ANNUAL REPORT
2016
s2resources.com.au
Corporate Directory
Directors
Jeff Dowling
Non-Executive Chairman
Mark Bennett
Managing Director
Anna Neuling
Executive Director
Grey Egerton-Warburton
Non-Executive Director
Company Secretary
Anna Neuling
Registered Office
North Wing
Level 2, 1 Manning Street
Scarborough WA 6019
Telephone:
+61 8 6166 0240
Facsimile:
+61 8 6270 5410
Share Register
Computershare Investor Services Pty Limited
Level 2, 45 St Georges Terrace
Perth WA 6000
Telephone: 1300 787 575
Auditor
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Telephone: 08 6382 4600
Stock Exchange Listing
S2 Resources Ltd’s shares are listed on the Australian
Securities Exchange (ASX).
ASX code: S2R
Website Address
www.s2resources.com.au
S2 Resources // 2016 Annual Report
Contents
Chairman’s Letter ......................................................................................................................................................................................2
Managing Director’s Review ................................................................................................................................................................. 3
Operations Review ...................................................................................................................................................................................5
Directors’ Report ......................................................................................................................................................................................61
Auditor’s Independence Declaration ...............................................................................................................................................76
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the period ended 30 June 2016 .................................................................................................................................................77
Consolidated Statement of Financial Position as at 30 June 2016 .......................................................................................78
Consolidated Statement of Changes in Equity for the period ended 30 June 2016 ......................................................79
Consolidated Statement of Cash Flows for the period ended 30 June 2016 ................................................................. 80
Notes to the Consolidated Financial Statements for the period ended 30 June 2016 ................................................. 81
Directors’ Declaration ..........................................................................................................................................................................116
Independent Auditor’s Report ........................................................................................................................................................... 117
Additional ASX Information ................................................................................................................................................................119
Competent Persons Statement ........................................................................................................................................................126
1
1
S2 Resources // 2016 Annual Report
Chairman’s Letter
Dear Shareholder
Following its demerger from Sirius Resources NL in September 2015 and its subsequent listing on 19th
October 2015, S2 Resources Ltd (“S2”) is well positioned to achieve its objectives, having a portfolio of
exploration ground which the S2 Board considers to be highly prospective, a pipeline of opportunities, a good
funding base, a highly successful team of explorers, and a breadth of corporate experience.
S2’s objective is to provide superior investment returns through the discovery and development of high value
mineral resources, as a result of exploration and the identification of early stage assets with high growth
potential.
S2 is focused on mainstream commodities such as gold and base metals in politically stable jurisdictions such
as Australia and Europe.
S2’s market capitalisation has increased substantially from approximately A$37 million on listing to
approximately A$150 million as at 17 August 2016. During this time, the Company has:
•
in respect to the Company’s 100% owned Polar Bear project, published a Mineral Resource estimate for
the Baloo gold deposit and a Mineral Resource estimate for the Nanook palaeochannel gold deposit, as
well as, subsequent to year’s end, receiving encouraging exploration results from drilling at the Monsoon
gold prospect;
• purchased the remaining 33% of its Scandinavian projects;
• successfully drilled to show proof of concept in the Skellefte project in Sweden;
• commenced the preliminary mining and engineering studies for Baloo; and
• subsequent to year’s end the Company also successfully completed an equity raising of approximately
A$12.2 million which together with cash on hand at 30 June 2016 positions the Company to pursue its
exploration objectives in Australia and Scandinavia without any financial constraints.
As evidenced in the results achieved in the ten months since listing, the Company’s objective is to conserve its
cash resources so as to aggressively pursue its exploration activities. As such, the Company has determined
that the best way to reward and incentivise its board, executive and employees is via the issue of options over
ordinary shares which have an exercise price that requires the share price to increase by nearly 50% before
they crystallise any value to the recipient. This results in the alignment of shareholder and employee interests
in maximising the Company’s share price. I therefore commend the Company’s remuneration report and the
option issue in the Notice of Annual General Meeting to shareholders.
On behalf of shareholders, I would like to thank Mark Bennett and his team for their outstanding efforts in
setting up S2 for success and for the outcomes already achieved in such a short period.
Jeff Dowling
Non-Executive Chairman
2
S2 Resources // 2016 Annual Report Managing Director’s Review
Since listing in October 2015, S2 has been busy assembling its team and advancing its exploration projects in
Australia and Scandinavia.
At its Polar Bear project in Western Australia, exploration drilling has delineated gold mineralisation at several
prospects on Lake Cowan, leading to the identification of in excess of 200,000 ounces of Indicated and
Inferred gold resources at the Baloo and Nanook deposits. Subsequent to year’s end, drilling also identified
high grade gold mineralisation at the Monsoon prospect which further enhances the prospectivity of the area.
Drilling of Monsoon, Baloo, Nanook and other prospects will continue throughout the coming year with the dual
aim of defining further oxide resources, and defining depth extensions to the already known mineralisation.
In Scandinavia, S2 is prioritising the numerous VTEM anomalies identified in its Skellefte project in Sweden
and has undertaken an initial drill test of one of these VTEM conductors to prove the validity of the technique
in this district. This test not only confirmed the validity of the chosen VTEM anomaly but it also identified a zinc-
bearing volcanogenic massive sulphide (VMS) deposit. We consider it highly encouraging to have intersected
zinc mineralisation in the first hole in the first anomaly of over sixty, in the first ever VTEM survey in this highly
endowed polymetallic mineral belt.
Drilling of the top priority VTEM anomalies will resume in earnest as soon as the northern winter freezes the
ground sufficiently for easy rig access – most likely in October.
During the year S2 appointed Grey Egerton Warburton to the Board as a non-executive director. Grey’s depth
of corporate and equity markets expertise will further enhance the Company’s capabilities.
At the end of the 2016 financial year the Company still had A$15.8 million cash. Subsequent to year’s end
and in response to the opportunity afforded by the discovery of high grade gold mineralisation at Monsoon,
the Company raised A$9.2 million in a heavily oversubscribed private placement and A$3 million via a share
purchase plan. As a result the Company is strongly positioned with cash of approximately A$27 million to
vigorously pursue the various exploration opportunities available to it. The cash available and the range of
compelling targets awaiting testing will ensure that the 2016-2017 financial year will be another busy year for
the Company.
I would like to make a special point of noting that S2 has begun life with the key members of the former
Sirius Resources corporate and exploration team, so the company is well placed in terms of having a skilled,
successful, experienced and committed team to do justice to its projects.
Our group has been augmented with the senior members of our Scandinavian team, who are now also
shareholders of S2 as a result of S2 purchasing 100% ownership of its Scandinavian subsidiary late in 2015.
Your company is well funded, has significant strategic ground holdings and prospects, is poised to pursue
an intensive exploration program, and has an exceptional team of highly motivated and aligned people to
execute this.
Mark Bennett
Managing Director and CEO
3
3
S2 Resources // 2016 Annual Report 4
S2 Resources // 2016 Annual Report
Operations Review
Polar Bear Project
The Polar Bear project spans an area of 151 square kilometres, located between Higginsville and Norseman,
and is surrounded by the major gold camps of Norseman (10 million ounces), St Ives (12 million ounces) and
Higginsville (2 million ounces). In addition, S2 Resources has over 358 square kilometres of ground adjacent to
the Polar Bear project.
Most of the area is unexplored or ineffectively explored due to it being largely concealed by the shallow salt
lake sediments of Lake Cowan and the sand dunes of the Polar Bear peninsula.
The Polar Bear project contains a number of shear zones of the type that host major gold mines elsewhere in
the district, and also contains southern extensions of the Kambalda and Widgiemooltha ultramafic stratigraphy,
which hosts a number of significant nickel sulphide mines along strike to the north.
Figure 1. Regional plan showing location of prospective greenstones (green), gold deposits (yellow dots), salt lakes (pale blue)
and S2’s ground holdings (red). S2’s ground is located on a major mineralised gold trend between the St Ives field at Kambalda
and the Norseman field, and covers the unexplored portion beneath Lake Cowan.
5
5
S2 Resources // 2016 Annual Report Operations Review
Baloo Gold Deposit
The Baloo deposit is located approximately 15 kilometres east of the Higginsville gold mine, at the northern
end of the Polar Bear project.
In late 2014, reconnaissance aircore drilling of the Baloo gold target identified gold mineralisation within
variably weathered rock beneath a thin veneer of salt lake sediment. Subsequent drilling defined a significant
zone of mineralisation and a maiden Mineral Resource estimate was completed in early 2016.
Gold mineralisation occurs in at least two structures (the Main Zone and Footwall Zone) as well as within a
number of flat lying supergene layers in the hanging wall (to the east side) of the Main Zone. The Main Zone
has been defined over a strike length of 450 metres and includes a central “sweet spot” within the oxide zone
averaging approximately 40 metres thickness, and extending 80 metres along strike and 80 metres down dip.
The localised thick oxide zone forms a funnel shaped zone of mineralisation starting from a depth of just two
metres beneath the lake surface, an ideal shape for a potential open pit.
Primary gold mineralisation, associated with quartz-arsenopyrite veining, occurs beneath and to the south of the
oxide gold zone at Baloo. Drill intercepts in the primary zone have defined a mineralised shoot which plunges
gently to the south over a strike length of at least 180 metres. Key intercepts, considered approximate true
width, includes 5 metres @ 6.91 g/t, 8 metres @ 5.14 g/t, 7.6 metres @ 8.35 g/t and 9.8 metres @ 4.97 g/t gold.
Latest drilling has shown that the Baloo mineralised system remains open to the south, as a narrow high grade
lode, indicating the system is still “live” beyond the current limits of drilling. Key intercepts from this zone
includes 1 metre @ 43.1 g/t , 1.25 metres @ 9.52 g/t, 0.6 metres @ 14.0 g/t and 2.5 metres @ 10.9 g/t gold.
Figure 2. Cross section of the Baloo gold deposit, showing the wide and near surface disposition of mineralisation.
6
S2 Resources // 2016 Annual Report Operations Review
A maiden Mineral Resource estimate for Baloo was announced in March 2016. The Mineral Resource estimate
for the Baloo gold deposit comprises 2,170,000 tonnes grading 1.8 g/t gold for a contained 123,000 ounces
of gold at a lower cutoff grade of 0.8 g/t gold. Of this, 1,150,000 tonnes (or 53%) containing 69,000 ounces
of gold (or 56%) is classified as higher confidence Indicated category material, with the balance being lower
confidence Inferred category material.
Near surface oxide and transitional mineralisation comprises approximately 61% of the total Mineral
Resource and 81% of the Indicated Resource, and this extends south and north from the central zone.
The remainder of the resource comprises a deeper primary lode, which plunges to the south and remains
open at depth.
Figure 3. 3D view of the Baloo deposit, showing the extent of drilling. The mineralised lode is open down dip and down plunge and
requires follow up drilling.
7
7
S2 Resources // 2016 Annual Report Operations Review
Nanook Gold Deposit
The Nanook prospect is located 10 kilometres south of the Baloo gold deposit, located along the same
structural corridor. Reconnaissance drilling has confirmed the presence of extensive gold mineralisation within
quartz gravels at the base of the Nanook palaeochannel, defined over 2 kilometres. Within this, a discrete
zone of high grade gold mineralisation has been defined with aircore drill intersections including 16 metres @
51.3 g/t, 13 metres @ 23.89 g/t, 8 metres @ 2.89 g/t, 6 metres @ 2.71g/t, and 9 metres @ 2.15 g/t gold.
The gold is concentrated in quartz gravels at the base of a broad ancient stream valley, which runs in a
northeasterly direction. This valley contains a discrete northwesterly trending zone of high grade quartz gravel
which overlies a quartz veined and altered shale-basalt contact in the subjacent bedrock. The coarseness
and angularity of the high grade quartz gravel, together with the close proximity and similar orientation of
mineralisation in the bedrock geology suggest that this quartz gravel hosted gold is largely elluvial, and has
been derived from erosion from a localised bedrock source.
Drilling also intersected in-situ high grade gold mineralisation in weathered Archaean basement rocks outside
the palaeochannel, to the northwest along trend of the high grade gravel zone, with drill intersections including
4 metres @ 50.7 g/t and 2 metres @ 6.42 g/t gold.
A maiden Mineral Resource estimate for the Nanook deposit was announced in May 2016. The Mineral
Resource estimate for the Nanook paleochannel gold deposit comprises 2,200,000 tonnes grading 1.2 g/t gold
for a contained 84,000 ounces of gold at a lower cutoff grade of 0.8 g/t gold, classified as Inferred category.
8
S2 Resources // 2016 Annual Report Operations Review
Figure 4. Plan showing the Nanook palaeochannel resource (light, medium and dark pink) outline superimposed on subjacent bedrock
gold trends, with key drill intercepts in bedrock.
9
9
S2 Resources // 2016 Annual Report Operations Review
Other gold prospects
The Monsoon gold prospect is located along the same prospective trend beneath Lake Cowan midway
between the Baloo gold deposit and the Nanook palaeochannel deposit. Reconnaissance aircore drilling on
an 80 metre by 40 metre grid has defined sporadic gold anomalism over a 1 kilometre strike length, associated
with quartz veining and arsenopyrite alteration within a north-northeast trending shear zone on a mafic –
shale contact. A number of aircore holes drilled along this contact have not adequately tested it due to them
being unable to penetrate zones of quartz veining and silica alteration. Two aircore holes that succeeded in
reaching full depth on this sheared contact intersected 12 metres @ 26.2g/t gold and 32 metres at 2.47g/t gold.
Subsequent to year’s end, two reverse circulation (RC) drillholes intersected broad downhole widths of high
grade gold mineralisation comprising 66 metres @ 11.4g/t gold and 38 metres @ 6.41g/t gold. Monsoon is a
focus for follow up drilling.
The Earlobe prospect is well advanced with drill intersections that include 8m @ 5.56g/t, 4m @ 4.95g/t, 2m @
26.6g/t and 4m @ 6.09g/t gold. The known gold mineralisation is split into an upper and lower gold lode with
individual quartz veins up to 4 metres thick. Both lodes remain open along strike and down dip and as yet the
limits of this mineralisation have not been defined.
At the Bindy prospect, located approximately 2 kilometres south of the Nanook gold prospect, gold anomalism
has been defined over a 1.8 kilometre strike length, with aircore drill intersections including 8m @ 3.96g/t gold
found within the core of the gold anomaly.
Figure 5. Cross section of northernmost of two RC drill sections at Monsoon.
10
S2 Resources // 2016 Annual Report Operations Review
Figure 6. Cross section of southernmost RC drill sections at Monsoon, showing relative position of the original aircore holes
(drilled 20 metres south of, and projected onto, this section).
11
11
S2 Resources // 2016 Annual Report Operations Review
Figure 7. Map showing location of Baloo, Monsoon and Nanook gold prospects, within the central 10 kilometres of strike of the 30
kilometres of gold trend within S2’s ground at Polar Bear.
12
S2 Resources // 2016 Annual Report Operations Review
Taipan nickel prospect
Drilling of prospective ultramafic stratigraphy has defined a zone of high grade nickel-copper-cobalt-platinum-
palladium mineralisation at the Taipan nickel prospect.
Nickel sulphide mineralisation has been defined over a strike extent of 250 metres and down dip over 150
metres within two zones. Both zones are open along strike. RC and diamond intersections include:
• 4.10 metres @ 3.8% nickel, 2.45% copper, 0.08% cobalt, 1.6 g/t palladium and 0.9 g/t platinum from 104.4
metres, including 2.15 metres @ 5.84% nickel, 3.73% copper, 0.12% cobalt, 1.65 g/t palladium and 1.1 g/t
platinum from 106 metres;
• 20 metres @ 0.62% nickel, 0.10% copper, 0.02% cobalt, 0.17 g/t platinum and 0.39 g/t palladium from 113
metres including 2 metres @ 1.46% nickel, 0.43% copper, 0.03% cobalt, 1.69 g/t palladium and 0.67 g/t
platinum and from 131 metres; and
• 53 metres @ 0.53% nickel, 0.05% copper and 0.01% cobalt from 23 metres.
Taipan North nickel prospect
Disseminated nickel sulphide mineralisation has also been intersected at the base of a thick sequence of
prospective ultramafic rocks at the Taipan North prospect, located approximately 2 kilometres north of Taipan.
To date mineralisation has been intersected over a 200 metre strike length and is open along strike and at
depth. RC drill intercepts include 40 metres @ 0.47% nickel, 0.02% copper and 0.01% cobalt from 99 metres,
including 5m @ 1.02% nickel, 0.09% copper and 0.02% cobalt from 109 metres.
Halls Knoll nickel prospect
The Halls Knoll gossan, located on an island approximately 1.2 kilometres southeast of the Taipan nickel prospect,
has yielded extremely high levels of nickel, copper and platinum group metals indicative of the presence of
massive nickel sulphide mineralisation. Initial drilling intersected disseminated nickel sulphides beneath the salt
lake surface, with individual metre values up to 2.5% nickel, 1.5% copper and 1-2g/t palladium and platinum.
Eundynie Project
S2 Resources holds an 80% interest in six exploration licenses, covering 103 square kilometres of ground
adjacent to the Polar Bear project (known as the Eundynie Joint Venture). The remaining 20% is held by
Shumwari Pty Ltd which is a private company run by a small group of project generation geologists. The
tenements cover the northern extension of the Baloo trend. In addition the project covers portions of the
ultramafic stratigraphy considered prospective for nickel sulphide mineralisation.
Norcott Project
The Baloo gold deposit is in an unusual geological setting that is different to most of the known gold
deposits in the Eastern Goldfields, and together with Gold Fields’ discovery of the Invincible gold deposit
near Kambalda, has demonstrated a new type of exploration opportunity in areas not previously considered
prospective for gold.
As a result of this, S2 Resources has expanded its ground holding in the district, having had two licences
granted covering approximately 256 square kilometres of relatively unexplored ground in a corridor to the east
of the Polar Bear Project.
13
13
S2 Resources // 2016 Annual Report Operations Review
Figure 8. Map showing location of Halls Knoll and Taipan nickel prospects and EM anomalies in the central part of the
Polar Bear project area.
14
S2 Resources // 2016 Annual Report Operations Review
Scandinavia
S2 Resources is the largest holder of Exploration Reservations in the Central Lapland Greenstone Belt (LGB) of
Finland (considered to be prospective for nickel, copper, platinum and gold) and the largest holder of Exploration
Permits in the core Skellefte Belt of Sweden (considered to be prospective for copper, zinc and gold).
S2’s Scandinavian projects are managed in-country by a small team of explorers who have had extensive
experience running exploration programs in these countries for companies such as Anglo American plc and
Lundin Mining Corporation.
Figure 9. Map showing S2 tenure in the Skellefte belt of northern Sweden, with active and closed mines.
Skellefte, Sweden (100% S2)
The Skellefte district of northern Sweden is a prolific mining district that contains numerous major polymetallic
zinc-copper-gold-silver volcanogenic massive sulphide (VMS) deposits, including mines such as Kristineberg
and Renstrom which underpin Boliden’s mining and smelting operations. S2 has approximately 518.7 square
kilometres of Exploration Permits and is the largest ground holder in the core Skellefte Belt, which it considers
highly prospective for similar polymetallic VMS mineralisation and also magmatic copper-nickel-PGM, and
orogenic shear zone hosted lode gold mineralisation.
The district’s first ever versatile time domain electromagnetic (VTEM) airborne survey, undertaken by S2 in the
northern summer of 2015, identified 64 electromagnetic conductors. Many of these are compelling anomalies
located in favourable locations in terms of geology and known mineralised trends.
Follow-up reconnaissance exploration of these over the northern winter included the collection of 1412 base of
till samples over 17 priority VTEM targets, ground electromagnetic surveys over 10 VTEM targets, an induced
polarisation (IP) survey at the Brannas prospect and various ground magnetic surveys.
15
15
S2 Resources // 2016 Annual Report Operations Review
Three diamond holes were drilled on one of these VTEM conductors. The primary aim was to verify the integrity
of the VTEM survey and the rationale underpinning the Company’s exploration concept. These holes verified
the VTEM conductor and intersected zinc-bearing VMS mineralisation. Subsequent downhole EM also indicated
that the main part of the conductor has not yet been drilled. This is now known as the Svan Vit prospect.
Svan Vit VMS prospect
Two of three diamond core holes drilled on a single section to test one of the VTEM anomalies intersected
sulphide mineralisation, including zinc sulphide mineralisation.
