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ANNUALREPORT2019
ACN 108 003 890
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Rey Resources Annual Report 2019
CONTENTS
Corporate Directory
Company Profile
Chairman’s Message
Business Performance and Outlook
Annual Reserves and Resources Statement
Directors’ Report
Auditor’s Independence Declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial report
Directors’ Declaration
Independent Audit Report
ASX Additional Information
Tenement Schedule
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Rey Resources Annual Report 2019
CORPORATE DIRECTORY
Managing Director
Directors
Ms Min Yang Non-Executive Chairman
Mr Wei Jin
Mr Geoff Baker
Mr Dachun Zhang
Dr Zhiliang Ou
Mr Louis Chien
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Alternate Director to Non-Executive Chairman, Ms Min Yang
Company Secretary
Ms Shannon Coates
Registered Office
Suite 5, 62 Ord Street
West Perth WA 6005
Tel +61 (08) 9322 1587
Fax +61 (08) 9322 5230
Principal Place of Business
Suite 2, 3B Macquarie Street
Sydney NSW 2000
Tel +61 (02) 9251 9088
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
Level 6, Brookfield Place Tower 2 123 St Georges Terrace
Perth WA 6000
Auditor
KPMG
Level 38, Tower 3 International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000
Securities Exchange
Australian Securities Exchange (ASX)
ASX Code: REY
Website
www.reyresources.com
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Rey Resources Annual Report 2019
COMPANY PROFILE
Rey Resources Limited (“Rey Resources” or “the 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 40%
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”.
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Rey has participated in and completed a series of exploration works for these permits,
including two deep conventional oil wells in 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.
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 2019
CHAIRMAN’S MESSAGE
Dear fellow Shareholder,
It is my pleasure to deliver Rey Resources’ Annual Report for the year ending 30 June
2019, a year in which our key focus remained on maximising the value of our coal project
and oil and gas exploration business in the Canning Basin in Western Australia.
During the year ended 30 June 2019, we executed two farmout agreements with
Doriemus Plc regarding EP487 and the L15 petroleum production licence, situated to the
north of EP487, to potentially provide Rey an opportunity to achieve production in the
short term. While the Doriemus farmin on EP487 was terminated in August 2019, Rey is in
positive discussions with other significant investors to undertake the development work on
EP487. The L15 farmout continues and was not affected by the above. We look forward
to progressing these opportunities into 2020.
During the year, 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.
However, in November 2018 Yuanrun and Rey both agreed to terminate the transaction.
Rey is currently discussing with other significant investors possible funding solutions for the
Project.
I would like to thank all Shareholders for their support and understand, 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.
Min Yang
Non-Executive Chairman
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BUSINESS PERFORMANCE AND OUTLOOK
OIL & GAS
1.Canning Basin – the Fitzroy Blocks (EP457 and EP458)
1.1 Background
Equity interests in the Fitzroy Blocks (EP457 and EP458) are currently:
Rey (Rey Oil & Gas Pty Ltd)
Buru
40%
60%
(Operator)
Rey holds a total 40% participating interest in the two blocks, but only has a 33.336%
funding obligation until commercial production. This is due to a Funding Agreement
whereby Buru Energy Ltd free carries 6.664% of Rey's 40% participating interest.
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:
•
•
•
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
An independent scientific inquiry into the hydraulic fracturing (fracking) process was
completed and the report from the panel was delivered to the Western Australian
Government ("Government") in September 2018. However, the Government is still
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Rey Resources Annual Report 2019
considering the potential imposition of new and additional regulations. In light of the
uncertainty of the outcome of these deliberations, applications for further 12 month
suspensions to the commencement of Year 1 and 12 month extensions to the permit
terms of EP 457 and EP 458 were lodged with the regulator (DMIRS) on 7 January 2019
(STP-EPS-0299 and STP-EPS-0300 respectively). These applications were approved on 16
January 2019 and the requirement to complete the acquisition of a magneto-telluric
geophysical survey in each permit to fulfil the Year 1 work program obligation has
therefore been deferred until March 2021.
During the year, the Government continued to consider the final report from the
independent scientific inquiry into the hydraulic fracturing (fracking) process. The final
report was delivered to the Government on 12 September 2018 (just over one year after
the inquiry panel was established on 5 September 2017) and included 91 findings and 44
recommendations.
The Government announced on 8 July 2019 that it had approved an Implementation Plan
(the Plan) following its consideration of the final report from the independent scientific
inquiry panel. The Government also announced that a steering group made up of senior
officials from key Government agencies developed the Plan and had been tasked with
overseeing the implementation of the actions resulting from the Government’s policy
decisions relating to the findings and recommendations of the report. The Government
has also stated its intention to implement the recommendations and policy decisions by
the end of 2020.
During the year, a trial 2D seismic reprocessing program was completed and resulted
in marked improvement in the quality of the sub-surface image. Technical work was
also conducted and a number of anomalous gravity and seismic features that may be
interpreted as isolated Late Devonian carbonate build-ups have been identified. These
activities provide sufficient encouragement for a larger seismic reprocessing program
potentially involving up to several hundred line kilometres of vintage 2D data across both
EP 457 and EP 458 and this remains under consideration. The possible acquisition of a
new 2D seismic survey may also be considered.
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).
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Rey Resources Annual Report 2019
Equity interests in the Derby Block are currently:
Rey (Rey Lennard Shelf Pty Ltd)
Rey (Rey Derby Block Pty Ltd)
50%
50%
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2.2 Work program during the year
On 20 March 2018, Rey was granted a suspension and extension of the current year
commitments for EP487. The one well commitment has been deferred by 12 months to
the end of 2019.
On 31 December 2018, Rey entered into a binding letter of intent (Agreement) with
Doriemus PLC ("Doriemus") (ASX: DOR) pursuant to which Doriemus, subject to the
completion of due diligence and fulfilling certain conditions precedent, agreed to
farmin to EP487. On 28 March 2019, Rey announced that definitive documentation
(subject to the usual Government approvals), including a binding Farmout Agreement
which comprises an agreed form Joint Operating Agreement (Agreements) had been
executed with Doriemus for EP487. Pursuant to the Agreements, Doriemus was to drill the
commitment well on EP487 at its own cost, in an endeavour to confirm the Butler Prospect
potential. Subsequently, Doriemus failed to raise sufficient funds by end of June 2019
(which was extended to 31 July 2019) to undertake the farmin work on EP487 and Rey
announced that it had terminated the Agreements on 5 August 2019.
On 20 May 2019, Rey sent a letter to the Government regarding the potential partial
surrender of a number of blocks in EP487 and applied to vary the work programs for
the remaining permit years, in consideration for the Government’s ban on fracture
stimulation. On 9 August 2019, the Government suggested Rey maintain all blocks
in EP487 and agreed to remove the drilling depth and core conditions for the year 2
commitment well and to provide an exemption for the 2 well drilling requirements in
permit year 3.
2.3 Prospective Resources
On 11 April 2019, Doriemus and Buru Energy Limited (Buru) jointly announced that an
independent review of the prospective gas and liquids Resources of the Butler prospect,
which straddles EP487 and EP129 (100% Buru), was undertaken by ERC Equipoise Pte
Ltd who had confirmed the view that the Butler prospect has the potential to host a
significant gas and liquids accumulation. (See Doriemus and Buru joint announcement,
as cross released on Rey’s ASX platform on 11 April 2019, for full details.) Rey engaged
3D Geo to review the prospective Resources for EP487 as part of its annual review of
Reserves and Resources, with the results detailed on page 11 of this Annual Report.
3.Lennard Shelf Blocks – EP104, R1 and L15
3.1 Background
Rey holds a 100% interest in the Lennard Shelf Blocks, comprising EP104, a Retention Lease
(R1) and one Production Licence (L15). The Lennard Shelf Blocks are situated to the
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Rey Resources Annual Report 2019
north of Rey’s existing interests in the Canning Basin petroleum exploration licence, EP487
covering a total area of approximately 1,145 km2 and are considered prospective for
conventional oil and tight gas.
3.2 Work Program during the year
On 31 December 2018, Rey entered into a binding letter of intent with Doriemus pursuant
to which Doriemus, subject to the completion of due diligence and fulfilling certain
conditions precedent, agreed to farmin to Production Licence 15 (L15).
On 5 March 2019, Rey announced that it had entered into definitive documentation
(subject only to the usual Government approvals), including a binding Farmout
Agreement which comprises an agreed form Joint Operating Agreement (Agreements)
with Doriemus for L15. Pursuant to the Agreements, Doriemus is to fund A$1 million in
development work on L15, in an endeavour to bring the West Kora 1 well (which is
located within L15) into economic production.
Subject to Doriemus funding the $1 million field development plan over the next 12
months, Doriemus will be assigned 50% of the L15 permit. On completion, and subject to
obtaining government approvals, Doriemus will be appointed the Operator for L15.
As requested by the Traditional Owners, Rey scheduled the heritage survey in July 2019 for
the coming geochemical survey in R1 and well inspection work in L15. A draft heritage
protection agreement has also been received and reviewed by Rey. On 11 July 2019, the
heritage survey was completed and the final heritage clearance report was received on
24 July 2019. The well inspection and West Kora Tank Farm clean work, required by the
Government, is still ongoing as at the date of this report.
On 20 May 2019, Rey sent a letter to the Government regarding the potential partial
surrender of several blocks in EP104 and applied to vary the work programs for the
remaining permit years in consideration for the Government’s ban on fracture stimulation.
On 9 August 2019, the Government suggested Rey maintain all blocks in EP104 and
agreed to remove the current geochemical survey requirements and drilling requirements
in permit year 3 and year 5.
3.3 Prospective Resources
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 ASX by Key Petroleum Limited (ASX:KEY) on 30
September 2015.
On 9 May 2019, Doriemus announced the results of an independent Resources review
for L15, which confirmed the prospectivity of L15 (See Doriemus announcement, as cross
released on Rey’s ASX platform on 9 May 2019, for full details). Rey engaged 3D Geo
to review the prospective Resources for L15 as part of its annual review of Reserves and
Resources, with the results detailed on page 12 of this Annual Report.
