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ANNUALREPORT2018
ACN 108 003 890
CONTENTS
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Corporate Directory......................................................................................................................................................3
Company Profile............................................................................................................................................................4
Chairman’s Message.....................................................................................................................................................5
Business Performance and Outlook.............................................................................................................................6
Annual Mineral Reserves and Resources Statement ................................................................................................11
Directors’ Report............................................................................................................................................................14
Auditor’s Independence Declaration .......................................................................................................................30
Consolidated Statement of Profit or Loss and Other Comprehensive Income........................................................31
Consolidated Statement of Financial Position............................................................................................................32
Consolidated Statement of Changes in Equity..........................................................................................................33
Consolidated Statement of Cash Flows.......................................................................................................................34
Notes to the Consolidated Financial Report...............................................................................................................35
Directors’ Declaration...................................................................................................................................................65
Independent Auditor's Report........................................................................................................................................66
ASX Additional Information..........................................................................................................................................72
Tenement Schedule.......................................................................................................................................................75
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Rey Resources Annual Report 2018
CORPORATE DIRECTORY
Non-Executive Chairman
Managing Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Alternate Director to Non-Executive Chairman, Ms Min Yang
Directors
Ms Min Yang
Mr Wei Jin
Mr Geoff Baker
Mr Dachun Zhang
Dr Zhiliang Ou
Mr Louis Chien
Company Secretary
Ms Shannon Coates
Registered Office
Suite 5, 62 Ord Street
West Perth WA 6005
Tel +61 (08) 9322 1587
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Fax +61 (08) 9322 5230
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Principal Place of Business
Suite 2, 3B Macquarie Street
Sydney NSW 2000
Tel +61 (02) 8259 9620
Fax +61 (02) 9251 9066
Share Registry
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
GPO Box 3993
Sydney NSW 2001
Lawyers
Corrs Chambers Westgarth
240 St Georges Terrace
Perth WA 6000
Auditor
KPMG
International Towers Sydney 3
300 Barangaroo Avenue
Sydney NSW 2000
Securities Exchange
Australian Securities Exchange (ASX)
ASX Code: REY
Website
www.reyresources.com
Rey Resources Annual Report 2018
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COMPANY PROFILE
Rey Resources Limited (“Rey Resources” or “Company”) is an ASX-listed company (ASX: REY) focused on
exploring and developing energy resources in Western Australia’s Canning Basin.
Rey holds a 100% interest in (and is Operator of) EP487, the “Derby Block” and a 25% interest in two prospective
Canning Basin petroleum exploration permits (EP457 and EP458) known as the “Fitzroy Blocks”. Rey also holds a
100% interest in EP104, Retention Licence R1 and Production Licence L15, together the “Lennard Shelf Blocks”.
Rey has participated in and completed a series of exploration works for these permits, including two deep
conventional oil wells in the Canning Basin, more than 100km of new seismic line acquisition, 2300+km vintage
seismic line reprocessing and multiple regional geology studies. Rey has planned integrated exploration
activity for future Canning Basin development.
Rey also holds coal tenements in the Canning Basin, some contiguous with the Fitzroy Blocks, including those
hosting the major Duchess Paradise Coal Project. On 17 July 2018, the Company entered into a cooperation
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framework agreement with Yuanrun Investment Ltd for the sale of 100% of the shares in Blackfin Pty Ltd which
holds the Duchess Paradise Coal Project for a total consideration of A$24 million. Shareholders approved the
transaction on 13 September 2018.
Rey has an experienced Board and management team and is committed to continuing to develop its energy
assets to deliver maximum value to its shareholders.
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Rey Resources Annual Report 2018
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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 2018.
Our key focus during this period remained on our coal project development and oil and gas exploration
business in the Canning Basin in Western Australia.
During the year ended 30 June 2018, we completed the acquisition of the Lennard Shelf Blocks, which
includes one petroleum Production Licence, L15, situated to the north of EP487, which will potentially provide
Rey an opportunity to achieve production in the short term. The Lennard Shelf Blocks extend Rey’s interests
in the Canning Basin and enable Rey to conduct larger scale oil and gas exploration in the region. We also
completed the planned new 2D seismic acquisition work for EP487, which will assist in the development of the
Butler Prospect.
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The Ungani Trend remains the priority exploration target in the Fitzroy Block, following the successful drilling on
Ungani 4 and Ungani 5 by the Operator, Buru Energy Limited. Rey continues to work with the Joint Venture
partners on an integrated study for identified leads in the Fitzroy Block.
Post the year end, the Company entered into a cooperation framework agreement with Yuanrun Investment
Ltd for the sale of 100% of the shares in Blackfin Pty Ltd, which holds the Company’s Duchess Paradise Coal
Project, for a total consideration of A$24 million. Further updates on this transaction can be obtained through
our ASX announcements. Shareholders overwhelmingly approved the transaction on 13 September 2018.
Duchess Paradise is still significant to Rey, with the intention that Yuanrun Investment Ltd will progress a listing
and capital raising on the Hong Kong Stock Exchange to fund the future mine development. We are working
with Yuanrun to progress the Duchess Paradise Coal 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 the next
exciting year.
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Min Yang
Non-Executive Chairman
Rey Resources Annual Report 2018
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BUSINESS PERFORMANCE AND OUTLOOK
OIL & GAS
1.1 Background
1. Canning Basin – the Fitzroy Blocks (EP457 and EP458)
Equity interests in the Fitzroy Blocks (EP457 and EP458) are currently:
Rey (Rey Oil & Gas Pty Ltd)
Buru
Diamond Resources (Barbwire)
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 5,000 kilometres2) 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 4,800 kilometre2). This extends diagonally, north-west to south-east,
across the Fitzroy Blocks. The conventional dolomite reservoir oil discovery by Buru in 2011 at Ungani (located
15 kilometres north-west 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.
1.2 Work program during the year
The Joint Venture drilled two exploration wells and completed the 100 line kilometre seismic survey program
over prospects Rafael, Wright and Victory in 2015. The drilling results were continually analysed during FY2018.
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Rey Resources Annual Report 2018
Exploration well Victory-1 was spudded on 9 September 2015 in EP457, 185 kilometres east of Broome and
85 kilometres southeast of Buru Energy’s producing Ungani Oilfield. The well was drilled with an 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.
The Senagi-1 conventional exploration well was spudded on 15 October 2015 in EP458, 240 kilometres south-
east of Broome and 144 kilometres south-east 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 286 metres 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.
The Operator completed the final reports for Victory-1 and Senagi-1 exploration wells. Both reports and all of
the associated well data were lodged with the regulator, the Department of Mines, Industry Regulation and
Safety (“DMIRS”) and this completed all mandatory reporting and data submission requirements.
The Operator planned the committed first permit year Magneto-Telluric (MT) survey after being granted the
second five year term on 6 January 2017.
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The Joint Venture parties lodged applications for suspension of the work program requirements for EP457 and
EP458 with the DMIRS on 28 July 2017. These applications were lodged due to the uncertainty generated
by the WA Government’s introduction of a moratorium on hydraulic fracture stimulation (fracking) pending
the outcome of a scientific inquiry. A 24 month suspension of work program for the two permits was granted
on 23 April 2018. Accordingly, the Operator has discontinued the planned Magneto-Telluric (MT) survey.
The Operator continues to conduct geology studies over the permits and the MT survey is expected to be
conducted in 2020.
Rey Resources Annual Report 2018
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2. Canning Basin - the Derby Block (EP487)
2.1 Background
The Derby Block (EP487) is a large petroleum exploration permit of approximately 5,000 kilometre2. It occurs
to the north-west 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).
In June 2015, the Company’s wholly owned subsidiary Rey Lennard Shelf Pty Ltd (“RLS”) completed the
acquisition of a 50% participating interest in EP487 from Backreef Oil Pty Ltd. The Company 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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In June 2016, RLS assumed Operatorship of the Derby Block and Rey reached an agreement with Oil Basins to
acquire its remaining 50% participating interest. In May 2017, Rey completed the transaction with Oil Basins and
acquired the remaining 50% interest in EP487 via its wholly owned subsidiary, Rey Derby Block Pty Ltd (“RDB”).
According to the agreement, Rey has an option to acquire Oil Basins Royalties Limited (“OBR”), a wholly
owned subsidiary of OBL, for up to $400,000 within 3 months if OBL fails to complete the sale of OBR within 6
months of completion of this agreement. OBR holds various royalties including two on hydrocarbon sales from
Derby Block.
Equity interests in the Derby Block are currently:
Rey (Rey Lennard Shelf Pty Ltd)
Rey (Rey Derby Block Pty Ltd)
50%
50%
2.2 Work program during the year
Since assuming Operatorship of the Derby Block, the Company has reviewed the status of the work completed
on the permit to date in the context of the regional setting. On 21 September 2017, a work program revision and
12-month commitment work suspension and extension was granted by DMIRS. The two well drilling condition to
December 2017 has been replaced by one well and 60 kilometre seismic acquisition by end of 2018.
Terrex was appointed as the contractor to conduct the planned 60 kilometre new seismic survey. The survey was
completed in October 2017 without any safety or environmental issues. The seismic results were processed and
received by the Company in November 2017 and are under interpretation. This work was planned in early 2017
to identify the Butler Prospect. The potential of conventional target, Butler Prospect, has been initially identified
based on the geology studies results. The new seismic data will be used to optimise the well locations.
On 20 March 2018, a further 12 month commitment work suspension and extension was granted by the DMIRS.
The commitment drilling is deferred to December 2019.
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Rey Resources Annual Report 2018
2.3 Prospective Resources
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 3D Geo in June 2017. The Company’s 100%
interest in these Prospective Potential Recoverable Resources (unrisked, probabilistic estimate) of the Derby
Block BCG play is provided in Table 1 below.
