Silver City Minerals Limited
Silver City Minerals Limited
ANNUAL REPORT 2018
ANNUAL REPORT 2018
E
m
0
0
0
6
4
5
6447000 mN
EL 8255
EL 8255
EL 8629
EL 8629
Northern Targets
Northern Targets
Falcon Gravity Anomaly
TM
Dipole-Dipole IP Anomaly (>15mv/v)
180m below surface
Gradient Array IP Anomaly (>8mv/v)
Near-surface
Drill Hole
Area of High Resolution
Dipole-Dipole IP
ELAELA
Copper Blow
Copper Blow
Pinnacles-Thackaringa Shear Zone
0
1 km
SCI 31-7-18
C
r
o
s
s
X
X
L o n g
?
Southern Targets
Southern Targets
EL 8076
EL 8076
Copper Blow Geophysics
Contents
Chairman’s Letter ............................................................................ 1
Review of Operations....................................................................... 2
Schedule of Tenements...................................................................11
Directors’ Report.............................................................................12
Consolidated Statement of Comprehensive Income.......................21
Consolidated Statement of Financial Position.................................22
Consolidated Statement of Cash Flows........................................... 23
Consolidated Statement of Changes in Equity.................................24
Notes to the Consolidated Financial Statements.............................25
Director’s Declaration......................................................................46
Independent Auditor’s Report.........................................................47
Additional Information.................................................................... 51
Cover photograph: Field mapping at Yalcowinna Creek
Chairman’s Letter
Dear Fellow Shareholders
The past year has seen good improvement in a number of commodity prices and an improved market for explorers
particularly in the first half. Towards the end of the year prices softened and the junior end of the resources market was
not as well supported.
Silver City Minerals has maintained a focus on copper and zinc as these metals have strong fundamental outlooks.
Copper prices in Australian dollar terms have remained strong over the year with LME stocks showing a significant
decline over the past 5 years. There is widespread recognition that copper is likely to continue in tight supply based on
the growth of electric cars and energy metal needs. Zinc prices also remained strong during the year while LME stocks
were at very low levels having declined from 1 million tonnes to 240,000 tonnes over the past 5 years. A number of large
zinc mines have come to the end of their lives and limited new projects are in the pipeline.
The past year has delivered some exciting drill results for the Company that has uncovered a significant IOCG style
copper-gold (+cobalt) deposit 20 kilometres south of Broken Hill. This is the Copper Blow deposit where drilling over the
past year has intersected a number of high grade lenses of greater than 2% copper as well as broad of 1% copper along
an 1000 metre strike length. Mineralisation tested to date is located in a 100-200 metre wide strongly altered and
magnetite bearing shear zone that has been traced for 4.5 kilometres, much of which remains to be drill tested.
Geophysical and geochemical surveys completed over the last few months are indicating the IOCG style of
mineralisation has a much larger footprint than initially recognised with very strong Induced Polarisation responses
indicative of sulphide mineralisation extending up to 1 kilometre south east of Copper Blow and over 4 kilometres in a
north west direction. This extensive system has the potential to host large tonnage copper-gold deposits and will be the
focus of drilling programmes over the coming year.
The great advantage for development of the Copper Blow deposit is its close proximity to the established infrastructure at
Broken Hill. Power, rail and sealed road are all within a few kilometres and the City of Broken Hill has all the facilities of a
major mining centre. There are two operating mines with large processing facilities. Copper Blow is a contributing joint
venture with CBH Resources (SCI 75%, CBH 25%) who operate the Rasp Mine at Broken Hill.
The Broken Hill District is a highly mineralised province that hosts the world’s largest and highest grade zinc-lead-silver
deposit. It is also part of the geological terrain that hosts large scale IOCG copper deposits across the Gawler Craton in
SA and the Curnamona Craton in SA and NSW that includes the massive Olympic Dam deposit. Exploration activities by
Silver City Minerals over several years has demonstrated that much of the Broken Hill District is poorly explored and the
potential for discovery of world class orebodies is outstanding.
In addition to the copper-gold IOCG system at Copper Blow, the Company has been exploring a potential repeat of the
Broken Hill ore system some 15 kilometres along strike to the north. This is the Razorback West project that is a fault
displaced block of Broken Hill host rocks that has a strike length of 12 kilometres and is held 100% by Silver City. This
zone is largely covered by outwash gravels but RAB drilling has identified lead and zinc anomalies that are 5 kilometres
long. Prior to Silver City acquiring the ground this 12-kilometre trend had never been drill tested despite being within 15
kilometres along strike from world’s richest base metal deposit.
Some 40 kilometres north of Broken Hill Silver City has established a belt of copper and cobalt mineralisation over a 25
kilometre strike length. Past data and recent SCI surface sampling along this zone has recorded values of greater than
0.5% copper in 107 of 723 samples (14%) with a maximum value of 38% copper. Anomalous cobalt was also recorded
with a maximum value of 0.23% cobalt. This represents a significant regional copper-cobalt trend not previously
recognised at Broken Hill.
The Company also holds exploration titles in the Cobar Basin some 400 kilometres east of Broken Hill, a prolific base
and precious metal producer over many decades.
Everyone in the Company is very focused on achieving a commercial discovery in the Broken Hill and Cobar Districts. I
would like to acknowledge the outstanding efforts of the entire team led by Chris Torrey our Managing Director.
Thank you for your continued support.
Bob Besley
Chairman
1 > Silver City Minerals Limited Annual Report 2018
Review of Operations
Project activities
Silver City Minerals (ASX:SCI) has maintained a strong focus on the Copper Blow copper-gold project, located close to
Broken Hill in western New South Wales (Figure 1). Last year at the time of writing the Annual Report, the Company had
just completed its first drill hole at Copper Blow. Now it has completed thirty holes for just over 7600 metres drilled. A fourth
round of drilling has commenced at the time of writing this year’s report. The Company has also undertaken extensive
ground geophysical surveys, surface geochemical surveys and preliminary metallurgical test work.
Drilling shows that copper-gold mineralisation occurs as sulphides within a magnetic ironstone. The ironstone forms within
an elongate shear zone 4.5 kilometres long. Drilling is concentrated over a 1-kilometre portion of this magnetic rock located
in the southwestern part of the shear zone. The remaining three and half kilometres remains to be tested.
Interpretation of geophysical surveys, particularly induced polarisation (IP), suggests that sulphide is not solely restricted
to the ironstone horizon and that large, intense IP anomalies, indicative of sulphide mineralisation, are hosted in non-
magnetic rock adjacent to the ironstone. One of these was being drill-tested at the time of writing.
