ACN 108 003 890
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A N N U A LR E P O R T2 0 2 0
CONTENTS
Page
Corporate Directory ..................................................................................................................................................... 2
Company Profile ....................................................................................................................................................3
Chairman’s Message ..............................................................................................................................................4
Business Performance and Outlook .......................................................................................................................5
Annual Reserves and Resources Statement ..........................................................................................................8
Director’s Report .................................................................................................................................................11
Auditor’s Independence Declaration ...................................................................................................................27
Consolidated statement of profit or loss and other comprehensive income ......................................................28
Consolidated statement of financial position ......................................................................................................29
Consolidated statement of changes in equity ......................................................................................................30
l
Consolidated statement of cash flows .................................................................................................................31
Note to the consolidated financial report ............................................................................................................32
Directors’ Declaration ..........................................................................................................................................59
Independent Audit Report ...................................................................................................................................60
ASX Additional Information ..................................................................................................................................65
Tenement Schedule ..............................................................................................................................................68
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1
CORPORATE DIRECTORY
Non-Executive Chairman
Managing Director
Non-Executive Director
Independent Non-Executive Director
Alternate Director to Non-Executive Chairman, Ms Min Yang
Directors
Ms Min Yang
Mr Wei Jin
Mr Geoff Baker
Mr Dachun Zhang
Mr Louis Chien
Company Secretary
Mr William Kuan
Registered Office
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
Auditor
ShineWing Australia
Level 8, 167 Macquarie Street
Sydney NSW 2000
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Securities Exchange
Australian Securities Exchange (ASX)
ASX Code: REY
Website
www.reyresources.com
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2
COMPANY PROFILE
Rey Resources Limited (“Rey” or “Company”) is an ASX-listed company (ASX: REY) focused on exploring
and developing energy resources in Western Australia’s Canning Basin.
Rey holds 100% interest in (and is Operator of) EP487 (the “Derby Block”) and 40% interest in two
prospective Canning Basin petroleum exploration permits - EP457 and EP458 (the “Fitzroy Blocks”). Rey
also holds 100% interest in EP104, Retention Licence R1 and Production Licence L15 (together the “Lennard
Shelf Blocks”).
Rey has participated and completed a series of exploration works on 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.
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Rey has an experienced Board and management team and is committed to continue developing its
energy assets to deliver maximum value to its shareholders.
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3
CHAIRMAN’S MESSAGE
Dear Shareholders,
It is my pleasure to deliver Rey’s Annual Report for the year ended 30 June 2020. We continually focus on
maximising the value of our coal and oil and gas exploration projects in the Canning Basin in Western
Australia during the year.
During the first half of the financial year ended 30 June 2020, we were positively seeking appropriate
method to achieve reproduction in a low production costs from West Kora-1 in L15 as well as reviewing
its commercial value especially after termination of the farmout agreement with Doriemus in Feb 2020
due to its failing to spend agreed expenditure in the project. We also completed most of the site cleaning
work for West Kora except for one tank with oil and oily water. All other development works planned for
EP487 and R1 were also in progress.
However, due to COVID-19 Rey slowed down the progress of all planned works since early 2020 aiming at
keeping all staff in good healthy standing and to help stopping community spreading of the virus.
During the year, as a strategical consideration of maintaining good relationships with traditional owners
and focusing on current proposed mining area development, we surrendered one tenement of Duchess
Paradise Project which is not included in the current Mining Lease Application. The surrender will have no
effect to the completed stage 1 Definitive Feasibility Study update.
I would like to thank all shareholders for their support and understanding. I also thank our staff and
management team for their work over the past year and look forward to the next exciting year.
Min Yang
Non-executive Chairman
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4
BUSINESS PERFORMANCE AND OUTLOOK
OIL & GAS
1. Canning Basin – the Fitzroy Blocks (EP457 and EP458)
1.1 Background
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Equity interests in the Fitzroy Blocks (EP457 and EP458) are currently:
Rey (Rey Oil & Gas Pty Ltd)
Buru
40%
60%
(including 6.66% free carried to production)
(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 kilometres
the southern flank of the Fitzroy Graben. The Fitzroy Blocks straddle three major trends:
2
) are located over parts of
•
•
•
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
After the left of Frack Ban, the government announced in July 2019 that the implementation of
Government’s response to the Independent Scientific Panel Inquiry into Hydraulic Fracture Stimulation in
Western Australia has commenced and is continuing and will have decisions be made by end of 2020. The
operator, Buru Energy, lodged the 12 months suspension and extension application to Department of
Mines, Industry Regulation and Safety (“DMIRS”) on 17 March 2020 for EP457 and EP458 in consideration
of the uncertainty of implementation in future. The application was approved on 19 April 2020.
During the year, Buru discussed a new budget with Rey to cover the proposed 500km 2D seismic
reprocessing and general geology studies. The new budget has been approved by Rey.
Rey also build a new strategic relationship with Buru for the farmout of future drilling and seismic work in
Fitzroy Block. However, the farmout progress was delayed due to the current health crisis.
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2. Canning Basin - the Derby Block (EP487)
2.1 Background
The Derby Block (EP487) is a large petroleum exploration permit of approximately 5,000 kilometre2. It
occurs to the north-west of Rey’s interests in the Fitzroy Blocks. The Derby Block is considered to be
predominantly a Wet Laurel Basin Centred Gas play (“BCG”) which is regionally extensive throughout the
Canning Basin and has been the subject of exploration in the Canning Basin by other parties in 2015,
resulting in encouraging flow tests by Buru Energy at Valhalla and Asgard (please refer various BRU ASX
releases including releases dated 20 January 2016 and 18 April 2016).
Rey is holding 100% of the equity interest in the Derby Block through the following subsidiaries:
Rey Lennard Shelf Pty Ltd
Rey Derby Block Pty Ltd
50%
50%
2.2 Work program during the year
Following the letter received from DMIRS about suggestion of EP487 commitment work changes on 9
August 2019, a formal 12-month suspension and extension application was lodged to DMIRS in September
2019 to reflect the suggestions. On 13 November 2019, an approval letter was received to suspend and
extend the current permit year to December 2020.
During the financial year, Rey is preparing the pre-drilling work for the commitment well. However, due
to the travel ban caused by COVID-19, the preparation was delayed and Rey expects the drilling work will
not be completed before the due date. Therefore, a notice letter regarding COVID-19 impact on drilling
has been prepared in July 2020 and submitted to DMIRS. The impact should meet the force majeure
ground for permit suspension and extension and Rey prepares to lodge a formal application in September
2020.
3. Lennard Shelf Blocks – EP104, R1 and L15
3.1 Background
Rey holds 100% interest in the Lennard Shelf Blocks which comprises EP104, a Retention Lease (R1) and
one Production License (L15). The Lennard Shelf Blocks are situated north of Rey’s existing interests in the
Canning Basin petroleum exploration license EP487 and covering a total area of approximately 1,145 km2
and considered prospective for conventional oil and tight gas.
3.2 Work Program during the year
In February 2020, Rey terminated the Farmout Agreement with Doriemus for L15 due to its failing to
spend the agreed expenditure in West Kora-1. Rey is positively seeking appropriate method to achieve
the reproduction from West Kora-1 with low production costs. However, this has been delayed due to the
current pandemic issue.
In October 2019, a work variation and suspension application was lodged with DMIRS to change the
committed geochemical survey from cover the whole area with large distance of each sampling point to
reasonable density that focus on the identified Anderson trap. The application was approved by DMIRS
on 23 June 2020. The work was completed on 22 August 2020. The sampling will be delivered to laboratory
for analysis soon. Rey also completed a geotechnical study and engineering study for the Point Tornment-
1 in R1. A simulation and commercial study is planned to be carried out very soon to value the contingency
gas resources in Point Tornment-1 before due date in October 2020.
6
Rey lodged a formal suspension and extension letter to DMIRS for EP104 to reflect their commitment
work revision suggestions on 9 August 2019. The application was approved on 13 November 2019 that no
works is required in permit year 3 and year 5.
COAL
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The Duchess Paradise Coal Project (“Duchess Paradise Project”) is a proposed bituminous thermal coal
operation of up to 2.5 million tonnes per annum in the Canning Basin, north Western Australia. A
Definitive Feasibility Study (“DFS”) of the Project was completed in June 2011.