Gas in place
Recoverable Gas
Recoverable Condensate
Recoverable BOE
Prospective Potential Recoverable Resources SPE PRMS (2011)3
Tcf1
Tcf1
MMbbl2
MMBOE4
P901
68.0
9.4
239
1,852
P501
169.6
28.4
707
5,283
P102
412.9
81.1
2,066
15,096
Table 1: Rey Resources’ 100% attributable interest in the gross Prospective Potential Recoverable Resources estimate of the
Laurel BCG in EP487 (estimate prepared by 3D-GEO June 2017).
1. Tcf- trillion cubic feet.
2. MMbbl- million barrels.
3. SPE PRMS (2011) - Society of Petroleum Engineers Petroleum Resource Management System (2011).
4. MMBOE- million barrels oil equivalent. Calculated using ratio of 6.22 billion cubic feet of gas equivalent to 1 million barrels of crude oil.
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.
3. Lennard Shelf Blocks – EP104, R1 and L15
In May 2018, Rey entered into a Sale and Purchase Agreement with Key Petroleum Ltd (“Key”) and Indigo
Oil Pty Ltd (“Indigo”) to acquire the Lennard Shelf Blocks which were held by Key and Indigo, comprising
an exploration permit (“EP104”), a Retention Lease (“R1”) and one Production Licence (“L15”). The Lennard
Shelf Blocks are situated to the north of Rey’s existing interests in the Canning Basin petroleum exploration
licence, EP487 covering a total area of approximately 1,145 kilometres2 and are considered prospective for
conventional oil and tight gas.
Rey has acquired from Key 100% of the shares in Gulliver Productions Pty Ltd (“Gulliver”), a wholly owned
subsidiary of Key, which held majority interests in the Lennard Shelf Blocks.
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In addition, Indigo agreed to transfer Indigo’s interests in each of EP104, R1 and L15 to Gulliver. Following
Completion of this transfer in August 2018, Gulliver now holds 100% of the Lennard Shelf Blocks. Further, Gulliver
has agreed to grant a commercial royalty of 2.5% and 0.5% to Key and Indigo separately over R1 and L15
upon completion of each applicable transfer.
Rey Resources Annual Report 2018
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3.2 Work Program during the year
During the report period, Rey has completed a series of geological studies to identify potential exploration
targets in the Lennard Shelf blocks, including the studies on the potential re-production of West Kora oilfield.
On 21 June 2018, a suspension and extension application in relation to the committed geochemical survey of
EP 104 and R1 was lodged and was granted on 30 July 2018.
L15 is a production licence with production history in the West Kora oilfield. An estimation of oil Reserves and
contingent oil Resources for the West Kora oilfield and Point Torment gas discovery in R1 was announced to
3.3 Prospective Resources
ASX by Key on 30 September 2015.
COAL
The Duchess Paradise Coal 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
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was completed in June 2011.
On 17 July 2018, the Company entered into a cooperation framework agreement with Yuanrun Investment Ltd
for the sale of 100% of the shares in Blackfin Pty Ltd, which holds the Duchess Paradise Coal Project for a total
consideration of A$24 million. The transfer of the ownership of shares in Blackfin will only occur once approval
of Rey's shareholders and approvals from the relevant governments and regulatory authorities has been
obtained. Rey’s shareholders approved the transaction on 13 September 2018.
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Rey Resources Annual Report 2018
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ANNUAL MINERAL RESOURCES AND
RESERVES STATEMENT
The current Coal Mineral Resource for the Duchess Paradise Coal Project, located in the Canning Basin,
Western Australia, is shown in Table 1 below.
Table 1: 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 of Mineral Resources estimates, please refer to the Company’s
ASX announcement dated 28 October 2014.
Material Changes and Mineral Resources and Ore Reserves Comparison
The Company reviews its Mineral Resources and Ore Reserves 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 Mineral Resources and/or Ore Reserves over the course of the year, the
Company is required to promptly report these changes as they occur.
Rey has undertaken an annual review of its Mineral Resources for the year ended 30 June 2018, which was
conducted by independent consultant ROM Resources. The historical factors were examined and found not
to have materially changed the estimate for the Mineral Resources of Duchess Paradise P1-seam from the
time they were first reported to ASX on 28 October 2014 (at which time the Mineral 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). As the Duchess Paradise Coal Project has
not commenced active operation, no resource depletion has occurred for the review period. The review
indicated that the Mineral Resource defined in the ASX announcement on 28 October 2014 remains consistent
to the date of this Annual Report, with an estimated total of 305.8 million tonnes in place.
As announced on 20 September 2017, the Company withdrew its Ore Reserves for the Duchess Paradise P1-
seam, as first reported in 2011. During the year the Company engaged an expert to undertake a review with a
focus on updating the economic and financial model which is expected to result in an increased Ore Reserve,
in comparison to the 2011 DFS. Other factors that may also require revision include transportation pathways.
As a result, the Company is not in a position to report the outcome of its annual review of Ore Reserves in this
Annual Report.
Rey Resources Annual Report 2018
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Governance Arrangements and Internal Controls
The Company ensures that its quoted Mineral Resources are subject to good governance arrangements and
internal controls. The Mineral Resources reported have been generated by independent external consultants
who are experienced in best practice modelling and estimation methods. The consultants have also
undertaken reviews of the quality and suitability of the underlying information used to generate the Mineral
Resource estimation. In addition, Rey management carries out regular reviews of internal processes and
external contractors that have been engaged by the Company.
Competent Persons Statements
Coal Resources
Coal Quality
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
in accordance with:
The estimate of P1-seam Resources in the Duchess Paradise area was first reported to ASX on 28 October 2014,
• “The Australian Guidelines for the Estimation and Classification of Coal Resources ” – September 2014
Edition prepared by the Coalfields Geology Council of New South Wales and the Queensland Resources
Council; and
• JORC Code, 2012 Edition, and as adopted by the Australian Stock Exchange.
The P1-seam Resources estimate and discussion presented in this Annual 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. Rey Resources is not aware of any new
information or data that materially affects the information included in the relevant market announcement
and all material assumptions and technical parameters underpinning the estimates in the relevant market
announcement continue to apply and have not materially changed.
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Rey Resources Annual Report 2018
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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.
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.
This Annual Mineral Resources and Reserves Statement is based on and fairly represents information and supporting
documentation prepared by competent persons and has been approved as a whole by Mr Mak Biggs. Mr Biggs
is a member of the AUSIMM, a recognised professional organisation and is adequately qualified as a competent
person as defined in the JORC code, 2012 Edition. Mr Biggs is a consultant employed by ROM Resources. Mr Biggs
consents to the inclusion in the Annual Report of this Annual Mineral Resources and Reserves Statement.
Oil and Gas
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.
The oil and gas prospective resources quoted in this Annual Report has been compiled and/or assessed by Mr
Keven Asquith who is a qualified petroleum reserves and resources evaluator. Mr Asquith is Director of 3D-GEO Pty
Ltd and has over 30 years of geotechnical experience in the Petroleum Industry, as well as seven years of Project
Management in the Government Sector. His experience includes four years at ESSO Resources Canada, 16 years
at BHP Petroleum in Melbourne and the 10 years consulting at 3D-GEO. Keven has an Honours BSc in Geology and
a Diploma in Project Management. He has been a member of the American Association of Petroleum Geologists
for over 25 years. The Company confirms that the form and context in which the information is presented has not
been materially modified and it is not aware of any new information or data that materially affects the information
included in the relevant market announcements, as detailed in the body of this announcement.
Rey Resources Annual Report 2018
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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”)
The Directors of the Company at any time during or since the end of the financial year are:
DIRECTORS’ REPORT
for the financial year ended 30 June 2018.
1. DIRECTORS
Ms Min Yang
Mr Wei Jin
Mr Geoff Baker
Non-Executive Chairman
Managing Director
Non-Executive Director
Mr Dachun Zhang
Independent Non-Executive Director
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Dr Zhiliang Ou
Mr Louis Chien
Independent Non-Executive Director
Alternate Director to Non-Executive Chairman, Ms Min Yang
Details of Directors’ qualifications, experience, special responsibilities and directorships of other listed
companies can be found on pages 15 to 16.
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Rey Resources Annual Report 2018
2. INFORMATION ON DIRECTORS AND OFFICERS
Designation
Experience, expertise and
Directorships of other ASX
Special
and
qualifications
listed companies during
responsibilities
Independence
status
the last three years
during the year
Chairman
Min Yang has extensive business
• ASF Group Ltd
• Non-
Appointed on
Non-Executive
connections in the Asia Pacific
(September 2005,
region, especially greater China,
ongoing)
and has over twenty years of
hands-on experience dealing
with both private and state-run
• ActiveEX Limited (May
• Member,
2012, ongoing)
Executive
Chairman
Audit and Risk
Management
Committee
• Member,
Audit and Risk
Management
Committee
businesses in China. Over the years,
• Key Petroleum Limited
Min Yang has proven her unique
(January 2014, ongoing)
business insight and expertise
in the identification, incubation
and realisation of embryonic
opportunities in the resources,
commodities trading & residential
estate and financial investment
sectors.
• Metaliko Resources
Limited (appointed
August 2014 and
resigned October 2016)
Managing
Wei Jin holds PhD in Science in
Director
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.
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Directors
Current
Min Yang
13 September 2012
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Wei Jin
Appointed
Non-Executive
Director on
2 December 2013.
Appointed
Managing Director
on 1 July 2016
Geoff Baker
Director
Qualifications – BCom, LLB, MBA
• ASF Group Ltd
• Member,
Appointed on
Non-Executive
13 September 2012
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Audit and Risk
Management
Committee
For the past 35 years Geoff has
been active in Asia and China
(November 2006,
ongoing)
working in law and conducting
• ActiveEX Limited
an advisory practice in assisting
(appointed February
companies doing business in the
2013. Resigned June
region. As an experienced lawyer
2017 and re-appointed
qualified to practice in Australia
August 2017)
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.
