ANNUAL
REPORT
2020
Annual Report 2020
Corporate Directory
Directors
Mark Bennett
Executive Chairman
Anna Neuling
Executive Director
Jeff Dowling
Non – Executive Director
Company Secretary
Anna Neuling
Registered Office
Share Register
Auditor
4/24 Parkland Road
Osborne Park WA 6017
Telephone:
Facsimile:
+61 8 6166 0240
+61 8 6270 5410
Computershare Investor Services Pty Limited
Level 2, 45 St Georges Terrace
Perth WA 6000
Telephone: 1300 787 575
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Telephone: 08 6382 4600
Stock Exchange Listing
S2 Resources Ltd’s shares are listed on the Australian Securities
Exchange (ASX).
ASX code: S2R
Website Address
www.s2resources.com.au
Annual Report 2020
Contents Page
Chairman’s Review
Operations Review
Directors Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Declaration of Independence
Independent Auditor’s Report
Additional ASX Information
Competent Persons Statement
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Annual Report 2020
Chairman’s Review
The year ending June 2020 was a turbulent one for the world and was not without
consequence for S2. The Covid-19 pandemic impacted our exploration programs through the
curtailment of overseas activities but also presented an opportunity to accelerate our
intended strategy to pivot our focus more towards Australia. To this end, we withdrew from
our one remaining project in Nevada, deferred our Finnish activities, and the final three
months of the year were spent identifying and acquiring new ground positions in Western
Australia.
Our response to the Covid-19 pandemic also included a number of initiatives to cut costs, such
as a 40% reduction in salaries and director’s fees and a temporary closure of the Perth office.
As part of these measures the board was also restructured with non-executive chairman Jeff
Dowling moving to a non-executive director role, and managing director Mark Bennett moving
to the executive chairman role. As part of this process, non-executive director Grey Egerton-
Warburton stepped off the board. I would like to take this opportunity to acknowledge and
thank Grey for his valuable contributions during his time with S2.
Fraser Range
In the first half of the year four blocks of ground became available in the otherwise tightly held
Fraser Range as a result of compulsory statutory relinquishments by third parties. Competition
for these was fierce so a ballot was held in which S2 won three out of the four blocks to be
sole applicant. Two of these were granted in January 2020 and initial reconnaissance work
commenced shortly thereafter. Subsequent to the year’s end, S2 has defined a strong EM
anomaly on one of these, and is awaiting grant of the third exploration licence. This is the first
opportunity the Company has had to be able to return to the Fraser Range since the takeover
of S2’s precursor, Sirius Resources, by IGO in 2015.
New WA nickel-copper-PGE targets
The Company also used this period to identify and apply for two large nickel-copper-PGE
targets in Western Australia following the revelation of the prospectivity of the western
margin of the Yilgarn craton as a result of the Julimar discovery by Chalice Gold Mines. Work
commenced on these late in the year.
Polar Bear
Additional drilling at the Polar Bear project where S2 owns the nickel rights also extended the
Gwardar nickel prospect, intersecting further disseminated and minor massive nickel sulphide
mineralisation in a steeply plunging ultramafic lava flow. This zone remains open and untested
down plunge.
Finland
In Finland, our systematic exploration approach identified a number of new gold and nickel
targets. Drilling of some of the gold targets has delivered technical successes but not a home
run - yet. Meanwhile, we are waiting for objections to the grant of an exploration licence over
our Ruopas nickel target to be heard and hope to test this in the 2021 year.
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Annual Report 2020
Corporate
We have continued with disciplined technical and strategic management of our exploration,
selective investment, and prudent financial management to ensure we remain well funded to
explore aggressively whilst minimising dilution of our share capital. An example of this is in
Nevada, where we were prepared to walk from the Ecru project in Nevada where, despite the
prospectivity being encouraging, the cost and risk was considered a poor fit with our strategy.
Another example of this is our investment in ASX-listed explorer Todd River Resources
(ASX:TRT). S2 is the largest shareholder in TRT, with which it also has a sublease and services
agreement. This has the dual benefit of exposing S2 to any upside in TRT and defraying
overhead costs via the sharing of office space and personnel.
In summary, our aim remains the same. It is to make substantial discoveries capable of having
a significant impact on the value of the company. We have the capability and the track record
of finding these and developing them into mines should they be financially robust, technically
low risk and in stable jurisdictions, but we are also prepared to monetise these should they be
deemed financially marginal and/or technically risky rather than persist with opportunities
that can become a management diversion and an opportunity cost.
Although we have not yet made that company making discovery, we continue to diligently
work towards that end. I sincerely thank our loyal shareholders for their patience and look
forward to a successful 2021.
Mark Bennett
Executive Chairman
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Annual Report 2020
Operations Review
Fraser Range, Western Australia (S2 100%)
In January 2020, the Department of Mines, Industry Regulation and Safety (DMIRS) granted
two exploration licences within the Fraser Range nickel province. These tenements represent
two of the three S2 exploration licence applications that were awarded to S2 in a DMIRS ballot
process. They are located 80 kilometres northeast of the Nova nickel mine and cover
approximately 179 square kilometres.
S2 has completed geological prospecting and passive seismic geophysical surveys as well as
an open file data search and a regional prospectivity review. This work confirms that the
granted tenements straddle the regional gravity anomaly that forms the axis of the Fraser
Range belt, and what is interpreted to be a prospective corridor containing mafic-ultramafic
granulites with a number of occurrences of magmatic nickel sulphides.
Subsequent to years end, S2 completed a moving loop electromagnetic (MLEM) survey over
tenement E28/2792, which has identified a discrete anomaly on the southeast flank of a
magnetic eye feature. Modelling of the MLEM data indicates the presence of a highly
conductive elongate body which dips steeply west over 160 metres and plunges moderately
to the northeast for a distance of 800 metres, commencing at approximately 200 metres
below surface. Very little is known about the underlying geology due to the presence of
extensive transported cover, and potential sources of the anomaly include nickel sulphide
mineralisation, barren (iron) sulphides, graphite bearing rock or even hypersaline water. A
MLEM survey has been undertaken on the second granted tenement, with the results still
being interpreted at the time of writing.
Diamond drilling of the conductor in E28/2792 will commence as soon as all drilling and
heritage approvals have been received.
Polar Bear, Western Australia (S2 100% nickel rights)
S2 holds the nickel rights over an area of 510 square kilometres to the southeast of the
Widgiemooltha and Kambalda nickel sulphide mining centres. The nickel rights area include
the Halls Knoll, Taipan and Gwardar nickel prospects, discovered by S2 and its precursor, Sirius
Resources.
S2 completed two follow-up diamond drilling at the Gwardar prospect at the start of 2020,
designed to test the down-dip extensions to the mineralisation within the prospective lava
channel. The drilling was successful with both holes intersecting multiple zones of
disseminated sulphides. Of particular interest was the presence of a broad zone of high tenor
disseminated mineralisation within a hangingwall flow position within the second hole.
Drilling to date has now defined a 100-metre thick nickel sulphide mineralised lava channel
comprising multiple mineralised flows over a strike with of 150 metres and at least 400 metres
plunge extent, with the channel remaining open at depth. The large volume of mineralised
ultramafic attests to the fertility and potential of this area, which is the southern strike
extension of the Widgiemooltha ultramafic package that hosts Mincor’s Cassini nickel mine to
the north.
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Annual Report 2020
West Murchison, Western Australia (S2 100% upon grant)
S2 has applied for three exploration licences, covering an area approximately 690 square
kilometres at the West Murchison project, located approximately 500 kilometres north of
Perth. The tenements cover portions of the Narryer Terrane on the northwest margin of the
Archaean Yilgarn Craton and are considered highly prospective for mafic/ultramafic intrusive
associated magmatic nickel-copper-cobalt-PGE style mineralisation on the basis of
interpreted, unexplored mafic-ultramafic intrusions within the granite-gneiss terrain, as
evidenced by aeromagnetic data and historic mapping.
A regional soil sampling program completed over one of these ultramafic intrusive bodies that
is not concealed by transported cover has identified a coincident nickel-copper anomaly with
a peak value of 550ppm copper and 1562ppm nickel. The anomaly remains open (unsampled)
to the east and corresponds with the southern margin of the ultramafic body that magnetic
data indicates extends a further kilometre eastward. Gold and PGE analysis has identified a
coherent and broad (+10 ppb) gold anomaly over two lines (400 metre spacing), as well as
isolated modest platinum and palladium, semi coincident with the nickel-copper anomaly.
Infill and extensional soil sampling has been collected with results still pending at the time of
writing.
This is the first of several magnetic anomalies, interpreted to represent ultramafic intrusions
within the exploration licence applications that will be subject to preliminary prospecting prior
to their grant, which is expected to be early in 2021.
Upon grant, a more extensive exploration program, including ground geophysics and
reconnaissance drilling will be undertaken over the priority targets.
Three Springs, Western Australia (S2 100% upon grant)
S2 has applied for two exploration licences, covering an area approximately 350 square
kilometres at the Three Springs project, located approximately 250 kilometres north of Perth,
within the northern Wheatbelt of Western Australia.
The project area was selected on the basis of interpreted mafic-ultramafic intrusions within a
predominately granite-gneiss terrain, immediately adjacent to the crustal scale Darling Fault,
that marks the western margin of the Archaean Yilgarn Craton.
historical government (Geological Survey of Western Australia) mapping indicates the area
has very limited bedrock exposure, but has identified a number of localised outcrops of mafic-
ultramafic intrusions and regional aeromagnetic imagery suggests that these may be much
more extensive than previously thought.
A regional exploration program,
including auger geochemical sampling and ground
electromagnetic surveys will commence once the tenements have been granted and land
access has been negotiated.
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Annual Report 2020
Finland (100% S2)
S2 holds a large area of the prospective Central Lapland Greenstone Belt (“CLGB”) of arctic
Finland (Lapland) under tenure via a mix of Exploration Licence applications and granted
Exploration Licences. These areas have not been extensively or effectively explored in the
past, despite the CLGB hosting significant gold and nickel-copper-cobalt-PGE deposits,
including Agnico Eagle’s 10 million ounce Kittilä gold mine, Boliden’s Kevitsa copper-nickel
mine and Anglo American’s Sakatti nickel-copper–platinum deposit.
On the Paana Central tenement, infill diamond drilling (80 metre x 40 metre) continued at the
Aarnivalkea prospect during the 2019 summer season to follow-up broad zones of strong
shearing, alteration and gold anomalism intersected on earlier on wide spaced reconnaissance
drilling. The infill drilling defined a southerly plunging zone of significant gold anomalism and
mineralisation associated with a steep east dipping shear zone containing strong alteration
within and adjacent to the sheared contacts of basalt and dacitic porphyries. The zone
remains open to the south, however planned extensional drilling had to be deferred due to
an unusually warm winter weather which prevented the swampy ground to freeze sufficiently
for drill rig access.