After about one year negotiation, Rey entered into an Access Deed with Hancock Prospecting on 8
November 2019 for the Mining Licence Application. With the execution of the Access Deed, all objectors
of the Mining Lease Application have been removed. An official notice letter has been sent to Warden’s
Court and this is under assessment by Karratha Mining Registrar for recommendation. Rey also have been
contacted by DMIRS in February 2020 to follow up the negotiation with Native Tile. By the date of this
annual report, Rey has re-started the negotiation process with Nyikina Mangala people.
During the reporting period, Rey surrendered one tenement, E04/1386, of Duchess Paradise Project in
June 2020. The surrender will provide Rey more flexibility to negotiate a heritage protection agreement
with Native title as well as allow Rey to focus more on the development within Mining Licence Application
area. E04/1386 located at south east corner of M04/453 application with total area of 16.27km2. Minor
of current inferred resources of Duchess Paradise Project extended in to this tenement.
CORPORATE
On 17 July 2019, the Company entered into a third loan agreement with Wanyan Liu (“Liu”), pursuant to
which a further loan facility of up to $3 million (“Third Liu Loan) has been granted by Liu. The Third Liu
Loan will mature on 31 December 2021 with interest accruing at the rate of 12% per annum.
On 31 December 2019, the Company agreed with ASF Group Limited (“ASF”) to reduce the facility amount
for the $3.8 million loan facility (“ASF Loan”) to $2 million and to extend the maturity date of the ASF Loan
to 31 March 2020. The maturity date of the ASF Loan was further extended to 31 October 2021 prior to
the end of the financial year.
The Company also announced on 25 June 2020 that Liu agreed to increase the second loan facility granted
in April 2019 from $3 million to $5 million (“Second Liu Loan”) and to extend the maturity date of the
Second Liu Loan from 31 December 2020 to 31 October 2021.
As at the balance sheet date, the Company had a total of $3.74 million remaining loan facilities available
for draw down, which represents $3.28 million available under Second Liu Loan and Third Liu Loan and
$0.46 million available under ASF Loan.
Subsequent after the financial year end on 8 July 2020, the Company announced the extension of the on-
market buyback program for a further 12 months from 23 July 2020. During the year ended 30 June 2020,
a total of 28,000 shares were bought back at a cost of $7,880.
7
ANNUAL RESERVES AND RESOURCES STATEMENT
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 surrendered the tenement of E04/1386 during the reporting period which may affect the inferred
JORC resources of Duchess Paradise P1-seam that was 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). The
Company is reviewing the effects on surrendered tenement to JORC resources with a third party. An
updated JORC resources in accordance with JORC 2012 is expected to be reported to ASX once the
assessment work is completed.
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 model as well as consider the effects on the surrendered
tenement.
As a result, the Company is not in a position to report the outcome of its annual review of Ore Resources
and 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.
Gas in place
Recoverable Gas
Recoverable Condensate
Recoverable BOE
Prospective Potential Recoverable Resources SPE PRMS (2011)3
Tcf1
Tcf1
MMbbl2
MMBOE4
P901
68.0
9.4
239
1,852
P501
169.6
28.4
707
5,283
P102
412.9
81.1
2,066
15,096
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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.
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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.
In August 2020, Rey reviewed the resources of EP487 with a third party consultant, 3D Geo. The results
showed that no adjustment is required to the resources of EP487 initially released in June 2017.
L15
A review of Rey’s oil Reserves and contingent Resources for the West Kora Oilfield in L15 and Point
Torment Gas Discovery in R1 was conducted by Rey in August 2020. The review showed no changes are
required. Detailed Resources of R1 and Reserves of West Kora Oilfield in L15 and and Point Torment Gas
Discovery in R1 are listed in Table 3 below:
Table 3: Estimated Remaining Petroleum Reserves and Contingent Resources West Kora Oilfield
1P
67
1C
13.2
2.41
Mstb1
Mstb
BCF2
2P
238
2C
60.7
3P
593
3C
226.4
4.725
8.42
West Kora Oilfield Recoverable Oil
West Kora Oilfield Recoverable
Contingent Resources
Point Torment Gas Discovery
Recoverable Contingent Resources
1 Mstb – Thousand stock tank barrels of oil.
2 BCF – billion cubic feet
(Point Torment Gas Resources in R1 was initially estimated by Energetica Consulting in September 2015,
refer to Key ASX releases dated on 30 September 2015. West Kora oilfield reserves and contingent
resources in L15 was estimated by ERCE in May 2019, refer to Doriemus ASX releases dated on 9 May 2019)
Governance Arrangements and Internal Controls
The Company ensures that its quoted Resources 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.
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Competent Persons Statements
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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10
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 2020.
1. DIRECTORS
The Directors of the Company at any time during or since the end of the financial year are:
Ms Min Yang
Mr Wei Jin
Mr Geoff Baker
Mr Dachun Zhang
Dr Zhiliang Ou
Mr Louis Chien
Non-Executive Chairman
Managing Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director (Resigned 8 April 2020)
Alternate Director to Non-Executive Chairman, Ms Min Yang
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Details of Directors’ qualifications, experience, special responsibilities and directorships of other listed
companies can be found on pages 12 to 14.
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2.
INFORMATION ON DIRECTORS AND OFFICERS
Designation and
Independence
status
Chairman
Non-Executive
Managing
Director
Director
Non-Executive
Experience, expertise and qualifications
Directorships of other listed
companies during the last three years
Min Yang has extensive business connections and has
over 30 years of hands-on experience dealing with
private and state-owned enterprises in the Asia-Pacific
region. Over the years, Ms Yang has proven her unique
business insight and expertise in the identification,
incubation and realisation of real asset investment
opportunities.
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.
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
structuring and
implementation of joint venture and commercial
agreements.
the negotiation,
to
• ASF Group Limited (September
2005, ongoing)
• ActiveEX Limited (May 2012,
ongoing)
• Key Petroleum Limited (January
2014, ongoing)
• BSF Enterprise PLC (appointed 5
September 2018, ongoing)
None
• ASF Group Limited (November
2006, ongoing)
• ActiveEX Limited (appointed
February 2013. Resigned June
2017 and re-appointed August
2017, ongoing)
• Key Petroleum Limited (January
2014, ongoing)
• BSF Enterprise PLC (appointed 5
September 2018, ongoing)
Special
responsibilities
during the year
• Non-Executive
Chairman
• Member,
Audit and Risk
Management
Committee
• Member,
Audit and Risk
Management
Committee
• Member,
Audit and Risk
Management
Committee
12
Directors
Current
Min Yang
Appointed on
13 September 2012
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Wei Jin
Appointed Non-
Executive Director on 2
December 2013.
Appointed Managing
Director on 1 July 2016.
Geoff Baker
Appointed on
13 September 2012
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Current
Dachun Zhang
Appointed on 1 July
2013
Director
Non-Executive
Independent
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.
None
• Chairman,
Audit and Risk
Management
Committee
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
international experience and Chinese
extensive
business relationships to the Board of Rey.
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
in Structural Engineering &
Engineering degrees
Engineering Management respectively.
Director
Non-Executive
Independent
None
None
13
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Zhiliang Ou
Appointed on 22
September 2016 and
resigned on 8 April 2020
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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 (May 2015,
None
ongoing)
• ActivEX Limited (appointed
Alternate Director to Ms Min Yang
on 20 April 2020, 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.
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.
14
Directors
Current
Louis Chien
Appointed Alternate
Director to Non-
Executive Chairman, Ms
Min Yang on 11 January
2016.
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3. COMPANY SECRETARY
Mr William Kuan was appointed to the position of Company Secretary on 1 July 2020. Mr Kuan holds
a Master Degree in International Accounting. He is a Fellow of CPA Australia and an Associate of The
Chartered Governance Institute (ICSA) in the UK and The Hong Kong Institute of Chartered Secretaries
(HKICS). Mr Kuan has extensive experience in accounting, corporate finance and company secretarial
areas. He is currently a Director and Company Secretary of ASF Group Limited, a substantial
shareholder of the Company. Prior to joining ASF, he was company secretary for a number of diverse
Hong Kong 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 (Resigned 8 April 2020)
Louis Chien
Meetings
A
3
3
3
3
3
-
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
Meetings
A
2
2
2
2
B
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
Min Yang
Geoff Baker
Dachun Zhang
Wei Jin
Louis Chien
200,000
200,000
777,414
200,000
Nil
6. REMUNERATION REPORT – AUDITED
Nil
Nil
Nil
Nil
Nil
Performance
Rights
Nil
Nil
Nil
Nil
Nil
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 associated
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.
