were updated in accordance with JORC 2012 and found not to have materially
changed since reported in accordance with JORC 2004 on 6 April 2011 and 6 June 2011 respectively). The
Duchess Paradise Project has not commenced active operation and hence no resource depletion has
occurred for the review period. The result of the review was verification of the Coal Reserve estimate for the P1
seam of 17.79 million marketable tonnes (gross as-received basis), recovered over a mine life of approximately
10 years. The review also indicates that the resource defined in the ASX announcement on 28 October 2015
remains valid at 305.8 million tonnes in place.
Governance Arrangements and Internal Controls
The Company has ensured that the Reserves and Resources quoted are subject to good governance
arrangements and internal controls. The Reserves and Resources reported have been generated by
independent external consultants who are experienced in best practices in modelling and estimation methods.
The consultants have also undertaken reviews of the quality and suitability of the underlying information used
to generate the resource estimation. In addition, Rey management carries out regular reviews of internal
processes and external contractors that have been engaged by the Company.
The Reserves and Resources were compiled in accordance with the December 2012 Edition of the “Australasian
Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves”.
Rey Resources Annual Report 2016
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Competent Persons Statements
Coal Reserves and Resources
Coal Quality
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The coal quality information in this report was first reported to ASX on 28 October 2014. It was compiled under
the supervision of and reviewed by Mr Andrew Meyers, a consultant to the Company, who is a Fellow of
the Australasian Institute of Mining and Metallurgy (Member since 1993) and Director of A&B Mylec Pty Ltd,
metallurgical and coal technology consultants. Andrew Meyers has more than 20 years’ experience in coal
processing for coal projects and coal mines both in Australia and overseas. With this level of experience, he
is adequately qualified as a Competent Person as defined in the December 2012 edition of the “Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (The JORC Code, 2012 Edition).
Coal Resources Estimate
The estimate of P1-seam Resources in the Duchess Paradise area was first reported to ASX on 28 October 2014,
in accordance with:
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• “The Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal
Reserves” – 2003 Edition prepared by the Coalfields Geology Council of New South Wales and the
Queensland Mining Council;
• JORC Code, 2012 Edition, and as adopted by the Australian Stock Exchange; and
• ASX Companies Update 03/07 and the JORC paper of June 19th 2007, Guidance for Practitioners.
The P1-seam Resources estimate and discussion presented in this report is based on information supplied
by Rey Resources or by companies employed by Rey Resources, as well as information collected during
exploration activities under the guidance of Rey Resources. The information was approved by consultants
to the Company Mr K. Scott Keim, C.P.G. , Area Manager, Senior Principal for Cardno, and Mr Ronald H.
Mullennex, C.P.G., C.G.W.P., Senior Principal for Cardno.
Mr Keim has over 32 years of experience in coal-related work, including but not limited to coal exploration and
coal reserve/resource estimation. He is a member of the Society of Mining, Metallurgy, and Exploration (SME),
which is part of The American Institute of Mining, Metallurgy, and Petroleum Engineers (AIME). He is also a
member of the American Institute of Professional Geologists (AIPG). He has served as a member of the Board
of Directors of The Penn State Research Foundation, and on the Advisory Board to the Virginia Center for Coal
and Energy Research, affiliated with the Virginia Polytechnic Institute and State University. Mr Keim holds a
Bachelor of Science degree from The Pennsylvania State University. His education and experience qualify him
as a Competent Person as defined in the JORC Code, 2012 Edition.
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Rey Resources Annual Report 2016
Mr Mullennex has over 40 years of experience in diverse geologic and hydrogeologic applications related to
all aspects of coal geology. One of his specific areas of expertise involves application of stratigraphic and
deposystem analysis to coal resource and reserve delineation and mineability determination. Mr Mullennex
is a member of the American Institute of Professional Geologists, the Association of Engineering Geologists,
the Geological Society of America (Coal Geology and Hydrogeology Divisions), SME of AIME, Association of
Ground Water Scientists and Engineers (division of National Ground Water Association), International Mine
Water Association, and the American Society of Mining and Reclamation. Mr Mullennex holds both Bachelor
of Science and Master of Science degrees in Geology from West Virginia University. He has served on the
Visiting Committee for the Department of Geology and Geography at WVU. His education and experience
qualify him as a Competent Person as defined in the JORC Code, 2012 Edition.
Coal Reserves Estimate
in accordance with:
The estimate of P1-seam Reserves in the Duchess Paradise area was first reported to ASX on 28 October 2014,
• “The Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal
Reserves” – 2003 Edition prepared by the Coalfields Geology Council of New South Wales and the
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Queensland Mining Council;
• JORC Code, 2012 Edition, as adopted by the Australian Stock Exchange; and
• ASX Companies Update 03/07 and the JORC paper of June 19th 2007, Guidance for Practitioners.
The P1-seam Reserves estimate and discussions presented in this report are based on information supplied
by Rey Resources or by companies employed by Rey Resources, as well as information collected during
exploration activities under the guidance of Rey Resources. The information was approved by consultants to
the Company, Mr Gerard Enigk, B.S.M.E., P.E., Manager of Engineering for Cardno and Mr Peter Christensen,
Mining Vice President for Cardno.
Mr Enigk has over 37 years of experience in coal-related work, including but not limited to coal reserve/
resource estimation, mine planning and design, mine operations, mineral valuation and appraisals, and
geotechnical evaluations. He is a Registered Member of the Society of Mining, Metallurgy, and Exploration
(SME), which is part of The American Institute of Mining, Metallurgy, and Petroleum Engineers (AIME). Mr
Enigk holds a Bachelor of Science degree in Engineering of Mines from The Pennsylvania State University and
a Master’s degree in Environmental Science from the West Virginia Graduate College, and is a Registered
Professional Engineer in West Virginia. Mr Enigk has served in the capacity as Manager of Engineering and
as a production supervisor for operating coal companies, and has extensive experience with surface and
underground mining operations, including the use of highwall mining systems. Mr Enigk is a certified mine
foreman in West Virginia. His education and experience qualify him as a Competent Person as defined in the
JORC Code, 2012 Edition.
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Mr Christenson has over 28 years of experience in underground and surface coal mining including the use
of highwall mining systems. He is a member of the Society of Mining, Metallurgy, and Exploration (SME),
which is part of The American Institute of Mining, Metallurgy, and Petroleum Engineers (AIME). He is also a
member of the Australasian Institute of Mining and Metallurgy, the Rocky Mountain Coal Mining Institute, the
Denver Mining Club, and the Denver Coal Club. Mr. Christensen is a certified underground mine foreman in
New Mexico. Mr Christensen holds a Bachelor of Engineering degree in Mining Engineering from University
of Queensland, Australia. He has broad international mining experience in open cut, underground and
highwall coal mining. He has held various senior positions with major mining companies and service providers
including roles of engineering manager, operations manager, project manager and statutory responsibility
as Site Senior Executive in Queensland, Australia. His experience includes managing feasibility studies, new
mine development, mining method and equipment selection, mine planning and cost estimation. He has
conducted economic and financial evaluations of mining operations as well as audits and reviews of mining
practices, cost structures and operating performance. He has also developed and implemented safety
management systems. His education and experience qualify him as a Competent Person as defined in the
JORC Code, 2012 Edition.
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The Company is not aware of any new information or data that materially affects the Reserves and Resources
information included in the ASX announcement on 28 October 2014 and confirms that all material assumptions
and technical parameters underpinning the estimates continue to apply and have not materially changed.
Reserves and Resources Statement
This Annual Mineral Reserves and Resources Statement is based on and fairly represents information and
supporting documentation prepared by the Competent Persons described above. The Annual Mineral
Reserves and Resources Statement as a whole has been consented to by Mr Gerard Enigk (see details above)
and Mr Justin Douthat.
Mr Douthat graduated with a Bachelor of Science in Mining Engineering from the Virginia Polytechnic Institute
& State University and a Master of Business Administration degree from The Pennsylvania State University, is a
registered member of SME and is licensed as a professional engineer in Virginia, West Virginia, Kentucky, Illinois,
North Carolina, Kansas, Arkansas, Colorado, Mississippi and Louisiana. He has been employed at Cardno since
1995, working on coal mining projects and feasibility studies throughout the United States and abroad. His
education and experience qualify him as a CP as defined in the JORC Code, 2012 Edition.
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Rey Resources Annual Report 2016
Oil and Gas
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The oil and gas technical information quoted in this Annual Report has been compiled and/or assessed by
Mr Keith Martens who is a self-employed consulting professional geologist, and a continuous Member of the
Petroleum Exploration Society of Australia since 1999. Mr Martens has a BSc degree in geology/geophysics
and has over 35 years’ experience in the petroleum industry. Mr Martens has consented to the inclusion in this
report of the matters based on the information in the form and context in which they appear.
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Rey Resources Annual Report 2016
15
The Directors of Rey Resources Limited (“Rey”, “Rey Resources” or “the Company”) present their report
together with the consolidated financial statements of the Company and its controlled entities (“the Group”)
DIRECTORS’ REPORT
for the financial year ended 30 June 2016.
1. DIRECTORS
Ms Min Yang - Non-Executive Chairman
The Directors of the Company at any time during or since the end of the financial year are:
Mr Wei Jin - Managing Director (appointed Managing Director 1 July 2016)
Mr Geoff Baker - Non-Executive Director
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Mr Dachun Zhang - Non-Executive Director
Dr Zhiliang Ou - Non-Executive Director (appointed 22 September 2016)
Mr Louis Chien - Alternate Director to Non-Executive Chairman, Ms Min Yang (appointed 11 January 2016)
Mr Kevin Wilson - Managing Director (resigned 31 May 2016)
Details of Directors’ qualifications, experience, special responsibilities and directorships of other listed
companies can be found on pages 17 to 19.
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Rey Resources Annual Report 2016
2. INFORMATION ON DIRECTORS AND OFFICERS
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Directors
Current
Min Yang
Appointed on
13 September
2012
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Geoff Baker
Appointed on
13 September
2012
Dachun Zhang
Appointed on
1 July 2013
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Designation and
Independence
status
Chairman
Non-Executive
Director
Non-Executive
Director
Non-Executive
Independent
Experience, expertise and qualifications
Min Yang has extensive business
connections in the Asia Pacific region,
especially greater China, and has over
twenty years of hands-on experience
dealing with both private and state-run
businesses in China. Over the years, Min
Yang has proven her unique business
insight and expertise in the identification,
incubation and realisation of embryonic
opportunities in the resources,
commodities trading & residential estate
and financial investment sectors.
Directorships of other ASX
listed companies during
the last three years
Special
responsibilities
during the year
• ASF Group Ltd
• Non-
(September 2005,
ongoing)
Executive
Chairman
• ActiveEX Limited
• Member,
Audit and Risk
Management
Committee
(May 2012, ongoing)
• Key Petroleum Limited
(January 2014,
ongoing)
• Metaliko Resources
Limited
(August 2014, ongoing)
Qualifications – BCom, LLB, MBA
• ASF Group Ltd
• Member,
Audit and Risk
Management
Committee
• Chairman,
Audit and Risk
Management
Committee
For the past 35 years Geoff has been
active in Asia and China working in law
and conducting an advisory practice
in assisting companies doing business in
the region. As an experienced lawyer
qualified to practice in Australia and
Hong Kong, Geoff provides valuable
assistance to international operations and
in particular to the negotiation, structuring
and implementation of joint venture and
commercial agreements.
(November 2006,
ongoing)
• ActiveEX Limited
(February 2013,
ongoing)
• Key Petroleum Limited
(alternate to Min
Yang) (January 2014,
ongoing)
• Metaliko Resources
Limited
(August 2014, ongoing)
Mr Zhang has a Bachelor’s Degree from
Poznan University, Poland and a Master’s
Degree from the University of Wales, UK
and was conferred the qualification of
Senior Economist in Shipping Management
by the Ministry of Communications of
China.
Mr Zhang was most recently Executive
Director and President of China Merchants
Group, as well as the Chairman of
Merchants International Co. Ltd (a listed
Hong Kong company). Previously his
career was with COSCO (a Chinese
company and one of the world’s largest
shipping groups) where he held the
positions of Executive Vice-Chairman and
President of COSCO (Hong Kong) Group
Ltd, as well as Vice-Chairman of two Hong
Kong listed companies: COSCO Pacific
Co. Ltd and COSCO International Holdings
Co. Ltd.
Mr Zhang, a resident of Victoria, Australia
brings extensive international experience
and Chinese business relationships to the
Board of Rey.
Rey Resources Annual Report 2016
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2. INFORMATION ON DIRECTORS AND OFFICERS (Continued)
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Directors
Current
Wei Jin
Appointed
Non-Executive
Director on
2 December
2013.