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COAL
The Duchess Paradise Coal Project (“Duchess Paradise Coal Project”) is a proposed
bituminous thermal coal operation in the Canning Basin, north Western Australia. A
Definitive Feasibility Study (“DFS”) of the Project 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. Rey’s
Shareholders approved the transaction on 13 September 2018. On 23 November 2018,
the cooperation framework agreement was terminated by Rey due to non-payment of
the deposit of A$2 million. The Company continues to investigate potential opportunities
for the Project to maximise shareholder value.
Following an internal review of its previously reported Ore Reserves in 2017, the Company
considered that a review of the DFS was warranted given that the initial DFS was
undertaken six years ago. Consequently, on 20 September 2017 the Company withdrew
its Ore Reserves pending the outcome of this review and decided to update the DFS. Rey
has fully reviewed the proposed work program for DFS phase 2 update prepared by LDO
during the June 2019 quarter and is consulting with mining services contractor for further
comments.
During the reporting period, Rey continued to progress an Access Deed with the only
objector, Hancock Prospecting, for a Mining Licence Application. After multi rounds
discussion, the Access Deed is close to being finalised.
CORPORATE
As at 30 June 2019, Rey had a loan facility for $3,800,000 with ASF Group Limited (ASF
Loan Facility), a $500,000 outstanding loan from Wanyan Liu, a substantial shareholder
in the Company (Liu Loan #1) and, as announced on 18 April 2019, a second loan from
with Wanyan Liu for $3,000,000 (Liu Loan #2). The Liu Loan #2 was used to repay $2,500,000
of the ASF Loan Facility (which remains available for re-draw pursuant to the terms of the
ASF Loan Facility) and to provide general working capital.
As at 30 June 2019, the Company had fully drawn down the Liu Loans #1 and #2 and
had $2.35 million remaining for draw down from the ASF Loan Facility.
As announced on 17 July 2019, the Company entered into a third loan agreement
with Wanyan Liu, pursuant to which a further loan facility of up to $3,000,000 has been
provided to the Company ("Liu Loan #3"). Liu Loan #3 has and will be used to repay the
balance of the ASF Loan Facility and support future working capital needs.
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Rey Resources Annual Report 2019
ANNUAL RESERVES
AND RESOURCES STATEMENT
Coal Mineral Resources and Ore Reserves
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 Mineral 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
1 Difference in Total Inferred Resources due to rounding
Total
305.8
For further information on the above summary of Coal Mineral Resources estimates,
please refer to the Company’s ASX announcement dated 28 October 2014.
Mineral Resources and Ore Reserves Comparison
The Company reviews its coal Mineral Resources and Ore Reserves at least annually in
accordance with ASX Listing Rule 5.21. The date of reporting is 30 June each year to
coincide with the release of the Company’s Annual Report. If there are any material
changes to its coal 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 coal Mineral Resources for the year ended
30 June 2019, 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).
There has been no additional exploration or drilling undertaken at the Duchess Paradise
Coal Project during the review period. Further, 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
continued to progress a review with a focus on updating the economic and financial
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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.
Oil and Gas Resources and Reserves
The Company reviews its oil and gas Reserves and Contingent Resources at least annually
in accordance with ASX Listing Rule 5.39 and 5.40. The date of reporting is 30 June each
year to coincide with the release of its Annual Report. If there are any material changes
to its oil and gas Reserves and Contingent Resources over the course of the year, the
Company is required to promptly report these changes as they occur.
EP487 (Derby Block)
An 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
independent consultant 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 2 below.
Prospective Potential Recoverable Resources SPE PRMS (2011)3
Gas in place
Recoverable Gas
Recoverable
Condensate
Tcf1
Tcf1
MMbbl2
P901
68.0
9.4
239
Recoverable BOE
MMBOE4
1,852
P501
169.6
28.4
707
5,283
P102
412.9
81.1
2,066
15,096
Table 2: 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.
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On 5 May 2019, Doriemus released an announcement to ASX regarding an independent review it
had commissioned on EP487, prepared by ERCE, which was cross released to Rey’s ASX platform.
Rey subsequently appointed independent consultant 3D Geo to review and compare the results
of the ERCE review to the one initially undertaken by 3D Geo in 2017 (See Table 4 below). 3D
GEO found the key differences to be in the Gross Rock Volumes (related to the depth to base
prospective gas with 3D-GEO using 5000mss and ERCE using 4250mss) and the Net to Gross Ratios
used by 3D-GEO ranging from 5 to 24% instead of 2 to 7% used by ERCE and confirmed that in
their view, their estimate from 2017 remained appropriate. Accordingly, Rey will not adopt the
Resources estimate provided by ERCE.
L15
An estimation of Rey’s oil Reserves and contingent Resources for the West Kora Oilfield
in L15 was provided by Energetica Consulting in September 2015 (refer to Key Petroleum
Limited’s ASX releases dated 30 September 2015) and reviewed and released by Rey on
14 May 2018. The estimation was based on the vintage wells in the permit and relevant
studies.
On 5 May 2019, Doriemus released to ASX the results of its own independent review of
the contingent oil Resources and Reserves of West Kora, prepared by ERCE and cross-
released on Rey’s ASX platform. Rey subsequently appointed independent consultant 3D
Geo to review and compare the ERCE and Energetica Consulting estimates. According
to the suggestion of 3D GEO, Rey adopts the Reserves results provided by ERCE. The
updated Resources of R1 and Reserves of West Kora Oilfield in L15 are listed in Table 3
and Table4 below:
Table 3: Estimated Remaining Petroleum Reserves and Contingent Resources West Kora
Oilfield - 30 June 2019
West Kora Oilfield Recoverable Oil
Mstb1
1P
67
1C
2P
238
2C
3P
593
3C
West Kora Oilfield Recoverable Contingent
Resources
Point Torment Gas Discovery Recoverable
Contingent Resources
Mstb
13.2
60.7
226.4
BCF2
2.41
4.725
8.42
1Mstb – Thousand stock tank barrels of oil.
2BCF – billion cube feet
(Estimate prepared by Energetica Consulting for Point Torment Gas Resources in R1 in September 2015, refer
to Key ASX releases dated on 30 September 2015. Estimate prepared by ERCE for West Kora oilfield reserves
in L15 in May 2019, refer to Doriemus ASX releases dated on 9 May 2019)
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Rey Resources Annual Report 2019
Oil Reserves and Contingent Resources Comparison
Table 4: Comparison of West Kora Reserves and Contingent Resources between report
prepared by ERCE and Energetica Consulting
West Kora Oilfield Recoverable Oil Mstb1
ERCE Estimation
Energetca Estimation
1P
67
1C
2P
238
2C
3P
593
3C
1P
250
1C
2P
380
2C
3P
660
3C
West Kora Oilfield Recoverable
Contingent Resources
Mstb
13.2
60.7
226.4
60
120
260
Governance Arrangements and Internal Controls
The Company ensures that its quoted Resource and Reserves are subject to good
governance arrangements and internal controls. The Resources and Reserves 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
applicable estimations. 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 Resources Estimate
The estimate of P1-seam Resources in the Duchess Paradise Coal Project was first
reported to ASX on 28 October 2014 and reviewed in August 2019, in accordance with:
• “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 Securities Exchange.
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The P1-seam Resources review has been prepared by Mark Biggs for and on behalf
of Rey Resources Limited. Mark Biggs has over 36 years of experience in base metal,
industrial mineral, coal exploration and mine evaluation throughout Australia. He has
worked extensively within the Bowen and Surat Basins and was resident at several Central
Queensland coal mines for 22 years. He has held many roles in these mine’s Technical
Services, including Senior Geologist, Chief Geologist, Coal Quality and Scheduling
Superintendent and Acting Technical Services Manager. He is a Competent Person for
coal as defined by the JORC Code (2012) and has extensive experience in open cut and
underground exploration techniques, geophysical techniques, coal quality, geotechnical
and structural modelling, mining, and scheduling.
Mark is the Managing Director and Principal Geologist of ROM Resources, which has
been operating since 2012. His principal qualifications are a B. App. Sci. and M. App.
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Rey Resources Annual Report 2019
Sci. from the Queensland University of Technology. Mark is a Member of The Australasian
Institute of Mining & Metallurgy and a Member of the Geological Society of Australia. In
November 2018 Mark successfully completed the AUSIMM JORC Online course.
The Company confirms that the form and context in which the information is presented
in this Annual Report 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. The Coal Resources
section of 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 Biggs. Mr Biggs has consented to the inclusion
in this report of the matters based on the information in the form and context in which
they appear.
Oil and Gas Reserves and Resources
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.
The oil and gas Reserves and 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 11 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 30 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. The Oil and Gas section of 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 Martens. Mr Martens has consented to the inclusion in this report of the
matters based on the information in the form and context in which they appear.
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DIRECTORS’ REPORT
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”) for the financial year ended 30 June 2019.
1.DIRECTORS
The Directors of the Company at any time during or since the end of the financial year
are:
Ms Min Yang Non-Executive Chairman
Mr Wei Jin
Mr Geoff Baker
Mr Dachun Zhang
Dr Zhiliang Ou
Mr Louis Chien
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Alternate Director to Non-Executive Chairman, Ms Min Yang
Managing Director
Details of Directors’ qualifications, experience, special responsibilities and
directorships of other listed companies can be found on pages 15 to 19.
2.INFORMATION ON DIRECTORS AND OFFICERS
Directors
Current
Min Yang
Appointed
on
13
September
2012
Designation
and
Independence
status
Chairman
Non-Executive
Experience, expertise and
qualifications
Directorships
of other listed
companies during
the last three years
Special
responsibilities
during the year
• Non-
Executive
Chairman
• Member,
Audit and Risk
Management
Committee
Min Yang has extensive business
connections in the Asia Pacific
region, especially greater China,
and has over twenty years of
hands-on experience dealing
with both private and state-
run businesses in China. Over
the years, Ms Yang has proven
her unique business insight and
expertise in the identification,
incubation and realisation of
embryonic opportunities in
the resources, commodities
trading & residential estate and
financial investment sectors.