2020 Key Management Personnel
The KMP of Rey Resources during the year ended 30 June 2020 were:
Non Executive
Min Yang
Geoff Baker
Dachun Zhang
Zhiliang Ou
Non-Executive Chairman (appointed 13 September 2012)
Non-Executive Director (appointed 13 September 2012)
Independent Non-Executive Director (appointed 1 July 2013)
Independent Non-Executive Director (appointed 22 September 2016
and resigned on 8 April 2020)
Louis Chien
Alternate Director to Ms Min Yang (appointed 11 January 2016)
Executive
Wei Jin
Managing Director (appointed Non-Executive Director 2 December
2013, appointed Managing Director 1 July 2016)
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6. REMUNERATION REPORT – AUDITED (continued)
6.1 Principles of compensation (continued)
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)
6.1 Principles of compensation (continued)
Executive remuneration components
Executive remuneration is structured so that it supports the key remuneration principles outlined
above, and is intended to motivate executives towards achievement of the annual objectives and
longer term success of the Company. A Total Fixed Remuneration (“TFR”) is paid which considers
external market comparisons and individual performance. Performance linked compensation is
available through the short term and long term incentive plans outlined below.
Fixed remuneration
Executives receive an annualised TFR from which they must have deducted statutory superannuation.
They may elect to salary sacrifice further superannuation contributions and other benefits such as a
motor vehicle. Accommodation assistance and medical insurance may be provided for employees
from overseas or interstate where it is necessary to be able to attract key talent. A review of TFR is
undertaken each year and reflects market movements and individual performance.
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.
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6. REMUNERATION REPORT – AUDITED (continued)
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6.1 Principles of compensation (continued)
Relationship between Company performance and remuneration
The objective of the Company’s remuneration structure is to reward and incentivise the executives so
as to ensure alignment with the interests of the shareholders. The remuneration structure also seeks
to reward executives for their contribution in a manner that is appropriate for a company at this stage
of its development. As outlined elsewhere in this Report, the remuneration structure incorporates
fixed, annual at risk and long term incentive components.
For shareholders, the key measure of value is Total Shareholder Return (“TSR”). Other than general
market conditions, the key drivers of value for the Company and a summary of performance are
provided in the table following.
At this stage in the development of the Company, successful execution of the below drivers is the
mechanism through which shareholder wealth will be created.
The only relevant financial measure at this point is the Rey share price for which the history is
presented below. Absolute TSR performance is the basis for long term incentive awards under the
EIRP.
Rey Closing Share Price as at 30 June
* Adjusted for 5 into 1 share consolidation
2020
0.31
2019
0.31
2018
0.32
2017
0.2
2016
0.145*
Consequences of performance on shareholder wealth
Loss ($’000)
Dividends declared
Total shareholder return (TSR)%
2020
(1,880)
-
0%
2019
(8,923)
-
(3%)
2018
(1,049)
-
60%
2017
(559)
-
38%
2016
(3,998)
-
(72%)
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 original annual cash fees payable to each NED were 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. From April 2020, fees paid to each NED were reduced by 50% of the original fees.
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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 2019 and
30 June 2020.
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
$
$
$
$
$
$
$
M Yang - Non-Executive Chairman - Appointed 13 September 2012
2020
2019
42,000
48,000
-
-
-
-
-
-
G Baker - Non-Executive Director - Appointed 13 September 2012
2020
2019
52,500
60,000
-
-
-
-
D Zhang - Non-Executive Director - Appointed 1 July 2013
2020
2019
21,875
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,000
48,000
52,500
60,000
21,875
25,000
W Jin - Managing Director - Appointed Non-Executive Director 2 December 2013, appointed Managing Director 1 July 2016
2020
2019
105,001
120,000
-
-
-
-
9,975
11,400
-
-
Z Ou - Non-Executive Director - Appointed 22 September 2016 and resigned 8 April 2020
2020
2019
41,746
54,000
-
-
-
-
3,966
5,130
L Chien - Alternate Director - Appointed 11 January 2016
2020
2019
TOTAL
2020
-
-
263,122
-
-
-
-
-
-
-
-
13,941
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
1 In accordance with his contract Wei Jin does not accrue long term employee benefits.
307,000
16,530
-
-
-
-
-
-
-
-
-
-
-
114,976
131,400
45,712
59,130
-
-
277,063
323,530
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.
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6. REMUNERATION REPORT – AUDITED (continued)
6.4 Key employment contract
The table below summarises the key contractual provisions of the executive KMP.
Name and
Position
Wei Jin
Contract
Term
Ongoing
Termination by Company
Termination by Executive
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 2020 financial year.
6.6 Movements in share holdings
Movements in shares
The movement during the reporting period in the number of ordinary shares in the Company held by
each KMP, including their related parties, is as follows:
2020
Directors
Min Yang1
Geoff Baker2
Wei Jin3
Dachun Zhang4
Zhiliang Ou
Louis Chien
Total
Held at 1
July 2019
Received as
compensation
Received on
exercise of
options/rights
Other
changes
Held at 30
June 2020
200,000
200,000
200,000
777,414
-
-
1,377,414
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
200,000
200,000
777,414
-
-
1,377,414
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.
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6. REMUNERATION REPORT – AUDITED (continued)
6.7 Movements in Option holdings
No KMP held or were issued options during the 2020 reporting period.
6.8 Movement in Share right holdings
No KMP held or were issued share rights during the 2020 reporting period.
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 40% interest in petroleum permits EP457 & 458 in joint
venture with Buru Energy Limited, 100% interest in the Derby Block EP487 and petroleum exploration
permit EP104, retention licence R1 and production licence L15. Rey also holds 100% interests 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)
After the left of Frack Ban, the government announced in July 2019 that the implementation of
Government’s response to the Independent Scientific Panel Inquiry into Hydraulic Fracture
Stimulation in Western Australia has commenced and is continuing and will have decisions be made
by end of 2020. The operator, Buru Energy, lodged the 12 months suspension and extension
application to DMIRS on 17 March 2020 for EP457 and EP458 in consideration of the uncertainty of
implementation in future. The application was approved on 19 April 2020.
During the year, Buru discussed a new budget with Rey to cover the proposed 500km 2D seismic
reprocessing and general geology studies. The new budget has been approved by Rey.
Rey is also building a new strategic relationship with Buru for the farmout of future drilling and seismic
work in the Fitzroy Block. However, the farmout progress was delayed due to the current pandemic
crisis.
Derby Block (EP487)
Following the letter received from DMIRS about suggestion of EP487 commitment work changes on 9
August 2019, a formal 12-month suspension and extension application was lodged to DMIRS in
September 2019 to reflect the suggestions. On 13 November 2019, an approval letter was received to
suspend and extend the current permit year to December 2020.
During the financial year, Rey is preparing the pre-drilling work for the commitment well. However,
due to the travel ban caused by COVID-19, the preparation was delayed and Rey expects the drilling
work will not be completed before the due date. Therefore, a notice letter regarding COVID-19 impact
on drilling has been prepared in July 2020 and submitted to DMIRS. The impact should meet the force
majeure ground for permit suspension and extension and Rey prepares to lodge a formal application
in September 2020.
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
Lennard Shelf Blocks (EP104, R1, L15)
In February 2020, Rey terminated the Farmout Agreement with Doriemus for L15 due to its failing to
spend the agreed expenditure in West Kora-1. Rey is positively seeking appropriate method to achieve
the reproduction from West Kora-1 with low production costs. However, this has been delayed due to
the current pandemic issue.
In October 2019, a work variation and suspension application was lodged with DMIRS to change the
committed geochemical survey from cover the whole area with large distance of each sampling point
to reasonable density that focus on the identified Anderson trap. The application was approved by
DMIRS on 23 June 2020. The work was completed on 22 August 2020. The sampling will be delivered
to laboratory for analysis soon. Rey also completed a geotechnical study and engineering study for the
Point Tornment-1 in R1. A simulation and commercial study is planned to be carried out very soon to
value the contingency gas resources in Point Tornment-1 before due date in October 2020.
Rey lodged a formal suspension and extension letter to DMIRS for EP104 to reflect their commitment
work revision suggestions on 9 August 2019. The application was approved on 13 November 2019 that
no works is required in permit year 3 and year 5.