The first hole (SSVA160001) clipped the top of the ground EM conductor model and intersected a narrow zone
of mixed sulphide mineralisation, comprising:
• 0.55m @ 1.49 g/t Au, 45 g/t Ag from 25.3m
•
1.05m @ 2.87% Zn, 5 g/t Ag from 88.7m
The second hole (SSVA160002), drilled 90 metres down dip of the first, intersected several zones of mixed
sulphide mineralisation, comprising:
• 0.55m @ 2.23% Zn from 164m
• 3.70m @ 1.75% Zn, 5.3g/t Ag from 170.2m
• 5.05m @ 3.15% Zn, 6g/t Ag, 0.2% Cu from 184.6m
The mineralised intervals in these two drill holes broadly coincide with the position of an EM conductor
since redefined in a subsequent downhole EM survey, and they appear to have intersected the northern and
western edges of a more extensive conductor which is as yet untested.
Downhole EM surveying in the third and deepest hole (SSVA160003) identified a second EM conductor, which
is modelled as measuring 200m along strike and 255m down dip. This deeper conductor is situated below
and east of the deepest hole in a position that is broadly co-planar and co-axial with the upper conductor
intersected by the first two holes. Together, these two modelled plates define a southeasterly plunging
conductive zone that may reflect single or multiple plunging elongate lenses as is typical of VMS deposits in
this district.
The outcomes of the downhole EM suggest that the three holes drilled to date have only tested the margins
of a potentially much more extensive zone. Further drilling will be required to adequately test the Svan Vit
prospect given that two of these holes intersected low grade zinc and silver bearing VMS-style mineralisation
on the margin of the upper conductor, and the third missed both conductors.
Drilling will resume as early as possible in the northern winter once the ground re-freezes to enable easy access.
These holes have successfully confirmed that VTEM is a very useful tool for targeting VMS mineralisation in
this district. The VTEM anomaly that is now the Svan Vit prospect is a new VMS discovery and the first of S2’s
many VTEM conductors identified on its Skellefte project to be tested. The remainder of the VTEM anomalies
so far identified will be prioritised with ground EM and base of till sampling (where ground conditions permit)
over the northern summer ready for systematic drill testing later in the year.
16
S2 Resources // 2016 Annual Report Operations Review
Figure 10. Cross section of drilling at the Svan Vit prospect, showing assayed drill intercepts and various EM conductor plate models.
Note that the alteration deepest in SSVA160002 includes chalcopyrite stringers typical of the footwall stockwork zones of VMS systems,
and the alteration zone in SSVA160003 includes barren sulphide intervals that are also typical of the marginal parts of VMS systems.
17
17
S2 Resources // 2016 Annual Report Operations Review
Figure 11. Plan of Svan Vit prospect showing initial VTEM anomaly (colour background), original ground EM plate model projected to
surface (red rectangle), two new down hole EM plate models projected to surface (pale and dark blue), and drillhole pierce points.
18
S2 Resources // 2016 Annual Report Operations Review
Figure 12. 3D view looking north of two new EM conductor plates as modelled from downhole EM surveying at Svan Vit prospect.
The first two holes clipped the upper and western edge of the upper conductor and the third hole missed both.
The lower conductor lies southeast and beneath the deepest hole and is broadly coplanar and coaxial with the
upper conductor, defining a southeast plunging conductive target zone.
19
19
S2 Resources // 2016 Annual Report Operations Review
Figure 13. Location of Svan Vit prospect (formerly VTEM conductor Svansele 403-C1) and other VTEM conductors
in the Skellefte belt, showing the extent of the 2015 VTEM survey, location of known deposits/mines,
and some of the new S2 tenure not yet covered by VTEM.
Mining in Sweden – overview
The government of Sweden promotes investments and development of mining, rock and mineral industries
through a body called the Geological Survey of Sweden (GSS), through providing geoscience information and
low-cost, accessible databases of information that can be used for the purposes of mining and environmental
permitting. Exploration and mining permits are granted by the Mining Inspectorate of Sweden, a decision
making body within the GSS.
Tenements are obtained through a claim system where the first applicant of a mining right receives a priority
over later applications. Applications are tried on a first-come first-serve basis, with no discretion in relation to of
the applicant or the applicant’s ability to carry out exploration or mining activities.
Mining rights are divided into exploration permits and mining permits. Exploration permits give the holder
the right to conduct geological surveying and other research necessary for establishing the location, shape,
orientation and exploitability of a mineral deposit. Before exploration can begin, however, a work plan for
the exploration activities has to be drawn up and approved by the Mining Inspectorate. The initial term of an
exploration permit is three years, and it may be extended for up to a total term of 15 years in aggregate. An
exploration permit does not authorise the exploitation of the deposit. It does, however, provide the holder with
the ability to apply for a mining permit.
20
S2 Resources // 2016 Annual Report Operations Review
Mining permits are required for the establishment of a mine and the undertaking of mining activity. A mining
permit entitles the holder to exploit the minerals found within the mining permit area. Mining permits have an
initial term of 25 years which is automatically extended for ten years at a time if mining activities are still being
conducted at the time of expiration of the permit. For mining permits issued after 1 May 2005, mining royalties
are payable at a rate of 0.2% of the estimated value of the minerals covered by the concession that have been
extracted within the concession area during the year.
All mining operations are subject to the requirements of Swedish environmental legislation and mining is only
possible if company holding the permit is awarded an environmental permit for its operations.
Finland (100% S2)
S2 owns 1,930 square kilometres of Reservations and 3.95 square kilometres of Exploration Licences in the
Lapland Greenstone Belt of northern Finland, which is not extensively or effectively explored, yet contains
a number of significant deposits, including Agnico Eagle’s Kittilä gold mine, Anglo American’s recently
discovered Sakatti nickel-copper–platinum deposit, and Boliden’s Kevitsa copper-nickel mine.
The Finnish project is at an early reconnaissance stage and work during the year focussed on the assessment
of previous exploration work undertaken by the GTK (Finnish Geological Survey).
Figure 14. S2’s ground holdings in the Lapland Greenstone Belt of northern Finland, showing known mines, deposits and prospects.
21
21
S2 Resources // 2016 Annual Report Operations Review
Mining in Finland – overview
Finland is generally considered to be an attractive investment and operating environment for the exploration
and mining industry. There is potential for new discoveries because exploration is currently undertaken on a
small-scale basis or not at all. In contrast to many other countries, Finland also has many high-class geological
databases available on the internet. The infrastructure and availability of skilled subcontractors and labour
is generally considered to be good. In addition, the public sector provides many services for the mining and
exploration industry that would, in other countries, incur large costs.
Reservation, exploration and mining permits are granted by the Mining Authority, being also responsible for
the supervising and enforcing compliance with the applicable legislation. All mining operations are subject to
the requirements of Finnish environmental legislation and mining is only possible if the applicant is granted an
environmental permit.
A reservation is often a preparatory action for obtaining an exploration permit. A reservation right does not
provide additional rights as compared to the right based on the generally applicable public right of access.
Holders of reservations will have priority to get an exploration permit (which will be valid for two years,
following which the reservation must be renewed or will expire. Reservations cannot be transferred, and there
is no minimum expenditure requirements in respect of reservations (as no exploration may be carried out on
them). However, a mandatory government fee for the rendering of the reservation is payable.
Exploration permits are granted on a first-to-file basis by the Mining Authority, taking into account that a
reservation gives priority. The term of the exploration permit is up to four years with three year extensions and a
total term limited to fifteen years. The permit holder generally has the right to conduct geological surveying and
other research necessary for establishing the location, shape, orientation and exploitability of a mineral deposit.
Mining permits are also granted on a first-to-file basis by the Mining Authority. However, exploration permit
holders have priority to the mining tenement. As a general rule, a mining permit is granted until further notice,
but sometimes for a fixed term. If a mining permit holder does not own the surface rights to the mining area,
the mining permit holder has to pay an annual excavation (compensation) fee to the landowners.
Polar Bear Mineral Resource Statement
The Polar Bear Mineral Resource estimate includes the Baloo and Nanook resources. This is completed in
accordance with the guidelines of the JORC Code (2012 edition).
Mineral Resources – Polar Bear Project
Resource
Area
LCOG Tonnes
(000’s)
Indi cated
g/t Au
Oz
Infer red
g/t Au
Oz
Tonnes
(000’s)
Tonnes,
(000’s)
Total
g/t Au
Oz
Baloo
Nanook
Total
0.8
0.8
0.8
1,150
–
1,150
1.9
–
1.9
69,000
1,030
–
2,200
69,000
3,230
1.6
1.2
1.4
54,000
2,170
84,000
2,200
138,000
4,370
1.8
1.2
1.5
123,000
84,000
207,000
Table 1 Mineral Resource estimate at 0.8g/t Au cut-off grade
22
S2 Resources // 2016 Annual Report Operations Review
Comparison with previous year’s estimates.
Both Baloo and Nanook are maiden resource estimates.
Use of independent experts
The resource estimates have been externally derived by an independent consultant who has exposure to best
practice in modelling and estimation techniques. Geology models have been generated by S2R staff and have
been reviewed by the external resource consultant. The consultant has also carried out reviews of the quality
and suitability of the data underlying the Mineral Resource estimate. It is has been classified and reported in
accordance with the JORC Code (2012 Edition).
Summary of information used in the February 2016 Baloo Mineral
Resource estimate.
The Baloo deposit is defined by Aircore, RC and Diamond drilling. The Mineral Resource area has dimensions
of 700 m (north) by 350 m (east) and 250 m (elevation).
The primary gold mineralisation at Baloo is related to hydrothermal activity during multiple deformation events.
Indications are that gold mineralisation is focused on or near to the stratigraphic boundary between the
Killaloe and Buldania Formation.
The Mineral Resource estimate was generated via multiple indicator kriging (MIK) and indirect lognormal
change of support to emulate mining selectivity. Additionally, areas of mineralisation of less certain grade
continuity unsuited to grade estimation via MIK have been estimated by ordinary Kriging. Mineralised domain
interpretation was completed as described above and approximates a 0.3g/t Au lower cutoff.
A range of lower cut-offs was used to report grades and tonnages, as shown in Figure 15.
Figure 15. Tonnage grade curves for the Baloo February 2016 Mineral Resource estimate.
23
23
S2 Resources // 2016 Annual Report Operations Review
Summary of information used in the May 2016 Nanook Mineral Resource
estimate.
The Nanook deposit is defined by Aircore and RC drilling. The Mineral Resource area has overall dimensions of
dimensions of 2700 m (north) by 1100 m (east) with a central core of 900m (north) by 400m (east). The deposit
has approximately 40m of cover.
The mineralisation modelled at Nanook is situated at or close to the Tertiary / Archaean unconformity, primarily
within unconsolidated quartz rich sands and gravel. The mineralisation is interpreted to be either elluvial or
alluvial in nature, although a supergene overprint is present.
It may be derived from a nearby basement source. Recent drilling has defined a number of potential gold
trends to the Northwest associated with sheared mafic and mafic-shale contact as well as to the southwest in
and adjacent to the Nanook granodiorite body.
The Mineral Resource estimate was generated via ordinary kriging (OK). Mineralised domain interpretation
was completed as described above and as such does not incorporate a lower cutoff grade. The interpretation
was coded to the drill hole database and 4m length composites were generated within the mineralisation
boundary.
A range of lower cut-offs was used to report grades and tonnages, as shown in Figure 16.
Figure 16. Tonnage grade curves for the Nanook May 2016 Mineral Resource estimate.
24
S2 Resources // 2016 Annual Report Operations Review
Annexure 1a Baloo Resource
The following Tables are provided to ensure compliance with the JORC code (2012) edition requirements for
the reporting of exploration results.
SECTION 1 SAMPLING TECHNIQUES AND DATA
Criteria
JORC Code explanation
Commentary
Sampling techniques
Nature and quality of
sampling (e.g. cut channels,
random chips, or specific
specialised industry
standard measurement tools
appropriate to the minerals
under investigation, such as
down hole gamma sondes,
or handheld XRF instruments,
etc). These examples should
not be taken as limiting the
broad meaning of sampling.
Include reference to measures
taken to ensure sample
representivity and the
appropriate calibration of any
measurement tools or systems
used
In zones of weakly weathered or fresh rock the
HQ or NQ2 core is cut using a diamond core
saw with half core sampled for assay. The ore is
cut along the orientation line, with the same side
sampled to ensure sample is representative.
In zones of highly weathered core where the
sample is either highly broken or highly friable
and a representative split cannot be achieved
then whole core sample of either the PQ3 or
HQ3 core is taken.
For RC sampling, a 1 metre split is taken directly
from a cone splitter mounted beneath the rigs
cyclone. The cyclone and splitter are cleaned
regularly to minimise any contamination. A
second reference split is also taken from each
metre and stored on site.
Aircore holes are sampled using an aluminium
scoop to produce a four metre composite
sample similar to the RC sampling methodology.
Sampling and QAQC procedures is carried out
using S2 protocols as per industry best practice.
25
25
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Aspects of the determination
of mineralisation that are
Material to the Public
Report. In cases where
‘industry standard’ work has
been done this would be
relatively simple (e.g. ‘reverse
circulation drilling was used
to obtain 1 m samples from
which 3 kg was pulverised to
produce a 30 g charge for fire
assay’). In other cases more
explanation may be required,
such as where there is
coarse gold that has inherent
sampling problems. Unusual
commodities or mineralisation
types (e.g. submarine nodules)
may warrant disclosure of
detailed information
Drilling techniques
Drill type (e.g. core, reverse
circulation, open-hole
hammer, rotary air blast,
auger, Bangka, sonic, etc) and
details (e.g. core diameter,
triple or standard tube,
depth of diamond tails, face-
sampling bit or other type,
whether core is oriented and if
so, by what method, etc).
26
Reconnaissance aircore samples are
composited at 4 m to produce a bulk 3 kg
sample. Samples were dried, pulverised (total
prep), and split to produce a 25 g sub sample
which is analysed using aqua-regia digestion
with ICP-MS finish with a 1 ppb detection limit.
A 1m end of hole sample was collected for all
aircore holes. Sample preparation was the
same as above and were analysed using a four
acid digest with an ICP/OES and fire assay. The
following elements are included in the assay
suite: Ag, Al, As, Au, Ba, Be, Bi, Ca, Cd, Ce, Co,
Cr, Cu, Fe, K, La, Mg, Mn, Mo, Na, Ni, P, Pb, Sb,
Sc, Sr, Te, Ti, Tl, V, W, Zn.
RC drilling is sampled a 1m “cone” split sample,
to produce a bulk 3 kg sample. Sample
preparation was the same as for the aircore
drilling. A nominal 50gram sub-sample was
collected and analysed by Samples were to
produce a sub sample for analysed by fire assay
with an AA finish.
Diamond core (HQ and NQ2) is half core
sampled to geological boundaries of no more
than 1m and no less than 30cm. Samples were
crushed, dried and pulverised (total prep).
Analysis is same as for RC.
Oxide PQ3 core is whole core sampled and then
dried, crushed to – 2mm and then rotary split
to a 3kg sample for pulverisation and 50g fire
assay.
Diamond drilling is completed using either NQ2,
HQ, or PQ3 (through the oxide zone) sized
coring equipment. All core is orientated (where
possible) using a Reflex ACT II RD orientation
tool.
RC drilling is carried out using a face sampling
hammer with a nominal diameter of 140mm.
Aircore drilling is carried out using a 3 ½ inch
blade bit. Where necessary a 3 ½ inch face
sampling hammer is employed to penetrate
through hard zones.
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Drill sample recovery
Method of recording and
assessing core and chip
sample recoveries and results
assessed
Diamond core recoveries is logged and
captured in the database. The core length
recovered is measured for each run and
recorded which is used to calculate the core
recovery as a percentage core recovered.
RC and aircore sample recoveries are visually
estimated qualitatively on a metre basis and are
recorded in the database.
Measures taken to maximise
sample recovery and ensure
representative nature of the
samples
Measures taken to maximise the core recoveries
includes using appropriate core diameter and,
where necessary, restricting drill penetration
and/or reducing core runs.
Triple tube diamond core through the weathered
zone is too broken to allow core cutting and
therefore the core is sampled whole to ensure
no bias is introduced.
Various drilling additives (including muds and
foams) have been used to condition RC and
aircore drill holes to maximise recoveries and
sample quality. Drill cyclone and sample buckets
are cleaned between rod-changes and after
each hole to minimise down hole and/or cross-
hole contamination.
Whether a relationship exists
between sample recovery and
grade and whether sample
bias may have occurred due
to preferential loss/gain of
fine/coarse material.
Core drilling has resulted in narrow zones of
poor to no core recoveries through the oxide
zone in areas of very soft clays and fault gouge
within the weathered zones. These are recorded
as poor or zero recovery and not assigned
grade.
Aircore drilling samples are occasionally wet
which may have resulted in sample bias due to
preferential loss/gain of fine/coarse material.
No sample recovery issues have impacted on
potential sample bias within coring of fresh rock
or within RC drilling.
27
27
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Logging
Whether core and
chip samples have
been geologically and
geotechnically logged to
a level of detail to support
appropriate Mineral Resource
estimation, mining studies and
metallurgical studies.
Whether logging is qualitative
or quantitative in nature. Core
(or costean, channel, etc)
photography.
The total length and
percentage of the relevant
intersections logged
Geological logging is completed for all holes to
a level of detail that would, where sufficient drill
density is completed, support an appropriate
Mineral Resource and mining study.
Lithology, alteration, veining, structural and
geotechnical (diamond core) characteristics
is recorded directly to a digital format and
imported into S2 Resources central database.
Logging is both qualitative and quantitative in
nature depending on the field being captured.
All core is photographed.
All drillholes were logged in full.
Sub-sampling
techniques and
sample preparation
If core, whether cut or sawn
and whether quarter, half or
all core taken.
If non-core, whether riffled,
tube sampled, rotary split, etc
and whether sampled wet or
dry.
For all sample types,
the nature, quality and
appropriateness of the
sample preparation
technique.
In zones of highly weathered core where the
sample is either highly broken or highly friable
the PQ3 or HQ3 core is sampled whole core.
Oxide whole core is submitted to the lab in
samples not exceeding 6kg and then coarse
crushed to <2mm. Samples are then rotary split
to provide a 3kg sub sample for pulverisation.
In zones of weakly weathered or fresh rock the
HQ or NQ2 core is cut using a diamond core
saw with half core sampled for assay.
RC and aircore samples consist of a 4 metre
composite RC spoils are sampled by scoop.
All RC holes are sampled 1 metre samples are
collected via an on-board cone splitter. Samples
were collected both wet and dry.
The sample preparation follows industry best
practice in sample preparation All samples
are pulverised utilising Essa LM1, LM2 or LM5
grinding mills determined by the size of the
sample. Samples are dried, crushed as required
and pulverized to produce a homogenous
representative sub-sample for analysis. A grind
quality target of 85% passing 75μm has been
established and is relative to sample size, type
and hardness.
28
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Quality control procedures
adopted for all sub-
sampling stages to maximise
representivity of samples.
Quality control procedures include submission
of Certified Reference Materials (CRM’s), blanks
and duplicate samples with each batch of
samples. Selected samples are also re-analysed
to confirm anomalous results.
Measures taken to ensure
that the sampling is
representative of the in situ
material collected, including
for instance results for
field duplicate/second-half
sampling.
Whether sample sizes are
appropriate to the grain size
of the material being sampled.
The nature, quality and
appropriateness of the
assaying and laboratory
procedures used and whether
the technique is considered
partial or total.
Quality of assay data
and laboratory tests
Grind size checks are routinely completed to
ensure samples meet the industry standard of
85% passing through a 75μm mesh.
Field duplicates are taken at regular intervals.
Samples are selected to weigh less than 3kg
to ensure total preparation at the pulverisation
stage.
Sample sizes are considered appropriate for
nickel sulphide and gold mineralisation.
RC and diamond core samples are analysed for
Au only using a 40g or 50g Lead Collection fire
Assay with either an ICP/MS or AAS finish.
4m composite samples from AC drilling are
analysed for Au only using a 25g aqua-regia
digestion with an ICP/MS finish. The method
gives a near total digestion of the regolith
intercepted in aircore drilling and is suitable for
the reconnaissance style sampling undertaken.
Infill 1m samples and samples greater than 1 g/t
are re-assayed using 50 g fire-assay with AAS
finish which gives total digestion and is more
appropriate for samples with high levels of gold.
All aircore holes (both gold and nickel
exploration) have a 1m end-of-hole sample is
collected for all AC holes. An extensive multi-
element suite (including Ag, Al, As, Ba, Be,
Bi, Ca, Cd, Ce, Co, Cr, Cu, Fe, K, La, Mg, Mn,
Mo, Na, Ni, P, Pb, Sb, Sc, Sr, Te, Ti, Tl, V, W, Zn)
is analysed using a four acid digest with an
ICP/OES and ICP/MS finish. Au, Pt And Pd is
analysed for using 25g or 50g Lead Collection
fire assay with an ICP/MS finish.
29
29
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
No geophysical tools were used to determine
any element concentrations used in this
resource estimate.
For geophysical tools,
spectrometers, handheld
XRF instruments, etc,
the parameters used in
determining the analysis
including instrument make
and model, reading times,
calibrations factors applied
and their derivation, etc.
