ANNUAL REPORT
2018
Find out more www.s2resources.com.au
S2 Resources Annual Report 2018
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
www.s2resources.com.au
Contents
Managing Director and Chairman’s Review ......................................................................... 2
Operations Review................................................................................................................... 4
Directors Report ....................................................................................................................... 7
Consolidated Statement of Profit or Loss and Other Comprehensive Income ..............20
Consolidated Statement of Financial Position ....................................................................21
Consolidated Statement of Changes in Equity ....................................................................22
Consolidated Statement of Cash Flows ...............................................................................24
Notes to the Consolidated Financial Statements ...............................................................26
Directors’ Declaration ............................................................................................................59
Declaration of Independence ................................................................................................60
Independent Auditor’s Report...............................................................................................61
Additional ASX Information ...................................................................................................65
Competent Persons Statement .............................................................................................77
Managing Director and Chairman’s Review
As stated on our website, our aim is to make order of magnitude returns on investment for our shareholders. To achieve this our
objective is to find, and if appropriate develop, financially robust and technically low risk resources in stable jurisdictions, and to avoid
pursuing financially marginal and/or technically risky opportunities that can become a management diversion and an opportunity cost.
This means having the vision to conceive big, bold ideas, the daring to go where necessary to execute them, and the preparedness and
honesty to cut our losses when necessary.
In short, we are looking for elephants, so we have to go to elephant country, that is we only explore in areas that have a demonstrated
high mineral endowment or where we believe there is an emerging or an as yet unrecognised but potentially substantial endowment,
and that are mining friendly, with an established framework for, and record of, actually turning discoveries into mines, being able to
keep them, and being able to translate this into shareholder wealth.
Elephant country is typically highly competitive so we have to be prepared to identify specific niches within such ecosystems, to identify
compelling opportunities, and act decisively to realise them.
We seek exploration opportunities that may exist because of a variety of technical, commercial or historical factors, including inefficient
or ineffective prior exploration, corporate legacies, market sentiment or changes in legislation, or by the application of new ideas and/
or the deployment of new detection technologies.
As a junior, it is important that we maximise the effectiveness of our expenditure by running a tight ship and restricting our activities
to situations where our exploration is both technically and cost effective.
Consequently, we only explore in regions that have good infrastructure, where there is sufficient technical data to assist in the
area selection process, where the terrain is amenable to our preferred exploration techniques, and where the cost of exploring it is
commensurate with our capacity to fund it to definitive decision points.
As a greenfields explorer hunting for elephants, we are unashamedly going against the odds, so we need to manage these odds by
exposing ourselves to as many chances as possible.
This means maintaining a strong treasury, maintaining financial rigour, exploring in a disciplined way by having well defined targets
and objectives with clear decision points, and being prepared to walk, rather than become anchored in one project – in other words,
explore to find it if it’s worth finding, not to ensure there’s nothing there.
Hunting elephants also takes time. S2 is in the enviable position of having the cash and shareholder support to conceive, plan and
pursue a strategy without being distracted by short term market pressures, unlike the typical tail chasing syndrome forced upon many
junior explorers in order to raise awareness and increase stock currency to raise money to simply subsist.
Last, but definitely not least, as shareholders ourselves, we are mindful of the need to ensure that all shareholders will be optimally
rewarded in the event of success.
We aim to achieve this by maintaining a tight capital structure and minimising dilution to maximise the financial impact of discovery, by
forward strategic planning of funding requirements, by making selected opportunistic investments, and by being prepared to monetise
non-core assets.
We don’t just talk the talk, we do our best to walk the walk. Examples of this during the year include the following:
• Having the patience to acquire mineral rights to additional ground owned by Newmont adjacent to the Ecru project in Nevada.
• Drilling – and exiting – two joint ventures in Nevada.
• Drilling the most obvious targets in Sweden, and subsequently shifting focus to emerging opportunities in Finland, where
more compelling targets can be tested with the more efficient use of our exploration spend.
•
Selling the Polar Bear project for A$9 million.
• Making a multiple return on investment in TSXV listed GT Gold.
The above has positioned us with ~A$15 million cash and A$8.3 million of liquid investments to fund our exploration – more than S2
had on listing despite having spent approximately A$23 million during this period.
In the coming year we will continue to drill our current Nevada targets and identify new projects whilst patiently undertaking the
preliminary work necessary to define new drill targets in Finland, and we will continue to assess additional opportunities around the
world in our quest for another “overnight” success.
Mark Bennett
Managing Director and CEO
Jeff Dowling
Non-Executive Chairman
2
S2 Resources Annual Report 2018 Operations Review
Nevada Projects
Ecru (S2 earning 70%)
The Ecru project is located 40 kilometres southeast of Battle Mountain in Lander County, Nevada, in the heart of the highly endowed
Battle Mountain-Eureka trend, adjacent to Barrick’s Pipeline, Cortez Hills and Goldrush deposits which have a collective endowment of
approximately 50 million ounces of gold.
The project is situated in an area covered by a veneer of transported colluvium (“pediment”) and is centred on a gravity high that is
interpreted to represent an upthrown block of the same carbonate rocks that host the nearby world class deposits.
Detailed gravity and AMT surveys have identified several targets considered prospective for Carlin-style gold mineralisation. Drilling
by third parties on ground to the south of Ecru has defined an Inferred Mineral Resource of 2.74 million ounces of gold. Drilling of S2’s
Ecru project is scheduled to commence in October 2018.
South Roberts (S2 earning 70%)
The South Roberts project is located in Eureka County, Nevada, 35 kilometres northwest of Eureka. It is located on the Battle Mountain-
Eureka trend of world class gold deposits and on the western margin of the northern Nevada rift in a very similar setting to Barrick’s
Goldrush deposit.
The project covers the southern extension of an uplifted block containing known gold mineralisation that plunges southwards beneath
transported colluvium (pediment) as evidenced by a gravity anomaly and confirmed by a six hole first pass drilling program conducted
in 2014.
S2 undertook geophysics and drilled three holes on this project. The results were disappointing and S2 exited the project subsequent
to 30 June 2018.
Scandinavian Projects
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 474 square kilometres of Exploration Permits and is the largest ground holder in the core
Skellefte Belt, which it considers prospective for similar polymetallic VMS mineralisation and orogenic shear zone hosted lode gold
mineralisation.
Whilst S2 has had technical success at two prospects, Bjurtraskgruvan and Storgroven, the company has refocused its activities on
Finland during calendar 2018 and will continue to do so for the next period.
Finland (100% S2)
S2 has a large area of the prospective Central Lapland Greenstone Belt of arctic Finland under tenure via a mix of Reservations,
Exploration Licence applications and granted Exploration Licences. These areas are not extensively or effectively explored, yet host
a number of significant deposits and prospects, including Agnico Eagle’s Kittilä gold mine, Anglo American’s Sakatti nickel-copper–
platinum deposit, and Boliden’s Kevitsa copper-nickel mine.
Following the successful trialing of a new sensitive geochemical technique known as ionic leach in the summer of 2017, S2 committed
to using this as its primary tool to identify the more prospective parts of its extensive Finnish tenure. Consequently, S2 has focused its
summer 2018 exploration effort on a major regional geochemical sampling program with the aim of identifying geochemical hotspots
and fast tracking the grant of tenure over these areas in order to be in a position to commence follow up base of till drilling over the
coming winter season.
The aim of this program is to identify broad gold and base metal anomalous areas in order to prioritise and rationalise tenure,
enabling the fast tracking of high priority areas for follow up together with the relinquishment of low priority areas to minimize ground
holding costs, thereby focusing activities to optimize their technical, time and cost effectiveness.
Approximately 14,000 samples have been collected and the program has identified distinct areas anomalous either in gold and arsenic
or nickel, copper, cobalt and palladium, representing promising lode gold and magmatic nickel sulphide targets respectively.
At Paana, which is located to the north west of Agnico Eagle’s 8 million ounce Kittila gold mine, several robust, strike extensive gold
anomalous corridors have been identified. These measure up to 5 kilometres along strike and up to 1 kilometre across strike and are
too large to enable the siting of specific diamond drill holes, so an extensive base of till geochemical drilling program will be undertaken
over the winter to define discrete hotspots within the broader trends that will in turn become discrete targets for subsequent
diamond drilling.
4
S2 Resources Annual Report 2018 At Ruopas, which is considered prospective for magmatic nickel-copper sulphide deposits like Anglo American’s nearby giant
Sakatti deposit, several discrete coincident nickel-copper-cobalt-palladium anomalies have been identified. This suite of elements is
considered a good indicator for this style of mineralisation. A large VTEM airborne electromagnetic survey is being undertaken during
the Autumn, and the results of this, together with the geochemistry, will drive winter follow up exploration activities which may include
ground EM and/or targeted diamond drilling.