Coal
Duchess Paradise Project
After about one year of negotiations, Rey entered into an Access Deed with Hancock Prospecting on
8 November 2019 for the Mining Licence Application. With the execution of the Access Deed, all
objectors of the Mining Lease Application have been removed. An official notice letter has been sent
to Warden’s Court and this is under assessment by Karratha Mining Registrar for recommendation.
Rey also have been contacted by DMIRS in February 2020 to follow up the negotiation with Native
Tile. By the date of this annual report, Rey has re-started the negotiation process with Nyikina Mangala
people.
During the reporting period, Rey surrendered one tenement, E04/1386, of Duchess Paradise Project
in June 2020. The surrender provides Rey more flexibility to negotiate a heritage protection agreement
with native title as well as allow Rey to focus more on the development within Mining Licence
Application area. E04/1386 located at south east corner of M04/453 application with total area of
16.27km2. Minor of inferred resources of Duchess Paradise Project extended in to this tenement.
Corporate
On 17 July 2019, the Company entered into a third loan agreement with Wanyan Liu (“Liu”), pursuant
to which a further loan facility of up to $3 million (“Third Liu Loan) has been granted by Liu. The Third
Liu Loan will mature on 31 December 2021 with interest accruing at the rate of 12% per annum.
On 31 December 2019, the Company agreed with ASF Group Limited (“ASF”) to reduce the facility
amount for the $3.8 million loan facility (“ASF Loan”) to $2 million and to extend the maturity date of
the ASF Loan to 31 March 2020. The maturity date of the ASF Loan was further extended to 31 October
2021 prior to the end of the financial year.
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8. RESULTS FOR THE YEAR AND REVIEW OF OPERATIONS (continued)
The Company also announced on 25 June 2020 that Liu agreed to increase the second loan facility
granted in April 2019 from $3 million to $5 million (“Second Liu Loan”) and to extend the maturity
date of the Second Liu Loan from 31 December 2020 to 31 October 2021.
As at the balance sheet date, the Company had a total of $3.74 million remaining loan facilities
available for draw down, which represents $3.28 million available under Second Liu Loan and Third
Liu Loan and $0.46 million available under ASF Loan.
Subsequent after the financial year end on 8 July 2020, the Company announced the extension of the
on-market buyback program for a further 12 months from 23 July 2020. During the year ended 30
June 2020, a total of 28,000 shares were bought back at a cost of $7,880.
Financial review
Net loss of the consolidated entity consisting of Rey Resources Limited (the “Company”) and the
entities it controlled (the “Group”) after income tax for the year ended 30 June 2020 was $1,880,000,
a decrease of approximately 79% compared with the loss of $8,923,000 for the last year.
Losses for the year was mainly attributed to the following:
impairment of exploration assets of $692,000; and
finance costs of $709,000, which was principally interest accrued for the loans granted by ASF
and Liu.
•
•
In January 2020, the Company disposed of all its shareholding of 53,056,027 shares in Norwest Energy
NL (ASX:NWE) for $0.005 per share for a total consideration of $265,280 (before costs).
During the year, $1,198,000 (2019: $1,537,000) in exploration expenditure was capitalised, of which
$1,100,000 related to oil and gas exploration (2019: $1,385,000).
9. DIVIDENDS
No dividend has been paid or declared by the Company during the financial year ended 30 June 2020
(2019: nil) and the Directors do not recommend the payment of a dividend in respect of the financial
year ended 30 June 2020.
10. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as noted elsewhere in this report, there have been no significant changes in the state of
the affairs of the Company up to and including the date of this report.
11. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Future information about the likely developments in the operations of the Group and the expected
results of those operations in future financial years has not been included in this report because
disclosure of the information would be likely to result in unreasonable prejudice to the Group.
24
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.
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
The Company had a Directors’ and Officers’ Liability Insurance (“D&O Insurance”) which insure the
Directors and officers of the Company against liabilities incurred in the performance of their duties.
However, the D&O Insurance expired on 31 May 2020 and, due to the pandemic and the recent tough
insurance markets, the Company is still in the course of securing a new D&O Insurance for the
Company.
16. SUBSEQUENT EVENTS
On 27 August 2020, the Company repaid $1,540,000 of the loan principal due to ASF.
No other matter or circumstance has arisen since 30 June 2020 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 proceedings brought on behalf of the Company under section
237 of the Corporations Act 2001.
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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 ShineWing Australia during this financial year.
20. AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is set out on page 27 and forms part of the Directors’ report
for the financial year ended 30 June 2020.
Signed in accordance with a resolution of Directors.
Min Yang
Non-Executive Chairman
Sydney, Australia
28 September 2020
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Take the lead
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Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 to
the directors of REY Resources Limited
e
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u
1.
2.
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been:
No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the audit, and
No contraventions of any applicable code of professional conduct in relation to the audit.
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ShineWing Australia
Chartered Accountants
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Yang Bessie Zhang
Partner
28 September 2020
Brisbane
Level 14
12 Creek Street
Brisbane QLD 4000
T + 61 7 3085 0888
Melbourne
Level 10
530 Collins Street
Melbourne VIC 3000
T + 61 3 8635 1800
F + 61 3 8102 3400
Sydney
Level 8
167 Macquarie Street
Sydney NSW 2000
T + 61 2 8059 6800
F + 61 2 8059 6899
ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional
Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited.
shinewing.com.au
27
Rey Resources Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Other income/(expense)
Impairment of exploration and evaluation assets
in thousands of dollars
Administrative expenses
Loss from operations
Finance income
Finance costs
Net finance costs
Loss before income tax
Income tax expense
Loss for the year attributable to owners of the
company
Other comprehensive income
Total comprehensive loss for the year,
attributable to owners of the Company
Loss per share
Basic and diluted (cents per share)
Note
4
13
6
5
7
8
30 June
2020
223
(692)
(702)
(1,171)
-
(709)
(709)
30 June
2019
(53)
(7,450)
(944)
(8,447)
-
(476)
(476)
(1,880)
(8,923)
-
-
(1,880)
(8,923)
-
-
(1,880)
(8,923)
(0.89)
(4.20)
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The notes on pages 32-58 are an integral part of these consolidated financial statements
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Rey Resources Limited
Consolidated statement of financial position
As at 30 June 2020
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In thousands of dollars
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total current assets
Non-current assets
Property, plant and equipment
Financial assets
Exploration and evaluation expenditure
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefits
Loans and borrowings
Total current liabilities
Non-current liabilities
Loans and borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Accumulated losses
Total equity attributable to equity
holders of the Company
Note
2020
2019
9a
10
Note
11
12
13
14
15
21d
21d
16
17
175
18
3
196
3
-
36,432
36,435
36,631
67
5
770
842
6,931
3,272
10,203
11,045
25,586
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
27,474
86,589
(61,003)
86,597
(59,123)
25,586
27,474
The notes on pages 32-58 are an integral part of these consolidated financial statements
29
Rey Resources Limited
Consolidated statement of changes in equity
For the year ended 30 June 2020
in thousands of dollars
Balance at 30 June 2018
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners recorded directly in equity:
Contributions by and distributions to owners
Share buy back
Balance at 30 June 2019
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners recorded directly in equity:
Contributions by and distributions to owners
Share buy back
Balance at 30 June 2020
Share capital
86,663
Accumulated Losses
(50,200)
-
-
-
(66)
86,597
-
-
-
(8)
86,589
(8,923)
-
(8,923)
-
(59,123)
(1,880)
-
(1,880)
-
(61,003)
Total
36,463
(8,923)
-
(8,923)
(66)
27,474
(1,880)
-
(1,880)
(8)
25,586
The notes on pages 32-58 are an integral part of these consolidated financial statements
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Rey Resources Limited
Consolidated statement of cash flows
For the year ended 30 June 2020
in thousands of dollars
Cash flows from operating activities
GST refund
Cash paid to suppliers and employees
Government Subsidy
Net cash used in operating activities
9b
Cash flows from investing activities
Proceeds sale of Investments
Payments for exploration expenditure
Net cash used in investing activities
Cash flows from financing activities
Share buy back
Proceeds from loans and borrowings
Repayment of loans and borrowings
Finance costs
Net cash inflow from financing activities
Net increase/(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
The notes on pages 32-58 are an integral part of these consolidated financial statements.
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Note
30 June
2020
30 June
2019
14
(744)
39
(691)
264
(878)
(614)
(8)
1,810
-
(350)
1,452
147
28
175
2
(917)
-
(915)
-
(1,537)
(1,537)
(66)
5,010
(2,500)
-
2,444
(8)
36
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
1.