Nature of quality control
procedures adopted (e.g.
standards, blanks, duplicates,
external laboratory checks)
and whether acceptable
levels of accuracy (i.e. lack of
bias) and precision have been
established.
Sample preparation checks for fineness were
carried out by the laboratory as part of their
internal procedures to ensure the grind size
of 85% passing 75 micron was being attained.
Laboratory QAQC involves the use of internal
lab standards using certified reference material,
blanks, splits and replicates as part of the in
house procedures.
Verification of
sampling and
assaying
The verification of significant
intersections by either
independent or alternative
company personnel.
The use of twinned holes.
The Exploration Manager of S2 has visually
verified significant intersections.
No twin holes have been drilled on the project
to date.
Documentation of primary
data, data entry procedures,
data verification, data storage
(physical and electronic)
protocols.
Primary data was collected using a set of
standard Excel templates using lookup codes.
The information was sent to an external
database consultant for validation and
compilation into a Perth based SQL database.
Discuss any adjustment to
assay data.
No adjustments or calibrations were made to
any assay data reported.
Accuracy and quality of
surveys used to locate
drillholes (collar and down-
hole surveys), trenches, mine
workings and other locations
used in Mineral Resource
estimation.
At Baloo all aircore and diamond drilling is
picked up by an external surveyor using an RTK
GPS system with an expected accuracy is +/–
0.05m for easting, northing and elevation.
RC drill sites were laid out by an external
surveyor using an RTK GPS system or tape and
compass off surveyed collars. All holes will be
picked up by the external surveyor prior to any
resource calculations.
Specification of the grid
system used.
The grid system used at Polar Bear is GDA94
(MGA), zone 51.
Location of data
points
30
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Quality and adequacy of
topographic control.
Data spacing and
distribution
Data spacing for reporting of
Exploration Results.
Whether the data spacing
and distribution is sufficient
to establish the degree
of geological and grade
continuity appropriate for
the Mineral Resource and
Ore Reserve estimation
procedure(s) and
classifications applied.
A topographic surface has been created from
aerial geophysical data, This has been calibrated
with DGPS survey data. All reconnaissance drill
holes have been corrected to this surface where
DGPS pickup is not available.
All resource drilling will be picked up by DGPS to
within a +/-50mm accuracy.
Data spacing is currently defined by the
geological criteria regarded appropriate
to determine the extents of mineralisation.
Reconnaissance AC drilling is on a nominal
spacing of between 240m x 40m and 400m x
40m drill pattern, with infill of resource areas
closing down to a nominal 40m x 20m drill
pattern for AC, RC and diamond.
Drilling is currently preliminary in nature had the
mineralised domains have not yet demonstrated
sufficient continuity in both geological and grade
continuity to support the definition of Mineral
Resource and Reserves, and the classifications
applied under the 2012 JORC Code.
Whether sample compositing
has been applied.
No compositing has been applied to the
exploration results.
Orientation of data in
relation to geological
structure
Whether the orientation of
sampling achieves unbiased
sampling of possible
structures and the extent
to which this is known,
considering the deposit type.
The drilling is not necessarily drilled
perpendicular to the orientation of the intersected
mineralisation. All reported intervals are
downhole intervals and not calculated true width.
This will be established with further drilling.
At Baloo the main mineralised structure appears
to be dipping moderately to the east and hence
270 azimuth diamond drilling give approximately
true width intersections. Supergene dispersion
appears relatively flat lying and hence the vertical
AC holes also approximate to true thickness.
31
31
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
If the relationship between
the drilling orientation and the
orientation of key mineralised
structures is considered to
have introduced a sampling
bias, this should be assessed
and reported if material.
The measures taken to ensure
sample security.
Sample security
Audits or reviews
The results of any audits
or reviews of sampling
techniques and data.
No orientation based sampling bias has been
identified in the data at this point.
Chain of custody is managed by S2 Resources.
Samples are stored on site and either delivered
by S2 personnel to Perth and then to the assay
laboratory, or collected from site by Centurion
Transport and delivered direct to the assay
laboratory. Whilst in storage, they are kept on a
locked yard. Tracking sheets have been set up
to track the progress of batches of samples.
No audits or reviews have been conducted at
this stage.
SECTION 2 REPORTING OF EXPLORATION RESULTS
Criteria
JORC Code explanation
Commentary
Mineral tenement and
land tenure status
Type, reference name/
number, location and
ownership including
agreements or material issues
with third parties such as
joint ventures, partnerships,
overriding royalties, native
title interests, historical sites,
wilderness or national park
and environmental settings.
The Baloo prospect is located within Exploration
License E15/1298, which is located within
the Polar Bear Project, 100% owned by Polar
Metals Pty Ltd, a wholly owned subsidiary of S2
Resources Ltd.
Polar Metals Pty Ltd has lodged a mining
lease application (MLA 15/1814) over the Baloo
prospect, and is currently in the approval
process.
The Baloo prospect is situated within the Ngadju
Native Title Claim (WC99/002).
The tenement is in good standing and no
known impediments exist on tenement actively
explored.
The security of the tenure held
at the time of reporting along
with any known impediments
to obtaining a licence to
operate in the area.
32
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Gold Exploration
Plutonic Operations Limited and Homestake
Gold of Australia Limited conducted
reconnaissance AC drilling (PBAC prefix) over
Lake Cowan on predominantly 100 m drillhole
spacing and 800 m line spacing from 1997-1999.
Location of these drillholes cannot be verified as
the collars are now mostly obscured.
AC sampling was done by 4 m composites with
1 m re-splits on samples greater than 0.1 g/t.
Samples were assayed by aqua-regia digest
with AAS finish although this cannot be verified
as the original laboratory.
The Polar Bear project is situated within the
Archaean Norseman-Wiluna Belt which locally
includes basalts, komatiites, metasediments, and
felsic volcanoclastics.
The primary gold mineralisation is related
to hydrothermal activity during multiple
deformation events. Indications are that gold
mineralisation is focused on or near to the
stratigraphic boundary between the Killaloe and
Buldania Formation.
Refer to ASX announcements for information on
drill holes.
Exploration done by
other parties
Acknowledgment and
appraisal of exploration by
other parties.
Geology
Deposit type, geological
setting and style of
mineralisation.
Drill hole Information
A summary of all information
material to the understanding
of the exploration results
including a tabulation of the
following information for all
Material drill holes:
• easting and northing of the
drill hole collar
• elevation or RL (Reduced
Level – elevation above
sea level in metres) of the
drill hole collar
• dip and azimuth of the
hole
• down hole length and
interception depth
• hole length.
33
33
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Data aggregation
methods
In reporting Exploration
Results, weighting averaging
techniques, maximum and/or
minimum grade truncations
(e.g. cutting of high grades)
and cut-off grades are usually
Material and should be stated.
Where aggregate intercepts
incorporate short lengths of
high grade results and longer
lengths of low grade results,
the procedure used for such
aggregation should be stated
and some typical examples of
such aggregations should be
shown in detail.
The assumptions used for any
reporting of metal equivalent
values should be clearly
stated.
All reported assays have been length weighted.
A top-cut of 30 g/t Au has been applied to
individual assays when reported intervals are
greater than one metre.
A nominal 0.5 g/t Au lower cut-off is used for RC
and diamond intersections (unless otherwise
stated). A nominal 0.1 g/t Au lower cut-off is used
to report AC intersections.
High grade gold intervals internal to broader
zones of mineralisation are reported as included
intervals.
No metal equivalent values are used for
reporting exploration results.
Relationship between
mineralisation widths
and intercept lengths
These relationships are
particularly important in
the reporting of Exploration
Results.
The trend of mineralisation at Baloo appears
broadly north south and dipping moderately to
the east with the intervals reported near true
width.
If the geometry of the
mineralisation with respect to
the drill hole angle is known,
its nature should be reported.
All other prospects, the geometry of the primary
mineralisation is not known at present due to
the lack of deeper drilling and the early stage of
exploration.
Refer to ASX announcements for information on
drill holes.
If it is not known and only
the down hole lengths are
reported, there should be a
clear statement to this effect
(e.g. ‘down hole length, true
width not known’).
34
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Diagram
Balanced reporting
Other substantive
exploration data
Appropriate maps and
sections (with scales) and
tabulations of intercepts
should be included for any
significant discovery being
reported These should
include, but not be limited to
a plan view of drill hole collar
locations and appropriate
sectional views.
Where comprehensive
reporting of all Exploration
Results is not practicable,
representative reporting of
both low and high grades and/
or widths should be practiced
to avoid misleading reporting
of Exploration Results.
Other exploration data, if
meaningful and material,
should be reported including
(but not limited to): geological
observations; geophysical
survey results; geochemical
survey results; bulk samples –
size and method of treatment;
metallurgical test results;
bulk density, groundwater,
geotechnical and rock
characteristics; potential
deleterious or contaminating
substances.
Refer to Figures in body of text.
The accompanying document is conserved to
represent a balanced report with grades and/or
widths reported in a consistent manner.
Two vertical PQ3 holes have been drilled in the
core of the weathered mineralisation to allow
bulk density determination and provide samples
for metallurgical testwork.
Three geotechnical holes have been drilled in
the western portion of the deposit to investigate
geotechnical ground conditions in the footwall of
a potential open pit.
Groundwater monitoring has been initiated with
insertion of PVC into selected holes to allow a
first pass pump test.
35
35
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
At Baloo, further drilling down plunge and
along strike within the mineralised zone will
follow. More reconnaissance drilling will also be
performed along strike to the south at Monsoon.
Further work
The nature and scale of
planned further work (e.g.
tests for lateral extensions or
depth extensions or large-
scale step-out drilling).
Diagrams clearly highlighting
the areas of possible
extensions, including the main
geological interpretations
and future drilling areas,
provided this information is
not commercially sensitive
SECTION 3 ESTIMATION AND REPORTING OF MINERAL RESOURCES
Criteria
JORC Code explanation
Commentary
Database integrity
Measures taken to ensure that
data has not been corrupted by, for
example, transcription or keying errors,
between its initial collection and its
use for Mineral Resource estimation
purposes.
Data validation procedures used.
Site visits
Comment on any site visits undertaken
by the Competent Person and the
outcome of those visits.
Data templates with lookup tables and
fixed formatting are used for logging,
spatial and sampling data. Data
transfer is electronic via e-mail. Sample
numbers are unique and pre-numbered
bags are used. These methods all
minimise the potential of these types of
errors.
Data validation checks are run by the
database management consultant.
Multiple site visits to the Baloo deposit
by Andy Thompson during diamond
and RC drilling to verify sampling
integrity and recovery. Site visit by
Andy Thompson and Brian Wolfe acting
as Competent Persons, inspected
the deposit area, the core logging
and sampling facility. During this time,
notes and photos were taken along
with discussions were held with site
personnel regarding the available RC
samples and diamond core. No issues
were encountered.
If no site visits have been undertaken
indicate why this is the case.
Not applicable
36
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Geological
interpretation
Confidence in (or conversely, the
uncertainty of) the geological
interpretation of the mineral deposit.
Nature of the data used and of any
assumptions made.
The effect, if any, of alternative
interpretations on Mineral Resource
estimation.
The use of geology in guiding
and controlling Mineral Resource
estimation.
The factors affecting continuity both of
grade and geology.
The extent and variability of the
Mineral Resource expressed as
length (along strike or otherwise), plan
width, and depth below surface to the
upper and lower limits of the Mineral
Resource.
Dimensions
The confidence in the geological
interpretation is considered good. The
deposit is a mesothermal lode gold
style typical of the Kalgoorlie Archaean
terrane.
Petrography has been used to
assist identification of the rock
type subdivisions applied in the
interpretation process.
The deposit is well constrained and
predictable with clear boundaries
which define the mineralised domains.
Infill drilling has supported and
refined the model and the current
interpretation is thus considered to be
robust.
Geological controls and relationships
were used to define sub-domains.
Key features are quartz veining in a
deformed lithological contact zone.
Gold grades are strongly related to
deformed quartz veining within a
shearzone formed on the contact of
basalt, black shale and volcanoclastics.
The Mineral Resource area has
dimensions of 700 m (north) by 350 m
(east) and 250 m (elevation).
37
37
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Estimation and
modelling techniques
The nature and appropriateness of the
estimation technique(s) applied and
key assumptions, including treatment
of extreme grade values, domaining,
interpolation parameters and maximum
distance of extrapolation from
data points. If a computer assisted
estimation method was chosen include
a description of computer software and
parameters used.
The Mineral Resource estimate
was generated via MIK and indirect
lognormal change of support to
emulate mining selectivity. Additionally,
areas of mineralisation of less
certain grade continuity unsuited
to grade estimation via MIK have
been estimated by ordinary Kriging.
Mineralised domain interpretation
was completed as described above
and approximates a 0.3g/t Au lower
cutoff. The interpretation was coded to
the drill hole database and 3m length
composites were generated within
the mineralisation boundary. A series
of indicator transforms were applied
to the composites as determined by
statistical evaluation and indicator
semivariograms were modelled for
each cut-off. The semivariograms
were input in preparation for kriging
of the indicator transformed data.
Hard boundaries were applied to
the kriging. A search neighbourhood
was applied parallel to the strike and
dip with radii of 50m, 50m and 15m
in the strike, down dip and across
strike directions respectively. Sample
counts for the estimates were set
at a minimum of 24 and a maximum
of 36. In the case of the domains
estimated by OK, an expanded search
ellipsoid of 100m x 100m x 30m and
a sample count of 6 were applied.
Any blocks not estimated in the first
estimation pass were estimated in a
second pass with expanded search
neighbourhoods and relaxed sample
limits to allow the domains to be fully
estimated. Extrapolation of the drillhole
composite data is generally limited to
approximately 50m down dip. Change
of support via the indirect lognormal
method has been applied to the
indicator kriging results to emulate
selectivity at the mining stage.
38
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
The availability of check estimates,
previous estimates and/or mine
production records and whether the
Mineral Resource estimate takes
appropriate account of such data.
The assumptions made regarding
recovery of by-products.
Estimation of deleterious elements or
other non-grade variables of economic
significance (e.g. sulphur for acid mine
drainage characterisation).
In the case of block model
interpolation, the block size in relation
to the average sample spacing and the
search employed.
Any assumptions behind modelling of
selective mining units.
This is a maiden Mineral Resource for
the Baloo deposit and no previous
mining activity has taken place in
this area.
No by-products are assumed.
No other elements have been assayed.
The parent block size is 20mN x20mE x
10mRL, with sub-celling to 5mE x 5mN
x 2.5mRL for domain volume resolution.
The parent block size was chosen
based on estimation methodology and
relates to a drill section spacing of 40m
to 20m and an on-section drill spacing
of approximately 20m. The search
ellipse was oriented with axes rotated
parallel to the mineralised bodies as
previously described.
Search ellipse dimensions were chosen
to encompass several drillholes up and
down dip and several lines of drilling
along strike.
Selective mining unit assumptions
were based on dimension and spacing
of drill sampling, geometry of the
mineralisation, likely method of mining
(open pit) and equipment used, likely
grade control and drill and blast
dimensions. In consideration of the
parent cell dimension described above,
an SMU of 5mE x 5mN x 2.5mRL has
therefore been applied.
Any assumptions about correlation
between variables.
Not applicable
39
39
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Description of how the geological
interpretation was used to control the
resource estimates.
Discussion of basis for using or not
using grade cutting or capping.
The process of validation, the checking
process used, the comparison of
model data to drillhole data, and use of
reconciliation data if available.
Whether the tonnages are estimated
on a dry basis or with natural moisture,
and the method of determination of the
moisture content.
The basis of the adopted cut-off
grade(s) or quality parameters applied
Moisture
Cut-off parameters
The geological model domained
the oxide, transitional and primary
mineralisation to geological and
structural zones. These domains were
used as hard boundaries to select
sample populations for variography
and estimation.
Top cutting of grades is not relevant
in the context of MIK methodology
and has only been considered in the
case of the grade variogram used
to calculate the change of support
variance reduction coefficient. In the
case of the OK estimates, grade has
been capped to either 15g/t Au or
20g/t Au depending on the domain.
No mining has taken place; therefore
no reconciliation data is available.
The tonnages are estimated on a dry
basis.
A 0.8g/t Au cut-off grade was used
to report the Mineral Resources. This
cut-off grade is estimated to be the
minimum grade required for economic
extraction.
A range of additional cut-off grades
have been reported up to 1.5g/t Au.
40
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Mining of the Baloo deposit will
by open cut mining methods. The
geometry of the deposit will make it
amenable to mining methods currently
employed in many gold open pits in the
Kalgoorlie district. It is assumed that
any pit will be mined on 2.5m benches
with grade control drilling density
sufficient to allow selectivity assumed
in the estimation.
Preliminary metallurgical testwork in
the primary mineralisation indicates
that the mineralisation is amenable to
standard cyanide leach extraction.
Mining factors or
assumptions
Metallurgical factors
or assumptions
Assumptions made regarding
possible mining methods, minimum
mining dimensions and internal (or, if
applicable, external) mining dilution.
It is always necessary as part of the
process of determining reasonable
prospects for eventual economic
extraction to consider potential
mining methods, but the assumptions
made regarding mining methods and
parameters when estimating Mineral
Resources may not always be rigorous.
Where this is the case, this should be
reported with an explanation of the
basis of the mining assumptions made.
The basis for assumptions or predictions
regarding metallurgical amenability. It is
always necessary as part of the process
of determining reasonable prospects
for eventual economic extraction
to consider potential metallurgical
methods, but the assumptions regarding
metallurgical treatment processes
and parameters made when reporting
Mineral Resources may not always be
rigorous. Where this is the case, this
should be reported with an explanation
of the basis of the metallurgical
assumptions made.
41
41
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Environmental factors
or assumptions
Bulk density
Assumptions made regarding possible
waste and process residue disposal
options. It is always necessary as
part of the process of determining
reasonable prospects for eventual
economic extraction to consider the
potential environmental impacts of
the mining and processing operation.
While at this stage the determination
of potential environmental impacts,
particularly for a greenfields project,
may not always be well advanced, the
status of early consideration of these
potential environmental impacts should
be reported. Where these aspects
have not been considered this should
be reported with an explanation of the
environmental assumptions made
Whether assumed or determined.
If assumed, the basis for the
assumptions. If determined, the method
used, whether wet or dry, the frequency
of the measurements, the nature, size
and representativeness of the samples.
The bulk density for bulk material must
have been measured by methods
that adequately account for void
spaces (vugs, porosity, etc), moisture
and differences between rock and
alteration zones within the deposit,
No assumptions have been made and
these will form part of the scoping
study commencing in April 2016.
Dry Bulk Densities were determined by
the Archimedes principle (immersion)
where possible and also by the direct
measurement method (caliper) in the
oxide clay. Samples were measured
directly from the rig (wet bulk density)
and then the samples were dried at
Minanalytical to determine moisture
content so that Dry Bulk Density (DBD)
could be calculated.
In total 86 oxide samples, 77 transition
zone samples and 282 primary
zone samples were collected from
mineralised zones.
Bulk density has been estimated
from density measurements carried
out on PQ3 core samples using the
Archimedes method (immersion) of dry
weight versus weight in water using
clingwrap to waterproof the core.
The caliper method was also used in
saprolitic oxide clay and showed good
correlation with the immersion method.
42
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Discuss assumptions for bulk density
estimates used in the evaluation
process of the different materials.
Classification
The basis for the classification of
the Mineral Resources into varying
confidence categories
Whether appropriate account has
been taken of all relevant factors (i.e.
relative confidence in tonnage/grade
estimations, reliability of input data,
confidence in continuity of geology
and metal values, quality, quantity and
distribution of the data).
The bulk density values were assigned
as an average value to the three
weathering domains, oxide, transition
and fresh.
The Mineral Resource classification
is based on good confidence in the
geological and grade continuity, along
with 20 m by 20 m or 20 x 40m spaced
drillhole density.
The input data is comprehensive in
its coverage of the mineralisation and
does not favour or misrepresent in-situ
mineralisation.
The validation of the block model
shows good correlation of the input
data to the estimated grades.
Whether the result appropriately
reflects the Competent Person’s view of
the deposit.
The Mineral Resource estimate
appropriately reflects the view of the
Competent Persons.
Audits or reviews
The results of any audits or reviews of
Mineral Resource estimates.
This is the maiden Baloo deposit
Mineral Resource estimate.
The relative accuracy of the Mineral
Resource estimate is reflected in the
reporting of the Mineral Resource as
per the guidelines of the 2012 JORC
Code.