As a result of these activities, S2’s Finnish tenure will be ready for a more intensive phase of prospect testing over the coming 12
months with the aim of discovering significant lode gold or magmatic sulphide mineralisation.
5
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 year ended 30 June 2018 (“Group”).
Directors
The names and details of the Directors in office during the financial year and until the date of this Report are as follows. Directors were
in office for the entire year unless otherwise stated.
Jeff Dowling
Mark Bennett
Anna Neuling
Grey Egerton-Warburton
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 year.
Review of Operations
Operating Result
The loss from continuing operations for the year ended 30 June 2018 after providing for income tax amounted to $1,673,903.
The loss results from $5,859,587 of exploration expenditure incurred and expensed; $1,090,320 of exploration impairment expense;
$876,753 of share-based payments expenses; $1,264,937 of administration costs; $752,561 of business development costs; $168,545
of depreciation costs; $1,893,669 of gain on disposal of available for sale financial assets; $5,919,557 gain on disposal of WA Gold
Projects; $423,038 of net income and other net gains; and income tax benefit of $102,536. The exploration expenditure incurred and
expensed mainly relates to the Company’s Scandinavian, Nevada and Polar Bear projects.
Significant Changes in the State of Affairs
On 1 August 2017, the Group entered into an agreement with Kinetic Gold (US) Inc, a subsidiary of Renaissance Gold Inc (“RenGold”),
a TSXV listed company to earn in to three of RenGold’s properties located on some of the major known gold mineralised trends in
Nevada, USA. The transaction provides the Group with earn-in rights over three separate properties, each on similar terms. The key
terms are as follows:
• One off payment of US$75,000 on signing (ie. US$25,000 per property).
• Minimum spend of US$200,000 within 2 years on each property, and ability to earn a 70% interest for expenditure of US$3
million within 5 years on each property.
•
•
If/when the Group earns in, RenGold can participate in exploration programs or dilute its interest, and if Rengold dilutes its
interest below 10%, it reverts to a net smelter return royalty.
If still participating (ie. above 10%) at the time of a decision to mine, RenGold can participate at its future interest level or
revert to a net smelter return royalty.
The transaction satisfied the conditions precedent of the agreement on 26 September 2017.
During the financial year ended 30 June 2018, the Group made a decision to impair the exploration asset for Sweden and the Pluto
project in Nevada of $1,033,028 and $57,292 respectively. The Group made a decision to change its focus and resources from Sweden
to other opportunities available to the Company but still retains tenure in Sweden. For the Pluto project, the Group made a decision
to not continue exploration activities and therefore will not earn into the joint venture with Rengold for this project.
On 5 December 2017, Mr Tony Walsh resigned as Company Secretary and Ms Anna Neuling was re-appointed as Company Secretary
and recommenced her executive responsibilities for the Group following her return from parental leave.
On 13th February 2018, the Group entered into a Heads of Agreement (“HOA”) with Westgold Resources Limited (“Westgold”) to sell
its interest in the Polar Bear Project (100%), Eundynie Joint Venture (80%) and the Norcott Project (100%) (together, the “WA Gold
Projects”) via the sale of all of the shares in S2’s wholly owned subsidiary Polar Metals Pty Ltd (“Sale”) for A$3 million cash and 4 million
Westgold shares. S2 retains nickel rights over the WA gold projects, including the Taipan and Halls Knoll nickel sulfide prospects
discovered by S2’s precursor Sirius Resources. The sale completed on 23rd February 2018.
7
Directors Report
After Balance Date Events
There have been no matter or circumstance that has arisen since 30 June 2018 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
The Group will recommence drilling activities on its targets in Nevada in the last quarter of 2018. In Finland, an extensive soil sampling
program has taken place during the summer period with results expected in October 2018 where a further evaluation will be made to
determine the next stage of exploration. In Sweden, the Group finalised its drilling activities after the winter period and changed its
focus and resources to other opportunities available to the Company but still retains tenure in Sweden.
Environmental Regulation
The Group’s operations are subject to environmental regulation under the laws of Sweden, Finland, the State of Nevada, 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 28 years of 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, USA and Europe, initially for LionOre Mining International Limited and WMC
Resources Limited at various locations including Kalgoorlie, Kambalda, St.Ives, LionOre’s nickel and gold mines throughout Western
Australia, the East Kimberley, and Stawell in Victoria. His more recent experience, as Managing Director of Sirius Resources and S2
Resources and as a director of private Canadian company True North Nickel has been predominantly in Western Australia (the Fraser
Range including Nova-Bollinger, and the Polar Bear project in the Eastern Goldfields), Quebec (the Raglan West nickel project), British
Columbia, Sweden, Finland, and Nevada.
Positions held include various technical, operational, executive and board positions including Managing Director, Chief Executive
Officer, Executive Director, Non-executive director, Exploration Manager and Chief Geologist.
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 directorships of other public listed companies.
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.
8
S2 Resources Annual Report 2018 Number of interests in shares and options held in S2 Resources Ltd
Options 19,500,000
Shares
4,695,001
Jeff Dowling – Non-Executive Chairman
Experience and Expertise
Mr Dowling was Sirius’ Non-Executive Chairman until 21 September 2015 and is a highly experienced corporate leader with 36 years’
experience in professional services with Ernst & Young. Mr Dowling 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.
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.
Non-Executive Director of Fleetwood Corporation Ltd since 1 July 2017.
Non-Executive Chairman of Battery Minerals since 25 January 2018.
Former Directorships in the Last Three Years
Non-Executive Director of Atlas Iron Ltd from 8 November 2011 to 6 May 2016.
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
4,750,000
Shares
700,000
Anna Neuling – Executive Director (Non-Executive Director from 1 July 2017 to 4 December 2017)
Experience and Expertise
Ms Neuling was the Company Secretary and CFO of Sirius Resources NL from the company’s inception in 2009 until 22 September
2013 where she was appointed as Executive Director – Corporate and Commercial until its merger with Independence Group that
occurred on 21 September 2015.
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.
Ms Neuling had returned from parental leave and recommenced as Executive Director and Company Secretary of the Group from 5
December 2017.
Ms Neuling is a member of the Group’s Audit & Risk Committee and Remuneration & Nomination Committee which was formed on
19 July 2016.
9
Directors Report
Other Directorships
Ms Neuling has no directorships of other public listed companies.
Former Directorships in the Last Three Years
Ms Neuling was 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 11,500,000
Shares 350,000
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.
He 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, he 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 directorships of other public listed companies.
Former Directorships in the Last Three Years
Mr Egerton-Warburton has had no directorships of any other public listed company in the last three years.
Number of interests in shares and options held in S2 Resources Ltd
Options
3,250,000
Shares
550,400
10
S2 Resources Annual Report 2018
Meetings of Directors
The number of meetings of the Board and of each Board Committee held during the year ended 30 June 2018 and the number of
meetings attended by each Director were:
Name
Mark Bennett*
Anna Neuling
Jeff Dowling
Grey Egerton-Warburton
Directors’ Meetings
Audit & Risk
Committee
Remuneration & Nomination
Committee
A
12
12
12
12
B
12
12
12
12
A
3
3
3
3
B
3
3
3
3
A
1
1
1
1
B
1
1
1
1
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
* Dr Bennett had attended the Audit & Risk and Remuneration & Nomination committee meetings by invitation and is not a member
of either committee.
Indemnifying of Officers or Auditor
During the year 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 year, indemnified or agreed to indemnify the auditor of the Group against a liability
incurred as an auditor.
Options & Rights
Unissued ordinary shares of the Company under options or rights at the date of this Report are as follows:
Options
Number
28,450,000
50,000
400,000
400,000
400,000
1,000,000
9,150,000
10,900,000
Grant Date
Expiry Date
Exercise Price $
14/09/2015
09/10/2015
23/10/2015
28/11/2015
18/04/2016
29/04/2016
07/10/2016
17/10/2017
14/09/2019
09/10/2019
23/10/2019
28/11/2019
17/04/2020
28/04/2020
06/10/2020
16/10/2021
0.31
0.31
0.31
0.31
0.31
0.35
0.61
0.23
There were no shares issued since the end of the financial year 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.
11
Directors Report
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 section 308 (3c) of the
Corporations Act 2001 and its Regulations.