• Key Petroleum Limited
(January 2014, ongoing)
• Metaliko Resources
Limited (appointed
August 2014 and
resigned January 2017)
Rey Resources Annual Report 2018
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2. INFORMATION ON DIRECTORS AND OFFICERS (continued)
Directors
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Dachun Zhang
Appointed on
1 July 2013
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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
Designation
Experience, expertise and qualifications
Directorships of
Special
other ASX listed
responsibilities
companies during
during the year
the last three years
• Chairman,
Audit and Risk
Management
Committee
and
Independence
status
Director
Mr Zhang has a Bachelor’s Degree from Poznan
Non-Executive
University, Poland and a Master’s Degree from
Independent
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.
Director
Dr Ou has over 27 years of professional engineering
Non-Executive
and management experience in the oil and gas,
Independent
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.
Alternate
Mr Chien was born in Shanghai, China, grew up and
• ASF Group Ltd
Director
was educated in the United States, and is now based
(May 2015,
in Australia. He has 20+ years of corporate experience
ongoing)
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.
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Rey Resources Annual Report 2018
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 public and private 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
A
3
3
3
3
3
-
B
3
3
3
3
3
-
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 one Executive and
three Non-Executive Directors, with independent Non-Executive Director Mr Dachun Zhang as Chair. The
number of Audit and Risk Management Committee meetings and number of meetings attended by each of
the members of the Committee during the financial year are:
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Director
Min Yang
Wei Jin
Geoff Baker
Dachun Zhang
Zhiliang Ou
Louis Chien
Director
Min Yang
Wei Jin
Geoff Baker
Dachun Zhang
Louis Chien
A - Number of meetings attended.
B - Number of meetings held during the time the Director held office.
Meetings
A
2
2
2
2
-
B
2
2
2
2
-
Rey Resources Annual Report 2018
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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
Ordinary shares
Options over ordinary shares
Performance Rights
200,000
200,000
777,413
200,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
6. REMUNERATION REPORT - AUDITED
This remuneration report outlines the Director and executive remuneration arrangements for Rey Resources in
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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, if any.
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6. REMUNERATION REPORT – AUDITED (continued)
6.1 Principles of compensation (continued)
2018 Key Management Personnel
The KMP of Rey Resources during the year ended 30 June 2018 were:
Non Executive
Min Yang
Geoff Baker
Non-Executive Chairman (appointed 13 September 2012)
Non-Executive Director (appointed 13 September 2012)
Dachun Zhang Independent Non-Executive Director (appointed 1 July 2013)
Zhiliang Ou
Louis Chien
Executive
Independent Non-Executive Director (appointed 22 September 2016)
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)
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Wei Jin
Remuneration policy
to these roles.
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:
1. To set demanding levels of performance for KMP and to align their remuneration with the achievement of
clearly defined targets.
2. To provide market competitive remuneration and conditions in the current market for high quality Directors
and executives.
3. To align remuneration with the creation of shareholder value and the achievement of Company strategy,
objectives and performance.
4. 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.
Rey Resources Annual Report 2018
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6. REMUNERATION REPORT – AUDITED (continued)
6.1 Principles of compensation (continued)
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
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
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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
package.
Executive remuneration components
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.
Short term incentive
Long term incentive
Executives are eligible to participate in the Rey Resources Limited Executive Incentive Rights Plan (“EIRP”), which
was adopted by shareholders on 23 November 2011 and re-approved at the Company’s 2014 Annual General
Meeting. The EIRP aligns the reward of the participants with the long term creation of shareholder value.
The EIRP enables participants to be granted rights to acquire shares subject to the satisfaction of certain vesting
conditions which will be determined by the Board from time to time. 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 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.
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6. REMUNERATION REPORT – AUDITED (continued)
6.1 Principles of compensation (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 Total Shareholder Return (“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
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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.
Rey Closing Share Price as at 30 June
* Adjusted for 5 into 1 share consolidation
Consequences of performance on shareholder wealth
2018
0.32
2017
0.20
2016
0.145*
2015
0.525*
2014
0.525*
Profit (loss) ($’000)
Dividends declared
Total shareholder return (TSR)%
Non-Executive Director fees
2018
(1,049)
0
60%
2017
(559)
0
38%
2016
(3,998)
0
(72%)
2015
(10,200)
0
0%
2014
(3,304)
0
102%
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 in cash.
An aggregate fee limit for NED fees of $400,000 was approved at the 2010 Annual General Meeting and no
change is currently proposed.
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 $48,000 per annum payable to her related
entity, Luxe Hill Limited; Mr Baker $60,000 per annum payable to his related entity, Gold Star Industry Ltd; Mr
Zhang $25,000 per annum payable to his related entity, AMI Corporation Pty Ltd; Dr Ou $54,000 per annum plus
superannuation.
Rey Resources Annual Report 2018
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2017
2018
2017
2018
2017
2018
2017
2018
2017
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 2017 and 30 June
Short Term Benefits
Post-
employment
Benefits
Other Long
Term employee
benefit
Share
Based
Payments
Termination
Benefits
Total
Cash salary/
Annual
Fees
Incentive
Non-monetary
Super
LSL & AL
Rights
Termination
/Options
Payments
W Jin - Managing Director - Appointed Non-Executive Director 2 December 2013, appointed Managing Director 1 July 2016
$
$
$
$
M Yang - Non-Executive Chairman - Appointed 13 September 2012
48,000
48,000
-
-
-
-
-
-
G Baker - Non-Executive Director - Appointed 13 September 2012
60,000
60,000
-
-
-
-
-
-
D Zhang - Non-Executive Director - Appointed 1 July 2013
25,000
25,000
-
-
-
-
-
-
120,000
90,000
-
-
-
-
11,400
8,550
Z Ou - Non-Executive Director - Appointed 22 September 2016
54,000
41,954
-
-
-
-
5,130
3,985
L Chien - Alternate Director - Appointed 11 January 2016
2018
2017
TOTAL
2018
2017
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-
307,000
264,954
-
-
-
-
-
-
-
-
-
-
16,530
12,535
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
48,000
48,000
60,000
60,000
25,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131,400
98,550
59,130
45,939
-
-
323,530
277,489
6.3 Equity instruments
6.3.1 No share rights were granted during the financial year.
6.3.2 No options and rights over ordinary shares in the Company were granted during the financial year.
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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
Wei Jin
Contract Term
Termination by Company
Termination by Executive
Ongoing
3 months’ notice or payment in lieu.
3 months’ notice or payment in lieu.
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.
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No external advisors were engaged on remuneration matters for the 2018 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:
2018
Directors
Min Yang
Geoff Baker
Wei Jin
Dachun Zhang1
Zhiliang Ou
Louis Chien
Total
Held at
Received as
Received on
Other changes
Held at
1 July 2016
compensation
exercise of options/rights
30 June 2017
200,000
200,000
200,000
777,413
-
-
1,377,413
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
200,000
200,000
777,413
-
-
1,377,413
1. The shares are held by Greenhouse Investment (VIC) Pty Ltd ATF AMF Superannuation Fund, a related company of Dachun Zhang.
6.7 Movements in Option holdings
No KMP held or were issued options during the 2017 reporting period.
6.8 Movement in Share right holdings
No KMP held or were issued share rights during the 2017 reporting period.
Rey Resources Annual Report 2018
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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 100% interest in the Derby
Block EP487 and a 43.47% in petroleum exploration permit EP437.
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, with particular focus on its oil and gas assets.
Oil and Gas
Fitzroy Blocks (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:
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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)
Fitzroy Block is considered prospective for conventional oil. It is close to Ungani oil field and on the Ungani Oil
Trend. Two wells have been drilled in 2015 and tens of prospects has been identified by operator in the block
for future development.
EP457 and EP458 was granted a further five year term commencing on 6 January 2017 with first year
commitment work of Magneto-Telluric (MT) survey.
During the reporting period, the 24 months suspensions of work program for the two permits was lodged on 28
July 2017 and granted on 23 April 2018. These applications were lodged due to the uncertainty generated by
the WA government’s introduction of a moratorium on hydraulic fracture stimulation pending the outcome of
an independent scientific inquiry. Accordingly, the operator has discontinued the planned Magneto-Telluric (MT)
survey. The operator is continually conducting geology studies over the permits and the MT survey is expected to
be conducted in the near future.
Derby Block (EP487)
Rey Resources holds 100% equity interests in EP487 (“Derby Block”) through the following wholly owned subsidiaries:
Rey Lennard Shelf Pty Ltd
Rey Derby Block Pty Ltd
50%
50%
The Derby Block is a large exploration licence with an area of approximately 5,000 km2. The block is considered
prospective for basin centred wet gas. It occurs to the north of Rey’s existing interests in petroleum exploration
licences in the Canning Basin.
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
On 21 September 2017, a work program revision and 12-month commitment work suspension and extension
was granted by DMP. The two wells drilling condition to December 2017 has been replaced by one well and
60km seismic acquisition by end of 2018.
On 20 March 2018, a further 12 month commitment work suspension and extension was granted by DMP. The
commitment drilling is deferred to December 2019.
During the report period, Terrex was appointed as the contractor to conduct the planned 60km new seismic
survey. The survey was completed in October 2017 without any safety and environmental issues. The seismic
results were processed and received by the Company in November 2017 and is under interpretation.
The potential of conventional target, Butler Prospect, has been initially identified based on the geology studies
results. The new seismic data will be used to optimal the well locations.
Lennard Shelf Blocks (EP104, R1, L15)
On 14 May 2018, the Company announced the acquisition from Key Petroleum Ltd (“Key”) 100% of the shares
in Gulliver Productions Pty Ltd (“Gulliver”), a wholly owned subsidiary of Key which holds majority interests in
EP104, R1 and L15 (together the “Lennard Shelf Blocks”). In consideration, the Company agreed to transfer
to Key 100% of its wholly owned subsidiary, Rey Oil & Gas Perth Pty Ltd, which sole asset is a 43.47% interest in
EP437.
In addition, Indigo Oil Pty Ltd (“Indigo”) agreed to transfer its interests in Lennard Shelf Blocks to Gulliver. Further,
Gulliver agreed to grant a commercial royalty of 2.5% and 0.5% to Key and Indigo separately over R1 and L15
upon completion of each applicable transfer. The transaction with Indigo was approved by the regulators on
1 August 2018 and Rey holds 100% of the three permits by the report date.
L15 is a production licence with production history in West Kora oil field. An estimation of oil reserves and
contingent oil resource for West Kora oilfield and Point Torment gas discover in R1 was provided by third party
in September 2015. The estimated remaining reserves and resources is listed in table below.