Regional base of till (BOT) drilling on the Paana Central tenement defined a new gold
mineralised trend approximately 2 kilometres east of Aarnivalkea, known as Aarni’ East.
Subsequent infill drilling defined a 1.2 kilometre-long, north-south striking zone of anomalous
gold-arsenic-antinomy-copper associated with strongly sheared and altered greenstones. The
structure is terminated to the south by a late fault, with its potential extension offset 1.5
kilometres to the northeast were BOT drilling intersected 10.7 g/t gold associated with
gossanous quartz veining.
S2 completed 13 shallow reconnaissance diamond holes to test the Aarni East BOT anomaly
during the 2020 summer period. The diamond drilling confirmed the shear zone responsible
for the BOT anomaly is a live structure, variably anomalous in gold, but a specific sweet spot
was not identified in the drilling.
At the Aakenusvaara Exploration Licence, results were received for the nine diamond drill
holes that S2 completed last year. A twin hole, drilled to verify earlier drilling, successfully
replicated the historical results. The remaining holes produced mixed results, however the
system remains open along strike and at depth, with the highest-grade interval from the S2
drilling intersected in the deepest drill hole drilled at Aakenusvaara to date. A high degree of
variability between repeat assays were observed, with subsequent testwork confirming the
presence of coarse nuggety gold within the system.
S2 had requested the fast track grant of a portion of the Ruopas Exploration Licence (“Ruopas
1”) application that covered a discrete electromagnetic conductor along strike from a >4km
long copper and nickel anomaly in historic BOT drilling associated with known ultramafic
rocks. Objections to the fast track grant of the Ruopas1 Exploration Licence were received by
TUKES (the Finnish mining authority), so drilling of the priority conductor is on hold pending
resolution of this objection.
S2 will continue to explore its CLGB tenure over the coming 12 months with the aim of
discovering significant lode gold or magmatic sulphide mineralization.
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Annual Report 2020
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 2020 (“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 (resigned 3rd April 2020)
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 2020 after providing for income tax amounted to
$7,475,048.
The loss results from $3,964,516 of exploration expenditure incurred and expensed, $68,172 of exploration impairment
expense, $806,194 of share-based payments expenses, $797,411 of administration costs, $913,392 of business
development costs including travel, $140,999 of depreciation costs, $136,540 of net income and other net gains, share
of our associate’s consolidated statement of loss being $1,494,960 and reversal of impairment of our associate’s
investment of $586,270. The exploration expenditure incurred and expensed mainly relates to the Company’s projects
in Finland and Australia.
During the year ended 30 June 2020, the Group withdrew from its Nevada project and have focused its exploration
activities in Finland and Australia.
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Annual Report 2020
Significant Changes in the State of Affairs
During the financial year ended 30 June 2020 the Group increased its investment in Todd River Resources Ltd (ASX:TRT),
from 19.99% to 22.99% in September 2019 (11,959,700 shares at $0.031 per share) and again to 30.62% in October 2019
(33,019,667 shares at $0.031 per share).The investment reduced to 30.52% in December 2019 due to a share issue in
relation to the acquisition of an exploration project by Todd River Resources Ltd.
During the financial year ended 30 June 2020, 1,000,000 remaining Westgold Resources Ltd shares were disposed of
and the Company received net proceeds of $1,841,779, the Company realised a gain of $321,769. For more
information in relation to the movement of the gain, please refer to note 8 of the financial report.
COVID 19
On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain
of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus
spreads globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the
WHO classified the COVID-19 outbreak as a pandemic.
The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain
as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of operations
during FY2021.
Management has actively managed the global situation and its impact on the Group's financial condition, operations, and
workforce. Due to the termination of flights, closures of borders and various measures being imposed by governments
in relation to the pandemic, the Group decided om 18 March 2020 that it is prudent to suspend its overseas exploration
activities and repatriate its Australian, Irish, French and Belgian personnel. This resulted in a temporary cessation of
exploration activities in Finland which restarted in July 2020 and an increased focus on Australian exploration which will
continue.
The Perth office was also closed from mid-March 2020 to June 2020 during which time, directors, employees and
consultants worked from home or exploration projects and a 40% salary reduction was in place for directors and
employees from April 2020 to June 2020.
The Group was eligible for Jobkeeper and lodged claims in relation to their eligible employees which resulted in a benefit
of $72,000 in the year to 30 June 2020. The Group also received a benefit of $100,000 of cash boost of which $50,000
was received in the year. The remaining $50,000 will be received between July and September 2020 upon lodgement of
the Group’s BAS returns.
Although the Group cannot fully estimate the length or gravity of the COVID-19 effect, from its initial assessment, the
impact over the next 12 months does not appear to be significant, indicating the entity will be able to continue as a going
concern.
After Balance Date Events
On 28 July 2020, the Group completed its placement by issuing 61,976,000 shares to institutional and sophisticated
investors at an issue price of $0.125 resulting in the Group having additional working capital of $7,747,000. The placement
was undertaken within the Group’s 25% capacity under ASX Listing Rule 7.1 and 7.1A and accordingly no shareholder
approval was required in connection with the equity raising.
No other matter or circumstance has arisen since the end of the financial year which significantly affected or may
significantly affect the operation of the Group, the results of those operations or the state of affairs of the Group in
subsequent financial years.
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Annual Report 2020
Likely Developments and Expected Results of Operations
The Group will continue its exploration activities in Australia and Finland for the foreseeable future. The Group will also
seek other exploration opportunities that will add value to the Group’s portfolio of assets.
Environmental Regulation
The Group’s operations are subject to environmental regulation under the laws of Finland, the Australian Commonwealth
and the State of Western Australia. The Board of Directors (“Board”) is of the view that all relevant environmental
regulation requirements have been met.
Information on Directors
Mark Bennett – Executive Chairman
Experience and Expertise
Dr Bennett was the managing director and CEO of Sirius Resources NL (“Sirius”) from its inception until its merger with
Independence Group NL, and was non-executive director of Independence Group following the merger until June 2016.
He is a geologist with 30 plus 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, 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 Executive Chairman,
Managing Director, Chief Executive Officer, Executive Director, Non-Executive Director, Exploration Manager and Chief
Geologist.
Dr Bennett 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, Dr Bennett is very experienced in corporate affairs, equity capital markets, investor
relations and community engagement and led Sirius from prior to the discovery of Nova through feasibility, financing,
permitting and construction, and through the schemes of arrangement to merge with Independence and to demerge S2.
Other Directorships
Non-Executive Director of Todd River Resources Ltd since 30 November 2018.
Former Directorships in the Last Three Years
Dr Bennett has had no directorships of any other public listed company in the last three years.
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Annual Report 2020
Number of interests in shares and options held in S2 Resources Ltd
Options
Shares
13,000,000
5,035,868
Jeff Dowling – Non- Executive Director
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 the Chairman 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 Director of Battery Minerals since 21 June 2019.
Former Directorships in the Last Three Years
Non-Executive Chairman of Battery Minerals from 25 January 2018 to 20 June 2019.
Number of interests in shares and options held in S2 Resources Ltd
Options
Shares
5,250,000
700,000
Anna Neuling – Executive Director
Experience and Expertise
Ms Neuling was the Company Secretary and Chief Financial Officer 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 is a member of the Group’s Audit & Risk Committee and Remuneration & Nomination Committee which was
formed on 19 July 2016.
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Annual Report 2020
Other Directorships
Ms Neuling has no directorships of other public listed companies.
Former Directorships in the Last Three Years
Ms Neuling 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
Shares
7,250,000
675,000
Grey Egerton-Warburton – Non-Executive Director until 3rd of April 2020
Experience and Expertise
Mr Egerton-Warburton is an experienced corporate financier, with a strong background in natural resources, having spent
16 years with Hartleys Limited, for many years 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.
Mr Egerton-Warburton 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, Mr Egerton-Warburton worked closely with Sirius Resources NL as its corporate advisor from mid-2012
until the completion of the merger between Sirius and Independence Group NL.
Mr Egerton-Warburton was 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 as at 3rd April 2020
Options
Shares
5,250,000
1,030,400
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Annual Report 2020
Meetings of Directors
The number of meetings of the Board and of each Board Committee held during the year ended 30 June 2020 and the
number of meetings attended by each Director were:
Directors’
Meetings
Audit & Risk
Committee
Remuneration &
Nomination
Committee
Name
Mark Bennett (i)
Anna Neuling
Jeff Dowling
Grey Egerton-Warburton (ii)
Meetings
attended
-
2
2
2
Mark Bennett is not a member of the Audit & Risk Committee or the Remuneration & Nomination Committee
Grey Egerton-Warburton resigned on 3 April 2020 and was not eligible to attend meetings after that date.
Meetings
attended
12
12
12
11
Meetings
attended
-
2
2
2
Meeting
Held
-
2
2
2
Meeting
Held
-
2
2
2
Meeting
Held
12
12
12
11
(i)
(ii)
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
1,000,000
9,050,000
7,750,000
2,650,000
2,700,000
50,000
18,000,000
400,000
200,000
Grant Date
07/10/2016
07/10/2016
17/10/2017
20/10/2017
28/11/2018
05/03/2019
12/11/2019
03/12/2019
27/08/2020
Expiry Date
Exercise Price $
06/10/2020
06/10/2020
16/10/2021
19/10/2021
27/11/2022
04/03/2023
11/11/2023
02/12/2023
26/08/2024
0.35
0.61
0.23
0.23
0.14
0.11
0.30
0.30
0.30
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.
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Annual Report 2020
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 – Executive Chairman
-
-
-
-
Anna Neuling – Executive Director and Company Secretary
Jeff Dowling – Non-Executive Director
Grey Egerton-Warburton – Non-Executive Director – resigned 3 April 2020
Su-Mei Sain – Chief Financial Officer – resigned 24 December 2019
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:
Principles used to determine the nature and amount of remuneration
1.
2. Details of remuneration
Service agreements
3.
Share-based compensation
4.
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:
competitiveness and reasonableness;
aligns shareholders and executive interests;
performance based and aligned to the successful achievement of strategic and tactical business objectives;
and
transparency.
Executive Directors
Remuneration to Executive Directors 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:
base pay;
share-based payments; and
other remuneration such as superannuation and long service leave.
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Annual Report 2020
1.PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION
(CONTINUED)
The combination of these comprises the Executive Director's total remuneration.
Fixed remuneration, consisting of base salary and superannuation will be reviewed annually by the Remuneration &
Nomination Committee, based on individual contribution to corporate performance and the overall relative position of
the Group to its market peers.