The KMP covered in this remuneration report are:
• Mark Bennett – CEO and Managing Director
• Anna Neuling – Was Non-Executive Director from 1 July 2017 to 4 December 2017 when Ms Neuling was on parental leave
and was Executive Director and Company Secretary from 5 December 2017.
•
Jeff Dowling – Non-Executive Chairman
• Grey Egerton-Warburton – Non-Executive Director
•
Su-Mei Sain – Chief Financial Officer – was on parental leave from 1 December 2017 to 25 June 2018.
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.
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:
(i)
competitiveness and reasonableness;
(ii) aligns shareholders and executive interests;
(iii) performance based and aligned to the successful achievement of strategic and tactical business objectives; and
(iv) transparency.
Executive Directors
Remuneration to Executive Directors reflects 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:
(i) base pay;
(ii) share-based payments; and
(iii) 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.
12
S2 Resources Annual Report 2018 Non - Executive Directors
Remuneration to Non-Executive Directors reflects the demands which are made on, and the responsibilities of, the Non-Executive
Directors. Non-Executive Directors’ remuneration is reviewed annually. For the year ended 30 June 2018, exclusive of superannuation
guarantee the annual cash remuneration for the Non-Executive Director was $45,000 per annum with the Chairman receiving $75,000
per annum. The Non-Executive Directors were also issued options under the Directors Share Option Plan in October 2017 that was
approved by Company’s shareholders at the 2017 Annual General Meeting.
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 identification and securing of new business growth
opportunities, the success of exploration and, if appropriate, feasibility activities, 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.
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 year ended 30 June 2018. 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 the board and management with shareholder’s interests and 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.
During the financial year ended 30 June 2018, the Remuneration and Nomination Audit Committee have agreed to not issue any
Director options and only issue employee and service provider options at the 2018 Annual General Meeting.
Company performance, shareholder wealth and directors’ and executives’ remuneration
No relationship exists between shareholder wealth, director and executive remuneration and Company performance due to the
nature of the Company’s operations being a non-producing resources exploration company.
The table below shows the losses and earnings per share of the Company for the last three financial years.
Net loss
(1,673,903)
(10,020,602)
(10,823,222)
2018
2017
2016
Share price at year end (cents)
Loss per share (cents)
16
(0.68)
16
(4.12)
28.5
(7.12)
13
Directors Report
2. DETAILS OF REMUNERATION
Year Ended 30 June 2018
The amount of remuneration paid and entitlements owed to KMP is set out below.
Cash remuneration and entitlements
2018
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
S Sain
T Walsh (1)
Cash remuneration
Salary
$
Post–employment benefits
(superannuation)
$
Untaken annual leave
entitlement owing
$
Total cash payments
and entitlements
$
325,000
91,443
75,000
45,000
63,638
31,000
631,081
20,049
8,654
7,125
4,275
4,857
-
44,960
11,871
1,548
-
-
862
-
14,281
356,920
101,645
82,125
49,275
69,357
31,000
690,322
1) Mr Walsh’s short term payments are fees incurred as per his consultancy agreement with the Company. The fees disclosed are for
the period 1 July 2017 to 5 December 2017 when Mr Walsh resigned as Company Secretary of the Group.
Year Ended 30 June 2017
Cash remuneration and entitlements
2017
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
S Sain
T Walsh (1)
Cash remuneration
Salary
$
Post–employment benefits
(superannuation)
$
Untaken annual leave
entitlement owing
$
Total cash payments
and entitlements
$
307,500
67,789
75,000
45,000
115,195
41,330
651,814
19,539
6,440
7,125
4,275
10,450
-
47,829
18,748
5,214
-
-
2,699
-
26,661
345,787
79,443
82,125
49,275
128,344
41,330
726,304
1) Mr Walsh’s short term payments are fees incurred as per his consultancy agreement with the Company. He was appointed on 3
January 2017 as Company Secretary for the Group.
14
S2 Resources Annual Report 2018
2018 Total remuneration
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management Personnel
S Sain
T Walsh
2017 Total remuneration
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management Personnel
S Sain
T Walsh
Total cash payments
$
Options issued
$
Total
$
LTI % of
remuneration
356,920
101,645
82,125
49,275
69,357
31,000
690,322
331,725
103,664
103,664
103,664
24,879
-
667,596
688,645
205,309
185,789
152,939
94,236
31,000
1,357,918
48%
50%
56%
68%
26%
0%
Total cash payments
$
Options issued
$
Total
$
LTI % of
remuneration
345,787
79,443
82,125
49,275
128,344
41,330
726,304
700,632
350,316
233,544
233,544
1,046,419
429,759
315,669
282,819
70,063
70,063
198,407
111,393
1,658,162
2,384,466
There were no non-monetary benefits paid to the Directors or KMP for the year ended 30 June 2018.
Other than those disclosed above, there were no transactions with related parties to the KMP for the year ended 30 June 2018.
67%
81%
74%
83%
35%
63%
15
Directors Report
3. SERVICE AGREEMENTS
For the year ended 30 June 2018, the following service agreements were in place with 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:
• 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.
On 3 January 2017, a letter of appointment was entered into between the Company and Ms Neuling for the role as Non-Executive
Director during her parental leave. Under the terms of the Agreement as Executive Director:
• Ms Neuling was appointed as Executive Director, including the role of Company Secretary;
• Ms Neuling was paid a remuneration package of $120,000 per annum comprising a base salary plus statutory superannuation
for work on a part time basis (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.
Under the terms of the Agreement as Non-Executive Director:
• Ms Neuling was paid a remuneration package of $45,000 per annum base salary plus statutory superannuation.
•
•
The same terms will apply under Ms Neuling’s Executive Director Agreement in regards to general termination of
employment provision between herself and the Company and in relation to serious misconduct.
This agreement ended on 5 December 2017 when Ms Neuling returned from parental leave and recommenced her executive
position.
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 Sain. Under the terms of the Agreement:
• Ms Sain was appointed in the capacity of Chief Financial Officer and paid a remuneration package of $120,000 per annum
base salary plus statutory superannuation for work on a part time basis (based on $150,000 full time equivalent).
The Company or Ms Sain 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 Sain is not entitled to any payment.
•
•
16
S2 Resources Annual Report 2018 On 6 October 2016, a consulting agreement was entered into between the Company and Company Secretary, Tony Walsh. Under the
terms of the Agreement:
• Mr Walsh’s commencement date was 12 December 2016 and the agreement was terminated on 5 December 2017 as he had
resigned as Company Secretary of the Group.
• Mr Walsh’s fees were paid to Tony Walsh Corporate Services Pty Ltd.
• Mr Walsh was paid a monthly fee of $5,000 per month (plus GST) for an average of one business day per week or $10,000 per
month (plus GST) for an average two business days per week.
4. SHARE-BASED COMPENSATION
Option holdings
The numbers of options in the Company held during the year ended by each KMP of S2, including their related parties, are set out
below:
2018
Director
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
S Sain
T Walsh
Balance at the start
of the year
Granted during
the year
Expired during
the year
Other
changes
Balance at the
year ended
15,500,000
10,250,000
3,500,000
2,000,000
31,250,000
4,000,000
1,250,000
1,250,000
1,250,000
7,750,000
1,100,000
300,000
1,400,000
300,000
-
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,500,000
11,500,000
4,750,000
3,250,000
39,000,000
1,400,000
300,000
1,700,000
As at 30 June 2018, the number of options that have vested and exercisable were 40,400,000 and the number of options yet to vest
and un-exercisable were 300,000.
The option terms and conditions of each grant of options over ordinary shares affecting remuneration of Directors and other KMP in
the year ended or future reporting years are as follows:
Options issued
Grant Date
Expiry date
Exercise price
$
Fair value
per option
$
Vested
$
Directors Option Plan
14 Sep 2015
14 Sep 2019
29 Apr 2016
28 Apr 2020
7 Oct 2016
6 Oct 2020
17 Oct 2017
16 Oct 2021
Employee Share Option Plan
14 Sep 2015
14 Sep 2019
7 Oct 2016
6 Oct 2020
17 Oct 2017
16 Oct 2021
0.31
0.35
0.61
0.23
0.31
0.61
0.23
*Options vest a year after grant date. Please refer to note 16 for more information.
0.13
0.16
0.23
0.08
0.13
0.23
0.08
100%
100%
100%
100%
100%
100%
0%*
17
Directors Report
Shareholdings
The numbers of shares in the Company held during the year ended by each KMP of S2, including their related parties, are set out
below:
2018
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management Personnel
S Sain
T Walsh
Balance at the
Other changes
Balance for
start of the year
during the year
the year ended
4,595,001
350,000
500,000
550,400
50,000
50,000
6,095,401
-
-
-
-
-
-
4,595,001
350,000
500,000
550,400
50,000
50,000
6,095,401
There were no shares granted to KMP’s during the reporting year as remuneration.