REPORTING ENTITY
Rey Resources Limited (the “Company”) is a company domiciled in Australia. The address of the
Company’s registered office is Suite 2, 3B Macquarie Street, Sydney NSW 2000. The consolidated financial
statements of the Company as at and for the financial year ended 30 June 2020 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
Statement of compliance
(a)
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 issued by the International Accounting Standards Board (“IASB”). The accounting policies
detailed below have been consistently applied to all of the years presented unless otherwise stated.
The consolidated financial statements were authorised for issue by the Board of Directors on 28
September 2020.
The outbreak of the Novel Coronavirus (“COVID-19”) was declared as a ‘Global Pandemic’ by the World
Health Organisation on 11 March 2020, developments throughout 2020 has caused great uncertainty for
the oil, gas and coal industry and the global and Australian economy. This uncertainty has created risks and
conditions that the Group has not encountered before. As a result, there has been a continual assessment
of the impacts of COVID-19 on the financial statements arising from this major global risk.
Going concern
(b)
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 2020 the Group incurred a loss after tax of $1,880,000 and incurred operating
and investing cash outflows of $1,305,000. As at 30 June 2020 the Group had cash of $175,000, available
standby loan facilities from ASF Group Limited of $460,000 and Wanyan Liu of $3,280,000, a net working
capital deficiency of $646,000 and net assets of $25,586,000 as at 30 June 2020.
The Group has prepared a cashflow forecast for the period to 30 September 2021. The cashflow forecast
reflects:
• The need to raise additional funding during the forecast period;
• 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.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
2.
BASIS OF PREPARATION (Continued)
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.
These conditions indicate the existence of a material uncertainty which may cast significant doubt on
the Group's ability to continue as a going concern and to be able to pay its debts as and when they fall
due, and therefore the Group may be unable to realise its assets and extinguish its liabilities in the
normal course of business and at the amounts stated in the consolidated financial statements.
Basis of measurement
(c)
The consolidated financial statements have been prepared on the historical cost basis.
Functional and presentation currency
(d)
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 dollars unless otherwise stated.
Critical accounting estimates and judgements
(e)
The Directors evaluate estimates and judgements incorporated into these consolidated financial
statements based on historical knowledge and best available current information. Estimates assume a
reasonable expectation of future events and are based on current trends and economic data, obtained
both externally and within the Group. The resulting accounting estimates will, by definition, seldom equal
the related actual results.
Following is a summary of the key assumptions concerning the future, and other key sources of estimation
and accounting judgements at the reporting date that have not been disclosed elsewhere in these
consolidated financial statements.
(i) Exploration and evaluation expenditure
The application of the Group's accounting policy for exploration and evaluation expenditure requires
judgement in determining whether it is likely that future economic benefits are likely, which may be based
on assumptions about future events or circumstances. Estimates and assumptions may change if new
information becomes available. If after expenditure is capitalised information becomes available
suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the profit
and loss in the period when the new information becomes available.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
2.
BASIS OF PREPARATION (Continued)
(ii) Impairment of assets
The determination of fair value and value in use requires management to make estimates and
assumptions about expected production and sales volumes, coal prices (considering current and historical
prices, price trends and related factors), foreign exchange rates, coal resources and reserves, operating
costs, closure and rehabilitation costs and future capital expenditure. These estimates and assumptions
are subject to risk and uncertainty; hence there is a possibility that changes in circumstances will alter
these projections, which may impact the recoverable amount of the assets. In such circumstances, some
or all of the carrying amount of the assets may be further impaired or the impairment charge reduced
with the impact recorded in the statement of profit or loss.
(iii) Rehabilitation
The rehabilitation provision has been created based on managements' internal estimates and
assumptions relating to the current economic environment, which management believes is a reasonable
basis upon which to estimate the future liability.
These estimates are reviewed regularly to take into account any material changes to the assumptions,
however actual rehabilitation costs will ultimately depend upon the future market prices for the necessary
decommissioning works and the timing of when the rehabilitation costs are incurred. Timing is dependent
upon when the mines ceases to produce at economically viable rates, which in turn, will depend upon
future oil and gas prices, which are inherently uncertain.
(iv) Income taxes
The Group is subject to income taxes in Australia. Significant judgement is required in determining the
provision for income taxes. There are transactions and calculations undertaken during the ordinary course
of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities
based on the Group's understanding of the tax law. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and
deferred income tax assets and liabilities in the period in which such determination is made.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
3.
SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
(a)
The consolidated financial statements comprise the financial statements of Rey Resources Limited and its
subsidiaries.
Subsidiaries
(i)
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.
Transactions eliminated on consolidation
(ii)
Intercompany transactions, balances and unrealised gains and expenses on transactions between
companies of the Group are eliminated in preparing the consolidated financial statements.
Loss of control
(iii)
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 accounted investee or as a financial asset depending on
the level of influence retained.
Joint arrangements
(iv)
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.
Foreign currency
(b)
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 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Non derivative financial instruments
Recognition and initial measurement
(i)
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.
Classification and subsequent measurement
(ii)
The Group has two types of financial assets: amortised cost and Fair Value Through Profit or Loss (“FVTPL”)
in accordance with AASB 9. Refer Note 22 for summary of the classification of the Group’s financial assets
and financial liabilities.
Derecognition
(iii)
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.
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.
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.
Share capital
(iv)
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
Recognition and measurement
(i)
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.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Subsequent costs
(ii)
The cost of replacing a component of an item of property, plant and equipment is recognised in the
carrying amount of the item if it is probable that the future economic benefits embodied within the
component will flow to the Group, and its cost can be measured reliably. The carrying amount of the
replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are
recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual
assets are assessed and if a component has a useful life that is different from the remainder of that asset,
that component is depreciated separately.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each
component of an item of property, plant and equipment. Leased assets are depreciated over the shorter
of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership
by the end of the lease term.
The estimated depreciation rates for the current and comparative years are as follows:
Class of Fixed Asset
Equipment
Depreciation Rate
8% - 33%
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and
adjusted if appropriate.
Exploration and development assets
(e)
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.
An exploration and evaluation asset is recognised 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;
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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.
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.
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.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of
interest are demonstrable, the exploration and evaluation assets attributable to that area of interest are
first tested for impairment and then reclassified to mining tenements or mine development assets. Then
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.
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 are 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.
Impairment of assets
(f)
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances indicate that they
might be impaired. Other assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised immediately
in profit or loss for the amount by which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely independent of the cash inflows from other assets or
groups of assets (cash generating units, "CGUs"). For the purposes of goodwill impairment testing, CGUs to
which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects
the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a
business combination, for the purpose of impairment testing, is allocated to CGUs that are expected to
benefit from the synergies of the combination.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal
of the impairment at the end of each reporting period.
Non-derivative financial assets
(i)
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.
Employee benefits
(g)
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.
Short-term employee benefits
(i)
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.
Share-based payment transactions
(ii)
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.
Goods and Services Tax (GST)
(h)
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.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Income tax
(i)
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.
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 the 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.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings per share
(j)
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.
Segment reporting
(k)
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.
Provisions
(l)
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.
Other income
(m)
Other income primarily relates to sundry deposits and recognised on receipt in the bank account or when
the right to receive payment is established.
Finance income and finance costs
(n)
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.
Determination of fair values
(o)
Share-based payment transactions
The fair value of the Directors’ performance rights is measured using Monte Carlo Sampling. The fair value
of the executive rights is measured with reference to the share price at grant date. The fair value of the
employee share options are measured using the Black-Scholes formula. Measurement inputs include
share price on measurement date, exercise price of the instrument, expected volatility (based on
weighted average historic volatility adjusted for changes expected due to publicly available information),
weighted average expected life of the instruments (based on historical experience and general option
holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds).
Service and non-market performance conditions attached to the transactions are not taken into account
in determining fair value.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Changes in significant accounting policies
(p)
(i) New and amended standards adopted by the Group
The new standards and interpretations that are applicable for the first time for the year ended 30 June
2020 are:
• AASB 16 Leases
• AASB 2017-7 Amendments to Australian Accounting Standards - Long-term Interests in Associates and
Joint Ventures;
• Interpretation 23 Uncertainty over Income Tax Treatments; and
• AASB 2018-1 Amendments to Australian Accounting Standards - Annual Improvements 2015-2017 Cycle.
These standards, amendments and interpretations did not affect any of the amounts recognised in these
consolidated financial statements.