Appointed
Managing
Director on 1
July 2016
Zhiliang Ou
Appointed on
22 September
2016
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Louis Chien
Appointed
Alternate
Director to
Non-Executive
Chairman,
Ms Min Yang
on 11 January
2016.
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Designation and
Independence
status
Managing
Director
Director
Non-Executive
Independent
Alternate
Director
Experience, expertise and qualifications
Directorships of other ASX
listed companies during
the last three years
Special
responsibilities
during the year
Member,
Audit and Risk
Management
Committee
Wei Jin holds PhD in Science in China
University of Geosciences. He has over 20
years’ professional experience covering
exploration, mineral industry construction
and operation, as well as mineral resources
products international trading activities in
Australia, China, Russia and Mongolia.
Dr Ou has over 27 years of professional
engineering and management
experience in the oil and gas, mining
and infrastructure industries both in
Australia and China. He currently serves
as an executive director of Hao Tian
Development Group Limited, a company
listed on the main board of the Hong Kong
Stock Exchange. Dr Ou holds a Doctor
of Philosophy degree in Civil & Resource
Engineering from the University of Western
Australia. He also holds two Bachelor
of Engineering degrees in Structural
Engineering & Engineering Management
respectively.
Mr Chien was born in Shanghai, China,
grew up and was educated in the United
States, and is now based in Australia. He
has 20+ years of corporate experience
based in Australia, the United States
and Singapore and has held various
engineering and finance leadership
positions within The Procter & Gamble
Company (P&G). He has managed
organisations across the Americas, Europe
and Asia-Pacific, and is currently a director
of ASX listed ASF Group Limited, and ASF
Consortium Pty Ltd.
Mr Chien holds a Master of Business
Administration in finance from Kelley
School of Business, Indiana University, and
two bachelor degrees in Architecture, all
attained in the United States.
ASF Group Ltd
(May 2015, ongoing)
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Rey Resources Annual Report 2016
2. INFORMATION ON DIRECTORS AND OFFICERS (Continued)
Directors
Current
Kevin Wilson
Appointed on
9 August 2007
and resigned
31 May 2016
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Directorships of other ASX
listed companies during
the last three years
Special
responsibilities
during the year
Navarre Minerals Limited
(March 2011, ongoing)
Managing
Director
Designation and
Independence
status
Managing
Director
Experience, expertise and qualifications
Qualifications – BSc (Hons), ARSM, MBA
Mr Wilson has over 30 years’ experience
in the minerals and finance industries.
He was the Managing Director of
Leviathan Resources Limited, a Victorian
gold mining company, from its IPO in 2005
through to its sale in 2006. His experience
includes eight years as a geologist with
the Anglo American Group in Africa
and North America and 14 years as a
stockbroking analyst and investment
banker with CS First Boston and Merrill
Lynch in Australia and New York.
Rey Resources Annual Report 2016
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Director
Min Yang
Kevin Wilson1
Geoff Baker
Dachun Zhang
Wei Jin
Louis Chien 2
Zhiliang Ou3
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3. COMPANY SECRETARY
Ms Shannon Coates was appointed to the position of Company Secretary on 11 January 2012. Ms Coates
holds a Bachelor of Laws from Murdoch University and has over 20 years’ experience in corporate law and
compliance. Ms Coates is a Chartered Secretary and currently acts as company secretary to several ASX listed
companies and unlisted companies, the majority of which operate in the mineral resources industry, both in
Australia and internationally. Ms Coates is Director to Perth based corporate advisory firm Evolution Corporate
Services Pty Ltd, which specialises in the provision of corporate services to listed companies.
4. DIRECTORS’ ATTENDANCE AT MEETINGS
The number of Directors’ meetings and number of meetings attended by each of the Directors of the
Company during the financial year are:
Meetings
B
4
4
4
4
4
2
0
A
3
4
4
4
4
2
0
A
2
2
2
2
B
2
2
2
2
1. Mr Kevin Wilson resigned 31 May 2016.
2. Mr Louis Chien attended one Directors meeting as an invitee and one as Alternate Director to Ms Min Yang.
3. Dr Zhiliang Ou was appointed on 22 September 2016.
A - Number of meetings attended.
B - Number of meetings held during the time the Director held office.
The Company has established an Audit and Risk Management Committee, comprising the four Non-Executive
Directors, with Mr Dachun Zhang as Chair. The number of Audit and Risk Management Committee meetings
and number of meetings attended by each of the member of the Committee during the financial year are:
Director
Meetings
Min Yang
Geoff Baker
Dachun Zhang
Wei Jin
A - Number of meetings attended.
B - Number of meetings held during the time the Director held office.
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5. DIRECTORS’ INTERESTS IN SECURITIES IN REY RESOURCES LIMITED
The relevant interest of each Director in the ordinary shares of Rey Resources Limited at the date of this report
is set out as below:
Min Yang
Geoff Baker
Dachun Zhang
Wei Jin
Zhiliang Ou
Louis Chien
Kevin Wilson
Ordinary shares
Options over ordinary shares
Performance Rights
1,000,000
1,000,000
3,887,066
1,200,000
Nil
Nil
8,911,6731
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil1
1. Mr Wilson resigned on 31 May 2016. At resignation, Mr Wilson held 3,426,667 performance rights All performance rights were vested to
Mr Kevin Wilson and converted into shares on 1 July 2016 in accordance with the Company’s share incentive scheme and as part of Mr
Wilson’s agreed termination payment.
6. REMUNERATION REPORT - AUDITED
This remuneration report outlines the Director and executive remuneration arrangements for Rey Resources in
accordance with the requirements of the Corporations Act 2001 and its Regulations. The information in the
report has been audited as required by Section 308(3C) of the Act.
6.1 Principles of compensation
For the purpose of this report key management personnel (“KMP”) are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the Company and
the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Company. The
officers listed as KMP below are included in the report. The report will provide an explanation of Rey Resources’
remuneration policy and structure, details of remuneration paid to KMP (including Directors), an analysis of the
relationship between Company performance and executive remuneration payments, details of share-based
payments, key terms of executive employment contracts and details of independent external advice received
in relation to KMP remuneration.
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Rey Resources Annual Report 2016
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Non Executive
Min Yang
Geoff Baker
Dachun Zhang
Executive
Wei Jin
Kevin Wilson
Ian Pound
Remuneration policy
to these roles.
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3.
4.
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6. REMUNERATION REPORT - AUDITED (Continued)
2016 Key Management Personnel
The KMP of Rey Resources during the year ended 30 June 2016 were:
Non-Executive Chairman (appointed 13 September 2012)
Non-Executive Director (appointed 13 September 2012)
Non-Executive Director (appointed 1 July 2013)
Louis Chien
Alternate Director to Ms Min Yang (appointed 11 January 2016)
Managing Director (appointed Non-Executive Director 2 December 2013,
appointed Managing Director 1 July 2016)
Managing Director (appointed 9 August 2007, resigned 31 May 2016)
General Manager (resigned 31 January 2016)
The successful performance of the Company is dependent on the quality and performance of Directors and
executives, so the focus of the remuneration policy is to attract, retain and motivate highly competent people
Four broad principles govern the remuneration strategy of the Company:
To set demanding levels of performance for KMP and to align their remuneration with the achievement of
clearly defined targets.
To provide market competitive remuneration and conditions in the current market for high quality Directors
and executives, particularly in Western Australia.
To align remuneration with the creation of shareholder value and the achievement of Company strategy,
objectives and performance.
To be able to differentiate reward based on performance, in particular acknowledging the contribution of
outstanding performers.
The Company seeks to provide fixed remuneration at the median level of the markets in which it competes for
talent, and to provide the opportunity for a higher than median level of variable reward for those individuals
who make an outstanding contribution to the success of the business.
The Board is responsible for matters relating to the remuneration of the Directors, senior executives and
employees of the Company, including making recommendations in relation to the remuneration framework of
the Company and the fees and remuneration paid to Directors and executives.
The Board seeks independent remuneration advice from time to time, and refers to relevant market survey
data for the purposes of external comparison. Further details have been included in section 6.5.
Hedging policy
The Company’s Securities Trading Policy prohibits all Directors and employees from entering into arrangements to
protect the value of unvested Long Term Incentive (“LTI”) awards. The prohibition includes entering into contracts
to hedge their exposure to unvested share rights and options awarded as part of their remuneration package.
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Rey Resources Annual Report 2016
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6. REMUNERATION REPORT - AUDITED (Continued)
Executive remuneration components
Executive remuneration is structured so that it supports the key remuneration principles outlined above, and is
intended to motivate executives towards achievement of the annual objectives and longer term success of
the Company. A Total Fixed Remuneration (“TFR”) is paid which considers external market comparisons and
individual performance. Performance linked compensation is available through the short term and long term
incentive plans outlined below.
Fixed remuneration
Executives receive an annualised TFR from which they must have deducted statutory superannuation. They
may elect to salary sacrifice further superannuation contributions and other benefits such as a motor vehicle.
Accommodation assistance and medical insurance may be provided for employees from overseas or
interstate where it is necessary to be able to attract key talent. A review of TFR is undertaken each year and
reflects market movements and individual performance.
The objective of the short term incentive (“STI”) plan is to align the achievement of the Company’s annual
targets with the performance of those executives who have key responsibility for achieving those targets. The
only participant in the plan is currently the Managing Director.
Short term incentive
Long term incentive
Executives are eligible to participate in the Rey Resources Limited Executive Incentive Rights Plan (“2014 EIRP”),
which was approved by shareholders at the Company’s 2014 Annual General Meeting. The 2014 EIRP replaced
the 2011 EIRP that was previously approved by shareholders. The EIRP aligns the reward of the participants with
the long term creation of shareholder value. The Managing Director and the General Manager are eligible to
participate in the plan.
Both the 2014 EIRP and 2011 EIRP enable participants to be granted rights to acquire shares subject to the
satisfaction of certain conditions including progression of Rey project milestones and Total Shareholder Return
(“TSR”). Subject to adjustments for any bonus issues of shares and capital reorganisations, one share will be
issued on the exercise of each right which vests or becomes exercisable. No amount is payable by employees
in respect of the grant or exercise of rights.
The EIRP forms an important component of the total remuneration of the Managing Director. The number of
rights provided are based on 50% of TFR. The allocated rights are then subject to a three year vesting period
which requires achievement of a compound annual growth in Total Shareholder Return hurdle for the vesting
period, and where relevant achievement of additional performance conditions. The proportion to vest
increases from 25% at a 10% compound annual growth rate, to 100% for achieving greater than 20% compound
annual growth. The vesting condition may be retested one year after the three year vesting period.
The EIRP plan has been designed to deliver benefits based on the value of shares when performance and
service conditions are satisfied. The benefits may be provided in cash or a combination of cash and shares.
Rey Resources Annual Report 2016
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6. REMUNERATION REPORT - AUDITED (Continued)
Relationship between Company performance and remuneration
The objective of the Company’s remuneration structure is to reward and incentivise the executives so
as to ensure alignment with the interests of the shareholders. The remuneration structure also seeks to
reward executives for their contribution in a manner that is appropriate for a company at this stage of its
development. As outlined elsewhere in this Report, the remuneration structure incorporates fixed, annual at risk
and long term incentive components.
For shareholders, the key measure of value is TSR. Other than general market conditions, the key drivers of
value for the Company and a summary of performance are provided in the table following.
At this stage in the development of the Company, successful execution of the below drivers is the mechanism
through which shareholder wealth will be created.
The only relevant financial measure at this point is the Rey share price for which the history is presented below.
Absolute TSR performance is the basis for long term incentive awards under the EIRP.
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Rey Closing Share Price as at 30 June
2016
0.029
2015
0.105
2014
0.105
2013
0.052
2012
0.075
Consequences of performance on shareholder wealth
2016
2015
2014
2013
2012
(3,998)
($10,200)
($3,304)
($7,678)
($8,919)
0
(72%)
0
0%
0
102%
0
(31%)
0
(63%)
Profit (loss)
Dividends declared
Total shareholder return (TSR)%
Non-Executive Director fees
in cash.
change is currently proposed.
The policy on Non-Executive Director (“NED”) fees is to apply a remuneration framework in order to attract and
retain highly capable NEDs and also in accordance with governance best practice. A fixed annual fee is paid
An aggregate fee limit for NED fees of $400,000 was approved at the 2010 Annual General Meeting and no
NED fees comprise a fixed annual fee, with no participation in any performance rights plan.