Use of remuneration consultants
No remuneration consultants were engaged or used for the Group during the year ended 30 June 2018.
Voting and comments made at the Company’s Annual General Meeting
At the 2017 Annual General Meeting, the resolution to adopt the Remuneration Report for the year ended 30 June 2017 was passed on
a poll with 91% of votes cast on the poll voting “For” the resolution to adopt the Remuneration Report. The Company did not receive
any specific feedback at the Annual General Meeting regarding its remuneration practices.
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. Directors and 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.
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.
18
S2 Resources Annual Report 2018 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 year ended 30 June 2018, $38,482 was paid or is payable for audit services provided by the auditors. There were no non-
audit services performed during the financial year.
Auditor’s Independence Declaration
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 59
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
11 September 2018
19
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2018
Other income
Corporate salaries and wages
Consulting and legal fees
Share and company registry
Listing fees
Office rental and variable outgoings
Insurance
Business development including travel expenditure
Depreciation expense
Share-based payments
Gain on disposal of available for sale financial assets
Gain on disposal of WA Gold Projects
Other gain/(losses) - net
Exploration expenditure expensed as incurred
Exploration impairment expense
Loss before income tax
Income tax (expense)/benefit
Loss after income tax for the year
Other comprehensive income
Items that may be classified to profit or loss
Changes in the fair value of available-for-sale financial assets
Exchange differences on translation of foreign operations
Total comprehensive income for the year attributable to the members
of S2 Resources Ltd
Notes
4
11
16
8
9
10
10
5
8
30 June 2018
$
30 June 2017
$
213,899
(531,168)
(346,577)
(85,501)
(40,326)
(141,476)
(119,889)
(752,561)
(168,545)
(876,753)
1,893,669
5,919,557
209,139
(5,859,587)
(1,090,320)
428,459
(493,851)
(408,516)
(140,596)
(52,008)
(252,891)
(95,509)
(645,916)
(154,050)
(2,870,328)
-
-
(84,833)
(4,978,990)
-
(1,776,439)
(9,749,029)
102,536
(271,573)
(1,673,903)
(10,020,602)
1,722,579
102,379
188,088
9,499
151,055
(9,823,015)
Loss per share for loss attributable to the members of S2 Resources Ltd
Basic loss per share
21(c)
(0.68)
(4.12)
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
20
S2 Resources Annual Report 2018 Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
for the year ended 30 June 2018
as at 30 June 2018
Current assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Total current assets
Non-current assets
Available-for-sale financial 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
30 June 2018
$
30 June 2017
$
6
6
7
8
10
11
12
13
15,026,119
17,501,007
348,889
403,758
306,061
227,465
15,778,766
18,034,533
8,310,859
1,083,153
227,737
9,621,749
1,188,689
4,650,820
391,590
6,231,099
25,400,515
24,265,632
546,786
60,521
607,307
476,819
338,413
815,232
607,307
815,232
24,793,208
23,450,400
14
15
52,552,523
9,973,013
52,237,523
(7,943,299)
(37,732,328)
(20,843,824)
24,793,208
23,450,400
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
21
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S2 Resources Annual Report 2018
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23
Consolidated Statement of Cash Flows
for the year ended 30 June 2018
Cash flows from operating activities
Cash paid to suppliers and employees for corporate activities
Cash paid to suppliers and employees for exploration activities
Interest received
Interest and other finance costs paid
Payroll tax refund from Office of State Revenue as a result of audit review
in December 2016
Income taxes paid
Net cash used in operating activities
Cash flows from investing activities
Payment of property, plant and equipment
Payment of exploration activities capitalised
Payment for Nevada JV acquisition
Payment for investment in TSX-V listed entity
Notes
30 June 2018
$
30 June 2017
$
(2,030,871)
(2,265,567)
(5,642,437)
(5,455,104)
234,389
(9,128)
424,024
(8,406)
-
13,653
5
19
(421,597)
-
(7,869,644)
(7,291,400)
(1,663)
(140,056)
(872)
(1,321,097)
(173,473)
-
-
(1,000,600)
Net proceeds from disposal of investment in TSX-V listed entity
Net proceeds for disposal of WA Gold Projects
8
9
2,574,078
2,829,437
-
-
Net cash derived from (used in) investing activities
5,227,507
(2,461,753)
Cash flows from financing activities
Proceeds from issue of share capital
Net receipts / (payments) for cash backed guarantees
Net cash from financing activities
Net increase in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at 1 July 2017
-
11,508,835
(41,890)
(61,792)
(41,890)
11,447,043
(2,684,027)
1,693,890
209,139
(84,143)
17,501,007
15,891,260
Cash and cash equivalents at 30 June 2018
6
15,026,119
17,501,007
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
24
S2 Resources Annual Report 2018 for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
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 year ended to 30 June 2018 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.
Summary parent information has been included in note 25.
The financial statements were authorised for issue on 11 September 2018 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.
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).
(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 year. 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.
26
S2 Resources Annual Report 2018 for the year ended 30 June 2018
Share-based payment transactions
The Group measures the cost of equity-settled transactions 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 16.
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 year. 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 26 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.
27
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
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.
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.
28
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
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.
(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 otherwise 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
short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value.
29
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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
short term 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.
(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.
(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.
30
S2 Resources Annual Report 2018 for the year ended 30 June 2018
(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
16.67%
• fixtures and fittings
22.5% - 40%
•
leasehold improvements
20%
• plant and equipment
22.5% - 40%
• motor vehicles
20%
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
(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.
31
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) Investments and other financial assets
Classification
The Group classifies its financial assets in the following categories:
• financial assets at fair value through profit or loss,
•
loans and receivables,
• held-to-maturity investments, and
•
available-for-sale financial assets.
The classification depends on the purpose for which the investments were acquired. Management determines the classification of its
investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of
the each reporting period. See note 8 for details about each type of financial asset.
Reclassification
The Group may choose to reclassify as a non-derivative trading financial asset out of the held for trading category if the financial asset
is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be
reclassified out of the held for trading category on in rare circumstances arising from a single event that is unusual and highly unlikely
to recur in the near term. In addition, the Group may choose to reclassify financial assets that would meet the definition of loans and
receivable out of the held for trading or available-for-sale categories if the Group has the intention and ability to hold these financial
assets for the foreseeable future or until maturity at the date of reclassification.
Reclassification are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable,
and no reversals of fair value gains or losses recorded before reclassification date ore subsequently made. Effective interest rates
for financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date.
Further increases in estimates of cash flows adjust effective interest rates prospectively.
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or
sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive
income are reclassified to profit or loss as gains and losses from investments securities.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in profit or loss.
Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest
method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains
or losses arising from changes in the fair value are recognised as follows:
•
•
for ‘financial assets at fair value through profit or loss’ – in profit or loss within other income or other expenses.
for available-for-sale financial assets that are monetary securities denominated in a foreign currency – translation differences
related to changes in the amortised cost of the security are recognised in profit or loss and other changes in the carrying
amount are recognised in other comprehensive income.
•
for other monetary and non-monetary securities classified as available-for-sale – in other comprehensive income.
Dividends on financial assets at fair value through profit or loss and available-for-sale equity instruments are recognised in profit or
loss as part of revenue from continuing operations when the Group’s right to receive payments is established.
Interest income from financial assets at fair value through profit or loss is included in the net gain/(losses). Interest on available-for-
sale securities, held-to-maturity investments and loans and receivables calculated using the effective interest method is recognised in
the statement of profit or loss as part of revenue from continuing operations.
Details on how the fair value of financial instruments is determined are disclosed in note 8.
32
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or Group of financial
assets is impaired. A financial asset or a Group of financial assets is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one more events that occurred after the initial recognition of the asset (a ‘loss event’)
and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Group of financial assets that
can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the
fair value of the security below its cost is considered an indicated that the assets are impaired.
Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised profit or loss. If
a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of
an instrument’s fair value using an observable market price.
If, in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously
recognised impairment loss is recognised in profit or loss.
Impairment testing of trade receivables is described in note 7.
Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit
or loss – is removed from equity and recognised in profit loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent
period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively
related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through 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.
33
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
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.
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.
34
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
(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 buy back, 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.
(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 year ended 30 June 2018. 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 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. 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.
The impact of this adoption is currently being reviewed by the Group however, the impact has not yet been quantified.