The size and extent of IP anomalies both within magnetic and non-magnetic rocks suggest that the mineralised system is
much larger than originally anticipated based solely on the distribution of magnetic ironstone. New anomalies to the
southeast and northeast of known mineralisation at Copper Blow provide appreciable upside for abundant copper-gold
mineralisation.
During the year the Company has had a strong focus on copper mineralisation in the Broken Hill district outside the Copper
Blow project. It initiated an exploration program to review and sample copper-rich occurrences within existing tenements,
especially those associated with ironstones. Initial work focussed on the Yalcowinna tenement to the northeast of Broken
Hill where historic work identified a belt of copper and copper-cobalt rich rocks over 25 kilometres.
In the Cobar district the Company has begun geological work on the Tindery exploration licence located close to the
Endeavor zinc-lead-silver mine and considers the tenements it has in the area have potential for both copper and zinc-
lead-silver mineralisation.
SCI spent approximately $2.2 million on in-ground exploration this year, almost $1 million up on last year, largely due to
positive results at Copper Blow. Of this almost all was spent in the Broken Hill district ($2.14 million) with approximately
$60,000 spent in the Cobar district and evaluation of new projects. This year expenditure on drilling and associated
expenses was $1.65 million, considerably up on last year, and representing 75% of all inground costs. Approximately
$175,000 was expended on geophysics.
Administration expenditure for the year was $659,000 consistent with previous years.
In July 2017 the Company raised $428,000 through a share placement which was followed by a share purchase plan in
August 2017 which raised a further $250,000. In March 2018 the Company raised a further $1.962 million (before costs).
The purpose of those issues was to enable drill testing of the copper-gold mineralisation at the Copper Blow.
Broken Hill, New South Wales
Copper Blow (EL 8255 Coombarra, EL 8629 Saltbush and EL 8076 Lynor; SCI 75%, CBH Resources
25%; both contributing)
The Copper Blow project is located 20 kilometres south of Broken Hill (Figure 1). The Company was first drawn to the
project when reviewing old drill holes data. An intersection from a hole drilled in 1988 returned 11.9 metres at 6.7% copper
and 1.92 g/t gold (ASX Release 4 May 2017).
The key feature to the project is an elongate magnetic anomaly which is 100-200 metres wide and extends for 4.5
kilometres in a north-easterly direction (Figure 5). The anomaly serves to outline the extent of a high strain shear zone (the
Copper Blow Shear) which hosts abundant iron oxide (ironstone) in the form of magnetite. The magnetite is not part of the
host rock sedimentary sequence but was introduced into the shear zone as a hydrothermal fluid during deformation.
Copper, gold and cobalt mineralisation was similarly introduced into the shear to form sulphide minerals. The sulphides
metasomatically replace and are intimately associated with magnetite. The shear zone is surrounded by a zone of strong
potassium alteration with abundant potassium-rich minerals such as biotite and potassium feldspar. The magnetite-biotite-
quartz component of the shear zone displays characteristics of high strain. The sulphide component of the shear locally
displays breccia textures and is associated with coarse brecciated quartz veins.
2 > Silver City Minerals Limited Annual Report 2018
Review of Operations
The copper-gold-rich zones drilled by SCI have a distinctive elevated trace element geochemistry characterised by
elements including molybdenum, silver, rhenium, phosphorous, cobalt, lanthanum, indium, cerium and nickel. This
distinctive geochemistry and the form and nature of the surrounding alteration minerals strongly suggests this
mineralisation is of the iron oxide copper-gold (IOCG) type. This style of deposit produces significant quantities of copper
and gold worldwide. Deposits range in size from 1 million tonnes of high grade gold ore at Tennent Creek in the Northern
Territory to super-giants (+10 billion tonnes) such as Olympic Dam in South Australia which is mined for copper and
uranium. Copper Blow displays geological similarities to several deposits in Australia including Ernest Henry (Qld),
Prominent Hill (SA) and Selwyn (Qld).
Drilling
Figure 1. Silver City tenements at Broken Hill
Copper Blow is in the southwestern portion of the shear zone where drilling has focussed over a strike length of 1 kilometre.
Drill hole intersections have been presented in ASX releases and Quarterly Reports during the year. A summary of
significant results is outlined below:
South Zone
➢ 4 metres at 6.1% copper, 4.23 g/t Au, 13 g/t Ag and 220 ppm cobalt from 188 metres, including 1 metre at 11.3%
copper, 10.7 g/t gold, 25 g/t silver and 405 ppm cobalt from 191 metres in hole 17CB041 (ASX Release 5 October
2017)
➢ 8.22 metres at 1.9% copper and 0.53 g/t gold from 131.78 metres, including 4 metres at 2.5% copper and 0.83 g/t
gold from 131.78 in hole 18CH043 (ASX Release 26 Sept 2018)
➢ 7 metres at 3.7% copper and 1.07 g/t gold from 126 metres, including 3 metres at 7.4% copper and 2.38 g/t gold
from 127 metres in hole 17CB045 (ASX Release 26 Oct 2017)
3 > Silver City Minerals Limited Annual Report 2018
Review of Operations
➢ 5 metres at 1.2 % copper and 0.42 g/t gold from 91 metres in hole 17CB048(ASX Release 26 Oct 2017)
➢ 9 metres at 1.0% copper and 0.26 g/t gold from 112 metres in hole 17CB048(ASX Release 26 Oct 2017)
➢ 5.2 metres at 0.14% cobalt from 400 metres in hole 17CB042(ASX Release 26 Oct 2017)
North Zone
➢ 41.2 metres at 1.3% copper and 0.40 g/t gold from 183.8 metres in hole 18CB054 including 7 metres at 2.0% copper
and 0.99 g/t gold from 189 metres and 7 metres at 2.0% copper and 0.48 g/t gold from 208 metres (ASX Release
22 February 2018)
➢ 61 metres at 0.7% copper and 0.14 g/t gold from 184 metres in hole 18CB055(ASX Release 28 May 2018)
➢ 31 metres at 1.0% copper and 0.26 g/t gold from 270 metres including 15 metres at 1.6% copper and 0.32 g/t gold
from 285 metres in hole 18CB057 (ASX Release 5 July 2018)
➢ 21 metres at 0.4% copper and 0.1 g/t gold from 139 metres in hole 18CB058 (ASX Release 5 July 2018)
➢ 16 metres at 0.5% copper and 0.18 g/t gold from 130 metres in hole 18CB063 (ASX Release 5 July 2018)
The North Zone hosts broad intersections of copper-gold mineralisation in a steeply plunging structure, has generally
consistent, evenly distributed copper-gold mineralisation and is in a single magnetite-rich zone. The down-dip, down-
plunge part of this structure is being drill tested at the time of writing (Figures 3 and 4). The South Zone hosts several
steeply dipping magnetite lodes.