Where appropriate a statement of
the relative accuracy and confidence
level in the Mineral Resource estimate
using an approach or procedure
deemed appropriate by the Competent
Person. For example, the application of
statistical or geostatistical procedures
to quantify the relative accuracy of
the resource within stated confidence
limits, or, if such an approach is not
deemed appropriate, a qualitative
discussion of the factors that could
affect the relative accuracy and
confidence of the estimate
43
43
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
The statement should specify
whether it relates to global or local
estimates, and, if local, state the
relevant tonnages, which should be
relevant to technical and economic
evaluation. Documentation should
include assumptions made and the
procedures used
These statements of relative accuracy
and confidence of the estimate should
be compared with production data,
where available
The statement relates to global
estimates of tonnes and grade.
No production data is available.
Annexure 1b Nanook Resource
The following Tables are provided to ensure compliance with the JORC code (2012) edition requirements for
the reporting of exploration results.
SECTION 1 SAMPLING TECHNIQUES AND DATA
Criteria
JORC Code explanation
Commentary
Sampling techniques
Nature and quality of sampling
(e.g. cut channels, random chips, or
specific specialised industry standard
measurement tools appropriate to
the minerals under investigation, such
as down hole gamma sondes, or
handheld XRF instruments, etc). These
examples should not be taken as
limiting the broad meaning of sampling.
Include reference to measures taken
to ensure sample representivity and
the appropriate calibration of any
measurement tools or systems used
44
The mineralised trend at Nanook is
sampled by RC and aircore drilling on a
nominal 40 m hole spacing and 100 m
lines, with local infill to 100m x 20m and
50m x 20m spacing. All holes drilled to
refusal.
For RC sampling, a 1 metre split is taken
directly from a cone splitter mounted
beneath the rigs cyclone. The cyclone
and splitter are cleaned regularly to
minimise any contamination. A second
reference split is also taken from each
metre and stored on site.
Aircore holes are sampled using an
aluminium scoop to produce a four
metre composite sample.
Sampling and QAQC procedures is
carried out using S2 protocols as per
industry best practice.
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Aspects of the determination of
mineralisation that are Material to the
Public Report. In cases where ‘industry
standard’ work has been done this
would be relatively simple (e.g. ‘reverse
circulation drilling was used to obtain
1 m samples from which 3 kg was
pulverised to produce a 30 g charge
for fire assay’). In other cases more
explanation may be required, such as
where there is coarse gold that has
inherent sampling problems. Unusual
commodities or mineralisation types
(e.g. submarine nodules) may warrant
disclosure of detailed information
Drilling techniques
Drill sample recovery
Drill type (e.g. core, reverse circulation,
open-hole hammer, rotary air blast,
auger, Bangka, sonic, etc) and details
(e.g. core diameter, triple or standard
tube, depth of diamond tails, face-
sampling bit or other type, whether
core is oriented and if so, by what
method, etc).
Method of recording and assessing
core and chip sample recoveries and
results assessed
Aircore samples are composited at
4 m to produce a bulk 3 kg sample.
Samples were dried, pulverised (total
prep), and split to produce a 25 g sub
sample which is analysed using aqua-
regia digestion with ICP-MS finish with
a 1 ppb detection limit. High grades
were repeated using 25g or 50g Lead
Collection fire assay with an ICP/MS
finish.
RC drilling is sampled a 1m “cone” split
sample, to produce a bulk 3 kg sample.
Sample preparation was the same
as for the aircore drilling. A nominal
50gram sub-sample was collected and
analysed by Samples were to produce
a sub sample for analysed by fire assay
with an AA finish.
A 1m end of hole sample was
collected for all aircore holes. Sample
preparation was the same as above
and were analysed using a four acid
digest with an ICP/OES and fire assay.
The following elements are included in
the assay suite: Ag, Al, As, Au, Ba, Be,
Bi, Ca, Cd, Ce, Co, Cr, Cu, Fe, K, La, Mg,
Mn, Mo, Na, Ni, P, Pb, Sb, Sc, Sr, Te, Ti,
Tl, V, W, Zn.
RC drilling is carried out using a face
sampling hammer with a nominal
diameter of 140mm.
Aircore drilling is carried out using a
3 ½ inch blade bit. Where necessary
a 3 ½ inch face sampling hammer is
employed to penetrate through hard
zones.
RC and aircore sample recoveries are
visually estimated qualitatively on a
metre basis and are recorded in the
database.
45
45
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Measures taken to maximise sample
recovery and ensure representative
nature of the samples
Sample quality is qualitatively logged
on a metre basis, recording sample
condition and contamination.
Whether a relationship exists between
sample recovery and grade and
whether sample bias may have
occurred due to preferential loss/gain
of fine/coarse material.
Various drilling additives (including
muds and foams) have been used to
condition RC and aircore drill holes
to maximise recoveries and sample
quality. Drill cyclone and sample
buckets are cleaned between rod-
changes and after each hole to
minimise down hole and/or cross-hole
contamination.
Insufficient drilling and geochemical
data is available at the present stage to
evaluate potential sample bias.
Aircore drilling samples are
occasionally wet which may have
resulted in sample bias due to
preferential loss/gain of fine/coarse
material.
The limited RC drilling with 1m sampling
through the mineralised gravels shows
a good correlation with the AC results
Logging
Whether core and chip samples have
been geologically and geotechnically
logged to a level of detail to support
appropriate Mineral Resource
estimation, mining studies and
metallurgical studies.
Lithology, alteration and veining is
recorded directly to a digital format and
imported into S2 Resources central
database. The logging is considered
of sufficient standard to support a
geological resource.
Whether logging is qualitative or
quantitative in nature. Core (or costean,
channel, etc) photography.
The total length and percentage of the
relevant intersections logged
Logging of aircore and RC records
lithology, mineralogy, mineralisation,
weathering, colour and other features
of the samples, and is qualitative in
nature.
All drillholes were logged in full.
Sub-sampling
techniques and
sample preparation
If core, whether cut or sawn and
whether quarter, half or all core taken.
Not applicable.
46
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
If non-core, whether riffled, tube
sampled, rotary split, etc and whether
sampled wet or dry.
For all sample types, the nature, quality
and appropriateness of the sample
preparation technique.
Quality control procedures adopted for
all sub-sampling stages to maximise
representivity of samples.
Measures taken to ensure that the
sampling is representative of the in
situ material collected, including for
instance results for field duplicate/
second-half sampling.
Whether sample sizes are appropriate
to the grain size of the material being
sampled.
Aircore samples consist of a 4 metre
composite pled 1 metre samples are
collected via an on-board cone splitter.
Samples were collected both wet and
dry.
The sample preparation follows
industry best practice in sample
preparation All samples are pulverised
utilising Essa LM1, LM2 or LM5 grinding
mills determined by the size of the
sample. Samples are dried, crushed
as required and pulverized to produce
a homogenous representative sub-
sample for analysis. A grind quality
target of 85% passing 75μm has been
established and is relative to sample
size, type and hardness.
Quality control procedures include
submission of Certified Reference
Materials (CRM’s), blanks and duplicate
samples with each batch of samples.
Selected samples are also re-analysed
to confirm anomalous results.
Grind size checks are routinely
completed to ensure samples meet
the industry standard of 85% passing
through a 75μm mesh.
Field duplicates are taken at regular
intervals. Samples are selected to
weigh less than 3kg to ensure total
preparation at the pulverisation stage.
Sample sizes are considered
appropriate for gold mineralisation.
47
47
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Quality of assay data
and laboratory tests
The nature, quality and
appropriateness of the assaying and
laboratory procedures used and
whether the technique is considered
partial or total.
For geophysical tools, spectrometers,
handheld XRF instruments, etc, the
parameters used in determining the
analysis including instrument make
and model, reading times, calibrations
factors applied and their derivation,
etc.
Nature of quality control procedures
adopted (e.g. standards, blanks,
duplicates, external laboratory checks)
and whether acceptable levels
of accuracy (i.e. lack of bias) and
precision have been established.
4m composite samples from AC drilling
are analysed for Au only using a 25g
aqua-regia digestion with an ICP/MS
finish. The method gives a near total
digestion of the regolith intercepted
in aircore drilling and is suitable for
the estimation of palaeochannel gold
deposits. High grades were repeated
using 25g or 50g Lead Collection fire
assay with an ICP/MS finish.
All aircore holes have a 1m end-of-hole
sample is collected for all AC holes. An
extensive multi-element suite (including
Ag, Al, As, Ba, Be, Bi, Ca, Cd, Ce, Co,
Cr, Cu, Fe, K, La, Mg, Mn, Mo, Na, Ni,
P, Pb, Sb, Sc, Sr, Te, Ti, Tl, V, W, Zn) is
analysed using a four acid digest with
an ICP/OES and ICP/MS finish. Au, Pt
And Pd is analysed for using 25g or
50g Lead Collection fire assay with an
ICP/MS finish.
No geophysical tools were used to
determine any element concentrations
used in this resource estimate.
Sample preparation checks for fineness
were carried out by the laboratory
as part of their internal procedures
to ensure the grind size of 85%
passing 75 micron was being attained.
Laboratory QAQC involves the use of
internal lab standards using certified
reference material, blanks, splits and
replicates as part of the in house
procedures.
Verification of
sampling and
assaying
The verification of significant
intersections by either independent or
alternative company personnel.
The Exploration Manager of S2
has visually verified significant
intersections.
The use of twinned holes.
No twin holes have been drilled on the
project to date.
48
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Location of data
points
Documentation of primary data, data
entry procedures, data verification,
data storage (physical and electronic)
protocols.
Discuss any adjustment to assay data.
Accuracy and quality of surveys used
to locate drillholes (collar and down-
hole surveys), trenches, mine workings
and other locations used in Mineral
Resource estimation.
Specification of the grid system used.
Quality and adequacy of topographic
control.
Data spacing and
distribution
Data spacing for reporting of
Exploration Results.
Whether the data spacing and
distribution is sufficient to establish
the degree of geological and grade
continuity appropriate for the Mineral
Resource and Ore Reserve estimation
procedure(s) and classifications
applied.
Primary data was collected using a
set of standard Excel templates using
lookup codes. The information was
sent to an external database consultant
for validation and compilation into a
Perth based SQL database.
No adjustments or calibrations were
made to any assay data reported.
Drillhole collars were located GPS with
an accuracy is +/ – 5m.
The grid system used at Polar Bear is
GDA94 (MGA), zone 51.
A topographic surface has been
created from aerial geophysical data,
This has been calibrated with DGPS
survey data. All reconnaissance drill
holes have been corrected to this
surface where DGPS pickup is not
available.
Data spacing is currently defined
by the geological criteria regarded
appropriate to determine the extents
of mineralisation. Reconnaissance
AC drilling is on a nominal spacing of
between 100m x 40m and 50m x 40m
drill pattern.
Drilling is considered to be of sufficient
spacing to allow an inferred mineral
resource to be estimated.
Whether sample compositing has been
applied.
No compositing has been applied to
the exploration results.
49
49
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Orientation of data in
relation to geological
structure
Whether the orientation of sampling
achieves unbiased sampling of
possible structures and the extent to
which this is known, considering the
deposit type.
If the relationship between the drilling
orientation and the orientation of key
mineralised structures is considered to
have introduced a sampling bias, this
should be assessed and reported if
material.
The measures taken to ensure sample
security.
Sample security
The drilling is not necessarily drilled
perpendicular to the orientation of the
intersected mineralisation. All reported
intervals are downhole intervals and
not calculated true width. This will be
established with further drilling.
No orientation biased sampling bias
has been identified in the data at this
point.
Chain of custody is managed by
S2 Resources. Samples are stored
on site and either delivered by S2
personnel to Perth and then to the
assay laboratory, or collected from site
by Centurion Transport and delivered
direct to the assay laboratory. Whilst
in storage, they are kept on a locked
yard. Tracking sheets have been set
up to track the progress of batches of
samples.
Audits or reviews
The results of any audits or reviews of
sampling techniques and data.
No audits or reviews have been
conducted at this stage.
SECTION 2 REPORTING OF EXPLORATION RESULTS
Criteria
JORC Code explanation
Commentary
Mineral tenement and
land tenure status
Type, reference name/number, location
and ownership including agreements
or material issues with third parties
such as joint ventures, partnerships,
overriding royalties, native title
interests, historical sites, wilderness
or national park and environmental
settings.
The security of the tenure held at the
time of reporting along with any known
impediments to obtaining a licence to
operate in the area.
The Nanook prospect is located within
Exploration License E63/1142, which is
located within the Polar Bear Project,
100% owned by Polar Metals Pty
Ltd, a wholly owned subsidiary of S2
Resources Ltd.
All projects are situated within the
Ngadju Native Title Claim (WC99/002).
The tenement is in good standing
and no known impediments exist on
tenement actively explored.
50
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Exploration done by
other parties
Acknowledgment and appraisal of
exploration by other parties.
Gold Exploration
Plutonic Operations Limited and
Homestake Gold of Australia Limited
conducted reconnaissance AC drilling
(PBAC prefix) over Lake Cowan on
predominantly 100 m drillhole spacing
and 800 m line spacing from 1997-1999.
Location of these drillholes cannot be
verified as the collars are now mostly
obscured.
AC sampling was done by 4 m
composites with 1 m re-splits on
samples greater than 0.1 g/t. Samples
were assayed by aqua-regia digest
with AAS finish although this cannot be
verified as the original laboratory.
51
51
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
The Polar Bear project is situated
within the Archaean Norseman-Wiluna
Belt which locally includes basalts,
komatiites, metasediments, and felsic
volcanoclastics.
The primary gold mineralisation
is related to hydrothermal activity
during multiple deformation events.
Indications are that gold mineralisation
is focused on or near to the
stratigraphic boundary between the
Killaloe and Buldania Formation.
The mineralisation modelled at Nanook
is situated at or close to the Tertiary /
Archaean unconformity, primarily within
unconsolidated quartz rich sands and
gravel. The mineralisation is interpreted
to be either elluvial or alluvial in nature,
although a supergene overprint is
present.
It may be derived from a nearby
basement source. Recent drilling has
defined a number of potential gold
trends to the Northwest associated
with sheared mafic and mafic-shale
contact as well as to the southwest
in and adjacent to the Nanook
granodiorite body.
Refer to ASX announcements for
information on drill holes.
Geology
Deposit type, geological setting and
style of mineralisation.
Drill hole Information
A summary of all information material
to the understanding of the exploration
results including a tabulation of the
following information for all Material
drill holes:
• easting and northing of the drill hole
collar
• elevation or RL (Reduced Level –
elevation above sea level in metres)
of the drill hole collar
• dip and azimuth of the hole
• down hole length and interception
depth
• hole length.
52
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Data aggregation
methods
In reporting Exploration Results,
weighting averaging techniques,
maximum and/or minimum grade
truncations (e.g. cutting of high grades)
and cut-off grades are usually Material
and should be stated.
Where aggregate intercepts
incorporate short lengths of high
grade results and longer lengths of
low grade results, the procedure used
for such aggregation should be stated
and some typical examples of such
aggregations should be shown in
detail.
The assumptions used for any
reporting of metal equivalent values
should be clearly stated.
Relationship between
mineralisation widths
and intercept lengths
These relationships are particularly
important in the reporting of
Exploration Results.
If the geometry of the mineralisation
with respect to the drill hole angle is
known, its nature should be reported.
If it is not known and only the down
hole lengths are reported, there should
be a clear statement to this effect
(e.g. ‘down hole length, true width not
known’).
Appropriate maps and sections (with
scales) and tabulations of intercepts
should be included for any significant
discovery being reported These should
include, but not be limited to a plan
view of drill hole collar locations and
appropriate sectional views.
Diagram
All reported assays have been
length weighted. A nominal 0.2 g/t
Au lower cut-off is used to report AC
intersections.
High grade gold intervals internal to
broader zones of mineralisation are
reported as included intervals.
No metal equivalent values are used
for reporting exploration results.
The bedrock trend of mineralisation at
Nanook is not known at present due to
the lack of deeper drilling and the early
stage of exploration.
Alluvial/elluvial gold has been defined
within two discrete palaeochannel
systems trending roughly N-S and NNE.
Downhole thicknesses can be
regarded as true thickness due to the
flat orientation of the palaeochannel
deposit.
Refer to ASX announcements for
information on drill holes.
Refer to Figures in body of text.
53
53
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
The accompanying document is
conserved to represent a balanced
report with grades and/or widths
reported in a consistent manner.
No other exploration data collected
to date is considered material or
meaningful at this stage.
RC follow-up of high grade intercepts
to establish the controls and geometry
of mineralisation is proposed.
Balanced reporting
Other substantive
exploration data
Further work
Where comprehensive reporting of all
Exploration Results is not practicable,
representative reporting of both low
and high grades and/or widths should
be practiced to avoid misleading
reporting of Exploration Results.
Other exploration data, if meaningful
and material, should be reported
including (but not limited to): geological
observations; geophysical survey
results; geochemical survey results;
bulk samples – size and method
of treatment; metallurgical test
results; bulk density, groundwater,
geotechnical and rock characteristics;
potential deleterious or contaminating
substances.
The nature and scale of planned
further work (e.g. tests for lateral
extensions or depth extensions or
large-scale step-out drilling).
Diagrams clearly highlighting the
areas of possible extensions, including
the main geological interpretations
and future drilling areas, provided
this information is not commercially
sensitive
SECTION 3 ESTIMATION AND REPORTING OF MINERAL RESOURCES
Criteria
JORC Code explanation
Commentary
Database integrity
Measures taken to ensure that
data has not been corrupted by, for
example, transcription or keying errors,
between its initial collection and its
use for Mineral Resource estimation
purposes.
Data validation procedures used.
Data templates with lookup tables and
fixed formatting are used for logging,
spatial and sampling data. Data
transfer is electronic via e-mail. Sample
numbers are unique and pre-numbered
bags are used. These methods all
minimise the potential of these types of
errors.
Data validation checks are run by the
database management consultant.
54
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Site visits
Comment on any site visits undertaken
by the Competent Person and the
outcome of those visits.
A site visit was made to the Nanook
deposit by Andy Thompson during AC
drilling to verify sampling integrity and
recovery. No issues were encountered.
Brian Wolfe has not undertaken a site
visit as of the data of reporting.
If no site visits have been undertaken
indicate why this is the case.
Not applicable
Geological
interpretation
Confidence in (or conversely, the
uncertainty of) the geological
interpretation of the mineral deposit.
Nature of the data used and of any
assumptions made.
The effect, if any, of alternative
interpretations on Mineral Resource
estimation.
The confidence in the geological
interpretation is considered good. The
deposit is a palaeochannel elluvial /
alluvial gold deposit style typical of the
Higginsville area.
Geological logging of the Tertiary
sediments and their contact with
Archaean basement has been used
to model the channel fill deposit. The
assays data consists of dominantly 4m
composites through the mineralisation.
The deposit is well constrained and
predictable with clear boundaries
which define the mineralised domains.
Infill drilling has supported and refined
the model and the current geological
interpretation is thus considered to be
robust.
The use of geology in guiding
and controlling Mineral Resource
estimation.
Key features are quartz rubble and
sands logged at the Tertiary / Archaean
unconformity.
The factors affecting continuity both of
grade and geology.
Geological continuity is strong in the
interpreted horizon at the current scale
of the drilling. Grade continuity appears
good but requires top cutting to reduce
the impact of extremely high local
grades. A top cut of 8 g/t was used.
Dimensions
The extent and variability of the
Mineral Resource expressed as
length (along strike or otherwise), plan
width, and depth below surface to the
upper and lower limits of the Mineral
Resource.
The Mineral Resource area has overall
dimensions of dimensions of 2700 m
(north) by 1100 m (east) with a central
core of 900m (north) by 400m (east).
The deposit has approximately 40m of
cover.
55
55
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Estimation and
modelling techniques
The nature and appropriateness of the
estimation technique(s) applied and
key assumptions, including treatment
of extreme grade values, domaining,
interpolation parameters and maximum
distance of extrapolation from
data points. If a computer assisted
estimation method was chosen include
a description of computer software and
parameters used.
The availability of check estimates,
previous estimates and/or mine
production records and whether the
Mineral Resource estimate takes
appropriate account of such data.
The assumptions made regarding
recovery of by-products.
Estimation of deleterious elements or
other non-grade variables of economic
significance (e.g. sulphur for acid mine
drainage characterisation).
56
The Mineral Resource estimate was
generated via OK. Mineralised domain
interpretation was completed as
described above and as such does
not incorporate a lower cutoff grade.
The interpretation was coded to the
drill hole database and 4m length
composites were generated within
the mineralisation boundary. A single
omni-directional semi-variogram
was calculated and was input in
preparation for kriging of the gold
grade data. Hard boundaries were
applied to the kriging. A horizontally
orientated search neighbourhood
was applied with radii of 150m in the
horizontal direction and 25m in the
vertical directions respectively. Sample
counts for the estimates were set at
a minimum of 8 and a maximum of 12.
Any blocks not estimated in the first
estimation pass were estimated in a
second pass with an expanded search
neighbourhood to allow the domains to
be fully estimated. Extrapolation of the
drillhole composite data is generally
limited to approximately 50m to 100m
beyond the edges of the interpreted
mineralisation however is commonly
constrained by drilling on adjacent
sections. Change of support has not
been applied to emulate selectivity at
the mining stage.