The annual cash fees payable to each NED are as follows: Ms Yang $96,000 per annum payable to her related
entity, Luxe Hill Limited; Mr Baker $120,000 per annum payable to his related entity, Gold Star Industry Ltd; Mr
Zhang $50,000 per annum payable to his related entity, AMI Corporation Pty Ltd; Mr Jin $60,000 per annum
payable to his related entity, Crystal Yield Investments Ltd. From 1 December 2015, fees payable to each NED
were reduced as follows: Ms Yang $48,000 per annum; Mr Baker $60,000 per annum; Mr Zhang $25,000 per
annum; Mr Jin $30,000 per annum.
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6. REMUNERATION REPORT - AUDITED (Continued)
6.2 Directors’ and executive officers’ remuneration
The table below sets out the remuneration of the Group’s KMP for the years ended 30 June 2015 and 30 June 2016.
Short Term Benefits
Post-
employment
Benefits
Other
Long Term
employee
benefit
Share Based
Payments
Termination
Benefits
Total
Cash
salary/ Fees
Annual
Incentive
Non-
monetary
Super
LSL & AL
Rights
/Options
Termination
Payments
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2015
2016
2015
2016
2015
2016
2015
$
$
$
$
M Yang - Non-Executive Chairman - Appointed 13 September 2012
2016
2015
68,000
96,000
-
-
-
-
-
-
K Wilson -Managing Director – Resigned 31 May 2016
2016
304,718
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332,420
-
-
-
-
28,948
31,580
49,264
422
G Baker - Non-Executive Director - Appointed 13 September 2012
85,000
120,000
-
-
-
-
-
-
D Zhang - Non-Executive Director - Appointed 1 July 2013
W Jin - Managing Director - Appointed 2 December 2013
35,625
50,000
-
-
-
-
42,500
60,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
L Chien – Alternate Director - Appointed 11 January 2016
I Pound – General Manager – Resigned 31 January 2016
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2015
TOTAL
2016
2015
163,333
280,000
699,176
938,420
-
-
-
-
-
-
-
-
15,517
26,600
44,465
58,180
$
-
-
-
-
-
-
-
-
-
-
-
12,923
49,264
13,345
$
-
90,000
38,000
61,910
-
90,000
-
45,000
-
90,000
-
-
-
-
$
-
-
$
68,000
186,000
108,601
529,531
-
-
-
-
-
-
-
-
-
426,332
85,000
210,000
35,625
95,000
42,500
150,000
-
-
112,349
291,199
-
319,523
38,000
220,950
1,051,855
376,910
-
1,386,855
Rey Resources Annual Report 2016
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6. REMUNERATION REPORT - AUDITED (Continued)
6.3 Equity instruments
6.3.1 No share rights were granted during the financial year.
6.3.2 The valuation assumptions and methodology for the Share based payments (rights) are set out in note 20
to the financial statements.
6.3.3 Rights over equity instruments granted as compensation
Details on rights over ordinary shares in the Company that were granted as compensation to the KMP during
the reporting period and details on those rights that also vested during the reporting period are as follows:
Name
K Wilson
Number of rights
held during FY 2016
1,000,0001
2,426,6672
Vesting
condition3
TSR
TSR
Grant Date
26 Nov 2014
22 Nov 2012
Fair value per share
right at grant date
Vest Date
Expiry Date
$0.057
$0.043
1 July 20164
1 July 20164
N/A
N/A
1. Approved by shareholders at 2014 Annual General Meeting.
2. Approved by shareholders at 2012 Annual General Meeting.
3. Subject to the Board’s discretion.
4. Mr Wilson resigned on 31 May 2016. In accordance with the Company’s share incentive scheme and as part of his agreed termination
payment, all performance rights vested and converted to Shares on 1 July 2016.
6.3.4 Options and rights over equity instruments granted as compensation
Details of the vesting profiles of the options and rights granted as remuneration to the KMP are detailed below.
Name
Share Rights
K Wilson
K Wilson
Number
Grant Date
% vested in year
% forfeited/ lapsed in
financial year 2015
Financial year in
which grant vests
1,000,000
26.11.2014
2,426,667
22.11.2012
0%
0%
0%
0%
Vest 1 July 2016
Vest 1 July 2016
6.3.5 Movements in share rights
KMP is detailed below.
The movement during the reporting period of share rights over ordinary shares in the Company held by the
Name
Share Rights
K Wilson
K Wilson
Held at 1 July 2015
Other Changes1
Held at 30 June 2016
Vested during year
2,426,667
1,000,000
2,426,6672
1,000,0002
N/A
N/A
N/A
N/A
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1. Other changes represent rights that lapsed or employees who are no longer key management personnel as at 30 June 2016.
2. Rights were vested on 1 July 2016.
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6. REMUNERATION REPORT - AUDITED (Continued)
6.4 Key employment contracts
The table below summarises the key contractual provisions of the executive KMP.
Name and Position
Kevin Wilson1
Managing Director
Contract
Term
Ongoing
Termination by Company
Termination by Executive
6 months’ notice or payment in lieu.
6 months’ notice or payment in lieu.
Pro-rata Annual Incentive is paid.
Unvested Long Term Incentive vests.
If terminated within 6 months of a Fundamental
Change receives 6 months TFR at termination
date.
Ongoing
3 months’ notice or payment in lieu.
Board discretion to pay pro-rata Annual
Incentive and unvested Long Term Incentive.
1 month notice or payment in lieu.
Ian Pound2
General Manager
1. Mr Kevin Wilson resigned 31 May 2016.
2. Mr Ian Pound resigned 31 January 2016.
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Non-Executive Directors are engaged by a letter of appointment for a term as stated in the Constitution of
the Company. They may resign from office with reasonable notice to the Chairman. Non-Executive Directors
receive annual fees. There are no post-employment benefits other than statutory superannuation.
6.5 Remuneration Consultant
The Board may seek advice on remuneration matters for the KMP and Non-Executive Directors from
independent external advisors. Such advisors are appointed and directly engaged by the Chairman.
No external advisors were engaged on remuneration matters for the 2016 financial year.
6.6 Movements in share holdings
Movements in shares
The movement during the reporting period in the number of ordinary shares in the Company held by each
KMP, including their related parties, is as follows:
Held at
1 July 2015
Received as
compensation
Received on exercise
of options/rights
Other changes
Held at
30 June 2016
2016
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Directors
Min Yang
Geoff Baker
Wei Jin
Dachun Zhang
Louis Chien
1,000,000
1,000,000
1,200,000
2,915,300
-
Kevin Wilson
4,485,006
Executives
Ian Pound
Total
353,000
10,953,306
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
971,7663
1,000,0003
-
1,971,766
1,000,000
1,000,000
1,200,000
3,887,066
-
N/A 1
N/A 2
7,087,066
1. Mr Kevin Wilson resigned 31 May 2016.
2. Mr Ian Pound resigned 31 January 2016.
3. Shares acquired pursuant to Company's Rights Issue.
Rey Resources Annual Report 2016
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6. REMUNERATION REPORT - AUDITED (Continued)
6.7 Movements in Option holdings
No KMP held or were issued options during the 2016 reporting period.
6.8 Movement in Share right holdings
The movement during the reporting period in the number of share rights over ordinary shares in the Company
by each KMP, including their related parties, is as follows:
2016
Directors
Min Yang
Geoff Baker
Wei Jin
Dachun Zhang
Louis Li Chien
Kevin Wilson
Executives
Ian Pound
Total
Held at
1 July 2015
Granted as
compensation
Exercised
Other
changes
Held at 30
June 2016
Vested and
exercisable at
30 June 2016
Unvested and
unexercisable
at 30 June 2016
-
-
-
-
-
3,426,667
-
3,426,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,426,667
-
3,426,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,426,6671
-
3,426,667
1. Mr Wilson resigned on 31 May 2016. In accordance with the Company’s share incentive scheme and as part of his agreed termination
payment, all performance rights vested and converted to Shares on 1 July 2016.
This is the end of the audited remuneration report.
7. PRINCIPAL ACTIVITIES
The principal activity of Rey Resources is exploring for and developing energy resources in Western Australia’s
Canning and Perth Basins. The Company holds coal exploration assets, a 25% interest in petroleum permits
EP457 & 458 in joint venture with Buru Energy Limited and Mitsubishi Corporation, a 50% interest in the Derby
Block EP487 and a 43.47% in petroleum exploration permit EP437.
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Rey Resources Annual Report 2016
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS
During the year, Rey Resources continued its strategy of exploring and developing energy resources in Western
Australia’s Canning Basin and Perth Basin, with particular focus on its oil and gas assets.
Oil and Gas
Canning Basin
EP457 & EP458
Rey Resources holds a 25% interest in Exploration Permits EP457 and EP458 (“the Fitzroy Blocks”). The Fitzroy Blocks
are located in the Canning Basin in the northwest of Western Australia. The equity interest in each permit is:
Rey Oil and Gas Pty Ltd
Buru Fitzroy Pty Ltd
Diamond Resources (Fitzroy) Pty Ltd
25%
(of which a 10% interest is free carried to production)
37.5% (Buru Energy Limited operator)
37.5% (100% subsidiary of Mitsubishi Corporation)
The joint venture drilled two exploration wells during the year. Exploration well Victory-1 was spudded on 9
September 2015 in EP457, 185 km east of Broome and 85 km southeast of Buru Energy’s producing Ungani
Oilfield. The well was drilled with Atlas Rig 2 to the programmed total depth of 2,600 metres.
At a depth of 1,945 metres complete lost circulation was encountered with high and erratic drilling rates
similar to those encountered elsewhere by the Operator in the Ungani Dolomite. The drilling system was then
switched to a managed pressure system but complete losses continued to a depth of 2,600 metres where logs
were attempted to be run. Logs were initially unable to be obtained deeper than approximately 2,030 metres
due to hole conditions and several further attempts were made to log the lower part of the hole below the lost
circulation zone with no success. The difficulties in acquiring the logs were principally due to a well-developed
shale section below the zone of lost circulation. During these logging operations, further problems with the
casing were encountered. After considering the options for remedying the issue, and the associated costs, it
was agreed by the joint venture to plug and abandon the well bore, meaning that a flow test of the horizon
where circulation was lost was not operationally achievable. Abandonment was undertaken in accordance
with all regulations and oil field practice to ensure all formations were effectively isolated.
100 line-km of 2D seismic data was acquired in EP457 over prospects Rafael, Wright and Victory. Processing of
this data was completed and early results suggest Wright to be a promising drill target.
The Senagi-1 conventional exploration well was spudded on 15 October 2015 in EP458, 240 km southeast of
Broome and 144 km southeast of Buru Energy’s Ungani Oilfield. Senagi-1 was drilled with the DDH1 Rig#31
(with Buru as Operator) and was drilled to a total depth of 1,045 metres. The well targeted conventional oil
and gas in the Lower Laurel (Ungani Dolomite) and Devonian-aged (Nullara) carbonates. A total of 286m of
continuous core was cut, with 97% recovered. A thin interval with vugular porosity with oil shows was observed
in core however, the shows were interpreted to be residual. Valuable data was obtained which will assist
with correlation of core and image logs over the very well developed vugular dolomite reservoir section. This
correlation will provide more certainty in the interpretation of the dolomite reservoirs encountered in future wells.
Wireline logs were obtained and the well was plugged and abandoned. All of the data from the well is being
analysed by the joint venture to ensure the highest chance of success of the other prospects in the area.
Rey Resources Annual Report 2016
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (Continued)
As part of the title conditions of both EP457 and EP458, the Joint Venture is required to relinquish 50% of the
licence area of both permits at the end of Title Year 6 in October 2016. Buru Energy, as Operator, completed
permit reviews in 2Q 2016 and proposed areas for mandatory relinquishment to the Joint Venture. Following
consideration and unanimous agreement on the relinquishment areas by the JV parties, applications to renew
both permits were lodged with the regulator.
Derby Block (EP487)
OBL). The equity interests in the permit are :
Rey Lennard Shelf Pty Ltd
Oil Basins Limited
50%
50%
As announced on 1 June 2015, Rey Lennard Shelf Pty Ltd (a wholly owned subsidiary of Rey Resources)
completed the acquisition of a 50% participating interest in petroleum exploration permit EP487 (“the Derby
Block”) from Backreef Oil Pty Ltd and entered into a Joint Venture Agreement with Oil Basins Limited (ASX:
The Derby Block is considered to be predominantly a Wet Laurel Basin Centred Gas play (“BCG”) which is
regionally extensive throughout the Canning Basin.
A new estimate of the gross prospective potential recoverable resource estimate (TCF gas recoverable) of the
BCG play in the Derby Block (onshore portion) was provided by Oil Basins (OBL ASX release dated 15 January 2016).
In September 2015, the joint venture, lodged a work plan variation and on 5 February 2016 Oil Basins
announced that the joint venture had been successful in its application to have the Work Program for Year 1
deemed complete and the Work Program Year 2 variation approved by the WA regulator, the Department of
Mines and Petroleum. The Year 2 Work Program requires the drilling of two exploration wells in 2016.