Geophysics and Geochemistry
Interpretation of geophysical surveys, particularly IP, suggests that potential copper-gold mineralisation is not solely
restricted to the magnetic ironstone structure. Large, strong IP anomalies, indicative of sulphide mineralisation, are hosted
in non-magnetic rock adjacent to the ironstone (Figures 2 and 3). A soil geochemical survey over the IP anomalies in the
Southern Target zone (Figure 5) suggests it is related to the IOCG mineralisation in the adjacent ironstone.
On a more regional scale IP surveys indicate other zones of potential copper-gold mineralisation. Gradient array IP surveys
show extensive anomalism within or adjacent to the magnetic ironstone rocks (Northern Targets in Figure 5). More
extensive soil geochemical programs are being conducted over areas of IP anomalism to assist in drill target definition
(ASX Release 3 Sept 2018).
Metallurgy
The Company completed preliminary test work on three samples. Each represents a style of mineralisation prevalent at
Copper Blow. These have been classified based on their copper or cobalt content and were selected from SCI drill holes
(ASX Release 27 March 2018).
Flotation test work was carried out on high-grade (7.6%) copper mineralisation located on the South Zone, a lower grade
(0.9%) copper sample in the North Zone and a pyritic cobalt (0.13% Co) sample also from the South Zone.
The high-grade sample responded well to typical industry copper flotation conditions at moderate grind sizes and yielded
high recoveries at 97% copper to a concentrate grading 26%.
The lower grade sample also responded well at a moderate grind size, and yielded a good recovery of 87.5% copper to a
concentrate grading 26% copper after regrinding and cleaning.
Pyritic sample achieved a high cobalt recovery of 93% at a concentrate grade of 0.5% after a fine grind. Cleaning had
minimal effect to the recovery. The work shows that cobalt is largely contained within pyrite.
Synopsis
Exploration work by the Company at Copper Blow has shown that the mineralised complex is large, extending for at least
4 kilometres along strike and covering an area of 2 to 3 square kilometres. This suggests a much larger mineralised
complex and potentially more copper and gold than that solely hosted in the magnetic ironstone complex where drilling
has been focussed. Favourable metallurgical recoveries were achieved for copper and cobalt in magnetic ironstone
samples.
The Company has previously suggested that mineralisation might be related to intrusive igneous rock, or that the non-
magnetic IP anomalies may be responding to sulphide hosted in hematite breccias, a common ore type in iron oxide
copper-gold (IOCG) deposits.
4 > Silver City Minerals Limited Annual Report 2018
Review of Operations
Company geologists suggest that not only is the Copper Blow magnetite-bearing shear zone an excellent conduit and trap
for copper-gold mineralisation, but the likely source of mineralising fluids may be an adjacent, copper-gold mineralised,
magmatic intrusive complex which is not well exposed.
Figure 2. Image is a
horizontal slice through
the IP chargeability model
at about 180 metres
below surface. It shows
elevated chargeabilities
over the copper-sulphide-
bearing magnetic
ironstone at Copper Blow
where drilling has taken
place. The position of the
Long Section (Figure 4)
and the Cross Section
(Figure 3) are shown. The
Falcon gravity anomaly is
derived from a publicly
available gravity
gradiometry survey flow
in the district in 2001.
Plate 1. Example of
abundant copper
mineralisation in
magnetite rich rocks in
hole 18CB054. Black is
predominantly magnetite,
biotite and quartz.
Yellow-bronze speckle is
sulphide dominated by
chalcopyrite (copper
sulphide).
5 > Silver City Minerals Limited Annual Report 2018
Figure 3. Image is a
vertical slice through the
IP chargeability model
and shows a clear
relationship between
elevated chargeabilities
in the magnetic ironstone
and copper
mineralisation (left-hand
side of diagram). The
anomaly to the southeast
(right-hand side of
diagram) has no
appreciable magnetic
signature and is being
drill-tested at the time of
writing.
Figure 4. Longitudinal
Section of the North Zone
at Copper Blow. Grade x
downhole thickness plot.
Each point represents the
piercement point of the
centre of each drill hole
intersection. The
proposed hole located
down-plunge of
mineralisation was being
drilled at the time of
writing.
Review of Operations
6 > Silver City Minerals Limited Annual Report 2018
Review of Operations
Figure 5. Simplified
geophysical map
showing
background image
of reduced-to-pole
magnetics, gradient
array contour at
8mv/v, the extent
of the dipole-dipole
IP survey, a
horizontal slice of
the IP model at 180
metres below
surface (15mv/v
contour) and Falcon
TM gravity
anomalies. Diagram
shows that the
location of
interpreted
sulphide-bearing
rock defined by the
8mv/v contour is
significantly larger
than the linear
magnetic anomaly
which host known
copper-gold
mineralisation at
Copper Blow.
Yalcowinna (EL 8078, SCI 92%, EGC 8% free carry to BFS)
During the year the Company embarked on a review of copper mineralisation within its existing tenements at Broken Hill.
This review is ongoing and has been accompanied by field work and rock chip sampling. Results of this study were pending
at the time of writing however an historic review of geochemical data for the Yalcowinna tenement has been completed. It
indicates a belt of copper and copper-cobalt mineralisation located to the northeast of Broken Hill extends for over 25
kilometres (ASX Release 17 October 2017).
Copper mineralisation was identified during field mapping by the NSW Geological Survey and previous explorers. The
review found data for 723 surface rock chip analyses, 126 of which were collected by SCI.
One hundred and seven (107) or 14% of all samples contain greater than or equal to 0.5% copper. Fifty-eight (58) samples
returned 2% copper or more with a maximum value of 37.7% recorded at Fairy Hill. Ninety (90) or 12% of all samples
contain greater than or equal to 200 ppm cobalt with a maximum value of 0.23% cobalt recorded at Parnalleroo.
Follow-up work has commenced within the licence with preliminary rock chip sampling and IP surveys ongoing at
Yalcowinna Creek (Figure 6).