This is a maiden Mineral Resource
for the Nanook Palaeochannel and
no previous mining activity has taken
place in this area.
No by-products are assumed.
No other elements have been assayed.
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
In the case of block model
interpolation, the block size in relation
to the average sample spacing and the
search employed.
The parent block size within the
estimated domain is 25mN x25mE
x 4mRL, with sub-celling to 5mE x
5mN x 1.0mRL for domain volume
resolution. The parent block size
was chosen based on mineralised
bodies dimension and orientation,
estimation methodology and relates
to a drill section spacing of 100m to
50m and an on-section drill spacing of
approximately 40m. The search ellipse
was horizontally oriented as previously
described.
Search ellipse dimensions were chosen
to encompass adjacent drillholes on
sections and adjacent lines of drilling
along strike.
Any assumptions behind modelling of
selective mining units.
No assumption on selective mining
were made.
Any assumptions about correlation
between variables.
Not applicable.
Description of how the geological
interpretation was used to control the
resource estimates.
Discussion of basis for using or not
using grade cutting or capping.
Moisture
The process of validation, the checking
process used, the comparison of
model data to drillhole data, and use of
reconciliation data if available.
Whether the tonnages are estimated
on a dry basis or with natural moisture,
and the method of determination of the
moisture content.
The geological model domained the
mineralised elluvial material which
is situated at the Tertiary / Archaean
boundary.
A number of extremely high grade
composites have been identified which
are considered true outliers to the data.
Given the relative lack of numbers of
very high grade composites and their
potential impact on the grade estimate,
these samples have been cut to 8g/t Au.
No mining has taken place; therefore
no reconciliation data is available.
The tonnages are estimated on a dry
basis.
57
57
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
A 0.8g/t Au cut-off grade was used
to report the Mineral Resources. This
cut-off grade is estimated to be the
minimum grade required for economic
extraction.
Additional cut-off grades have been
reported at 0.5g/t and 1.0g/t Au.
No assumptions have been made as to
possible mining method.
No metallurgical testwork has been
performed.
Cut-off parameters
The basis of the adopted cut-off
grade(s) or quality parameters applied
Mining factors or
assumptions
Metallurgical factors
or assumptions
Assumptions made regarding
possible mining methods, minimum
mining dimensions and internal (or, if
applicable, external) mining dilution.
It is always necessary as part of the
process of determining reasonable
prospects for eventual economic
extraction to consider potential
mining methods, but the assumptions
made regarding mining methods and
parameters when estimating Mineral
Resources may not always be rigorous.
Where this is the case, this should be
reported with an explanation of the
basis of the mining assumptions made.
The basis for assumptions or predictions
regarding metallurgical amenability. It is
always necessary as part of the process
of determining reasonable prospects
for eventual economic extraction
to consider potential metallurgical
methods, but the assumptions regarding
metallurgical treatment processes
and parameters made when reporting
Mineral Resources may not always be
rigorous. Where this is the case, this
should be reported with an explanation
of the basis of the metallurgical
assumptions made.
58
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Environmental factors
or assumptions
Bulk density
Assumptions made regarding possible
waste and process residue disposal
options. It is always necessary as
part of the process of determining
reasonable prospects for eventual
economic extraction to consider the
potential environmental impacts of
the mining and processing operation.
While at this stage the determination
of potential environmental impacts,
particularly for a greenfields project,
may not always be well advanced, the
status of early consideration of these
potential environmental impacts should
be reported. Where these aspects
have not been considered this should
be reported with an explanation of the
environmental assumptions made.
Whether assumed or determined.
If assumed, the basis for the
assumptions. If determined, the method
used, whether wet or dry, the frequency
of the measurements, the nature, size
and representativeness of the samples.
The bulk density for bulk material must
have been measured by methods
that adequately account for void
spaces (vugs, porosity, etc), moisture
and differences between rock and
alteration zones within the deposit,
Discuss assumptions for bulk density
estimates used in the evaluation
process of the different materials.
Classification
The basis for the classification of
the Mineral Resources into varying
confidence categories.
No assumptions have been made.
Dry Bulk Densities have been
assumed as 1.8 gm/cm3. No direct
measurements have been taken.
Dry Bulk Densities have been
estimated as 1.8 gm/cm3. No direct
measurements have been taken.
The bulk density values were assigned
as a single value in the gravels using
data accepted as typical for such
deposits.
The Mineral Resource has been entirely
classified as Inferred. The classification
is based on good confidence in the
geological domain countered by high
nugget values,sampling method of
4m composites, variable drill spacing
and no direct Dry Bulk Density
measurements.
59
59
S2 Resources // 2016 Annual Report Operations Review
Criteria
JORC Code explanation
Commentary
Whether appropriate account has
been taken of all relevant factors (i.e.
relative confidence in tonnage/grade
estimations, reliability of input data,
confidence in continuity of geology
and metal values, quality, quantity and
distribution of the data).
The input data is comprehensive in
its coverage of the mineralisation and
does not favour or misrepresent in-situ
mineralisation.
The validation of the block model
shows good correlation of the input
data to the estimated grades.
Whether the result appropriately
reflects the Competent Person’s view of
the deposit.
The Mineral Resource estimate
appropriately reflects the view of the
Competent Persons.
Audits or reviews
The results of any audits or reviews of
Mineral Resource estimates.
Where appropriate a statement of
the relative accuracy and confidence
level in the Mineral Resource estimate
using an approach or procedure
deemed appropriate by the Competent
Person. For example, the application of
statistical or geostatistical procedures
to quantify the relative accuracy of
the resource within stated confidence
limits, or, if such an approach is not
deemed appropriate, a qualitative
discussion of the factors that could
affect the relative accuracy and
confidence of the estimate
The statement should specify whether
it relates to global or local estimates,
and, if local, state the relevant
tonnages, which should be relevant
to technical and economic evaluation.
Documentation should include
assumptions made and the procedures
used
These statements of relative accuracy
and confidence of the estimate should
be compared with production data,
where available
This is the maiden Nanook
Palaeochannel gold deposit Mineral
Resource estimate.
The relative accuracy of the Mineral
Resource estimate is reflected in the
reporting of the Mineral Resource as
per the guidelines of the 2012 JORC
Code.
The statement relates to global
estimates of tonnes and grade.
No production data is available.
60
S2 Resources // 2016 Annual Report Directors’ Report
The Directors of S2 Resources Ltd (“Directors”) present their report on the consolidated entity consisting of S2
Resources Ltd (“the Company” or “S2”) and the entities it controlled at the end of, or during, the period ended
30 June 2016 (“Group”).
Directors
The names and details of the Directors in office during the financial period and until the date of this Report are
as follows. Directors were in office for the entire period unless otherwise stated.
Jeff Dowling – appointed on 29 May 2015
Mark Bennett – appointed on 29 May 2015
Anna Neuling – appointed on 29 May 2015
Grey Egerton-Warburton – appointed on 29 April 2016
Principal Activities
The principal continuing activity of the Group is mineral exploration.
Dividends
No dividends were paid or proposed to be paid to members during the financial period.
Review of Operations
Operating Result
The loss from continuing operations for the period ended 30 June 2016 after providing for income tax
amounted to $10,823,222.
The loss results from $4,917,968 of exploration expenditure incurred and expensed, $4,039,525 of share-
based payments expenses, $1,791,086 of administration costs, $331,105 of business development costs,
$114,308 depreciation costs and $370,770 of net income and foreign exchange losses. The exploration
expenditure incurred and expensed mainly relates to its Scandinavian projects and to the Polar Bear project,
which contains the Baloo and Nanook gold deposits and the Monsoon gold prospect.
61
61
S2 Resources // 2016 Annual Report Directors’ Report
Significant Changes in the State of Affairs
On 29 May 2015, the Company was incorporated and appointed Mr Jeff Dowling, Dr Bennett and Ms Anna
Neuling as directors.
On 21 September 2015, S2 Resources Ltd and its subsidiaries, demerged from Sirius Resources NL (“Sirius”,
now a subsidiary of Independence Group (“IGO”)). The demerger transaction comprised S2 receiving cash
from IGO and acquiring Polar Metals Pty Ltd and Sirius Europa Pty Ltd (“acquired entities”). The following
transactions occurred for the demerger transaction to complete on 21 September 2015:
• On 3 September 2015, the shareholders of Sirius Resources NL approved the demerger transaction.
• On 10 September 2015, subsequent to court order approval of the demerger transaction, the Company
received cash of $15,854,974 and a reimbursement for Deferred Tax Assets of $4,145,026 due to exiting the
Sirius Resources NL tax consolidated group (i.e. total cash received of $20,000,000).
• On 21 September 2015, 207,401,278 shares were issued to S2 shareholders. The number of shares
determined on completion of the Demerger transaction was based on Sirius Resources NL shareholders
receiving 1 S2 share for every 2 Sirius ordinary shares.
• Also on 21 September 2015, the Company acquired Polar Metals and Sirius Europa Pty Ltd. The net assets
acquired on this date was $9,969,347 and comprised cash which included the reimbursement for Deferred
Tax Assets due to exiting the Sirius Resources NL tax consolidated group and exploration assets.
On 19 October 2015, S2 listed on the Australian Stock Exchange.
On inception, the Group held a 100% interest in Sirius Europa Pty Ltd, which in turn held a 67% interest in
Norse Exploration Pty Ltd (“Norse”), which in turn held 100% of Sakumpu Exploration Oy (“Sakumpu”), a Finnish
registered company that holds exploration assets in Finland and Sweden. The balance of Norse was held by
the original vendors of Sakumpu. On 30 November 2015, the Group announced its acquisition of the remaining
33% interest, held by the Sakumpu vendors, in Norse which became a wholly owned subsidiary of S2. The
consideration of $1,260,000 was based on issuing 8,400,000 S2 shares at 15 cents per share.
On 4 March 2016, the Group announced the initial Mineral Resource Estimate for the Baloo gold deposit
comprising 1,150,000 tonnes of Indicated material at a grade of 1.9g/t gold containing 69,000 ounces and
1,030,000 tonnes of Inferred material at a grade of 1.6g/t gold containing 54,000 ounces . The total Mineral
Resource Estimate for the Baloo gold deposit was 2,170,000 tonnes grading 1.8g/t gold for a contained
123,000 ounces at a cutoff grade of 0.8g/t gold.
On 29 April 2016, the Group appointed Grey Egerton-Warburton as Non-Executive Director.
On 6 May 2016 and in conjunction with the announcement made on 29 June 2016, the Group announced
the initial Mineral Resource Estimate for the Nanook palaeochannel gold deposit comprising of an estimated
2,200,000 tonnes Inferred material at a grade of 1.2g/t gold containing 84,000 ounces.
62
S2 Resources // 2016 Annual Report Directors’ Report
After Balance Date Events
On 20 July 2016 the Group announced the results of initial metallurgical, engineering, hydrological and
environmental studies for the Baloo gold deposit on its Polar Bear project.
On 21 July 2016 the Group announced the discovery of significant gold mineralisation at the Monsoon
prospect, which is part of the Polar Bear project.
On 26 July 2016, the Group announced a capital raising of $9.08 million via the placement of 22.7 million
shares at 40 cents per share (“Issue Price”). This was completed on 2 August 2016. Also announced on the
same day was a Share Purchase Plan (“SPP”) where eligible S2 shareholders were invited to subscribe for new
ordinary shares in S2 at the Issue Price up to a maximum of $15,000 per shareholder. The SPP, to raise up to
$3 million, closed on 15 August 2016 and was heavily oversubscribed. The shares issued under the SPP are
anticipated to be allotted on Monday 22 August 2016 and quoted on the ASX on Tuesday 23 August 2016.
Other than the after balance date events stated above, there has been no matter or circumstance that has
arisen since 30 June 2016 that has significantly affected, or may significantly affect:
•
•
•
the Group’s operations in future financial years; or
the result of those operations in future financial years; or
the Group’s state of affairs in future financial years.
Likely Developments and Expected Results of Operations
In relation to the Baloo gold deposit announced on 4 March 2016, various studies have been performed on
the resource for a potential future mining operation since the period ended 30 June 2016. Further exploration
drilling has taken place in other areas of the Polar Bear project such as at the Monsoon prospect.
Environmental Regulation
The Group’s operations are subject to the environmental regulation under the laws in Sweden, Finland, the
Australian Commonwealth and the State of Western Australia. The Board of Directors (“Board”) is of the view
that all relevant environmental regulation requirements have been met.
Information on Directors
Mark Bennett – Chief Executive Officer and Managing Director
Experience and Expertise
Mark was the managing director and CEO of Sirius from its inception to its merger with Independence Group,
and was non-executive director of Independence Group following the merger until June 2016.
He is a geologist with 25 years’ experience in gold, nickel and base metal exploration and mining. He holds a
BSc in Mining Geology from the University of Leicester and a PhD from the University of Leeds and is a Member
of the Australasian Institute of Mining and Metallurgy, a Fellow of the Geological Society of London, a Fellow of
the Australian Institute of Geoscientists and a Member of the Australian Institute of Company Directors.
He has worked in Australia, West Africa, Canada and Europe, predominantly for LionOre Mining International
Limited and WMC Resources Limited at locations such as Kalgoorlie, Kambalda, St. Ives, LionOre’s nickel
and gold mines throughout Western Australia, Wiluna and most recently Nova, the Fraser Range and Polar
Bear. Positions held include various technical, operational, executive and board positions including Managing
Director, Chief Executive Officer, Executive Director, Exploration Manager and Chief Geologist.
63
63
S2 Resources // 2016 Annual Report Directors’ Report
Mark is a two times winner of the Association of Mining and Exploration Companies “Prospector Award” for his
discoveries which include the Thunderbox Gold Mine, the Waterloo nickel mine and most recently the world
class Nova-Bollinger nickel-copper mine.
In addition to his technical expertise, Mark is very experienced in corporate affairs, equity capital markets,
investor relations and community engagement and has led Sirius from prior to the discovery of Nova all
the way through feasibility, financing, permitting and construction, and latterly through the schemes of
arrangement to merge with Independence and to demerge S2.
Other Directorships
Dr Bennett has no other directorships of any other public listed company.
Former Directorships in the Last Three Years
CEO and Managing Director of Sirius Resources NL from 31 August 2009 to 21 September 2015.
Non-Executive Director of Independence Group from 21 September 2015 to 1 June 2016.
Number of interests in shares and options held in S2 Resources Ltd
Options
Shares
12,500,000
4,595,001
Jeff Dowling – Non-Executive Chairman
Experience and Expertise
Mr Dowling was recently Sirius’ Non-Executive Chairman and is a highly experienced corporate leader with 36
years’ experience in professional services with Ernst & Young. Mr Dowling has held numerous leadership roles
within Ernst & Young which focused on the mining, oil and gas and other industries.
His professional expertise centres around audit, risk and financial management derived from acting as lead
partner on large public company audits, capital raisings and corporate transactions. Mr Dowling’s career with
Ernst & Young culminated in his appointment as Managing Partner of the Ernst & Young Western Region for a
period of 5 years. He also led Ernst & Young’s Oceania China Business Group, responsible for building Ernst &
Young’s Oceania relationships with Chinese Corporations.
Mr Dowling has a Bachelor of Commerce from the University of Western Australia and is a fellow of the Institute
of Chartered Accountants, the Australian Institute of Company Directors and the Financial Services Institute of
Australasia.
Mr Dowling is a member of the Group’s Audit & Risk Committee and Chairman of the Remuneration &
Nomination Committee which was formed on 19 July 2016.
Other Directorships
Non-Executive Director of NRW Holdings Ltd since 22 August 2013.
64
S2 Resources // 2016 Annual Report Directors’ Report
Former Directorships in the Last Three Years
Non-Executive Director of Atlas Iron Ltd from 8 November 2011 to 6 May 2016.
Non-Executive Director of Neptune Marine Services Ltd from 1 December 2011 to 25 June 2013.
Non-Executive Chairman of Sirius Resources NL from 28 February 2013 to 22 September 2015.
Non-Executive Chairman of Pura Vida Energy from 13 January 2014 to 17 May 2016.
Number of interests in shares and options held in S2 Resources Ltd
Options
Shares
2,500,000
500,000
Anna Neuling – Executive Director
Experience and Expertise
Ms Neuling was the Company Secretary and CFO of Sirius Resources Ltd from the company’s inception
in 2009 and was Sirius’ Executive Director – Corporate and Commercial until its recent merger with
Independence Group.
Ms Neuling worked at Deloitte in London and Perth prior to joining LionOre Mining International Limited in 2005,
until its takeover by Norilsk Nickel. She holds a degree in mathematics from the University of Newcastle (UK).
She is a Fellow of the Institute of Chartered Accountants in England and Wales and has held a number of
senior executive positions in the resources industry, including CFO and Company Secretarial roles at several
listed companies.
She is responsible for the corporate affairs of the company, the company secretarial function, human
resources, public and investor relations functions, and general commercial matters.
Ms Neuling is a member of the Group’s Audit & Risk Committee and Remuneration & Nomination Committee
which was formed on 19 July 2016.
Other Directorships
Ms Neuling has no other directorships of any other public listed company.
Former Directorships in the Last Three Years
Ms Neuling was formerly a Non-Executive Director (28 September 2012 to 22 September 2013) and Executive
Director (23 September 2013 to 21 September 2015) of Sirius.
Number of interests in shares and options held in S2 Resources Ltd
Options
Shares
8,750,000
350,000
65
65
S2 Resources // 2016 Annual Report Directors’ Report
Grey Egerton-Warburton – Non-Executive Director
Experience and Expertise
Mr Egerton-Warburton is a very experienced corporate financier, with a strong background in natural
resources, having spent 16 years with Hartleys Limited, including most recently as head of corporate
finance. He has extensive experience in equity capital markets, acquisitions, divestments and domestic and
international change of control transactions, having led a substantial number of capital raisings, takeovers
and mergers for many ASX listed companies, across many sectors. Prior to a career in corporate finance, Mr
Egerton-Warburton practiced at a tier one national law firm.
Grey currently serves as Deputy Chair of the Womens and Infants Research Foundation (WIRF), the charitable
arm of King Edward Memorial Hospital in Perth, Western Australia.
While at Hartleys, Grey worked closely with Sirius Resources NL as its corporate advisor from mid-2012 until
the completion of the merger between Sirius and Independence Group.
Mr Egerton-Warburton is the Chairman of the Group’s Audit & Risk Committee and a member of the
Remuneration & Nomination Committee which was formed on 19 July 2016.
Other Directorships
Mr Egerton-Warburton has no other directorships of any public listed company.
Former Directorships in the Last Three Years
Mr Egerton-Warburton had no directorships of any public listed company in the last three years.
Number of interests in shares and options held in S2 Resources Ltd
Options
Shares
1,000,000*
200,400
*Subject to shareholder approval. Please see page 73 of the Directors’ report.
Company Secretary
The Company Secretary is Anna Neuling.
66
S2 Resources // 2016 Annual Report Directors’ Report
Meetings of Directors
The number of meetings of the Board and of each Board Committee held during the period ended 30 June
2016 and the number of meetings attended by each Director were:
Directors’ Meetings
Audit & Risk
Committee
Remun eration
& Nomination
Committee
Name
Mark Bennett
Anna Neuling
Jeff Dowling
Grey Egerton-Warburton
A
11
11
11
1
B
11
11
11
1
A
–
0
0
0
B
–
0
0
0
A
–
0
0
0
B
–
0
0
0
A Number of meetings attended (including circular resolutions)
B Number of meetings held during the time the Director held office during the period and that he/she was
able to attend (including circular resolutions)
– Not a member of the relevant Committee
The Audit & Risk Committee and Remuneration & Nomination Committee were formed on 19 July 2016 where
Grey Egerton-Warburton, Jeff Dowling and Anna Neuling were appointed on both committees. As these
committees were formed after the reporting period, no meetings were held for the period during 30 June 2016.
Indemnifying of Officers or Auditor
During the period the Group paid a premium in respect of insuring Directors and Officers of the Group against
liabilities incurred as a Director or Officer. The insurer shall pay on behalf of the Group or each Director or
Officer all losses for which the Director or Officer is not indemnified by the Group arising from a claim against a
Director or Officer individually or collectively.
The Group had not, during or since the financial period, indemnified or agreed to indemnify the auditor of the
Group against a liability incurred as an auditor.
67
67
S2 Resources // 2016 Annual Report Directors’ Report
Options & Rights
Unissued ordinary shares of the Company under options or rights at the date of this Report are as follows:
Options
Number
29,250,000
50,000
400,000
400,000
800,000
Grant Date
14/09/2015
09/10/2015
23/10/2015
28/11/2015
18/04/2016
Expiry Date
Exercise Price $
14/09/2019
09/10/2019
23/10/2019
28/11/2019
17/04/2020
0.31
0.31
0.31
0.31
0.31
There were no shares issued since the end of the financial period on the exercise of options.