(ii) Early adoption of standards
No new Australian Accounting Standards and Interpretations that have been issued but are not yet
effective have been applied in the preparation of these consolidated financial statements. Such standards
are not expected to have a material impact on the Group’s financial statements on initial application.
(iii) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30
June 2020 reporting years and have not been early adopted by the Group.
There are no standards that are not yet effective and that would be expected to have a material impact on
the Group’s consolidated financial statements in the current or future reporting years and on foreseeable
future transactions.
4.
OTHER INCOME
in thousands of dollars
Other income/(expense)
Change in fair value of investment
Gain on disposal of investment
Government Subsidy *
Others
* Cash flow boost payment
2020
2019
-
159
50
14
223
(53)
-
-
-
(53)
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
5.
FINANCE COSTS
in thousands of dollars
Finance costs
Bank charges
Interest on loans
2020
2019
2
707
709
2
474
476
6.
ADMINISTRATIVE EXPENSES
in thousands of dollars
2020
2019
Corporate and administration overheads
Employee benefits (see below)
Depreciation and amortisation
Insurance premiums
Legal costs
Other expenses (incl travel expense)
Employee benefits expense consists of:
Salaries and fees
Superannuation
7.
INCOME TAX EXPENSE
in thousands of dollars
Income tax recognised in profit or loss
Current tax expenses
Deferred tax expenses
Income tax expenses
314
242
1
15
126
4
702
218
24
242
255
320
5
16
191
157
944
283
37
320
2020
2019
-
-
-
-
-
-
-
-
Reconciliation of prima facie tax on accounting loss before tax to income tax (benefit) / expense
in thousands of dollars
Accounting loss before tax
At statutory income tax rate of 27.5% (2019: 27.5%)
Non-deductible expenses
Tax losses for which no deferred tax asset was recognised
Income tax benefit
2020
2019
(1,880)
(8,923)
(517)
(16)
533
-
(2,453)
(19)
2,472
-
43
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
7.
INCOME TAX EXPENSE (CONTINUED)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
in thousands of dollars
2020
2019
2020
2019
Statement of financial
position
Profit or loss
Deferred tax liabilities
Exploration and evaluation expenditure
Other
Gross deferred tax liability
Deferred tax assets
Tax loss carry forwards
Other
Gross deferred tax asset
Net deferred tax asset
(9,904)
(1)
(9,905)
8,994
911
9,905
-
Tax losses
(9,876)
(4)
(9,880)
9,053
827
9,880
-
(28)
3
(25)
(60)
85
25
-
829
(1)
828
(1,639)
811
(828)
-
At 30 June 2020, the Group has tax losses arising in Australia of $83,721,067 (2019: $81,407,675) 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 Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
8. LOSS PER SHARE
in thousands of dollars
Earnings
Earnings used in calculating basic and
diluted earnings per share attributable to
the owners of the company
Number of ordinary shares
Weighted average number of ordinary
shares outstanding during the year used
in calculating basic and diluted loss per
share
Basic loss per Share (cents per share)
Diluted loss per Share (cents per share)
Calculation of loss per share
2020
2019
(1,880)
2020
(8,923)
2019
212,176,887
212,364,928
(0.89)
(0.89)
(4.2)
(4.2)
Basic loss per share is calculated as loss for the period attributable to shareholders of $1,880,000 (2019:
$8,923,000) divided by the weighted average number of ordinary shares of 212,176,887 (2019:
212,364,928). The diluted loss per share for the year ended 30 June 2020 and 2019 was the same as the
basic loss per share as there were no dilutive instruments outstanding.
9a.
CASH AND CASH EQUIVALENTS
in thousands of dollars
Cash at bank and in hand
Cash and cash equivalents
2020
2019
175
175
28
28
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are
disclosed in note 22.
45
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
9b.
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
in thousands of dollars
Note
2020
2019
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation
Impairment of capitalised exploration expenditure
Change in fair value of investment
Government grant receivable
Finance costs
Other non-cash item
11
12
5
Decrease in trade and other receivables
Decrease / (increase) in prepayments
(Decrease) / increase in trade and other payables
Decrease in employee benefits
Net cash used in operating activities
10.
TRADE AND OTHER RECEIVABLES
in thousands of dollars
Current
Other receivables
11.
PROPERTY, PLANT AND EQUIPMENT
in thousands of dollars
Equipment
At cost
Accumulated depreciation
Total Equipment
Movements in carrying amounts:
in thousands of dollars
Balance as at 1 July
Additions
Disposals
Depreciation expense
Balance as at 30 June
(1,880)
(8,923)
1
692
159
11
357
8
(652)
2
13
(43)
(11)
(691)
5
7,450
53
-
474
-
(941)
2
(2)
27
(1)
(915)
2020
2019
18
18
20
20
2020
2019
181
(178)
3
181
(177)
4
2020
2019
4
-
-
(1)
3
9
-
-
(5)
4
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
12.
FINANCIAL ASSETS
in thousands of dollars
Investment in Norwest Energy NL at fair value
as at 1 July
Changes in fair value of investment
Disposal of investment
2020
106
159
(265)
-
2019
159
(53)
-
106
The financial asset at FVTPL 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. 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. In January 2020, the Company disposed of all its shareholding of 53,056,027 shares in
Norwest Energy NL (ASX:NWE) for $0.005 per share for a total consideration of $265,280 (before
costs)/$264,405 (after costs).
13.
EXPLORATION AND EVALUATION EXPENDITURE
in respect of:
Duchess Paradise 1
EP457 and EP458 2
EP104 3
R1 3
L15 3
EP487 4
Costs carried forward
Movements in carrying amount:
in thousands of dollars
Opening balance
Current year expenditure capitalised
Impairment 1, 2
Others
Working
Interests
Exploration and evaluation
expenditures carried
forward
in thousands of dollars
2020
2019
2020
2019
100%
40%
100%
100%
100%
100%
100%
40%
100%
100%
100%
100%
21,514
4,370
2,944
660
3,281
3,663
36,432
2020
35,912
1,198
(692)
14
36,432
22,094
4,134
2,893
169
3,087
3,535
35,912
2019
41,825
1,537
(7,450)
-
35,912
1. Exploration and evaluation expenditure recognised in Duchess Paradise is held solely by the Group. Tenement
E04/1386 was surrendered during the year and was fully impaired.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
13.
EXPLORATION AND EVALUATION EXPENDITURE (Continued)
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 which are held
solely by the Group.
4. Exploration and evaluation expenditure recognised on EP487 which is held solely by the Group.
Management expect to extend the right of tenure for tenements approaching expiry.
14.
TRADE AND OTHER PAYABLES
in thousands of dollars
2020
2019
Unsecured liabilities
Sundry payables and accrued expenses
67
67
110
110
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in
note 22.
15.
EMPLOYEE BENEFITS
in thousands of dollars
Employee benefits
Current
Non-current
16.
PROVISION
in thousands of dollars
Restoration provision (L15, R1)
2020
2019
5
-
5
16
-
16
2020
2019
3,272
3,272
2,952
2,952
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.
48
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
17.
ISSUED CAPITAL
in thousands of dollars
212,160,439 (2019: 212,188,439) fully paid ordinary
shares
2020
2019
86,589
86,597
86,589
86,597
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
On issue at beginning of the year
Share buy back
On issue at the end of the year
2020
2019
Number
212,188,439
(28,000)
212,160,439
$’000
86,597
(8)
86,589
Number
212,405,266
(216,827)
212,188,439
$’000
86,663
(66)
86,597
During the year ended 30 June 2020, a total of 28,000 shares were bought back at a cost of $7,880 and
cancelled. On 8 July 2020, the Company announced the extension of the on-market buyback program for
a further 12 months from 23 July 2020.
18.
COMMITMENTS
Exploration expenditure commitments
The commitments are required in order to maintain the Group’s interests in good standing with the
DMIRS. 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 DMIRS.
In thousands of dollars
Year 1
Year 2-5
Total
Mineral
139
Petroleum
684
34
173
8,513
9,197
Total
823
8,547
9,370
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
19.
GROUP ENTITIES
Consolidated subsidiaries
Country of incorporation
Ownership Interest
Australia
Blackfin Pty Limited
Gulliver Productions Pty Limited
Australia
Australia
Humitos Pty Limited
Australia
Rey Cattamarra Pty Limited (deregistered)
Australia
Rey Derby Block Pty Limited
Australia
Rey Derby Port Operations Pty Limited
Australia
Rey Derby Pty Limited
Rey Lennard Shelf Pty Limited Australia
Australia
Rey Oil and Gas Pty Limited
Australia
Rey Royalty Chile Pty Limited
Australia
Rey Victory Pty Limited (deregistered)
20.