7 > Silver City Minerals Limited Annual Report 2018
Review of Operations
Figure 6. Historic rock chip samples from Yalcowinna EL
Razorback West (EL 8077 100% SCI)
to
these
along
rocks extend
Razorback West is a highly prospective
zinc-lead-silver project hosted in the fault-
offset, northern extension of the Broken Hill
mine corridor. The corridor contains the
same host rocks as the large Broken Hill
the
located 15 kilometres
orebody
the SCI exploration
southwest. Within
for 12
licence
kilometres
has
the poorly
concentrated exploration
exposed, southern part of this corridor
where
lead
it has outlined zinc and
geochemical anomalies beneath a veneer
of alluvium and soil over 5 kilometres long.
These are coincident with geophysical
anomalies including IP, magnetics and
gravity (ASX Release 15 January 2013).
During the year a ground gravity survey
was undertaken to map the prospective
rocks in more detail.
strike. SCI
in
8 > Silver City Minerals Limited Annual Report 2018
Plate 2 Drilling Copper Blow
Review of Operations
Drilling by SCI focused on a central zinc anomaly and encountered a northwest-dipping zone of anomalous zinc and lead
(Annual Report 2017). Limited historic rotary air blast (RAB) drilling in the northern part of the corridor hosts a similar zinc
anomaly which has never been drilled (Figures 7). Of significant interest is an elongate lead anomaly to the west and
subparallel to the main zinc anomaly. It extends for approximately 7 kilometres and is 100 to 300 metres wide. It coincides
with an IP chargeability anomaly which is 1 kilometre long and hosts elevated ground gravity responses.
Geological interpretation, based on core drilling, suggests the western lead anomaly marks the stratigraphic position of the
Hores Gneiss. This rock lies in the upper parts of the Broken Hill Group and is host to, or intimately associated with, some
of the most significant zinc-lead-silver ore bodies at Broken Hill.
This western zone has never been drilled and the Company plans more detailed work including RAB and RC drilling. It
considers there is significant potential for discovery of a Broken Hill type deposit in this area.
Figure 7. Regional diagram (left) shows relationship of Razorback West and Copper Blow with respect to the large Broken Hill orebody.
The diagram to the right shows the Razorback West project in more detail. The prospective rock package extending for 12km is shown.
Drilling to date has only focussed on the central zinc anomaly. The western lead anomaly is interpreted to lie in the same stratigraphic
position as the Broken Hill orebody, it hosts IP and gravity anomalies and has not yet been drill tested.
Other Projects
Silver City remains focussed on the Broken Hill and Cobar mining districts. It has recently embarked on both regional and
detailed assessments of copper mineralisation within its tenements in both districts. Both host significant metalliferous
deposits and mines and potential for discovery is high.
In the Broken Hill area, the Company is undertaking rock chip sampling, geological mapping and ground geophysical
programs. At Cobar it plans to drill the Wilga Downs magnetic anomaly which is a joint venture with Thomson Resources
(Annual Report 2017). It has also commenced reconnaissance work within the Tindery licence (EL 8579), near the
Endeavor Mine at Cobar, where several electromagnetic geophysical and other geological targets exist. It anticipates RAB
drilling within this tenement in the coming year (Figure 8).
9 > Silver City Minerals Limited Annual Report 2018
Review of Operations
Figure 8. SCI tenements in the Cobar district
Competent Person
The information in this report that relates to Exploration Results is based on information compiled by Chris Torrey (BSc,
MSc, RPGeo.) who is a member of the Australian Institute of Geoscientists. Mr Torrey is the Managing Director, a
shareholder and full-time employee of Silver City Minerals Limited. Mr Torrey has sufficient experience which is relevant
to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify
as a “Competent Person” as defined by the 2012 edition of the “Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves”. Mr Torrey consents to the inclusion in this Report of the matters based on this
information in the form and context in which it appears.
This report contains information extracted from the reports to the ASX cited in the body of this report. All are available to
view on the website www.silvercityminerals.com.au. The Company confirms that it is not aware of any new information or
data that materially affects the information included in the original market announcements. The Company confirms that the
form and context in which the Competent Person’s findings are presented have not been materially modified from the
original market announcements.
10 > Silver City Minerals Limited Annual Report 2018
Schedule of Tenements
As at 6 September 2018
Tenement
Tenement no.
SCI interest Joint venture details
New South Wales
Aragon
Aspen
Coombarra
Enmore
Lynor
Native Dog
Rantyga
Razorback
Riddock
Rildar
Saltbush
Southern Cross
Tindery
White Tank
Wilga Downs
Willyama
Yalcowinna
Yanco
Yellowstone
EL 7300
EL 8685
EL 8255
EL 8333
EL 8076
EL 8236
ELA 5702
EL 8077
EL 8020
EL 8074
EL 8629
EL 8495
EL 8579
EL 8496
EL 8136
EL 8075
EL 8078
EL 8454
EL 7390
EL = Exploration Licence
85%
92%
75%
100%
75%
75%
100%
100%
100%
75%
75%
75%
100%
100%
0%
75%
92%
100%
20%
CBH 15%, Eaglehawk 0.5% NSR
Eaglehawk 8%, Note 3
CBH 25% contributing interest
CBH 25% contributing interest
CBH 25%, Note 1
CBH 25% contributing interest
CBH 25% contributing interest
CBH 25%
SCI can earn 80%, Thomson Resources 100%
CBH 25%, Note 1
Eaglehawk 8% in area of previous EL 7319, Notes 1
and 3
Note 2 Impact Minerals 80%
Note 1 These tenements are subject to agreements with Variscan Mines Limited and Eaglehawk Geological Consulting
Pty Ltd whereby Variscan and Eaglehawk hold an NSR (Net Smelter Return) interest in parts of these
tenements.
Note 2 Silver City has an agreement with Impact Minerals on the lead-zinc-silver metal rights for this EL. Silver City’s
interest is free-carried to a Decision to Mine.
Note 3 Eaglehawk has an 8% interest carried to the completion of a BFS in EL 8695 and in 45 of the 50 units that are
now EL 8078. On completion of a BFS, Eaglehawk can contribute to retain the 8% interest or revert to a 0.2%
NSR.
11 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Your directors submit their report for the year ended 30 June 2018.
Directors
The names and details of the Company’s directors in office during the financial year and until the date of this report are as
follows. Directors were in office for this entire period unless otherwise stated.
Bob Besley, BSc (Hons), MAusIMM, MAIG
Chairman
Director since 5 March 2010
Bob is a geologist with more than 40 years’ experience in the minerals industry in Asia, the Middle East, North and South
America, Australia and the Pacific Rim. He spent 13 years with Unocal, seven of those as Manager of Minerals for Australia
and the Pacific and was General Manager of Australmin Holdings Limited when that company developed a minerals sands
project in eastern Australia and a gold mine in Western Australia. Bob founded and was Managing Director of CBH
Resources Limited from its initial ASX listing as a junior to when it was an important Australian zinc/lead/silver producer.
