RESOURCES & ENERGY GROUP LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Resources & Energy Group Limited
Contents
Corporate Directory
Directors' Report
Mineral Resources and Ore Reserves
Financial Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
Directors' Declaration
Auditor's Independence Declaration
Independent Audit Report
Security Holders' Information
2
3-11
12
13
14
15
16
17-49
50
51
52-56
57-58
1
Resources & Energy Group Limited
Corporate Directory
Directors
Gavin Rezos
Richard Poole
Virginia Bruce
Secretary
Warren Kember
Share Registry
Boardroom Pty Ltd
Level 12, 255 George St,
Sydney, NSW 2000
Telephone 1300 737 760/ +(612) 9290 9600
Email: enquiries@boardroomlimited.com.au
Registered office and principal place of business
Level 33 Colonial Centre
52 Martin Place
Sydney, NSW 2000
Telephone +(612) 9227 8900
Facsimile +(612) 9227 8901
ABN: 12 110 005 822
Web site: www.rezgroup.com.au
Solicitor
Steinepreis Paganin
Level 4, 16 Milligan Street
Perth, WA 6000
Auditor
LNP Audit and Assurance Pty Limited
Level 14, 309 Kent Street
Sydney, NSW 2000
Bankers
National Australia Bank
255 George Street
Sydney, NSW 2000
Stock exchange listing
Resources & Energy Group Limited's fully paid
ordinary shares are listed on the Australian
Securities Exchange (ASX:REZ)
2
Resources & Energy Group Limited
Directors' Report
The directors present their report together with the annual Financial Report of Resources & Energy Group Limited
(Company) and its controlled entities (the Group or consolidated entity) for the year ended 30 June 2018 and the
Independent Audit Report thereon.
DIRECTORS
The details of directors of the Company at any time during or since the end of the financial year to the date of this
report are set out below.
Names, qualifications, experience and special responsibilities
Mr Gavin Rezos
Bachelor of Laws, LLB, BA
Chairman, non-executive director, independent
Appointed: 22 April 2016
Completed years of service: 2 years
Mr Rezos has extensive Australian and international investment banking experience and is a former investment
banking Director of HSBC Group with regional roles during his career in London, Sydney and Dubai. Mr Rezos has
held chief executive officer positions and executive directorships of companies in the technology sector in Australia, the
United Kingdom, the US and Singapore and was a non-executive director of Rowing Australia, the peak Olympics
sports body for rowing in Australia from 2009 to 2014. He is currently the Non-Executive Chairman of Alexium
International Group Limited and a principal of Viaticus Capital LLC. Non-executive director positions held during the
past 3 years include Iluka Resources Limited and Department 13 International Limited.
Mr Richard Poole
Bachelor of Laws, Bachelor of Commerce, LLB, ASIA
Director and Chief Executive Officer, non-independent
Appointed: 12 July 2004
Completed years of service: 14 years
Mr Poole commenced his career as a lawyer specialising in mergers and acquisitions. He left the law in 1990 to build a
research and development operation with operations in Japan, USA and Australia and added a manufacturing
company in China in 1994. He successfully built the R&D company from its early stages to a public listed vehicle
raising the necessary capital up to his departure in 1999. Since 1999 he has continued his involvement in fund raising
and the development of companies. He is a principal of Arthur Phillip Pty Limited a corporate advisory firm providing
investment services and he is an experienced corporate advisor and entrepreneur.
Ms Virginia Bruce
Non-executive director, independent
Appointed: 6 December 2004
Completed years of service: 13 years
Ms Bruce’s international reputation was developed through her key role in developing International brand and business
strategies for many Fortune 500 brands including Warner Bros, Mattel, Avon, Disney, Kelloggs, Audi, Volkswagen,
Coca Cola, Network 7 including four back to back Olympics starting with the Sydney Olympic Games. She has worked
extensively in the USA, Australia, Asia, China, Middle East and Europe, establishing business operations in all of these
markets. Ms Bruce is currently the CEO of The REAL Group, which focuses on social development and mentoring
programs.
3
Resources & Energy Group Limited
Directors' Report
Mr James Croser
Bachelor of Engineering
Director, non-independent
Appointed: 19 May 2016, Resigned: 16 October 2018
Completed years of service: 2 years
Mr Croser is a qualified mining engineer from the Western Australian School of Mines, with over 20 years mining
experience in the Australian resource sector. Mr Croser has held operational, technical and management roles at
numerous hard rock mines particularly in the Kalgoorlie region, including Silver Swan, Bullant, Daisy-Milano and Frog's
Leg. He has recently been General Manager of a Perth based mining consultancy company and the Managing
Director of ASX listed Kalgoorlie Mining Company Limited until its takeover in mid 2013. Mr Croser was the founding
director of Radio Gold Pty Limited (formerly Brightsun Enterprises Pty Limited), which was acquired by the Group in
March 2016.
Company Secretary
Mr Warren Kember
Bachelor of Commerce, MBA, Dip Applied Finance
Appointed: 8 August 2016
Completed years of service: 2 year
Mr Kember is the Chief Financial Officer and Company Secretary of the Group and is responsible for directing all
financial, legal and risk management. Mr Kember has significant experience in executive finance having served as
Chief Financial Officer for a number of ASX listed companies in the construction, mining and technology sectors.
Interests in the shares and options of the company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of the Company were:
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Number of
Ordinary
Shares
Number of
Options over
Ordinary
Shares
7,500,000
10,250,000
37,987,302
6,250,000
50,000 -
Directors' meetings
The number of meetings of directors (including meetings of committees of directors) held during the financial year and
the number of meetings attended by each director were as follows:
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Crosser
Directors' meetings
Eligible to
attend
Attended
6 6
6 6
6 6
6 6
4
Resources & Energy Group Limited
Directors' Report
DIVIDENDS
No dividends have been paid or declared since the end of the previous financial year, nor do the directors recommend
the declaration of a dividend. (2017: $Nil).
PRINCIPAL ACTIVITIES
The principal activities of the Group are to explore and develop suitable mineral deposits, including gold and silver.
The Group had 5 employees at 30 June 2018 (2017: 2 employees).
OPERATING RESULTS FOR THE YEAR
Financial results
The loss after tax of the Group for the year ended 30 June 2018 was $3,431,387 (2017: $1,415,567).
The operating loss included the following items:
(i) a loss of $1,528,440 from operations at the Radio Gold mine site;
(ii) corporate maintenance and employment expenses by $1,008,920 as activity in relation to the Radio mine and
Mount Mackenzie projects increased, along with coporate financing and acquisition reviews;
(iii) share based payment expense of $40,589 relating to the issue of share options; and
(iv) finance expense of $611,670 relating to interest and amortisation expense of Project Development Notes.
During the year the Company raised equity and debt capital to facilitate the continuing development of the Radio mine
in Western Australia. A further placement of Project Development Notes #2 (PDN2s) raised $1,000,000 during the
financial year. 7,142,857 new share options associated with the PDN2s provides the financiers with an opportunity to
convert their loans into ordinary shares at 14 cents each on and from 30 November 2018 and expire on 30 November
2021. A loan of $200,000 was also obtained from a financial institution.
Radio Gold Pty Limited
The Radio mine located in the Kalgoorlie region of Western Australia continued its development during the financial
year. Following the dewatering of the mine shaft to 100m underground, clearance of previous mine workings was
undertaken and bulk sampling of the exposed ore body undertaken. The sampling produced 246 ounces of gold which
generated revenue of $426,437 during the financial year, a yield of 5 grams/tonne of material processed. Work
continued on development of a mine plan for the site along with a drilling program to determine the extent of the
mineral resource.
Mount Mackenzie
The Mount Mackenzie project, located 110km northwest of Rockhampton, Queensland, under went further evaluation
via a drilling program. The program focussed on strategically located exploration holes to confirm resource extents in
the North Knoll, enabling mine planning studies to commence. Drilling included 110 metres of HQ3 core size, to
provide samples of oxide, transitional and primary ore types. A scoping study to guide project feasibility is currently
underway, which include assessment of environmental issues, mine planning and approvals, processing options and
geotechnical assessment.
5
Resources & Energy Group Limited
Directors' Report
Tenement Schedule
Tenements held by the Group as of 30 June 2018 were as follows.
State
Project
Number
Status
Queensland
Western Australia
Mt Mackenzie
Radio Gold
EPM10006
ML77/633
Live
Live
REZ
beneficial
ownership
100.00%
100.00%
Expiry
28/03/2023
24/08/2036
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the financial year the following significant changes occurred. The Company undertook a number of capital
raisings to facilitate development of its mining interests, these consisted of:
- the placement of PDN2 that raised $1,000,000. An issue of 7,142,857 share options was also made
concurrently to the providers of funds under PDN2; and
- drawing a loan of $200,000 from a financial institution.
GOING CONCERN
The directors have prepared financial statements on a going concern basis which contemplates the continuity of
normal business activity and the realisation of assets and settlement of liabilities in the normal course of business. At
30 June 2018, the Group's current assets of $177,281 (2017: $741,866) were less than current liabilities of $2,847,736
(2017: $1,447,376).
Included in current liabilities is $483,200 being the estimated current portion of unsecured interest bearing liabilities
(project development notes), based on its repayment date of 3 years from the date of the advances and trade payables
of $1,675,614
For the 12 months ended 30 June 2018 the Group reported a loss after taxation of $3,431,387 (2017: $1,415,567), and
net cash used by operating activities was $1,620,994 (2017: $1,599,844).
During the current phase of development the generation of sufficient funds from operating and financing activities in
accordance with the Group’s current business plan and growth forecasts is dependent on one or more of the following
matters being successfully realised:
(i) the availability of equity and financing facilities to fund working capital requirements;
(ii) realising value from its assets through joint ventures or outright sale;
(iii) the ability for the directors to scale back activities in order to preserve cash when required; and
(iv) continuing financial support from directors and related parties.
As at 30 June 2018, the Group had fully drawn upon existing loan facility agreements.
The directors are of the opinion that the use of the going concern basis of accounting is appropriate as they are
satisfied regarding the Group's ability to maintain the continued financial support of its directors, current financiers,
creditors and shareholders. This was demonstrated in May 2019 where certain financiers and creditors agreed to
convert their debts to equity. Refer to significant events after balance date for further details.
The financial statements do not include adjustments relating to the recoverability and classification of recorded asset
amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a
going concern.
6
Resources & Energy Group Limited
Directors' Report
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 21 December 2019 the Company acquired 100% of the issued share capital of Menzies Goldfield Pty Limited
(previously Menzies Goldfield Limited) for total consideration of $2,100,000. The consideration consisted of the issue
of 32,400,000 ordinary shares at a deemed issue price of 5 cents each, plus cash consideration of $480,000.
Trading of the Company's ordinary shares on the Australian Stock Exchange has remained subject to a voluntary
suspension while the Group conducted a financial restructure.
The Company placed 64,550,000 ordinary shares to participants in a capital raising at an issue price of 5 cents which
raised a total of $3,227,500 via a combination of cash and the settlement of contractual payments or other amounts.
The Company agreed to convert interest bearing debts and other amounts payable of $5,346,411 into 107,218,225
ordinary shares issued at 5 cents each.