Estimated Remaining Reserves and Resources
West Kora Oilfield Recoverable Oil
West Kora Oilfield Recoverable Contingent Resources
Point Torment Gas Discovery Recoverable Contingent Resources
mmSTBO1
mmSTBO
BCF2
1P
0.25
1C
0.06
2.41
2P
0.38
2C
0.12
4.725
3P
0.66
3C
0.26
8.42
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(Estimate prepared by Energetica Consulting in September 2015, refer to Key ASX releases dated on 30 September 2015).
Rey Resources Annual Report 2018
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
Coal
Duchess Paradise Project
The Duchess Paradise Project is a proposed bituminous thermal coal in the Canning Basin, north Western
Australia. A Definitive Feasibility Study of the Project was completed in June 2011. The project covers 3 tenements.
During the period, two tenements of the project have been renewed for one year until 20 January 2019 and
19 April 2019 respectively. Rey has also completed the first phase Definitive Feasibility Study update. The
results significantly increased the recoverable reserves by the new mining method. A valuation also has been
conducted by a third party in February 2018 and the calculation supports the carrying value of the project.
A Mining Licence covering three tenements is under application. Warden’s court is considering the application
after particular and support documents were lodged by Rey and objectors in early 2018. An initial result has
come out that the decision of Warden related to EPA will not be affected by the environmental objections.The
final recommendation of Warden’s court will come out in second half of 2018 and then Minister is able to make
final decision on the mining licence application. An access deed has also been drafted and commented
negotiation with one of the objectors.
Rey also attended the PBC Board Meeting in mid June 2018 to present the new mining plan and Fitzroy River
protection plan to Niykina Mangala People. Rey sincerely want to build a good relationship with local native
title and help them to develop the community.
Rey and Yuanrun Investment Ltd (“Yuanrun”) entered into a cooperation framework agreement (“Agreement”)
on 17 July 2018 for the sale of 100% of the shares in Blackfin Pty Ltd (“Blackfin”). Blackfin is a wholly-owned
subsidiary of Rey which holds interests in a coal project in Western Australia, the Duchess Paradise Thermal
Coal Project (“DP Project”). The consideration for the sale of Blackfin is A$24,000,000, consisting of an initial
cash payment of A$2,000,000 and a convertible loan with a face value of A$22,000,000.
The convertible loan of A$22 million (“CL”) will bear an interest of 3% per annum, payable on a quarterly basis.
The CL will be guaranteed by a guarantor, the identity of whom is to be agreed by the parties. The CL will be
convertible into shares in a project company (“Project Company”), which will hold interests in the DP Project,
upon the Project Company's listing on a mutually approved stock exchange (preferably, the Hong Kong Stock
Exchange) (“Listing”). The issue price for securities in the Project Company has not yet been determined.
The Agreement contemplates that the Listing will occur within three years from all licenses being obtained
for the Project Company. Within this three-year period, construction of a coal mine must also commence
(“Construction”). If Listing and Construction do not occur within the three-year period, the parties can agree
to negotiate on extending the period for Listing and Construction by a further 24 months. In the event that the
Project Company is unable to achieve Listing and Construction within the agreed period, the Agreement shall
be terminated by the parties and Yuanrun or the guarantor shall repay in full any remaining amounts under the
CL together with any accrued interest in cash.
At the general meeting of the Company held on 13 September 2018, the Agreement has been approved by
shareholders of the Company.
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
Corporate
On 3 July 2017, the Company announced that it had entered into a loan agreement with Ms Wanyan Liu, a
substantial shareholder of the Company, for a $500,000 unsecured loan to the Company with interest accruing
at the rate of 12% per annum for a term of 12 months which was subsequently extended to 31 December 2019.
The Company further entered into a loan facility agreement on 12 October 2017 with ASF Group Limited (“ASF”),
pursuant to which ASF agreed to provide up to $1 million standby facility (“Facility”) to the Company at an
interest rate of 12% per annum with maturity date on 11 October 2018. The Facility was subsequently increased
to $1.5 million and then $2 million and extended to 31 December 2019. On 18 July 2018, ASF agreed to further
extend the facility amount to $2.5 million. As at 30 June 2018, a total of $1.94 million of the Facility had been
drawn down by the Company. At the date of this report, a total of $2.4 million of the Facility has been drawn
On 14 May 2018, the Company announced the acquisition of a 100% interest in EP104, R1 and L15 from Key
and Indigo. In consideration, the Company agreed to transfer to Key its interest in EP437 and the granting of a
commercial royalty of 2.5% and 0.5% to Key and Indigo separately over R1 and L15 upon completion of each
During the financial year, the Company undertook an on-market share buyback and bought back 90,000
shares at a cost of $19,863. As part of the ongoing capital management strategy, the Company has on 7 June
2018 announced the extension of the on-market buyback program for a further 12 months from 22 June 2018.
The net loss of the consolidated entity after income tax for the year ended 30 June 2018 was $1,049,000,
compared with the loss of $559,000 for last year, an increase of approximately 87%. The increase in loss for the
year was mainly attributed by the increase in employee expenses and the accrued interests on the aforesaid
During the year, $1,629,000 (2017: $1,171,000) in exploration expenditure was capitalised, of which $1,249,000
related to oil and gas exploration (2017: $1,065,000) which included capitalised exploration expenditure
recognised on the acquisition of EP104, R1 and L15.
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down.
applicable transfer.
Finance review
loan facilities.
9. DIVIDENDS
No dividend has been paid or declared by the Company during the financial year ended 30 June 2018 (2017:
nil) and the Directors do not recommend the payment of a dividend in respect of the financial year ended 30
June 2018.
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.
Rey Resources Annual Report 2018
27
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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..
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
No performance rights were vested and converted to shares during the year.
13. OPTIONS OVER UNISSUED SHARES
Options on Issue
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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
as protection 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.
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Rey Resources Annual Report 2018
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16. SUBSEQUENT EVENTS
On 17 July 2018, Rey and Yuanrun entered into a cooperation framework agreement for the sale of 100% of
the shares in Blackfin which holds the Duchess Paradise Thermal Coal Project. The consideration for the sale
of Blackfin is A$24,000,000, consisting of an initial cash payment of A$2,000,000 and a convertible loan worth
A$22,000,000. The Agreement has been approved by shareholders of the Company at the general meeting
held on 13 September 2018. As at the date of this report, the $2 million cash has not been received. The
Directors remain in negotiation with Yuanrun regarding the receipt of the deposit to crystalise the transaction.
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may
significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in
future financial years.
17. PROCEEDINGS ON BEHALF OF THE COMPANY
At the date of this report, there are no leave applications or proceedings brought on behalf of the Company
l
under section 237 of the Corporations Act 2001.
18. ROUNDING
The Group is of a kind referred to in Australian Securities and Investments Commission (ASIC) Class Order
2016/191. In accordance with that Class Order, amounts contained in the consolidated financial statements
and Directors’ report have been rounded off to the nearest one thousand dollars, unless specially stated to be
otherwise.
19. NON-AUDIT SERVICES
There were no non-audit services provided by KPMG during this financial year.
20. AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is set out on page 30 and forms part of the Directors’ report for the
financial year ended 30 June 2018.
Signed in accordance with a resolution of Directors.
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Min Yang
Non-Executive Chairman
Sydney, Australia
27 September 2018
Rey Resources Annual Report 2018
29
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 of Rey Resources Limited for
the financial year ended 30 June 2018 there have been:
i.
ii.
KPM_INI_01
PAR_SIG_01
KPMG
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.
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
Daniel Camilleri
Partner
Sydney
27 September 2018
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
Professional Standards Legislation.
30
Rey Resources Annual Report 2018
Rey Resources Limited
For the year ended 30 June 2018
Consolidated statement of profit or loss and other comprehensive income
Impairment reversal /(loss) of exploration and evaluation assets
in thousands of dollars
Other income/(expense)
Administrative expenses
Loss from operations
Finance income
Finance costs
Net finance costs
Loss before income tax
Income tax benefit
Loss for the year attributable to owners of the company
Other comprehensive income
Total comprehensive loss for the year, attributable to owners of the Company
Loss per share
Basic and diluted (cents per share)
The notes on pages 35-64 are an integral part of these consolidated financial statements
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Note
4, 12
6
4
5
7
30 June
2018
30 June
2017
(42)
(1)
(844)
(887)
1
(163)
(162)
145
-
(704)
(559)
3
(3)
-
(1,049)
(559)
-
-
(1,049)
(559)
-
(1,049)
-
(559)
8
(0.49)
(0.27)
Rey Resources Annual Report 2018
31
Rey Resources Limited
Consolidated statement of financial position
As at 30 June 2018
Property, plant and equipment
Investment
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Exploration and evaluation expenditure
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in thousands of dollars
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total current assets
Non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefits
Loan and borrowings
Total current liabilities
Non-current liabilities
Provision
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 35-64 are an integral part of these consolidated financial statements
32
Rey Resources Annual Report 2018
Note
2018
2017
9a
10
11
12
13
14
15
22d
16
17
18
36
22
14
72
9
159
41,825
41,993
42,065
84
16
2,602
2,702
2,900
2,900
5,602
36,463
590
23
13
626
12
212
37,296
37,520
38,146
111
3
500
614
-
-
614
37,532
86,663
86,683
-
-
(50,200)
(49,151)
36,463
37,532
Rey Resources Limited
Consolidated statement of changes in equity
For the year ended 30 June 2018
In thousands of dollars
Balance at 30 June 2016
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
Issue of ordinary shares (Note 17)
Less: transaction Cost(Note 17)
Share-based payment transactions
Balance at 30 June 2017
Loss for the period
Other comprehensive income
Total comprehensive loss for the period
Transactions with owners recorded directly in equity:
Contributions by and distributions to owners
Issue of ordinary shares
Less: transaction Cost
Share buy back
Balance at 30 June 2018
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The notes on pages 35-64 are an integral part of these consolidated financial statements
Share capital
Reserves
Accumulated Losses
Total
85,683
2,238
(50,830)
37,091
-
-
-
-
-
(559)
-
(559)
-
-
(2,238)
2,238
(49,151)
(1,049)
-
(559)
-
(559)
1,000
-
-
37,532
(1,049)
-
-
-
-
1,000
-
-
86,683
-
-
-
-
-
(20)
86,663
-
-
-
-
-
-
-
-
(1,049)
(1,049)
-
-
-
(50,200)
-
-
(20)
36,463
Rey Resources Annual Report 2018
33
Rey Resources Limited
Consolidated statement of cash flows
For the year ended 30 June 2018
in thousands of dollars
Cash flows from operating activities
GST refund
Miscellaneous Income
Cash paid to suppliers and employees
Net cash used in operating activities
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Cash flows from investing activities
Interest received
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Payments for property, plant and equipment
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
The notes on pages 35-64 are an integral part of these consolidated financial statements
Note
30 June
2018
30 June
2017
(2)
-
(853)
(855)
-
(2)
(1,617)
(1,619)
-
(20)
1,940
-
-
7
41
(944)
(896)
3
(3)
(1,171)
(1,171)
1,000
-
500
-
-
1,920
1,500
(554)
590
36
(567)
1,157
590
9b
9a
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Rey Resources Annual Report 2018
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Notes to the consolidated financial report
For the year ended 30 June 2018
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 2018 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
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 27 September 2018.