He was a founding Director of Kimberley Metals Ltd, that became KBL Mining Limited. He is a Director and Chairman of
the listed company Image Resources that is building a new mineral sands mine in Western Australia. Bob has served on
a number of Government and Industry advisory boards.
During the past three years Bob has served as a director of the following listed companies:
KBL Mining Limited - appointed 29 February 2008, resigned November 2016
Image Resources NL- appointed 9th June 2016
Christopher Torrey, BSc, MSc, RPGeo, MAIG, FSEG
Managing Director
Director since 23 August 2010
Chris is a geologist with over 35 years international exploration experience. He started his career with large north American
mining companies, notable Noranda and Cyprus Amax where he attained senior management positions in Australia, New
Zealand, Indonesia, United States and Central America. He joined ASX-listed Golden Cross Resources as Exploration
Manager in 1996 and was appointed to that Board in 2003, ultimately holding the Chairman’s position.
Prior to joining Silver City Minerals in April 2010 he managed a Sydney-based geological consulting business and was the
Chief Consulting Geologist to Golden Minerals Company, a North American-based silver explorer and Manager of Silex
Exploration Pty Limited.
During the past three years Chris has not served as a director of any other listed companies.
Gregory Jones, BSc (Hons), MAusIMM, MAIG
Non-Executive Director
Director since 30 April 2009
Greg is a geologist with over 30 years of exploration and operational experience gained in a broad range of metalliferous
commodities within Australia and overseas. Greg has held senior positions in a number of resource companies including
Western Mining Corporation and Sino Gold Mining Limited. His experience spans the spectrum of exploration activity from
grass-roots exploration through to resource definition and new project generation, as well as mine geology, ore
resource/reserve generation and new mine development.
Greg was awarded the Institute Medal for academic excellence whilst at university and is credited with several economic
discoveries including the Blair nickel and the Orion gold deposits in Western Australia.
12 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
During the past three years Greg has also served as a director of the following other listed companies:
Variscan Mines Limited - appointed 20 April 2009
Eastern Iron Limited – appointed 24 April 2009, resigned 27 November 2017
Thomson Resources Ltd – appointed 17 July 2009
Moly Mines Limited – appointed August 2014, resigned 17 April 2018
Professor Ian Plimer, BSc (Hons), PhD, FGS, FTSE, FAIMM
Non-Executive Director
Director since 21 February 2011 (resigned 20 November 2017)
During the past three years Ian has also served as a director of the following other listed companies:
Niuminco Group Ltd - appointed 9 May 2011
Lakes Oil NL – appointed January 2013
Sun Resources NL – appointed September 2013, resigned March 2016
Josh Puckridge
Non-Executive Director
Director since 3 February 2017
Josh is a Corporate Finance Executive formerly working as a specialist Equity Capital Markets Advisor for Fleming
Australia, a Corporate Advisory and Funds Management firm. He has significant experience within funds management,
capital raising, mergers, acquisitions and divestments of projects by companies listed on the Australian Securities
Exchange.
Formerly Executive Director and Chief Executive of Discovery Resources Limited, Mr Puckridge structured the acquisition
of the Canberra Casino and the relisting of the Company as Aquis Entertainment Limited. He was a founding Director of
Windward Resources Limited, seeding and listing the Company and raising more than $11m. Mr Puckridge coordinated
the change of Board of TopTung Ltd (then, Krucible Metals Limited), returning $5m to its shareholders in 2015;
subsequently, the Company acquired a NSW based tungsten project. Mr Puckridge also holds various positions on private
company boards.
During the past three years Josh has also served as a director of the following other listed companies:
Blaze International Ltd – appointed 4 December 2015
MCS Services Ltd – appointed 27 May 2015, resigned 14 July 2017
Fraser Range Metals Group Ltd – appointed 20 January 2016
Alcidion Group Ltd – appointed 9 March 2015, resigned 29 November 2016
Directors' interests in shares and options
As at the date of this report, the interests of the Directors in the shares and options of Silver City Minerals Limited were:
Directors
B Besley
C Torrey
G Jones
J Puckridge
Shares directly and indirectly held
Options directly and indirectly held
3,157,044
1,430,889
-
-
1,500,000
2,750,000
1,000,000
-
13 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Company Secretary
Ivo Polovineo, FIPA
Ivo Polovineo was appointed Company Secretary of the Company on 5 August 2011. Ivo has over 30 years’ experience in
corporate accounting, finance and company secretarial work for a diverse range of companies. He has spent the past 20
years in senior management roles in the resources sector including seven years as Company Secretary (and five years as
CFO) of Sino Gold Mining Limited (a former ASX 100 company) until December 2009.
Ivo is currently also Company Secretary of Thomson Resources Ltd and Lynas Corporation Ltd.
Principal activities
The principal activity of the Company is exploration for the discovery and delineation of high grade base and precious
metal deposits and the development of those resources into economic, cash flow generating businesses.
Results
The net result of operations of the consolidated entity after applicable income tax expense was a profit of $43,520 (2017:
loss of $1,673,633).
Dividends
No dividends were paid or proposed during the period.
Review of operations
A review of the operations commences on page 2 of this Annual Financial Report. This, together with the Chairman’s Letter
and the sections headed “Significant changes in the state of affairs” and “Significant events after the balance date” in this
report, provides a review of operations of the Company during the year and subsequent to reporting date.
Significant changes in the state of affairs
The Directors are not aware of any significant changes in the state of affairs of the Group occurring during the financial
period, other than as disclosed in this report.
Significant events after the balance date
There were, at the date of this report, no matters or circumstances which have arisen since 30 June 2018 that have
significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.
Likely developments and expected results
As the Company’s areas of interest are at an early stage of exploration, it is not possible to postulate likely developments
and any expected results. The Company is hoping to establish resources from some of its current prospects and to identify
further base and precious metal targets.
14 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Shares under option or issued on exercise of options
Details of unissued shares or interests under option for Silver City Minerals Limited as at the date of this report are:
Number of shares
under option
750,000
11,722,540
8,500,000
3,000,000
4,000,000
27,972,540
Class of share
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Exercise price
of option
$0.04
$0.067
$0.06
$0.03
$0.06
Expiry date of options
24 November 2018
21 July 2019
24 November 2019
16 January 2021
5 June 2022
The holders of these options do not have the right, by virtue of the option, to participate in any share issue of the Company
or of any other body corporate or registered scheme.