JOINT OPERATION INTERESTS
2020
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
-
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Joint venture agreements have been entered into with third parties. Details of joint venture agreements
are disclosed below. These are accounted for as joint operations.
Assets employed by these joint ventures and the Group’s expenditure in respect of them is brought to
account initially as capitalised exploration expenditure (refer note 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
Buru Fitzroy Pty Limited
40%
60%
(of which a 6.66% interest is free carried to production)
(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 $4,370,000 (2019: $4,134,000).
50
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
21. RELATED PARTIES
Parent entity
(a)
The ultimate parent entity within the Group is Rey Resources Limited.
Subsidiaries
(b)
Interests in subsidiaries are set out in note 19.
KMP compensation
(c)
Disclosures relating to compensation of the KMP compensation comprised:
Individual Directors and executives compensation disclosures
in dollars
Short term benefits
Post-employment benefits
2020
263,122
13,941
277,063
2019
307,000
16,530
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.
(d)
Transactions with related parties
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ASF Group Limited
Service fees
r
Loan granted (inclusive of interest) 1
-
Current
o
- Non current
F
Wanyan Liu
Loan granted (inclusive of interest) 2
-
Current
- Non current
2020
105,000
2,092,947
-
2,092,947
5,608,123
770,082
4,838,041
2019
120,000
1,834,969
1,834,969
-
3,699,069
699,069
3,000,000
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
21.
RELATED PARTIES (Continued)
1. An unsecured loan of $3.8 million (“ASF Loan”) was granted by ASF Group Ltd, a substantial
shareholder of the Company, with maturity date on 31 December 2019 and interest bearing at 12%
per annum. On 31 December 2019, the Company announced that it has agreed with ASF to reduce
the facility amount from $3.8 million to $2 million and to extend the maturity date of the loan facility
from 31 December 2019 to 31 March 2020. The Company further announced on 25 June 2020 that
the maturity date was further extended to 31 October 2021.
As at 30 June 2020, an aggregate of $1.54 million of ASF Loan had been drawn down.
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 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. On 17 July 2019, the Company entered
into a new loan agreement with Liu pursuant to which Liu agreed to grant a further loan facility of $3
million (“Third Liu Loan”) to the Company maturing 31 December 2021 and interest bearing 12% per
annum. On 25 June 2020, the Company announced that Liu has agreed to increase the Second Liu
Loan from $3 million to $5 million and extend the maturity date from 31 December 2020 to 31 October
2021.
As at 30 June 2020. the First Liu Loan had been fully drawn down. $3 million and $1.72 million had
been drawn down under the Second Liu Loan and the Third Liu Loan respectively.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
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
2020
2019
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
-
175
18
193
67
67
106
28
20
154
110
110
1. On 5 June 2015, the Company subscribed for $250,000 of Norwest Energy NL (ASX:NWE) shares at a
price of $0.004712 per share on 5 June 2015. In January 2020, the Company disposed of all its
shareholding of 53,056,027 shares in NWE for $0.005 per share for a total consideration of $265,280
(before costs).
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
2020
18
2019
20
The Board of Directors has overall responsibility for the establishment and oversight of the risk
management framework.
The Group does not use any form of derivatives for speculative purposes. The Group is not at a level of
exposure that requires the use of derivatives to hedge its exposure.
The main risks the Group is exposed to through its financial instruments are liquidity risk and market risk
which includes interest rate risk.
53
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
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22.
FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group’s cash and cash equivalents,
and trade and other receivables.
The carrying amount of financial assets represents the maximum credit exposure.
The Group limits its exposure to credit risk in respect of cash and cash equivalents and other deposits with
banks by only dealing with reputable banks with high credit ratings.
In respect of trade and other receivables, the Group has no significant concentration of credit risk with
respect to any single counter party or group of counter parties. The Group is not exposed to any significant
credit risk as there were no trading operations during the year.
At 30 June 2020 and 30 June 2019, 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.
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:
2020
in thousands of dollars
Carrying
amount
Expected /
contractual
cash flows
6 months
or less
6-12
months
1-2
years
2-5
years
More
than 5
years
Financial liabilities
Trade and other payables
Loans from shareholders
67
7,701
7,768
67
7,792
7,859
67
181
248
-
-
680 6,931
680 6,931
-
-
-
-
-
-
2019
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
Loans from shareholders
110
5,534
5,644
110
6,188
6,298
110
2,827
2,937
-
180
180
-
3,181
3,181
-
-
-
More
than 5
years
-
-
-
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
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22.
FINANCIAL RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
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.
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
Variable rate instruments
Cash and cash equivalents
2020
2019
175
175
28
28
At the reporting date, the Group had a total of $10.5 million term loan facilities from shareholders. Due
to the fixed interest rate of the loans, the Group is not exposed to interest rate fluctuations.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased or decreased
profit or loss by $0 (2019: $374).
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 2019 and 20, 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.
55
Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
23.
OPERATING SEGMENTS
The Group operates in two segments, mineral exploration and development and petroleum exploration in
one geographical location, Western Australia. The consolidated financial results from these segments are
equivalent to the financial statements of the Group.
Operating segment information
Consolidated
Revenue
Total
Reportable
segment
revenue
Other income/
(expense)
Impairment of
assets
Finance costs
Administration
cost
Profit/(loss)
before income
tax benefit
income tax
benefit
Loss after
income tax
benefit
Assets
Other Assets
Segment
assets
Total assets
Liability
Other
liabilities
Segment
liabilities
Total
Liabilities
Capital
Expenditure
Mineral
2020
$'000
Mineral
2019
$'000
Petroleum
2020
$'000
Petroleum
2019
$'000
Corporate
2020
$'000
Corporate
2019
$'000
Total
2020
$'000
Total
2019
$'000
-
14
(692)
-
-
(678)
-
(678)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,514
21,514
22,094
22,094
14,918
14,918
-
-
(7,450)
-
-
209
-
(709)
-
-
-
(53)
223
(53)
-
(476)
(692)
(709)
(7,450)
(476)
-
(702)
(944)
(702)
(944)
(7,450)
(1,202)
(1,473)
(1,880)
(8,923)
-
-
-
-
-
(7,450)
(1,202)
(1,473)
(1,880)
(8,923)
-
13,818
13,818
199
-
199
174
-
174
199
174
36,432
36,631
35,912
36,086
-
-
-
-
-
-
-
-
7,773
5,660
7,773
5,660
3,272
2,952
-
-
3,272
2,952
3,272
2,952
7,773
5,660
11,045
8,612
99
152
1,099
1,385
-
-
1,198
1,537
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
24.
AUDITORS REMUNERATION
in dollars
Audit services
Auditors of the Company
KPMG Australia:
Audit and review of financial reports
Other assurance services
ShineWing Australia:
Audit and review of financial reports
Other assurance services
25.
SUBSEQUENT EVENTS
2020
2019
-
5,693
50,000
-
55,693
69,917
-
-
-
69,917
On 27 August 2020, the Company repaid $1,540,000 of the loan principal due to ASF.
No other matter or circumstance that is not already disclosed in these financial statements has arisen since
30 June 2020 that has significantly affected, or may significantly affect the Group’s operations, the results
of those operations, or the Group’s state of affairs in future financial years.
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Rey Resources Limited
Notes to the consolidated financial report
For the year ended 30 June 2020
26.
PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ended 30 June 2020 the parent entity of the Group was Rey
Resources Limited.
in thousands of dollars
2020
2019
A. Result of parent entity
Loss for the year
Total comprehensive loss for the year
B. Financial position of the parent entity
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Share capital
Accumulated losses
Total equity
(2,871)
(2,871)
(1,419)
(1,419)
191
37,848
38,039
841
6,931
7,772
(30,267)
86,589
(56,322)
30,267
57
31,301
31,358
2,660
3,000
5,660
25,698
86,597
(60,899)
25,698
Parent entity contingencies
C.
As at 30 June 2020 and 2019, there are no contingent liabilities of the parent entity.
Parent entity capital commitments
D.
As at 30 June 2020 and 2019, the parent entity has not entered into any material contractual agreements
for the acquisition of property, plant or equipment.
Parent entity guarantees in respect of the debts of its subsidiaries
E.