(b) Going concern
ordinary course of business.
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
For the year ended 30 June 2018 the Group incurred a loss of $1,049,000 and incurred operating and investing
cash outflows of $2,474,000. As at 30 June 2018 the Group had cash of $36,000, net working capital deficiency
of $2,630,000 and net assets of $36,463,000.
The Group has prepared a cashflow forecast for the period ending 31 October 2019. The cashflow forecasts
demonstrates the expected receipt of $2 million for the sale of Duchess Paradise and also 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 while discretionary expenditure includes staff costs, company overheads etc. The
Directors are evaluating funding alternatives in the form of debt and equity, including discussions with existing
shareholders, and with third parties for farming out certain petroleum interests.
Rey Resources Annual Report 2018
35
Notes to the consolidated financial report (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
(c) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis.
(d) Functional and presentation currency
currency.
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional
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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)
Note 7
Note 13
- Going concern
- Recoverability of tax losses.
- Ultimate recoupment of carried forward exploration expenditure.
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.
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Rey Resources Annual Report 2018
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Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
subsidiaries.
(i) Subsidiaries
The consolidated financial statements comprise the financial statements of Rey Resources Limited and its
Subsidiaries are entities controlled by the Group. The Group controls an entity 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 is 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.
Rey Resources Annual Report 2018
37
Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Foreign currency
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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.
(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
Loans and receivables
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.
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 or less.
Cash and cash equivalents
(ii) Non-derivative financial liabilities
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
cancelled or expire.
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.
38
Rey Resources Annual Report 2018
Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
(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.
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(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.
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Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
The estimated depreciation rates for the current and comparative years are as follows:
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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
(e) Exploration and development assets
if appropriate.
area of interest.
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable
At the end of each reporting period, the capitalised exploration and evaluation expenditure is assessed for
impairment. This expenditure is 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
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carry forward costs in relation to that area of interest.
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Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
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 may be uncertainty
regarding the nature and extent of the restoration due to community expectations and future legislation.
(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.
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.
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Rey Resources Annual Report 2018
41
Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Employee benefits
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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
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
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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.
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Rey Resources Annual Report 2018
Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Income tax
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
recognised for:
• 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.
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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 2018
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Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(j) Earnings per share
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.
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Notes to the consolidated financial report (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.
(o) New standards and interpretations not yet adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are
not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30
June 2018. The Group's assessment of the impact of these new or amended Accounting Standards and
Interpretations, most relevant to the Group, are set out below:
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
replaces all previous versions of AASB 9 and completes the project to replace AASB 139 'Financial Instruments:
Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial
assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose
objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely
principal and interest. All other financial instrument assets are to be classified and measured at fair value
through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and
losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial
liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit
risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting
requirements are intended to more closely align the accounting treatment with the risk management activities
of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an
allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial
instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted.
The standard introduces additional new disclosures. The Group expects to adopt this standard from 1 July 2018
but the impact of its adoption is yet to be assessed.
Rey Resources Annual Report 2018
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Notes to the consolidated financial report (continued)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
AASB 15 Revenue from Contracts with Customers
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This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
provides a single standard for revenue recognition. The core principle of the standard is that an entity will
recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The
standard will require: contracts (either written, verbal or implied) to be identified, together with the separate
performance obligations within the contract; determine the transaction price, adjusted for the time value of
money excluding credit risk; allocation of the transaction price to the separate performance obligations on a
basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct
observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit
risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance
obligation is satisfied when the service has been provided, typically for promises to transfer services to
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customers. For performance obligations satisfied over time, an entity would select an appropriate measure
of progress to determine how much revenue should be recognised as the performance obligation is satisfied.
Contracts with customers will be presented in an entity’s statement of financial position as a contract liability,
a contract asset, or a receivable, depending on the relationship between the entity’s performance and the
customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand
the contracts with customers; the significant judgments made in applying the guidance to those contracts;
and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group expects
to adopt this standard from 1 July 2018. The impact of its adoption is yet to be finalised, however no material
impacted is expected on the financial statement of the group from adopting this standard.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard
replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases.
Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured as
the present value of the unavoidable future lease payments to be made over the lease term. The exceptions
relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and
small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised
or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease
will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred
and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense
recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and
an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the
lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses
under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be
improved as the operating expense is replaced by interest expense and depreciation in profit or loss under
AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both
a principal (financing activities) and interest (either operating or financing activities) component. For lessor
accounting, the standard does not substantially change how a lessor accounts for leases. The Group will adopt
this standard from 1 July 2019 but the impact of its adoption is yet to be assessed.
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Notes to the consolidated financial report (continued)
4. OTHER INCOME AND FINANCE INCOME
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in thousands of dollars
Other income/(expense)
Change in fair value of investment
Others
Finance income
Interest income
5. FINANICAL COSTS
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in thousands of dollars
Financial costs
Bank charges
Interest on loans
6. 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:
Salaries and fees
Superannuation
2018
2017
(53)
11
(42)
1
1
106
39
145
3
3
2018
2017
1
162
163
3
-
3
2018
2017
225
2
319
5
10
198
85
844
282
37
319
194
144
167
3
16
112
68
704
150
17
167
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Notes to the consolidated financial report (continued)
7. INCOME TAX EXPENSE
in thousands of dollars
Income tax recognised in profit or loss
Current tax benefit
Deferred tax benefit
Income tax benefit
in thousands of dollars
Accounting loss before tax
At statutory income tax rate of 27.5% (2017: 30%)
Non-deductible expenses
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:
Reconciliation of prima facie tax on accounting loss before tax to income tax (benefit) / expense
2018
2017
-
-
-
-
2018
(1,049)
(288)
(25)
313
-
-
-
-
-
2017
(559)
(168)
(71)
239
-
Exploration and evaluation expenditure
in thousands of dollars
Deferred tax liabilities
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
Profit or loss
2018
2017
2018
2017
(10,704)
(11,189)
(4)
(4)
(10,708)
(11,193)
10,692
16
10,708
-
11,180
13
11,193
-
485
-
485
(488)
3
(485)
-
(352)
2
(350)
445
(95)
350
-
At 30 June 2018, the Group has tax losses arising in Australia of $79,503,136 (2017: $76,790,474) 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. The ability of the Group to utilise these tax losses will depend on whether the Group is determined to
pass the Australian Tax Office rules of continuity of ownership test, or failing that, the same business test.
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.
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Rey Resources Annual Report 2018
Notes to the consolidated financial report (continued)
8. LOSS PER SHARE
in thousands of dollars
2018
2017
Earnings
Earnings used in calculating basic and diluted
earnings per share attributable to the owners
of the company
Number of ordinary shares
Weighted average number of ordinary shares
outstanding during the year used in calculating
(1,049)
2018
(559)
2017
basic and diluted loss per share
212,484,287
208,549,966
Basic loss per Share (cents per share)
Diluted loss per Share (cents per share)
(0.49)
(0.49)
(0.27)
(0.27)
Calculation of loss per share
Basic loss per share is calculated as loss for the period attributable to shareholders of $1,049,000 (2017: $559,000
loss) divided by the weighted average number of ordinary shares of 212,484,287 (2017: 208,549,966). The
diluted loss per share for the year ended 30 June 2018 and 2017 were the same as the basic loss per share as
the outstanding performance share rights had an anti-dilutive effect to the basic loss per share.
9a. CASH AND CASH EQUIVALENTS
in thousands of dollars
Cash at bank and in hand
Cash and cash equivalents
in note 22.
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed
2018
2017
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36
590
590
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Note
2018
2017
(1,049)
(559)
11
12
5
(12)
53
162
-
-
(841)
1
(1)
(27)
13
(855)
3
-
(106)
-
2
(2)
(662)
5
6
(90)
(155)
(896)
2018
2017
22
22
23
23
Notes to the consolidated financial report (continued)
9b. 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
Change in fair value of investment
Finance costs
Loss/(Profit) on disposal of fixed assets
Other non-cash transactions
Write back Impairment of capitalised exploration expenditure
(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
10. TRADE AND OTHER RECEIVABLES
in thousands of dollars
Current
Other receivables
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2018
2017
181
(172)
9
179
(167)
12
2018
2017
12
2
-
(5)
9
15
-
-
(3)
12
2018
2017
212
(53)
159
106
106
212
Notes to the consolidated financial report (continued)
11. 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
Balance as at 30 June
12. INVESTMENT
in thousands of dollars
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Investment in Norwest Energy NL at fair value as at 1 July
Changes in fair value of investment
On 5 June 2015, Rey subscribed for $250,000 of Norwest Energy NL (Norwest) shares at a price of $0.004712 per share. The
closing price of Norwest shares as at 30 June 2018 was $0.003 per share. This investment is classified as a fair value through
profit or loss financial asset and accordingly fair value changes are recorded in the profit and loss statement.