There will be no change to the classification of available for sale assets which will continue to be classified as current or non-current
assets unless management intends to dispose of them which would be recognise in other comprehensive income.
AASB 16 Leases
AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased term) and a financial
liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not
significantly change.
The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-
cancellable operating lease commitments of $245,404, see note 22. However, the Group has not yet determined to what extent these
commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group’s loss and
classification of cash flows.
Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate
to arrangements that will not qualify as leases under AASB 16.
The application of this standard is mandatory on or after 1 January 2019. At this stage the Group does not intend to adopt the
standard before its effective date.
35
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (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. The impact of this standard will be not applicable as the Group does not have revenue from contracts with customers.
36
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
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.
2018
Financial Instruments
Floating
interest
rate
$
Fixed interest
rate maturing
in 1 year or less
$
Fixed interest
rate maturing
between 1 and 2
years
$
Non-interest
bearing
$
Total
$
(i) Financial assets
Available cash on hand
1,912,527
7,014,097
Restricted cash
Other receivables
195,000
-
-
-
Total financial assets
2,107,527
7,014,097
(ii) Financial liabilities
Trade and other payables
Total financial liabilities
-
-
-
-
-
-
-
-
-
-
6,099,495
15,026,119
153,889
348,889
-
-
6,253,384
15,375,008
546,786
546,786
546,786
546,786
2017
Financial Instruments
Floating
interest
rate
$
Fixed interest
rate maturing
in 1 year or less
$
Fixed interest
rate maturing
between 1 and
2 years
$
Non-interest
bearing
$
Total
$
(i) Financial assets
Available cash on hand
2,574,633
8,500,000
Restricted cash
Other receivables
195,000
-
-
-
Total financial assets
2,769,633
8,500,000
(ii) Financial liabilities
Trade and other payables
Total financial liabilities
-
-
-
-
-
-
-
-
-
-
6,426,374
17,501,007
111,061
306,061
-
-
6,537,435
17,807,068
476,819
476,819
476,819
476,819
Weighted
average
effective
interest rate
%
2.31%
2.51%
Weighted
average
effective
interest rate
%
1.46
2.63
-
-
37
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED)
Net Fair Values
The net fair value of financial assets and liabilities approximate carrying values due to their short term nature.
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 2018
$
30 June 2017
$
(16,739)
16,739
(100,206)
100,206
(247,932)
247,932
(234,504)
234,504
The Group holds foreign currency cash in Euro, US Dollar and Swedish Krona to operate in Finland, Sweden and the United States. It
also has foreign currency receivables and payables in these countries which are exposed to foreign currency fluctuations. The Group
manages its foreign exchange risk and exposure by purchasing foreign currency for the following budget year and reviews forecasted
exchange rates by various banks on a monthly basis. The Group’s exposure to foreign currency risk at the end of the reporting year,
expressed in Australian dollar, was as follows:
Year ended 30 June 2018
Cash on hand
Restricted cash
Other receivables
EUR
$
USD
$
2,817,022
3,211,515
17,170
4,632
41,625
-
SEK
$
70,800
14,861
4,342
Total
$
6,099,037
73,656
8,974
Trade and other payables
(288,972)
(23,622)
(63,695)
(376,289)
2,549,852
3,229,518
26,308
5,805,378
EUR
$
USD
$
SEK
$
Total
$
4,100,224
2,069,950
255,700
6,425,874
16,186
13,047
(92,497)
-
-
-
4,036,960
2,069,950
15,262
33,347
(69,100)
235,209
31,448
46,394
(161,597)
6,342,119
Year ended 30 June 2017
Cash on hand
Restricted cash
Other receivables
Trade and other payables
38
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Amounts recognised in profit or loss and other comprehensive income
During the year 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 year
2018
$
2017
$
209,139
209,139
(84,143)
(84,143)
Net gains/(losses) recognised in other comprehensive income
Translation of foreign operations
102,379
9,499
Sensitivity
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 Euro, US dollar and Swedish Krona denominated financial instruments and the
impact on other components of equity arises from translation of foreign operations.
Impact on post tax loss
$
Impact on other
components of equity
$
(109,316)
109,316
(128,728)
128,728
(305,303)
305,303
550
(550)
(3,895)
3,895
(12,447)
12,447
EUR/$ exchange rate – increase 10%*
EUR/$ exchange rate – decrease (10%)*
USD/$ exchange rate – increase 10%*
USD/$ exchange rate – decrease (10%)*
SEK/$ exchange rate – increase 10%*
SEK/$ exchange rate – decrease (10%)*
*Holding all other variables constant
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 year ended 30 June 2018, the Group had no contractual financial liabilities.
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.
39
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED)
Price risk
Exposure
The Group’s exposure to equity securities price risk arises from investments held by the Group and classified in the statement of
financial position as available-for-sale (see note 8). The Group’s investment is publicly traded on the Toronto Stock Exchange Venture
Exchange (“TSXV”) and Australian Stock Exchange (“ASX”).
The Group is not currently exposed to commodity price risk.
Sensitivity
The table below summarises the impact of increases/decreases of the investment’s share price on the Group’s equity and post-tax
loss for the year. The analysis is based on the assumption that the investment’s share price had increased or decreased by 10% with
all other variables held constant, and that the Group’s equity instrument moved in line with the indexes.
Impact on post
tax loss
Impact on post
tax loss
Impact on other
components of equity
Impact on other
components of equity
2018
2017
$
-
-
-
-
$
-
-
-
-
2018
$
(91,086)
91,086
(740,000)
740,000
2017
$
118,869
(118,869)
-
-
TSXV index – increase 10%
TSXV index – decrease (10%)
ASX index – increase 10%
ASX index – decrease (10%)
There would be no impact on post tax loss as the Group does not recognise any financial assets at fair value through profit or loss.
Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as available-for-sale.
As the fair value of the available-for-sale financial assets would still be above cost, no impairment loss would be recognised in profit
or loss as a result of the decrease in the index.
Amounts recognised in statement of profit or loss and other comprehensive income
The amounts recognised in profit or loss and other comprehensive income in relation to the investments held by the Group are
disclosed in note 8.
40
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 3. SEGMENT INFORMATION
For management purposes, the Group has three reportable segments as follows:
•
•
Finland exploration activities, which includes exploration and evaluation of mineral tenements in Central Lapland.
Sweden exploration activities, which includes exploration and evaluation of mineral tenements in Skellefte.
• US exploration activities, which includes exploration and evaluation of mineral tenements in Nevada.
• Australia exploration activities, which includes exploration and evaluation of mineral tenements in Western 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.