• ASF Group Limited
(September 2005,
ongoing)
• ActiveEX Limited
(May 2012,
ongoing)
• Key Petroleum
Limited (January
2014, ongoing)
• Metaliko
Resources Limited
(appointed
August 2014 and
resigned October
2016)
• BSF Enterprise
PLC (appointed 5
September 2018)
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Rey Resources Annual Report 2019
2.INFORMATION ON DIRECTORS AND OFFICERS(Continued)
Directors
Designation
and
Independence
status
Experience, expertise and
qualifications
Directorships
of other listed
companies during
the last three years
Special
responsibilities
during the year
Current
Wei Jin
Appointed
Non-
Executive
Director
on 2
December
2013.
Appointed
Managing
Director on
1 July 2016.
Geoff
Baker
Appointed
on
13
September
2012
Managing
Director
Wei Jin holds PhD in Science from
China University of Geosciences.
He has over 20 years’ professional
experience covering exploration,
mineral industry construction and
operation, as well as international
mineral trading activities in Australia,
China, Russia and Mongolia.
None
• Member,
Audit and Risk
Management
Committee
Director
Non-Executive
Qualifications – BCom, LLB, MBA
For the past 35 years Geoff
Baker has been active in Asia
and China working in law
and conducting an advisory
practice in assisting companies
doing business in the region.
As an experienced lawyer
qualified to practice in Australia
and Hong Kong, Mr Baker
provides valuable assistance to
international operations and in
particular to the negotiation,
structuring and implementation
of joint venture and commercial
agreements.
• ASF Group
Limited
(November 2006,
ongoing)
• ActiveEX Limited
• Member,
Audit and Risk
Management
Committee
(appointed
February 2013.
Resigned June
2017 and re-
appointed
August 2017)
• Key Petroleum
Limited (January
2014, ongoing)
• Metaliko
Resources
Limited
(appointed
August 2014 and
resigned January
2017)
• BSF Enterprise
PLC (appointed 5
September 2018)
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2.INFORMATION ON DIRECTORS AND OFFICERS(Continued)
Directors
Current
Dachun
Zhang
Appointed
on 1 July
2013
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and
Independence
status
Director
Non-Executive
Independent
Experience, expertise and
qualifications
Directorships
of other listed
companies during
the last three years
Special
responsibilities
during the year
None
• Chairman,
Audit and Risk
Management
Committee
Mr Zhang has a Bachelor’s
Degree from Poznan University,
Poland and a Master’s Degree
from the University of Wales,
UK and was conferred the
qualification of Senior Economist
in Shipping Management by the
Ministry of Communications of
China.
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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.
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Rey Resources Annual Report 2019
2.INFORMATION ON DIRECTORS AND OFFICERS(Continued)
Directors
Designation
and
Independence
status
Experience, expertise and
qualifications
Directorships
of other listed
companies during
the last three years
Special
responsibilities
during the year
Current
Zhiliang Ou
Appointed
on 22
September
2016
Director
Non-Executive
Independent
None
Executive director
of Haotian
International
Construction
Investment Group
since 2017.
Executive director
of Haotian
Development
Group Ltd since
2012.
Dr Ou has over 27 years of
professional engineering and
management experience
in the oil and gas, mining
and infrastructure industries
both in Australia and China.
He currently serves as an
executive director of Hao Tian
Development Group Limited,
a company listed on the main
board of the Hong Kong Stock
Exchange. Dr Ou holds a Doctor
of Philosophy degree in Civil &
Resource Engineering from the
University of Western Australia.
He also holds two Bachelor
of Engineering degrees in
Structural Engineering &
Engineering Management
respectively.
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2.INFORMATION ON DIRECTORS AND OFFICERS(Continued)
Directors
Current
Louis Chien
Appointed
Alternate
Director to
Non-
Executive
Chairman,
Ms Min
Yang on
11 January
2016.
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Designation
and
Independence
status
Alternate
Director
Experience, expertise and
qualifications
Directorships
of other listed
companies during
the last three years
Special
responsibilities
during the year
• ASF Group Limited
None
(May 2015,
ongoing)
Mr Chien was born in Shanghai,
China, grew up and was
educated in the United
States, and is now based in
Australia. He has 20+ years of
corporate experience based
in Australia, the United States
and Singapore and has held
various engineering and
finance leadership positions
within The Procter & Gamble
Company (P&G). He has
managed organisations across
the Americas, Europe and
Asia-Pacific, and is currently a
director of ASX listed ASF Group
Limited, and ASF Consortium Pty
Ltd.
Mr Chien holds a Master of
Business Administration in
finance from Kelley School of
Business, Indiana University,
and two bachelor degrees in
Architecture, all attained in the
United States.
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Rey Resources Annual Report 2019
3.COMPANY SECRETARY
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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 of Perth based
corporate advisory firm Evolution Corporate Services Pty Limited, 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:
Director
Min Yang
Wei Jin
Geoff Baker
Dachun Zhang
Zhiliang Ou
Louis Chien
Meetings
A
3
3
3
2
2
0
B
3
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:
Director
Min Yang
Wei Jin
Geoff Baker
Dachun Zhang
Louis Chien
Meetings
A
2
2
2
1
0
B
2
2
2
2
2
A - Number of meetings attended.
B - Number of meetings held during the time the Director held office.
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5.DIRECTORS’ INTERESTS IN SECURITIES IN REY RESOURCES LIMITED
The relevant interest of each Director in the ordinary shares of Rey Resources Limited at
the date of this report is set out as below:
Ordinary shares
Options over ordinary shares
Performance Rights
Min Yang
Geoff Baker
Dachun Zhang
Wei Jin
Zhiliang Ou
Louis Chien
200,000
200,000
777,414
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 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.
2019 Key Management Personnel
The KMP of Rey Resources during the year ended 30 June 2019 were:
Non Executive
Min Yang
Geoff Baker Non-Executive Director (appointed 13 September 2012)
Dachun Zhang
Non-Executive Chairman (appointed 13 September 2012)
Independent Non-Executive Director (appointed 1 July 2013)
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6.REMUNERATION REPORT - AUDITED (continued)
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Zhiliang Ou
Louis Chien
Independent Non-Executive Director (appointed 22 September 2016)
Alternate Director to Ms Min Yang (appointed 11 January 2016)
Executive
Wei Jin
appointed Managing Director 1 July 2016)
Managing Director (appointed Non-Executive Director 2 December 2013,
Remuneration policy
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 to these roles.
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.
The Board seeks independent remuneration advice from time to time, and refers to
relevant market survey data for the purposes of external comparison. Further details have
been included in section 6.5.
Hedging policy
The Company’s Securities Trading Policy prohibits all Directors and employees from
entering into arrangements to protect the value of unvested Long Term Incentive (“LTI”)
awards. The prohibition includes entering into contracts to hedge their exposure to
unvested share rights and options awarded as part of their remuneration package.
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6.REMUNERATION REPORT - AUDITED (continued)
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Executive remuneration components
Executive remuneration is structured so that it supports the key remuneration principles
outlined above, and is intended to motivate executives towards achievement of the
annual objectives and longer term success of the Company. A Total Fixed Remuneration
(“TFR”) is paid which considers external market comparisons and individual performance.
Performance linked compensation is available through the short term and long term
incentive plans outlined below.
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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.
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Short term incentive
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.
Long term incentive
Executives are eligible to participate in the Rey Resources Limited Executive Incentive
Rights Plan (“EIRP”), which was first adopted by shareholders on 23 November 2011 and
most recently re-approved at the Company’s 2018 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.
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
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6.REMUNERATION REPORT - AUDITED (continued)
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 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
0.31
2019
2018
0.32
2017
2016
2015
0.2
0.145*
0.525*
* Adjusted for 5 into 1 share consolidation
Consequences of performance on shareholder wealth
2019
2018
2017
2016
2015
Loss ($’000)
(8,923)
(1,049)
(559)
(3,998)
(10,200)
Dividends declared
0
0
0
0
Total shareholder return (TSR)%
(3%)
60%
38%
(72%)
0
0%
Non-Executive Director fees
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.
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6.REMUNERATION REPORT - AUDITED (continued)
6.2 Directors’ and executive officers’ remuneration
The table below sets out the remuneration of the Group’s KMP for the years ended 30
June 2018 and 30 June 2019.
Short Term Benefits
Post-
employment
Benefits
Other
Long Term
employee
benefit 1
Share
Based
Payments
Termination
Benefits
Total
Cash
salary/
Fees
Annual
Incentive
Non-
monetary
Super
LSL & AL
Rights
/Options
Termination
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
2019
2018
48,000
48,000
-
-
-
-
-
-
-
-
G Baker - Non-Executive Director - Appointed 13 September 2012
2019
2018
60,000
60,000
-
-
-
-
-
-
-
-
D Zhang - Non-Executive Director - Appointed 1 July 2013
2019
2018
25,000
25,000
-
-
-
-
-
-
-
-
2019 120,000
2018 120,000
-
-
-
-
11,400
11,400
-
-
Z Ou - Non-Executive Director - Appointed 22 September 2016
2019
2018
54,000
54,000
-
-
-
-
5,130
5,130
L Chien - Alternate Director - Appointed 11 January 2016
-
-
2019
2018
TOTAL
2019 307,000
2018 307,000
-
-
-
-
-
-
-
-
-
-
16,530
16,530
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48,000
48,000
60,000
60,000
25,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131,400
131,400
59,130
59,130
-
-
323,530
323,530
1 In accordance with his contract Wei Jin does not accrue long term employee benefits.
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6.REMUNERATION REPORT - AUDITED (continued)
6.3 Equity instruments
No share rights were granted during the financial year.
No options and rights over ordinary shares in the Company were granted during the
financial year.
6.4 Key employment contracts
The table below summarises the key contractual provisions of the executive KMP.
Name and Position
Contract Term
Termination by Company
Termination by Executive
Wei Jin
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 by notice to the Chairman.