Non - Executive Directors
Remuneration to Non-Executive Directors reflects the demands which are made on, and the responsibilities of, the Non-
Executive Directors. Non-Executive Directors’ remuneration is reviewed annually. The maximum aggregate for
remuneration of Non-Executive Directors is $300,000 and was approved by shareholders prior to the demerger of the
Company from Independence Group NL (formerly Sirius Resources NL) on 21 September 2015.
From 1 July 2019 to 3 April 2020, exclusive of superannuation guarantee the annual cash remuneration for the Non-
Executive Director was $34,062 per annum with the Chairman receiving $67,500 per annum.
From 3 April 2020 (when Grey Egerton-Warburton resigned and Jeff Dowling changed in role from Non-Executive
Chairman to Non-Executive Director) to 30 June 2020, exclusive of superannuation guarantee the annual cash
remuneration for the Non-Executive Director was $67,500 per annum. However, from 1 April 2020 to 30 June 2020, all
Directors accepted a 40% pay reduction and therefore the actual annual cash remuneration during the last quarter for
the Non-Executive Director was $40,500 per annum.
Company Performance
As an exploration company the Board does not consider the operating loss after tax as one of the performance indicators
when implementing an incentive based remuneration policy. The Board considers that 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 2020. 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.
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.
13
Annual Report 2020
The table below shows the losses and earnings per share of the Company for the last five financial years.
Net loss
Share price at year end (cents)
Loss per share (cents)
2020
(7,475,048)
9.3
(3.02)
2019
(8,288,971)
12
(3.34)
2018
(1,673,903)
16
(0.68)
2017
(10,020,602)
16
(4.12)
2016
(10,823,222)
28.5
(7.12)
2.DETAILS OF REMUNERATION
Year Ended 30 June 2020
The amount of remuneration paid and entitlements owed to KMP is set out below.
CASH REMUNERATION AND ENTITLEMENTS
Cash remuneration
2020
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton(1)
Other Key Management
Personnel
S Sain (2)
Salary
$
Post–employment
benefits
(superannuation)
$
292,500
106,383
67,500
34,062
37,764
538,209
20,383
10,106
6,412
3,206
3,326
43,433
Annual leave
entitlement owing
$
19,369
4,021
-
-
Total cash
payments and
entitlements
$
332,252
120,511
73,912
37,268
-
41,090
23,390
605,033
1) Mr Egerton- Warburton’s salary is for the period 1 July 2019 to 3 April 2020 when Mr Egerton- Warburton resigned
as Non-Executive Director.
2) Ms Sain’s salary is for the period 1 July 2019 to 24 December 2019 when Ms Sain resigned as Chief Financial Officer.
All directors and employees had a 40% salary reduction from 1 April 2020 to 30 June 2020.
14
Annual Report 2020
2.DETAILS OF REMUNERATION (CONTINUED)
Year Ended 30 June 2019
CASH REMUNERATION AND ENTITLEMENTS
Cash remuneration
2019
Salary
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
S Sain
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
S Sain
Post–employment
benefits
(superannuation)
$
20,531
6,935
7,125
4,275
5,775
44,641
Annual leave
entitlement owing
$
23,120
4,856
-
-
Total cash
payments and
entitlements
$
368,651
84,794
82,125
49,275
2,365
68,931
30,341
653,776
$
325,000
73,003
75,000
45,000
60,791
578,794
2020 TOTAL REMUNERATION
Total cash
payments and
entitlements
$
Options
issued
Total
$
$
LTI
% of
remuneration
332,252
120,511
73,912
37,268
259,348
194,511
129,674
86,449
591,600
315,022
203,586
123,717
44%
62%
64%
70%
41,090
-
41,090
-
605,033
669,982
1,275,015
15
Annual Report 2020
2.DETAILS OF REMUNERATION (CONTINUED)
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
S Sain
2019 TOTAL REMUNERATION
Total cash
payments and
entitlements
$
Options
issued
Total
$
$
LTI
% of
remuneration
368,651
84,794
82,125
49,275
-
-
-
-
368,651
84,794
82,125
49,275
-
-
-
-
68,931
13,519
82,450
17%
653,776
13,519
667,295
There were no non-monetary benefits other than options paid to the Directors or KMP for the year ended 30 June 2020.
Other than those disclosed above, there were no transactions with related parties to the KMP for the year ended 30 June
2020.
3. SERVICE AGREEMENTS
For the year ended 30 June 2020, the following service agreements were in place with the Directors and KMP of S2:
For all Directors and KMP’s of S2, a 40% salary reduction was in place from 1 April 2020 to 30 June 2020 as part of
managing the Group’s working capital with regards to the COVID-19 pandemic.
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 or payment in lieu of 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 3 April 2020, a Change of Role letter was entered into between the Company and Mark Bennett which changed his
role from Managing Director and Chief Executive Officer to Executive Chairman. All other terms remained in line with his
Executive Services Agreement.
16
Annual Report 2020
3. SERVICE AGREEMENTS (CONTINUED)
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 3 April 2020, a Change of Role Letter was entered into between the Company and Jeff Dowling which changed his role
from Non-Executive Chairman to Non-Executive Director. All other terms remained in line with his letter of appointment.
On 4 September 2015, an Executive Services Agreement was entered into between the Company and Executive Director
Anna Neuling. Under the terms of the Agreement 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 or payment in lieu of notice.
• Under the general termination of employment provision, Ms Neuling may terminate the Agreement by giving
•
the Company three months’ notice.
The Company may terminate the Agreement at any time without notice if serious misconduct has occurred. On
termination with cause, the Executive is not entitled to any payment.
On 29 April 2016, a letter of appointment was entered into between the Company and Non-Executive Director Grey
Egerton-Warburton. Under the terms of the Agreement:
• Mr Egerton-Warburton was paid a remuneration package of $45,000 per annum base salary plus statutory
superannuation.
• Under the general termination of employment provision, either party may terminate the Agreement by the
giving of written notice.
Mr Egerton-Warburton resigned in line with the terms of the Agreement on 3 April 2020.
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 or
payment in lieu of 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.
Ms Sain resigned in line with the terms of the Agreement on 24 December 2019.
•
17
Annual Report 2020
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:
Balance at
the start of
the year
19,500,000
11,500,000
4,750,000
3,250,000
39,000,000
2020
Director
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key
Management Personnel
S Sain
Granted
during the
year
Expired
during the
year
Other
changes
Balance at
the year
ended*
6,000,000
4,500,000
3,000,000
2,000,000
15,500,000
12,500,000
8,750,000
2,500,000
-
23,750,000
-
-
-
-
-
-
-
13,000,000
7,250,000
5,250,000
5,250,000
30,750,000
900,000
900,000
1,700,000
1,700,000
-
-
800,000
800,000
*Or at their resignation date.
As at 30 June 2020, the number of options that have vested and exercisable were 31,650,000. All director options are
vested and exercisable.
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
Directors Option Plan
Options issued
7 Oct 2016
7 Oct 2016
6 Oct 2020
6 Oct 2020
17 Oct 2017
16 Oct 2021
12 Nov 2019 11 Nov 2023
Expiry date
Grant Date
Employee Share Option Plan
7 Oct 2016
6 Oct 2020
17 Oct 2017
16 Oct 2021
28 Nov 2018
27 Nov 2022
5 Mar 2019
4 Mar 2023
12 Nov 2019
11 Nov 2023
3 Dec 2019
2 Dec 2023
Exercise
price
$
0.35
0.61
0.23
0.30
Exercise
price
$
0.61
0.23
0.14
0.11
0.30
0.30
Fair value per
option
$
0.16
0.23
0.08
0.04
Fair value per
option
$
0.23
0.08
0.05
0.04
0.04
0.04
Vested
%
100%
100%
100%
100%
Vested
%
100%
100%
100%
100%
*
*
*Options vest a year after grant date.
18
Annual Report 2020
4.SHARE-BASED COMPENSATION (CONTINUED)
Options issued in the year 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
0.115
0.30
80%
4 years
0.00%
0.86%
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:
2020
Balance at the
start of the year
Other changes during
the year
Directors
M Bennett
A Neuling
J Dowling
G Egerton-Warburton
Other Key Management
Personnel
S Sain
5,035,868
675,000
700,000
1,030,400
50,000
7,491,268
-
-
-
-
-
-
Balance for
the year
ended
5,035,868
675,000
700,000
1,030,400*
50,000*
7,491,268
*Or at their resignation date.
There were no shares granted to KMP’s during the reporting year as remuneration.
Use of remuneration consultants
Hewitt Associates Pty Ltd remuneration consultants were engaged by the Group for remuneration benchmarking during
the year ended 30 June 2020 and were paid $8,140 including GST for their services.
Voting and comments made at the Company's Annual General Meeting
At the 2019 Annual General Meeting, the resolution to adopt the Remuneration Report for the year ended 30 June 2019
was passed on a poll with 90% 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.
19
Annual Report 2020
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.
20
Annual Report 2020
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.