Segment results
Statement of profit or loss for the
year ended 30 June 2018
Other income
Corporate expenses
Business Development
Depreciation expense
Share-based payments
Gain on disposal of available for sale
financial assets
Gain on disposal of WA Gold Projects
Other gain/(losses) - net
Exploration expenditure expensed
$
Finland
Sweden
US
Australia
Unallocated
Total
exploration
activities
exploration
activities
exploration
activities
exploration
activities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
213,899
213,899
(1,268,537)
(1,268,537)
(748,961)
(748,961)
(168,545)
(168,545)
(876,753)
(876,753)
1,893,669
1,893,669
5,919,557
5,919,557
209,139
209,139
as incurred
(1,093,154)
(3,053,031)
(1,282,779)
(430,623)
Exploration impairment expense
-
(1,033,028)
(57,292)
-
-
-
(5,859,587)
(1,090,320)
Loss before income tax
(1,093,154)
(4,086,059)
(1,340,071)
(430,623)
5,173,468
(1,776,439)
Income tax expense
-
-
-
-
102,536
102,536
Loss after income tax for the year
(1,093,154)
(4,086,059)
(1,340,071)
(430,623)
5,276,004
(1,673,903)
41
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 3. SEGMENT INFORMATION (CONTINUED)
Statement of profit or loss
for the year ended 30 June 2017
$
Finland
Sweden
US
Australia
Unallocated
Total
exploration
exploration
exploration
exploration
activities
activities
activities
activities
Other income
Corporate expenses
Business Development
Depreciation expense
Share-based payments
Other gain/(losses) - net
-
-
-
-
-
-
-
-
-
-
-
-
Exploration expenditure expensed
as incurred
Loss before income tax
Income tax expense
(453,775)
(3,002,571)
-
-
Loss after income tax for the year
(453,775)
(3,002,571)
Segment assets and liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
428,459
428,459
(1,772,618)
(1,772,618)
(316,669)
(154,050)
(316,669)
(154,050)
(2,870,328)
(2,870,328)
(84,833)
(84,833)
(1,522,644)
-
(4,978,990)
-
(271,573)
(271,573)
(1,522,644)
(5,041,612)
(10,020,602)
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 2018
$
30 June 2017
$
213,899
428,459
42
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Statement of profit or loss
for the year ended 30 June 2017
Other income
Corporate expenses
Business Development
Depreciation expense
Share-based payments
Other gain/(losses) - net
as incurred
Loss before income tax
Income tax expense
Exploration expenditure expensed
Finland
Sweden
US
Australia
Unallocated
Total
exploration
exploration
exploration
exploration
activities
activities
activities
activities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
428,459
428,459
(1,772,618)
(1,772,618)
(316,669)
(154,050)
(316,669)
(154,050)
(2,870,328)
(2,870,328)
(84,833)
(84,833)
(271,573)
(271,573)
(453,775)
(3,002,571)
(1,522,644)
-
(4,978,990)
$
-
-
-
-
-
-
-
-
-
Loss after income tax for the year
(453,775)
(3,002,571)
(1,522,644)
(5,041,612)
(10,020,602)
NOTE 5. INCOME TAX
Recognised in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Current tax (1)
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 27.5%
Income tax expense for overseas entities
Increase in income tax due to:
Non-deductible expenses
Current year tax losses not recognised
Current tax on profits for the year
Decrease in income tax due to:
Movement in unrecognised temporary differences
Tax losses utilised during the year
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following:
Previous year tax losses brought forward
Tax revenue losses (2)
30 June 2018
$
30 June 2017
$
271,573
(169,037)
(271,573)
-
-
102,536
(271,573)
(1,776,438)
1,025,898
(2,581,474)
252,947
2,581,474
102,536
993,502
(2,272,347)
(102,536)
3,645,300
3,016,543
6,661,843
(9,749,028)
(1,717,274)
(735,943)
872,898
1,780,405
-
(471,660)
-
271,573
1,864,894
1,780,405
3,645,300
(1) The Group had estimated an income tax expense resulting from of a transfer of assets on 31 October 2016 between its Swedish
subsidiaries being Sakumpu Exploration Filial and S2 Sverige AB. For tax purposes, this transfer was considered a sale between
the two entities and a profit was made by Sakumpu Exploration Filial, despite the fact that they are both wholly owned subsidiaries
of the same parent. This profit is subject to tax under Swedish and Finnish tax laws and regulations as Sakumpu Exploration
Filial (“the Branch) is registered in Sweden and is owned by Sakumpu Exploration Oy (registered in Finland). The tax return for
the Sakumpu entities was completed during the financial year end 30 June 2018 however the tax payable provision provided of
$271,573 for the financial year 30 June 2017 was over provided due to the under estimation of losses incurred by the entities.
For the financial year end 30 June 2018, the Sakumpu entities incurred an income tax benefit for the financial year end 30 June 2018
of $102,536 and this comprised of:
Income tax paid during the financial year end 30 June 2018
Tax credit owing from the Finnish tax authorities*
Exchange differences
Net Tax Payable
Less Tax Provision 30 June 2017
Income Tax Benefit 30 June 2018
$421,597
($249,570)
($2,990)
$169,037
($271,573)
($102,536)
*The tax credit owing from the Finnish tax authorities represents the profit earned in Sweden (ie. the profit earned by the Branch) to
avoid double taxation for the Finnish entity.
(2) 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.
43
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
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
Income Tax Receivable (1)
Other
30 June 2018
$
30 June 2017
$
15,026,119
17,501,007
348,889
306,061
15,375,008
17,807,068
30 June 2018
$
30 June 2017
$
16,559
13,508
50,612
252,560
70,519
403,758
64,228
33,998
117,010
-
12,229
227,465
(1) Please refer to note 5 for more information on the Income Tax Receivable.
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.
44
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets include the following classes of assets:
Non-current assets
Canadian listed equity securities (1)
ASX listed equity securities (2)
30 June 2018
$
30 June 2017
$
910,859
1,188,689
7,400,000
-
8,310,859
1,188,689
(1) During the financial year ended 30 June 2017, the Group invested C$1 million in TSXV listed gold explorer GT Gold (TSXV: GTT) via a
placement of 3.125 million shares at C$0.32 cents per share. During the financial year, the Group sold 2,125,000 GT Gold shares and
have a 1,000,000 shares remaining as at 30 June 2018. The total cash received for the sale of shares was $2,574,078 and the gain on
sale was $1,893,669.
(2) As per the ASX announcement on 13 February 2018, Westgold issued 4,000,000 shares at $1.52 per shares to the Company for
the consideration of the WA Gold Projects. These shares have a voluntary six month escrow period starting from 23 February 2018.
Classification of financial assets as available-for-sale
Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable
payments, and management intends to hold them for the medium to long term. Financial assets that are not classified into any of the
other categories (at fair value profit or loss, loans and receivables or held-to-maturity investments) are also included in the available-
for-sale category.
The financial assets are presented as non-current assets unless they mature, or management intends to dispose of them within 12
months of the end of the reporting period.
Impairment indicators for available-for-sale financial assets
A security is considered to be impaired if there has been a significant or prolonged decline in the fair value below its cost. See note 1
(n) for further details about the Group’s impairment policies for financial assets.
Amounts recognised in profit or loss
During the year, the following gains were recognised in the profit or loss and other comprehensive income.
Gain on disposal of available for sale financial assets (1)
Gains/(losses) recognised in other comprehensive income
30 June 2018
$
30 June 2017
$
1,893,669
1,722,579
-
188,088
(1) During the financial year ended 30 June 2018, the Group sold 2,125,000 shares in TSXV listed gold explorer GT Gold and has
1,000,000 shares in the company remaining.
Available-for-sale financial assets include the following classes of assets:
Fair value, impairment and risk exposure
Information about the Group’s exposure to price risk is provided in note 2. None of the available-for-sale financial assets are either
past due or impaired. The fair value of financial instruments traded in active markets is based on quoted market prices at the end of
the reporting period. All available-for-sale financial assets are denominated in Australian dollar. For an analysis of the sensitivity of
available-for-sale financial assets to price risk refer to note 2.
45
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 9. DISPOSAL OF WA GOLD PROJECTS
On 13th February 2018, the Group entered into a Heads of Agreement (“HOA”) with Westgold to sell its interest in the Polar Bear
Project (100%), Eundynie Joint Venture (80%) and the Norcott Project (100%) (together, the “WA Gold Projects”) via the sale of all of
the shares in S2’s wholly owned subsidiary Polar Metals Pty Ltd (“Sale”) for A$3 million cash and 4 million Westgold shares. The sale
completed on 23rd February 2018.
Details of the sale of the subsidiary are as follows:
Consideration received
Cash*
Westgold shares 4,000,000 at $1.52per share
Total disposal consideration
Less:
Transaction costs
Carrying amount of net assets sold**
Gain on disposal of WA Gold Projects
$
3,000,000
6,080,000
9,080,000
(508,479)
(2,651,964)
5,919,557
*The cash received for this transaction less cost of sale of $170,563 was $2,829,437.
**The carrying amount of assets and liabilities for Polar Metals Pty Ltd as at the date of sale 13 February 2018 of $2,651,964 only
consisted of the exploration asset.
46
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 10. EXPLORATION AND EVALUATION
Exploration costs
Movement during the year
Balance at beginning of the year
Exploration expenditure incurred during the year
Exploration expenditure incurred during the year and expensed (i)
Exploration expenditure relating to acquisitions (ii)
Exploration impairment expense (iii)
Disposal of WA Gold Projects (see note 9)
Balance at end of the year
30 June 2018
$
30 June 2017
$
1,083,153
4,650,820
4,650,820
5,860,731
3,335,880
6,293,930
(5,859,587)
(4,978,990)
173,473
(1,090,320)
(2,651,964)
-
-
-
1,083,153
4,650,820
(i) During the year ended 30 June 2018 the exploration expenditure incurred pertains to the following:
Australian Projects
The total exploration expenditure expensed for the Baloo, Nanook, Polar Bear, Eundynie JV and Norcott projects was $430,623. These
projects were owned by the Group’s subsidiary Polar Metals Pty Ltd which was sold to Westgold Resources Limited on 13 February
2018 as described in note 9.
Finland Project
Exploration expenditure incurred and expensed for Finland was $1,093,154.
Sweden Project
Exploration expenditure incurred and expensed for Sweden was $3,053,031.
US Projects
Exploration expenditure incurred and expensed for the following projects in the US were:
•
South Roberts $678,922.