On 12 February 2016, Rey announced that it and RLS had commenced legal proceedings against Oil Basins
in the Supreme Court of Western Australia seeking orders that Oil Basins resign as the Operator of EP487 in
accordance with the terms of the Joint Operating Agreement between Rey, RLS and Oil Basins.
The proceedings were heard in the Western Australian Supreme Court on 25 May 2016. On 26 May 2016, the
Supreme Court ruled in favour of the Company and Oil Basins was ordered to immediately resign as operator.
Since assuming operatorship, the Company has reviewed the status of the work completed on the permit
to date in the context of the regional setting and proposed new well sites to the joint venture as well as
geophysical studies.
Perth Basin (EP437)
The beneficial interests in EP437 are as follows:
Key Petroleum Limited (Key Petroleum (Australia) Pty Ltd) (Operator)
Rey (Rey Oil and Gas Perth Pty Ltd)
Pilot Energy Limited
43.47%
43.47%
13.06%
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Rey Resources Annual Report 2016
8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (Continued)
The Joint Venture continued to review the prospectivity of the basin during the quarter and decided to
reprocess approximately 130kms of vintage 2D seismic data across the Wye Not and Becos prospects. The
permit conditions requires a commitment well in 2017.
Rey’s thermal coal tenements are located in the Fitzroy Trough of the Canning Basin, north Western Australia
and are partly contiguous with the Fitzroy Blocks petroleum tenements. The Canning Basin is well situated to
feed the strong Asian demand for Australian export thermal coal for power generation.
Duchess Paradise Project
in June 2011.
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The Duchess Paradise Project is a proposed bituminous thermal coal operation of up to 2.5 million tonnes per
annum in the Canning Basin, north Western Australia. A Definitive Feasibility Study of the Project was completed
In April 2015, the environmental assessment of the proposed Duchess Paradise Project by the Western
Australian Environmental Protection Authority (EPA) was placed on hold by agreement between Rey and the
EPA. In August 2016, Rey informed the EPA that it considered the assessment of the proposed project should
be withdrawn pending an improvement in economic conditions impacting Duchess Paradise. However, Rey is
currently meeting its statutory expenditure commitments on the Duchess Paradise project and the intention is
to realise the value of the project through development. Management has re-assessed the carrying value of
the Duchess Paradise exploration and evaluation asset using a fair value calculation. The calculation supports
the carrying value of the Duchess Paradise exploration and evaluation asset however changes in certain key
assumptions, such as the coal price (US$65 per tonne), FX (AUD:USD $0.74) and the post-tax discount rate (10%)
may result in an impairment of the carrying value of the asset.
Coal
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Corporate
follows:
During the year, the Company raised a total of $4.7 million (before costs) through the issue of new equity as
• On 12 February 2016, the Company completed a private placement to raise $1 million (before costs) via
the issue of a total of 33,333,333 shares at an issue price of 3 cents per share to an existing shareholder; and
• On 26 February 2016, the Company announced a non-renounceable pro-rata 1 for 3 rights issue at an offer
price of $0.015 per share. On 5 April 2016, the Company announced that entitlement applications were
received for 141,692,231 new shares and a further 87,804,814 new shares were applied for as additional
shortfall shares, raising approximately $3.4 million before costs. On 29 April 2016 it was announced that the
remaining shortfall of 18,598,424 shares was placed to investors, completing the rights issue.
Rey Resources Annual Report 2016
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (Continued)
On 29 October 2015 the Company entered into a loan facility agreement with its major shareholder ASF Group
Limited (“ASF”) for a loan facility of up to $2 million with an interest rate of 9% per annum (“Loan Facility”). The
Loan Facility had been fully drawn down during the year. On 16 May 2016, the Company announced that it
had repaid the Loan Facility in full.
As part of the Company’s restructuring, the registered address of the Company was changed to Suite 5, 62
Ord Street, West Perth WA 6005 on 1 January 2016.
During the year, a total of 797,000 shares were bought back at a cost of $69,466 and cancelled under the
previous buyback scheme which expired on 17 December 2015. On 10 May 2016, the Company announced
the implementation of a new buyback scheme for 12 months from 25 May 2016. No shares have been
acquired and cancelled under the new buyback scheme to the date of this report.
On 11 January 2016 the Company appointed Mr Louis Chien as Alternate Director to the Non-Executive
Chairman, Ms Min Yang.
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On 1 June 2016, the Company announced that Mr Kevin Wilson had resigned as Managing Director following
the completion of his 6 month notice period. Pursuant to the Company’s share incentive scheme and as
part of Mr Wilson’s termination payment, 3,426,667 performance rights held by Mr Wilson vested and were
converted to an equivalent number of ordinary shares on 1 July 2016.
The loss for the Group after income tax for the year ended 30 June 2016 was $3,998,000 (2015: $10,200,000). This
amount includes $2,329,000 written off as a result of relinquishment of mineral exploration tenements during
During the period $3,658,000 (2015: $4,758,000) in exploration expenditure was capitalised, $3,451,000 of which
related to oil and gas exploration (2015: $3,723,000).
Finance review
the year.
9. DIVIDENDS
No dividend has been paid or declared by the Company during the financial year ended 30 June 2016 (2015: nil)
and the Directors do not recommend the payment of a dividend in respect of the financial year ended 30 June 2016.
10. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as noted elsewhere in this report, there have been no significant changes in the state of the affairs
of the Company up to and including the date of this report.
11. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Future information about the likely developments in the operations of the Group and the expected results
of those operations in future financial years has not been included in this report because disclosure of the
information would be likely to result in unreasonable prejudice to the consolidated Group.
32
Rey Resources Annual Report 2016
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12. PERFORMANCE RIGHTS OVER UNISSUED SHARES
Performance rights on Issue
As at the date of this report there were no performance rights on issue.
Performance rights vested, forfeited or lapsed
During or since the end of the financial year, 3,426,667 performance rights vested and were converted to
shares.
13. OPTIONS OVER UNISSUED SHARES
Options on Issue
14. ENVIRONMENTAL DISCLOSURE
During the financial year and as at the date of this report there are no options on issue.
The Group’s operations are subject to various laws governing the protection of the environment in areas such
asprotection of water quality, waste emission and disposal, environmental impact assessments, exploration
rehabilitation and use of, ground water. In particular, some operations are required to be licensed to conduct
certain activities under the environmental protection legislation in the state in which they operate and such
licences include requirements specific to the subject site.
So far as the Directors are aware, there have been no material breaches of the Company’s licences and
all exploration and other activities have been undertaken in compliance with the relevant environmental
regulations.
15. INDEMNITIES AND INSURANCE
During the financial year, the Company paid a premium to insure the Directors and officers of the Company
against liabilities incurred in the performance of their duties. Under the terms and conditions of the insurance
contract, the premium paid cannot be disclosed.
The officers of the Company covered by the insurance policy include any person acting in the course of duties
for the Company who is, or was, a Director, Company Secretary or senior manager within the Company.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may
be brought against the officers, in their capacity as officers, of the Company, and any other payments arising
from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities
that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of
their position or of information to gain advantage for themselves or someone else or to cause detriment to the
Company. It is not possible to apportion the premium between amounts relating to the insurance against legal
costs and those relating to other liabilities.
Rey Resources Annual Report 2016
33
16. SUBSEQUENT EVENTS
Mr Wei Jin was appointed Managing Director of the Company on 1 July 2016. Mr Jin has been a
Director of Rey Resources since 2 December 2013. He holds a PhD in Science from the China University
of Geosciences. He has over 22 years’ professional experience covering exploration, mineral industry
construction and operation, as well as mineral resources products international trading activities in
Australia, China, Russia and Mongolia.
3,426,667 performance rights held by former Managing Director, Mr Wilson vested and were converted to an
equivalent number of ordinary shares of the Company on 1 July 2016 in accordance with the Company’s
share incentive scheme and as part of his agreed termination payment.
Dr Zhiliang Ou was appointed as an independent Non-Executive Director of the Company on 22
September 2016.
17. PROCEEDINGS ON BEHALF OF THE COMPANY
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At the date of this report, there are no leave applications or proceedings brought on behalf of the Company
under section 237 of the Corporations Act 2001.
18. ROUNDING
The Group is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 10 July 1998 and in
accordance with that Class Order 98/100, amounts included in the consolidated financial statements and
Directors’ report have been rounded to the nearest thousand dollars, unless otherwise stated.
19. NON-AUDIT SERVICES
There were no non-audit services provided by KPMG during this financial year.
The auditor’s independence declaration is set out on page 35 and forms part of the Directors’ report for the
20. AUDITOR’S INDEPENDENCE DECLARATION
financial year ended 30 June 2016.
Signed in accordance with a resolution of Directors.
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Min Yang
Non-Executive Chairman
Sydney, Australia
23 September 2016
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Rey Resources Annual Report 2016
AUDITOR’S INDEPENDENCE DECLARATION
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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Rey Resources Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2016 there have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Daniel Camilleri
Partner
Sydney
23 September 2016
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KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity.
Profession Standards Legislation.
Rey Resources Annual Report 2016
35
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Profession Standards Legislation.
23
Consolidated statement of profit or loss and other comprehensive income
Rey Resources Limited
for the year ended 30 June 2016
in thousands of dollars
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Other income
Impairment of exploration and evaluation assets
Impairment of investment
Administrative expenses
Loss from operations
Finance income
Finance costs
Net finance income
Loss before income tax
Income tax benefit
Loss for the year attributable to owners of the company
Other comprehensive income
Items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Total comprehensive loss for the year, attributable to owners
of the Company
Loss per share
Note
30 June
30 June
2016
2015
4
12
5
4
6
7
(2,329)
(144)
(1,458)
(3,924)
9
(83)
(74)
14
(8,117)
-
(2,147)
(10,250)
50
-
50
(3,998)
(10,200)
-
-
(3,998)
(10,200)
-
-
-
-
(3,998)
(10,200)
Basic and diluted (cents per share)
7
(0.48)
(1.40)
The notes on pages 40-71 are an integral part of these consolidated financial statements.
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Rey Resources Annual Report 2016
Rey Resources Limited
Consolidated statement of financial position
as at 30 June 2016
in thousands of dollars
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total current assets
Non-current assets
Property, plant and equipment
Investment
Exploration and evaluation expenditure
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Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefits
Total current liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Accumulated losses
Total equity attributable to equity
holders of the Company
The notes on pages 40-71 are an integral part of these consolidated financial statements.
Note
2016
2015
8a
9
10
11
12
13
14
14
15
16
1,157
28
19
1,204
15
106
36,125
36,246
37,450
201
158
359
-
-
359
37,091
85,683
2,238
(50,830)
1,652
58
22
1,732
20
250
34,796
35,066
36,798
129
184
313
45
45
358
36,440
81,072
2,200
(46,832)
37,091
36,440
Rey Resources Annual Report 2016
37
Share
capital
75,565
-
-
6,000
(305)
-
(188)
81,072
-
-
4,721
(41)
-
(69)
Reserves Accumulated Losses
Total
1,823
(36,632)
40,756
-
-
-
-
377
-
2,200
-
-
-
-
38
-
(10,200)
(10,200)
-
-
(10,200)
(10,200)
-
-
-
-
(46,832)
(3,998)
-
6,000
(305)
377
(188)
36,440
(3,998)
-
(3,998)
(3,998)
-
-
-
-
4,721
(41)
38
(69)
85,683
2,238
(50,830)
37,091
Rey Resources Limited
Consolidated statement of changes in equity
for the year ended 30 June 2016
In thousands of dollars
Balance at 30 June 2014
Total comprehensive income:
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners recorded directly in equity:
Contributions by and distributions to owners
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Issue of ordinary shares
Less: transaction Cost
Share-based payment transactions
Share buy back
Balance at 30 June 2015
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners recorded directly in equity:
Contributions by and distributions to owners
Issue of ordinary shares (Note 15)
Less: transaction Cost (Note 15)
Share-based payment transactions (Note 20)
Share buy back (Note 15)
Balance at 30 June 2016
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The notes on pages 40-71 are an integral part of these consolidated financial statements.
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Rey Resources Limited
Consolidated statement of cash flows
for the year ended 30 June 2016
in thousands of dollars
Cash flows from operating activities
BAS refund
Misc income
Cash paid to suppliers and employees
Net cash used in operating activities
Cash flows from investing activities
Interest received
Cash received from R&D claims
Investment in share
Payments for property, plant and equipment
Proceeds from sale of plant and equipment
Recovery of rehabilitation bonds
Recovery of other bonds
Payments for exploration expenditure
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares (net of costs)
Share buy back
Proceeds from loans and borrowings
Repayment of loans and borrowings
Finance costs
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
30 June
30 June
2016
2015
30
4
(1,408)
(1,374)
9
-
-
-
4
-
-
(3,658)
(3,645)
4,680
(69)
2,503
(2,503)
(87)
4,524
(495)
1,652
1,157
-
-
(1,927)
(1,927)
47
-
(250)
(16)
10
-
38
(4,757)
(4,928)
5,695
(188)
-
5,507
(1,348)
3,000
1,652
8b
8a
The notes on pages 40-71 are an integral part of these consolidated financial statements.