Non-Executive Directors receive annual fees. There are no post-employment benefits
other than statutory superannuation.
6.5 Remuneration Consultant
The Board may seek advice on remuneration matters for the KMP and Non-
Executive Directors from independent external advisors. Such advisors are appointed
and directly engaged by the Chairman.
No external advisors were engaged on remuneration matters for the 2019 financial year.
6.6 Movements in share holdings
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:
2019
Directors
Held at 1
July 2018
Received as
compensation
Received on
exercise of
options/rights
Other changes
Held at 30
June 2019
Min Yang1
200,000
Geoff Baker2
200,000
Wei Jin3
200,000
Dachun Zhang4
777,414
Zhiliang Ou
Louis Chien
-
-
Total
1,377,414
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
200,000
200,000
777,414
-
-
1,377,414
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6.REMUNERATION REPORT - AUDITED (continued)
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1. The shares are held by Luxe Hill Ltd, of which Min Yang is a director and shareholder.
2. The shares are held by Gold Star Industry Ltd, of which Geoff Baker is a director and
shareholder.
3. The shares are held by Renown Capital Holdings Ltd, of which Wei Jin is a director
and shareholder.
4. The shares are held by Greenhouse Investment (VIC) Pty Ltd ATF AMF
Superannuation Fund. Dachun Zhang is a director of Greenhouse Investment (VIC)
Pty Ltd and a beneficiary of the AMF Superannuation Fund.
6.7 Movements in Option holdings
No KMP held or were issued options during the 2019 reporting period.
6.8 Movement in Share right holdings
No KMP held or were issued share rights during the 2019 reporting period.
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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 Basin. The Company holds a 40% interest in petroleum
permits EP457 & 458 in joint venture with Buru Energy Limited, a 100% interest in the
Derby Block EP487 and petroleum exploration permit EP104, retention licence R1 and
production licence L15. Rey also holds a 100% interest in Duchess Paradise Coal Project.
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)
On 10 December 2018, the Company announced that, pursuant to a transaction
entered into between Buru Energy Limited (“Buru”) and Diamond Resources (Barbwire)
Pty Ltd (“DRB”) whereby Buru will increase its interests in these permits from 37.5% to 60%,
Rey (via its wholly owned subsidiary Rey Oil and Gas Pty Limited) has exercised its pre-
emptive rights under the permit joint operating agreements and entered into a parallel
agreement with DRB to increase its current interests in each of the EP457 and EP458
permits from 25% to 40% for a total cash consideration of $480,000.
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8.RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
The equity interest in each permit is currently:
Rey Oil and Gas Pty Limited
Buru Fitzroy Pty Limited
40%
60%
(Buru Energy Limited operator)
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 the operator in the block for future development.
On 4 January 2019, the operator lodged an application for a further 12 month suspension
of years 1-5 work requirements to the DMIRS because the lifting of the frack moratorium
has not been formalized. The application was approved on 16 January 2019 and the
planned magneto-telluric survey will be conducted in 2021.
Derby Block (EP487)
Rey Resources holds 100% equity interests in EP487 (“Derby Block”) through the following
wholly owned subsidiaries:
Rey Lennard Shelf Pty Limited 50%
50%
Rey Derby Block Pty Limited
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.
On 31 December 2018, the Company announced that it has entered into a binding
letter of intent (“LOI”) with Doriemus pursuant to which Doriemus agreed to farmout to
exploration permit EP487. Upon completion of the farmout, Doriemus will earn a 50%
operating interest in the asset. Subsequently, Doriemus failed to raise sufficient funds by
end of June 2019 (which was extended to 31 July 2019) to undertake the farmout work on
EP487 and Rey announced that it had terminated the Agreements on 5 August 2019.
On 20 May 2019, Rey sent a letter to the government regarding the voluntary
relinquishment of 13 blocks in EP487 and apply to change the work programs for all
rested permit years in consideration of ban area of fracture stimulation. On 9 August,
Rey received suggestion letter from the DMIRS. The DMIRS will not suggest Rey to partially
surrender of any blocks in EP487 at this stage but prepares to agree to remove the drilling
depth and core conditions for year 2 commitment well and exempt the 2 well drilling
requirements in permit year 3.
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8.RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
Lennard Shelf Blocks (EP104, R1, L15)
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.
On 31 December 2018, the Company announced that it has entered into a binding
letter of intent (“LOI”) with Doriemus PLC (“Doriemus”, ASX: DOR) pursuant to which
Doriemus agreed to farmout the 100% owned Petroleum Production Licence 15 (L15).
Upon completion of the farmout, Doriemus will earn a 50% operating interest L15. On 5
March 2019, the Company announced that it has signed a binding Farmout Agreement
with Doriemus pursuant to which Doriemus will fund A$1 million in development work on
Petroleum Production Licence 15. These activity has not yet commenced at 30 June
2019, and accordingly Rey continue to consider their interest and exploration activity.
On 5 May 2019, Doriemus released announcement regarding the updated reserves of
West Kora prepared by ERCE cross Rey’s ASX platform. Rey appointed 3D Geo to review
and compare the new reserves report to the one provided by Energetca Consulting
for Key Petroleum Ltd in 2015. According to the suggestion of 3D Geo, Rey adopts the
reserves results provided by ERCE.
As requested by the Traditional Land Owners, Rey scheduled the heritage survey in July
2019 for the coming geochemical survey in R1 and well inspection work in L15. A drafted
heritage protection agreement has also been received and reviewed by Rey. On 11
July 2019, the heritage survey was completed and final heritage clearance report was
received on 24 July 2019. The well inspection and West Kora Tank Farm clean work, which
is required by the government, is still ongoing as at 30 June 2019.
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Coal
Duchess Paradise Project
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The Duchess-Paradise Thermal Coal Project (“DP”) is located in the Canning Basin in the
northwest of Australia, which is also the largest undeveloped Permian coal-bearing basin
in Australia. The total identified JORC mineral resources of P1 seam is 305Mt (Measured
60.2Mt/Indicated 78.5Mt/Inferred 167.1Mt). The thermal coal of DP is in shallow seam from
the surface which makes both open pit and underground mining potentially viable.
During the period, the Company continued to plan the second phase Definitive Feasibility
Study (“DFS”) update. Rey has fully reviewed the proposed work program for DFS phase
2 update prepared by LDO during the June 2019 quarter and is consulting with mining
services contractor for further comments.
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Rey Resources Annual Report 2019
8.RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
The DFS review and update will focus on updating the economic and financial model
through different mining technology. Rey expects the new results will potentially increase
Coal Reserve in comparison to the 2011 DFS. Other factors that may also require revision
include transportation pathways.
Rey is now negotiating with Hancock Prospecting, the only objector to the Mining License
Application for the DP project, to remove the objection. After multi rounds discussion, the
Access Deed is close to be finalized.
Corporate
During the year, the loan facility granted by ASF Group Limited (“ASF”) increased to $3.8
million (“ASF Loan”). In April 2019, the Company repaid $2.5 million of ASF Loan which
remains available for re-draw before maturity pursuant to the terms of the ASF Loan. On
14 June 2019, the Company further drawdown $150,000, therefore the remaining amount
available under the $3.8 million ASF Loan is $2.35 million as at 30 June 2019.
In addition to the existing $500,000 loan (“First Liu Loan”), the Company entered into a
further loan agreement on 18 April 2019 with Wanyan Liu (“Liu”), a substantial shareholder
of the Company, for the granting of additional $3 million loan (“Second Liu Loan”), part
of which had been used to repay ASF Loan as mentioned above. The Second Liu Loan
will mature on 31 December 2020, with interest accruing at the rate of 12% per annum.
Subsequently after the financial year end, the Company entered into another new loan
agreement with Liu for the granting of a further $3 million standby loan facility (“Third Liu
Loan”) and the extension of the maturity date of the First Liu Loan from 31 December
2019 to 31 March 2021. The Third Liu Loan will mature on 31 December 2021, with interest
accruing at the rate of 12% per annum.
During the financial year, the Company undertook an on-market share buyback
and bought back 216,827 shares at a cost of $66,000. As part of the ongoing capital
management strategy, the Company has on 24 June 2019 announced the extension of
the on-market buyback program for a further 12 months from 9 July 2019.
Finance review
Net loss of the consolidated entity after income tax for the year ended 30 June 2019 was
$8,923,000, compared with the loss of $1,049,000 for the last year. The significant increase
in loss for the year was mainly attributed to the following:
•
impairment of exploration assets of $7,450,000 as a result of revaluation of EP457 &
EP458 to their fair value;
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Rey Resources Annual Report 2019
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8.RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
•
impairment of listed investment of $53,000 as a result of the decline in market price;
and
• finance costs of $476,000, which was principally interest accrued for the loans from
ASF and Liu.
During the year, $1,537,000 (2018: $1,629,000) in exploration expenditure was
capitalised, of which $1,385,000 related to oil and gas exploration (2018: $1,249,000).
9.DIVIDENDS
No dividend has been paid or declared by the Company during the financial year
ended 30 June 2019 (2018: nil) and the Directors do not recommend the payment of a
dividend in respect of the financial year ended 30 June 2019.
10.SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
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Other than as noted elsewhere in this report, there have been no significant changes in
the state of the affairs of the Company up to and including the date of this report.
11.LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Future information about the likely developments in the operations of the Group and the
expected results of those operations in future financial years has not been included in
this report because disclosure of the information would be likely to result in unreasonable
prejudice to the consolidated Group.
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
During the financial year and as at the date of this report there are no options on issue.
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Rey Resources Annual Report 2019
14.ENVIRONMENTAL DISCLOSURE
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.
16.SUBSEQUENT EVENTS
On 17 July 2019, the Group entered into a new loan agreement with Wanyan Liu,
pursuant to which Liu agreed to grant a further loan facility to $3 million (Third Liu Loan) to
the Company expiring 31 December 2021 and to extend the maturity date of the existing
$500,000 loan (First Liu Loan) from 31 December 2019 to 31 March 2021.