There have been no other significant events occurring after the balance date which may affect either the Group's
operations, results of those operations or the Group's state of affairs.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Apart from the matters referred to above in the Operating Results for the year other likely developments in the
operations of the Group and the expected results of those operations in subsequent financials years have not been
included in this report because the directors believe this could result in unreasonable prejudice to the Group.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Exploration and development activities are subject to State and Federal laws and regulations. The Group has a policy
of complying with its environmental performance obligations as a minimum, and during the reporting period, there has
been no known breach of the environment regulations. The Group is committed to ensuring the activities of its
business are conducted in a way so as to minimise adverse impacts on the environment and local communities.
UNISSUED SHARES UNDER OPTIONS
There were 48,709,524 share options on issue as at 30 June 2018 that can convert to ordinary shares in the ratio of
one fully paid ordinary share for each share option. No share options have been issued subsequent to the end of the
financial year to the date of this report.
Option class
Class C (i)
Class D (i) (ii)
Class E
Class F
Class G
Class H
Class I
Class J
Class K
Class L
Vesting conditions
VWAP > 7 cents
Grant date
10/04/2015
Expiry date
31/12/2018
Number of
Exercise
price
share options
$0.05 1,000,000
Referral of projects
9/11/2015
31/12/2019
$0.12 1,000,000
na
na
22/04/2016
31/03/2021
$0.12 18,566,667
20/06/2016
31/03/2021
$0.12 5,000,000
Continuing service
20/06/2016
31/03/2021
$0.12 2,500,000
na
6/12/2016
30/11/2021
$0.14 11,000,000
Continuing service
6/12/2016
30/11/2021
$0.12 250,000
Continuing service
6/12/2016
31/03/2021
$0.14 250,000
na
10/11/2017
30/11/2021
$0.14 7,142,857
Continuing service
18/12/2017
15/11/2021
$0.14 1,000,000
Class M
Share options on issue at 30 June 2018
Continuing service
18/12/2017
15/11/2021
$0.14 1,000,000
48,709,524
7
Resources & Energy Group Limited
Directors' Report
(i) Exercisable anytime from date of issue until expiry. Expired unexercised on 31 December 2018.
(ii) Class D options have been valued at nil due to uncertainty as to whether vesting condition will be meet.
(iii) No shares were issued during the financial year as a result of the exercise of options.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
No indemnities have been given or insurance premiums were paid during the financial year for any person who is or
has been an officer or auditor of the Group. Subsequent to the end of the financial year the Company paid a premium
in respect of a contract insuring the directors and officers of the Group against a liability incurred as such by a director
or officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the
nature of the liability and the amount of the premium. The Company has not otherwise except to the extent permitted
by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate
against a liability incurred by such an officer or auditor.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any
proceedings to which the company is party for the purpose of taking responsibility for the company for all or any part of
those proceedings. The Company and Group were not party to any such proceedings during the financial year.
AUDITOR INDEPENDENCE
A copy of the external auditor's declaration under Section 370C of the Corporations Act in relation to the audit for the
financial year is attached to the Financial Statements.
NON-AUDIT SERVICES
No non-audit services were provided during the current year by the auditor.
REMUNERATION REPORT (AUDITED)
The remuneration report, which has been audited, outlines the key management personnel remuneration
arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its
Regulations. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those
persons having authority and responsibility for planning, directing and controlling the major activities of the Group,
including executive and non-executive directors.
During the financial year ended 30 June 2018, KMP consisted of:
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser
Mr Warren Kember
Non-executive director and Chairman
Director and Chief Executive Officer
Non-executive director
Non-executive director (note: resigned 16 October 2018)
Chief Financial Officer and Company Secretary
8
Resources & Energy Group Limited
Directors' Report
Principles used to determine the nature and amount of remuneration
In order for the Company and Group to prosper and enhance shareholder value, the Group must be able to attract and
retain the highest calibre of executives. At this stage of the Group's development, a framework has not been
developed that links performance and KMP remuneration. The responsibilities of the Remuneration Committee, which
have been assumed by the full Board, include reviewing the remuneration of KMP and determining the nature and
amount of emoluments of KMP on an annual basis. In conducting this review reference is made to market and industry
conditions. Remuneration packages, can consist of base salary, fringe benefits, incentive schemes (including
performance related bonuses), superannuation, and entitlements upon retirement or termination, are reviewed with due
regard to performance and other relevant factors.
Where appropriate, share-based remuneration is provided to encourage KMP to focus on improving shareholder value
and also to reduce cash costs during the Group's development phase.
The aggregate amount of non-executive director fees is limited to $200,000 per annum as per a resolution of
shareholders. For further information, please refer to our corporate governance plan and annual governance
statement on our web site at www.rezgroup.com.au.
Short-term incentives and long-term incentives
Due to the current size of the Group and the extent of its operations limited short-term incentives, such as performance
based bonuses or longer term incentives, were provided to KMP other than as shown below.
Details of remuneration
Amounts paid or owing to KMP during the financial year ended 30 June 2018 are set out below.
Year ended 30 June 2018
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser (i)
Mr Warren Kember (ii)
Short-term
benefits
Post
employment
Salary & fees Superannuation
$
$
48,000
33,000
36,000
150,355
-
-
-
-
10,547
-
267,355
10,547
Share-based
payments
Equity settled
$
-
-
-
-
-
-
Total
$
48,000
33,000
36,000
160,902
-
277,902
(i) Mr Croser resigned on 16 October 2018.
(ii) Remuneration forms part of the fees charged by a director related entity, Proprietary & Fiduciary Services Pty
Limited. Details of the nature of the engagement and the amount of fees charged are provided in Note 20 of the
financial statements.
9
Resources & Energy Group Limited
Directors' Report
Amounts paid or owing to KMP during the financial year ended 30 June 2017 are set out below.
Year ended 30 June 2017
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser
Mr Michael Hogg
Mr Warren Kember
Short-term
benefits
Post
employment
Salary & fees Superannuation
$
$
48,000
33,000
36,000
200,000
5,000
-
322,000
Share-based
payments
Equity settled
$
-
-
-
-
-
-
Total
$
48,000
33,000
36,000
219,000
5,000
-
-
341,000
-
-
-
19,000
-
-
19,000
The percentage of total remuneration provided in the form of share-based payments for all KMP for the current
financial year was nil.
Service agreements
The non-executive directors did not enter into any service agreements with the Group. The responsibilities of the
Nomination Committee, which have been assumed by the full board, includes reviewing the appointment and
retirement of Non-Executive Directors on a case by case basis. Currently all directors are required to be re-elected at
least every three years and at least one-third of directors must retire at each Annual General Meeting.
The details of a service agreement entered into with the Chief Operating Officer are as follows:
Name
Title
Agreement commenced
Resigned
Term of agreement
Short and long term incentives No incentive arrangements have been agreed
Remuneration
James Croser
Director and Chief Operating Officer
11 April 2016 (as Chief Operating Officer)
Resigned as Chief Operating Officer 15 December 2017
No fixed term, termination by either party with 1 months notice
$200,000 plus superannuation per annum
Share options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of KMP in the prior,
current financial year or future reporting years are as follows:
Option class/Holder
Class F(i) Mr Gavin Rezos
Class G(ii) Mr Gavin Rezos
Number of share
options
5,000,000
2,500,000
7,500,000
(i) Earliest exercise date 31 March 2017
(ii) Earliest exercise date 31 March 2017
Grant date
20/06/2016
20/06/2016
Expiry date
31/03/2021
31/03/2021
Exercise
price
$0.12
$0.12
Fair value per
option at grant
date
$155,210
$77,605
$232,815
10
Resources & Energy Group Limited
Directors' Report
The Share options were issued to Mr Rezos as an incentive upon joining the board of the Company. Share options
carry no entitlement to dividends or right to vote. No share options were exercised, cancelled or lapsed during the
current or prior financial year. No person entitled to exercise share options had or has any right by virtue of the options
to participate in any share issue of any other body corporate.
Movements in Shares held by Key Management Personnel
2018
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser (i)
Mr Warren Kember
Balance at the start of
the year
250,000
14,067,302
50,000
3,597,022
-
Granted as
compensation
Net other change
-
-
-
-
-
-
-
-
-
-
Balance at the
end of the year
250,000
14,067,302
50,000
3,597,022
-
(i) 3,597,022 ordinary shares were issued to Mr Croser pursuant to the acquisition of Radio Gold Pty Limited (formerly
Brightsun Enterprises Pty Limited). Of these ordinary shares, 1,798,511 are subject to a performance condition as set
out in Note 17 of the Financial Statements.
Movements in Share Options held by Key Management Personnel
2018
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser
Mr Warren Kember
Balance at the start of
the year
7,500,000
6,250,000
-
-
-
Granted as
compensation
Granted on
subscription to loan
-
-
-
-
-
-
-
-
-
-
End of remuneration report
Signed in accordance with a resolution of the directors.
Mr Gavin Rezos
Chairman
Sydney, 17 May 2019
Net other change Balance at the end
of the year
11,666,667
6,250,000
4,166,667
-
-
-
-
-
-
-
11
Resources & Energy Group Limited
Mineral Resources and Ore Reserves
Group mineral resources as at 30 June 2018 were estimated at 2.5 million tonnes at 1.54g/t Au for 128,700 ounces, an increase of 28,700 ounces with the inclusion of the mineral
resources at the Radio mine. Mineral resource figures prepared in accordance with the requirements of 2012 Edition of the ‘Australasian Code for Reporting of Exploration
Results.
Mineral Resources
Project
Type
Cut off
30 June 2018
Mount Mackenzie
Underground
Oxide
Primary
Radio Gold
Underground
Main Lode
East Lode
(g/t)
0.43
0.58
1.00
1.00
Tonnes
(kt)
Indicated
Gold
metal
(koz)
Gold
grade
(g/t)
Silver
grade
(g/t)
Silver
metal
(koz)
Tonnes
(kt)
Inferred
Gold
metal
(koz)
Gold
grade
(g/t)
Silver
grade
(g/t)
Silver
metal
(koz)
Tonnes
(kt)
Gold
grade
(g/t)
Total
Gold
metal
(koz)
Silver
grade
(g/t)
Silver
metal
(koz)
450
700
25
25
1.18
1.42
3.81
5.33
17.0
32.0
3.2
4.2
9
14
130
315
520
700
1.18
1.37
20.00
31.00
4
5
67
112
970
1,400
-
-
-
-
76
84
3.47
4.72
8.50
12.80
-
-
-
-
101
109
1.18
1.39
3.55
4.85
37.0
63.0
11.7
17.0
7
9
7
7
197
427
197
197
1,200
1.46
56.4
11
445
1,380
1.62
72.3
3
179
2,580
1.54
128.7
30
174
30 June 2017
Mount Mackenzie
Underground
Oxide
Primary
0.43
0.58
450
700
1.18
1.42
Competent Persons Statement and Consent
1,150
1.33
17
32
49
9
14
130
315
520
700
1.18
1.37
12
445
1,220
1.29
20
31
51
4
5
67
112
970
1,400
1.18
1.39
37
63
7
9
197
427
5
179
2,370
1.30
100
16
326
The information in this release that relates to mineral resources is based on and fairly represents information compiled by Mr. Michael Johnstone and Mr Todd Axford and who are members of the
Australasian Institute of Mining and Metallurgy, and Principal Consultants for Minerva Geological Services (MGS) and Geko‐Co (GKC) respectively. MGS and GKC have been contracted by
Resources & Energy Group Limited (the Company) to provide exploration management, advice and guidance to the company. Both Mr. Axford and Mr Johnstone have sufficient technical experience
that is relevant to the reporting of exploration results to qualify as a competent person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves’. Mr. Axford and Mr Johnstone consent to the inclusion in this release of the matters based on their information in the form and context in which it appears.