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Notes to the consolidated financial report (continued)
13. EXPLORATION AND EVALUATION EXPENDITURE
in thousands of dollars
Exploration and evaluation expenditures carried forward in respect of:
Duchess Paradise 1
EP457 and EP458 2
EP437 3
EP104, R1 and L15 4
EP487 5
Costs carried forward
2018
2017
21,942
10,789
-
5,740
3,354
41,825
21,562
10,640
2,717
-
2,377
37,296
1. Exploration and evaluation expenditure recognised in Duchess Paradise which is 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 joint venture agreement with Key Petroleum Ltd (“Key”) and
Pilot Energy Ltd. This amount includes The Group’s proportionate share of exploration assets held by the EP437 tenement owners. On
14 May 2018, the Company announced the acquisition from Key 100% of the shares in Gulliver Productions Pty Ltd (“Gulliver”), a wholly
owned subsidiary of Key which holds majority interests in EP104, R1 and L15 (together the “Lennard Shelf Blocks”). In consideration, the
Company agreed to transfer to Key 100% of its wholly owned subsidiary, Rey Oil & Gas Perth Pty Ltd, which sole asset is a 43.47% interest
in EP437. In addition, Indigo Oil Pty Ltd (“Indigo”) agreed to transfer its interests in Lennard Shelf Blocks to Gulliver. The transaction with
Indigo was approved by the regulators on 1 August 2018 and Rey now holds 100 % of the three permits. Further exploration works may
be carried out by the Company and the costs for the Lennard Shelf Blocks were accordingly classified as exploration and evaluation
expenditures in these financial statements.
4. Exploration and evaluation expenditure recognised on EP104, R1 and L15. Detail refers to note 3 above.
5. 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. In June 2017, Rey Derby Block Pty Ltd, a
wholly owned subsidiary of the Company, completed the acquisition of a 50% interest from Oil Basins Ltd and the Group now holds a
100% beneficial interest in EP487.
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in thousands of dollars
At cost
Movements in carrying amount:
in thousands of dollars
Opening balance
Disposal of interest in EP437
Acquisition of interests in EP104, R1, L15
Current year expenditure capitalised
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Rey Resources Annual Report 2018
2018
41,825
41,825
2018
37,296
(2,716)
5,616
1,629
41,825
2017
37,296
37,296
2017
36,125
-
-
1,171
37,296
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are satisfied:
Notes to the consolidated financial report (continued)
13. EXPLORATION AND EVALUATION EXPENDITURE (continued)
An exploration and evaluation asset is recognised in relation to an area of interest if the following conditions
(a) The rights to tenure of the area of interest are current; and
(b) At least one of the following conditions is also met:
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(i) the exploration and evaluation expenditures are expected to be recouped through successful
development and exploitation of the area of interest, or alternatively, by its sale; and
(ii) exploration and evaluation activities in the area of interest have not at the end of the reporting period
reached a stage which permits a reasonable assessment of the existence or otherwise of economically
recoverable reserves, and active and significant operations in, or in relation to, the area of interest are
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continuing.
Tenements where tenure is not intended to be continued have been fully impaired as at 30 June 2018.
Management expected to extend the right of tenure for tenements approaching expiry.
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 23.
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14. TRADE AND OTHER PAYABLES
in thousands of dollars
Unsecured liabilities
Sundry payables and accrued expenses
15. EMPLOYEE BENEFITS
in thousands of dollars
Employee benefits
Current
Non-current
2018
84
84
2017
111
111
2018
2017
16
-
16
3
-
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Notes to the consolidated financial report (continued)
16. PROVISION
in thousands of dollars
Restoration provision (L15, R1)
During the year, the Company acquired from Key Petroleum Ltd and Indigo Oil Pty Ltd 100% interests in EP104,
R1 and L15 (refer note 13). The restoration provision related to the West Kora 1 well and disused production
facilities in Production License L15, which was estimated based upon converting the well to a water well
following confirmation from the pastoral lease owner and removing the tank farm and restoring the site back
to its original condition.
17. ISSUED CAPITAL
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in thousands of dollars
212,405,266 (2017: 212,495,266) fully paid ordinary shares
2018
2,900
2,900
2017
-
-
2018
2017
86,663
86,663
86,683
86,683
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
value.
shares held.
Movements in shares on issue
On issue at beginning of the year
Shares issued during the year:
1 July 2016 1
17 Oct 2016 2
Share consolidation 3
Share buy back 4
Transaction costs relating to share issues
On issue at the end of the year
Number
2018
$’000
Number
212,495,266
86,683
992,381,876
(90,000)
(20)
3,426,667
66,666,666
(849,979,943)
-
-
2017
$’000
85,683
-
1,000
-
-
-
212,405,266
86,663
212,495,266
86,683
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1. On 1 July 2016, 3,426,667 share performance rights held by Mr Wilson vested and were converted to fully paid ordinary shares of the
Company.
2. On 17 October 2016, the Company completed a private placement to raise $1 million (before costs) via the issue of a total of
66,666,666 shares at an issue price of $0.015 per share to sophisticated investors.
3. On 1 December 2016, shares of the Company were consolidated on a five (5) into one (1) basis. Accordingly the total number of issued
shares of the Company after consolidation became 212,495,266 shares.
4. During the year ended 30 June 2018, a total of 90,000 shares were bought back at a cost of $20,000 and cancelled. On 7 June 2018,
the Company announced the extension of the on-market buyback program for a further 12 months from 22 June 2018.
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Notes to the consolidated financial report (continued)
18. 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 ended 30 June 2018, all
outstanding share performance rights were either lapsed or exercised and the share based payments reserves
were reversed accordingly.
19. COMMITMENTS
(a) Operating lease commitments
There was no non-cancellable operating lease commitment for the Group.
(b) Exploration expenditure commitments
The commitments are required in order to maintain the Group’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
112
-
112
Petroleum
7,602
28,584
36,186
Total
7,714
28,584
36,298
During the year, the Company acquired from Key and Indigo 100% interests in EP104, R1 and L15 (refer note
13). Pursuant to the agreement, Key and Indigo would be granted a royalty of 2.5% and 0.5% separately
over R1 and L15 upon completion of each applicable transfer. The royalty is payable based on the value of
wellhead of petroleum recovered and produced from the licences.
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Country of incorporation
Ownership Interest
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2018
100%
100%
100%
100%
100%
100%
-
-
100%
-
100%
-
100%
100%
100%
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
Notes to the consolidated financial report (continued)
Rey Derby Port Operations Pty Limited
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Rey Royalty Chile Pty Ltd
20. GROUP ENTITIES
Consolidated subsidiaries
Blackfin Pty Limited4
Rey Cattamarra Pty Limited
Rey Derby Pty Limited
Rey Derby Block Pty Limited
Rey Mt Fenton Pty Limited 1
Rey Freney Pty Limited 1
Rey Victory Pty Limited
Camballin Energy Pty Limited1
Rey Oil and Gas Pty Limited
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Rey Oil and Gas Perth Pty Limited2
Rey Lennard Shelf Pty Limited
Humitos Pty Ltd
Gulliver Productions Pty Ltd3
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1. Deregistered during the financial year
2. Disposed to Key Petroleum Ltd in May 2018. Detail refers to note 21.
3. Acquired from Key Petroleum Ltd in May 2018. Detail refers to note 21.
4. To be disposed to Yuanrun Investment Ltd pursuant to the cooperation framework agreement dated 17 July 2018 which had been
approved by shareholders at the general meeting of the Company held on 13 September 2018.
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Notes to the consolidated financial report (continued)
21. JOINT OPERATION INTERESTS
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 13) 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.
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The interest in the two exploration permits, known as “The Fitzroy Blocks”, are:
Buru Energy Limited
Mitsubishi Corporation
Rey Resources Limited
37.5% (operator)
37.5%
25% (of which a 10% interest is free carried to production).
The total amount of the Group’s capitalised exploration and evaluation expenditure under this joint venture
agreement at the reporting date was $10,789,000 (2017: $10,640,000 ) (note 13)
Rey/Key/Pilot Joint Venture and Rey/Indigo Joint Venture
On 29 May 2014, Rey Oil and Gas Perth Ltd (a wholly owned subsidiary 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.
On 14 May 2018, the Company announced the acquisition from Key Petroleum Ltd (“Key”) 100% of the shares
in Gulliver Productions Pty Ltd (“Gulliver”), a wholly owned subsidiary of Key which holds majority interests in
EP104, R1 and L15 (together the “Lennard Shelf Blocks”). In consideration, the Company agreed to transfer
to Key 100% of its wholly owned subsidiary, Rey Oil & Gas Perth Pty Ltd, which sole asset is a 43.47% interest in
EP437.
Following the completion of the transaction, Rey had no Joint Venture relationship with Key, Pilot and Indigo.
As at the report date, Rey holds 100% interests in EP104, R1 and L15 and no interests in EP437.
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Notes to the consolidated financial report (continued)
22. 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 20.
(c) KMP compensation
Disclosures relating to compensation of the KMP compensation comprised:
Individual Directors and executives compensation disclosures
Short term benefits
Post-employment benefits
2018
307,000
16,530
323,530
2017
264,954
12,535
277,489
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.
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Notes to the consolidated financial report (continued)
22. RELATED PARTIES (continued)
(d) Transactions with related parties
ASF Group Ltd
Service fees
Loan granted (inclusive of interest) 1
Wanyan Liu
Loan granted (inclusive of interest) 2
2018
2017
120,000
2,041,717
85,000
-
560,164
500,000
1. An unsecured loan of $2,000,000 was granted by ASF Group Ltd, a substantial shareholder of the Company, with maturity date on 31
December 2019 and interest bearing at 12% per annum. On 18 July 2018, ASF agreed to further extend the facility amount to $2.5 million.