Audit Services
During the year ended 30 June 2020, $36,845 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 61 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
Executive Chairman
Perth
10 September 2020
21
Annual Report 2020
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2020
Other income
Corporate salaries and wages
Consulting and legal fees
Share and company registry
Rent, insurance and variable outgoings
Business development
Travel expenditure
Depreciation expense
Share-based payments
Other net gains
Finance cost of Right of Use Asset
Exploration expenditure expensed as incurred
Exploration impairment expense
Share of associate’s loss
Associate impairment reversal (expense)
Loss before income tax
Income tax benefit/(expense)
Loss after income tax for the year
Other comprehensive income
Items that will not be classified to profit or loss
Changes in the fair value of Investments at fair value through other
comprehensive income
Items that may be classified to profit or loss
Exchange differences on translation of foreign operations
Total comprehensive income/(loss) for the year attributable to the
members of S2 Resources Ltd
Notes
4
14
9
9
5
8
30 June
2020
$
74,570
(294,411)
(231,941)
(127,670)
(143,389)
(689,267)
(224,125)
(140,999)
(806,194)
61,970
(12,214)
(3,964,516)
(68,172)
(1,494,960)
586,270
(7,475,048)
-
30 June
2019
$
157,154
(503,769)
(257,504)
(102,971)
(229,737)
(428,646)
(175,782)
(101,376)
(118,994)
199,015
-
(5,093,484)
(60,446)
(915,715)
(586,270)
(8,218,526)
(70,445)
(7,475,048)
(8,288,971)
(33,229)
(597,921)
50,285
3,175
(7,457,992)
(8,883,717)
Loss per share for loss attributable to the members of S2 Resources
Ltd
Basic loss per share (cents)
18
(3.02)
(3.34)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
22
Consolidated Statement of Financial Position
as at 30 June 2020
CURRENT ASSETS
Cash and cash equivalents
Restricted cash
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Investments
Investments in associates
Exploration and evaluation
Property, plant and equipment
Right-of-Use Assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease Liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Lease Liabilities
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
Annual Report 2020
Notes
30 June
2020
$
30 June
2019
$
6
6
7
8
9
10
1
11
1
1
12
13
6,419,891
323,107
177,555
11,645,063
365,778
454,872
6,920,553
12,465,713
-
1,735,627
966,977
107,234
251,196
1,875,000
1,241,255
1,028,199
151,878
-
3,061,034
4,296,332
9,981,587
16,762,045
286,131
86,394
54,803
427,328
177,572
177,572
604,900
660,511
-
73,049
733,560
-
733,560
9,376,687
16,028,485
52,552,523
4,345,801
(47,521,637)
52,552,523
8,539,513
(45,063,551)
9,376,687
16,028,485
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
23
Annual Report 2020
Consolidated Statement of Changes in Equity
for the year ended 30 June 2020
Attributable to equity holders of the Group
in $ dollars
Share
capital
Other
Reserve
Share
based
payment
Reserves
Foreign
Currency
Translation
Reserve
Fair Value Other
Comprehensive
Income
(“FVOCI”)
Reserve
Accumulated
losses
Total
Balance at 1 July 2019
Total comprehensive income for the year
Transactions with owners, recorded directly in
equity
Contributions by and distributions to owners
Issue of share capital
Capital raising costs
Share-based payment transactions
Share options exercised
Transfer of lapsed and expired options value to
accumulated losses
Transfer cumulative gain on sale of investments to
accumulated losses
Total contributions by and distributions to owners
52,552,523
-
7,905,600 144,517
-
-
134,398
50,285
354,998
(33,229)
(45,063,551)
(7,469,776)
16,028,485
(7,457,992)
-
-
-
-
-
-
-
-
-
806,194
-
(4,695,193)
-
(3,888,999)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
806,194
-
4,695,193
-
-
50,285
(321,769)
(354,998)
321,769
(2,458,086)
-
(6,651,798)
Balance at 30 June 2020
52,552,523
4,016,601 144,517
184,683
-
(47,521,637)
9,376,687
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
24
Annual Report 2020
Consolidated Statement of Changes in Equity
for the year ended 30 June 2019
Attributable to equity holders of the Group
in $ dollars
Share
capital
Other
Reserve
Share
based
payment
Reserves
Foreign
Currency
Translation
Reserve
Fair Value Other
Comprehensive
Income
(“FVOCI”)
Reserve
Accumulated
losses
Total
Balance at 1 July 2018
Total comprehensive income for the year
Transactions with owners, recorded directly in
equity
Contributions by and distributions to owners
Issue of share capital
Capital raising costs
Share-based payment transactions
Share options exercised
Transfer cumulative gain on sale of investments to
accumulated losses
Total contributions by and distributions to owners
52,552,523
-
7,786,606 144,517
-
-
131,223
3,175
1,910,667
(597,921)
(37,732,328)
(8,288,971)
24,793,208
(8,883,717)
-
-
-
-
-
-
-
-
118,994
-
-
118,994
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
118,994
-
-
3,175
(957,748)
(1,555,669)
957,748
(7,331,223)
-
(8,764,723)
Balance at 30 June 2019
52,552,523
7,905,600 144,517
134,398
354,998
(45,063,551)
16,028,485
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
25
Consolidated Statement of Cash Flows
For the year ended 30 June 2020
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
Income taxes refund/(paid)
Net cash used in operating activities
Cash flows from investing activities
Payment of property, plant and equipment
Investment in Todd River Resources Ltd
Net proceeds from disposal of investments
Net cash derived from investing activities
Cash flows from financing activities
Repayment of Borrowings
Receipts/(Payments) for cash backed guarantees
Cash payments for 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
Cash and cash equivalents at 30 June
Annual Report 2020
Notes
30 June
2020
$
30 June
2019
$
(1,720,917)
(1,858,012)
(4,227,264)
(4,928,662)
94,274
(19,160)
186,048
145,260
(18,423)
-
(5,687,019)
(6,659,837)
(33,824)
(15,779)
(1,403,063)
(2,743,240)
1,837,167
400,280
5,837,938
3,078,919
5
17
9
8
(64,080)
43,799
(20,281)
-
(15,888)
(15,888)
(5,307,020)
(3,596,805)
81,848
215,749
11,645,063
15,026,119
6
6,419,891
11,645,063
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
26
Annual Report 2020
Notes to the Consolidated Financial Statements
for the year ended 30 June 2020
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 2020 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 22.
The financial statements were authorised for issue on 10 September 2020 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 financial assets and liabilities at fair value through profit or loss, 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
27
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
(ii)
Basis of preparation (continued)
Adoption of new and revised Accounting Standards (continued)
not have any material impact on the financial performance or position of the consolidated entity, except for AASB 16
Leases.
This note explains the changes in the Group’s accounting policies as a result of the adoption of AASB 16 Leases, however
the prior year financial statements did not have to be restated as a result.
Impact on operating leases
AASB 16 Leases supersedes AASB 117 Leases. The Group has adopted AASB 16 from 1 July 2019 which has resulted in
changes classification, measurement and recognition leases. The changes result in almost all leases where the Group is
the lessee being recognised on the Consolidated Statement of Financial Position and removes the former distinction
between ‘operating and ‘finance leases’. The new standard requires recognition of a right-of-use asset (the leased item)
and a financial liability (to pay rentals). The exceptions are short-term, and low value leases.
The Group has adopted AASB 16 using the modified retrospective approach under which the reclassifications and the
adjustments arising from the new leasing rules are recognised in the opening Condensed Statement of Financial Position
on 1 July 2019. There is no initial impact on retained earnings under this approach. The Group has not restated
comparatives for the 2019 reporting period.
The Group leases various premises, plant and equipment. As at 30 June 2019, leases were classified as operating leases.
Payments made under operating leases were charged to profit or loss on a straight-line basis over the period of the lease.
From 1 July 2019, where the Group is a lessee, the Group recognised a right-of-use asset and a corresponding liability at
the date which the lease asset is available for use by the Group. Each lease payment is allocated between the liability and
the finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a consistent period
rate of interest on the remaining balance of the liability for each period.
The lease payments are discounted using an interest rate implicit in the lease. If that rate cannot be determined, the
Group’s incremental borrowing rate is used, being the rate the lessee would have to pay to borrow funds necessary to
obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Extension options are included in property leases across the Group. In determining the lease term, management
considers all facts and circumstances that create an economic incentive to exercise an extension option. Extension
options are only included in the lease term if the lease is reasonably certain to be extended.
28
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of preparation (continued)
On initial application right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount
of any prepaid or accrued lease payments relating to that lease recognised ln the Consolidated Statement of Financial
Position as at 30 June 2019.
There were no onerous lease contracts that required an adjustment to the right-of-use assets of initial application.
On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been classified
as operating leases under the principles of AASB 117. These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 July 2019. The weighted
average lessee's incremental borrowing rate applied to lease liabilities on 1 July 2019 was 5%.
In the statement of cash flows, the Group has recognised cash payments for the principal portion of the lease liability
within operating activities, cash payments for the interest portion of the lease liability as interest paid within operating
activities and short-term lease payments and payments for lease of low-value assets within operating activities.
Extension and termination options are included in property leases across the Group and are an area of judgement. In
determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension options (or periods after termination
options) are only included in the lease term if the lease Is reasonably certain to be extended (or not terminated). As at 1
July 2019 the financial effect of revising lease terms to reflect the effect of exercising extension options was an increase
in recognised lease liabilities and right-of-use assets of $110,888, an increase in depreciation of $76,846 and an increase
of interest of $12,181 in the year ended 30 June 2020.
Right-of-use asset
The recognised right-of-use asset relate to the following types of assets:
Property leases
IT Equipment
Lease liability
Current lease liabilities
Non-current lease liabilities
30 June
2020
$
227,929
23,267
251,196
30 June
2020
$
86,394
177,572
263,996
29
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Impact
Basis of preparation (continued)
The change in accounting policy resulted in an increase of a right-of-use asset of $315,901 and a corresponding lease
liability of $317,001 in respect of all these leases, other than short-term leases and leases of low-value assets as at 1 July
2019.
The net impact on retained earnings on 1 July 2019 was $nil.
Practical expedients applied
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard:
•
•
The accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-
term leases, with no right-of-use asset nor lease liability recognised; and
The use of hindsight in determining the lease term where the contract contains options to extend or terminate the
lease.
(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.
Impact of Coronavirus (COVID-19) pandemic.
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may
have, on the company based on known information. Other than as addressed in specific notes, there does not currently
appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to
events or conditions which may impact the company unfavourably as at the reporting date or subsequently as a result of
the Coronavirus (COVID-19) pandemic.
Incremental borrowing rate.
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to
discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such
a rate is based on what the entity estimates it would have to pay a third party to borrow the funds necessary to obtain
an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
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 14.
30
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of preparation (continued)
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.
Significant judgement – Interest in Associates and Impairment
Through the Subscription Agreement between the Company and its associate, Todd River Resources Ltd (“TRT”), the
Company retains a board member on TRT’s board of directors if the shareholding is above 7.5%. For the financial year
ended 30 June 2020, the Group’s shareholding in TRT was 30.52%. If TRT issues new shares, the Company has the right
but not the obligation to participate in the new issue on the same terms as the other participants up to such additional
number of shares in order to maintain its ownership percentage. The Company also has a shared services agreement
with TRT to share its offices and staff. Therefore the Company in accordance with AASB 128, determined it has significant
influence over TRT for the year ended 30 June 2020. At each reporting date, the Company reviews for any impairment
triggers that adversely reduces the value of its interest after the asset has been treated under equity accounting. The
Company takes into consideration a number of impairment triggers such as but not limited to, TRT’s net assets as at
reporting date, exploration activities announced on the ASX and movement in share price.
(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 23 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.
31
Annual Report 2020
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.
32
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for
each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure
the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial
recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary
differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not
affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in
equity.
(e)
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.
(f)
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.
33
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g)
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.
(h)
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.
(i)
Investments in Associates
Principles of consolidation and equity accounting
Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally
the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for
by using the equity method of accounting after being initially recognised at cost.
Equity method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to
recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share
of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or
receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or excess its interest in the entity, including
any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations
or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of
the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where
necessary to ensure consistency with the policies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment each reporting period.