This presentation contains information initially provided in releases made by the Company to the ASX on 26 February 2016 and 21 June 2016 concerning the Mt Mackenzie Resource and 3 July 2018
concerning Radio Gold. The Company is not aware of any new information or data that materially affects the information included in previous ASX announcements and that all material assumptions
and technical parameters underpinning the estimates in the announcement continue to apply and have not materially changed.
12
Resources & Energy Group Limited
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2018
Revenue from continuing operations
Sales revenue
Cost of sales
Consulting fees
Legal costs
Corporation maintenance expenses
Director fees
Employee benefits expense
Finance costs
Depreciation
Share-based payments expense
Other expenses
Loss before income tax
Income tax benefit
Loss after tax from continuing operations
Other comprehensive income
Total comprehensive loss for the year attributable to the owners of
Resources & Energy Group Limited
Total comprehensive loss is attributable to:
- shareholders of Resource & Energy Group Limited
- non- controlling interests
Notes
2018
$
2017
$
4(a)
4(b)
426,437 -
(1,954,877) -
(1,528,440) -
4(c)
4(d)
(112,097)
(37,818)
(269,331)
(161,862)
(427,812)
(611,670)
(58,298)
(40,589)
(183,470)
(39,511)
(37,014)
(294,897)
(122,000)
(232,062)
(311,026)
(38,763)
(29,120)
(311,174)
5
(3,431,387)
-
(3,431,387)
(1,415,567)
-
(1,415,567)
-
-
(3,431,387)
(1,415,567)
(3,427,606)
(3,781)
(3,431,387)
(1,394,379)
(21,188)
(1,415,567)
Loss per share (cents per share) – basic and diluted
15
(3.53)
(1.46)
This consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
notes to the financial statements.
13
Resources & Energy Group Limited
Consolidated Statement of Financial Position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Total current assets
Non-current Assets
Property, plant and equipment
Exploration and evaluation assets
Mine development
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Issued capital
Reserves
Retained earnings
Notes
2018
$
2017
$
6
7
8
9
10
11
12
11
12
108,027
49,254
20,000
323,710
298,156
120,000
177,281
741,866
457,568
1,712,668
3,659,784
466,402
1,581,148
3,033,147
5,830,020
5,080,697
6,007,301
5,822,563
1,675,614
1,151,646
20,476
373,054
1,043,067
31,255
2,847,736
1,447,376
3,476,615
583,200
2,086,865
-
4,059,815
2,086,865
6,907,550
3,534,241
(900,249)
2,288,322
13
14
14,712,060
1,575,267
(19,556,412)
14,666,238
1,378,273
(16,128,806)
Total equity attributable to the shareholders of
Resources & Energy Group Limited
Non-controlling interests
Total equity
(3,269,085)
(84,295)
2,368,836
(900,249)
2,372,617
2,288,322
This consolidated statement of financial position should be read in conjunction with the notes to the financial
statements
14
Resources & Energy Group Limited
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest paid
Interest received
Notes
2018
$
2017
$
426,437 -
(1,514,640)
(93,779)
8,575
(2,028,236)
(19,727)
532
Net cash flows used in operating activities
6(b)
(1,620,994)
(1,599,844)
Cash flows from investing activities
Purchase of property, plant and equipment
Exploration and evaluation costs capitalised
Mine development costs capitalised
Deposits
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from borrowings - related party, net
(47,225)
(131,520)
(78,442)
100,000
(420,540)
(668,620)
(1,023,252)
(20,000)
(157,188)
(2,132,412)
1,409,000
(17,244)
170,743
3,123,500
-
4,779
Net cash flows provided by financing activities
1,562,499
3,128,279
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
(215,683)
(603,977)
323,710
927,687
Cash and cash equivalents at end of period
6(a)
108,027
323,710
This consolidated statement of cash flow should be read in conjunction with the notes to the financial
statements
15
Resources & Energy Group Limited
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Issued
capital
Share option
reserve
Retained
earnings
$
$
$
Non-
controlling
interests
$
Total
$
Balance at 1 July 2016
14,666,238
450,384
(14,734,427)
2,393,805
2,776,000
Total comprehensive income for the year
Issue of shares
Issue of options
Recognition of equity component on
issue of project development notes
Capital raising cost
-
29,120
998,440
(1,394,379)
-
-
-
(21,188)
-
-
-
(1,415,567)
-
29,120
998,440
(99,671)
-
-
(99,671)
-
-
-
-
Balance at 30 June 2017
14,666,238
1,378,273
(16,128,806)
2,372,617
2,288,322
Balance at 1 July 2017
14,666,238
1,378,273
(16,128,806)
2,372,617
2,288,322
Total comprehensive income for the year
Issue of options
Cancellation of options
Transfer to equity on conversion of options
Recognition of equity component on
issue of project development notes
Capital raising cost
-
-
45,822
-
-
55,149
(14,560)
(45,822)
325,181
(3,427,606)
-
-
-
-
(3,781)
-
-
-
-
(3,431,387)
55,149
(14,560)
-
325,181
-
(122,954)
-
-
(122,954)
Balance at 30 June 2018
14,712,060
1,575,267
(19,556,412)
2,368,836
(900,249)
This consolidated statement of changes in equity should be read in conjunction with the notes to the financial
statements
16
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
1
Corporate informaton
2
a
b
Resources & Energy Group Limited (the “Company”) is a listed public company incorporated and domiciled
in Australia. The consolidated financial statements for the year ended 30 June 2018 comprise the Company
and its controlled entities (together referred to as the “Group”).
The financial statements are presented in Australian dollars which is the Company's functional and
presentation currency.
The consolidated financial statements were approved by the Board of Directors on 17 May 2019.
The principal accounting policies are set out below. These policies have been consistently applied unless
otherwise noted.
Summary of significant accounting policies
Basis of preparation
These financial statements are general purpose financial statements which have been prepared in
accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with
other requirements of the law.
For the purposes of preparing the consolidated financial statements, the Company is a for-profit listed public
entity.
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting
Standards ensures that the financial statements and notes of the company and the Group comply with
International Financial Reporting Standards ('IFRS').
The consolidated financial statements have been prepared on the basis of historical cost, except where
assets or liabilities are measured at revalued amounts or fair values at the end of each reporting period, as
explained in the accounting policies below. Historical cost is generally based on the fair values of the
consideration given in exchange for goods and services. All amounts are presented in Australian dollars.
Going concern
The directors have prepared financial statements on a going concern basis which contemplates the
continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal
course of business. At 30 June 2018, the Group's current assets of $177,281 (2017: $741,866) were less
than current liabilities of $2,847,736 (2017: $1,447,376).
Included in current liabilities is $483,200 being the estimated current portion of unsecured interest bearing
liabilities (project development notes), based on its repayment date of 3 years from the date of the advances
and trade payables of $1,675,614
For the 12 months ended 30 June 2018 the Group reported a loss after taxation of $3,431,387 (2017:
$1,415,567), and net cash used by operating activities was $1,620,994 (2017: $1,599,844).
During the current phase of development the generation of sufficient funds from operating and financing
activities in accordance with the Group’s current business plan and growth forecasts is dependent on one or
more of the following matters being successfully realised:
(i) the availability of equity and financing facilities to fund working capital requirements;
(ii) realising value from its assets through joint ventures or outright sale;
(iii) the ability for the directors to scale back activities in order to preserve cash when required; and
(iv) continuing financial support from directors and related parties.
17
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
As at 30 June 2018, the Group had fully drawn upon existing loan facility agreements.
The directors are of the opinion that the use of the going concern basis of accounting is appropriate as they
are satisfied regarding the Group's ability to maintain the continued support of current financiers, creditors
and shareholders.
The financial statements do not include adjustments relating to the recoverability and classification of
recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the
Group not continue as a going concern.
c
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company. Control is achieved when the Company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases
when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of profit or loss and other
comprehensive income from the date the Company gains control until the date when the Company ceases to
control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the
Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the
owners of the Company and to the non-controlling interests even if this results in the non-controlling interests
having a deficit balance.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
d
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in
a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair
values of assets transferred by the Group, liabilities incurred by the Group to the former owners and the
equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are
recognised in profit or loss as incurred.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree
(if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
18
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
e
Significant accounting judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements requires management to make judgements,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities,
and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.
The key assumptions concerning the future and other key sources of estimate uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements were prepared. Existing circumstances
and assumptions about future developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when
they occur.
Carrying value of exploration, evaluation and development assets
The Group capitalises expenditure relating to exploration, evaluation and mine development where it is
considered likely to be recoverable or where the activities have not reached a stage which permits a
reasonable assessment of the existence of reserves. While there are certain areas of interest from which no
reserves have been extracted, the directors are of the continued belief that such expenditure should not be
written off since feasibility studies in such areas have not yet concluded.
The Group reclassifies exploration and evaluation expenditure to mine development assets when the Board
assess that the mine has reached a point where it is certain that extraction of ore will commence in the
immediate future.
Capitalised expenditure for exploration and evaluation is carried at the end of the reporting period at
$1,712,668 (2017: $1,581,148). Capitalised expenditure for mine development is carried at the end of the
reporting period at $3,659,784 (2017: $3,033,147).
Impairment of non-financial assets
An impairment exists when the carrying value of an asset or Cash Generating Unit (CGU) exceeds its
recoverable amount, which is the higher of its fair value less costs to sell and its value-in-use. Each mine is
considered to be a separate CGU. The fair value less costs to sell calculation is based on available data
from binding sales transactions, conducted at arm's length, for similar assets or observable market prices
less incremental costs for disposing of the asset. The value-in-use calculation is based on a discounted cash
flow model. The cash flows are derived from the budget for the next financial year and do not include
restructuring activities that the Group is not yet committed to or significant future investments that will
enhance the asset's performance or the CGU being tested. The recoverable amount is most sensitive to the
discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the
growth rate used for extrapolation purposes.
19
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
Determination of mineral resources and ore reserves
The Group estimates its Mineral Resources and Ore Reserves in accordance with the Australasian Code of
Reporting of Exploration Results, Mineral Resources and Ore Reserves (“the JORC Code”). The information
on mineral resources and ore reserves is prepared by or under the supervision of Competent Persons as
defined in the JORC Code. The amounts presented in the statement of Mineral Resources and Ore
Reserves are determined under the JORC Code where is information is available. When a resource or
reserve amount prepared in accordance with the JORC Code for a particular mine is not available, then no
amounts are disclosed. For the purposes of impairment testing of assets the Board applies JORC Code
verified information when it is available, or otherwise management estimates of potential resources.
There are numerous uncertainties inherent in estimating mineral resources and ore reserves and
assumptions that are valid at the time of estimation which may change significantly when new information
becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or
recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being
restated. Such changes in reserves could impact depreciation and amortisation rates, asset carrying values
and impairment assessments.