The loan is repayable on demand with three months notice from the lender. Subsequent to 30 June 2018, a further $460,000 has been
drawn down against the ASF loan.
2. An unsecured loan of $500,000 was granted by Wanyan Liu, a substantial shareholder of the Company, with maturity date on 31
December 2019 and interest bearing at 12% per annum. The loan is repayable on demand with one month notice from the lender.
3. Refer to note 13 for transaction between the Company and Key Petroleum Ltd (“Key”). ASF Group Ltd is a substantial shareholder in both
the Company and Key.
23. FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Categories of financial instruments
share investment.
The Group’s financial instruments consist mainly of deposits with banks and accounts receivable, payable and
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
Financial assets measured at fair value
Share investment 1
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
2018
2017
159
36
22
217
84
84
212
590
23
825
111
111
1. 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. The closing price of Norwest shares as at 30 June 2018 was $0.003 per share.
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Notes to the consolidated financial report (continued)
23 . FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
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:
2018
22
2017
23
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
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.
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The main risks the Group is exposed to through its financial instruments are liquidity risk and market risk which
Neither past due nor impaired
Financial risk management framework
framework.
includes interest rate risk.
Credit risk
and other receivables.
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
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
as there were no trading operations during the year.
At 30 June 2018 and 30 June 2017, 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.
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Notes to the consolidated financial report (continued)
23. FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
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:
in thousands of dollars
Carrying
Expected /
6 months
6-12
1-2
2-5
More than
amount
contractual cash flows
or less
months
years
years
5 years
Financial liabilities
Trade and other payables
Loans from a shareholder
84
2,602
2,686
84
3,042
3,126
84
-
84
-
-
-
-
3,042
3,042
-
-
-
-
-
-
in thousands of dollars
Carrying
Expected / contractual
6 months
6-12
1-2
2-5
More than
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amount
cash flows
or less
months
years
years
5 years
111
500
611
111
560
671
111
-
111
-
560
560
-
-
-
-
-
-
-
-
-
The Group is not exposed to currency risk at the reporting date because the Group holds no financial assets or
The Group is exposed to interest rate risk 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.
Financial liabilities
Trade and other payables
Loans from a shareholder
Currency risk
liabilities denominated in foreign currency.
Interest rate risk
in thousands of dollars
Variable rate instruments
Cash and cash equivalents
2018
2017
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2018
2017
36
36
590
590
At the reporting date, the Group had a total of $2.5 million term loan facilities from shareholders. Due to the
fixed interest rate of the loans, the Group is not exposed to interest rate fluctuations.
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
or loss by $624 (2017: $4,429).
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Notes to the consolidated financial report (continued)
23. FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Fair values
The Group's share investment measured at fair value at the end of the reporting period on a recurring basis
and categorised into Level 1 fair value hierarchy as defined in AASB 13 Fair value measurement. The fair value
of the share investment is measured using unadjusted quote price on the Australian Securities Exchange.
During the year ended 30 June 2017 and 2018, there were no transfers between Level 1 and Level 2 or transfer
into or out of Level 3.
Except for the share investment, the carrying amounts of other financial assets and financial liabilities are
assumed to approximate their fair values due to their short-term nature.
24. OPERATING SEGMENTS
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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
Impairment reversal of assets
Impairment of investment
Consolidated
Revenue
Total Reportable
segment revenue
Other income
Interest revenue
Finance costs
Administration cost
Profit/(loss) before
income tax benefit
income tax benefit
Assets
Other Assets
Segment assets
Total assets
Liability
Other liabilities
Segment liabilities
Total Liabilities
Loss after income tax benefit
Mineral
Mineral
Petroleum
Petroleum
Corporate
Corporate
Total
Total
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
104
-
-
-
-
-
104
-
104
-
-
12
(1)
-
-
-
-
11
-
11
-
-
-
-
-
-
-
-
-
-
-
-
21,942
21,562
21,942
21,562
19,883
19,883
15,734
15,734
-
-
-
-
-
-
-
2,900
2,900
1,249
-
-
-
1,065
-
-
-
(53)
-
(163)
(844)
-
41
-
-
3
(3)
(704)
-
12
(1)
(53)
-
(163)
(844)
-
145
-
-
3
(3)
(704)
(1,060)
(663)
(1,049)
(559)
-
-
-
-
(1,060)
(663)
(1,049)
(559)
240
-
240
2,702
-
2,702
-
850
-
850
614
-
614
-
240
41,825
42,065
2,702
2,900
5,602
1,629
850
37,296
38,146
614
-
614
1,171
Capital Expenditure
380
106
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Notes to the consolidated financial report (continued)
25. SUBSEQUENT EVENTS
On 17 July 2018, Rey and Yuanrun entered into a cooperation framework agreement for the sale of 100%
of the shares in Blackfin Pty Limited (“Blackfin”) which holds the Duchess Paradise Thermal Coal Project. The
consideration for the sale of Blackfin is A$24,000,000, consisting of an initial cash payment of A$2,000,000 and a
convertible loan worth A$22,000,000. The Agreement has been approved by shareholders of the Company at
the general meeting held on 13 September 2018. As at the date of this report, the $2 million cash has not been
received. The directors remain in negotiation with Yuanrun regarding the receipt of the deposit to crystalise the
transaction.
No other matter or circumstance that is not already disclosed in these financial statements has arisen since 30
June 2018 that has significantly affected, or may significantly affect the Group’s operations, the results of those
operations, or the Group’s state of affairs in future financial years
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26. AUDITORS REMUNERATION
in dollars
Audit services
Auditors of the Company
KPMG Australia:
Audit and review of financial reports
Other assurance services
2018
2017
62,000
2,000
64,000
58,700
-
58,700
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Notes to the consolidated financial report (continued)
27. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ended 30 June 2018 the parent entity of the Group was Rey
2018
2017
(1,059)
(1,059)
65
37,263
37,328
2,695
-
2,695
(600)
(600)
614
35,705
36,319
608
-
608
34,633
35,711
86,663
-
(52,030)
34,633
86,683
-
(50,972)
35,711
Resources Limited.
in thousands of dollars
A. Result of parent entity
Loss for the year
Total comprehensive loss for the year
B. Financial position of the parent entity
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Share capital
Reserves
Accumulated losses
Total equity
C. Parent entity contingencies
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As at 30 June 2018 and 2017, there are no contingent liabilities of the parent entity.
D. Parent entity capital commitments
As at 30 June 2018 and 2017, the parent entity has not entered into any material contractual agreements
for the acquisition of property, plant or equipment.
E. Parent entity guarantees in respect of the debts of its subsidiaries
As at 30 June 2018 and 2017, there are no guarantees entered into by the parent entity.
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 2018 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 2018.
Signed in accordance with a resolution of the Directors.
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Min Yang
Non-Executive Chairman
Sydney, Australia
27 September 2018
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Independent Auditor’s Report
To the shareholders of Rey Resources Limited
Report on the audit of the Financial Report
Opinions
We have audited the Financial Report of
Rey Resources Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with
the Corporations Act 2001, including:
• giving a true and fair view of the Group’s
financial position as at 30 June 2018 and of
its financial performance for the year ended
on that date; and
• complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2018;
• 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 then ended;
• Notes including a summary of significant accounting
policies; and
• Directors' Declaration.
The Group consists of the Company and the entities it
controlled at the year end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audits of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audits of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
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
Professional Standards Legislation.
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Material uncertainty related to going concern
We draw attention to Note 2(b), “Going concern” in the financial report. The conditions disclosed in Note
2(b), indicate a material uncertainty exists that may cast significant doubt on the Group’s ability to continue
as a going concern and, therefore, whether it will realise its assets and discharge its liabilities in the normal
course of business, and at the amounts stated in the financial report. Our opinion is not modified in
respect of this matter.
In concluding there is a material uncertainty related to going concern we evaluated the extent of
uncertainty regarding events or conditions casting significant doubt in the Group’s assessment of going
concern. This included:
Analysing the cash flow projections by:
Evaluating the underlying data used to generate the projections for consistency with other
information tested by us, our understanding of the Group’s intentions, and past results and
practices;
Assessing the planned levels of operating and capital expenditures for consistency of relationships
and trends to the Group’s historical results, results since year end, and our understanding of the
business, industry and economic conditions of the Group;
Assessing significant non-routine forecast cash inflows and outflows including the impact of the share
issue subsequent to year end for feasibility, quantum and timing. We used our knowledge of the
client, its industry and current status of those initiatives to assess the level of associated uncertainty.
Reading Directors minutes and relevant correspondence with the Group’s advisors to understand
the Group’s ability to raise additional shareholder funds, and assess the level of associated
uncertainty; and
Evaluating the Group’s going concern disclosures in the financial report by comparing them to our
understanding of the matter, the events or conditions incorporated into the cash flow projection
assessment, the Group’s plans to address those events or conditions, and accounting standard
requirements. We specifically focused on the principle matters giving rise to the material uncertainty.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section, we have
determined the matter described below to be the Key Audit Matter.
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Exploration and evaluation expenditure ($41,825,000)
Refer to Note 13 ‘Exploration and Evaluation Expenditure’
The key audit matter
How the matter was addressed in our audit
Exploration and evaluation expenditure
capitalised (E&E) is a key audit matter due to:
the significance of the activity to the Group’s
business and the balance (being 99% of
total assets); and
the greater level of audit effort to evaluate
the Group’s application of the requirements
of the industry specific accounting standard
AASB 6 Exploration for and Evaluation of
Mineral Resources, in particular the
conditions allowing capitalisation of relevant
expenditure and presence of impairment
indicators. The presence of impairment
indicators would necessitate a detailed
analysis by the Group of the value of E&E,
therefore given the criticality of this to the
scope and depth of our work, we involved
senior team members to challenge the
Group’s determination that no such
indicators existed.