No person entitled to exercise an option had or has any rights by virtue of the option to participate in any share
issue of any other body corporate.
Remuneration Report (audited)
This Remuneration Report, which has been audited, outlines the Key Management Personnel (as defined in
AASB 124 Related Party Disclosures) (“KMP”) remuneration arrangements for the Group, in accordance with the
requirements of the Corporations Act 2001 and its Regulations.
The KMP covered in this remuneration report are:
• Mark Bennett – CEO and Managing Director
• Anna Neuling – Executive Director
• Jeff Dowling – Non-Executive Chairman
• Grey Egerton-Warburton – Non-Executive Director
• Su-Mei Chan – Chief Financial Officer
The principles adopted have been approved by the Board and have been set out in this Remuneration Report.
This audited Remuneration Report is set out under the following main headings:
1. Principles used to determine the nature and amount of remuneration
2. Details of remuneration
3. Service agreements
4. Share-based compensation
The information provided under headings 1 to 4 above includes remuneration disclosures that are required
under Accounting Standard AASB 124, Related Party Disclosures.
68
S2 Resources // 2016 Annual Report Directors’ Report
1. Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework which has been set out in detail under the
remuneration structure in this Remuneration Report aligns executive reward with achievement of strategic
objectives and the creation of value for shareholders, and conforms to market best practice for delivery
of reward. The Board ensures that executive reward satisfies the following key criteria for good reward
governance practices:
• competitiveness and reasonableness;
• aligns shareholders and executive interests;
• performance based and aligned to the successful achievement of strategic and tactical business
objectives; and
•
transparency.
Executive Directors
Remuneration to Executive Directors reflect the demands which are made on, and the responsibilities of the
Executive Directors. Executive Directors’ remuneration is reviewed annually to ensure it is appropriate and in
line with the market. There are no retirement allowances or other benefits paid to Executive Directors other
than superannuation guarantee amounts as required.
The executive remuneration and reward framework has three components:
• base pay;
• share-based payments; and
• other remuneration such as superannuation and long service leave.
The combination of these comprises the Executive Director’s total remuneration.
Fixed remuneration, consisting of base salary and superannuation will be reviewed annually by the
Remuneration & Nomination Committee, based on individual contribution to corporate performance and the
overall relative position of the Group to its market peers.
Non-Executive Directors
Remuneration to Non-Executive Directors reflect the demands which are made on, and the responsibilities
of, the Non-Executive Directors. Non-Executive Directors’ remuneration is reviewed annually. For the period
ended 30 June 2016, exclusive of superannuation guarantee the annual remuneration for the Non-Executive
Director was $45,000 per annum with the Chairman receiving $75,000 per annum.
Company Performance
As an exploration company the Board does not consider the operating loss after tax as one of the
performance indicators when implementing an incentive based remuneration policy. The Board considers
that the success of exploration and feasibility programs, safety and environmental performance, the securing
of funding arrangements and responsible management of cash resources and the Company’s other assets
are more appropriate performance indicators to assess the performance of management at this stage of the
company’s development.
69
69
S2 Resources // 2016 Annual Report Directors’ Report
Short-term incentives
To align the remuneration of employees with the company aim of responsible management of cash resources,
there were no short-term incentives paid or proposed to be paid for the period ended 30 June 2016. The
company’s approach in regards to the use of short term cash incentives will be assessed by the Remuneration
& Nomination Committee on an ongoing basis as the company evolves.
Long-term incentives
To align with market practices of peer companies and to provide a competitive total remuneration package,
the Board introduced a long-term incentive (“LTI”) plan to motivate and reward executives and non-executive
directors. The LTI is provided as options over ordinary shares of the Company under the rules of the Employee
Share Option Plan and the Directors Option Plan as approved in September 2015.
The quantum offered under the LTI is determined by the Remuneration & Nomination Committee using a
comparison to a peer group of companies similar to S2 Resources Ltd in terms of market capitalisation and
sector. The peer group were companies in the Materials sector of the ASX with a market capitalisation of $50-
$100 million that issued options in relation to the FY 2015.
2. Details of Remuneration
Period Ended 30 June 2016
The amount of remuneration paid to KMP is set out below.
CASH REMUNER ATION
2016
Short term
payments
$
Annual
leave
$
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
245,000
67,497
57,981
7,673
18,845
5,192
–
–
Post –
employment
benefits
(super-
annuation)
$
15,193
6,412
5,508
729
Total cash
payments
$
279,038
79,101
63,489
8,402
S Chan
71,347
5,488
6,778
83,613
449,498
29,525
34,620
513,643
70
S2 Resources // 2016 Annual Report Directors’ Report
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton (i)
Other Key Management
Personnel
2016 TOTAL REMUNERA TION
Total cash
payments
$
Appointment
Options
$
279,038
1,678,275
79,101
63,489
8,402
1,174,792
335,655
162,455
Total
$
1,957,313
1,253,893
399,144
170,857
LTI
% of
remuneration
86%
94%
84%
95%
S Chan
83,613
107,410
191,023
56%
513,643
3,458,587
3,972,230
(i)
Mr Egerton-Warburton’s options were approved by the Board of Directors on 29 April 2016 but are subject to shareholder approval
at the Annual General Meeting.
As the Company was incorporated on 29 May 2015, remuneration comparatives have not been disclosed.
There were nil non-monetary benefits paid to the Directors or KMP for the period ended 30 June 2016.
Other than those disclosed above, there were no transactions with related parties to the KMP for the period
ended 30 June 2016.
3. Service Agreements
For the period ended 30 June 2016, the following service agreements were entered into for the Directors and
key management personnel of S2:
On 4 September 2015, an Executive Services Agreement was entered into between the Company and
Managing Director and Chief Executive Officer Mark Bennett. Under the terms of the Agreement:
• Dr Bennett was paid a remuneration package of $325,000 per annum base salary plus statutory
superannuation.
• Under the general termination of employment provision, the Company may terminate the Agreement by
giving Dr Bennett twelve months’ notice.
• Under the general termination of employment provision, Dr Bennett may terminate the Agreement by giving
the Company three months’ notice.
• The Company may terminate the Agreement at any time without notice if serious misconduct has occurred.
On termination with cause, the Executive is not entitled to any payment.
On 10 September 2015, a letter of appointment was entered into between the Company and Non-Executive
Chairman Jeff Dowling. Under the terms of the Agreement:
71
71
S2 Resources // 2016 Annual Report Directors’ Report
• Mr Dowling was paid a remuneration package of $75,000 per annum base salary plus statutory
superannuation.
• Under the general termination of employment provision, either party may terminate the Agreement by the
giving of written notice.
On 4 September 2015, an Executive Services Agreement was entered into between the Company and
Executive Director Anna Neuling. Under the terms of the Agreement:
• Ms Neuling was appointed as Executive Director, encompassing the role of Company Secretary;
• Ms Neuling was paid a remuneration package of $120,000 per annum comprising a base salary plus
statutory superannuation (based on $300,000 full time equivalent).
• Under the general termination of employment provision, the Company may terminate the Agreement by
giving Ms Neuling twelve months’ notice.
• Under the general termination of employment provision, Ms Neuling may terminate the Agreement by
giving the Company three months’ notice.
• The Company may terminate the Agreement at any time without notice if serious misconduct has occurred.
On termination with cause, the Executive is not entitled to any payment.
On 29 April 2016, a letter of appointment was entered into between the Company and Non-Executive Director
Grey Egerton-Warburton. Under the terms of the Agreement:
• Mr Egerton-Warburton was paid a remuneration package of $45,000 per annum base salary plus statutory
superannuation.
• Under the general termination of employment provision, either party may terminate the Agreement by the
giving of written notice.
On 8 September 2015, the Company entered into an employment contract with Su-Mei Chan. Under the terms
of the Agreement:
• Ms Chan was appointed in the capacity of Chief Financial Officer and paid a remuneration package of
$120,000 per annum base salary plus statutory superannuation (based on $150,000 full time equivalent).
• Service Agreements (continued)
• The Company or Ms Chan may terminate the contract at any time by giving the other party 12 weeks’ notice.
• The Company may terminate the Agreement at any time without notice if serious misconduct has occurred.
On termination with cause, Ms Chan is not entitled to any payment.
72
S2 Resources // 2016 Annual Report Directors’ Report
4. Share-Based Compensation
Option holdings
The numbers of options in the Company held during the period ended by each KMP of S2, including their
related parties, are set out below:
Balance at
the start of
the period
Granted
during the
period
Expired
during the
period
Other
changes
Balance for
the period
ended
2016
Director
M Bennett
A Neuling
J Dowling
G Egerton-Warburton (i)
–
–
–
–
–
12,500,000
8,750,000
2,500,000
1,000,000
24,750,000
Other Key Management
Personnel
S Chan
–
800,000
–
25,550,000
–
–
–
–
–
–
–
–
–
–
–
–
12,500,000
8,750,000
2,500,000
1,000,000
24,750,000
–
800,000
–
25,550,000
(i) Mr Egerton-Warburton’s options were approved by the Board of Directors on 29 April 2016 but are subject
to shareholder approval at the Annual General Meeting.
As at 30 June 2016, the number of options that have vested and exercisable were 23,750,000 and the number
of options yet to vest and un-exercisable were 800,000. The remaining 1,000,000 options are un-exercisable
as they are subject to shareholder approval.
The option terms and conditions of each grant of options over ordinary shares affecting remuneration of
Directors and other KMP in the period ended or future reporting years are as follows:
Exercise
price
$
Fair value
per option
$
Options issued
Grant Date
Expiry date
Directors Option Plan
14 Sep 2015
14 Sep 2019
29 Apr 2016
28 Apr 2020
0.31
0.35
Employee Share
Option Plan
14 Sep 2015
14 Sep 2019
0.31
*Options vest a year after grant date. Please refer to note 15 for more information.
0.13
0.16
0.13
Vested
$
100%
100%
0%*
73
73
S2 Resources // 2016 Annual Report Directors’ Report
Shareholdings
The numbers of shares in the Company held during the period ended by each KMP of S2, including their
related parties, are set out below:
2016
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management Personnel
S Chan
Balance at the
start of the
period
Other changes
during the
period
Balance for
the period
ended
–
–
–
–
–
–
4,595,001
4,595,001
350,000
500,000
200,400
350,000
500,000
200,400
30,000
30,000
5,675,401
5,675,401
There were no shares granted to KMP’s during the reporting period as remuneration.
Use of remuneration consultants
No remuneration consultants were engaged or used for the Group during the period ended 30 June 2016.
Voting and comments made at the Company’s Annual General Meeting
As the Company was incorporated on 29 May 2015, there was no Annual General Meeting held for the period
ended 30 June 2015.
Share trading policy
The trading of shares issued to participants under any of the Group’s employee equity plans is subject to, and
conditional upon, compliance with the Group’s employee share trading policy as per the Group’s Corporate
Governance Policy. Executives are prohibited from entering into any hedging arrangements over unvested
options under the Group’s employee option plan. The Group would consider a breach of this policy as gross
misconduct which may lead to disciplinary action and potentially dismissal.
This concludes the Remuneration Report, which has been audited.
74
S2 Resources // 2016 Annual Report Directors’ Report
Proceedings on behalf of the Group
No person had applied to the court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the
purpose of taking responsibility on behalf of the Group for all or part of those proceedings. No proceedings
had been brought or intervened in on behalf of the Group with leave of the court under section 237 of the
Corporations Act 2001.
Auditor
BDO Audit (WA) Pty Ltd was appointed as auditors for the Group in office in accordance with section 327 of the
Corporations Act 2001.
Audit Services
During the period ended $34,280 was paid or is payable for audit services provided by the auditors.
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 76 of the financial report.
Corporate Governance
The Directors support and adhere to the principles of corporate governance, recognising the need for the
highest standard of corporate behaviour and accountability.
Signed in accordance with a resolution of the Board of Directors.
Mark Bennett
Director
Perth
19 August 2016
75
75
S2 Resources // 2016 Annual Report Auditor’s Independence Declaration
76
S2 Resources // 2016 Annual Report Consolidated Statement of Profit or Loss and Other
Comprehensive Income for the period ended 30 June 2016
30 June
2016
$
Notes
Other income
Salaries and wages
Travel expenditure
Consulting and legal fees
Share and company registry
Listing fees
Office rental and variable outgoings
Insurance
Other office related costs
Business development
Depreciation expense
Share-based payments
Other gain/(losses) – net
Exploration expenditure expensed as incurred
Loss before income tax
Income tax expense
Loss after income tax for the period
Other comprehensive income
Items that may be classified to profit or loss
Exchange differences on translation of foreign operations
Total comprehensive loss for the period attributable to the
members of S2 Resources Ltd
Loss per share for loss attributable to the members of S2
Resources Ltd
386,173
(776,502)
(328,171)
(129,088)
(77,534)
(158,536)
(215,452)
(44,637)
(61,166)
(331,105)
(114,308)
(4,039,525)
(15,403)
(4,917,968)
(10,823,222)
–
(10,823,222)
14,421
(10,808,801)
10
15
9
Basic loss per share
19(c)
(7.12)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
77
77
S2 Resources // 2016 Annual Report Consolidated Statement of Financial Position
as at 30 June 2016
CURRENT ASSETS
Cash and cash equivalents
Restricted cash
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Exploration and evaluation
Property, plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
Notes
6
6
7
9
10
11
12
13
14
30 June
2016
$
15,891,260
244,270
194,630
16,330,160
3,335,880
405,318
3,741,198
20,071,358
1,129,154
47,952
1,177,106
1,177,106
18,894,252
40,728,688
(11,011,214)
(10,823,222)
18,894,252
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes
78
S2 Resources // 2016 Annual Report –
–
–
–
)
,
2
2
2
3
2
8
0
1
(
,
1
2
4
4
1
,
–
–
–
4
2
9
4
,
5
4
3
9
1
,
5
4
3
9
1
,
–
,
)
1
0
8
8
0
8
0
1
(
,
–
–
,
)
1
0
8
8
0
8
0
1
(
,
–
–
–
l
a
t
o
T
t
s
e
r
e
t
n
i
l
a
t
o
T
s
e
s
s
o
l
e
v
r
e
s
e
R
e
v
r
e
s
e
R
e
v
r
e
s
e
R
s
e
v
r
e
s
e
R
-
n
o
N
-
l
o
r
t
n
o
c
g
n
i
l
l
d
e
t
a
u
m
u
c
c
A
n
o
i
t
a
l
s
n
a
r
T
n
o
i
t
i
s
i
u
q
c
A
r
e
h
t
O
t
n
e
m
i
n
g
e
r
o
F
y
c
n
e
r
r
u
C
e
r
a
h
S
-
y
a
p
d
e
s
a
b
y
t
i
u
q
E
n
i
s
e
g
n
a
h
C
f
o
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
6
1
0
2
e
n
u
J
0
3
d
e
d
n
e
d
o
i
r
e
p
e
h
t
r
o
f
e
r
a
h
S
l
a
t
i
p
a
c
p
u
o
r
G
e
h
t
f
o
s
r
a
l
l
o
d
$
n
i
l
s
r
e
d
o
h
y
t
i
u
q
e
o
t
e
b
a
t
u
b
i
r
t
t
l
A
–
–
–
–
–
–
–
–
,
)
1
0
6
4
1
2
5
1
(
,
6
3
1
,
0
5
6
–
,
8
8
6
8
6
4
9
3
,
,
2
5
2
4
9
8
8
1
,
,
2
5
2
4
9
8
8
1
,
–
–
,
2
5
2
4
9
8
8
1
,
)
,
2
2
2
3
2
8
0
1
(
,
,
2
5
2
4
9
8
8
1
,
)
,
2
2
2
3
2
8
0
1
(
,
,
)
1
0
6
4
1
2
5
1
(
,
,
)
1
0
6
4
1
2
5
1
(
,
,
7
1
5
4
4
1
,
7
1
5
4
4
1
,
5
2
5
9
3
0
4
,
,
8
8
6
8
2
7
0
4
,
,
5
2
5
9
3
0
4
,
,
8
8
6
8
2
7
0
4
,
,
2
2
3
4
2
8
5
2
,
5
7
1
,
5
1
9
7
4
1
,
9
0
9
4
2
,
,
5
2
5
9
3
0
4
,
,
0
0
0
0
6
2
,
1
–
–
,
5
2
5
9
3
0
4
,
,
0
0
0
0
6
2
,
1
)
,
4
9
7
0
2
4
,
1
(
)
5
7
1
,
5
1
9
(
)
,
9
1
6
5
0
5
(
–
–
–
)
,
9
1
6
5
0
5
(
–
–
–
–
,
5
2
5
9
3
0
4
,
–
–
,
0
0
0
0
6
2
,
1
t
s
e
r
e
t
n
i
%
3
3
d
t
L
y
t
P
n
o
l
i
t
a
r
o
p
x
E
e
s
r
o
N
f
o
e
s
a
h
c
r
u
P
.
i
t
s
e
o
n
g
n
y
n
a
p
m
o
c
c
a
e
h
t
h
t
i
w
n
o
j
i
t
c
n
u
n
o
c
n
i
d
a
e
r
e
b
d
u
o
h
s
l
y
t
i
u
q
e
n
i
s
e
g
n
a
h
c
f
o
t
t
n
e
m
e
a
t
s
d
e
a
d
t
i
l
o
s
n
o
c
e
v
o
b
a
e
h
T
79
79
r
o
f
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
d
o
i
r
e
p
e
h
t
,
s
r
e
n
w
o
h
t
i
w
s
n
o
i
t
c
a
s
n
a
r
T
y
t
i
u
q
e
n
i
y
l
t
c
e
r
i
d
d
e
d
r
o
c
e
r
5
1
0
2
y
a
M
9
2
t
a
e
c
n
a
a
B
l
s
r
e
n
w
o
o
t
s
n
o
i
t
u
b
i
r
t
s
d
i
d
n
a
y
b
s
n
o
i
t
u
b
i
r
t
n
o
C
l
y
n
o
m
m
o
c
f
o
n
o
i
t
i
i
s
u
q
c
A
s
e
i
t
i
t
n
e
d
e
l
l
o
r
t
n
o
c
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
s
n
o
i
t
c
a
s
n
a
r
t
d
n
a
y
b
s
n
o
i
t
u
b
i
r
t
n
o
c
l
a
t
o
T
s
r
e
n
w
o
o
t
s
n
o
i
t
u
b
i
r
t
s
d
i
6
1
0
2
e
n
u
J
0
3
t
a
e
c
n
a
a
B
l
-
n
o
n
h
t
i
w
s
n
o
i
t
c
a
s
n
a
r
T
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
S2 Resources // 2016 Annual Report
Consolidated Statement of Cash Flows
for the period ended 30 June 2016
Cash flows from operating activities
Cash paid to suppliers and employees for administration activities
Cash paid to suppliers and employees for exploration activities
Notes
Interest received
Interest and other finance costs paid
Foreign exchange gains/(losses)
Income taxes paid
30 June
2016
$
(1,802,055)
(4,380,719)
356,612
(5,709)
(15,403)
(5,729)
Net cash used in operating activities
18
(5,853,003)
Cash flows from investing activities
Payment of property, plant and equipment
Payment of exploration activities capitalised
Payment for stamp duty on transfer of tenements
Payment for costs related to purchase of Norse Exploration Pty Ltd
33% interest
Cash acquired upon acquisition of subsidiaries
Net cash derived from investing activities
Cash flows from financing activities
Proceeds from demerger
Net receipts / (payments) for cash backed guarantees
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 29 May 2015
Cash and cash equivalents at 30 June
(519,626)
(215,776)
(30,669)
(33,694)
2,765,347
1,965,582
20,000,000
(221,320)
19,778,681
15,891,260
–
15,891,260
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
80
S2 Resources // 2016 Annual Report Notes to the Consolidated Financial Statements
for the period ended 30 June 2016
S2 Resources Ltd (“Company” or “S2”) is a company incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange. The consolidated financial statements of the Group as at and for the
period ended to 30 June 2016 comprise the Company and its subsidiaries (together referred to as the “Group”
or “consolidated entity” and individually as a “Group entity”).
The separate financial statements of the parent entity, S2 Resources Ltd, have not been presented within this
financial report as required by the Corporations Act 2001. Summary parent information has been included in
note 23.
The financial statements were authorised for issue on 19 August 2016 by the Directors of the Company.
Note 1. Statement of significant accounting policies
(a) Basis of preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian
Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the
Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a
financial report containing relevant and reliable information about transactions, events and conditions to which
they apply. The financial statements and notes also comply with International Financial Reporting Standards
as issued by the International Accounting Standard Board (IASB). Material accounting policies adopted in
the preparation of this financial report are presented below. They have been consistently applied unless
otherwise stated.