(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:
34
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j)
Exploration and Evaluation (continued)
•
•
•
•
•
the period for which the Group has the right to explore in the specific area has expired during the period or will
expire in the near future, and is not expected to be renewed; or
substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is
neither budgeted nor planned; or
exploration for and evaluation of mineral resources in the specific area have not led to the discovery of
commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in
the specific area; or
sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying
amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development
or by sale; 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.
35
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k)
Property, plant and equipment (continued)
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment and are recognised net within other income in
profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained
earnings.
(ii) Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be
measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of
property, plant and equipment are recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for
cost, less its residual value.
Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future
economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term or their useful
lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.
The depreciation rates used for each class of asset are:
buildings
fixtures and fittings
leasehold improvements
plant and equipment
•
•
•
•
• motor vehicles
16.67%
22.5% - 40%
20%
22.5% - 40%
20%
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate.
(l)
Leases
The following accounting policy was in place until 30 June 2019.
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.
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Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l)
Leases (continued)
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.
The following accounting policy was in place from 1 July 2019.
From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased
asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
•
•
•
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date
amounts expected to be payable by the group under residual value guarantees
the exercise price of a purchase option if the group is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the
liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the group, the lessee’s incremental borrowing rate is used, being the rate that
the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-
use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the group:
• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted
•
to reflect changes in financing conditions since third party financing was received
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by VALUE
IFRS Retail Limited, which does not have recent third party financing, and
• makes adjustments specific to the lease, eg term, country, currency and security.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
•
•
•
•
the amount of the initial measurement of lease liability
any lease payments made at or before the commencement date less any lease incentives received
any initial direct costs, and
restoration costs.
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Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l)
Leases (continued)
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-
line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the
underlying asset’s useful life. While the group revalues its land and buildings that are presented within property, plant
and equipment, it has chosen not to do so for the right-of-use buildings held by the group.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised
on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Low-value assets comprise IT equipment and small items of office furniture.
(m)
Interest in Joint Ventures
The Group accounts for 100% of the assets, liabilities and expenses of joint venture activity. These have been
incorporated in the financial statements.
(n)
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.
(o)
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.
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Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o)
Employee Benefits (continued)
(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.
(p)
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
39
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p)
Issued Capital (continued)
(i) Basic earnings per share (continued)
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.
(q)
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.
(r)
Government grants
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match
them with the costs that they are intended to compensate. This includes Job Keeper and Cash Boost income received due
to COVID-19 during the year which has been net off with the associated salaries this year.
(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 2020. 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.
Amendment to Conceptual Framework for Financial Reporting
The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria
for assets and liabilities and clarifies some important concepts. It is arranged in eight chapters, as follows:
•
•
•
•
•
•
•
•
Chapter 1 – The objective of financial reporting
Chapter 2 – Qualitative characteristics of useful financial information
Chapter 3 – Financial statements and the reporting entity
Chapter 4 – The elements of financial statements
Chapter 5 – Recognition and derecognition
Chapter 6 – Measurement
Chapter 7 – Presentation and disclosure
Chapter 8 – Concepts of capital and capital maintenance
40
Annual Report 2020
NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) New Accounting Standards and Interpretations not yet mandatory or early adopted (continued)
AASB 2019-1 has also been issued, which sets out the amendments to Australian Accounting Standards, Interpretations
and other pronouncements in order to update references to the revised Conceptual Framework. The changes to the
Conceptual Framework may affect the application of accounting standards in situations where no standard applies to a
particular transaction or event. In addition, relief has been provided in applying AASB 3 and developing accounting
policies for regulatory account balances using AASB 108, such that entities must continue to apply the definitions of an
asset and a liability (and supporting concepts) in the Framework for the Preparation and Presentation of Financial
Statements (July 2004), and not the definitions in the revised Conceptual Framework.
The amendments apply prospectively on or after 1 January 2020, with no material effect to the Group.
Amendments to AASB 3: Definition of a Business
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help
entities determine whether an acquired set of activities and assets is a business or not. They clarify the minimum
requirements for a business, remove the assessment of whether market participants are capable of replacing any missing
elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a
business and of outputs, and introduce an optional fair value concentration test. New illustrative examples were provided
along with the amendments.
Since the amendments apply prospectively to transactions or other events that occur on or after the date of first
application, the Group will not be affected by these amendments on the date of transition.
Amendments to AASB 101: Definition of Material
This Standard amends AASB 101 Presentation of Financial Statements and AAS 108 Accounting Policies, Changes in
Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of
the definition. The amendments clarify that materiality will depend on the nature or magnitude of information. An entity
will need to assess whether the information, either individually or in combination with other information, is material in
the context of the financial statements. A misstatement of information is material if it could reasonably be expected to
influence decisions made by the primary users.
The amendments apply prospectively on or after 1 January 2020, with no material effect to the Group.
Amendments to IAS 1: Presentation of Financial Statements
This Standard aims to improve presentation in financial statements by clarifying the criteria for the classification of a
liability as either current or non-current.
This amendment is to:
•
•
Clarify that the classification of a liability as either current or non-current is based on the entity’s rights at the
end of the reporting period
Clarify the link between the settlement of the liability and the outflow of resources from the entity
The amendments apply prospectively on or after 1 January 2022. The client has not yet determined the impact of this
amendment.
41
Annual Report 2020
NOTE 2. FINANCIAL RISK MANAGEMENT
The Group’s financial instruments consist mainly of deposits with banks, lease liabilities 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, and
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.
2020
Floating
interest rate
Fixed interest
rate maturing in
1 year or less
$
$
325,504
-
325,504
2,500,000
195,000
2,695,000
Fixed interest
rate maturing
between 1 and
2 years
$
Non-interest
bearing
$
Total Weighted
average
effective
interest rate
%
$
-
-
-
3,594,387
128,107
3,722,494
6,419,891
323,107
6,742,998
0.98%
1.05%
-
-
-
-
-
-
-
-
-
86,394
286,131
-
286,131
86,394
177,572
263,966
-
286,131
177,572
550,097
Financial Instruments
(i) Financial assets
Available cash on hand
Restricted cash
Total financial assets
(ii) Financial liabilities
Trade and other payables
Lease liabilities – current
Lease
liabilities – non
current
Total financial liabilities
42
NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED)
2019
Floating
interest rate
Fixed interest
rate maturing in
1 year or less
$
$
472,860
-
472,860
7,425,923
195,000
7,620,923
-
-
-
-
Financial Instruments
(i) Financial assets
Available cash on hand
Restricted cash
Total financial assets
(ii) Financial liabilities
Trade and other payables
Total financial liabilities
Net Fair Values
Annual Report 2020
Fixed interest
rate maturing
between 1 and
2 years
$
Non-interest
bearing
$
Total Weighted
average
effective
interest rate
%
$
-
-
-
-
-
3,746,280 11,645,063
365,778
3,917,058 12,010,841
170,778
2.17%
2.69%
660,511
660,511
660,511
660,511
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
30 June
2020
$
30 June
2019
$
(3,255)
3,255
(82,890)
82,890
(3,255)
3,255
(160,285)
160,285
Exposure
The Group holds foreign currency cash in Euro and US Dollar to operate in Finlandand 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:
43
NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED)
Annual Report 2020
Year ended 30 June 2020
Cash on hand
Restricted cash
Other receivables
Trade and other payables
Year ended 30 June 2019
Cash on hand
Restricted cash
Other receivables
Trade and other payables
EUR
$
3,330,495
68,458
24,870
(116,910)
3,306,913
EUR
$
3,536,863
19,174
210,805
(300,390)
3,466,452
USD
$
240,767
53,883
-
(729)
293,921
USD
$
1,486,187
79,952
-
(41,345)
1,527,794
SEK
$
23,104
-
483
3
23,590
SEK
$
146,060
-
896
(4,032)
142,924
Total
$
3,594,366
122,341
25,353
(117,635)
3,624,424
Total
$
5,169,110
99,126
211,701
(345,767)
5,134,170
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
2020
$
2019
$
62,110
199,015
62,110
199,015
Net gains/(losses) recognised in other comprehensive income
Translation of foreign operations
50,285
3,175
44
Annual Report 2020
NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED)
Sensitivity
As shown in the table above, the Group is primarily exposed to changes in EUR/$exchange rates. The sensitivity of profit
or loss to changes in the exchange rates arises mainly from Euro and US dollar denominated financial instruments and
the impact on other components of equity arises from translation of foreign operations.
EUR/$ exchange rate – increase 10%*
EUR/$ exchange rate – decrease (10%)*
Impact on
post tax loss
$
(299,002)
299,002
Impact on
other
components
of equity
$
3,324
(3,324)
USD/$ exchange rate – increase 10%*
USD/$ exchange rate – decrease (10%)*
(8,092)
8,092
(6,252)
6,252
*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 2020, 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.
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 investments (see note 8). The Group’s investment is publicly traded on the Australian
Stock Exchange (“ASX”).
The Group is not currently exposed to commodity price risk.
45
Annual Report 2020
NOTE 2. FINANCIAL RISK MANAGEMENT (CONTINUED)
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.
ASX index – increase 10%
ASX index – decrease (10%)
Impact on
post tax loss
Impact on
post tax loss
2020
$
-
-
2019
$
-
-
Impact on
other
components
of equity
2020
$
-
-
Impact on
other
components
of equity
2019
$
(187,500)
187,500
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 investments. As the fair value of investments 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.
46
Annual Report 2020
NOTE 3. SEGMENT INFORMATION
For management purposes, the Group has four 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. As
disclosed in the half year ended 31 December 2018 financial report, the Group had discontinued its exploration
activities in Sweden and any costs incurred relate to relinquishment of tenure and closure of the Swedish office
based in Malå.
• US exploration activities, which includes exploration and evaluation of mineral tenements in Nevada. In March
2020, the Ecru project was withdrawn from and therefore there are no longer any exploration activities in the
US.