There were 250,000 shares issued during or since the end of the financial year as a result of exercise of the above options.
Indemnification and insurance of directors and officers
Indemnification
The Company has not, during or since the end of the financial period, in respect of any person who is or has been an
officer of the Company or a related body corporate indemnified or made any relevant agreement for indemnifying against
a liability incurred as an officer, including costs and expenses in successfully defending legal proceedings.
Insurance premiums
During the financial period the Company has paid premiums to insure each of the Directors and officers against liabilities
for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the
capacity of Director or officer of the Company, other than conduct involving a wilful breach of duty in relation to the
Company.
The premiums paid are not disclosed as such disclosure is prohibited under the terms of the contract.
Environmental performance
Silver City Minerals holds exploration titles issued by New South Wales Department of Planning and Environment –
Resources and Geoscience, which specify guidelines for environmental impacts in relation to exploration activities. The
licence conditions provide for the full rehabilitation of the areas of exploration in accordance with the Department’s
guidelines and standards. There have been no significant known breaches of the licence conditions.
15 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Auditor’s independence Declaration
Auditor's Independence Declaration
To the directors of Silver City Minerals Limited
As engagement partner for the audit of Silver City Minerals Limited for the year ended 30 June 2018, I declare that, to
the best of my knowledge and belief, there have been:
i) no contraventions of the independence requirements of the Corporations Act 2001 in relation to the audit; and
ii) no contraventions of any applicable code of professional conduct in relation to the audit.
BDJ Partners
Chartered Accountants
……………………………………………………..
Anthony J Dowell
Partner
25 September 2018
16 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Non-audit services
The Company’s auditor, BDJ Partners did not provide non-audit services to the Company during the period ended 30 June
2018 (2017: Nil). The Directors are satisfied that the provision of non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit
service provided means that auditor independence was not compromised.
Remuneration report (audited)
This remuneration report for the year ended 30 June 2018 outlines the remuneration arrangements of the Company and
the Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information
has been audited as required by section 308(3C) of the Act.
The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined
as those persons having authority and responsibility for planning, directing and controlling the major activities of the
Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent
company.
Details of key management personnel
Details of KMP including the top five remunerated executives of the Parent and Group are set out below.
Directors
B Besley
C Torrey
G Jones
I Plimer
J Puckridge
Key management personnel
I Polovineo
Remuneration philosophy
Chairman, Non-Executive Director
Managing Director
Non-Executive Director
Non-Executive Director (resigned 20 November 2017)
Non-Executive Director
Company Secretary
The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and
the creation of value for shareholders. The Board believes that executive remuneration satisfies the following key criteria:
Competitiveness and reasonableness
Acceptability to shareholders
Performance linkage/alignment of executive compensation
Transparency
Capital management
These criteria result in a framework which can be used to provide a mix of fixed and variable remuneration, and a blend of
short and long-term incentives in line with the Company’s limited financial resources.
Fees and payments to the Company’s Non-Executive Directors and Senior Executives reflect the demands which are
made on, and the responsibilities of, the Directors and the senior management. Such fees and payments are reviewed
annually by the Board. The Company’s Executive and Non-Executive Directors, Senior Executives and Officers are entitled
to receive options under the Company’s Employee Share Option Scheme.
17 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Non-executive director remuneration arrangements
Directors are entitled to remuneration out of the funds of the Company but the remuneration of the Non-Executive Directors
may not exceed in any year the amount fixed by the Company in general meeting for that purpose. The aggregate
remuneration of the Non-Executive Directors has been fixed at a maximum of $200,000 per annum to be apportioned
among the Non-Executive Directors in such a manner as the Board determines. Directors are also entitled to be paid
reasonable travelling, accommodation and other expenses incurred in consequence of their attendance at Board meetings
and otherwise in the execution of their duties as Directors.
The Chairman’s fee is set at $50,000 p.a. and Non-Executive Director fees at $40,000 p.a. At present, no Committee fees
are paid to Directors.
On 1 October 2015 the Directors temporarily reduced their fees by 25% until 31 May 2018, whereby the Chairman’s fees
and Directors fees reverted to their full fees.
Service agreements
Remuneration and other terms for key management personnel are formalised in contractor agreements. Details of these
agreements are set out below:
Chairman – Bob Besley
Agreement for ad hoc consulting services. Term: Rolling forward arrangement. Either party may terminate the
agreement with 30 days’ notice.
Fee rate: $200 per hour as at 30 June 2018. (2017: $200)
Termination payments: Not applicable
Managing Director – Chris Torrey
Contract term: No fixed term. Either party may terminate the letter of employment with three months’ notice.
Remuneration: $281,285 p.a. as at 30 June 2018 (2017: $281,285).
Termination payments: Any applicable payments on Redundancy in accordance with the Act.
Company Secretary – Ivo Polovineo
12 month rolling contract. Either party may terminate the contract with 30 days’ notice.
Remuneration: $1,500 per day plus GST as at 30 June 2018 (2017: $1,350 per day).
Termination payments: Nil
18 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Director and key management personnel remuneration for the year ended 30 June
2018
Short-term benefits
Post
employment
Share-based
payments
Cash salary
and fees
$
35,360
242,061
28,274
11,468
30,833
Directors
B Besley
C Torrey
G Jones
I Plimer (a)
J Puckridge
Total Directors
Other key management personnel
I Polovineo
347,996
-
Total KMP
Totals
-
347,996
Consulting
$
Superannuation
$
Options
$
Total
$
Consisting
of options
%
22,000
-
-
-
-
22,000
32,700
32,700
54,700
3,359
22,996
2,615
1,089
-
30,059
-
-
30,059
-
-
-
-
-
-
-
-
-
60,719
265,057
30,889
12,557
30,833
400,055
32,700
32,700
432,755
-
-
-
-
-
-
No performance based remuneration was paid in the 2018 and 2017 financial period.
(a)
Resigned 20 November 2017.
Director and key management personnel remuneration for the year ended 30 June
2017
Short-term benefits
Post
employment
Share-based
payments
Cash salary
and fees
$
34,404
256,881
27,523
27,523
12,500
16,055
Directors
B Besley
C Torrey
G Jones
I Plimer
J Puckridge (a)
I Hume (b)
Total Directors
Other key management personnel
374,886
I Polovineo
Total KMP
Totals
-
-
374,886
(a)
(b)
Appointed 3 February 2017.
Resigned 31 January 2017.