During July 2019 and August 2019, the Group has drawn down $500,000 of the $3.0 million
available under the Third Liu Loan.
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Rey Resources Annual Report 2019
The Company announced on 5 August 2019 that it has terminated the EP487 Farmout
Agreement with Doriemus PLC.
No other matter or circumstance has arisen since 30 June 2019 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 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 34 and forms part of the
Directors’ report for the financial year ended 30 June 2019.
Signed in accordance with a resolution of Directors.
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19 September 2019F
Min Yang
Non-Executive Chairman
Sydney, Australia
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Rey Resources Annual Report 2019
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KPMG, an Australian partnership and a member firm of the KPMG
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
network of independent member firms affiliated with KPMG
International Cooperative ("KPMG International"), a Swiss entity.
International Cooperative ("KPMG International"), a Swiss entity.
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
Liability limited by a scheme approved under
Professional Standards Legislation.
Professional Standards Legislation.
Liability limited by a scheme approved under
Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
network of independent member firms affiliated with KPMG
International Cooperative ("KPMG International"), a Swiss entity.
International Cooperative ("KPMG International"), a Swiss entity.
Liability limited by a scheme approved under
Liability limited by a scheme approved under
Professional Standards Legislation.
Professional Standards Legislation.
Rey Resources Annual Report 2019
Rey Resources Limited
in thousands of dollars
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
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Other income/(expense)
Impairment of exploration and evaluation assets
Administrative expenses
Loss from operations
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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
Note
30 June
30 June
2019
2018
4
13
6
4
5
7
(53)
(7,450)
(944)
(8,447)
-
(476)
(476)
(42)
(1)
(844)
(887)
1
(163)
(162)
(8,923)
(1,049)
-
-
(8,923)
(1,049)
-
-
(8,923)
(1,049)
Loss per share
Basic and diluted (cents per share)
8
(4.20)
(0.49)
The notes on pages 39-76 are an integral part of these consolidated financial statements
35
Rey Resources Annual Report 2019
Rey Resources Limited
Consolidated statement of financial position
As at 30 June 2019
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In thousands of dollars
Note
2019
2018
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total current assets
Non-current assets
Property, plant and equipment
Investment
Exploration and evaluation expenditure
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefits
Loan and borrowings
Total current liabilities
Non-current liabilities
Loan and borrowings
Provision
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Accumulated losses
Total equity attributable to equity
holders of the Company
9a
10
11
12
13
14
15
21d
21d
16
17
28
20
16
64
4
106
35,912
36,022
36,086
110
16
2,534
2,660
3,000
2,952
5,952
8,612
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22
14
72
9
159
41,825
41,993
42,065
84
16
2,602
2,702
-
2,900
2,900
5,602
27,474
36,463
86,597
86,663
(59,123)
(50,200)
27,474
36,463
The notes on pages 39-76 are an integral part of these consolidated financial statements.
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Rey Resources Annual Report 2019
Rey Resources Limited
Consolidated statement of changes in equity
For the year ended 30 June 2019
in thousands of dollars
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Balance at 30 June 2017
Loss for the period
Other comprehensive income
Total comprehensive loss for the period
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Transactions with owners recorded directly in equity:
Contributions by and distributions to owners
Share buy back
Balance at 30 June 2018
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
Share buy back
Balance at 30 June 2019
Share capital Accumulated
Losses
Total
86,683
(49,151)
37,532
-
-
-
(1,049)
(1,049)
-
-
(1,049)
(1,049)
(20)
-
(20)
86,663
(50,200)
36,463
-
-
-
(8,923)
(8,923)
-
-
(8,923)
(8,923)
(66)
-
(66)
86,597
(59,123)
27,474
The notes on pages 39-76 are an integral part of these consolidated financial statements.
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Rey Resources Annual Report 2019
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Rey Resources Limited
Consolidated statement of cash flows
For the year ended 30 June 2019
in thousands of dollars
Cash flows from operating activities
GST refund
Cash paid to suppliers and employees
Note
30 June
30 June
2019
2018
2
(2)
(917)
(853)
Net cash used in operating activities
9b
(915)
(855)
Cash flows from investing activities
Interest received
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 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
9a
-
-
-
(2)
(1,537)
(1,617)
(1,537)
(1,619)
-
-
(66)
(20)
5,010
1,940
(2,500)
-
-
-
2,444
1,920
(8)
36
28
(554)
590
36
The notes on pages 39-76 are an integral part of these consolidated financial statements.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
1. REPORTING ENTITY
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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 financial year
ended 30 June 2019 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.
This is the first set of the Group’s annual financial statements in which AASB 15 Revenue
from Contracts with Customers and AASB 9 Financial Instruments have been applied.
Changes to significant accounting policies are described in Note 3(o).
The consolidated financial statements were authorised for issue by the Board of Directors
on 19 September 2019.
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(b) Going concern
The consolidated financial statements have been prepared on a going concern basis
which contemplates the continuity of normal business activities and the realisation of
assets and the settlement of liabilities in the ordinary course of business.
For the year ended 30 June 2019 the Group incurred a loss of $8,923,000 and incurred
operating and investing cash outflows of $2,452,000. As at 30 June 2019 the Group had
cash of $28,000, an available standby loan facility from ASF Group Limited of $2,350,000,
net working capital deficiency of $1,897,000 and net assets of $27,474,000 as at 30 June
2019.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
2. BASIS OF PREPARATION (Continued)
The Group has prepared a cashflow forecast for the period to 31 October 2020. The
cashflow forecast reflects:
• The need to raise additional funding during the forecast period;
• The need to renegotiate to extend the repayment of the loan from ASF Group
Limited beyond 31 December 2019.
• That the Group has subsequent to 30 June 2019 drawdown $500,000 and has
access to the remaining $2.5 million under the $3.0 million “Third Liu Loan”.
• That ASF Group Limited and Wanyan Liu will not call their loans owing from the
Group in advance of the loan maturity date; and
• The need to defer or farm out the Group’s share of certain petroleum
interests to meet committed and forecast expenditures.
Rey is pursuing funding alternatives in the form of debt and equity, including discussions
with existing shareholders, and with third parties for farmout certain petroleum interests.
The Directors believe that sufficient funding will be sourced, the repayment of loans
extended, the loans will not be recalled and farm out parties will be sourced in
the timeframes required and therefore the adoption of the going concern basis of
preparation is appropriate. The requirement to raise the necessary funding to meet its
commitments and secure farm out parties, or defer expenditure, is a material uncertainty
that may cast significant doubt as to whether the Group will be able to continue as a
going concern.
If the Group is unable to continue as a going concern, it may be unable to realise its
assets and extinguish its liabilities in the normal course of business and at the amounts
stated in the financial report.
(c) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis.
(d) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the
Company’s functional currency.
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 10
July 1998 and in accordance with that Class Order, all financial information presented in
Australian dollars has been rounded to the nearest thousand unless otherwise stated.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
2. BASIS OF PREPARATION (Continued)
(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:
- Going concern
Note 2(b)
Note 7 - Recoverability of tax losses.
Note 13
- 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.
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The consolidated financial statements comprise the financial statements of Rey Resources
Limited and its subsidiaries.
(i) Subsidiaries
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.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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.
(b) Foreign currency
Transactions in foreign currencies are translated to Australian dollars being the functional
currencies of Group entities at exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate at that date. The foreign
currency differences arising on retranslation are recognised in profit or loss.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Non derivative financial instruments
(i) Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial
assets and financial liabilities are initially recognised when the Group becomes a party
to the contractual provisions of the instrument. A trade receivable without a significant
financing component is initially measured at the transaction price.
(ii) Classification and subsequent measurement
The Group has two types of financial assets: amortised cost and FVTPL in accordance
with AASB 9. Refer Note 22 for summary of the reclassification of the Group’s financial
assets and financial liabilities.
(iii) Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows
from the financial asset expire, or it transfers the rights to receive the contractual cash
flows in a transaction in which substantially all of the risks and rewards of ownership of
the financial asset are transferred or in which the Group neither transfers nor retains
substantially all of the risks and rewards of ownership and it does not retain control of the
financial asset.
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The Group enters into transactions whereby it transfers assets recognised in its statement
of financial position, but retains either all or substantially all of the risks and rewards of the
transferred assets. In these cases, the transferred assets are not derecognised.
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Financial liabilities
The Group derecognises a financial liability when its contractual obligations are
discharged or cancelled, or expire. The Group also derecognises a financial liability
when its terms are modified and the cash flows of the modified liability are substantially
different, in which case a new financial liability based on the modified terms is recognised
at fair value.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(iv) 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
Items of property, plant and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The
cost of self- constructed assets includes the cost of materials and direct labour, any other
costs directly attributable to bringing the assets to a working condition for their intended
use, the costs of dismantling and removing the items and restoring the site on which they
are located and capitalised borrowing costs. Purchased software that is integral to the
functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives,
they are accounted for as separate items (major components) of property, plant and
equipment.
The gains and losses on disposal of an item of property, plant and equipment are
determined by comparing the proceeds from disposal with the carrying amount of
property, plant and equipment and are recognised net within other income/other
expenses in profit or loss.
(ii) Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is
recognised in the carrying amount of the item if it is probable that the future economic
benefits embodied within the component will flow to the Group, and its cost can be
measured reliably. The carrying amount of the replaced part is derecognised. The costs
of the day-to-day servicing of property, plant and equipment are recognised in profit or
loss as incurred.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
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:
Class of Fixed Asset Depreciation Rate
Plant and equipment
20 - 40%
Depreciation methods, useful lives and residual values are reviewed at each financial
year-end and adjusted if appropriate.
(e) Exploration and development assets
Exploration, evaluation and development expenditure incurred is accumulated in
respect of each identifiable area of interest.
At the end of each reporting period, the capitalised exploration and evaluation
expenditure is assessed for impairment. 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.
45
Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
A regular review is undertaken of each area of interest to determine the appropriateness
of continuing to carry forward costs in relation to that area of interest.