Amortisation of mine development expenditure
Mine development costs are amortised on a units of production basis over the life of the mine to which they
relate and during the financial year costs of $35,005 were amortised. In applying a units of production
method, amortisation is calculated using the expected total contained ounces with the mine to achieve a
consistent amortisation rate per ounce. To achieve this the amortisation rate is based on the ratio of the
annual ounces produced over the expected total contained ounces.
Going concern
The financial statements have been prepared on the basis that the Group is a going concern, refer to Note
1(b) for discussion on the basis of this assumption.
Equity component of converting loans
The equity component that arises from the ability of loan providers to convert their loans into ordinary shares
of the Company is calculated with reference to a market rate of interest. Due to the lack of a readily available
debt market for the Company at its stage of development, an estimated market rate has been determined.
Share based payments
The costs of the share-based payments are calculated on the basis of the fair value of the equity instrument
at grant date. During the financial year share based payments of $40,589 was recognised. Determining the
fair value assumes choosing the most suitable valuation model for these equity instruments, by which the
characteristics of the grant have a decisive influence. This assumes also the input into the valuation model of
some relevant judgments, like the estimated expected life of the share option and the market volatility of the
Company's ordinary shares.
The judgments made and the model used are further detailed in Note 17.
20
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
f
Revenue recogntion
Revenue from the sale of goods is recognised when there has been a transfer of the risks and rewards to the
customers and no further processing is required by the Group, the quality and quantity of the goods has been
determined with reasonable accuracy, the price is fixed or determinable and collectibility is probable.
Revenue is measured at fair value of the consideration received or receivable. Interest revenue is
recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
Other revenue is recognised when the right to receive the revenue has been established.
g
h
Borrowing costs
Borrowing costs are recognised as an expense when incurred.
Cash and short-term deposits
Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand,
short-term deposits and highly liquid investments with a maturity of three months or less.
For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and
short-term deposits as defined above.
i
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using
the effective interest method, less any provision for impairment. Trade receivables are generally due for
settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade
receivables is raised when there is objective evidence that the consolidated entity will not be able to collect
all amounts due according to the original terms of the receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency
in payments (more than 60 days overdue) are considered indicators that the trade receivable may be
impaired.
Other receivables are recognised at amortised cost, less any provision for impairment.
j
Financial Instruments - initial recognition and subsquent measurement
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
21
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
(i) Financial assets
Financial assets are classified as financial assets as fair value through profit or loss, loans and
receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated
as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of
its financial assets at initial recognition based on the nature and purpose of a financial asset.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial measurement, such financial assets are subsequently measured at
amortised cost using the effective interest rate (EIR) method, less impairment. Amortised cost is calculated
by taking into account any discount or premium on acquisition and fees or costs that are an integral part of
the EIR. The EIR amortisation is included in the income statement in finance costs for loans or other
operating expenses for receivables.
(ii) Impairment of financial assets
The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be
impaired if there is objective evidence of impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be reliably
estimated.
(iii) Financial liabilities
Financial liabilities are classified as trade and other payables, loans and borrowings. The Group
determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of
directly attributable transaction costs.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at
the initial date of recognition, and only if the criteria in AASB 139 are satisfied. The Group has not
designated any financial liability as, at fair value through profit or loss.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income
statement.
22
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
k
Income tax
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting date in the countries where the Group
operates and generates taxable income.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and that, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or
•
• when the taxable temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and
it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and unused tax losses. Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences and the carry forward of
unused tax credits and unused tax losses can be utilised, except:
• when the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
• when the deductible temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is
probable that the temporary difference will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred
tax items are recognised in correlation to the underlying transaction either in other comprehensive income or
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable
entity and the same taxation authority.
23
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
l
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
•
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority
are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
m
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the cost of replacing part of property, plant and equipment and
borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts
of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as
individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major
inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in
profit or loss as incurred.
Depreciation is calculated using a combination of straight-line and diminishing-value basis over the estimated
useful life of all assets.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if appropriate. Property, plant and equipment are
depreciate over periods of three to five years.
24
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
n
Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral resources, including gold and copper, and
includes:
•
•
•
•
assessing all available geophysical data including gravity, magnetic and seismic and collation of additional
data;
exploratory drilling;
determining and examining the volume and grade of the resource; and
cost of acquisition of exploration tenements.
Administration costs that are not directly attributable to a specific exploration area are charged to the profit or
loss. Licence costs paid in connection with a right to explore in an existing exploration area are capitalised
and amortised over the term of the permit. Exploration and evaluation expenditure is capitalised in respect of
each identifiable area of interest as the exploration and evaluation activity has not reached a stage which
permits a reasonable assessment of the existence of commercially recoverable gold deposits that are of
sufficient scale to support the project concept.
As the asset is not available for use, it is not depreciated. All capitalised exploration and evaluation
expenditure is monitored for indication of impairment. Where a potential impairment is indicated, assessment
is performed for each area of interest in conjunction with the group of operating assets (representing a cash
generating unit) to which the exploration is attributed. When production commences, the assets 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.
Accumulated exploration and evaluation expenditure in relation to an abandoned area are written-off in full in
profit and loss in the period in which the decision of abandon the area is made.
Mine development expenditure
Mine development costs include costs incurred in preparing and re-opening mine sites for production.
Mine development costs are amortised on a units of production basis over the life of the mine to which they
relate. In applying a units of production method, amortisation is calculated using the expected total contained
ounces within the mine to achieve a consistent amortisation rate per ounce. The amortisation rate is based
on the ratio of the ounces produced annually over the expected total contained ounces.
Site restoration
Site restoration costs include the dismantling and removal of mining plant, equipment and building structures,
waste removal and rehabilitation of the site in accordance with the requirements of the mining permits. Such
costs are determined using estimates of future costs, current legal requirements and technology.
Costs of site restoration are recognised in full at present value as a non-current liability. An equivalent
amount is capitalised as part of the cost of the asset when an obligation arises to decommission or restore a
site to a certain condition after abandonment as a result of bringing the assets to its present location. In
determining the costs of site restoration there is uncertainty regarding the nature and extent of the restoration
due to community expectations and future legislation.
o
p
25
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
q
Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing for an asset is required, the Group estimates the
asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating
unit's ("CGU's") fair value less costs to sell and its value-in-use. Recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If
no such transactions can be identified, an appropriate valuation model is used. These calculations are
corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair
value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are
prepared separately for each of the Group's CGU's to which the individual assets are allocated. These
budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term
growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the income statement in expenses.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is
an indication that previously recognised impairment losses no longer exist or have decreased. If such
indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions used to determine the
asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the
carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised for the asset in
prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued
amount, in which case, the reversal is treated as a revaluation increase.
r
Share-based payment transactions
Equity-settled share-based payments to employees and others providing similar services are measured at
the fair value of the equity instrument at the grant date. Fair value is measured by use of either a binominal or
Black Scholes model. The expected life used in the model has been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Further details on how the fair value of equity-settled share-based transactions has been determined can be
found in Note 17.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will
eventually vest, with a corresponding increase in equity.
26
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
Equity-settled share-based payment transactions with parties other than employees are measured at the fair
value of the goods and services received, except where the fair value cannot be estimated reliably, in which
case they are measured at the fair value of the equity instruments granted, measured at the date the entity
obtains the goods or the counterparty renders the service. For cash-settled share-based payments, a liability
equal to the portion of the goods or services received is recognised at the current fair value determined at
each reporting date, with any changes in fair value recognised in profit or loss for the year.
s
Employee benefits provision
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave, and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other short-term employee benefits
are measured at their nominal amounts based on remuneration rates which are expected to be paid when
the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated
future cash outflow to be made in respect of services provided by employees up to the reporting date. In
determining the present value of future cash outflows, the market yield as at the reporting date on national
government bonds, which have terms to maturity approximating the terms of the related liability, are used.
t
Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
u
Comparatives
Where necessary, comparatives have been reclassified and repositioned for consistency with current year
disclosures.
27
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
v
New accounting standards for application in future periods
Certain new accounting standards and interpretations have been published that are not mandatory for the
30 June 2018 period. The Group has adopted all new standards and interpretations which became
mandatorily effective during the period. There has been no significant impact on the reported financial
position or performance of the Group on adoption.
Standard
AASB 9 Financial
Instruments and amending
standards
AASB 15 Revenue from
contracts with customers
and amending standards
Requirements
This standard is effective for reporting period
beginning on or after 1 January 2018. The
Group will apply AASB 9 for the annual period
beginning 1 July 2018. Significant revisions to
the classification and measurement of financial
assets, reducing the number of categories and
simplifying the measurement choices,
including the removal of impairment testing of
assets measured at fair value. The amortised
cost model is available for debt assets meeting
both business model and cash flow
characteristics test. All investment in equity
instruments using AASB 9 are to be measured
at fair value.
This standard is effective for reporting period
beginning on or after 1 January 2018. The
Group will apply AASB 15 for the annual period
beginning 1 July 2018.
AASB 15 introduces a five- step process for
revenue recognition with the core principle of
the new Standard being for entities to
recognise revenue to depict the transfer of
goods or services to customers in amounts that
reflect the consideration (that is, payment) to
which the entity expects to be entitled in
exchange for those goods or services.
Impact
Based on the Groups’s preliminary
assessment, the Standard is not expected
to have a material impact on the
transactions and balances recognised in
the financial statements when it is first
adopted for the year ending 30 June
2019.
Adoption of this standards on 1 July 2018
did not have a material effect on the
recognition and measurement of
revenue.
However the Group will be required to
provide additional disclosures in
accordance with the 5-step process to
state when its performance obligations
are met.
28
Resources & Energy Group Limited
Notes to the Financial Statements
For the year ended 30 June 2018
Standard
AASB 2016 -5
Amendments to Australian
Accounting Standards –
Clarification and
Measurement of Share
Based Payments
Requirements
effective for reporting period beginning on or
after 1 January 2018. The Group will apply
these amendments for the annual period
beginning 1 July 2018.
Impact
These changes will not have material
impact on the Group.
AASB 16 Leases
AASB 2016 -5 addresses the accounting for the
vesting and non-vesting conditions on the
measurement of cash-settled share-based
payments; the classification of share-based
payment transactions with a net settlement
feature for withholding tax obligations; and the
accounting for a modification to the terms and
conditions of a share-based payment that
changes the classification of the transaction
from cash-settled to equity-settled.
This standard is effective for reporting period
beginning on or after 1 January 2019. The
Group will apply AASB 16 for the annual period
beginning 1 July 2019.
The requirements of this standards will cause
the majority of leases to be capitalised onto the
statement of financial position. There are
exceptions relating to short-term leases and
low value assets which may remain off-balance
sheet. The calculation of the lease liability will
take into account appropriate discount rates,
assumptions about lease term and increases in
lease payments. A corresponding right to use
asset will be recognised which will be
amortised over the term of the lease.
Mineral Extraction leases are not covered by
this standard and continue to be accounted for
under AASB 6 Exploration for and the
Evaluation of Mineral Resources.
It is expected that these changes will not
have material impact on the Group.
29
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
3 Segment information
As at the date of this report, the Group has two operating segments: gold mine exploration and
development and other activities (primarily corporate costs). A previous segement of geothermal
mining has been discontinued. The Group has identified its operating segments based on internal
reports that are reviewed and used by the chief operating decision maker in assessing performance.