• Pluto $397,395
•
Ecru $206,462
(ii) During the year ended 30 June 2018, the Group entered into a joint venture with Renaissance Gold Inc (“Rengold”), a TSXV listed
company to earn in to three of RenGold’s properties located on some of the major known gold mineralised trends in Nevada, USA.
The properties were South Roberts, Pluto and Ecru and each property had an initial investment of US$25,000. The total cost of
acquiring these projects including transaction costs was $173,473.
(iii) The Group had made a decision to impair the Swedish exploration asset of $1,033,028 due to its change in focus and resources
from Sweden to other opportunities available to the Company. The Company still retains tenure in Sweden.
The Group also made a decision to withdraw from the Pluto Project and therefore made an impairment expense of $57,292. This
decision would result in the Group not earning into the Pluto joint venture with Rengold.
47
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Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 12. TRADE AND OTHER PAYABLES
Trade and other payables (i)
30 June 2018
$
30 June 2017
$
546,786
476,819
(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.
NOTE 13. PROVISIONS
Current
Employee benefits (1)
Income Tax Payable (2)
Carrying amount at start of the year
Provisions made during the year
Carrying amount at end of the year
30 June 2018
$
30 June 2017
$
60,521
-
60,521
338,413
(277,892)
60,521
66,840
271,573
338,413
47,952
290,461
338,413
(1) Employee benefits are provided for all employees of the Group in line with their employment contracts and the balance for
the year ended 30 June 2018 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.
(2) During the financial year ended 30 June 2018, the Group paid an income tax payable for its subsidiary, Sakumpu Exploration Oy,
however a credit is due as at 30 June 2018 from the Finnish Tax authorities. This credit has been disclosed as a receivable in note
7. For further information in relation to this credit, please refer to note 5.
50
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 14. SHARE CAPITAL
Ordinary shares fully paid
Movement in Share Capital
Ordinary shares fully paid
30 June 2018
No. of Shares
30 June 2018
$
30 June 2017
No. of Shares
30 June 2017
$
246,052,451
52,237,523
246,052,451
52,237,523
Balance at beginning of year
246,052,452
52,237,523
215,801,278
40,728,688
Placement at $0.40 per share for cash
-
-
30,201,174
12,080,470
Shares issued at $0.17 per share*
1,862,727
315,000
Options exercised at $0.31
Cost of issues of shares
Balance at year end
-
-
-
-
247,915,179
52,552,523
246,052,452
-
50,000
-
-
15,500
(587,135)
52,237,523
*The share price of $0.16910691 has been rounded to two decimal points.
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.
NOTE 15. RESERVES
Share-based payments reserve (i)
Other reserve (ii)
Foreign currency translation reserve (iii)
Acquisition reserve (iv)
Revaluation reserve (v)
30 June 2018
$
30 June 2017
$
7,786,606
6,909,853
144,517
131,223
1,910,667
9,973,013
144,517
28,844
(15,214,601)
188,088
(7,943,299)
(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 Sirius Europa Pty Ltd and
Polar Metals Pty Ltd. Due to the sale of Polar Metals Pty Ltd, the amount of $14,362,583 has been transferred to retained earnings
to reflect the subsidiary leaving the Group and the remaining amount of $852,018 representing the purchase of Sirius Europa Pty
Ltd has been transferred to accumulated losses.
(v) The revaluation reserve recognises the change in fair value of available-for-sale financial assets. Please refer to note 8 of these
financials.
51
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 16. SHARE-BASED PAYMENTS
The following share-based payments arrangements were in existence during the current reporting year:
Options Series
Number
Grant Date
Expiry Date Exercise Price $
Fair value at
(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
(6) Issued at 28 April 2016
800,000
18/04/2016
17/04/2020
1,000,000
29/04/2016
28/04/2020
(7) Issued at 7 October 2016
11,950,000
07/10/2016
06/10/2020
(8) Issued 17 October 2017
11,150,000
17/10/2017
16/10/2021
Grant Date $
0.13
0.13
0.12
0.08
0.14
0.16
0.23
0.08
0.31
0.31
0.31
0.31
0.31
0.35
0.61
0.23
(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.
(7) The 11,950,000 options in series 7 comprised 6,500,000 options issued to the Directors of the Group which vested immediately,
2,700,000 options were issued to employees under the Employee Share Option Plan which vest one year from grant date and
2,750,000 options were 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.
(8) The 7,750,000 options in series 8 which vested immediately were issued to the Directors of the Group which vested immediately.
(9) The 3,400,000 options in series 9 comprised 2,950,000 options issued to employees under the Employee Share Option Plan which
vest one year from grant date and 450,000 options were 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.
52
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
The weighted average fair value of the share options granted during the year is $0.08.
The total expense of the share based payments for the year was:
Options issued under Directors Option Plan
Options issued under Employee Share Plan
Options issued under Service Provider Plan
30 June 2018
$
30 June 2017
$
642,717
196,717
37,319
876,753
1,518,037
710,045
642,246
2,870,328
The weighted average contractual life for options outstanding at the end of the year was 3.95 years.
Options were priced using a Black-Scholes option pricing model using the inputs below:
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest rate
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest rate
Series 1
Series 2
Series 3
Series 4
Series 5
0.21
0.31
100.00%
4 years
0.00%
3.10%
0.19
0.31
100.00%
4 years
0.00%
3.10%
0.19
0.31
100.00%
4 years
0.00%
3.10%
0.14
0.31
100.00%
4 years
0.00%
3.35%
0.22
0.31
100.00%
4 years
0.00%
3.26%
Series 6
Series 7
Series 8
Series 9
0.25
0.35
100%
4 years
0.00%
3.35%
0.44
0.61
80%
4 years
0.00%
2.87%
0.16
0.23
80%
4 years
0.00%
2.34%
0.23
0.23
80%
4 years
0.00%
2.34%
The following reconciles the outstanding share options granted in the year ended 30 June 2018:
30 June 2018
30 June 2018
30 June 2017
30 June 2017
No. of Options Weighted average
exercise price
$
No. of Options Weighted average
exercise price
$
Balance at the beginning of the year
40,350,000
0.36
31,900,000
Granted during the year
Exercised during the year
Expired during the year (i)
Balance at the end of the year
Un-exercisable at the end of the year
Exercisable at end of the year
11,150,000
-
(750,000)
50,750,000
3,150,000
47,600,000
(i) Options expired or cancelled during the year
0.23
-
0.40
0.35
0.23
0.36
11,950,000
(50,000)
(3,450,000)
40,350,000
2,750,000
37,600,000
0.31
0.61
0.31
0.53
0.38
0.55
0.36
For the year ended 30 June 2018, due to employee redundancies during the financial year, 450,000 employee share options 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.
53
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 17. DIVIDENDS
There were no dividends recommended or paid during the year ended 30 June 2018.
NOTE 18. KEY MANAGEMENT PERSONNEL DISCLOSURES
Short term employee benefits
Post-employment benefits
Long-term benefits
Share-based payment
Detailed remuneration disclosures are provided in the Remuneration Report.
30 June 2018
$
30 June 2017
$
631,081
44,960
14,281
667,596
1,357,918
651,814
47,829
26,661
1,658,162
2,384,466
NOTE 19. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH USED IN
OPERATING ACTIVITIES
Loss for the year
Depreciation
Equity Settled share-based payment transaction
Exploration expenditure written off
Income tax benefit
Other (gain)/losses – net
Gain on disposal of available for sale financial assets
Gain on disposal of WA Gold Projects
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in provisions
(Increase)/Decrease in receivables
30 June 2018
$
30 June 2017
$
(1,673,903)
(10,020,602)
168,545
876,753
1,090,320
(102,536)
(209,139)
(1,893,669)
(5,919,557)
69,967
(421,597)
145,172
154,050
2,870,328
-
271,573
84,833
-
-
(652,335)
(18,888)
19,641
Net cash outflow from operating activities
(7,869,644)
(7,291,400)
54
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 20. NON-CASH INVESTING AND FINANCING ACTIVITIES
During the financial year ended 30 June 2018, the Group acquired available for sale assets with a fair value of $6,080,000 as
consideration for the sale of the WA Gold Projects as per note 9. In relation the transaction costs of the sale, shares were issued at a
value of $315,000 in exchange for services provided. The share consideration and transaction costs are not reflected in the statement
of cashflows.