The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. The
consolidated financial statements have been prepared on a going concern basis which contemplates the
continuity of normal business activities and the realisation of assets and the settlement of liabilities in the
ordinary course of business.
The Company was incorporated on 29 May 2015 and accordingly the financials for the period ended 30 June
2016 have not disclosed comparatives.
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where
applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value
through profit or loss, investment properties, certain classes of property, plant and equipment and derivative
financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the consolidated entity’s accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed in note 1(a)(iii).
81
81
S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(a) Basis of preparation (continued)
(i) Operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on
the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM
is responsible for the allocation of resources to operating segments and assessing their performance.
(ii) Adoption of new and revised Accounting Standards
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations
issued by the AASB that are mandatory for the current reporting period. The adoption of these Accounting
Standards and Interpretations did not have any material impact on the financial performance or position of the
consolidated entity.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not
been early adopted.
(iii) Use of estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other
various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using the Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-settled share-based payments would have no impact
on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit
or loss and equity. Refer to note 15.
82
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(a) Basis of preparation (continued)
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as
a result of technical innovations or some other event. The depreciation and amortisation charge will increase
where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets
that have been abandoned or sold will be written off or written down.
Exploration and evaluation costs
Exploration and evaluation costs are capitalised in an identifiable area of interest upon announcement of
a JORC 2012 compliant resource and costs will be amortised in proportion to the depletion of the mineral
resources at the commencement of production. Key judgements are applied in considering costs to be
capitalised which includes determining expenditures directly related to these activities and allocating
overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are
expected to be recovered either through successful development or sale of the relevant mining interest.
Factors that could impact the future commercial production at the mine include the level of reserves and
resources, future technology changes, which could impact the cost of mining, future legal changes and
changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the
future, they will be written off in the period in which this determination is made.
(iv)
Principles of consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by S2
at the end of the reporting period. A controlled entity is any entity over which S2 has the ability and right to
govern the financial and operating policies so as to obtain benefits from the entity’s activities.
Where controlled entities have entered or left the Group during the year, the financial performance of those
entities is included only for the period of the year that they were controlled. A list of controlled entities is
contained in note 24 to the financial statements.
In preparing the consolidated financial statements, all intragroup balances and transactions between entities in
the consolidated Group have been eliminated in full on consolidation.
Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent,
are reported separately within the equity section of the Consolidated Statement of Financial Position and the
Consolidated Statement of Profit or Loss and Other Comprehensive Income. The non-controlling interests
in the net assets comprise their interests at the date of the original business combination and their share of
changes in equity since that date.
83
83
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(b)
Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (“the functional currency”). The consolidated
financial statements are presented in the Australian dollar ($), which is the Company’s functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange
rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash
flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign
operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss,
within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or
loss on a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchanges
rates at the date when the fair value was determined. Translation differences on assets and liabilities carried
at fair value are reported as part of the fair value gain or loss. For example, translation difference on non-
monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in
profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as
equities classified as available-for-sale financial assets are recognised in other comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
• assets and liabilities for each statement of financial position presented are translated at the closing rate at
the date of that statement of financial position,
•
income and expenses for each statement of profit or loss and statement of comprehensive income are
translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions), and
• all resulting exchange differences are recognised in other comprehensive income.
84
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(b) Foreign currency translation (continued)
On consolidation, exchange differences arising from the translation of any net investment in foreign entities,
and of borrowings and other financial instruments designated as hedges of such investments, are recognised
in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net
investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain
or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated at the closing rate.
(c) Revenue Recognition
Interest income is recognised on a time proportion basis using the effective interest method.
(d) Income Tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income
based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to
apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or
substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences
to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising
from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to
these temporary differences if they arose in a transaction, other than a business combination, that at the time
of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on
a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised
directly in equity.
85
85
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(e) Acquisition of entities under common control
The Group adopts the pooling of interest method to account for acquisition of entities under common control.
The pooling of interest method involves the following:
The assets and liabilities of the combining entities are reflected at their carrying amounts prior to the
combination;
No adjustments are made to reflect fair values, or recognise any new assets or liabilities, that would other be
done under the acquisition method. The only adjustments that are made are to harmonise accounting policies;
No ‘new’ goodwill is recognised as a result of the combination; and
The only goodwill that is recognised is any existing goodwill relating to either of the combining entities. Any
difference between the consideration paid/transferred (including liabilities assumed) and the entity ‘acquired’
is reflected within equity.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income reflects the result of the
combining entities from the date that the combination occurred. Financial information for the periods prior to
the date the combination occurred is not restated.
(f) Impairment of Assets
At each reporting date, the Group reviews the carrying values of its tangible assets to determine whether there
is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of
the asset being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s
carrying value.
Any excess of the asset’s carrying value over its recoverable amount is expensed to the Consolidated
Statement of Profit or Loss and Other Comprehensive Income. Where it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating
unit to which the asset belongs.
(g) Cash and Cash Equivalents
For the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions, other shortterm, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
(h) Trade and Other Receivables
A provision for doubtful receivables is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original terms of receivables. The amount of the
provision is the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate. Cash flows relating to shortterm receivables are
not discounted if the effect of discounting is immaterial. The amount of any provision is recognised in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income.
86
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(i) Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
(j) Exploration and Evaluation
Exploration and evaluation assets acquired
Exploration and evaluation assets comprise of acquisition of mineral rights (such as joint ventures) and fair
value (at acquisition date) of exploration and expenditure assets from other entities. As the assets are not yet
ready for use they are not depreciated. Exploration and evaluation assets are assessed for impairment if:
• sufficient data exists to determine technical feasibility and commercial viability; or
• other facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
Once the technical feasibility and commercial viability of the assets are demonstrable, exploration and
evaluation assets are first tested for impairment and then reclassified to mine properties as development
assets.
Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is expensed in respect of each identifiable area of interest
until such a time where a JORC 2012 compliant resource is announced in relation to the identifiable area of
interest. These costs are only carried forward to the extent that they are expected to be recouped through the
successful development of the area or where activities in the area have not yet reached a stage which permits
reasonable assessment of the existence of economically recoverable reserves.
When the technical feasibility and commercial viability of extracting a mineral resource have been
demonstrated then any capitalised exploration and evaluation expenditure is reclassified as capitalised mine
development.
Prior to reclassification, capitalised exploration and evaluation expenditure is assessed for impairment annually
in accordance with AASB 6. Where impairment indicators exist, recoverable amounts of these assets will be
estimated based on discounted cash flows from their associated cash generating units.
The Statement of Profit or Loss and Other Comprehensive Income will recognise expenses arising from excess
of the carrying values of exploration and evaluation assets over the recoverable amounts of these assets.
In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced
value, accumulated costs carried forward are written off in the period in which that assessment is made. Each
area of interest is reviewed at the end of each accounting period and accumulated costs are written off to the
extent that they will not be recoverable in the future.
87
87
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(k) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labour, any other costs directly attributable to
bringing the assets to a working condition for their intended use, the costs of dismantling and removing the
items and restoring the site on which they are located and capitalised borrowing costs.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that
equipment. When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net
within other income in profit or loss. When revalued assets are sold, the amounts included in the revaluation
reserve are transferred to retained earnings.
(ii) Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount
of the item if it is probable that the future economic benefits embodied within the part will flow to the Group,
and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of
the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount
substituted for cost, less its residual value.
Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each
part of an item of property, plant and equipment, since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the
shorter of the lease term or their useful lives unless it is reasonably certain that the Group will obtain ownership
by the end of the lease term.
The depreciation rates used for each class of asset are:
• buildings
• fixtures and fittings
•
• plant and equipment
• motor vehicles
16.67%
22.5% – 40%
20%
22.5% – 40%
20%
leasehold improvements
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate.
88
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(l) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to ownership of leased assets, and operating leases, under
which the lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets,
or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal
component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the
remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter
of the asset’s useful life and the lease term if there is no reasonable certainty that the consolidated entity will
obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a
straight-line basis over the term of the lease.
(m) Interest in Joint Ventures
The Group accounts for 100% of the assets, liabilities and expenses of joint venture activity. These have been
incorporated in the financial statements.
(n) Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when
the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are
measured as set out below.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are stated at amortised cost using the effective interest rate method.
Financial liabilities
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal
payments and amortisation.
89
89
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(n) Financial Instruments (continued)
Fair value
Fair value represents the amount for which an asset could be exchanged or a liability settled, between
knowledgeable, willing parties.
Impairment
At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has
been impaired.
De-recognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset
is transferred to another party whereby the entity no longer has any significant continuing involvement in the
risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations
are either discharged, cancelled or expired. The difference between the carrying value of the financial liability
extinguished or transferred to another party and the fair value of consideration paid, including the transfer or
non-cash assets or liabilities assumed, is recognised in profit or loss.
(o) Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some
or all of a provision to be reimbursed the reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Profit
or Loss and Other Comprehensive Income net of any reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure required
to settle the present obligation at the reporting date. The discount rate used to determine the present value
reflects current market assessments of the time value of money and the risks specific to the liability. The
increase in the provision resulting from the passage of time is recognised in finance costs.
90
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(p) Employee Benefits
(i) Equity Settled Compensation
The Group operates equity-settled share-based payment employee share and option schemes. The fair
value of the equity to which employees become entitled is measured at grant date and recognised as an
expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares
is ascertained as the market bid price. The fair value of options is ascertained using a Black–Scholes pricing
model which incorporates all market vesting conditions. The number of shares and options expected to vest
is reviewed and adjusted at each reporting date such that the amount recognised for services received as
consideration for the equity instruments granted shall be based on the number of equity instruments that
eventually vest.
(ii) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months after the end of the period in which the employees render the related
service are recognised in respect of employees’ services up to the end of the reporting period and are
measured at the amounts expected to be paid when the liabilities are settled.
The liability for annual leave and accumulating sick leave is recognised in the provision for employee benefits.
All other short-term employee benefit obligations are presented as payables.
(iii) Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after
the end of the period in which the employees render the related service is recognised in the provision for
employee benefits and measured as the present value of expected future payments to be made in respect of
services provided by employees up to the end of the reporting period using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the end of the reporting
period on national government bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
(iv) Share-based payments
Share-based compensation benefits are provided to employees via the Employee Option Plan.
The fair value of options granted under the Employee Option Plan is recognised as an employee benefits
expense with a corresponding increase in equity. The total amount to be expensed is determined by reference
to the fair value of the options granted, which includes any market performance conditions and the impact
of any non-vesting conditions but excludes the impact of any service and non-market performance vesting
conditions.
91
91
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(p) Employee Benefits (continued)
(iv) Share-based payments (continued)
Non-market vesting conditions are included in assumptions about the number of options that are expected
to vest. The total expense is recognised over the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of
the number of options that are expected to vest based on the non-market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
When the options are exercised, the Company transfers the appropriate amount of shares to the employee.
The proceeds received net of any directly attributable transaction costs are credited directly to equity.
(v) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either terminating the employment of current employees
according to a detailed formal plan without possibility of withdrawal or to providing termination benefits as a
result of an offer made to encourage voluntary redundancy.
Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(q) Issued Capital
Ordinary shares are classified as equity. Costs associated with capital raisings (exclusive of GST) directly
attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds. If
the entity reacquires its own equity instruments, e.g. as the result of a share buyback, those instruments are
deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or
loss and the consideration paid including any directly attributable costs associated with capital raisings (net of
income taxes) is recognised directly in equity.
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit / (loss) attributable to equity holders of the Group,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued
during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
92
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(r) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of
the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in
the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flow.
(s) New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are
not yet mandatory, have not been early adopted by the consolidated entity for period ended 30 June 2016.
The consolidated entity’s assessment of the impact of these new or amended Accounting Standards and
Interpretations, most relevant to the consolidated entity, are set out below.
• AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian
Accounting Standards 2012-2014 Cycle, and
• AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to
AASB 101.
As these amendments merely clarify the existing requirements, they do not affect the Group’s accounting
policies or any of the disclosures.
AASB 9 Financial Instruments
These amendments must be applied for financial years commencing on or after 1 January 2018. Therefore
application date for the Company will be 30 June 2019. The Company does not currently have any hedging
arrangements in place.
AASB 9 addresses the classification, measurement and de-recognition of financial assets and financial
liabilities. Since December 2013, it also sets out new rules for hedge accounting. There will be no impact on
the Company’s accounting for financial assets and financial liabilities, as the new requirements only effect the
accounting for available-for-sale financial assets and the accounting for financial liabilities that are designated
at fair value through profit or loss and the Company does not have any such financial assets or financial
liabilities. The new hedging rules align hedge accounting more closely with the Company’s risk management
practices. As a general rule it will be easier to apply hedge accounting going forward. The new standard also
introduces expanded disclosure requirements and changes in presentation.
93
93
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(s) New Accounting Standards and Interpretations not yet mandatory or early adopted
(continued)
AASB 15 Revenue from Contracts with Customers
These amendments must be applied for annual reporting periods beginning on or after 1 January 2018.
Therefore application date for the Company will be 30 June 2019.
An entity will recognise revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. This means that revenue will be recognised when control of goods or services is transferred,
rather than on transfer of risks and rewards as is currently the case under IAS 18 Revenue. Due to the recent
release of this standard the Company has not yet made an assessment of the impact of this standard.
AASB 16 Leases
IFRS 16 eliminates the operating and finance lease classifications for lessees currently accounted for under
AASB 117 Leases. It instead requires an entity to bring most leases onto its statement of financial position in a
similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a
lease liability and a right of use asset in its statement of financial position for most leases.
There are some optional exemptions for leases with a period of 12 months or less and for low value leases.
The application date of this standard is for annual reporting periods beginning on or after 1 January 2019. Due
to the recent release of this standard, the group has not yet made a detailed assessment of the impact of this
standard.
AASB 2014-3 (issued August 2014) – Amendments to Australian Accounting Standards –
Accounting for Acquisitions of Interests in Joint Operations
When an entity acquires an interest in a joint operation whose activities meet the definition of a ‘business’
in AASB 3 Business Combinations, to the extent of its share of assets, liabilities, revenues and expenses as
specified in the contractual arrangement, the entity must apply all of the principles for business combination
accounting in AASB 3, and other IFRSs, to the extent that they do not conflict with AASB 11 Joint Arrangements.
This means that it will expense all acquisition-related costs and recognise its share, according to the
contractual arrangements, of:
• Fair value of identifiable assets and liabilities, unless fair value exceptions included in AASB 3 or other
IFRSs, and
• Deferred tax assets and liabilities that arise from the initial recognition of an asset or liability as required by
AASB 3 and AASB 112 Income Taxes.
• Goodwill will then be recognised as the excess consideration over the fair value of net identifiable assets
acquired.
Annual periods beginning on or after 1 January 2016.
There will be no impact on the financial statements when these amendments are first adopted because they
apply prospectively to acquisitions of interests in joint operations.
94
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 1. Statement of significant accounting policies (continued)
(s) New Accounting Standards and Interpretations not yet mandatory or early adopted
(continued)
AASB 2014-3 (issued August 2014) – Amendments to Australian Accounting Standards – Sale
or Contribution of Assets between an Investor and its Associate or Joint Venture
Removes the inconsistency between AASB 10 Consolidated Financial Statements and AASB 128 Investments
in Associates and Joint Ventures in accounting for transactions where a parent loses control over a subsidiary
that is not a business under AASB 3 Business Combinations, by selling part of its interest to an associate or
joint venture, or by selling down part of its interest so that the remaining investment becomes an associate or
joint venture. Requires that:
• Gain or loss from measuring the retained interest in the former subsidiary at fair value, as well as gains
or losses to be reclassified from other comprehensive income to profit or loss, only be recognised to the
extent of the unrelated investor’s interest in that associate or joint venture, and
• Remaining gains or losses to be eliminated against the investment in associate or joint venture.
Annual periods beginning on or after 1 January 2016.
There will be no impact on the financial statements when these amendments are first adopted because they
apply prospectively to sales or contributions of assets occurring after the application date.
Note 2. Financial Risk Management
The Group’s financial instruments consist mainly of deposits with banks and accounts receivable and payable.
The Group’s activities expose it to a variety of financial risks; market risk (including fair value interest rate risk
and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group’s overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the financial performance of the Group. Risk management is carried out by the Board of Directors under
policies approved by the Board. The Board identifies and evaluates financial risks and provides written
principles for overall risk management.
The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency
risk, liquidity risk, credit risk and price risk.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because
of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates
primarily to the Group’s Australian Dollar current and non-current debt obligations with floating interest rates.
The Group is also exposed to interest rate risk on its cash and short term deposits.
95
95
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 2. Financial Risk Management (continued)
Interest Rate Risk (continued)
Fixed
interest
rate
maturing
in 1 year or
less
$
Fixed
interest
rate
maturing
between 1
and 2 years
$
Floating
interest
rate
$
Non-
interest
bearing
$
Total
$
Weighted
average
effective
interest
rate
%
2016
Financial
Instruments
(i) Financial assets
Available cash on
hand
2,461,588
10,000,000
Restricted cash
210,966
Other receivables
–
–
–
Total financial
assets
(ii) Financial
liabilities
Trade and other
payables
Total financial
liabilities
Net Fair Values
2,672,554
10,000,000
–
–
–
–
–
–
–
–
–
–
3,429,672
15,891,260
33,304
244,270
194,630
194,630
2.68
2.22
–
3,657,606
16,330,160
1,129,154
1,129,154
–
1,129,154
1,129,154
The net fair value of financial assets and liabilities approximate carrying values due to their short term nature.
96
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 2. Financial Risk Management (continued)
Sensitivity Analysis – Interest Rate Risk
The Group has performed a sensitivity analysis relating to its exposure to interest rate risk at the reporting
date. This sensitivity analysis demonstrates the effect on the current period results and equity which could
result from a change in interest rates.
Change in loss:
Increase by 1%
Decrease by 1%
Change in equity:
Increase by 1%
Decrease by 1%
Foreign exchange risk
Exposure
30 June
2016
$
(108,232)
108,232
(188,943)
188,943
The group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar,
was as follows:
Period ended 30 June 2016
Cash on hand
Restricted cash
Other receivables
Trade payables
EUR
$
USD
$
3,353,773
75,399
33,304
39,912
(174,068)
3,252,921
–
–
–
75,399
97
97
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 2. Financial Risk Management (continued)
Sensitivity Analysis – Interest Rate Risk (continued)
Amounts recognised in profit or loss and other comprehensive income
During the period ended, the following foreign-exchange related amounts were recognised in profit or loss
and other comprehensive income:
Amounts recognised in profit or loss
Net foreign exchange gain/(loss) included in other income/other expenses
Total net foreign exchange (losses) recognised in loss before income tax for the period
Net gains/(losses) recognised in other comprehensive income
Translation of foreign operations
Sensitivity
2016
$
(15,403)
(15,403)
14,421
As shown in the table above, the Group is primarily exposed to changes in EUR/$exchange rates. The
sensitivity of profit or loss to changes in the exchange rates arises mainly from EUR-dollar denominated
financial instruments and the impact on other components of equity arises from translation of foreign
operations.
EUR/$ exchange rate – increase 10%*
EUR/$ exchange rate – decrease (10%)*
*Holding all other variables constant
Impact on post
tax loss
$
Impact on other
components of
equity
$
(1,540)
1,540
(1,934)
1,934
The Group’s exposure to the USD dollar exchange rate is not disclosed in the table above because it is not
material.
Liquidity Risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or
otherwise meeting its obligations related to financial liabilities. Management monitors rolling forecasts of the
Group’s cash reserves on the basis of expected development, exploration and corporate cash flows. This
ensures that the Group complies with prudent liquidity risk management by maintaining sufficient cash and
marketable securities and the availability of funding through the equity markets to meet obligations when due.
For the period ended 30 June 2016, the Group has no contractual financial liabilities.
98
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 2. Financial Risk Management (continued)
Credit Risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and other
receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with a
maximum exposure equal to the carrying amount of these instruments. The cash and cash equivalents are
held with bank and financial institution counterparties, which are rated AA – based on Standard and Poor’s
rating agency.
The credit risk on other receivables is limited as it is comprised of prepayments and GST recoverable from the
Australian Taxation Office and tax authorities in Scandinavia. The credit risk on liquid funds is limited because
the counter party is a bank with high credit rating. There are no receivable balances which are past due or
impaired.
Price risk
The Group is not currently exposed to commodity price risk.
Note 3. Segment Information
For management purposes, the Group has three reportable segments as follows:
• Scandinavian exploration activities, which includes exploration and evaluation of mineral tenements in
Finland and Sweden.
• Australian exploration activities, which includes exploration and evaluation of mineral tenements in
Australia.
• Unallocated, which includes all other expenses that cannot be directly attributed to either segments above.