• 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 2020
Other income
Corporate expenses
Business Development
Travel
Depreciation expense
Share-based payments
Other gain/(losses) - net
Finance Cost of Right of Use
asset
Exploration expenditure
expensed as incurred
Exploration impairment expense
Share of associate's loss
Associate impairment expense
Loss before income tax
Income tax expense
Loss after income tax for the year
Finland
exploration
activities
-
-
-
-
-
-
-
-
(2,990,022)
-
-
-
(2,990,022)
-
(2,990,022)
$
Sweden
exploration
activities
-
-
-
-
-
-
-
US
exploration
activities
-
-
-
-
-
-
-
Australia
exploration
activities
-
-
-
-
-
-
-
Unallocated
Total
74,570
(797,411)
(689,267)
(224,125)
(140,999)
(806,194)
61,970
74,570
(797,411)
(689,267)
(224,125)
(140,999)
(806,194)
61,970
-
-
-
-
-
-
-
-
-
-
(12,214)
(12,214)
(80,920)
(68,172)
-
-
(149,092)
-
(149,092)
(893,574)
-
-
-
(893,574)
-
(893,574)
-
-
(1,494,960)
586,270
(3,442,360)
-
(3,442,360)
(3,964,516)
(68,172)
(1,494,960)
586,270
(7,475,048)
-
(7,475,048)
47
Annual Report 2020
NOTE 3. SEGMENT INFORMATION (CONTINUED)
Statement of profit or loss
for the year ended 30 June
2019
Other income
Corporate expenses
Business Development
Travel
Depreciation expense
Share-based payments
Other gain/(losses) - net
Exploration expenditure
expensed as incurred
Exploration impairment
expense
Share of associate's loss
Associate
expense
Loss before income tax
Income tax expense
Loss after income tax for the
year
impairment
$
Finland
exploration
activities
-
-
-
-
-
-
Sweden
exploration
activities
-
-
-
-
-
-
-
US
exploration
activities
-
-
-
-
-
-
-
Australia
exploration
activities
-
-
-
-
-
-
-
Unallocated
Total
157,154
(1,093,981)
(428,646)
(224,124)
(101,376)
(118,994)
199,015
157,154
(1,093,981)
(428,646)
(224,124)
(101,376)
(118,994)
199,015
(2,925,806)
9,164
(1,890,118)
(286,724)
-
(5,093,484)
-
-
-
-
(60,446)
-
-
-
-
(915,715)
(60,446)
(915,715)
-
(2,925,806)
-
-
9,164
-
-
(1,950,564)
-
-
(286,724)
-
(586,270)
(3,064,596)
(70,445)
(586,270)
(8,218,526)
(70,445)
(2,925,806)
9,164
(1,950,564)
(286,724)
(3,135,041)
(8,288,971)
SEGMENT ASSETS AND LIABILITIES
The Group’s assets are mostly attributable to the unallocated segment therefore assets attributable to exploration in
Scandinavia, Nevada and Australia is immaterial for disclosure.
NOTE 4. OTHER INCOME
Interest received
30 June
2020
$
30 June
2019
$
74,570
157,154
48
NOTE 5. INCOME TAX
Recognised in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Current tax
Deferred tax
Under (over) provided in prior years
Total income tax benefit/(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/(expense) at 27.5%
Income tax benefit/(expense) for overseas entities (at various rates)
Increase in income tax due to:
Non-deductible expenses
Current year tax losses not recognised
Decrease in income tax due to:
Movement in unrecognised temporary differences
Capital losses recognised during the year
Capital losses utilised during the year
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 (1)
Annual Report 2020
30 June
2020
$
30 June
2019
$
-
-
-
-
-
-
(7,475,048)
(1,187,478)
(662,959)
(8,288,971)
(914,780)
(1,042,125)
540,082
1,118,423
121,932
(92,712)
92,712
-
1,423,602
998,111
119,975
-
-
(584,783)
-
5,581,723
1,185,713
6,767,436
3,736,617
1,845,105
5,581,723
(1) 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.
49
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
Other
Annual Report 2020
30 June
2020
$
30 June
2019
$
6,419,891
323,107
6,742,998
11,645,063
365,778
12,010,841
30 June
2020
$
28,809
5,666
61,723
-
81,357
177,555
30 June
2019
$
28,635
25,403
134,898
186,037
79,899
454,872
The Group has no impairments to other receivables or have receivables that are past due but not impaired. Refer to note
2 for detail on the risk exposure and management of the Group’s other receivables.
NOTE 8. INVESTMENTS AND OTHER FINANCIAL ASSETS
(i) Classification of financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income (FVOCI) comprise of equity securities which are not
held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category.
(ii) Equity investments at fair value through other comprehensive income
Equity investments at FVOCI comprise the following individual investments:
Investments
Balance at beginning of the year
GT Gold
Westgold Resources Ltd
30 June
30 June
2020
$
2019
$
-
1,875,000
910,859
7,400,000
50
Annual Report 2020
NOTE 8: INVESTMENTS AND OTHER FINANCIAL ASSETS (CONTINUED)
Investments
Movement during the year
GT Gold
Westgold Resources Ltd
30 June
2020
$
30 June
2019
$
-
(1,875,000)
(910,859)
(5,525,000)
Balance as at 30 June
-
1,875,000
The table below describes the total gain/(loss) on disposal of the Group’s investments from the initial purchase to the
financial year ended 30 June 2020:
GT Gold Corp.
Westgold Resources Ltd
Net
proceeds
$
Original cost
$
Gain
$
Net
proceeds
$
Original
cost
$
Gain/
(loss)
$
Net
proceeds
$
Total
Original
cost
$
Gain/
(loss)
$
Sold 30 June 2018
2,574,078
(680,409)
1,893,669
-
-
-
2,574,078
(680,409)
1,893,669*
Sold 30 June 2019
1,813,925
(320,192)
1,493,733
4,024,015
(4,560,000)
(535,985)
5,837,940
(4,880,192)
957,748**
Sold 30 June 2020
-
-
-
1,841,769
(1,520,000)
321,769
1,841,769
(1,520,000)
321,769**
Total gain/(loss) on
disposal
3,387,402
(214,216)
3,173,186
*The gain recognised of $1,893,669 for the financial year ended 30 June 2018 was disclosed in the profit or loss or other
comprehensive income as per AASB 139. AASB 9 became effective from 1 July 2018.
** The total gain during the financial year was transferred from the fair value other comprehensive income (FVOCI)
reserve to accumulated losses.
(iii) Amounts recognised in profit or loss and other comprehensive income
During the year, the following gains/(losses) were recognised in profit or loss and other comprehensive income.
Gains/(losses) recognised in other comprehensive income
(33,229)
(597,921)
30 June
30 June
2020
$
2019
$
51
Annual Report 2020
NOTE 8: INVESTMENTS AND OTHER FINANCIAL ASSETS (continued)
The table below describes the movement in the FVOCI reserve the financial year ended 30 June 2020:
Net proceeds
Less carrying value as at 30 June 2019
Gain/(loss) on disposal
Westgold Resources
Ltd
1,841,769
(1,875,000)
(33,229)
Change in Fair Value Recognised in OCI
(33,229)
On disposal of these equity investments, any related balance within the FVOCI reserve is reclassified to retained earnings.
(iv) Fair values of other financial assets at amortised cost
Financial assets at amortised cost include the following:
Current – Trade and other receivables
Trade and other receivables
30 June
2020
$
177,555
177,555
30 June
2019
$
454,872
454,872
Due to the short term nature of the trade and other receivables and prepayments, their carrying amount is considered
to be the same as their fair value.
NOTE 9. INTERESTS IN ASSOCIATES
The entity listed below have share capital consisting of ordinary shares and options of which 30.52% of the ordinary
shares are held directly by the Group. The country of incorporation or registration is also their principal place of business,
and the proportion of ownership interest is the same as the proportion of voting rights held.
Name of
entity
Place of
business/
country of
incorporate
% of ownership
interest
Nature of
relationship
Measurement
method
Carrying amount
Todd River
Resources Ltd
Australia
30.52%
19.99%
Associate
2020
$
2019
$
2020
$
2019
$
Equity
method
1,735,627
1,241,255
The Group increased its investment in Todd River Resources Ltd (ASX:TRT) from 19.99% to 22.99% in September 2019
(11,959,700 shares at $0.031 per share) and again to 30.62% in October 2019 (33,019,667 shares at $0.031 per share).
The investment reduced to 30.52% in December 2019 due to a share issue in relation to the acquisition of an exploration
project by Todd River Resources Ltd.
52
Annual Report 2020
NOTE 9. INTERESTS IN ASSOCIATES (CONTINUED)
Summarised financial information for associates
The tables below provide summarised financial information of Todd River Resources Ltd that are material to the Group.
The information disclosed reflects the amounts presented in the financial statement of the relevant associates and not
the Group’s share of those amounts. A reconciliation has been provided to reflect the adjustments made by the Group
when using the equity method, including fair value adjustment and modifications for differences in accounting policy.
Summarised balance sheet
Current assets
Non current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
NET ASSETS
Share capital
Reserves
Accumulated losses
Total equity
Reconciliation to carrying amounts
S2R's investment as at 1 July
Increase in Investment (1)
Loss for the period - Todd River Resources
Less Group’s share
Less impairment reversal (expense) (2)
Carrying amount
$
$
$
$
$
$
$
30 June
2020
$
1,608,821
4,450,318
6,059,139
209,427
-
209,427
30 June
2019
$
1,674,154
11,544,769
13,218,923
642,361
-
642,361
5,849,712
12,576,562
21,501,151
872,622
(16,524,061)
5,849,712
30 June
2020
1,241,255
1,403,063
18,846,172
2,521,731
(8,791,341)
12,576,562
30 June
2019
2,743,240
-
(5,083,810)
(4,580,869)
(1,494,961)
586,270
1,735,627
(915,715)
(586,270)
1,241,255
(1) This includes transaction costs.
(2) The Group reversed the impairment as at June 2019 in the year ended 30 June 2020 on the basis of the market price
of TRT shares as at 30 June 2020.
53
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
Exploration impairment expense (ii)
Foreign currency translation differences
Balance at end of the year
Annual Report 2020
30 June
2020
$
30 June
2019
$
966,977
1,028,199
1,028,199
3,964,516
(3,964,516)
-
(68,172)
6,951
966,978
1,083,153
5,093,484
(5,093,484)
-
(60,446)
5,492
1,028,199
(i) During the year ended 30 June 2020 the exploration expenditure incurred pertains to the following:
Australian Projects
The total exploration expenditure expensed for Polar Bear and Fraser Range projects was $893,574. The Polar
Bear project was owned by the Group’s subsidiary Polar Metals Pty Ltd which was sold to Westgold Resources
Limited on 13 February 2018. The Group still holds nickel rights to the Polar Bear project.
Finland Projects
Exploration expenditure incurred and expensed for Finland was $2,990,022.
US Projects
Exploration expenditure incurred and expensed for the following projects in the US were:
•
•
•
Ecru $80,559
South Roberts - $175
Pluto - $186
(ii) During the year ended 30 June 2020, the Group made a decision to withdraw from the Ecru Project and therefore
made an impairment expense of $68,172. This decision would result in the Group not earning into the Ecru joint
venture with Rengold.
During the year ended 30 June 2019, the Group made a decision to withdraw from the South Roberts Project
and therefore made an impairment expense of $60,446. This decision would result in the Group not earning
into the South Roberts joint venture with Rengold.