Costs of the site restoration are provided over the life of the facility from when exploration
commences and are included in the costs of that stage. Site restoration costs include
the dismantling and removal of plant, 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
The Group has adopted AASB 9 from 1 July 2019 which has introduced a revised
impairment model for financial assets. AASB 9 replaces the ‘incurred loss’ model in AASB
139 with an ‘expected credit loss’ ("ECL") model. The new impairment model applies
to financial assets measured at amortised cost, contract assets and debt investments
at FVTOCI, but not to investments in equity instruments. Under AASB 9, credit losses are
recognised earlier than under AASB 139.
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 Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g) Employee benefits
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 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.
47
Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
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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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
(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.
49
Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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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(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) Changes in significant accounting policies
The Group has initially applied AASB 15 and AASB 9, including any consequential
amendments to other standards from 1 July 2018. A number of other new standards are
also effective from 1 July 2018.
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much
and when revenue is recognised. It replaced AASB 118 Revenue, AASB 111 Construction
Contracts and related interpretations. Under AASB 15, revenue is recognised when a
customer obtains control of the goods or services. Determining the timing of the transfer
of control – at a point in time or over time – requires judgement. The adoption of AASB 15
has no impact on this set of financial statements.
AASB 9 Financial Instruments
AASB 9 sets out requirements for recognising and measuring financial assets, financial
liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
39 Financial Instruments: Recognition and Measurement. The adoption of AASB 9 has not
had a significant effect on the Group’s financial statements.
Classification and measurement of financial assets and financial liabilities
AASB 9 contains principal classification categories for financial assets: measured at
amortised cost and FVTPL. The classification of financial assets under AASB 9 is generally
based on the business model in which a financial asset is managed and its contractual
cash flow characteristics. AASB 9 eliminates the previous AASB 139 categories of held
to maturity, loans and receivables and available for sale. Under AASB 9, derivatives
embedded in contracts where the host is a financial asset in the scope of the standard
is never separated. Instead, the hybrid financial instrument as a whole is assessed for
classification.
AASB 9 largely retains the existing requirements in AASB 139 for the classification and
measurement of financial liabilities.
Impairment of financial assets
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with an ‘expected credit loss’ (ECL)
model. The new impairment model applies to financial assets measured at amortised
cost, contract assets and debt investments at FVOCI, but not to investments in equity
instruments. Under AASB 9, credit losses are recognised earlier than under AASB 139.
The Group has determined that the application of AASB 9’s impairment requirements
does not result in material change to the impairment loss recognised at 1 July 2019.
Financial liabilities
The Group classifies non-derivative financial liabilities into the other financial liabilities
category.
The Group derecognises a financial liability when its contractual obligations are
discharged or cancelled, or expire. The Group also derecognises a financial liability
when its terms are modified and the cash flows of the modified liability are modified and
the cash flows of the modified liability are substantially different, in which case a new
financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount
extinguished and the consideration paid (including any non-cash assets transferred or
liabilities assumed) is recognised in profit or loss.
51
Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial liabilities are initially recognised when the Group becomes party to the
contractual provisions of the instrument. A financial liability is initially measured at fair
value plus transactions costs that are directly attributable to its issue.
Transition
On the date of initial application, 1 July 2018, the Group’s financial assets and financial
liabilities were reclassified as follows:
In thousands of dollars
Original
AASB 139
Category
New
Carrying Carrying
AASB 9
Amount
Amount
Category AASB 139
AASB 9
Note
Original
New
Cash and cash equivalents
9a
Loans and
receivables
Amortised
cost
36
36
Investments – fair value
Trade and other receivables
12
10
Designated at
FVTPL
Mandatorily at
FVTPL
159
159
Loans and
receivables
Amortised
cost
22
22
Total financial assets
Trade and other payables
14
Other financial
liabilities
Other financial
liabilities
217
85
217
85
Loans and borrowings
21d
Other financial
liabilities
Other financial
liabilities
2,602
2,602
Total financial liabilities
2,687
2,687
(p) New standards and interpretations not yet adopted
At the date of authorisation of the financial report, AASB 16 Leases (effective 1 Jul
2019) was issued but not yet effective. As disclosed in Note 19 (a), there was no non-
cancellable operating lease commitment for the Group. Based on management
assessment, AASB 16 Leases will have minimal impact on the Group.
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Rey Resources Annual Report 2019
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
4. OTHER INCOME AND FINANCE INCOME
in thousands of dollars
2019
2018
e
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Other income/(expense)
Change in fair value of investment
Others
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Finance income
Interest income
5. FINANCE COSTS
(53)
-
(53)
-
-
(53)
11
(42)
1
1
in thousands of dollars
2019
2018
Finance costs
Bank charges
Interest on loans
2
474
476
1
162
163
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
6. ADMINISTRATIVE EXPENSES
in thousands of dollars
2019
2018
Office supplies and expenses
Professional consulting fees
Employee benefits expense (see below)
Depreciation and amortisation expense
Insurance premiums
Legal costs
Other expenses (incl travel expense)
Employee benefits expense consists of:
Salaries and fees
Superannuation
7. INCOME TAX EXPENSE
255
1
320
5
16
191
156
944
283
37
320
225
2
319
5
10
198
85
844
282
37
319
in thousands of dollars
2019
2018
Income tax recognised in profit or loss
Current tax benefit
Deferred tax benefit
Income tax benefit
-
-
-
-
-
-
-
-
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
7. INCOME TAX EXPENSE (Continued)
Reconciliation of prima facie tax on accounting loss before tax to income tax (benefit) /
expense
in thousands of dollars
Accounting loss before tax
2019
2018
(8,923)
(1,049)
At statutory income tax rate of 27.5% (2018: 27.5%)
(2,453)
(288)
Non-deductible expenses
Tax losses for which no deferred tax asset was recognised
Income tax benefit
(19)
2,472
-
(25)
313
-
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
in thousands of dollars
Deferred tax liabilities
Exploration and evaluation expenditure
Other
Gross deferred tax liability
Statement of financial
position
Profit or loss
2019
2018
2019
2018
(9,876)
(10,704)
(4)
(4)
(9,880)
(10,708)
829
(1)
828
485
-
485
Deferred tax assets
Tax loss carry forwards
9,053
10,692
(1,639)
(488)
Other
Gross deferred tax asset
Net deferred tax asset
827
16
9,880
10,708
-
-
811
(828)
-
3
(485)
-
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Rey Resources Annual Report 2019
Rey Resources Limited
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Notes to the consolidated financial report
For the year ended 30 June 2019
7. INCOME TAX EXPENSE (Continued)
Tax losses
e
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At 30 June 2019, the Group has tax losses arising in Australia of $81,407,676 (2018:
$79,503,136) 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.
Additionally, 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 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
8. LOSS PER SHARE
in thousands of dollars
2019
2018
Earnings
Earnings used in calculating basic and
diluted earnings per share attributable to
the owners of the company
(8,923)
(1,049)
Number of ordinary shares
2019
2018
Weighted average number of ordinary
shares outstanding during the year used in
calculating basic and diluted loss per share
Basic loss per Share (cents per share)
Diluted loss per Share (cents per share)
212,364,928
212,484,287
(4.2)
(4.2)
(0.49)
(0.49)
Calculation of loss per share
Basic loss per share is calculated as loss for the period attributable to shareholders of
$8,923,000 (2018:$1,049,000 loss) divided by the weighted average number of ordinary
shares of 212,364,928 (2018: 212,484,287). The diluted loss per share for the year ended
30 June 2019 and 2018 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.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
9a. CASH AND CASH EQUIVALENTS
in thousands of dollars
2019
2018
Cash at bank and in hand
Cash and cash equivalents
28
28
36
36
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets
and liabilities are disclosed in note 22.
9b. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
in thousands of dollars
Note
2019
2018
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation
Write back Impairment of capitalised exploration
expenditure
Impairment of capitalised exploration expenditure
Change in fair value of investment
Finance costs
( I n c r e a s e ) / d e c r e a s e i n t r a d e a n d o t h e r
receivables
(Increase) / decrease in prepayments
Increase / (decrease) in trade and other payables
Increase / (decrease) in employee benefits
11
12
5
(8,923)
(1,049)
5
-
7,450
53
474
(941)
2
(2)
27
(1)
5
(12)
-
53
162
(841)
1
(1)
(27)
13
Net cash used in operating activities
(915)
(855)
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Rey Resources Annual Report 2019
in thousands of dollars
2019
2018
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
10. TRADE AND OTHER RECEIVABLES
Current
Other receivables
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
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20
20
2019
181
(177)
4
22
22
2018
181
(172)
9
2019
2018
9
-
-
(5)
4
12
2
-
(5)
9
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
12. INVESTMENT
in thousands of dollars
Investment in Norwest Energy NL at fair value
as at 1 July
Changes in fair value of investment
2019
159
(53)
106
2018
212
(53)
159
The financial asset at fair value through profit or loss is an investment in Norwest Energy NL.
Fair value represents the market value of the financial assets at balance date. 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 2019 was $0.002 per
share. This financial asset is initially measured at fair value plus transaction costs that are
directly attributable to its acquisition or issue. These assets are subsequently measured at
fair value. Net gains and losses, including any interest or dividend income, are recognised
in profit or loss.
13. EXPLORATION AND EVALUATION EXPENDITURE
Working Interests
Exploration
and evaluation
expenditures carried
forward
in thousands of dollars
2019
100%
40%
100%
100%
100%
100%
2018
2019
2018
100%
22,094
21,942
25%
100%
100%
100%
100%
4,134
2,893
169
3,087
3,535
10,789
2,829
4
2,907
3,354
in respect of:
Duchess Paradise 1
EP457 and EP458 2
EP104 3
R1 3
L15 3
EP487 4
Costs carried forward
35,912
41,825
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
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Movements in carrying amount:
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in thousands of dollars
Opening balance
Disposal of interest in EP437
Acquisition of interests in EP104, R1, L15
Current year expenditure capitalised
Impairment2
2019
41,825
-
-
1,537
(7,450)
35,912
2018
37,296
(2,716)
5,616
1,629
-
41,825
1. Exploration and evaluation expenditure recognised in Duchess Paradise 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. This amount
includes the Group’s proportionate share of exploration assets held by the
respective joint venture entities. On 28 March 2019, the Company increased its
current interests in each of the EP457 & EP458 permits from 25% to 40% for a total
cash consideration of $480,000. An impairment of $7,450,000 was made as a result
of revaluation of EP457 & EP458 to their fair value. The Group utilized a third party
valuation expert who applied the VALMIN code to determine the fair value of
EP457 and EP458.