As at 30 June 2020 and 2019, 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 2020
The Board of Directors of Rey Resources Limited declares that:
(a)
The consolidated financial statements and the accompanying notes are in accordance with the
Corporations Act 2001, including:
•
giving a true and fair view of the financial position as at 30 June 2020 and performance of the
Group for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations), the Corporations Regulations 2001 and other mandatory professional
reporting requirements.
•
(b)
(c)
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.
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 2020.
Signed in accordance with a resolution of the Directors.
Min Yang
Non-Executive Chairman
Sydney, Australia
28 September 2020
59
Take the lead
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF REY RESOURCES LIMITED
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Rey Resources Limited (the “Company”) and its
subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying consolidated financial statements of the Group are in accordance with the
Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance
for the year then ended; and
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(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the “Code”) that are
relevant to our audit of the consolidated financial statements in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2(b) in the consolidated financial statements, which indicates that the Group incurred a
net loss of $1,880,000 and had operating and investing cash outflows totalling $1,305,000 for the year ended 30
June 2020. The Group’s current liabilities exceeded current assets by $646,000 as at 30 June 2020. As stated in
Note 2(b), these conditions, along with other matters as set forth in Note 2(b), indicate that a material uncertainty
exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
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Brisbane
Level 14
12 Creek Street
Brisbane QLD 4000
T + 61 7 3085 0888
Melbourne
Level 10
530 Collins Street
Melbourne VIC 3000
T + 61 3 8635 1800
F + 61 3 8102 3400
Sydney
Level 8
167 Macquarie Street
Sydney NSW 2000
T + 61 2 8059 6800
F + 61 2 8059 6899
ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional
Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited.
shinewing.com.au
60
Key Audit Matters
Take the lead
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter
Exploration and Evaluation Expenditure
(Note 13)
As at 30 June 2020, the Group has $36 million
exploration and evaluation expenditure (E&E
Expenditure) capitalised as assets.
The E&E Expenditure must be assessed for
impairment when facts and circumstances suggest
that the carrying amount of an exploration and
evaluation asset may exceed its recoverable
amount in accordance with AASB 6 Exploration for
and Evaluation of Mineral Resources.
E&E Expenditure was a key audit matter due to the
size of the balances, being 99% of the Group’s total
assets. And the level of judgement required to be
applied to prepare the impairment assessment.
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How the matter was addressed during the audit
Our audit procedures included:
Evaluating the Group’s accounting policy to
recognise E&E Expenditure using the criteria in the
accounting standard AASB 6 Exploration for and
Evaluation of Mineral Resources;
Reviewing the positon paper, prepared by
management, to identify if any impairment indicators
have been identified for the E&E Expenditure and
whether the carrying value is appropriate;
Assessing independently if there are facts,
circumstances or impairment indicators which
suggest that the carrying amount of the Group’s E&E
Expenditure may exceed its recoverable amount in
accordance with AASB 6 Exploration for and
Evaluation of Mineral Resources;
Considering whether the Group’s right to explore in
the relevant exploration areas is valid. This included
obtaining and assessing relevant documentation
such as contracts and legal documents on the
Group’s rights to explore;
Considering the Group’s intention to continue to
carry out exploration and evaluation activity in the
relevant exploration area which included assessment
of the Group’s cash-flow forecasts and the strategy
of the Group;
We obtained project and corporate budgets and
evaluate the Group’s ability to fund continued E&E
activities and its capacity to secure additional funding
when necessary;
We tested the Group’s additions to E&E Expenditure
for the year by evaluating a statistical sample of
recorded expenditure for consistency to underlying
records, the capitalisation requirements of the
accounting standard;
Testing the mathematical accuracy of the cash flow
models used in the impairment test;
Assessing the discount rates, commodity prices and
other key assumptions to internal and external data,
with involvement from our valuation specialists; and
Evaluating the adequacy of the related disclosures in
the financial statements including those made with
respect to judgements and estimates.
61
Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon
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The directors are responsible for the other information. The other information comprises the information included in
the Group’s annual report for the year ended 30 June 2020, but does not include the consolidated financial
statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and accordingly we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that give
a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the consolidated financial
statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the ability of the
Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and 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 consolidated
financial statements.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
62
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
Take the lead
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them, all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance in
the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
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Report on the Remuneration Report
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Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 22 of the directors’ report for the year ended 30
June 2020.
In our opinion, the Remuneration Report of Rey Resources Limited for the year ended 30 June 2020 complies with
section 300A of the Corporations Act 2001.
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Responsibilities
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 responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
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ShineWing Australia
Chartered Accountants
Yang (Bessie) Zhang
Partner
Sydney, 28 September 2020
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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 22 September
2020.
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 2020 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 2020 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
ASF GROUP LIMITED
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
Number of shares
Percentage held
34,666,667
34,068,800
25,114,286
14,450,580
12,970,000
12,361,500
12,092,553
10,959,614
16.340%
16.058%
11.837%
6.811%
6.113%
5.826%
5.700%
5.166%
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Top 20 Shareholders
The 20 largest shareholders of the Company are listed below:
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Name
ASF GROUP LIMITED
MISS WANYAN LIU
MERCHANT CENTRAL LIMITED
NEWAY ENERGY INTERNATIONAL LIMITED
MRS YINXIN HE
START GRAND GLOBAL LIMITED
MISS MEI CHI JOYCE LEE
START LINK INVESTMENTS LIMITED
JADE SILVER INVESTMENTS LIMITED
XIAO HUI ENTERPRISES LIMITED
BNP PARIBAS NOMS PTY LTD
MR JIARONG HE
MR HAITAO GENG
TONG HENG HOLDINGS LIMITED
JADE SILVER INVESTMENTS LTD
FOREVER GRAND GROUP LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BROWNSTONE INTERNATIONAL PTY LTD
MEGA AHEAD LIMITED
MR WEICHENG HE
Number of Shares
Percentage Held %
34,666,667
34,068,800
25,114,286
14,450,580
12,970,000
12,361,500
12,092,553
10,959,614
9,352,056
6,959,404
6,695,102
6,228,491
3,000,000
1,846,126
1,480,000
1,150,837
1,018,357
1,000,000
990,326
944,000
16.340%
16.058%
11.837%
6.811%
6.113%
5.826%
5.700%
5.166%
4.408%
3.280%
3.156%
2.936%
1.414%
0.870%
0.698%
0.542%
0.480%
0.471%
0.467%
0.445%
TOTAL TOP 20 SHAREHOLDERS
197,348,699
93.019%
66
Distribution of Equity Securities
There were 821 holders of less than a marketable parcel of ordinary shares (being 659,927 shares on
22 September 2020).
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
568
395
148
142
45
1,298
160,631
1,084,533
1,127,392
3,838,953
205,948,930
212,160,439
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 24 June 2019, 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 28,000 shares were bought back pursuant
to the share buy-back before it closed on 8 July 2020.
On 8 July 2020, 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
EL
EL
MA
EP
EP
EP
EP
L
R
EP
Licence No.1
Grant Date
Expiry Date
Holder
Area (Ha) Percentage
E04/1519
20/04/2006
19/04/2021
Blackfin Pty Ltd
11,386
E04/1770
4/03/2009
3/03/2021
Blackfin Pty Ltd
6,834
Held
100%
100%
M04/0453
Pending
Pending
Blackfin Pty Ltd
12,964
100%
EP457
24/10/2007
05/01/2022
EP458
24/10/2007
05/01/2022
EP4872
14/03/2014
13/12/2024
Rey Oil and Gas Pty Ltd
/Buru
Rey Oil and Gas Pty Ltd
/Buru
Rey Lennard Shelf Pty
Ltd
251,737
40%
292,050
40%
505,840
50%
EP4872
14/03/2014
13/12/2024
Rey Derby Block Pty Ltd 505,840
50%
L153
R13
01/04/2010
21/03/2031
11/10/2016
10/10/2022
EP1043
30/01/2015
29/07/2022
Gulliver Productions Pty
Ltd
Gulliver Productions Pty
Ltd
Gulliver Productions Pty
Ltd
16,400
100%
24,516
100%
73,596
100%
EL:
Exploration Licence
MA: Mining Lease Application
EP: Exploration Permit Petroleum
L:
R:
Production Licence
Retention Licence
1.
2.
3.
All licences are located in Western Australia
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.
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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ASX: REY
reyresources.com
Suite 2
3B Macquarie Street
Sydney
NSW 2000