54
NOTE 11. TRADE AND OTHER PAYABLES
Trade and other payables (i)
Annual Report 2020
30 June
2020
$
30 June
2019
$
286,131
660,511
(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 12. SHARE CAPITAL
Ordinary shares fully paid
Movement in Share Capital
Ordinary shares fully paid
Balance at beginning of year
Balance at year end
30 June
2020
No. of Shares
30 June
2020
$
30 June
2019
No. of Shares
30 June
2019
$
247,915,179
52,552,523
247,915,179
52,552,523
247,915,179
52,552,523
247,915,179
52,552,523
247,915,179
52,552,523
247,915,179
52,552,523
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 13. RESERVES
Share-based payments reserve (i)
Other reserve (ii)
Foreign currency translation reserve (iii)
Revaluation reserve (iv)
30 June
2020
$
30 June
2019
$
4,016,601
144,517
184,683
-
4,345,801
7,905,600
144,517
134,398
354,998
8,539,513
(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.
In the year ended 30 June 2020, $4,965,193 in relation to the fair value of options which has lapsed or expired was
transferred to accumulated losses.
55
Annual Report 2020
NOTE 13. RESERVES (CONTINUED)
(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) The revaluation reserve recognises the change in fair value of investments. Please refer to note 8 of these
financials.
NOTE 14. SHARE-BASED PAYMENTS
The following share-based payments arrangements were in existence during the current reporting year:
Options
Options Series
Number
Issued
Number at 30
June 2020
Grant Date
Expiry Date
(1) Issued at 14 September
(2) Issued at 9 October 2015
(3) Issued at 23 October 2015
(4) Issued at 29 November
(5) Issued at 18 April 2016
(6) Issued at 7 October 2016
(7) Issued at 7 October 2016
(8) Issued 17 October 2017
(9) Issued 17 October 2017
(10) Issued 28 November 2018
(11) Issued 5 March 2019
(12) Issued 12 November 2019
(13) Issued 3 December 2019
Total
29,250,000
50,000
400,000
400,000
800,000
1,000,000
11,950,000
7,750,000
3,400,000
2,900,000
50,000
18,000,000
400,000
76,350,000
-
-
-
-
-
1,000,000
9,050,000
7,750,000
2,650,000
2,700,000
50,000
18,000,000
400,000
41,600,000
14/09/2015
09/10/2015
23/10/2015
29/11/2015
18/04/2016
07/10/2016
07/10/2016
17/10/2017
17/10/2017
28/11/2018
05/03/2019
12/11/2019
03/12/2019
14/09/2019
09/10/2019
23/10/2019
28/11/2019
17/04/2020
06/10/2020
06/10/2020
16/10/2021
16/10/2021
27/11/2022
04/03/2023
11/11/2023
02/12/2023
Exercise
Price $
Fair
value at
Grant
Date $
0.31
0.31
0.31
0.31
0.31
0.35
0.61
0.23
0.23
0.14
0.11
0.30
0.30
0.13
0.13
0.12
0.08
0.14
0.16
0.23
0.08
0.08
0.05
0.04
0.04
0.04
(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.
56
Annual Report 2020
NOTE 14. SHARE-BASED PAYMENTS (CONTINUED)
(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.
(10) The 2,900,000 options in series 10 comprised 2,500,000 were issued to employees under the Employee Share
Option Plan which vest one year from grant date and 400,000 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.
(11) The 50,000 options in series 11 which vests one year from grant date was issued to an employee under the
Employee Share Option Plan.
(12) The 18,000,000 options in series 12 comprised 15,500,000 options issued to the Directors of the Group which
vested immediately, 2,100,000 options were issued to employees under the Employee Share Option Plan which
vest one year from grant date and 400,000 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.
(13) The 400,000 options in series 13 which vests one year from grant date were issued to employees under the
Employee Share Option Plan.
The weighted average fair value of the share options granted during the year is $0.04.
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
2020
$
669,982
111,466
24,746
806,194
30 June
2019
$
-
108,426
10,568
118,994
The weighted average contractual life for options outstanding at the end of the year was 2.05 years.
57
Annual Report 2020
NOTE 14. SHARE-BASED PAYMENTS (CONTINUED)
Options were priced using a Black-Scholes option pricing model using the inputs below:
Series 1
Series 2
Series 3
Series 4
Series 5
Series 6
Series 7
Grant date share
price
Exercise price
Expected volatility
Option life
Dividend yield
Interest rate
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%
0.25
0.35
100%
4 years
0.00%
3.35%
0.44
0.61
80%
4 years
0.00%
2.87%
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest rate
Series 8
0.16
0.23
80%
4 years
0.00%
2.34%
Series 9
0.23
0.23
80%
4 years
0.00%
2.34%
Series 10
0.09
0.14
80%
4 years
0.00%
2.29%
Series 11
0.07
0.11
80%
4 years
0.00%
1.75%
Series 12
0.115
0.30
80%
4 years
0.00%
0.86%
Series 13
0.115
0.30
80%
4 years
0.00%
0.86%
The following reconciles the outstanding share options granted in the year ended 30 June 2020:
30 June
2020
No. of Options
30 June
2019
No. of Options
30 June
2020
Weighted
average
exercise price
$
30 June
2019
Weighted
average
exercise price
$
Balance at the beginning of the year
50,450,000
0.35
50,750,000
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
(i) Options expired or cancelled during the year
18,400,000
-
(27,250,000)
41,600,000
2,900,000
38,700,000
0.30
0.27
0.34
0.30
0.34
2,950,000
-
(500,000)
53,200,000
2,750,000
50,450,000
0.36
0.14
-
0.19
0.34
0.14
0.35
For the year ended 30 June 2020, 27,250,000 employee, director and service provider share options were lapsed or
expired.
58
Annual Report 2020
NOTE 14. SHARE-BASED PAYMENTS (CONTINUED)
No amounts are unpaid on any of the shares. No person entitled to exercise an option had or has any rights by virtue of
the option to participate in any share issue of any other body corporate.
NOTE 15. DIVIDENDS
There were no dividends recommended or paid during the year ended 30 June 2020.
NOTE 16. KEY MANAGEMENT PERSONNEL DISCLOSURES
Short term employee benefits
Post-employment benefits
Annual Leave benefits
Share-based payment
30 June
2020
$
538,209
43,433
23,390
669,982
1,275,015
30 June
2019
$
578,794
44,641
30,341
13,519
667,295
Detailed remuneration disclosures are provided in the Remuneration Report.
NOTE 17. 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/(expense)
Other (gain)/losses – net
Share of associate’s loss
Associate impairment (reversal)/ expense
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in provisions
(Increase)/Decrease in receivables
30 June
2020
$
(7,475,048)
30 June
2019
$
(8,288,971)
140,999
806,194
68,172
-
(61,970)
1,494,960
(586,270)
(374,380)
(18,246)
318,570
101,376
118,994
60,446
70,445
(199,015)
915,715
586,270
13,486
12,529
(51,112)
Net cash outflow from operating activities
(5,687,019)
(6,659,837)
59
NOTE 18. BASIC LOSS PER SHARE
Annual Report 2020
30 June
2020
$
30 June
2019
$
(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
(7,475,048)
(8,288,971)
(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
247,915,179
(c) Basic loss per share
Basic loss per share
Where loss per share is non-dilutive, it is not disclosed.
NOTE 19. COMMITMENTS
Cents
(3.02)
Cents
(3.34)
The Group must meet the following 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
NOTE 20. RELATED PARTY TRANSACTIONS
30 June
2020
$
261,962
261,962
175,127
-
699,051
30 June
2019
$
361,920
287,382
702,546
227,232
1,579,080
On 5 March 2019, the Company entered into a Shared Services Agreement with Todd Resources Ltd (“TRT”). The fees
and costs associated with the agreement include 40% of the Company’s budgeted administrative expenditure per month
in lieu of the office facilities provided by the Company to TRT. The Company also provide personnel on a consulting basis
for geological, GIS, financial and office administration services to TRT as part of the agreement. A total of $102,215 for
administrative expenditure and consulting services had been incurred for the financial year ended 30 June 2020. As at
30 June 2020, the Group has a receivable outstanding from TRT of $7,357.
Other than the Directors and key management personnel salaries and options described in Note 16 and the Remuneration
Report, there were no related party transactions for the year ended 30 June 2020.
60
NOTE 21. JOINT VENTURES
The Group has interests in the following joint venture operations:
Tenement
Area
Activities
Eundynie
Nickel
NOTE 22. 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
Fair value and other comprehensive income reserve
Accumulated losses
Total equity
Financial performance
Loss for the year
Other comprehensive income
Total comprehensive income
Annual Report 2020
2020
2019
80%
80%
30 June
2020
$
30 June
2019
$
6,513,905
3,284,331
9,798,236
11,693,967
4,667,728
16,361,695
243,981
177,568
421,549
9,376,687
333,211
-
333,211
16,028,484
52,552,523
4,016,601
-
(47,192,435)
9,376,687
52,552,523
7,905,600
354,998
(44,784,639)
16,028,484
30 June
2020
$
30 June
2019
$
(7,419,490)
(33,229)
(7,452,719)
(8,208,819)
(597,921)
(8,806,740)
61
Annual Report 2020
NOTE 23. SUBSIDIARIES
Name of entity
Country of incorporation Class of Shares
Equity Holding
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
Finland
Canada
Sweden
Australia
United States
United States
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2020
100%
100%
100%
100%
100%
100%
100%
100%
2019
100%
100%
100%
100%
100%
100%
100%
100%
NOTE 24. EVENTS OCCURRING AFTER THE REPORTING YEAR
On 28 July 2020, the Group completed its placement by issuing 61,976,000 shares to institutional and sophisticated
investors at an issue price of $0.125 resulting in the Group having additional working capital of $7,747,000. The placement
was undertaken within the Group’s 25% capacity under ASX Listing Rule 7.1 and 7.1A and accordingly no shareholder
approval was required in connection with the equity raising.
No other matter or circumstance has arisen since the end of the financial year which significantly affected or may
significantly affect the operation of the Group, the results of those operations or the state of affairs of the Group in
subsequent financial years.
NOTE 25. 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
NOTE 26. GROUP BENEFITS IN RELATION TO COVID
30 June
2020
$
36,845
36,845
30 June
2019
$
37,309
37,309
The Group was eligible for Job keeper and lodged claims in relation to their eligible employees which resulted in a benefit
of $72,000 in the year to 30 June 2020.
The Group also received a benefit of $100,000 of Cash Boost of which $50,000 was received in the year. The remaining
$50,000 will be received between July and September 2020 upon lodgement of the Group’s BAS returns.
62
Annual Report 2020
Directors’ Declaration
The Directors of the Group declare that:
1. The financial statements and notes as set out on pages 18 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 2020 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
Executive Chairman
Perth
10 September 2020
63 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 2020, 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, 10 September 2020
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 a firms. Liability limited by a scheme approved under Professional Standards Legislation.