Rey Resources Annual Report 2016
39
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Notes to the financial statements
1. REPORTING ENTITY
Rey Resources Limited (the “Company”) is a company domiciled in Australia. The address of the Company’s
registered office is Suite 5, 62 Ord Street, West Perth WA 6005. The consolidated financial statements of the
Company as at and for the year ended 30 June 2016 comprise the Company and its subsidiaries (together
referred to as “Rey Resources” or the “Group”). The Group is a for-profit entity and is primarily involved in
mineral and oil and gas exploration and project evaluation.
2. BASIS OF PREPARATION
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared
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in accordance with Australian Accounting Standards (including the Australian Interpretations) adopted by the
Australian Accounting Standards Board (“AASB”), and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (“IFRS”) and interpretations adopted by
the International Accounting Standards Board (“IASB”). The accounting policies detailed below have been
consistently applied to all of the years presented unless otherwise stated.
The consolidated financial statements were authorised for issue by the Board of Directors on 23 September 2016.
(b) Going concern
The consolidated financial statements have been prepared on a going concern basis which contemplates
the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the
ordinary course of business.
For the year ended 30 June 2016 the Group incurred a loss of $3,998,000 and incurred operating and investing
cash outflows of $5,019,000. The loss for the period was significantly impacted by the recognition of non-cash
impairment losses on exploration and evaluation assets of $2,329,000. As at 30 June 2016 the Group had cash
of $1,157,000,net working capital of $845,000 and net assets of $37,091,000.
The Group has prepared a cashflow forecast for the 12 months ending 30 September 2017. The cashflow
forecasts demonstrates the need to raise additional funding to meet both non-discretionary and discretionary
expenditure. The forecast non-discretionary expenditure includes Rey’s share of committed spend for
exploration programs on the Canning Basin and Perth properties. Rey is considering funding alternatives in the
form of debt and equity, including discussions with existing shareholders, and with third parties for farming out
certain petroleum interests.
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Notes to the financial statements (Continued)
2. BASIS OF PREPARATION (Continued)
The Directors believe that sufficient funding will be available in the timeframes required and that the adoption
of the going concern basis of preparation is appropriate. The matters referred to above indicate the existence
of a material uncertainty as to whether the Group will continue as a going concern and whether it will realise
its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial
report.
(c) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis.
(d) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional
currency.
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 10 July 1998 and in
accordance with that Class Order, all financial information presented in Australian dollars has been rounded
to the nearest thousand unless otherwise stated.
(e) Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are revised and in any future periods affected.
Other information about assumptions, estimates and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognised in the financial statements is included in the
following notes:
Note 2(b) - going concern
Note 6 - recoverability of tax losses.
Note 12 - ultimate recoupment of carried forward exploration expenditure.
Note 20 - key assumptions in determining the fair value of share based payments.
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by the Group.
Rey Resources Annual Report 2016
41
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Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
and its subsidiaries.
(i) Subsidiaries
The consolidated financial statements comprise the financial statements of Rey Resources Limited
Subsidiaries are entities controlled by the Group. The Group controls an enity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. The financial statements of subsidiaries are included in the consolidated financial
statements from the date on which control commences until the date on which control ceases.
(ii) Transactions eliminated on consolidation
Intercompany transactions, balances and unrealised gains and expenses on transactions between companies
of the consolidated entity are eliminated in preparing the consolidated financial statements.
(iii) Loss of control
On the loss of control, the Group de-recognises the assets and liabilities of the subsidiary, any non-controlling
interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the
loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then
such interest is measured at fair value at the date that control is lost. Subsequently that retained interest is
accounted for as an equity accounts investee or as an available-for-sale financial asset depending on the
level of influence retained.
(iv) Joint arrangements
Joint arrangements are defined as the contractually agreed sharing of control of an arrangement, which exists
only when decisions about relevant activities require unanimous consent of the parties sharing control. These
arrangements may be accounted for as a joint venture or a joint operation.
A joint venture, which is an arrangement in which the Group has joint control, whereby the Group has rights to
the net assets of the arrangement, rather than the rights to its assets and obligation for its liabilities. Interest in
joint ventures are accounted for using the equity method.
A joint operation is an arrangement in which the parties with joint control have rights to the assets and
obligations for the liabilities relating to that arrangement. In respect of its interest in a joint operation, a joint
operator the Group recognises its relative share of its assets, liabilities, revenues and expenses.
(b) Foreign currency
Transactions in foreign currencies are translated to Australian dollars being the functional currencies of Group
entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at
that date. The foreign currency differences arising on retranslation are recognised in profit or loss.
42
Rey Resources Annual Report 2016
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Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Non derivative financial instruments
Financial instruments are recognised when the Group becomes a party to the contractual provisions of
the instrument. For financial assets, this is equivalent to the date that the Group commits itself to either the
purchase or sale of the asset (i.e. trade date accounting is adopted).
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. The
Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred.
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Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective
interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents and trade and other receivables.
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months
Cash and cash equivalents
or less.
(ii) Non-derivative financial liabilities
cancelled or expire.
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. The Group derecognises a financial liability when its contractual obligations are discharged or
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
Other financial liabilities comprise loans and borrowings and trade and other payables.
(iii) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity, net of any tax effects.
Rey Resources Annual Report 2016
43
Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Property, plant and equipment
(i) Recognition and measurement
accumulated impairment losses.
Items of property, plant and equipment are measured at cost less accumulated depreciation and
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labour, any other costs directly attributable to
bringing the assets to a working condition for their intended use, the costs of dismantling and removing the
items and restoring the site on which they are located and capitalised borrowing costs. Purchased software
that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
The gains and losses on disposal of an item of property, plant and equipment are determined by comparing
the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised
net within other income/other expenses in profit or loss.
(ii) Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the component will flow
to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised.
The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual
assets are assessed and if a component has a useful life that is different from the remainder of that asset, that
component is depreciated separately.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component
of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and
their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.
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The estimated depreciation rates for the current and comparative years are as follows:
Class of Fixed Asset
Depreciation Rate
Plant and equipment
20 - 40%
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted
if appropriate.
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Rey Resources Annual Report 2016
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Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Exploration and development assets
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable
area of interest.
At the end of each reporting period, the capitalised exploration and evaluation expenditure is assessed
for impairment. These costs are only carried forward to the extent that they are expected to be recouped
through the successful development of the area or where activities in the area have not yet reached a stage
that permits reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year 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.
Costs of the site restoration are provided over the life of the facility from when exploration commences and
are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining
plants, equipment and building structures, waste removal, and rehabilitation of the site in accordance with
clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal
requirements and technology on an undiscounted basis. Any changes in the estimates for costs are accounted
on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and
extent of the restoration due to community expectations and future legislation. Accordingly, the costs have
been determined on the basis that the restoration will be completed within one year of abandoning the site.
(f) Impairment
(i) Non-derivative financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence
indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a
negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Loans and receivables and held-to maturity securities
In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries
and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and
credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
Rey Resources Annual Report 2016
45
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Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the
asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance
account against receivables. Interest on the impaired asset continues to be recognised through the unwinding
of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to
balance sheet date. Employee benefits that are expected to be settled within one year have been measured
at the amounts expected to be paid when the liability is settled, plus related on-cost. Employee benefits
payable later than one year have been measured at the present value of the estimated future cash outflows
(g) Employee benefits
to be made for those benefits.
(i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for the amount expected to be paid under short-term cash
bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably.
(ii) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognised as
an employee expense, with a corresponding increase in equity, over the period that the employees
unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect
the number of awards for which the related service and non-market vesting conditions are expected to be
met, such that the amount ultimately recognised as an expense is based on the number of awards that meet
the related service and non-market performance conditions at the vesting date. For share-based payment
awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to
reflect such conditions and there is no true-up for differences between expected and actual outcomes.
(h) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Tax Office. In these circumstances GST is recognised as part
of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the
balance sheet are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.
46
Rey Resources Annual Report 2016
Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Income tax
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recognised for:
Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or
loss except to the extent that it relates to a business combination, or items recognised directly in equity or in
other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect
of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss.
• temporary differences related to investments in subsidiaries and associates and jointly controlled entities
to the extent that it is probable that they will not reverse in the foreseeable future taxable temporary
differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to
the extent that it is probable that future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group. As a
consequence, all members of the tax-consolidated group are taxed as a single entity. The head entity within
the tax-consolidated group is Rey Resources Limited. Current income tax expense / benefit, deferred tax
liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated
group are recognised in the separate financial statements of the members of the tax-consolidated group using
the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in
the separate financial statements of each entity and the tax values applying under tax consolidation.
Rey Resources Annual Report 2016
47
Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Earnings per share
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The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per
share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.
Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and
the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of
all dilutive potential ordinary shares, which comprise share options and share performance rights granted to
employees.
(k) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of
the Group’s other components. All operating results are reviewed regularly by the Group’s Chief Operating
Decision maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Board of Directors.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment, and intangible assets other than goodwill.
(l) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability. The
unwinding of the discount is recognised as finance cost.
(m) Finance income and finance costs
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying
asset are recognised in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis as either finance income or finance cost
depending on whether foreign currency movements are in a net gain or net loss position.
48
Rey Resources Annual Report 2016
Notes to the financial statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Determination of fair values
Share-based payment transactions
The fair value of the Directors’ performance rights is measured using Monte Carlo Sampling. The fair value of
the executive rights is measured with reference to the share price at grant date. The fair value of the employee
share options are measured using the Black-Scholes formula. Measurement inputs include share price on
measurement date, exercise price of the instrument, expected volatility (based on weighted average historic
volatility adjusted for changes expected due to publicly available information), weighted average expected
life of the instruments (based on historical experience and general option holder behaviour), expected
dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance
conditions attached to the transactions are not taken into account in determining fair value.
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(o) New standards and interpretations not yet adopted
In the year ended 30 June 2016, the Group has reviewed all of the new and revised Standards and
Interpretations issued by the AASB that are relevant to its operations and effective for the current annual
reporting period.
accounting policies.
It has been determined by the Group that there is no material impact of the new and revised Standards and
Interpretations on its business that are not already disclosed, and therefore, no change is necessary to Group
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Rey Resources Annual Report 2016
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2016
2015
7
7
9
9
2016
140
257
578
4
23
157
299
1,458
38
491
45
4
578
14
14
50
50
2015
263
311
1,192
4
50
94
233
2,147
377
757
58
-
1,192
Notes to the financial statements (Continued)
4. OTHER INCOME AND FINANCE INCOME
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in thousands of dollars
Other income
Other income
Finance income
Interest income
5. ADMINISTRATIVE EXPENSES
in thousands of dollars
Office supplies and expenses
Professional consulting fees
Employee benefits expense (see below)
Depreciation and amortisation expense
Insurance premiums
Legal costs
Other expenses (inc Travel expense)
Employee benefits expense consists of:
Equity-settled share- based payments
Salaries and fees
Superannuation
Fringe Benefit Tax
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Notes to the financial statements (Continued)
6. INCOME TAX EXPENSE
in thousands of dollars
Income tax recognised in loss
Current tax benefit
Deferred tax benefit
Income tax benefit
in thousands of dollars
Accounting loss before tax
Reconciliation of prima facie tax on accounting loss before tax to income tax (benefit) / expense
At statutory income tax rate of 30% (2015: 30%)
Non-deductible expenses
Tax exempt income
Tax losses for which no deferred tax asset was recognised
Income tax benefit
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
in thousands of dollars
Deferred tax liabilities
Exploration and evaluation expenditure
Other
Gross deferred tax liability
Deferred tax assets
Tax loss carry forwards
Other
Gross deferred tax asset
Net deferred tax asset
Tax losses
Statement of financial position
2015
2016
Profit or loss
2016
(10,837)
(6)
(10,843)
10,735
108
10,843
-
(10,438)
-
(10,438)
10,339
99
10,438
-
(399)
(6)
(405)
396
9
405
-
2016
2015
-
-
-
-
-
-
-
-
2016
2015
(3,998)
(10,200)
(1,199)
(139)
-
(1,338)
-
(3,061)
(259)
-
3,319
-
2015
1,008
16
1,024
(1,043)
19
(1,024)
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At 30 June 2016, the Group has tax losses arising in Australia of $74,471,305 (2015: $69,020,361) that are
available for offset against future taxable income. The Group has not recognised a deferred tax asset in
relation to these tax losses (other than an offset to the deferred tax liability) as realisation of the benefit is not
regarded as probable.