Consideration of shares from Westgold as per the sale of WA Gold Projects
Transaction costs in relation to the sale of WA Gold Projects – shares issued
NOTE 21. BASIC LOSS PER SHARE
30 June 2018
$
30 June 2017
$
6,080,000
(315,000)
-
-
30 June 2018
$
30 June 2017
$
(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
(1,673,903)
(10,020,602)
(b) Weighted average number of shares used as the Denominator
Number
Number
Ordinary shares used as the denominator in calculating basic loss per share
247,915,179
246,052,452
(c) Basic loss per share
Basic loss per share
Cents
(0.68)
Cents
(4.12)
Where loss per share is non-dilutive, it is not disclosed
NOTE 22. COMMITMENTS
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:
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
30 June 2018
$
30 June 2017
$
43,007
202,397
-
-
245,404
876,497
876,497
2,224,697
674,100
4,651,791
55
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 23. 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 year ended 30 June 2018.
NOTE 24. JOINT VENTURES
The Group has interests in the following joint venture operations:
Tenement Area
Activities
Eundynie
Eundynie
All metals excluding nickel
Nickel
2018
-
80%
2017
80%
80%
Due to the sale of Polar Metals Pty Ltd to Westgold Resources Limited as announced on 13 February 2018, the Group had sold all
metals rights (excluding nickel) for the Eundynie JV.
56
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 25. 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
Revaluation reserve
Accumulated losses
Total equity
Financial performance
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income
30 June 2018
$
30 June 2017
$
14,902,074
10,003,974
24,906,048
17,306,827
6,243,286
23,550,113
189,819
-
189,819
382,061
-
382,061
24,716,229
23,168,052
52,552,523
7,786,606
1,910,667
52,237,523
7,097,942
-
(37,533,567)
(36,167,413)
24,716,229
23,168,052
30 June 2018
$
(1,366,154)
1,722,578
356,424
30 June 2017
$
(30,320,368)
-
(30,320,368)
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
30 June 2018
$
30 June 2017
$
33,341
202,397
235,738
202,397
202,397
404,794
57
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTE 26. SUBSIDIARIES
Name of entity
Country of incorporation
Class of Shares
Equity Holding
Polar Metals Pty Ltd*
Sirius Europa Pty Ltd
Norse Exploration Pty Ltd
Sakumpu Exploration Oy
S2 Exploration Quebec Inc.
S2 Sverige AB
S2RUS Pty Ltd
S2RUS LLC
Nevada Star Exploration LLC
Australia
Australia
Australia
Finland
Canada
Sweden
Australia
United States
United States
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
2018
0%
100%
100%
100%
100%
100%
100%
100%
100%
*Polar Metals Pty Ltd was sold to Westgold Resources Limited during the financial year end 30 June 2018. Please refer to note 9 for
details of this transaction.
NOTE 27. EVENTS OCCURRING AFTER THE REPORTING YEAR
Other than the after balance date events stated above, there has been no matter or circumstance that has arisen since 30 June 2018
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 28. REMUNERATION OF AUDITORS
During the year 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 2018
$
30 June 2017
$
38,482
38,482
36,970
36,970
58
S2 Resources Annual Report 2018 Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Directors Declaration
The Directors of the Group declare that:
1. The financial statements and notes as set out on pages 20 to 58 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 2018 and of its performance for the year
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 year have been properly maintained in accordance with section 286
of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with the accounting standards; and
(c)
the financial statements and notes for the financial year 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
11 September 2018
59
Declaration of Independence
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF S2 RESOURCES LIMITED
As lead auditor of S2 Resources Limited for the year ended 30 June 2018, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of S2 Resources Limited and the entities it controlled during the period.
Jarrad Prue
Director
BDO Audit (WA) Pty Ltd
Perth, 11 September 2018
INDEPENDENT AUDITOR'S REPORT
To the members of S2 Resources Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of S2 Resources Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2018, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
declaration.
Act 2001, including:
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
with the Code.
time of this auditor’s report.
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
60
S2 Resources Annual Report 2018 Independent Auditor’s Report
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of S2 Resources Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of S2 Resources Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2018, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
61
Independent Auditor’s Report (Continued)
Carrying value of exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
The carrying value of the capitalised exploration
and evaluation asset as at 30 June 2018 was
disclosed in Note 10.
As the carrying value of the capitalised
exploration and evaluation asset represents a
significant asset of the Group, we considered it
necessary to assess whether any facts or
circumstances exist to suggest that the carrying
amount of this asset may exceed its recoverable
amount.
Judgement is applied in determining the
treatment of exploration expenditure in
accordance with Australian Accounting Standard
AASB 6 Exploration for and Evaluation of Mineral
Resources. In particular:
(cid:120)(cid:65535) (cid:65535) (cid:65535) (cid:65535) (cid:65535)
Whether the conditions for capitalisation
are satisfied;
(cid:120)(cid:65535) (cid:65535) (cid:65535) (cid:65535) (cid:65535)
Which elements of exploration and
evaluation expenditures qualify for
recognition; and
(cid:120)(cid:65535) (cid:65535) (cid:65535) (cid:65535) (cid:65535)
Whether facts and circumstances indicate
that the exploration and expenditure
assets should be tested for impairment.
Our procedures included, but were not limited
to:
•
•
•
•
•
•
Obtaining a schedule of the areas of
interest held by the Group and assessing
whether the rights to tenure of those
areas of interest remained current at
balance date;
Verifying, on a sample basis, exploration
and evaluation expenditure capitalised
during the year for compliance with the
recognition and measurement criteria of
AASB 6;
Considering the status of the ongoing
exploration programmes in the
respective areas of interest by holding
discussions with management, and
reviewing the Group’s exploration
budgets, ASX announcements and
director’s minutes;
Considering whether any such areas of
interest had reached a stage where a
reasonable assessment of economically
recoverable reserves existed;
Considering whether any facts or
circumstances existed to suggest
impairment testing was required; and
Assessing the adequacy of the related
disclosures in Note 10 to the Financial
Statements.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in the Financial Report for the year ended 30 June 2018, but does not include
the financial report and our auditor’s report thereon, which we obtained prior to the date of this
auditor’s report, and the Annual Report to Shareholders, which is expected to be made available to us
after that date.
62
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
When we read the Annual Report to Shareholders, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the directors and will request that it is
corrected. If it is not corrected, we will seek to have the matter appropriately brought to the
attention of users for whom our report is prepared.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 15 of the directors’ report for the
year ended 30 June 2018.
S2 Resources Annual Report 2018 Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
When we read the Annual Report to Shareholders, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the directors and will request that it is
corrected. If it is not corrected, we will seek to have the matter appropriately brought to the
attention of users for whom our report is prepared.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 15 of the directors’ report for the
year ended 30 June 2018.
63
Independent Auditor’s Report (Continued)
In our opinion, the Remuneration Report of S2 Resources Limited, for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Jarrad Prue
Director
Perth, 11 September 2018
64
S2 Resources Annual Report 2018 Additional ASX Information
The shareholder information set out below was applicable as at the dates specified.
Unlisted Securities
Options (Current as at 11 September 2018)
Number on issue
Number of
holders
Options expiring 14 September 2019 at an exercise price of $0.31
28,500,000
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
Options expiring 6 October 2020 at an exercise price of $0.61
Options expiring 17 October 2021
Option expiring 20 October 2021
400,000
400,000
400,000
10,150,000
7,750,000
3,150,000
15
1
1
2
16
4
10
Holders of over 20% of unlisted securities
There are the following holders of more than 20% of unlisted securities as at 11 September 2018:
Mark Bennett
Anna Neuling
Number held
19,500,000
11,500,000
Distribution of Equity Securities (Current as at 11 September 2018)
Analysis of numbers of ordinary shareholders by size of holding:
1
1,001
5,001
10,001
100,001
-
-
-
-
and over
1,000
5,000
10,000
100,000
Number of Shareholders
2,015
1,233
482
892
235
4,857
There are 3,147 holders holding less than a marketable parcel of ordinary shares based on the closing market price as at 11
September 2018.
65
Additional ASX Information (Continued)
Substantial Holders (Current as at 11 September 2018)
Substantial holders of equity securities in the Company are set out below:
Ordinary Shares
Name
Number held
Percentage of issued shares
Mark Gareth Creasy, Yandal Investments Pty Ltd, Ponton Minerals
73,175,881
29.75%
Pty Ltd, Lake Rivers Gold Pty Ltd and Free CI Pty Ltd
Ordinary Shares subject to escrow (Current as at 11 September 2018)
There are zero ordinary shares subject to either regulatory or voluntary escrow.
Equity Security Holders (Current as at 11 September 2018)
The names of the twenty largest holders of quoted equity securities (ordinary shares) are listed below:
Rank
Name
Units
% of Units
YANDAL INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
PONTON MINERALS PTY LTD
FREE CI PTY LTD
LAKE RIVERS GOLD PTY LTD
BT PORTFOLIO SERVICES LIMITED
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