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 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the 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 2020 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 (including Independence Standards) (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 a firms. Liability limited by a scheme approved under Professional Standards Legislation.
Carrying value of exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
As the carrying value of the capitalised exploration
Our procedures included, but were not limited to:
and evaluation asset represents a significant asset of
the Group at 30 June 2020, 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, whether facts and circumstances indicate
that the exploration and evaluation assets should be
tested for impairment
·
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;
·
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 Notes 10 and 1(a) to the
Financial Statements.
Carrying value of investment in associate
Key audit matter
How the matter was addressed in our audit
The carrying value of the equity accounted investment
Our procedures included, but were not limited to:
in associate Todd River Resources Limited (“TRT”) as
at 30 June 2020 is disclosed in Note 9.
·
Considering the existence of any indicator
of impairment of the investment under
At each reporting period, the value of the equity
AASB 128;
accounted investment in TRT needs to be assessed for
indicators of impairment. If indicators of impairment
exist, the recoverable amount needs to be estimated.
The assessment of the carrying value of the equity
accounted investment in TRT was a key audit matter
due to the judgement involved in determining the
recoverable amount.
·
Reviewing ASX announcements, Board of
Directors meetings minutes to assess for
potential indicators of impairment;
·
Reviewing management’s calculation of the
reversal of impairment of the investment
based on the increase in the share price of
TRT during the year; and
·
Assessing the adequacy of the related
disclosures in Notes 9 and 1(a) to the
Financial Statements
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2020, but does not include the
financial report and the auditor’s report thereon.
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
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, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the 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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 16 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of S2 Resources Limited, for the year ended 30 June 2020,
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, 10 September 2020
Annual Report 2020
Additional ASX Information
The shareholder information set out below was applicable as at the dates specified.
Unlisted Securities
Options (Current as at 9 September 2020)
Number on issue
Number of
holders
Options expiring 6 October 2020 at an exercise price of $0.61
Options expiring 6 October 2020 at an exercise price of $0.35
Options expiring 17 October 2021 at an exercise price of $0.23
Options expiring 20 October 2021 at an exercise price of $0.23
Options expiring 27 November 2022 at an exercise price of $0.14
Options expiring 4 March 2023 at an exercise price of $0.11
Options expiring 11 November 2023 at an exercise price of $0.30
Options expiring 2 December 2023 at an exercise price of $0.30
Options expiring 26 August 2024 at an exercise price of $0.30
Holders of over 20% of unlisted securities
9,050,000
1,000,000
7,750,000
2,650,000
2,700,000
50,000
18,000,000
400,000
200,000
14
1
4
7
6
1
10
2
0
There are the following holders of more than 20% of unlisted securities as at 9 September 2020:
Mark Bennett
Number held
13,000,000
Distribution of Equity Securities (Current as at 9 September 2020)
Analysis of numbers of ordinary shareholders by size of holding:
1
1,001
5,001
10,001
100,001
Number of Shareholders
-
-
-
-
and over
1,000
5,000
10,000
100,000
1,981
1,142
528
892
301
4,844
There are 2,587 holders holding less than a marketable parcel of ordinary shares based on the closing market price as at
9 September 2020.
Ordinary Shares subject to escrow (Current as at 9 September 2020)
There are zero ordinary shares subject to either regulatory or voluntary escrow.
On-Market Buy-Back
There is no current on-market buy-back.
Voting Rights
The voting rights attaching to each class of equity securities are set out below:
(a)
(b)
Ordinary Shares: On a show of hands every member present at a meeting in person or by proxy shall have one
vote and upon a poll each share shall have one vote.
Options: These securities have no voting rights.
69 Annual Report 2020
Substantial Holders (Current as at 9 September 2020)
Substantial holders of equity securities in the Company are set out below:
Ordinary Shares
Name
Mark Gareth Creasy, Yandal Investments Pty Ltd, Ponton Minerals Pty Ltd,
Lake Rivers Gold Pty Ltd and Free CI Pty Ltd
Merian Global Investors (UK) Limited
Paradice Investment Management Pty Ltd
Number held
Percentage
of issued
shares
76,419,935
24.66%
46,621,574
19,993,635
14.93%
6.452%
Equity Security Holders (Current as at 9 September 2020)
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
48,482,707
46,959,266
22,517,404
BT PORTFOLIO SERVICES LIMITED
10,000,000
PONTON MINERALS PTY LTD
FREE CI PTY LTD
LAKE RIVERS GOLD PTY LTD
8,312,410
8,312,409
8,312,409
GURRAVEMBI INVESTMENTS PTY LTD
5,000,000
DR MARK ANTHONY BENNETT
BRINDABELLA CAPITAL MANAGEMENT PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
REDLAND PLAINS PTY LTD
BELLARINE GOLD PTY LTD
PERSHING AUSTRALIA NOMINEES PT Y LTD
SOUTHERN CROSS CAPITAL PTY LTD
MR ALAIN CHEVALIER
ROXTRUS PTY LTD
PERTH SELECT SEAFOODS PTY LTD
MARTINI 29 PTY LTD
4,095,000
4,000,000
3,953,373
2,965,150
2,800,000
2,621,856
2,500,000
2,100,000
2,005,946
2,000,000
1,600,000
R J TURNER PROPERTIES PTY LTD
1,600,000
1
2
3
4
5
6
6
8
9
10
11
12
13
14
15
16
17
18
19
19
19
15.65
15.15
7.27
3.23
2.68
2.68
2.68
1.61
1.32
1.29
1.28
0.96
0.90
0.85
0.81
0.68
0.65
0.65
0.52
0.52
0.52
MR HUGH WALLACE-SMITH
Total of Top 20
Total Remaining Holders Balance
1,600,000
191,737,930
61.87
118,153,249
38.13
70
Annual Report 2020
Tenement Schedule at 30 June 2020
Project
Tenement ID
Registered Holder
Location
Ownership %
Status
Western Australia
Fraser Range
Fraser Range
E28/2791
E28/2792
Southern Star Pty Ltd
Fraser Range
100%
Southern Star Pty Ltd
Fraser Range
Fraser Range
E28/2793
Southern Star Pty Ltd
Fraser Range
Southern Star Pty Ltd
Fraser Range
M15/1814
Polar Metals Pty Ltd
Fraser Range
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
Polar Bear
E28/2794
E15/1298
E15/1461
E15/1541
E63/1142
E63/1712
E63/1725
E63/1756
E63/1757
M15/651
M15/710
M63/230
M63/255
M63/269
M63/279
M63/662
P15/5958
P15/5959
P63/1587
P63/1588
P63/1589
P63/1590
P63/1591
P63/1592
P63/1593
P63/1594
Eundynie JV
E15/1458
Eundynie JV
E15/1459
Eundynie JV
E15/1464
Eundynie JV
E63/1726
Eundynie JV
E63/1727
Eundynie JV
E63/1738
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Polar Metals Pty Ltd /
Shumwari Pty Ltd
Polar Metals Pty Ltd /
Shumwari Pty Ltd
Polar Metals Pty Ltd /
Shumwari Pty Ltd
Polar Metals Pty Ltd /
Shumwari Pty Ltd
Polar Metals Pty Ltd /
Shumwari Pty Ltd
Polar Metals Pty Ltd /
Shumwari Pty Ltd
100%
100% when granted –
subject to ballot
100% when granted –
subject to ballot
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
100% nickel
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
Lake Cowan
80% nickel
Lake Cowan
80% nickel
Lake Cowan
80% nickel
Lake Cowan
80% nickel
Lake Cowan
80% nickel
Lake Cowan
80% nickel
Granted
Granted
Application
Application
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
100% nickel when granted
Application
71
Annual Report 2020
Granted
Granted
Application
Application
Application
Application
Application
Granted
Granted
Granted
Granted
Renewal
pending
Norcott
Norcott
Three Springs
Three Springs
E15/1487
E63/1728
E70/5380
E70/5381
Polar Metals Pty Ltd
Polar Metals Pty Ltd
Mt Norcott
Mt Norcott
100% nickel
100% nickel
Southern Star Pty Ltd
Three Springs
100% when granted
Southern Star Pty Ltd
Three Springs
100% when granted
West Murchison
E70/5382
Southern Star Pty Ltd
West Murchison
100% when granted
West Murchison
E09/2390
Southern Star Pty Ltd
West Murchison
100% when granted
West Murchison
E09/2391
Southern Star Pty Ltd
West Murchison
100% when granted
Finland
Exploration Licences
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Central Lapland
Keulakkopää
ML2016:0058
Paana Central
ML2018:0081
Aakenusvaara
ML2018:0105
Paana W2
ML2018:0107
Kerjonen
ML2015:0061
Palvanen
ML2016:0062
Putaanperä
ML2016:0063
Sikavaara E
ML2016:0056
Paana East
ML2017:0029
Paana West
ML2017:0028
Selkä
ML2017:0037
Mesi
ML2017:0034
Ruopas
ML2017:0040
Nuttio
ML2017:0041
Home
ML2017:0042
Hanhijarvi
ML2017:0112
Pikkulaki
ML2017:0111
Ruopas 1
ML2018:0065
Home 1
ML2018:0109
Pahasvuoma
ML2019:0085
Rova
ML2019:0086
Sikavaara W
ML2019:0107
Sakumpu Exploration Oy
Central Lapland
100%
Sakumpu Exploration Oy
Central Lapland
100%
Sakumpu Exploration Oy
Central Lapland
100%
Sakumpu Exploration Oy
Central Lapland
100%
Sakumpu Exploration Oy
Central Lapland
100% upon renewal
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
Sakumpu Exploration Oy
Central Lapland
100% when granted
Application
72
Annual Report 2020
Competent Persons Statement
The information in this report that relates to exploration results from Australia and Nevada is based on information
compiled by John Bartlett who is an employee of the company. Mr Bartlett is a member of the Australasian Institute of
Mining and Metallurgy. Mr Bartlett has sufficient experience of relevance to the style of mineralisation and the types of
deposits under consideration, and to the activities undertaken, to qualify as Competent Persons as defined in the 2012
Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves. Mr Bartlett consents to the inclusion in this report of the matters based on information in
the form and context in which it appears.
The information in this report that relates to exploration results Finland is based on information compiled by Andy
Thompson who is an employee of the company. Mr Thompson is a member of the Australasian Institute of Mining and
Metallurgy. Mr Thompson has sufficient experience of relevance to the style of mineralization and the types of deposits
under consideration, and to the activities undertaken, to qualify as Competent Persons as defined in the 2012 Edition of
the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves. Mr Thompson consents to the inclusion in this report of the matters based on information in the form and
context in which it appears.
73