Tax consolidation
Rey Resources Limited and its 100% owned Australian resident subsidiaries formed a tax-consolidated Group
with effect from 1 July 2009. The first consolidated income tax return for the Group was filed for the tax year
ended 30 June 2010. Rey Resources Limited is the head entity of the tax-consolidated group.
Rey Resources Annual Report 2016
51
Notes to the financial statements (Continued)
7. LOSS PER SHARE
in thousands of dollars
Earnings
Earnings used in calculating basic and
diluted earnings per share attibutable to
the owners of the company
Number of ordinary shares
Weighted average number of ordinary
shares outstanding during the year used in
calculating basic and diluted loss per share
Basic loss per Share (cents per share)
Diluted loss per Share (cents per share)
2016
2015
(3,998)
(10,200)
2016
2015
Restated1
832,749,305
728,837,778
(0.48)
(0.48)
(1.40)
(1.40)
1. Restatement of weighted average number of shares used as denominator.
During the period, Rey Resources completed a rights issue of 248,095,469 shares at $0.015 per share. The
rights issue took place on two dates, with the first date having a 25% discount to the market price and the
second date having a 50% discount to the market price. Therefore a bonus was received by shareholders who
participated in the rights issue. Accordingly, earnings per share for the 2015 comparative period have been
adjusted for the bonus element of the issue by multiplying the average weighted number of shares prior to the
rights issue by 1.07 (i.e. a 7% bonus element).
Weighted average number of ordinary shares pre adjustement for rights issue
Bonus element of rights issue
Weighted average number of ordinary shares adjusted for rights issue
2015
679,468,199
1.07
728,837,778
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Rey Resources Annual Report 2016
Notes to the financial statements (Continued)
8. CALCULATION OF LOSS PER SHARE
Basic loss per share is calculated as loss for the period attributable to the parent entity (2016: $3,998,000 loss;
2015: $10,200,000 loss) divided by the weighted average number of ordinary shares (2016: 832,749,305; 2015:
728,837,778).
Diluted loss per share represents loss for the period attributable to the parent entity divided by the weighted
average number of ordinary shares (2016: 836,175,972; 2015: 732,264,445) which has been adjusted to reflect
the number of shares which would be issued the performance share rights were to be exercised (2016: 3,426,667;
2015: 3,426,667). Due to the loss attributable to the parent entity for the year ended 30 June 2016, the effect
of these instruments and the impact of the share rights issue on these instruments has been excluded in the 30
June 2016 calculation of diluted earnings per share as they would reduce the loss per share.
8a. CASH AND CASH EQUIVALENTS
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in thousands of dollars
Cash at bank and in hand
Cash and cash equivalents
2016
1,157
1,157
2015
1,652
1,652
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed
in note 22.
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Notes to the financial statements (Continued)
8. CALCULATION OF LOSS PER SHARE (Continued)
8b. Reconciliation of cash flows from operating activities
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in thousands of dollars
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation
Impairment of capitalised exploration expenditure
Impairment of investment
Equity-settled share-based payment expense
Interest income
Finance costs
Profit on disposal of fixed assets
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Other non-cash
(Increase) / decrease in trade and other receivables
(Increase) / decrease in prepayments
Increase / (decrease) in trade and other payables
Increase / (decrease) in employee benefits
Net cash used in operating activities
9. TRADE AND OTHER RECEIVABLES
in thousands of dollars
Current
Other receivables
Note
2016
2015
10
12
11
5
(3,998)
(10,200)
4
2,329
144
38
(9)
87
(4)
1
4
8,117
-
377
(50)
-
-
(8)
(1,408)
(1,760)
30
3
72
(71)
(1,374)
(8)
28
(139)
(48)
(1,927)
2016
2015
28
28
58
58
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Rey Resources Annual Report 2016
Notes to the financial statements (Continued)
10. PROPERTY, PLANT AND EQUIPMENT
in thousands of dollars
Property, plant and equipment
At cost
Accumulated depreciation
Total property plant and equipment
Movements in carrying amounts:
in thousands of dollars
Balance as at 1 July
Additions
Disposals
Depreciation expense
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Balance as at 30 June
11. INVESTMENT
in thousands of dollars
Investment in Norwest Energy NL
Provision for impairment
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2016
2015
178
(163)
15
198
(178)
20
2016
2015
20
2
(3)
(4)
15
2016
250
(144)
106
8
16
-
(4)
20
2015
250
-
250
On 5 June 2015, Rey subscribed for $250,000 of Norwest Energy NL (Norwest) shares at a price of $0.004712 per
share, resulting in approximately 3.68% of total Norwest shares on issue. The closing price of Norwest shares as
at 30 June 2016 was $0.002 per share and as a result a provision for impairment of $144,000 was made for the
financial year ended 30 June 2016. Refer to note 16 for further details.
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55
1. Exploration and evaluation expenditure recognised in exploration assets held solely by the Group.
2. Exploration and evaluation expenditure recognised on EP457 and EP458 tenements under joint venture agreement with Buru Energy
Limited and Mitsubishi Corporation. This amount includes the Group’s proportionate share of exploration assets held by the respective joint
venture entities.
3. Exploration and evaluation expenditure recognised on tenements under under joint venture agreement with Key Petroleum Pty Ltd and
Caracal Exploration Pty Ltd. This amount includes The Group’s proportionate share of exploration assets held by the EP437 tenement
owners.
4. Exploration and evaluation expenditure recognised on tenements under joint venture agreement with Oil Basins Ltd. This amount includes
The Group’s proportionate share of exploration assets held by the EP487 tenement owners.
Notes to the financial statements (Continued)
12. EXPLORATION AND EVALUATION EXPENDITURE
in thousands of dollars
Costs carried forward in respect of:
Incurred at cost by the Group on assets not governed by
joint venture agreements1
Capitalised share of exploration assets under
Joint Venture Agreements2
Capitalised share of exploration assets under
Joint Venture Agreements3
Capitalised share of exploration assets under
Joint Venture Agreements4
Costs carried forward
in thousands of dollars
At cost
Accumulated impairment losses
Movements in carrying amount:
in thousands of dollars
Opening balance
Transfer from asset held for sale
Current year expenditure capitalised
Impairment
R&D refund offset
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2016
2015
21,456
23,579
10,459
2,650
1,560
36,125
7,932
2,445
840
34,796
2016
56,021
(19,896)
36,125
2016
34,796
-
3,658
(2,329)
-
36,125
2015
52,363
(17,567)
34,796
2015
38,155
-
4,758
(8,117)
-
34,796
During 2016, as a result of the impairment testing process at 30 June 2016, the Group recognised an
impairment loss of $2,329,000 with respect to relinquishment of tenements exploration licenses. The impairment
loss was recognised in ’exploration impairment’ on the Consolidated Statement of Profit or Loss and other
comprehensive Income.
Management has re-assessed the carrying value of the Duchess Paradise exploration and evaluation asset
using a fair value calculation. The calculation supports the carrying value of the Duchess Paradise exploration
and evaluation asset however changes in certain key assumptions, such as the coal price (US$65 per tonne),
FX (AUD:USD $0.74) and the post-tax discount rate (10%) may result in an impairment of the carrying value of
the asset.
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Notes to the financial statements (Continued)
12. EXPLORATION AND EVALUATION EXPENDITURE (Continued)
The ultimate recoupment of balances carried forward in relation to areas of interest still in the exploration or
evaluation phase is dependent on successful development and commercial exploitation, or alternatively sale
of the respective areas.
Tenements where tenure is not intended to be continued have been fully impaired as at 30 June 2016.
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13. TRADE AND OTHER PAYABLES
in thousands of dollars
Unsecured liabilities
Trade payables
Sundry payables and accrued expenses
14. EMPLOYEE BENEFITS
in thousands of dollars
Employee benefits
Current
Non-current
15. ISSUED CAPITAL
in thousands of dollars
value.
shares held.
992,381,876 (2015: 711,750,074) fully paid ordinary shares
The Company does not have a limited amount of authorised capital and issued shares do not have a par
Ordinary shares participate in the proceeds on winding up of the parent entity in proportion to the numbers of
2016
2015
-
201
201
2
127
129
2016
2015
158
-
158
184
45
229
2016
2015
85,683
85,683
81,072
81,072
Rey Resources Annual Report 2016
57
Notes to the financial statements (Continued)
15. ISSUED CAPITAL (Continued)
Movements in shares on issue
On issue at beginning of the year
30 June 20141
19 August 20141
9 September 20141
28 November 20142
27 January 20153
Share buy back (01/07/14-30/06/15)
Transaction costs relating to share issues
Shares issued during the year:
12 February 20164
7 April 20165
29 April 20165
Share buy back (01/07/15-30/06/16)6
Transaction costs relating to share issues
On issue at the end of the year
2016
Number
711,750,074
$’000
81,072
-
-
-
-
-
-
-
33,333,333
229,497,045
18,598,424
(797,000)
-
-
-
-
-
-
-
-
1,000
3,442
279
(69)
(41)
2015
Number
630,202,151
10,000,000
15,000,000
4,854,368
3,500,000
50,000,000
(1,806,445)
-
-
-
-
-
-
$’000
75,565
-
1,500
500
-
4,000
(188)
(305)
-
-
-
-
-
992,381,876
85,683
711,750,074
81,072
1. On 30 June 2014 the Company announced that it was undertaking a capital raising of up to $3 million (before costs) at 10 cents per share.
The first tranche of shares was issued on 10 July 2014 and $1 million received before 30 June 2014; the second tranche was issued on 19
August 2014; and the final tranche of 4,854,368 shares was issued for 10.3 cents per share on 9 September 2014.
2. Issue of shares to Directors following approval at the Company’s AGM.
3. On 27 January 2015, the Company completed a private placement to raise $4 million (before costs) via the issue of a total of 50,000,000
shares at an issue price of 8 cents per share to two Hong Kong-registered sophisticated investors.
4. On 12 February 2016, the Company completed a private placement to raise $1 million (before costs) via the issue of a total of 33,333,333
shares at an issue price of 3 cents per share to a sophisticated investor.
5. On 26 February 2016, the Company announced a non-renounceable pro-rata one for three rights issue at an offer price of $0.015 per
share. A total of 229,497,045 new shares were subscribed and issued on 7 April 2016 under the entitlement offer. The remaining shortfall of
18,598,424 shares were issued on 29 April 2016.
6. During the year, a total of 797,000 shares were bought back at a cost of $69,466 and cancelled under the previous buyback scheme
which expired on 17 December 2015. On 10 May 2016, the Company announced the implementation of a new buyback scheme for 12
months from 25 May 2016. No shares have been acquired and cancelled under the new buyback scheme to the date of this Report.
Options and share performance rights
For information relating to the Rey Resources Limited employee option plan and share performance rights
plan, including numbers granted, exercised and lapsed during the financial year and the numbers outstanding
at year-end, refer to note 20.
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Notes to the financial statements (Continued)
16. RESERVES
Share based payments reserve
The share based payments reserve records the fair values recognised in accounting for employee share
options and share rights awarded as share-based payments. During the year to June 2016 the share based
payment reserve increased $38,000 due to the expensing of share performance rights granted to Mr Kevin
Wilson.
Available for sale reserve
The available for sale reserve records movements in the fair value of the Company’s investment in Norwest
Energy NL. The closing price of Norwest shares as at 30 June 2016 was $0.002 per share and as a result an
impairment of $144,000 was made for the financial year ended 30 June 2016. The diminution in share price
was considered permanent and as such the change in fair value recorded in reserves was reclassified to the
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income statement.
17. COMMITMENTS
(a) Operating lease commitments
Non-cancellable operating lease rentals are payable as follows:
in thousands of dollars
Not later than one year1
Later than one year but not later than five years
1. 1121 Hay Street West Perth office lease expired in February 2016.
(b) Exploration expenditure commitments
2016
2015
-
-
-
86
-
86
The commitments are required in order to maintain the Company’s interests in good standing with the
Department of Mines & Petroleum (DMP). It includes commitment for both mineral exploration tenements
and also the Company’s share in petroleum exploration permits in which it has joint venture interests. These
obligations may be varied from time to time, subject to approval by the DMP.