The accounting policies and amounts reported for internal reporting are consistent with the financial
information in this financial report.
2018
Segement revenue
Revenue
Segment expenses
Mine operating costs
Depreciation, impairment and amortisation
Administration and employment costs
Finance costs (net interest income)
Gold
$
Other
$
Total
$
426,437
426,437
- 426,437
- 426,437
1,919,872
58,298
- 1,919,872
- 58,298
- 1,264,203 1,264,203
- 611,670 611,670
1,978,170 1,875,873 3,854,043
Income tax benefit
- - -
Loss after tax from continuing operations
(1,551,733)
(1,875,873)
(3,427,606)
Segment assets
Segment liabilities
2017
Segement revenue
Interest income
Segment expenses
Administration and employment costs
Depreciation, impairment and amortisation
Finance costs (net interest income)
5,830,020
2,847,736
177,281
4,059,815
6,007,301
6,907,550
- 8,575 8,575
- 1,044,590 1,044,590
37,426 1,337 38,763
- 319,601 319,601
37,426 1,365,528 1,402,954
Income tax benefit
- - -
Loss after tax from continuing operations
(37,426)
(1,356,953)
(1,394,379)
Segment assets
Segment liabilities
5,080,697
1,447,376
741,866
2,086,865
5,822,563
3,534,241
30
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
4
Revenue and expenses
(a) Revenue
Gold sales
(b) Cost of sales
Mine operating costs
Depreciation and amortisation expense
(c) Employee benefits expense
Wages and salaries
Superannuation benefits
Total employee benefits expense
(d) Finance costs
Interest expense - Project Development Notes
Project Development Notes - equity component amortisation
Interest expense - related party (refer Note 20)
Less: interest income
Finance costs (net)
2018
$
2017
$
426,437
-
1,919,872
35,005
1,954,877
-
-
-
316,933
110,879
427,812
142,190
458,132
11,880
(532)
611,670
213,065
18,997
232,062
105,517
202,204
11,880
(8,575)
311,026
5
Income tax
Income tax expense - tax benefit written off
-
-
The Group has tax losses as at the 30 June 2018 of $3,436,631 (2017: $3,051,626). The benefit relating to
these and the current year losses has not been recognised in the financial report at 30 June 2018 as it is not
probable that future taxable profit will be available against which the Group would be able to utilise these losses.
Tax returns for the Group for the year ended 30 June 2018 are in progress at the date of this report.
Current and prior year tax losses will only be available to offset against future profits if:
(i) the Group and the Company derives future assessable income of a nature and of an amount sufficient to
enable the benefit from the deductions for the losses to be realised;
(ii) the Group and the Company continue to comply with the conditions for deductibility imposed by tax
legislation; and
(iii) no changes in tax legislation adversely affect the Group and the Company in realising the benefit from the
The Company and its wholly owned entities have not formed a consolidated income tax group as of 30 June
2018.
31
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
6
Cash and cash equivalents
(a) Cash and bank balances
Cash at bank earns interest at floating rates based on daily bank deposit rates.
2018
$
2017
$
108,027
323,710
(b)
Reconciliation from the net profit after tax to the net cash flows from operations
Loss from continuing operations after tax
(3,431,387)
(1,415,567)
Adjustments for:
Depreciation and amortisation
Share-based payments
Project development notes - equity component amortisation
Project development notes - equity component of interest paid
Other
58,298
40,589
458,132
7,677
38,763
29,120
202,204
(47,880)
(17,414)
Changes in operating assets and liabilities, net of effects from purchase of controlled entity
Decrease/(increase) in receivables
Decrease/(increase) in deposits
(Decrease)/increase in payables
(Decrease)/increase in other liabilities
Net cash used in operating activities
7
Financial assets
Deposits
(2,098)
100,000
1,158,574
(10,779)
(285,109)
(20,000)
(112,716)
28,755
(1,620,994)
(1,599,844)
20,000
120,000
Deposits of $20,000 (2017: $100,000) are subject to a charge refer Note 18.
32
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
8
Property, plant and equipment
At 30 June 2018
Cost
Accumulated depreciation
Net carrying amount
Movement in property, plant and equipment
Carrying amount at the beginning of the year
Additions - other
Depreciation charge for the year
Carrying amount at the end of the year
At 30 June 2017
Cost
Accumulated depreciation
Net carrying amount
Movement in property, plant and equipment
Carrying amount at the beginning of the year
Additions - other
Depreciation charge for the year
Carrying amount at the end of the year
9 Exploration and evaluation assets
At 30 June 2018
Cost
Accumulated depreciation and impairment
Net carrying amount
Movement in exploration and evaluation assets
Carrying amount at the beginning of the year
Additions
Carrying amount at the end of the year
Freehold
land
Plant and
equipment
30,000
-
30,000
524,629
(97,061)
427,568
30,000
-
-
30,000
Freehold land
30,000
-
30,000
436,402
49,464
(58,298)
427,568
Plant and
equipment
477,404
(41,002)
436,402
Total
554,629
(97,061)
457,568
466,402
49,464
(58,298)
457,568
Total
507,404
(41,002)
466,402
30,000
-
-
30,000
54,621
420,542
(38,761)
436,402
84,621
420,542
(38,761)
466,402
Gold
Total
1,712,668
-
1,712,668
1,712,668
-
1,712,668
1,581,148
131,520
1,581,148
131,520
1,712,668
1,712,668
33
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
At 30 June 2017
Cost
Accumulated depreciation and impairment
Net carrying amount
Movement in exploration and evaluation assets
Carrying amount at the beginning of the year
Additions
Reclassification to mine development expenditure (Note 10)
Carrying amount at the end of the year
Gold
Total
1,581,148
-
1,581,148
1,581,148
-
1,581,148
2,922,421
1,691,874
(3,033,147)
2,922,421
1,691,874
(3,033,147)
1,581,148
1,581,148
Exploration licenses are carried at cost of acquisition less impairment losses. The recoverability of the carrying
amount of the exploration and evaluation assets is dependent on successful development and commercial
exploitation, or alternatively, sale of the respective areas of interest. The recoverable amount of development
expenditure is determined as the higher of its fair value less costs to sell and its value in use.
10 Mine development assets
At 30 June 2018
Cost
Accumulated amortisation and impairment
Net carrying amount
Movement in exploration and evaluation assets
Carrying amount at the beginning of the year
Additions
Recognition of mine rehabilitation liability
Amortisation charge for the year
Carrying amount at the end of the year
At 30 June 2017
Cost
Accumulated amortisation and impairment
Net carrying amount
Movement in exploration and evaluation assets
Carrying amount at the beginning of the year
Reclassification from exploration and development expenditure (Note 9)
Carrying amount at the end of the year
Gold
Total
3,694,789
(35,005)
3,659,784
3,694,789
(35,005)
3,659,784
3,033,147
78,442
583,200
(35,005)
3,659,784
3,033,147
78,442
583,200
(35,005)
3,659,784
Gold
Total
3,033,147
-
3,033,147
3,033,147
-
3,033,147
-
3,033,147
-
3,033,147
3,033,147
3,033,147
34
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
11 Interest-bearing loans and borrowings
Current - unsecured
Borrowings - related party (i)
Borrowings - project development notes issue 1 (ii)
Borrowings - other (iv)
Non-current - unsecured
Borrowings - project development notes issue 1 (ii)
Borrowings - project development notes issue 2 (iii)
2018
$
2017
$
485,690
483,200
182,756
1,151,646
303,067
740,000
-
1,043,067
1,449,599
2,027,016
3,476,615
968,029
1,118,836
2,086,865
(i) Borrowings - related party
Advances by director related entities are interest free other than a balance of $144,000 which has an interest rate of
8.25% (refer Note 19). All balances are unsecured and repayable on demand.
(ii) Project Development Notes Issue 1
The facility was provided by private financiers (Financiers) and, once the final amount owing is received, is fully drawn to
its committed limit of $2,228,000. Interest is payable quarterly at the rate of 8.0% per annum.
Any PDN1 borrowing not repaid by the exercise of the attaching option and application of the exercise price to the
repayment (refer below) is required to be repaid at the earlier of either at the end of 3 years from the date of draw down
of each advance, or in repayments equal to 50% of the Company's positive pre-tax cash from operations (each quarter)
until balance owed under the PDN1s and any outstanding interest is repaid in full.
The Company issued 18,566,667 share options concurrently with the initial draw down under PDN1 to the Financiers.
The share options provide Financiers with the right to subscribe for ordinary shares of the Company (PDN1 Options). As
a result the net proceeds received from the issue of the PDN1s have been split between a liability and an equity
component. The equity component represents the value of the option to convert the liability into equity of the Company.
The terms of the PDN1 Options are as follows:
(i)
(ii)
(iii)
(iv)
Right to subscribe: The Financiers have the right to subscribe for one fully paid ordinary share of the Company for
each share option held at an issue price of 12 cents each anytime after 31 March 2017 and until the expiry of the
share options on 31 March 2021.
Right of offset: At the election of the Financiers any amounts owed under the PDNs may be applied either in part or
whole to the exercise price owed on issue of the ordinary shares.
Number of ordinary shares to be issued: If all of the PDN1 Options are exercised a maximum of 18,566,667 fully
paid ordinary shares of the Company would be issued.
Right to acquire: Within 6 months prior to the expiry date of the PDN Options of 31 March 2021, the Company may
seek to acquire the PDN1 Options from the Financiers at a volume weighted average price calculated for a 1 month
period ending 3 days before the election notice is provided to the Financiers.
35
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
(v)
Cancellation of options: If a Financier fails to provide funding pursuant to the PDN1s any unexercised PDN1 Options
held by that Financier can be cancelled at the election of the Company.
(iii) Project Development Notes - Issue 2
Project Development Note facility (PDN2) is provided by a private financier (PDN2 Financier) and has a committed limit of
$2,540,000 which has been fully drawn. An amount of $1,000,000 was drawn under PDN2 during the financial year.
Interest is payable quarterly at the rate of 8.0% per annum.
Any PDN2s not repaid by exercise of the attached option and application of the exercise price to repayment (refer below)
are repaid either at the end of 3 years from the date of draw down of each advance, or subsequent to repayment of
amounts owed under PDN1 in repayments equal to 50% of the Company's positive pre-tax cash from operations (each
quarter) until balance owed under the PDN2 and any outstanding interest is repaid in full.
The Company issued 11,000,000 share options concurrently with the PDN2 to the PDN2 Financier whereby the PDN2
Financier has the right to subscribe for ordinary shares of the Company (PDN2 Options). As a result the net proceeds
received from the issue of the PDN2 have been split between a liability and an equity component. The equity component
represents the value of the option to convert the liability into equity of the Company.
The terms of the PDN2 Options are as follows:
(i)
Right to subscribe: The PDN2 Financier has the right to subscribe for one fully paid ordinary share of the Company
for each share option held at an issue price of 14 cents each anytime from 30 November 2017 and until the expiry of
the share options on 30 November 2021.
(ii)
Right of offset: At the election of the PDN2 Financier any amounts owed under the PDN2s may be applied either in
part or whole to the exercise price owed on issue of the ordinary shares.