3. Acquisition costs and the exploration and evaluation expenditure recognised
on EP104, R1 and L15 (together the “Lennard Shelf Blocks”) which are held solely
by the Group. On 5 March 2019, the Company announced that it has signed a
binding Farmout Agreement with Doriemus Plc (“Doriemus”) pursuant to which
Doriemus will fund $1 million in development work on L15 for a 50% interest in L15.
The carry value of L15 will be reassessed upon the completion of the Farmout
Agreement activities.
4. Exploration and evaluation expenditure recognised on EP487 which is held solely
by the Group. On 31 December 2018, the Company announced that it has
entered into a binding letter of intent (“LOI”) with Doriemus PLC (“Doriemus”, ASX:
DOR) pursuant to which Doriemus agreed to farmout to exploration permit EP487.
Upon completion of the farmout, Doriemus will earn a 50% operating interest in the
asset. As announced by the Company on 5 March 2019, Doriemus advised that it
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
13. EXPLORATION AND EVALUATION EXPENDITURE (Continued)
has finalised the due diligence on EP487. On 5 August 2019, Rey announced that it
has terminated the farmout arrangement with Doriemus as Doriemus has failed to
raise the necessary fund required for the drilling commitments before the mutually
agreed deadline.
An exploration and evaluation asset is recognized in relation to an area of interest if the
following conditions are satisfied:
(a) The rights to tenure of the area of interest are current;
(b) At least one of the following conditions is also met:
(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 continuing.
Management expect to extend the right of tenure for tenements approaching expiry.
14. TRADE AND OTHER PAYABLES
in thousands of dollars
Unsecured liabilities
Sundry payables and accrued expenses
2019
2018
110
110
84
84
The Group’s exposure to currency and liquidity risk related to trade and other payables is
disclosed in note 22.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
15. EMPLOYEE BENEFITS
in thousands of dollars
Employee benefits
Current
Non-current
16. Provision
in thousands of dollars
Restoration provision (L15, R1)
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The restoration provision relates 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.
The provision has been calculated on an assumption that management expects that the
cash out flow will not be incurred until approximately 2029.
The movement of the provision is related to the discount unwind.
2019
2018
16
-
16
2019
2,952
2,952
16
-
16
2018
2,900
2,900
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
17. ISSUED CAPITAL
in thousands of dollars
2019
2018
212,188,439 (2018: 212,405,266) fully paid
ordinary shares
86,597
86,597
86,663
86,663
The Company does not have a limited amount of authorised capital and issued shares
do not have a par value.
Ordinary shares participate in the proceeds on winding up of the parent entity in
proportion to the numbers of shares held.
Movements in shares on issue
2019
2018
Number
$’000
Number
$’000
On issue at beginning of the year
212,405,266
86,663
212,495,266
86,683
Share buy back
(216,827)
(66)
(90,000)
(20)
On issue at the end of the year
212,188,439
86,597
212,405,266
86,663
During the year ended 30 June 2019, a total of 216,827 shares were bought back at a
cost of $66,000 and cancelled. On 24 June 2019, the Company announced the extension
of the on-market buyback program for a further 12 months from 9 July 2019.
18. 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
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
18. COMMITMENTS (Continued)
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
Mineral
Petroleum
Year 1
Year 2-5
Total
169
37
206
7,327
13,882
21,209
Total
7,496
13,919
21,415
In May 2018, the Company acquired from Key and Indigo 100% interests in EP104, R1
and L15. 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 petroleum recovered and produced
from the licences.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
19. GROUP ENTITIES
Consolidated subsidiaries
Country of
incorporation
Ownership Interest
Blackfin Pty Limited
Rey Cattamarra Pty Limited
Rey Derby Pty Limited
Rey Derby Block Pty Limited
Australia
Australia
Australia
Australia
Rey Derby Port Operations Pty Limited
Australia
Rey Royalty Chile Pty Limited
Rey Victory Pty Limited
Rey Oil and Gas Pty Limited
Rey Lennard Shelf Pty Limited
Humitos Pty Limited
Gulliver Productions Pty Limited
Australia
Australia
Australia
Australia
Australia
Australia
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
20. 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 Joint Venture
On 18 March 2013, the Company entered into an agreement with Buru Energy Limited
(“Buru”) 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.
On 10 December 2018, the Company announced that, pursuant to a transaction entered
into between Buru and Diamond Resources (Barbwire) Pty Limited (“DRB”) whereby Buru
will increase its interests in these permits from 37.5% to 60%, Rey (via its wholly owned
subsidiary Rey Oil and Gas Pty Limited) has exercised its pre- emptive rights under the
permit joint operating agreements and entered into a parallel agreement with DRB to
increase its current interests in each of the EP457 and EP458 permits from 25% to 40% for a
total cash consideration of $480,000.
The current interest in the two exploration permits, known as “The Fitzroy Blocks”, are:
Rey Oil and Gas Pty Limited 40% (of which a 10% interest is free carried to production)
Buru Fitzroy Pty Limited
60% (Buru Energy Limited operator)
The total amount of the Group’s capitalised exploration and evaluation expenditure
under this joint venture agreement at the reporting date was $4,134,000 (2018:
$10,789,000).
21.RELATED PARTIES
(a) Parent entity
The ultimate parent entity within the Group is Rey Resources Limited.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
21. RELATED PARTIES (Continued)
(b) Subsidiaries
Interests in subsidiaries are set out in note 19.
(c) KMP compensation
Disclosures relating to compensation of the KMP compensation comprised:
Individual Directors and executives compensation disclosures
Short term benefits
Post-employment benefits
2019
2018
307,000
307,000
16,530
16,530
323,530
323,530
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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Rey Resources Annual Report 2019
2019
2018
120,000
120,000
1,834,969
2,041,717
1,834,969
2,041,717
3,699,069
699,069
3,000,000
560,164
560,164
-
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
21. RELATED PARTIES (Continued)
(d) Transactions with related parties
ASF Group Limited
Service fees
Loan granted (inclusive of interest) 1
-current
l
Wanyan Liu
-current
-Non current
Loan granted (inclusive of interest) 2
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1. An unsecured loan of up to $3.8 million (“ASF Loan”) was granted by ASF Group
Limited, a substantial shareholder of the Company, with maturity date on 31
December 2019 and interest bearing at 12% per annum. During the year, the
Company repaid $2.5 million ASF Loan, which will remain available for re-draw
pursuant to the terms of the ASF Loan. Ms Min Yang and Mr Geoff Baker are
directors of ASF Group Limited.
There is $2.35 million available under the $3.8 million facility from ASF to the Group
at 30 June 2019.
2. An unsecured loan of $500,000 was granted by Wanyan Liu (“Liu”), a substantial
shareholder of the Company, with maturity date on 31 March 2021 and interest
bearing at 12% per annum (First Liu Loan). On 18 April 2019, the Company entered
into another Loan Agreement with Liu for the granting of $3 million additional loan
(Second Liu Loan), with maturity date on 31 December 2020 and interest bearing at
12% per annum payable quarterly by cash.
Liu loans are fully drawn down as at 30 June 2019. Refer to Note 24 Subsequent
event update relating to Liu loans.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
22. FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
Categories of financial instruments
The Group’s financial instruments consist mainly of cash and cash equivalents, trade and
other receivables, investment, trade and other payables, and loan and borrowings.
The totals for each category of financial instruments, measured in accordance with AASB
9 as detailed in the accounting policies to these financial statements, are as follows:
in thousands of dollars
2019
2018
FVTPL
-Investment 1
Financial assets measured at amortised cost
-Cash and cash equivalents
-Trade and other receivables
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Total financial liabilities
106
28
20
154
110
110
159
36
22
217
84
84
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 2019 was $0.002 per share.
Trade and other receivables: analysis of age of financial asset
The aging of trade and other receivables at the reporting date that were not impaired
was as follows:
Neither past due nor impaired
Financial risk management framework
2019
20
2018
22
The Board of Directors has overall responsibility for the establishment and oversight of the
risk management framework.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
22. FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL
INSTRUMENTS (Continued)
The Group does not use any form of derivatives for speculative purposes. The Group is not
at a level of exposure that requires the use of derivatives to hedge its exposure.
The main risks the Group is exposed to through its financial instruments are liquidity risk
and market risk which includes interest rate risk.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises principally from the
Group’s cash and cash equivalents, and trade and other receivables.
The carrying amount of financial assets represents the maximum credit exposure.
The Group limits its exposure to credit risk in respect of cash and cash equivalents and
other deposits with banks by only dealing with reputable banks with high credit ratings.
In respect of trade and other receivables, the Group has no significant concentration of
credit risk with respect to any single counter party or group of counter parties. The Group
is not exposed to any significant credit risk as there were no trading operations during the
year.
At 30 June 2019 and 30 June 2018, there was no impairment loss allowance 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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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
22. 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:
2019
in thousands of dollars
Carrying
amount
Expected /
contractual
cash flows
6 months
or less
6-12
months
1-2
years
2-5
years
More
than 5
years
Financial liabilities
Trade and other payables
110
110
110
-
-
Loans from shareholders
5,534
6,188
2,827
180
3,181
5,644
6,298
2,937
180
3,181
2018
in thousands of dollars
Carrying
amount
Expected /
contractual
cash flows
6 months
or less
6-12
months
1-2
years
2-5
years
Financial liabilities
Trade and other payables
84
84
Loans from shareholders
2,602
3,042
2,686
3,126
84
-
84
-
-
-
-
3,042
3,042
-
-
-
-
-
-
-
-
-
More
than 5
years
-
-
-
Currency risk
The Group is not exposed to currency risk at the reporting date because the Group holds
no financial assets or liabilities denominated in foreign currency.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
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22. FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL
INSTRUMENTS (Continued)
Interest rate risk
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.
in thousands of dollars
2019
2018
Variable rate instruments
Cash and cash equivalents
28
28
36
36
At the reporting date, the Group had a total of $7.3 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 $374 (2018: $624).