In thousands of dollars
Year 1
Year 2-5
Total
Mineral
250
-
250
Petroleum
4,167
5,883
10,050
Total
4,417
5,883
10,300
Rey Resources Annual Report 2016
59
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Notes to the financial statements (Continued)
18. Group entities
Consolidated subsidiaries
Blackfin Pty Limited
Rey Cattamarra Pty Limited
Rey Derby Pty Limited
Rey Derby Block Pty Limited
Rey Royalty Chile Pty Ltd
Rey Mt Fenton Pty Limited
Rey Freney Pty Limited
Rey Derby Port Operations Pty Limited
Rey Victory Pty Limited
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Camballin Energy Pty Limited
Rey Oil and Gas Pty Limited
Rey Oil and Gas Perth Pty Limited
Rey Lennard Shelf Pty Limited
Humitos Pty Ltd
19. JOINT OPERATION INTERESTS
Country of incorporation
Ownership Interest
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2015
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Joint venture agreements have been entered into with third parties. Details of joint venture agreements are
disclosed below. These are accounted for as joint operations.
Assets employed by these joint ventures and the Group’s expenditure in respect of them is brought to
account initially as capitalised exploration expenditure (refer note 12) and disclosed distinctly from capitalised
exploration costs incurred on the Group’s 100% owned projects.
Rey/Buru/Mitsubishi Joint Venture
On 18 March 2013, the Company entered into an agreement with Buru Energy Limited and Mitsubishi
Corporation pursuant to which the Company acquired an additional 15% interest in exploration permits EP457
and EP458 in the Canning Basin, Western Australia.
The interest in the two exploration permits, known as “The Fitzroy Blocks”, are:
Buru Energy Limited
37.5% (operator)
Mitsubishi Corporation
37.5%
Rey Resources Limited
25% (of which a 10% interest is free carried to production).
The total amount of the Group’s capitalised exploration and evaluation expenditure capitalised and
employed under this joint venture agreement at the reporting date is $10,458,786 (2015: $7,931,895) (note 12)
60
Rey Resources Annual Report 2016
Notes to the financial statements (Continued)
19. JOINT OPERATION INTERESTS (Continued)
Rey/Key/Caracal Joint Venture
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On 29 May 2014, Rey Oil and Gas Perth Ltd (a wholly owned subsidrary company of the Company) entered
into an agreement with Key Petroleum (Australia) Pty Ltd and Caracal Exploration Pty Ltd to farm in to
Exploration Permit EP437 in the North Perth Basin, Western Australia.
Following the completion of the farm in the beneficial interests in EP437 are as follows:
Key Petroleum Limited (Key Petroleum (Australia) Pty Ltd) (Operator)
Rey Oil and Gas Perth Pty Ltd
Caracal Exploration Pty Ltd
43.47%
43.47%
13.06%
The total amount of the Group’s capitalised exploration and evaluation expenditure capitalised and
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employed in this farm in agreement at the reporting date is $2,649,463 (2015:$ 2,445,281) (note 12).
Rey/Oil Basins Joint Venture
On 29 May 2015, Rey Lennard Shelf Pty Ltd (“RLS” a wholly owned subsidiary of the Company) completed
the acquisition of a 50% participating interest in petroleum exploration permit EP487 (“the Derby Block”) from
Backreef Oil Pty Ltd. RLS entered into a Joint Operating agreement with Oil Basins Ltd (holder of the remaining
50% interest), for the operation of exploration programmes on the Derby Block, located in the Canning Basin of
Western Australia.
The equity interests in the exploration permit are:
RLS
Oil Basins Ltd
50% (assuming operatorship on 1 January 2016 under certain preconditions)
50% (acting as operator until at least 1 January 2016)
Following a hearing in the Supreme Court of western Australia, Oil Basins transferred operatorship to RLS on 2
June 2016.
The total amount of the Group’s capitalised interest in EP487 is $1,560,229 (2015: 839,559) (note 12)
Rey Resources Annual Report 2016
61
Notes to the financial statements (Continued)
20. SHARE BASED PAYMENTS
(a) Description of the share-based payment arrangements
The Group has the following share-based payment arrangements:
Share option programme (equity-settled)
On 2 June 2006, the Group established a share option programme that entitles key management personnel
(KMP) to purchase shares in the Company. The plan is subject to ASX Listing Rules. In accordance with these
programmes, options are exercisable at the market price of the share at the date of the grant. No options
remain outstanding at 30th June 2016.
Share performance rights programme (equity-settled)
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Executives are eligible to participate in the 2011 Executive Incentive Rights Plan (“2011 EIRP”), which replaced
an earlier 2010 EIRP and was approved at the 2011 Annual General Meeting. The 2011 EIRP aligns the reward
of the participants with the long term creation of shareholder value as outlined below.
The 2011 EIRP enables participants to be granted rights to acquire shares subject to the satisfaction of certain
conditions. Subject to adjustments for any bonus issues of shares and capital reorganisations, one share will be
issued on the exercise of each right which vests or becomes exercisable. No amount is payable by employees
in respect of the grant or exercise of rights.
The 2011 EIRP, issued in November 2012, relates to the period 1 July 2011 to 30 June 2014 with provision for
a one year retest; and for share rights issued in November 2012 for the period 1 July 2012 to 30 June 2015
with provision for a one year retest. At the end of the measurement periods (either first or second), the
following vesting scale will be applied to the share rights given to executive Directors. This will be based on
the compound annual growth rate over the relevant period. The retest of provision only applies if none of the
share rights for Directors vest at the end of the First Test Period.
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Rey Resources Annual Report 2016
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Notes to the financial statements (Continued)
20. SHARE BASED PAYMENTS (Continued)
(a) Description of the share-based payment arrangements (Continued)
Vesting Scale:
Performance Level
Threshold & Target & 10% & <15%
15%
>15% & <20%
≥20%
Vesting %
-
25%
Pro rata based on the % achieved
50%
Pro rata based on the % achieved
100%
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In relation to the share rights granted to the executive KMP, the Board has determined the service and/
or performance conditions that need to be satisfied for incentive rights to vest along with the relationship
between the various potential levels of performance and levels of vesting that may occur. Performance
conditions will be determined by the Board for each tranche of each offer and may vary between offers.
Following the end of the measurement period, the Board will determine for each tranche of incentive rights to
which the measurement period applies, the extent to which they vest. If the incentive rights in a tranche have
not vested and there is no opportunity for those incentive rights to vest at a later date, they lapse.
(b) Share-option programme
Terms and conditions of share-option programme
No options were outstanding at the beginning of the year ended 30 June 2016.
(c) Share rights programme
Terms and conditions of share rights programme
The terms and conditions relating to the grants of the share rights are as follows:
Grant date /
employees entitled
Rights grant to Director in
22 November 2012
Number of instruments
Vesting conditions
2,426,667
Subject to the Company's absolute total
shareholder return over the measurement
period 1 July 2012 to 30 June 2015. Subject to
retest on 30 June 2016.
Contractual
life of rights
4 years
Rights grant to Director in
28 November 2014
1,000,000
Subject to the Company's absolute total
shareholder return over the measurement
period 1 July 2014 to 30 June 2017.
3 years
Total
3,426,667
Rey Resources Annual Report 2016
63
Notes to the financial statements (Continued)
20. SHARE BASED PAYMENTS (Continued)
(c) Share rights programme (Continued)
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The number and weighted average exercise prices of share performance rights are as follows:
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u
Outstanding at 1 July
Granted during the year
Vested during the year
Lapsed during the year
Outstanding at 30 June
Weighted average
exercise price ($)
2016
-
-
-
-
-
Number
2016
3,426,667
-
-
-
3,426,667
Weighted average
exercise price ($)
2015
-
-
-
-
-
Number
2015
4,911,961
1,000,000
-
(2,485,294)
3,426,667
Inputs for measurement of grant date fair values
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The grant date fair value of the rights granted, the vesting conditions of which were subject to the Company's
absolute total shareholder return over the measurement period, was measured based on Monte Carlo
simulation model. The grant date fair value of other share-based payments was measured based on the fair
value of the shares on the grant date and for options issued fair value was measured based on the Black-
Scholes valuation model. The inputs used in the measurement of the fair values at grant date of the share-
based payment plans, which were subject to the vesting conditions relating to the Company's absolute total
shareholder return are the following:
Valuation of Director and Executive Performance Rights
Grant Date
Start of measurement period
End of first DPR measurement period
End of second DPR measurement period
30 June 2018
30 June 2016
Spot price at start of measurement period ($)
28 November 2014
22 November 2012
Tranche A
Tranche B
1 July 2014
1 July 2012
1 July 2011
30 June 2017
30 June 2015
30 June 2014
$0.105
$0.09
90.0
2.4
Nil
2.59
$0.22
$0.06
90.0
2.63
Nil
1.57
30 June 2015,
retest 30 June 2016
$0.08
$0.06
90.0
2.63
Nil
2.57
0.057
0.033
0.043
Share price at grant date
Volatility of share (%)
Risk fee rate (4.0 years) (%)
Dividend yield
Expected life (years)
Director performance rights (DPR)
Fair Value at Grant Date ($/DPR)
64
Rey Resources Annual Report 2016
Notes to the financial statements (Continued)
21. RELATED PARTIES
(a) Parent entity
The ultimate parent entity within the Group is Rey Resources Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 18.
(c) KMP compensation
Disclosures relating to compensation of the KMP compensation comprised:
Individual Directors and executives compensation disclosures
in thousands of dollars
Short term benefits
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Post-employment benefits
Other long term employee benefits
Share based payments
Termination benefits
2016
699
45
49
38
221
1,052
2015
938
58
13
377
-
1,386
Information regarding individual Directors and executives compensation and some equity instruments
disclosures as required by Corporations Regulations 2M.3.03, is provided in the Remuneration Report section of
the Directors’ report.
Apart from the details disclosed in this note, no Director has entered into a material contract with the
Company or the Group since the end of the previous financial year and there were no material contracts
involving Directors’ interests existing at year-end.
Loans to KMP and their related parties
There were no loans given to KMP and their related parties.
(d) Transactions with related parties
In thousands of dollars
ASF Group Ltd
Service fees
Loan granted and fully repaid during the year (inclusive of interest)
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2016
45
2,587
2015
-
-
Rey Resources Annual Report 2016
65
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Notes to the financial statements (Continued)
22. FINANCIAL RISK MANAGEMENT
Categories of financial instruments
The Group’s financial instruments consist mainly of deposits with banks and accounts receivable, payable and
share investment.
The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in
the accounting policies to these financial statements, are as follows:
in thousands of dollars
Financial assets
Share investment
Financial assets measured at fair value
Financial assets not measured at fair value
Cash and cash equivalents
Trade and other receivables
Total
Financial liabilities
Financial assets not measured at fair value
Trade and other payables
Total
2016
2015
106
1,157
28
1,291
201
201
250
1,652
58
1,960
129
129
In support of a strategic alliance, Rey subscribed for $250,000 of Norwest Energy NL (Norwest) shares at a
price of $0.004712 per share on 5 June 2015, resulting in approximately 3.68% of total Norwest shares on issue.
The closing price of Norwest shares as at 30 June 2016 was $0.002 per share and as a result a provision for
impairment of $144,000 was made for the financial year ended 30 June 2016.
Trade and other receivables: analysis of age of financial asset
The aging of trade and other receivables at the reporting date that were not impaired was as follows:
Neither past due nor impaired
Financial risk management framework
2016
28
2015
58
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework.
The Group does not use any form of derivatives for speculative purposes. The Group is not at a level of
exposure that requires the use of derivatives to hedge its exposure.
The main risks the Group is exposed to through its financial instruments are liquidity risk and market risk which
includes interest rate risk.
66
Rey Resources Annual Report 2016
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Notes to the financial statements (Continued)
22. FINANCIAL RISK MANAGEMENT (Continued)
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group’s cash and cash equivalents, and trade
and other receivables.
The carrying amount of financial assets represents the maximum credit exposure.
The Group limits its exposure to credit risk in respect of cash and cash equivalents and other deposits with
banks by only dealing with reputable banks with high credit ratings.
In respect of trade and other receivables, the Group has no significant concentration of credit risk with respect
to any single counter party or group of counter parties. The Group is not exposed to any significant credit risk
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as there were no trading operations during the year.
At 30 June 2016 and 30 June 2015, there was no allowance for doubtful debts and there were no receivables
past due but not impaired.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate cash reserves from funds raised in the market, by
continuously monitoring forecast and actual cash flows and ensuring that adequate uncommitted funding is
available and maintained.
The following are the expected maturities of financial assets and the contractual maturities of financial
liabilities, including estimated interest payments and excluding the impact of netting agreements:
2016
in thousands of dollars
Carrying
amount
Expected /
contractual cash flows
6 months
or less
6-12
months
1-2 years 2-5 years
More than
5 years
Financial liabilities
Trade and other payables
Loans and borrowings
201
-
201
201
-
201
201
-
201
-
-
-
-
-
-
-
-
-
-
-
-
Rey Resources Annual Report 2016
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Notes to the financial statements (Continued)
22. FINANCIAL RISK MANAGEMENT (Continued)
Carrying
amount
Expected /
contractual cash flows
6 months or
less
6-12
months
1-2 years 2-5 years
More than
5 years
129
-
129
129
-
129
129
-
129
-
-
-
-
-
-
-
-
-
-
-
-
The Group is not exposed to currency risk at the reporting date because the Group holds no financial assets or
liabilities denominated in foreign currency.