(iii)
Number of ordinary shares to be issued: If all of the PDN2 Options are exercised a maximum of 11,000,000 fully
paid ordinary shares of the Company would be issued.
(iv)
Right to acquire: Within 6 months prior to the expiry date of the PDN2 Options of 30 November 2021, the Company
may seek to acquire the PDN2 Options from the PDN2 Financier at a volume weighted average price calculated for
a 1 month period ending 3 days before the election notice is provided to the PDN2 Financier.
(v)
Cancellation of options: If the PDN2 Financier fails to provide funding pursuant to the PDN2s any unexercised PDN2
Options can be cancelled at the election of the Company.
(iv) Borrowings - Other
Other borrowings are repayable by 16 May 2019. Interest is payable monthly at a rate of 12% per annum.
12 Provisions
Current
Employee entitlements
Non-Current
Rehabilitation provision
Total provisions
2018
$
2017
$
20,476 31,255
583,200
-
603,676
31,255
36
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
Movement in provisions
At 30 June 2018
Carrying amount at the beginning of the year
Remeasurement of provision
Employee
benefits
Rehabilitation
Total
31,255
(10,779)
-
583,200
31,255
572,421
Carrying amount at the end of the year
20,476
583,200
603,676
At 30 June 2017
Carrying amount at the beginning of the year
Remeasurement of provision
Carrying amount at the end of the year
13
Issued capital
98,143,845 fully paid ordinary shares (2017: 95,682,306) (i)
Movements in fully paid ordinary shares
2,500
28,755
31,255
-
-
-
2,500
28,755
31,255
2018
$
2017
$
14,712,060
14,666,238
2018
$/share
Number
$
$/share
2017
Number
$
Balance at the beginning of the financial
year
Cashless conversion of Class A options into
ordinary shares 18 November 2017
Cashless conversion of Class B options into
ordinary shares 17 January 2018
95,682,306
14,666,238
95,682,306
14,666,238
1,230,769
22,911
1,230,770
22,911
-
-
-
-
Balance at the end of the financial year
98,143,845
14,712,060
95,682,306
14,666,238
(i)
During a prior financial year 15,000,000 ordinary shares were issued as partial consideration for the acquisition of
Radio Gold Pty Limited (formerly Brightsun Enterprises Pty Limited). 7,500,000 ordinary shares remain subject to a
performance condition relating to the Radio Gold mine (owned by Radio Gold Pty Limited) whereby a minimum net
positive cash flow of $1 million must be achieved within 24 months of commencing operations. If this condition is not
achieved then the Company has the right to repurchase the shares subject to the performance condition at a
nominal sum.
37
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
14
Reserves
Share option reserve
Balance at the beginning of the financial year
Share based payment
Cancellation of options
Transfer to equity on conversion of options
Recognition of equity component on issue of project development notes, net of
costs (ii)
Capital raising cost
Balance at the end of the financial year
2018
$
2017
$
1,378,273
55,149
450,384
29,120
(14,560)
(45,822)
325,181
-
-
898,769
(122,954)
-
1,575,267
1,378,273
(i)
(ii)
Reserve arises on the issue of options in payment for services or fees. Further information on options issued is
shown in Note 17 to the financial statements.
Equity component on the issue of project development notes represents the equity component of the conversion
rights as detailed in Note 11.
15
Asset backing and earnings per share
Basic and diluted earnings per share (continuing operations) (cents per share)
Basic and diluted assets per share (continuing operations) (cents per share)
The following reflects the income and share data used in the basic and diluted earnings
per share calculations:
2018
cents per
share
2017
cents per
share
(3.53)
(0.93)
2018
$
(1.46)
2.39
2017
$
Loss attributable to shareholders of the Company used in the calculation of basic and
diluted earnings per share
(3,427,606)
(1,394,379)
Weighted average number of ordinary shares for basic earnings per share
Effect of dilution of share options on issue (i)
96,990,631
1,000,000
95,682,306
5,000,000
Weighted average number of ordinary shares adjusted for the effect of dilution
97,990,631
100,682,306
(i)
Share options on issue that have been assessed as being dilutive for the purpose of calculating earnings per share
have been excluded from the calculation of earnings per share as the Group has incurred a loss after tax. In that
circumstance the inclusion of share options would reduce the earnings per share (loss) and present a misleading
result.
38
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
16 Financial instruments
Financial risk management objectives
(a)
The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, loans to and
from subsidiaries, convertible instruments and derivatives. The main purpose of non-derivative financial instruments is to
raise finance for Group operations. The directors consider that the limited risks mean there is no need to enter into risk
management strategies involving derivative instruments.
The Group is exposed to credit risk, liquidity risk and interest rate risk. There have been no substantive changes in the
types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for
managing or measuring the risks from the previous period.
The Group manages liquidity risk by a combination of maintaining cash reserves, banking facilities and continuously
monitoring forecast and actual cash flows. Ultimate responsibility for liquidity risk management rests with the board of
directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short,
medium and long-term funding and liquidity management requirements. Risks are managed through sensitivity analysis
to model the impact of changes upon the Group’s profits.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of
recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in
the balance sheet and notes to the financial statements.
(b)
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 2 to the financial statements.
Fair value of financial instruments
(c)
The fair values of financial assets and financial liabilities are determined as follows:
-
-
the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid
markets are determined with reference to quoted market prices; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted
pricing models based on discounted cash flow analysis.
(d) Categories of financial instruments
The following table details the carrying amounts and fair values of the Group's financial assets and financial liabilities.
The directors consider that the carrying amounts of financial assets and liabilities recorded at amortised cost in the
financial statements approximate their fair values.
Financial assets
Cash and cash equivalents
Trade and other receivables
Note
2018
$
2017
$
6 108,027 323,710
49,254 298,156
157,281 621,866
39
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
Financial liabilities
Liabilities measured at amortised cost:
Trade and other payables
Borrowings - related parties
Liabilities measured at fair value - Level 3 (i)
Borrowings - project development notes
Note
2018
$
2017
$
1,675,614 373,054
1,151,646 303,067
11 3,959,814 2,826,865
5,635,428 3,502,986
(i) Financial instruments that are measured subsequent to initial recognition at fair value, are grouped into Levels 1 to 3
based on the degree to which the fair value is observable.
Level 1 - fair value measurements are those derived from quoted sources (unadjusted) in active markets for identical
assets or liabilities.
Level 2 - fair value measurements are those derived from inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset of
liability that are not based on observable market data (unobservable inputs).
The fair value of derivative instruments is significantly affected by movements in interest rates. Sensitivity of the
valuation of the derivative liabilities to changes in these factors is shown below at item (j).
(e) Credit risk exposures
Credit risk arises principally from the Group’s receivables and cash and bank balances. Credit risk is kept continually
under review and managed to reduce the incidence of material losses being incurred by the non-receipt of monies due.
The Group’s financial assets include trade and other receivables and loans to related entities.
The maximum exposure to credit risk on financial assets of the Group which has been recognised on the balance sheets
is generally the carrying amount, net of any provisions for doubtful debts. The Group has no significant concentrations of
credit risk with any single counterparty or group of counterparties. The Group's financial assets are limited to credit risk
exposures to Australia on a geographical basis. Trade and other receivables that are neither past due nor impaired are
limited to a few counterparties which are considered credit worthy.
2018
Cash and cash
equivalents
Receivables
Contractual
repayment
amount
6mths or
less
Interest rates
6-12 mths
1-5 years
2.0%
na
108,027
108,027
-
-
49,254
49,254
-
-
40
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
2017
Cash and cash
equivalents
Receivables
(f)
Liquidity risk management
Contractual
repayment
amount
6mths or
less
6-12 mths
1-5 years
2.0%
na
323,710
323,710
-
-
298,156
298,156
-
-
The board has put in place liquidity risk management policies for the management of the Group’s short, medium and long-
term funding and liquidity management requirements. The Group manages liquidity risk by having a combination of:
-
-
-
continuously monitoring forecast and actual cash flows;
having in place loan facilities structured to grow as the size of the business increases; and
arranging issues of securities as required.
To the extent possible maturity profiles of financial assets and liabilities are matched.
The board reviews the capital structure on a regular basis. The board does not have a set debt level target however the
level of borrowings is in line with expectations.
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
Group could be required to pay. The table includes principal and interest cash flows at the face value of the amount
owing and therefore the figures differ from those shown in the financial statements.
2018
Trade payables
Borrowings - other
(fixed rate)
Borrowings - related
parties (variable rate)
2017
Trade payables
Borrowings - other (fixed
rate)
Borrowings - related
parties (variable rate)
Interest
rate
-
8%-12%
Contractual
repayment
amount
1,675,614
5,190,252
Less than 1 year
1-5 years
1,675,614
912,364
-
4,277,888
8.25%
491,630
491,630
-
7,357,497
3,079,608
4,277,888
Interest
rate
-
8.00%
Contractual
repayment
amount
373,054
4,386,674
Less than 1 year
1-5 years
373,054
982,240
-
3,404,434
8.25%
309,007
309,007
-
5,068,735
1,664,301
3,404,434
41
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
The table below reflects an undiscounted view of the contractual maturity for financial liabilities and cash flows expected
to be realised from financial assets. Actual timing may differ from that disclosed. The timing of the cash flows presented
in the table to settle financial liabilities reflects the earliest contractual settlement dates.
Within 1 Year
2017
$
2018
$
1 to 5 Year
2017
$
2018
$
Total
2018
$
2017
$
Group financial liabilities due for payment
Trade payables
Borrowings - fixed rate
Borrowings - related
1,675,614 373,054
912,364 982,240
491,630 309,007
-
4,277,888
-
3,404,434
- 1,675,614 373,054
5,190,252 4,386,674
- 491,630 309,007
Total contractual and
expected outflows
3,079,608
1,664,301
4,277,888
3,404,434
7,357,496 5,068,735
Group financial assets - cash flows realisable
Cash and cash
Receivables
108,027 323,710
49,254 298,156
-
-
- 108,027 323,710
- 49,254 298,156
Total anticipated inflows
157,281 621,866
-
- 157,281 621,866
Net outflow/(inflows)
2,922,327 1,042,435
4,277,888
3,404,434
7,200,215 4,446,869
(g)
Interest rate risk
The Group has borrowed funds at fixed rate of interest and therefore currently has limited exposure to movements in
interest rates.
(h) Foreign currency risk
At its current stage of development the Group is indirectly exposed to foreign currency risk, in respect of the market price
for gold which is based in US dollars.
(i) Commodity price risk
At its current stage of development the Group is indirectly exposed to commodity price risk, in respect of the market price
for gold.
(j) Sensitivity analysis of risk factors
The following table illustrates sensitivities to the Group’s exposures to changes in interest rates. The table indicates the
impact on how profit and equity values reported at the end of the reporting period would have been affected by changes
in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the
movement in a particular variable is independent of other variables.
At 30 June 2018, the effect on profit and equity as a result of changes in interest rates, with all other variables remaining
constant, would not have a material impact.