In assessing the conditions allowing
capitalisation of relevant expenditure, we
focused on:
the determination of the areas of interest;
documentation available regarding rights to
tenure, via licensing, and compliance with
relevant conditions, to maintain current
rights to an area of interest and the Group’s
intention and capacity to continue the
relevant E&E activities; and
the Group’s determination of whether the
E&E are expected to be recouped through
successful development and exploitation of
the area of interest, or alternatively, by its
sale.
In assessing the presence of impairment
indicators, we focused on those that may draw
Our audit procedures included:
Evaluating the Group’s accounting policy to
recognise exploration and evaluation assets using
the criteria in the accounting standard;
We assessed the Group’s determination of its
areas of interest for consistency with the
definition in the accounting standard. This
involved analysing the licenses in which the
Group holds an interest and the exploration
programs planned for those for consistency with
documentation such as license related technical
conditions, joint venture agreements, results of
the external expert engaged by the Group, and
planned work programs;
For each area of interest, we assessed the
Group’s current rights to tenure by corroborating
the ownership of the relevant license to
government registries and evaluating agreements
in place with other parties. We also tested for
compliance with conditions, such as minimum
expenditure requirements, on a sample of
licenses;
We tested the Group’s additions to E&E for the
year by evaluating a statistical sample of recorded
expenditure for consistency to underlying records,
the capitalisation requirements of the Group’s
accounting policy and the requirements of the
accounting standard;
We evaluated Group documents, such as minutes
of Board meetings, for consistency with their
stated intentions for continuing E&E in certain
areas. We corroborated this through interviews
with key operational and finance personnel;
We analysed the Group’s determination of
recoupment through successful development and
exploitation of the area or by its sale by evaluating
the Group’s documentation of planned
future/continuing activities including work
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into question the commercial continuation of
E&E activities for areas of interest where
significant capitalised E&E exists. In addition to
the assessments above, and given the financial
position of the Group and restrictive events
imposed we paid particular attention to:
documentation available regarding rights to
tenure, via licensing, and compliance with
relevant conditions, to maintain current
rights to an area of interest and the Group’s
intention and capacity to continue the
relevant E&E activities;
The ability of the Group to fund the
continuation of activities;
The impact of the restrictive event imposed
on the Group to the implications to carrying
forward capitalised E&E; and
Results from latest activities regarding the
existence or otherwise of economically
recoverable reserves.
These assessments can be inherently difficult,
particularly in uncertain or depressed market
conditions such as those currently being
experienced in Australian oil and gas exploration.
programs and project and corporate budgets for a
sample of areas;
We obtained project and corporate budgets
identifying areas with existing funding and those
requiring alternate funding sources. We compared
this for consistency with areas with E&E, for
evidence of the ability to fund continued activities.
We identified those areas relying on alternate
funding sources and evaluated the capacity of the
Group to secure such funding;
We assessed the impact of the unconventional
drilling moratoriums to the Group’s planned
continued exploration and evaluation activities.
We read correspondence from the Government of
Western Australia which imposed the moratorium
to understand the scenario and status, and
compared this to the Group’s proposed level and
timing of recommencement activity to that prior
to the moratorium. We used this knowledge to
assess the Group’s decision to continue to carry
E&E on these areas, and the consistency of the
decision for commercial continuation of activities;
and
We compared the results regarding the existence
of reserves for consistency to the treatment of
E&E and the requirements of the accounting
standard.
Other Information
Other Information is financial and non-financial information in Rey Resources Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Corporate Directory
and Directors’ Report. The Annual Mineral Reserves and Resources Statement is expected to be made
available to us after the date of the Auditor’s report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Reports
or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
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Rey Resources Annual Report 2018
69
Responsibilities of the Directors for the Financial Reports
The Directors are responsible for:
• preparing the Financial Report that give a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
• implementing necessary internal control to enable the preparation of a Financial Report that give a true
and fair view and are free from material misstatement, whether due to fraud or error
• assessing the Group's ability to continue as a going concern and whether the use of the going concern
basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audits of the Financial Reports
Our objective is:
• to obtain reasonable assurance about the Financial Report as a whole are free from material
misstatement, whether due to fraud or error; and
• to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audits of the Financial Reports is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.
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Rey Resources Annual Report 2018
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Rey Resources Limited for the year ended
30 June 2018, complies with Section 300A
of the Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in section 6
of the Directors’ report for the year ended 30 June 2018.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Daniel Camilleri
Partner
Sydney
27 September 2018
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Rey Resources Annual Report 2018
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ASX ADDITIONAL 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 13 September 2018.
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 2018
financial year and to the date of this report, the Company followed and reports against the 3rd Edition of
the ASX Principles. The Company’s 2018 Corporate Governance Statement is available from the Company’s
website at http://reyresources.com/corporate/corporate-governance/
Substantial Shareholders
Company) is set out below:
An extract of the Company’s register of substantial shareholders (being those shareholders who held 5% or
more of the issued capital of the Company and who have provided substantial shareholding notices to the
Shareholder
Number of shares
Percentage held
ASF Canning Basin Energy Pty Ltd
Miss Wanyan Liu
Merchant Central Limited
Neway Energy International Limited
Mrs Yinxin He
Start Grand Global Limited
Miss Mei Chi Joyce Lee
Start Link Investments Limited
34,666,667
34,068,800
25,114,286
14,450,580
13,337,285
12,361,500
12,092,553
10,959,614
16.31
16.03
11.82
6.80
6.28
5.82
5.69
5.16
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Rey Resources Annual Report 2018
Top 20 Shareholders
The 20 largest shareholders of the Company are listed below:
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XIAO HUI ENTERPRISES LIMITED
MR JIARONG HE
BNP PARIBAS NOMS PTY LTD
Name
ASF CANNING BASIN ENERGY PTY LTD
MISS WANYAN LIU
MERCHANT CENTRAL LIMITED
NEWAY ENERGY INTERNATIONAL LIMITED
MRS YINXIN HE
START GRAND GLOBAL LIMITED
MISS MEI CHI JOYCE LEE
START LINK INVESTMENTS LIMITED
JADE SILVER INVESTMENTS LIMITED
MR HAITAO GENG
TONG HENG HOLDINGS LIMITED
JADE SILVER INVESTMENTS LTD
FOREVER GRAND GROUP LIMITED
BROWNSTONE INTERNATIONAL PTY LTD
MEGA AHEAD LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR KEVIN JOHN WILSON & MRS JOLA WILSON
TOTAL TOP 20 SHAREHOLDERS
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Number of Shares
Percentage Held %
34,666,667
34,068,800
25,114,286
14,450,580
13,270,000
12,361,500
12,092,553
10,959,614
9,352,056
6,959,404
6,128,491
6,110,416
3,000,000
1,846,126
1,480,000
1,150,837
1,000,000
990,326
972,128
830,335
16.32%
16.04%
11.82%
6.80%
6.25%
5.82%
5.69%
5.16%
4.40%
3.28%
2.89%
2.88%
1.41%
0.87%
0.70%
0.54%
0.47%
0.47%
0.46%
0.39%
196,804,119
92.66%
Rey Resources Annual Report 2018
73
There were 680 holders of less than a marketable parcel of ordinary shares (being 1,666 shares on 13
Distribution of Equity Securities
The number of shareholders by size of holding is set out below:
September 2018).
Fully Paid Ordinary Shares
Size of Holding
Number of holders
Number of shares
583
448
171
185
49
1,436
169,486
1,246,911
1,314,588
4,992,749
204,661,532
212,385,266
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-market Share Buy-back
On 7 June 2018, 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. In the 2018 financial year and to the date of this Annual Report, Rey
Resources has bought back 20,000 shares pursuant to the current share buy-back.
Securities Exchange
Rey Resources is listed on the Australian Securities Exchange (ASX code: REY).
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
TOTALS
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Voting Rights
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Rey Resources Annual Report 2018
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Tenement Schedule
The tenement schedule for the Group as at the date of this report is tabulated below:
Licence
Type
Licence
No.1
Grant Date
Expiry Date
Holder
EL
EL
EL
E04/1386
21/01/2004
20/01/2018
E04/1519
20/04/2006
19/04/2018
E04/1770
4/03/2009
3/03/2019
MA
M04/0453
Pending
Pending
Blackfin Pty Ltd2
Blackfin Pty Ltd2
Blackfin Pty Ltd2
Blackfin Pty Ltd2
(Ha)
1,627
11,386
6,834
12,964
Area
Percentage
EP
EP
EP
EP
L
R
EP
EP457
EP458
EP4873
EP4873
L154
R14
EP1044
24/10/2007
05/01/20221
Rey Oil and Gas Pty Ltd
251,737
24/10/2007
05/01/20221
Rey Oil and Gas Pty Ltd
292,050
14/03/2014
13/12/2021
Rey Lennard Shelf Pty Ltd
505,840
14/03/2014
13/12/2021
Rey Derby Block Pty Ltd
505,840
01/04/2010
21/03/2031
Gulliver Productions
16,346
100%
11/10/2016
10/10/2022
Gulliver Productions
24,516
100%
30/01/2015
29/07/2022
Gulliver Productions
73,596
100%
Held
100%
100%
100%
100%
25%
25%
50%
50%
EL: Exploration Licence
MA: Mining Lease Application
EP: Exploration Permit Petroleum
L:
R:
Production Licence
Retention Licence
1. All licences are located in Western Australia
2. On 17 July 2018, the Company entered into a cooperation framework agreement with Yuanrun Investment Ltd for the sale of 100% of the
shares in Blackfin Pty Ltd which holds the Duchess Paradise Coal Project for a total consideration of A$24 million. Shareholders approved
the transaction on 13 September 2018.
3. Royalties attaching to EP487: Rey Lennard Shelf Pty Ltd may, at its election, on the grant of a production licence on EP487, either: grant
Backreef Oil Pty Ltd a 1% royalty on sales proceeds from future production from its former interest in EP487 or pay $2 million to Backreef.
4. Royalties attaching to L15, R1 and EP104: Gulliver granted Key Petroleum Ltd and Indigo Oil Pty Ltd a 25% and 0.5% royalty respectively
over the three blocks.
Rey Resources Annual Report 2018
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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