The Group is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that a
financial instrument’s fair value or future cash flows will fluctuate as a result of changes in market interest rates
on interest-bearing financial instruments.
At the reporting date, the Group had the following mix of financial assets exposed to interest rate risk. There
were no financial liabilities exposed to interest rate risk.
2015
in thousands of dollars
Financial liabilities
Trade and other payables
Loans and borrowings
Currency risk
Interest rate risk
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in thousands of dollars
Variable rate instruments
Cash and cash equivalents
Security deposits
or loss by $7,164 (2015: $23,850).
Fair values
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased or decreased profit
The carrying amounts of financial assets and financial liabilities approximate fair value.
2016
1,157
-
1,157
2015
1,652
-
1,652
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Rey Resources Annual Report 2016
Notes to the financial statements (Continued)
23. OPERATING SEGMENTS
The Group operates in two segments, mineral exploration and development and petroleum exploration in
one geographical location, Western Australia. The consolidated financial results from these segments are
equivalent to the financial statements of the Group.
Operating segment information
Consolidated-2016
Revenue
Total Reportable segment revenue
Other income
impairment of assets
interest revenue
Finance costs
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Profit/(loss) before income tax benefit
income tax benefit
Loss after income tax benefit
Assets
Other Assets
Segment assets
Total assets
Liability
Other liabilities
Total Liabilities
Capital Expenditure
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Mineral
Petroleum
Corporate
$'000
$'000
$'000
Total
$'000
-
7
(2,473)
9
(83)
(1,458)
(3,998)
-
-
-
(144)
9
(83)
(1,458)
(1,676)
-
(1,676)
(3,998)
1,325
-
1,325
359
359
1,325
36,125
37,450
359
359
-
7
(2,329)
-
-
-
(2,322)
-
(2,322)
-
21,456
21,456
-
-
-
-
-
-
-
-
-
14,669
14,669
-
-
-
-
207
3,452
-
3,659
Rey Resources Annual Report 2016
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Notes to the financial statements (Continued)
24. SUBSEQUENT EVENTS
Mr Wei Jin was appointed Managing Director of the Company on 1 July 2016. Mr Jin has been a Director of
Rey Resources since 2 December 2013. He holds a PhD in Science from the China University of Geosciences.
He has over 22 years’ professional experience covering exploration, mineral industry construction and
operation, as well as mineral resources products international trading activities in Australia, China, Russia and
3,426,667 share performance rights held by Mr Wilson vested and were converted to an equivalent number of
ordinary shares of the Company on 1 July 2016 in accordance with the Company’s share incentive scheme
and as part of Mr Wilson’s terminiation payment.
Dr Zhiliang Ou was appointed as an independent Non-Executive Director of the Company on 22 September
2016
2015
13,317
56,690
70,007
57,538
-
57,538
The auditors of the Company did not provide any other services to the Company during the years ended 30
June 2016 and 30 June 2015.
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Mongolia.
2016.
in dollars
Audit services
25. AUDITORS REMUNERATION
Auditors of the Company
KPMG Australia:
Audit and review of financial reports -2015
-2016
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Notes to the financial statements (Continued)
26. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ended 30 June 2016 the parent entity of the Group was Rey
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Resources Limited.
in thousands of dollars
A. Result of parent entity
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B.
Loss for the year
Total comprehensive loss for the year
Financial position of the parent entity
Total current assets
Total non-current assets
Total assets
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Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Share capital
Options reserve
Accumulated losses
Total equity
C. Parent entity contingencies
There are no contingent liabilities of the parent entity.
D. Parent entity capital commitments
plant or equipment.
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At balance date the parent entity has not entered into any material contractual agreements for the acquisition of property,
E. Parent entity guarantees in respect of the debts of its subsidiaries
There are no guarantees entered into by the parent entity.
2016
2015
(26,673)
(26,673)
(2,071)
(2,071)
1,194
34,477
35,671
202
158
360
1,719
55,968
57,687
121
229
350
35,311
57,337
85,683
2,238
(52,610)
35,311
81,072
2,200
(25,935)
57,337
Rey Resources Annual Report 2016
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DIRECTORS’ DECLARATION
The Board of Directors of Rey Resources Limited declares that:
(a) The consolidated financial statements, accompanying notes and the remuneration disclosures that are
contained in the Remuneration Report in the Directors’ Report are in accordance with the Corporations
Act 2001, including:
• giving a true and fair view of the financial position as at 30 June 2016 and performance of the
consolidated entity for the financial year ended on that date; and
• complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001.
(b) The Directors draw attention to note 2(a) of the consolidated financial statements, which includes a
statement of compliance with the International Financial Reporting Standards.
(c) The remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report
comply with Australian Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act
2001 and the Corporations Regulations 2001.
(d) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they
fall due.
The Board of Directors has received the declaration by the Managing Director and Financial Controller
required by Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016.
Signed in accordance with a resolution of the Directors.
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Min Yang
Non-Executive Chairman
Sydney, Australia
23 September 2016
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INDEPENDENT AUDIT REPORT – KPMG
ABCD
Independent auditor’s report to the members of Rey Resources Limited
Report on the financial report
We have audited the accompanying financial report of Rey Resources Limited (the Company),
which comprises the consolidated statement of financial position as at 30 June 2016, the
consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on
that date, notes 1 to 26 comprising a summary of significant accounting policies and other
explanatory information, and the Directors’ Declaration of the Group comprising the Company
and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001, and for such internal control as the Directors determine is necessary to
enable the preparation of a financial report that is free from material misstatement, whether due
to fraud or error. In Note 2(a), the Directors also state, in accordance with Australian
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements of the Group comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the Company’s preparation of the financial report that gives a true and fair view in
order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Directors, as well as evaluating the overall
presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence that we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Rey Resources Annual Report 2016
73
60
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity. Professional Standards Legislation
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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Rey Resources Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2016 there have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Daniel Camilleri
Partner
Sydney
23 September 2016
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity.
Profession Standards Legislation.
74
Rey Resources Annual Report 2016
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Profession Standards Legislation.
23
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ASX ADDITIONAL INFORMATION
Additional Shareholder Information
Additional information required by the Australian Securities Exchange Listing Rules and not disclosed elsewhere
in this Annual Report is set out below. The information was current as at 14 September 2016.
Corporate Governance Statement
ASX Listing Rule 4.10.3 requires ASX listed companies to report on the extent to which they have followed the
Corporate Governance Principles and Recommendations (“ASX Principles”) released by the ASX Corporate
Governance Council. The ASX Principles require the Board to consider the development and adoption
of appropriate corporate governance policies and practices founded on the ASX Principles. For the 2016
financial year, the Company followed and reports against the 3rd Edition of the ASX Principles. The Company’s
2016 Corporate Governance Statement is available from the Company’s website at http://reyresources.com/
l
corporate/corporate-governance/
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Top 20 Shareholders
The 20 largest shareholders of the Company are listed below:
Name
1
2
3
4
5
6
7
8
9
ASF CANNING BASIN ENERGY PTY LTD
MISS WANYAN LIU
MERCHANT CENTRAL LIMITED
MRS YINXIN HE
MISS MEI CHI JOYCE LEE
START LINK INVESTMENTS LIMITED
JADE SILVER INVESTMENTS LIMITED
START GRAND GLOBAL LIMITED
XIAO HUI ENTERPRISES LIMITED
10
UNIQUE INVESTMENT HOLDINGS PTY LTD
11
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
12 MR HAITAO GENG
13
14
15
TONG HENG HOLDINGS LIMITED
JADE SILVER INVESTMENTS LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
16
BNP PARIBAS NOMS PTY LTD
17
18
19
FOREVER GRAND GROUP LIMITED
NEWAY ENERGY INTERNATIONAL LIMITED
BROWNSTONE INTERNATIONAL PTY LTD
20 MEGA AHEAD LIMITED
TOTAL TOP 20 SHAREHOLDERS
Number of
Percentage
Shares
Held %
173,333,333
170,344,000
125,571,429
66,686,424
60,462,765
54,798,067
46,760,280
40,103,583
34,797,020
21,703,912
18,406,385
15,000,000
9,230,628
7,400,000
7,211,426
6,664,548
5,754,185
5,586,233
5,000,000
4,951,626
17.40
17.10
12.61
6.69
6.07
5.50
4.69
4.03
3.49
2.18
1.85
1.50
0.93
0.74
0.72
0.67
0.58
0.56
0.50
0.50
879,765,844
88.35%
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Rey Resources Annual Report 2016
An extract of the Company’s register of substantial shareholders (being those shareholders who held 5% or
more of the issued capital on 14 September 2016 and who have provided substantial shareholding notices to
Number of shares
Percentage held
125,571,429
66,686,424
170,344,300
64,160,280
54,798,067
60,462,765
173,333,333
40,103,583
12.90
6.72
17.49
5.56
5.62
6.20
17.60
5.62
There were 1,250 holders of less than a marketable parcel of ordinary shares (being 31,250 shares on
The number of shareholders by size of holding is set out below:
Substantial Shareholders
the Company) is set out below:
Shareholder
Merchant Central Limited1
Mrs Yinxin He2
Wanyan Liu3
Jade Silver Investments Limited4
Start Link Investments Limited5
Miss Mei Chi Joyce Lee6
ASF Canning Basin Energy Pty Ltd7
Start Grand Global Limited8
1. As provided to the Company on 21 June 2016.
2. As provided to the Company on 2 May 2016.
3. As provided to the Company on 14 April 2016.
4. As provided to the Company on 12 April 2016.
5. As provided to the Company on 11 April 2016.
6. As provided to the Company on 11 April 2016.
7. As provided to the Company on 7 April 2016.
8. As provided to the Company on 29 January 2015.
Distribution of Equity Securities
14 September 2016).
Fully Paid Ordinary Shares
Size of Holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
TOTALS
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Number of holders
Number of shares
332
282
221
728
206
1,769
77,039
876,180
1,797,674
26,628,694
966,428,956
995,808,543
Rey Resources Annual Report 2016
77
For all ordinary shares, voting rights are on a show of hands whereby every member present in person or by
proxy shall have one vote and upon a poll, each share shall have one vote.
On 23 May 2016, Rey Resources announced an on market share buy-back of up to 10% of its issued share
capital on market over a 12 month period. As at the date of this Annual Report, Rey Resources had not bought
back any shares pursuant to the share buy-back.
Rey Resources is listed on the Australian Securities Exchange (ASX code: REY).
Voting Rights
Ordinary Shares
On-market Share Buy-back
Securities Exchange
Tel: +61 8 9322 1587
Fax: +61 8 9322 5230
www.reyresources.com
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Rey Resources Annual Report 2016
Tenement Schedule
The tenement schedule for the Group as at the date of this report is tabulated below:
Licence
Type
EL
EL
EL
Licence No.
Grant Date
Expiry Date
Holder
E04/1386
21/01/2004
20/01/2017
Blackfin Pty Ltd
E04/15191
20/04/2006
19/04/2017
Blackfin Pty Ltd
E04/1770
4/03/2009
3/03/2019
Blackfin Pty Ltd
MA
M04/453
Pending
L04/58
Pending
Pending
Pending
Blackfin Pty Ltd
Blackfin Pty Ltd
LA
EP
EP
EP
EP
EP457
EP458
EP437
EP487
24/10/2007
23/10/20161
Rey Oil and Gas Pty Ltd /Buru/DR
503,780
24/10/2007
23/10/20161
Rey Oil and Gas Pty Ltd /Buru/DR
576,022
28/11/2014
27/11/2019
Rey Oil and Gas Perth Pty Ltd
71,573
43.47%
14/03/2014
13/12/2020
Rey Lennard Shelf Pty Ltd
505,840
50%
Area
(Ha)
1,627
11,386
6,834
12,964
3,137
Percentage
Held
100%
100%
100%
100%
100%
25%
25%
R: Retention Licence
RA: Retention Licence Application
EL: Exploration Licence
EA: Exploration Licence Application
MA: Mining Lease Application
LA: Miscellaneous Licence Application
EP: Exploration Permit Petroleum
1: Extension applied for
All licences are located in Western Australia
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Suite 5
62 Ord Street
West Perth
WA 6005
Tel: +61 8 9322 1587
Fax: +61 8 9322 5230
www.reyresources.com