42
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
17 Share-based payments
The Company has the following share options outstanding under share based plans:
2018
2017
Weighted
average
exercise
price
Weighted
average
exercise
price
Number of
options
$0.117
$0.140
$0.140
$0.140
$0.050
$0.120
$0.140
$0.127
32,066,667
11,000,000
500,000
500,000
$0.109
$0.140
$0.120
$0.140
44,066,667
$0.117
Number of
options
44,066,667
7,142,857
2,000,000
-
(4,000,000)
(250,000)
(250,000)
48,709,524
Balance at the beginning of the financial year
Granted
Granted
Granted
Converted to ordinary shares
Cancelled
Cancelled
Balance at the end of the financial year
Exercisable at the end of the financial year
39,316,667
$0.124
32,066,667
$0.109
No options expired or were exercised during the periods covered by the above tables.
Share options outstanding at the end of the year have the following expiry date and exercise prices
Class
Class A
Class B
Class C
Class D
Class E
Class F
Class G
Class H
Class I
Class J
Class K
Class L
Class M
Vesting
Conditions
Grant date Expiry date
Exercise
price
Converted during the financial year
Converted during the financial year
10/04/2015
VWAP > 7 cents
9/11/2015
Referral of projects
22/04/2016
na
na
20/06/2016
Continuing service 20/06/2016
6/12/2016
na
6/12/2016
Continuing service
6/12/2016
Continuing service
10/11/2017
na
Continuing service 18/12/2017
Continuing service 18/12/2017
31/12/2018
31/12/2019
31/03/2021
31/03/2021
31/03/2021
30/11/2021
30/11/2021
31/03/2021
30/11/2021
15/11/2021
15/11/2021
$0.05
$0.12
$0.12
$0.12
$0.12
$0.14
$0.12
$0.14
$0.14
$0.14
$0.14
Number of
share
options
2018
-
-
1,000,000
1,000,000
18,566,667
5,000,000
2,500,000
11,000,000
250,000
250,000
7,142,857
1,000,000
1,000,000
Number of
share
options
2017
2,000,000
2,000,000
1,000,000
1,000,000
18,566,667
5,000,000
2,500,000
11,000,000
500,000
500,000
-
-
-
48,709,524
44,066,667
43
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
Details of share options granted during the year:
Grant date
Expiry date
Exercisable from
Exercise price
Number of options issued
Fair value at grant date
Fair value at grant date per option
Vesting conditions
Class K (i)
10/11/2017
30/11/2021
30/11/2018
$0.14
7,142,857
na
Class L
18/12/2017
15/11/2021
18/12/2018
$0.14
1,000,000
27,575
$0.028
Continuing
service
Class M
18/12/2017
15/11/2021
18/12/2019
$0.14
1,000,000
27,575
$0.028
Continuing
service
(i) Issue of share options pursuant to the Project Development Note Facility - Issue 2 (Note 11)
The fair values of the share options granted during the financial year were determined using the following
parameters:
Expected volatility of ordinary shares
Risk free interest rate
Underlying share price at valuation date
Weighted average life of option
Weighted average exercise price
Valuation method
%
%
$/share
years
$/share
Details of share options granted during the prior year:
Grant date
Expiry date
Exercisable from
Exercise price
Number of options issued
Fair value at grant date
Fair value at grant date per option
Vesting conditions
Class K (i)
Class L
50%-65%
1.50%
$0.13
5.0
$0.14
Black-
scholes
Class M
50%-65%
1.50%
$0.13
5.0
$0.14
Black-
scholes
Class H (i)
6/12/2016
30/11/2021
30/11/2017
$0.14
11,000,000
na
Class I
6/12/2016
31/03/2021
6/12/2017
$0.12
500,000
15,258
$0.031
Continuing
service
Class J
6/12/2016
31/03/2021
6/12/2017
$0.14
500,000
13,862
$0.028
Continuing
service
(i) Issue of share options pursuant to the Project Development Note Facility (Note 11)
44
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
The fair values of the share options were determined using the following parameters:
Expected volatility of ordinary shares
Risk free interest rate
Underlying share price at valuation date
Weighted average life of option
Weighted average exercise price
Valuation method
%
%
$/share
years
$/share
18
Contingent liabilities
Bank guarantees
Class H (i)
50%-65%
2.00%
$0.12
Class I
50%-65%
2.00%
$0.12
5.0 4.3
$0.12
Black-
scholes
$0.14
Black-
scholes
Class J
50%-65%
2.00%
$0.12
4.3
$0.14
Black-
scholes
2018
$
2017
$
20,000
120,000
Bank guarantees are issued on behalf of the Group by its bankers. The guarantees provide that the financier will
honour the Group's obligations under specific agreements and are secured against monies held on deposit of
$20,000 (2017: $120,000) (refer Note 7). No material losses are expected.
There are no other contingent liabilities as at 2018 (2017: nil)
19 Tenement lease commitments
Minimum expenditure commitment on tenement leases
The Group held three exploration mineral licences in relation to the Mount Mackenzie Mine and three exploration
mineral licences in relation to the Radio mine as at 30 June 2018.
2018
$
2017
$
Committed but not provided for and payable:
Within one year
One year or later and no later than for five years
264,538
1,428,613
815,281
1,410,619
1,693,150
2,225,900
45
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
20
Key management personnel disclosures
Key management personnel are those having authority and responsibility for planning, directing and controlling
the activities of the Group. Key management personnel consists of the directors of the Company and senior
management of the Group as defined in the Remuneration Report section of the Directors' Report.
(a) Compensation of Key Management Personnel
The aggregate compensation made to key management personnel of the Group is set out below (i). The
remuneration shown includes all amounts incurred for the year. Further details of the compensation of key
management personnel is contained in the Directors' Report in the Remuneration Report section.
(i) Mr Kember was appointed on 8 August 2016 and his remuneration forms part of the fees charged by a
director related entity, Propriertary & Fiduciary Services Pty Limited. Details of the nature of the engagement
and the amount of fees charged are provided below.
Short-term
Post employment
(b) Shareholdings
2018
$
2017
$
267,355
10,547
277,902
322,000
19,000
341,000
The number of ordinary shares in the Company held during the financial year by each director of the Company
and senior management of the Group, including their personally related parties, are set out below.
2018
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser (i)
Mr Warren Kember
2017
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser (i)
Mr Warren Kember
Balance at the
start of the year
250,000
14,067,302
50,000
3,597,022
-
Balance at the
start of the year
250,000
12,742,729
50,000
3,597,022
-
Granted as
compensation
Net other change
-
Balance at the
end of the year
250,000
-
14,067,302
-
50,000
-
3,597,022
-
-
Granted as
compensation
Net other change
-
Balance at the
end of the year
250,000
1,324,573
14,067,302
-
50,000
-
3,597,022
-
-
-
-
-
-
-
-
-
-
-
-
(i) 3,597,022 ordinary shares were issued to Mr Croser pursuant to the acquisition of Radio Gold Pty Limited
(formerly Brightsun Enterprises Pty Limited). Of these ordinary shares, 1,798,511 are subject to a performance
condition as set out in Note 12.
46
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
(b) Share option holdings
The number of share options in the Company held during the financial year by each director of the Company and
senior management of the Group, including their personally related parties, are set out below.
Details of share options granted during the year are provided at Note17
2018
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser
Mr Warren Kember
2017
Mr Gavin Rezos
Mr Richard Poole
Ms Virginia Bruce
Mr James Croser
Mr Warren Kember
Balance
at the
start of
the year
7,500,000
6,250,000
-
-
-
Balance
at the
start of
the year
7,500,000
6,250,000
-
-
-
Granted as
compensation
Granted on
subscription to
loan
Net other change
Balance at the
end of the year
-
-
-
-
-
-
-
-
-
-
4,166,667
11,666,667
-
6,250,000
-
-
-
-
-
-
Granted as
compensation
Granted on
subscription to
loan
Net other change
Balance at the
end of the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,500,000
6,250,000
-
-
-
(c) Other transactions with key management personnel
Richard Poole
Transactions with, or with persons or entities associated with, Mr Richard Poole, a director and the chief
executive officer of the Company, during the financial year were as follows:
The Company has provided a Corporate Advisory and Business Development Mandate (Agreement) to
Proprietary & Fiduciary Services Pty Limited (formerly Arthur Phillip Pty Limited, PFS), an entity ultimately
controlled by interests associated with Mr Poole. The Agreement provides for the payment of fees for the
raising of debt or equity capital and the charging of costs associated with the administration of the Group.
During the financial year PFS was entitled to the following fees and expenses relating to the provision of
management, accounting, office administration, consulting and company secretarial services to the Company,
amounting to $302,168 (2017: $272,520).
An amount of $285,822 of these fees and expenses remained unpaid as at 2018 and is included in Trade and
Other Payables (2017:$49,500).
A related party of Mr Richard Poole advanced $144,000 to the Group in a prior year. The unsecured
borrowing bears annual interest at 8.25% and an expense of $11,880 (2017: $11,880) (refer Note 4(c)) was
incurred during the financial year.
47
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
An amount of $303,067 was advanced in a prior year for working capital. During the financial year this
balance was increased by a net amount of $182,623 and as at the end of the financial year a total of $485,690
remained outstanding. The loan is interest free, unsecured and repayable on demand.
During the prior financial year a related party of Mr Richard Poole advanced $750,000 to the Group pursant to
the Project Development Notes 1 (refer Note 11). The amount bears annual interest at 8.0% and an expense
of $60,000 (2017: $29,152) was incurred during the financial year.
21
Related party disclosures
The consolidated financial statements include the financial statements of the Company and its controlled entities
listed in the following table. The Company is the ultimate Australian parent entity and the ultimate parent of the
Group.
Name
Mount Mackenzie Pty Limited
Radio Gold Pty Limited (formerly Brightsun Enterprises Pty Limited)
Resource & Energy Operations Pty Limited
Deep Energy Pty Limited
Country of
incorporation
Australia
Australia
Australia
Australia
% Equity interest
2018
100.00%
100.00%
100.00%
51.85%
2017
100.00%
100.00%
100.00%
51.85%
22 Parent entity financial information
(a) Summary financial information
The individual financial statements for the Company (parent entity) show the following aggregate amounts:
Balance Sheet
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Net Assets
Shareholders' contributed equity
Reserves
Accumulated Losses
Profit or Loss for the year
2018
$
2017
$
70,129
6,688,305
1,970,028
5,372,844
1,315,462
338,613
5,811,824
211,407
3,181,274
2,630,549
14,712,059
1,627,962
(15,024,559)
1,315,462
14,614,446
1,158,088
(13,141,985)
2,630,549
Total comprehensive income/(loss) for the year
(1,882,574)
(1,068,343)
(b) Contingent Liabilities of the Parent
The Company did not have any contingent liabilities as at 30 June 2018 or in the prior financial year.
48
Resources & Energy Group Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
23
Auditors’ remuneration
Fees charged by the auditor of the Company for auditing or
reviewing the financial report
2018
$
2017
$
$55,213
52,000
24 Dividend
No dividend has been declared or paid during the financial year or the prior period. The directors do not
recommend the payment of a dividend for the year ended 30 June 2018.
25
Events after balance sheet date
On 21 December 2019 the Company acquired 100% of the issued share capital of Menzies Goldfield Pty Limited
(previously Menzies Goldfield Limited) for total consideration of $2,100,000. The consideration consisted of the
issue of 32,400,000 ordinary shares at a deemed issue price of 5 cents each, plus cash consideration of
$480,000.