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 2018 and 2019, 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.
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
23. OPERATING SEGMENTS
The Group operates in two segments, mineral exploration and development and
petroleum exploration in one geographical location, Western Australia. The consolidated
financial results from these segments are equivalent to the financial statements of the
Group.
Operating segment information
Mineral
2019
Mineral
2018
Petroleum
2019
Petroleum
2018
Corporate
2019
Corporate
2018
Total
2019
Total
2018
Consolidated
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Revenue
Total Reportable
segment revenue
Other income/
(expense)
Impairment of
assets
Interest revenue
Finance costs
Administration cost
Profit/(loss) before
income tax benefit
income tax benefit
Loss after income
tax benefit
Assets
Other Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,450)
-
-
-
-
-
-
-
-
11
(53)
(53)
(53)
42
-
-
-
-
-
-
-
-
(7,450)
-
-
-
(476)
(944)
(163)
(476)
(163)
(844)
(944)
(844)
(7,450)
11
(1,473)
(1,060)
(8,923) (1,049)
-
-
-
-
-
-
(7,450)
11
(1,473)
(1,060)
(8,923) (1,049)
Segment assets
22,094
21,942
13,818
19,883
Total assets
22,094
21,942
13,818
19,883
-
-
174
-
174
240
174
240
-
35,912 41,825
240
36,086 42,065
Liability
Other liabilities
Segment liabilities
Total Liabilities
Capital
Expenditure
-
-
-
-
-
-
-
2,952
2,952
-
5,660
2,702
5,660
2,702
2,900
2,900
-
-
2,952
2,900
5,660
2,702
8,612
5,602
152
380
1,385
1,249
-
-
1,537
1,629
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
24. SUBSEQUENT EVENTS
On 17 July 2019, the Group entered into a new loan agreement with Wanyan Liu,
pursuant to which Liu agreed to grant a further loan facility to $3 million (Third Liu Loan) to
the Company expiring 31 December 2021 and to extend the maturity date of the existing
$500,000 loan (First Liu Loan) from 31 December 2019 to 31 March 2021.
During July 2019 and August 2019, the Group has drawn down $500,000 of the $3.0 million
available under the Third Liu Loan.
The Company announced on 5 August 2019 that it has terminated the EP487 Farmout
Agreement with Doriemus PLC.
No other matter or circumstance that is not already disclosed in these financial
statements has arisen since 30 June 2019 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.
25.AUDITORS REMUNERATION
in dollars
Audit services
Auditors of the Company
KPMG Australia:
Audit and review of financial reports
Other assurance services
2019
2018
69,917
-
69,917
62,000
2,000
64,000
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Rey Resources Annual Report 2019
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2019
26. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ended 30 June 2019 the parent entity of the
Group was Rey 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
2019
2018
(1,419)
(1,419)
57
31,301
31,358
2,660
3,000
5,660
25,698
(1,060)
(1,060)
65
37,263
37,328
2,695
-
2,695
34,633
Total equity of the parent entity comprising of:
Share capital
Accumulated losses
Total equity
86,597
(60,899)
25,698
86,663
(52,030)
34,633
C. Parent entity contingencies
As at 30 June 2019 and 2018, there are no contingent liabilities of the parent entity.
D. Parent entity capital commitments
As at 30 June 2019 and 2018, 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 2019 and 2018, there are no guarantees entered into by the parent entity.
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Rey Resources Limited
Directors' Declaration
For the year ended 30 June 2019
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 2019 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 2019.
Signed in accordance with a resolution of the Directors.
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Min Yang
Non-Executive Chairman
Sydney, Australia
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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).
I n o u r o p i n i o n , t h e a c c o m p a n y i n g
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
• giving a true and fair view of the
G r o u p ’ s f i n a n c i a l p o s i t i o n a s a t
30 June 2019 and of its financial
performance for the year ended on
that date; and
• complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated statement of financial
position as at 30 June 2019;
• 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;
• N o t e s i n c l u d i n g a s u m m a r y o f
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.
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.
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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 a potential 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 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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Rey Resources Annual Report 2019
Exploration and evaluation expenditure ($35,912,000)
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.
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,
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
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In assessing the presence of
impairment indicators, we focused
on those that may draw 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 Groups 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.
In addition to the above across significant
tenements, the Group recorded an
impairment charge of $7,450,000 against
two areas of interest, as a result of the
recent market transaction with a third
party. This further increased our audit
effort in this key audit area.
work 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.
• We assessed the scope, competency and
objectivity of the external expert engaged by
the Group who assisted with the assessments
of the valuation of E&E assets.
• For the specific tenements where impairment
was recorded, we recalculated the
impairment charge against the recorded
carrying value and compared this to the
amount disclosed.
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
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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.
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; and
• 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
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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.
Report on the Remuneration Report
Opinion
Directors' responsibilities
In our opinion, the Remuneration Report
of Rey Resources Limited for the year
ended 30 June 2019, 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 2019.
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
19 September 2019
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ASX ADDITIONAL INFORMATION
Additional Shareholder Information
Additional information required by the Australian Securities Exchange Listing Rules and
not disclosed elsewhere in this Annual Report is set out below. The information was current
as at 12 September 2019.
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 2019 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 2019 Corporate Governance Statement is
available from the Company’s website at http://reyresources.com/corporate/corporate-
governance/
Substantial Shareholders
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 Company) is set out below:
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
12,970,000
12,361,500
12,092,553
10,959,614
16.34%
16.06%
11.84%
6.81%
6.11%
5.83%
5.70%
5.17%
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Top 20 Shareholders
The 20 largest shareholders of the Company are listed below:
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Name
Number of Shares
Percentage Held %
1. ASF CANNING BASIN ENERGY PTY LTD
2. MISS WANYAN LIU
3. MERCHANT CENTRAL LIMITED
34,666,667
34,068,800
25,114,286
4. NEWAY ENERGY INTERNATIONAL LIMITED
14,450,580
5. MRS YINXIN HE
6. START GRAND GLOBAL LIMITED
7. MISS MEI CHI JOYCE LEE
8. START LINK INVESTMENTS LIMITED
9. JADE SILVER INVESTMENTS LIMITED
10. XIAO HUI ENTERPRISES LIMITED
11. BNP PARIBAS NOMS PTY LTD
12. MR JIARONG HE
13. MR HAITAO GENG
14. TONG HENG HOLDINGS LIMITED
15. JADE SILVER INVESTMENTS LTD
16. FOREVER GRAND GROUP LIMITED
17. HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED
12,970,000
12,361,500
12,092,553
10,959,614
9,352,056
6,959,404
6,633,063
6,228,491
3,000,000
1,846,126
1,480,000
1,150,837
1,025,921
18. BROWNSTONE INTERNATIONAL PTY LTD
1,000,000
19. MEGA AHEAD LIMITED
20. MRS SHUNYI ZHU
990,326
915,755
16.34%
16.06%
11.84%
6.81%
6.11%
5.83%
5.70%
5.17%
4.41%
3.28%
3.13%
2.94%
1.41%
0.87%
0.70%
0.54%
0.48%
0.47%
0.47%
0.43%
TOTAL TOP 20 SHAREHOLDERS
197,265,979
92.97%
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Distribution of Equity Securities
There were 665 holders of less than a marketable parcel of ordinary shares (being 291,523
shares on 12 September 2019).
The number of shareholders by size of holding is set out below:
Fully Paid Ordinary Shares
Size of Holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
TOTALS
Voting Rights
Number of holders
Number of shares
570
411
152
157
50
1,340
163,501
1,132,168
1,166,689
4,113,912
205,612,169
212,188,439
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. A total of 216,827 shares were
bought back pursuant to the share buy-back before it closed on 21 June 2019.
On 24 June 2019, Rey Resources announced another on-market share buy-back of up
to 10% of its issued share capital on market over a 12-month period. To the date of this
Annual Report, Rey Resources has not bought back any shares pursuant to the current
share buy-back.
Securities Exchange
Rey Resources is listed on the Australian Securities Exchange (ASX code: REY).
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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
Area
(Ha)
Percentage
Held
EL
EL
EL
E04/1386
21/01/2004
20/01/2020
Blackfin Pty Ltd
1,627
E04/1519
20/04/2006
19/04/2020
Blackfin Pty Ltd
11,386
E04/1770
4/03/2009
3/03/2020
Blackfin Pty Ltd
6,834
MA
M04/0453
Pending
Pending
Blackfin Pty Ltd
12,964
100%
100%
100%
100%
EP
EP
EP457
24/10/2007 05/01/20221
EP458
24/10/2007 05/01/20221
l
EP
EP4872
14/03/2014
13/12/2021
Rey Oil and Gas Pty
Ltd /Buru/DR
Rey Oil and Gas Pty
Ltd /Buru/DR
251,737
40%
292,050
40%
Rey Lennard Shelf Pty
Ltd
505,840
50%
EP
L
R
EP
EP4872
14/03/2014
13/12/2021
Rey Derby Block Pty
Ltd
505,840
50%
L153,4
R14
EP1044
01/04/2010
21/03/2031 Gulliver Productions
16,400
11/10/2016
10/10/2022 Gulliver Productions
24,516
30/01/2015
29/07/2022 Gulliver Productions
73,596
100%
100%
100%
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. 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.
3. Subject to farmin by Doriemus Plc., with Doriemus to earn 50% operating interest on
completion.
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.
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88
Suite 5
62 Ord Street
West Perth
WA 6005
Tel: +61 8 9322 1587
Fax:+61 8 9322 5230
www.reyresources.con
Rey Resources Annual Report 2019