Segment information that is evaluated by the CODM is prepared in conformity with the accounting policies
adopted for preparing the financial statements of the Group.
99
99
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 3. Segment Information (continued)
Segment Results
Statement of profit or loss for the period ended
30 June 2016
$
Scandinavian
exploration
activities
Australia
exploration
activities
Other income
Administrative expenses
Depreciation expense
Share-based payments
Other gain/(losses) – net
–
–
–
–
–
–
–
–
–
–
Exploration expenditure expensed as incurred
(1,907,826)
(3,010,142)
Unallocated
386,173
(2,122,191)
(114,308)
(4,039,525)
(15,403)
–
Loss before income tax
Income tax expense
(1,907,826)
(3,010,142)
(5,905,254)
–
–
–
Loss after income tax for the period
(1,907,826)
(3,010,142)
(5,905,254)
Segment assets
The Group’s assets are mostly attributable to the unallocated segment therefore assets attributable to
exploration in Scandinavia and Australia is immaterial for disclosure.
Note 4. Other income
Interest received
30 June
2016
$
386,173
100
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 5. Income Tax
Recognised in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Current tax
Deferred tax
Under (over) provided in prior years
Total income tax expense per Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Numerical reconciliation between tax expense and pre-tax net loss
Net loss before tax
Income tax benefit at 30%
Income tax expense for overseas entities
Increase in income tax due to:
Non-deductible expenses
Current year tax losses not recognised
Decrease in income tax due to:
Movement in unrecognised temporary differences
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following:
Deductible temporary differences
Tax revenue losses
Tax capital losses
30 June
2016
$
–
–
–
–
(10,823,222)
(2,659,328)
(418,312)
1,213,570
1,864,894
(824)
–
200,385
1,664,509
–
1,864,894
Net deferred tax assets have not been brought to account as it is not probable that within the immediate future
tax profits will be available against which deductible temporary differences and tax losses can be utilised.
101
101
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 6. Cash and Cash Equivalents
Current
Cash at bank and in hand
Restricted cash
Note 7. Other Receivables
GST refund due
Accrued interest
Prepayment
Other
30 June
2016
$
15,891,260
244,270
16,135,530
30 June
2016
$
87,554
29,562
73,791
3,723
194,630
The Group has no impairments to other receivables or have receivables that are past due but not impaired.
Refer to note 2 for detail on the risk exposure and management of the Group’s other receivables.
Note 8. Acquisition of commonly controlled entities
On 21 September 2015, S2 Resources Ltd and its subsidiaries, demerged from Sirius Resources NL (now a
subsidiary of Independence Group (“IGO”)). The demerger transaction comprised of S2 receiving cash from
IGO and acquiring the carrying value of Polar Metals Pty Ltd and Sirius Europa Pty Ltd (“acquired entities”). The
following transactions occurred for the demerger transaction to complete on 21 September 2015:
• On 3 September 2015, the shareholders of Sirius Resources NL approved the demerger transaction.
• On 10 September 2015, subsequent to court order approval of the demerger transaction, the Company
received cash of $15,854,974 and a reimbursement for Deferred Tax Assets of $4,145,026 due to exiting the
Sirius Resources NL tax consolidated group (i.e. total cash received of $20,000,000).
• On 21 September 2015, 207,401,278 shares were issued to S2 shareholders. The number of shares
determined on completion of the Demerger transaction was based on Sirius Resources NL shareholders
receiving 1 S2 share for every 2 Sirius ordinary shares.
• Also on 21 September 2015, the Company acquired the carrying value of Polar Metals and Sirius Europa
Pty Ltd. The net assets acquired on this date was $9,969,347 and comprised cash which included the
reimbursement for Deferred Tax Assets due to exiting the Sirius Resources NL tax consolidated group and
exploration assets.
102
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 8. Acquisition of commonly controlled entities (continued)
As a result of the transactions described above, the summarised financial information as at 21 September 2015
for the acquired entities is provided below:
CURRENT ASSETS
Cash and cash equivalents
Restricted cash
Trade receivables
Other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Exploration and evaluation
Property, plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILTIES
TOTAL LIABILTIES
NET ASSETS
EQUITY
Share capital
Reserves
Foreign Currency Translation Reserve
Non-controlling interest
Acquisition Reserve
TOTAL EQUITY
21 September
2015
$
2,765,346
74,949
12,570
4,156,026
7,008,891
3,062,848
73,878
3,136,726
10,145,617
172,070
4,200
176,270
176,270
9,969,347
23,613,713
650,136
4,924
915,175
(15,214,601)
9,969,347
103
103
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 9. Exploration and Evaluation
Exploration costs
Movement during the period
Balance at beginning of the period
Exploration expenditure incurred during the period (i)
Exploration expenditure incurred during the period and expensed (i)
Exploration expenditure relating to acquisitions (ii)
Balance at end of the period
30 June
2016
$
3,335,880
–
5,160,331
(4,917,968)
3,093,517
3,335,880
(i) During the period ended 30 June 2016 the exploration expenditure incurred pertains to the following:
Baloo Project
Exploration expenditure incurred for the Baloo project was $1,777,320 with $1,543,764 expensed and
$233,556 capitalised in respect of the resource announcement on 4 March 2016.
Nanook Project
Exploration expenditure incurred for the Nanook project was $8,807 and this amount was capitalised in
respect of the resource announcement on 6 May 2016.
Polar Bear Project
Exploration expenditure incurred and expensed for the Polar Bear Project was $1,372,481.
Eundynie JV Project (80% interest)
Exploration expenditure incurred and expensed for the Eundynie JV was $71,610.
Norcott Project
Exploration expenditure incurred and expensed for the Norcott was $22,287.
Scandinavian Project
Exploration expenditure incurred and expensed for Scandinavia was $1,907,826.
(ii) As a result of the Demerger transaction on 21 September 2015, the Group acquired exploration assets in
the Scandinavian Project valued at $2,000,000, Polar Bear Project valued at $400,000 and Eundynie JV
Project valued at $662,848. During the period ended 30 June 2016, a purchase was made for transfer of
tenements for the Eundynie JV of $30,669.
104
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 10. Property, Plant and Equipment
Property,
Plant and
Equipment
$
Motor
Vehicles
$
Computer
Software
$
Fixtures and
fittings
$
Total
$
2016
Cost or deemed cost
Balance at 29 May 2015
–
–
–
–
–
Additions
Disposals
Transfers
Exchange differences
Balance at 30 June 2016
Depreciation
290,737
37,263
101,397
86,850
516,247
–
–
2,426
293,163
–
–
–
–
–
208
–
–
–
37,263
101,605
86,850
–
–
2,634
518,881
Balance at 29 May 2015
–
–
–
–
–
Depreciation for the
period – expensed
Exchange differences
Disposals
71,520
4,968
22,276
15,544
114,308
(689)
–
–
–
(56)
–
–
–
(745)
–
Balance at 30 June 2016
70,831
4,968
22,220
15,544
113,563
Carrying amounts
at 29 May 2015
at 30 June 2016
–
–
–
–
–
222,332
32,295
79,385
71,306
405,318
Note 11. Trade and Other Payables
Trade and other payables (i)
30 June
2016
$
1,129,154
(i) These amounts generally arise from the usual operating activities of the Group and are expected to be
settled within 12 months. Collateral is not normally obtained.
105
105
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 12. Provisions
Current
Employee benefits
Carrying amount at start of the period
Provisions made during the period
Carrying amount at end of the period
30 June
2016
$
47,952
–
47,952
47,952
Employee benefits are provided for all employees of the Group in line with their employment contracts and the
balance for the period ended 30 June 2016 is expected to be settled within 12 months. The measurement and
recognition criteria relating to employee benefits have been included in note 1 to this financial report.
Note 13. Share Capital
Ordinary shares fully paid
Movement in Share Capital
Ordinary shares fully paid
Balance at beginning of period
Shares issued at $0.1903 per share at the completion of the
Demerger on 21 September 2015.
Shares issued at $0.15 per share (i)
Balance at period end
30 June
2016
No. of Shares
30 June
2016
$
215,801,278
40,728,688
–
–
207,401,278
39,468,688
8,400,000
1,260,000
215,801,278
40,728,688
(i) On 30 November 2015, the Group announced its acquisition of the 33% interest, held by the Sakumpu
vendors, in Norse Exploration Pty Ltd and becoming a wholly owned subsidiary of S2.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group
in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of
ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share
is entitled to one vote.
106
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 14. Reserves
Share-based payments reserve (i)
Other reserve (ii)
Foreign currency translation reserve (iii)
Acquisition reserve (iv)
30 June
2016
$
4,039,525
144,517
19,345
(15,214,601)
(11,011,214)
(i) The share-based payments reserve recognises the fair value of the options issued to Directors, employees
and service providers.
Each share option converts into one ordinary share of the Company on exercise. No amounts are paid or
payable by the recipient on receipt of the option. The options carry neither rights to dividends or voting
rights. Options may be exercised at any time from the date of vesting to the date of their expiry.
(ii) The other reserve recognises the remaining non-controlling interest (33%) that was purchased from the
Sakumpu vendors on 30 November 2015. Sakumpu Exploration Oy is a registered entity in Finland.
(iii) Exchange differences arising on translation of the foreign controlled entity are recognised in other
comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is
reclassified to profit or loss when the net investment is disposed of.
(iv) This acquisition reserve arises from the interest pooling method accounting policy for the purchase of Polar
Metals Pty Ltd and Sirius Europa Pty Ltd as described in note 8 of these financials.
107
107
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report
Note 15. Share-based Payments
The following share-based payments arrangements were in existence during the current reporting period:
Options
Options Series
Number
Grant Date
Expiry Date
Exercise
Price $
Fair value at
Grant Date $
(1) Issued at 14 September 2015
29,250,000
14/09/2015
14/09/2019
(2) Issued at 9 October 2015
50,000
09/10/2015
09/10/2019
(3) Issued at 23 October 2015
400,000
23/10/2015
23/10/2019
(4) Issued at 29 November 2015
400,000
29/11/2015
28/11/2019
(5) Issued at 18 April 2016
800,000
18/04/2016
19/04/2020
0.31
0.31
0.31
0.31
0.31
(6) Issued at 28 April 2016
1,000,000
28/04/2016
29/04/2020
0.35
0.13
0.13
0.12
0.08
0.14
0.16
(1) The 29,250,000 options in series 1 comprised 23,750,000 options issued to the Directors of the Group
which vested immediately, 3,600,000 options issued to employees under the Employee Share Option Plan
which vest one year from grant date and 1,900,000 options issued to service providers which vest one
year from grant date. For the service provider options, the value of services received was unable to be
measured reliably and therefore the value of services received was measured by reference to the fair value
of options issued.
(2) The 50,000 options in series 2 which vests one year from grant date was issued to employees under the
Employee Share Option Plan.
(3) The 400,000 options in series 3 which vests one year from grant date was issued to employees under the
Employee Share Option Plan.
(4) The 400,000 options in series 4 which vests one year from grant date was issued to employees under the
Employee Share Option Plan.
(5) The 800,000 options in series 5 comprised of 400,000 options were issued to employees under the
Employee Share Option Plan which vests one year from grant date, and 400,000 options issued to service
providers which vests one year from grant date. For the service provider options, the value of services
received was unable to be measured reliably and therefore the value of services received was measured
by reference to the fair value of options issued
(6) The 1,000,000 options in series 6 which vested immediately were issued to a Director of the Group. These
options are subject to shareholder approval.
The weighted average fair value of the share options granted during the period is $0.13.
108
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 15. Share-based Payments (continued)
The total expense of the share based payments for the period was:
Options issued under Directors Option Plan
Options issued under Employee Share Plan
Options issued under Service Provider Plan
30 June
2016
$
3,351,176
409,782
278,567
4,039,525
The weighted average contractual life for options outstanding at the end of the year was 4 years.
Options were priced using a Black-Scholes option pricing model using the inputs below:
Series 1
Series 2
Series 3
Series 4
Series 5
Grant date share price
Exercise price
0.21
0.31
0.19
0.31
0.19
0.31
0.14
0.31
0.22
0.31
Expected volatility
100.00%
100.00%
100.00%
100.00%
100.00%
Option life
Dividend yield
Interest rate
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest rate
4 years
4 years
4 years
4 years
4 years
0.00%
3.10%
0.00%
3.10%
0.00%
3.35%
0.00%
3.26%
0.00%
3.10%
Series 6
0.25
0.35
100%
4 years
0.00%
3.35%
109
109
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 15. Share-based Payments (continued)
The following reconciles the outstanding share options granted in the period ended 30 June 2016:
Balance at the beginning of the period
Granted during the period
Exercised during the period
Expired during the period (i)
Balance at the end of the period
Un-exercisable at the end of the period
Exercisable at end of the period
30 June
2016
No. of Options
30 June
2016
Weighted
average
exercise price
$
–
31,900,000
–
–
31,900,000
8,150,000
23,750,000
–
0.31
–
–
0.31
0.31
0.31
(i) Options expired or cancelled during the period
For the period ended 30 June 2016 no options expired or were cancelled.
No amounts are unpaid on any of the shares. No person entitled to exercise an option had or has any rights by
virtue of the option to participate in any share issue of any other body corporate.
Note 16. Dividends
There were no dividends recommended or paid during the period ended 30 June 2016.
110
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 17. Key Management Personnel Disclosures
Short term employee benefits
Post-employment benefits
Long-term benefits
Non-monetary benefits
Share-based payment
30 June
2016
$
449,498
34,620
29,525
–
3,458,587
3,972,230
Detailed remuneration disclosures are provided in the Remuneration Report.
Note 18. Reconciliation of Profit After Income Tax to Net Cash used in
Operating Activities
Loss for the period
Depreciation
Equity Settled share-based payment transaction
Increase in trade and other payables
Increase in provisions
(Increase) in receivables
Net cash outflow from operating activities
30 June
2016
$
(10,823,222)
114,308
4,039,525
1,129,154
47,952
(360,720)
(5,853,003)
111
111
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 19. Basic Loss per share
30 June
2016
$
(a) Reconciliation of loss used in calculating loss per share
Basic loss per share
Loss attributable to the ordinary equity holders used in calculating basic loss per share
(10,823,222)
(b) Weighted average number of shares used as the Denominator
30 June
2016
Number
Ordinary shares used as the denominator in calculating basic loss per share
215,801,278
(c) Basic loss per share
Basic loss per share
Where loss per share is non-dilutive, it is not disclosed.
Note 20. Commitments
Cents
(7.12)
The Group must meet the following operating lease and tenement expenditure commitments to maintain
them in good standing until they are joint ventured, sold, reduced, relinquished, exemptions from expenditure
are applied or are otherwise disposed of. These commitments, net of farm outs, are not provided for in the
financial statements and are:
30 June
2016
$
766,580
1,437,225
1,982,220
660,740
4,846,765
Not later than one year
After one year but less than two years
After two years but less than five years
After five years*
* Per annum
112
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 21. Related Party Transactions
Other than the Directors and key management personnel salaries and options described in the Remuneration
Report, there were no related party transactions for the period ended 30 June 2016.
Note 22. Joint Ventures
The Group has interests in the following joint venture operations:
Tenement Area
Eundynie
Activities
Gold
Note 23. Parent entity disclosures
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
2016
80%
30 June
2016
$
15,518,868
24,403,244
39,922,112
1,000,944
–
1,000,944
38,921,168
40,728,688
4,039,525
(5,847,045)
38,921,168
113
113
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 23. Parent entity disclosures (continued)
Financial performance
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income
30 June
2016
$
(5,847,045)
–
(5,847,045)
The parent entity has entered into an office lease agreement where the following commitments must be met:
Not later than one year
After one year but less than two years
* Per Annum
Note 24. Subsidiaries
Name of entity
Polar Metals Pty Ltd
Sirius Europa Pty Ltd
Norse Exploration Pty Ltd
Sakumpu Exploration Oy
S2 Exploration Quebec Inc.
30 June
2016
$
125,840
115,745
241,585
Country of
incorporation
Class of Shares
Australia
Australia
Australia
Finland
Canada
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2016
100%
100%
100%
100%
100%
114
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Note 25. Events Occurring After the Reporting Period
On 20 July 2016 the Group announced the results of initial metallurgical, engineering, hydrological and
environmental studies for the Baloo gold deposit on its Polar Bear project.
On 21 July 2016 the Group announced the discovery of significant gold mineralisation at the Monsoon
prospect, which is part of the Polar Bear project.
On 26 July 2016, the Group announced a capital raising of $9.08 million via the placement of 22.7 million
shares at 40 cents per share (“Issue Price”). This was completed on 2 August 2016. Also announced on the
same day was a Share Purchase Plan (“SPP”) where eligible S2 shareholders were invited to subscribe for new
ordinary shares in S2 at the Issue Price up to a maximum of $15,000 per shareholder. The SPP, to raise up to
$3 million, closed on 15 August 2016 and was heavily oversubscribed. The shares issued under the SPP are
anticipated to be allotted on Monday 22 August 2016 and quoted on the ASX on Tuesday 23 August 2016.
Other than the after balance date events stated above, there has been no matter or circumstance that has
arisen since 30 June 2016 that has significantly affected, or may significantly affect:
•
•
•
the Group’s operations in future financial years; or
the result of those operations in future financial years; or
the Group’s state of affairs in future financial years.
Note 26. Remuneration of Auditors
During the period the following fees were paid or payable for services provided by the
auditor of the Group:
Audit services
Total remuneration for audit services
30 June
2016
$
34,280
34,280
115
115
Notes to the Consolidated Financial Statements for the period ended 30 June 2016S2 Resources // 2016 Annual Report Directors’ Declaration
Directors’ Declaration
The Directors of the Group declare that:
1. The financial statements and notes as set out on pages 77 to 115 are in accordance with the Corporations
Act 2001, and
(a) comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
(b) give a true and fair view of the financial position of the Group as at 30 June 2016 and of its performance
for the period ended on that date.
2. The financial report also complies with International Financial Reporting Standards as disclosed in note 1 to
the financial statements.
3. The Director acting in the capacity of Chief Executive Officer has declared that:
(a) the financial records of the Company for the financial period have been properly maintained in
accordance with section 286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial period comply with the accounting standards; and
(c) the financial statements and notes for the financial period give a true and fair view.
4. In the opinion of the Directors there are reasonable grounds to believe that the Group will be able to pay its
debts as and when they become due and payable.
5. The remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report
comply with Australian Accounting Standards AASB 124 Related Party Disclosures, the Corporations Act
2001 and the Corporations Regulations 2001.
This declaration is made in accordance with a resolution of the Board of Directors.
Mark Bennett
Director
Perth
19 August 2016
116
S2 Resources // 2016 Annual Report Independent Auditor’s Report
Independent Auditor’s Report
117
117
S2 Resources // 2016 Annual Report Independent Auditor’s Report
118
S2 Resources // 2016 Annual Report Additional ASX Information
Additional ASX Information
The shareholder information set out below was applicable as at the dates specified.
Unlisted Securities
Options (Current as at 8 August 2016)
Number on
issue
Number of
holders
Options expiring 14 September 2019 at an exercise price of $0.31
29,250,000
Options expiring 9 October 2019 at an exercise price of $0.31
Options expiring 23 October 2019 at an exercise price of $0.31
Options expiring 28 November 2019 at an exercise price of $0.31
Options expiring 17 April 2020 at an exercise price of $0.31
50,000
400,000
400,000
800,000
18
1
1
1
4
Holders of over 20% of unlisted securities
There are the following holders of more than 20% of unlisted securities as at 8 August 2016:
Mark Bennett
Anna Neuling
Distribution of Equity Securities (Current as at 8 August 2016)
Analysis of numbers of ordinary shareholders by size of holding:
1
1,001
5,001
10,001
–
–
–
–
1,000
5,000
10,000
100,000
100,001
and over
Number held
12,500,000
8,750,000
Number of
Shareholders
2,488
1,436
457
909
215
5,505
There are 2,150 holders holding less than a marketable parcel of ordinary shares based on the closing market
price as at 8 August 2016.
119
119
S2 Resources // 2016 Annual Report Additional ASX Information
Substantial Holders (Current as at 8 August 2016)
Substantial holders of equity securities in the Company are set out below:
Ordinary Shares
Name
Mark Gareth Creasy, Yandal Investments Pty Ltd, Ponton Minerals
Pty Ltd, Lake Rivers Gold Pty Ltd and Free CI Pty Ltd
Ordinary Shares subject to voluntary escrow (Current as at 8 August 2016)
Number held
Percentage of
issued shares
73,146,151
30.67%
There are 8,400,00 of ordinary shares subject to voluntary escrow which will end on 18 November 2016.
Equity Security Holders (Current as at 8 August 2016)
The names of the twenty largest holders of quoted equity securities (ordinary shares) are listed below:
Rank
Name
Units
% of Units
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
YANDAL INVESTMENTS PTY LTD
Continue reading text version or see original annual report in PDF format above