Trading of the Company's ordinary shares on the Australian Stock Exchange has remained subject to a voluntary
suspension while the Group conducted a financial restructure.
The Company placed 64,550,000 ordinary shares to participants in a capital raising at an issue price of 5 cents
which raised a total of $3,227,500 via a combination of cash and the settlement of contractual payments or other
amounts.
The Company agreed to convert interest bearing debts and other amounts payable of $5,346,411 into
107,218,225 ordinary shares issued at 5 cents each.
There have been no other significant events occurring after the balance date which may affect either the Group's
operations, results of those operations or the Group's state of affairs.
49
Resources & Energy Group Limited
Directors' Declaration
In accordance with a resolution of the directors of Resources & Energy Group Limited, the directors declare that:
(a)
The financial statements and notes of the company are in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the company's financial position as at 30 June 2018 and of its performance for
the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001, including compliance with
International Financail Reporting Statements as issued by the International Accounting Standards Board
as stated in Note 2 of the financial statements.
(b)
The Chief Executive Officer has declared that:
(i)
the financial records of the Company for the financial year have been properly maintained in accordance
with Section 286 of the Corporations Act 2001;
(ii)
the financial statements and notes for the financial year comply with the Accounting Standards; and
(iii) the financial statements and notes for the financial year give a true and fair view.
(c)
There are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
On behalf of the Board,
Mr Gavin Rezos
Chairman
Sydney, 17 May 2019
50
ABN 65 155 188 837
L14 309 Kent St Sydney NSW 2000
T +61 2 9290 8515
L24 570 Bourke Street Melbourne VIC 3000
T +61 3 8658 5928
www.lnpaudit.com
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF RESOURCES & ENERGY GROUP LIMITED
As lead auditor of Resources & Energy Group Limited for the year ended 30 June 2018, I declare that,
to the best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
2.
no contraventions of any applicable code of professional conduct in relation to the audit.
LNP Audit and Assurance Pty Ltd
Robert Nielson
Director
Sydney, 17 May 2019
Liability limited by a scheme approved under the professional standards legislation
51
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF RESOURCES AND ENERGY GROUP LIMITED
ABN 65 155 188 837
L14 309 Kent St Sydney NSW 2000
T +61 2 9290 8515
L24 570 Bourke Street Melbourne VIC 3000
T +61 3 8658 5928
www.lnpaudit.com
Opinion
We have audited the financial report of Resources and Energy Group Limited, and its controlled entities (the
Group), which comprises the consolidated statement of financial position as at 30 June 2018, the
consolidated statement of profit and loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a
summary of significant accounting policies and other explanatory information and the Directors’ Declaration
of the Company.
In our opinion:
the accompanying financial report of Resources and Energy Group Limited is in accordance with the
Corporations Act 2001, including:
a) Giving a true and fair view of the Group’s consolidated financial position as at 30 June 2018 and of
its consolidated financial performance for the year ended on that date; and
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 Consolidated Financial
Statements section of our report. We are independent of the Group in accordance with the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES110
Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report
in Australia; and we have 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 Relating to Going Concern
We draw your attention to Note 2(b) in the financial report which indicates that the Group incurred a loss
before tax of $3,431,387 (2017: $1,415,567) during the year ended 30 June 2018 and, as at that date, the
Group’s current liabilities exceeded its current assets by $2,670,455 (2017:$705,510). As started in Note 2(b)
these events or conditions, along with other matters set out in Note 2(b), indicate that a material uncertainty
exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
No adjustments have been made to the financial report relating to the recoverability or classification of the
recorded asset amounts and classification of liabilities that maybe necessary should the Group not continue
as a going concern.
Liability limited by a scheme approved under the professional standards legislation
52
INDEPENDENT AUDIT REPORT (continued)
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial report of the current year. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on
these matters. For each matter below, our description of how our audit addressed the matter is provided in
that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of
the financial statements. The results of our audit procedures, including the procedures performed to address
the matters below, provide the basis for our audit opinion on the accompanying financial report.
Key Audit Matter
How our audit addressed the matter
Mine Exploration and Development costs
exploration
expenditure
development
The balance sheet of the group includes mine exploration
and
of
$5,372,452. The assessment of the recoverability and
lack of impairment of exploration assets incorporates
significant judgement in respect of factors such as
strategy to recover them, future production prospects
and levels, commodity prices, operating and capital
availability and costs and economic assumptions such as
discount, inflation, and foreign exchange rates.
No impairment indicators were noted for mine assets
during the current year. All exploration expenditure
relating to Deep Energy was fully impaired in the previous
financial years upon relinquishment of the geothermal
license.
Our procedures included:
Testing the design and operation of internal controls
over valuation of these assets including those to
determine any impairments;
Evaluating the Group’s assumptions and estimates
used to determine the recoverable amount of assets,
including those relating to method of recovery,
production, cost, capital expenditure, discount rates
and foreign exchange rates;
Validating the mathematical accuracy of cashflow
models and agreeing relevant data to underlying
information and assumptions; and
Assessing the adequacy of the Group’s disclosures in
respect of asset carrying values and impairment
testing.
Estimation of Minerals and Ore Reserves
Estimation of mineral resource and ore reserves is
determined in accordance with the JORC code by a
competent person. There are numerous uncertainties
in estimating mineral resources and ore
inherent
reserves and assumptions that are valid at the time of
estimation which may change significantly when new
information becomes available. These estimations can
have a material effect on the financial report such as :
a) Classification of assets into exploration and
evaluation, or development and production;
Our procedures were in accordance with ASA 620 Using
the Work of an Auditors Expert, and included;
We assessed the competency and objectivity of
management expert (both internal and external
experts) in the estimation process;
Evaluated the adequacy of the work;
Understood the process and controls surrounding the
estimation process; and
We considered whether recognition of a provision for
mine rehabilitation at balance date was required.
b) Testing fair value of asset for impairment;
c)
Estimating the useful life or units of production
to determine the appropriate amortisation
charge; and
d) Calculation of
rehabilitation
restoration/
provision
53
INDEPENDENT AUDIT REPORT (continued)
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the annual report to shareholders for the year ended 30 June 2018 (Annual Report) which is not
included in the financial report for the year ended 30 June 2018 and our auditor’s report thereon. The annual
report is expected to be made available to us after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above when it becomes available and, in doing so, consider whether the other information is
materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears
to be materially misstated.
When we read the other information, if we conclude that there is a material misstatement of other
information, we are required to report that matter.
Directors’ Responsibilities
The Directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the Directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability 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 cease operations, or have no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is 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 this
financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, 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.
54
INDEPENDENT AUDIT REPORT (continued)
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’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 in
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
whether a material uncertainty exists related to events and conditions that may cast significant
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the
financial report about the material uncertainty or, if such disclosures are inadequate, to modify the
opinion on the financial report. However, future events or conditions may cause an entity to cease
to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, 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 financial report. 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 are also required to 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, related safeguards.
From the matters communicated to the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current year 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.
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 11 of the Directors' Report for the year
ended 30 June 2018.
In our opinion, the Remuneration Report of Resources and Energy Group Limited for the year ended 30
June 2018, complies with section 300A of the Corporations Act 2001.
55
INDEPENDENT AUDIT REPORT (continued)
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.
The engagement partner on the audit resulting in this independent auditor’s report is Robert Nielson.
LNP Audit and Assurance Pty td
Robert Nielson
Director
Sydney 17 May 2019
56
Resources & Energy Group Limited
Security Holders' Information
Additional information included in accordance with the Listing Rules of the Australian Securities Exchange Ltd. The
information provided is current as of 6 May 2019.
1. Ordinary share holders
(a) Top 20 shareholders
The names of the 20 largest holders of ordinary shares as shown in the Company's share register are listed below.
Name
Arthur Phillip Nominees Pty Ltd
Riqo Pty Limited
Fontelina Pty Limited
J P Morgan Nominees Australia Limited
Larca Pty Limited
HSBC Custody Nominees (Australia) Limited
Seefeld Investments Pty Limited
Minerva Geological Services Pty Limited
Mr Roger Kwok and Ms Catherine Kwok
Australian Mineral Partners Pty Limited
Sanjur Pty Ltd
Ms Amanda Croser
Mr Paul Healey
Riverbend Investments Pty Ltd
Netwealth Investments Limited
Mac Drill Pty Ltd
Hestian Pty Ltd
Citicrop Nominees Pty Limited
Gaffwick Pty Limited
Jamstep Holdings Pty Limited
Total top 20 holders
Other holders
Total ordinary shares on issue
(b) Shareholder analysis
Number of
Shares
% of Issued
Shares
20,503,583
10,000,000
9,920,000
8,750,000
7,166,666
6,423,334
5,802,004
4,095,385
4,000,808
4,000,000
3,988,802
3,597,022
3,000,000
2,583,334
2,500,000
2,500,000
2,500,000
2,049,000
1,750,000
1,615,384
15.7%
7.7%
7.6%
6.7%
5.5%
4.9%
4.4%
3.1%
3.1%
3.1%
3.1%
2.8%
2.3%
2.0%
1.9%
1.9%
1.9%
1.6%
1.3%
1.2%
106,745,322
23,798,523
130,543,845
81.8%
18.2%
100.0%
An analysis of the numbers of ordinary share holders by size of holding is shown below
Size of holding range
Number of
holders
Percentage of
holders
Units held
1
1,001
5,001
10,001
100,001 and
-
-
-
-
1,000
5,000
10,000
100,000
Over
9
143
62
109
71
394
2.3% 1,598
36.3% 406,850
15.7% 601,194
27.7% 3,916,445
18.0% 125,617,758
100.0% 130,543,845
There were 131 shareholders that held less than a marketable parcel of ordinary shares.
57
Resources & Energy Group Limited
Security Holders' Information
(c) Substantial shareholders
Holders of more than 5% of the ordinary shares who have lodged substantial shareholder notices are listed below.
Name of shareholder
Ordinary
shares held
Percentage of total
ordinary shares on issue
Richard Poole and family
Terra Capital Pty Limited
Gaffwick Pty Limited
Larca Pty Limited
37,987,302
8,750,000
7,333,334
7,166,666
29.1%
6.7%
5.6%
5.5%
(d) Voting rights
There are no restrictions on voting rights attached to the ordinary shares. On a show of hands every member
present in person shall have one vote and upon a poll, every member present or by proxy shall have one vote
every share held.
(e) Share buyback
There were no share buybacks during the 12 months to 30 June 2018 or subsequently.
2 Share options
The names of holders of more than 20% of each class of unlisted share options are shown below. Share options
do not have voting rights until converted into ordinary shares.
Class
Name of holder
D
E
F
G
H
I
J
K
L
M
Moutier Pty Limited
Fontelina Pty Limited
Gaffwick Pty Limited
Vantage House Limited
Others
Vivien Enterprises Pte Ltd
Vivien Enterprises Pte Ltd
Gaffwick Pty Limited
Employee options
Employee options
Gaffwick Pty Limited
Employee options
Employee options
Total share options on issue
Share
options
issued
Percentage
held of each
class
1,000,000
6,250,000
4,200,000
4,166,667
3,950,000
5,000,000
2,500,000
11,000,000
250,000
250,000
7,142,857
1,000,000
1,000,000
47,709,524
100.0%
33.7%
22.6%
22.4%
21.3%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
58