Consulting
$
Superannuation
$
Options
$
Total
$
Consisting
of options
%
2,000
-
-
-
-
-
2,000
32,400
32,400
34,400
3,268
24,404
2,615
2,615
-
1,525
34,427
-
-
14,100
18,800
9,400
9,400
-
9,400
61,100
9,400
9,400
53,772
300,085
39,538
39,538
12,500
26,980
472,413
41,800
41,800
26%
6%
24%
24%
-
35%
22%
34,427
70,500
514,213
19 > Silver City Minerals Limited Annual Report 2018
Directors’ Report
Share-based compensation
Employee share option plan
The Company has established the Silver City Minerals Employee Share Option Plan (Plan) to assist in the attraction,
retention and motivation of employees of the Company and its related bodies corporate (Group). At 30 June 2018 there
were 2,000,000 options on issue pursuant to the Plan. The Plan is administered by the Board in accordance with the rules
of the Plan, and the rules are subject to the ASX Listing Rules.
Compensation options: granted and vested during the year
There were no share based payments granted to Directors and Key Management personal during the financial year.
There were no alterations to the terms and conditions of options granted as remuneration since their grant date. There
were no forfeitures during the period.
Meetings of directors
The following table sets out the number of Directors’ meetings (including meetings of Committees of Directors) held during
the financial year and the number of meetings attended by each director:
Directors
B Besley
C Torrey
G Jones
I Plimer
J Puckridge
Board of directors
Audit committee
Remuneration committee
Held
Attended
Held
Attended
Held
Attended
7
7
7
3
7
7
7
6
3
5
2
-
2
1
1
2
-
1
1
1
2
-
2
1
1
2
-
2
1
1
Signed at Sydney this 26th day of September 2018 in accordance with a resolution of the Directors.
Chris Torrey
Managing Director
20 > Silver City Minerals Limited Annual Report 2018
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2018
Revenue
ASX and ASIC fees
Audit fees
Computer services/licences
Contract administration services
Employee costs
Exploration expenditure written off
Insurances
Marketing and conference costs
Rent
Share based payments
Travel and accommodation
Other expenses from ordinary activities
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense
Other comprehensive income
Other comprehensive (loss)
Other comprehensive income/(loss) for the period
Total comprehensive income/(loss) for the period attributable
to members of silver city minerals limited
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Consolidated
2018
$
Consolidated
2017
$
645,376
(37,291)
(26,300)
(18,994)
(103,848)
(201,630)
(12,287)
(16,543)
(74,803)
(34,215)
-
(22,926)
(53,019)
43,520
-
43,520
-
-
43,520
0.02
0.02
185,427
(23,127)
(26,500)
(21,145)
(95,718)
(204,159)
(1,211,203)
(14,325)
(83,579)
(31,740)
(79,900)
(14,304)
(53,360)
(1,673,633)
-
(1,673,633)
-
-
(1,673,633)
(1.06)
(1.06)
Note
3
4
13
15
15
The Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
21 > Silver City Minerals Limited Annual Report 2018
Consolidated Statement of Financial Position
As at 30 June 2018
Current assets
Cash assets
Receivables
Tenement security deposits
Total current assets
Non-current assets
Receivables
Tenement security deposits
Property, plant and equipment
Deferred exploration and evaluation expenditure
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Reserves
Total equity
Consolidated
2018
$
Consolidated
2017
$
Note
5
6
7
6
7
8
9
10
11
11
12
13
14
1,170,664
140,475
-
898,701
52,259
-
1,311,139
950,960
1,280
150,000
9,850
6,113,964
6,275,094
7,586,233
158,774
9,112
167,886
33,731
33,731
201,617
7,384,616
1,600
160,000
11,798
3,892,787
4,066,185
5,017,145
86,521
27,617
114,138
45,087
45,087
159,225
4,857,920
18,067,440
15,583,680
(10,761,763)
(10,907,223)
78,939
7,384,616
181,463
4,857,920
The Statement of Financial Position should be read in conjunction with the accompanying notes.
22 > Silver City Minerals Limited Annual Report 2018
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
Consolidated
2018
$
Consolidated
2017
$
Note
Cash flows from operating activities
Payment to suppliers and employees
R&D tax concession offset
Government grant
JV and consulting income
Interest received
Net cash flows (used in) operating activities
25
Cash flows from investing activities
Purchase of fixed assets
Expenditure on mining interests (exploration)
Tenement security deposits
Net cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Equity raising expenses
Net cash flows from financing activities
Net increase/(decrease) in cash held
Net foreign exchange differences
Add opening cash brought forward
Closing cash carried forward
25
(701,616)
120,468
-
449,455
17,631
(114,062)
(475,844)
35,139
79,197
10,105
35,392
(316,011)
(6,856)
(5,309)
(2,090,102)
(1,304,053)
10,000
(20,000)
(2,086,958)
(1,329,362)
2,556,228
(82,469)
2,473,759
272,739
(776)
898,701
1,170,664
1,117,497
(25,240)
1,092,257
(553,116)
(32)
1,451,849
898,701
The Statement of Cash Flows should be read in conjunction with the accompanying notes.
23 > Silver City Minerals Limited Annual Report 2018
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
At 1 July 2016
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners in their capacity
as owners:
Issue of share capital (net of share issue
costs)
Option issue consideration
Share-based payments
Expired option value
Foreign currency translation
At 30 June 2017
At 1 July 2017
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners in their capacity
as owners:
Issue of share capital (net of share issue
costs)
Option issue consideration
Expired option value
Foreign currency translation
At 30 June 2018
Consolidated
Note
Issued
capital
$
14,471,415
-
-
-
Accumulated
losses
$
(9,259,810)
(1,673,633)
-
(1,673,633)
12
12
14
13
14
939,944
172,321
-
-
-
-
-
-
26,220
-
Reserves
$
127,801
-
-
-
-
-
79,900
(26,220)
(18)
Total
equity
$
5,339,406
(1,673,633)
-
(1,673,633)
939,944
172,321
79,900
-
(18)
15,583,680
(10,907,223)
181,463
4,857,920
15,583,680
(10,907,223)
181,463
4,857,920
-
-
-
43,520
-
43,520
2,342,086
141,674
-
-
-
-
-
-
-
14
-
-
101,940
(101,940)
-
(584)
43,520
-
43,520
2,342,086
141,674
-
(584)
18,067,440
(10,761,763)
78,939
7,384,616
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
24 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1. Corporate information
The financial report of Silver City Minerals Limited (the Company) for the year ended 30 June 2018 was authorised for
issue in accordance with a resolution of the Directors on 26 September 2018.
Silver City Minerals Limited is a company limited by shares, incorporated and domiciled in Australia whose shares are
publicly traded on the Australian Securities Exchange using the ASX code SCI.
The consolidated financial statements comprise the financial statements of Silver City Minerals Ltd and its subsidiaries
(the Group or Consolidated Entity).
The nature of the operations and principal activities of the Consolidated Entity are described in the Directors’ Report.
2. Summary of significant accounting policies
Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements
of the Corporations Act 2001 and Australian Accounting Standards. The financial report has been prepared on a historical
cost basis. All amounts are presented in Australian dollars.
Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with the Corporations
Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. Accounting
Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS
ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards
(IFRS).
Basis of consolidation
The consolidated financial statements comprise the financial statements of Silver City Minerals Limited (Silver City or the
“Company”) and its subsidiaries if applicable (“the Group”) as at 30 June each year. The financial statements of subsidiaries
are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are
made to bring into line any dissimilar accounting policies that may exist. All inter-company balances and transactions,
including unrealised profits arising from intra-group transactions, have been eliminated in full. Subsidiaries are fully
consolidated from date on which control is transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group.
Property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is
calculated on a straight-line basis over the estimated useful life of the asset as follows:
Plant and equipment – 2 - 5 years
Motor Vehicle – 5 years
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. An item of plant and equipment is derecognised upon disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the item) is included in the income statement in the period the item is derecognised.
Borrowing costs
Borrowing costs are recognised as an expense when incurred.
25 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Interest in jointly controlled operations – joint ventures
The Company has an interest in exploration joint ventures that are jointly controlled. A joint venture is a contractual
arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A jointly controlled
operation involves use of assets and other resources of the venturers rather than establishment of a separate entity.
The Company recognises its interest in the jointly controlled operations by recognising the assets that it controls and the
liabilities that it incurs. The Company also recognises the expenses that it incurs and its share of any income that it earns
from the sale of goods or services by the jointly controlled operations.
Recoverable amount of assets
At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Company makes a formal estimate of recoverable amount. Where the carrying amount
of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use.
Investments
All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition
charges associated with the investment. After initial recognition, investments, which are classified as held-for-trading and
available-for-sale, are measured at fair value. Gains or losses on investments held-for-trading are recognised in the income
statement. Gains or losses on available-for-sale investments are recognised as a separate component of equity until the
investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time
the cumulative gain or loss previously reported in equity is included in the income statement. Non-derivative financial assets
with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Company has the
positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included
in this classification. Other long-term investments that are intended to be held-to-maturity, such as bonds, are subsequently
measured at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period to maturity.
For investments carried at amortised cost, gains and losses are recognised in income when the investments are
derecognised or impaired, as well as through the amortisation process. For investments that are actively traded in
organised financial markets, fair value is determined by reference to Securities Exchange quoted market bid prices at the
close of business on the balance sheet date. For investments where there is no quoted market price, fair value is
determined by reference to the current market value of another instrument which is substantially the same or is calculated
based on the expected cash flows of the underlying net asset base of the investment.
Purchases and sales of financial assets that require delivery of assets within the time frame generally established by
regulation or convention in the market place are recognised on the trade date, being the date that the Company commits
to purchase the asset.
Exploration, evaluation, development and restoration costs
Exploration and evaluation
Exploration and evaluation expenditure incurred by or on behalf of the Company is accumulated separately for each area
of interest. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure, but
does not include general overheads or administrative expenditure not having a specific connection with a particular area
of interest.
Exploration and evaluation costs in relation to separate areas of interest for which rights of tenure are current are brought
to account in the year in which they are incurred and carried forward provided that:
Such costs are expected to be recouped through successful development and exploitation of the area, or alternatively
through its sale; or
Exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves.
Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect of the
area of interest is aggregated within costs of development.
26 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Exploration and evaluation – impairment
The Directors assess at each reporting date whether there is an indication that an asset has been impaired and for
exploration and evaluation cost whether the above carry-forward criteria are met.
Accumulated costs in respect of areas of interest are written off or a provision made in the Income Statement when the
above criteria do not apply or when the Directors assess that the carrying value may exceed the recoverable amount. The
costs of productive areas are amortised over the life of the area of interest to which such costs relate on the production
output basis, provisions would be reviewed and if appropriate, written back.
Development
Development expenditure incurred by or on behalf of the Company is accumulated separately for each area of interest in
which economically recoverable reserves have been identified to the satisfaction of the directors. Such expenditure
comprises net direct costs and, in the same manner as for exploration and evaluation expenditure, an appropriate portion
of related overhead expenditure having a specific connection with the development property.
All expenditure incurred prior to the commencement of commercial levels of production from each development property
is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the
relevant development property, or from the sale of that property, is reasonably assured.
No amortisation is provided in respect of development properties until a decision has been made to commence mining.
After this decision, the costs are amortised over the life of the area of interest to which such costs relate on a production
output basis.
Restoration
Provisions for restoration costs are recognised when the Company has a present obligation (legal or constructive) as a
result of a past event, and 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. If the effect of the time value of money
is material, provisions are determined by discounting the expected cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability. When discounting is
used, the increase in the provision due to the passage of time is recognised as a finance cost.
Remaining mine life
In estimating the remaining life of the mine at each mine property for the purpose of amortisation and depreciation
calculations, due regard is given not only to the volume of remaining economically recoverable reserves but also to
limitations which could arise from the potential for changes in technology, demand, product substitution and other issues
that are inherently difficult to estimate over a lengthy time frame.
Mine property held for sale
Where the carrying amount of mine property and related assets will be recovered principally through a sale transaction
rather than through continuing use, the assets are reclassified as Mine Property Held for Sale and carried at the lower of
the assets’ carrying amount and fair value less costs to sell – where such fair value can be reasonably determined, and
otherwise at its carrying amount. Liabilities and provisions related to mine property held for sale are similarly reclassified
as Liabilities – Mine Property Held for Sale and, Provisions – Mine Property Held for sale, as applicable, and carried at the
value at which the liability or provisions expected to be settled.
Trade and other receivables
Trade receivables, which generally have 7-30 day terms, are recognised and carried at original invoice amount less an
allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no
longer probable. Bad debts are written off when identified.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an
original maturity of one year or less. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist
of cash and cash equivalents as defined above, net of any outstanding bank overdrafts, if any.
27 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Trade and other payables and provisions
Provisions are recognised when the Company 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.
Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, 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 income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as
a finance cost.
Employee entitlements
Liabilities for wages and salaries are recognised and are measured as an amount unpaid at the reporting date at current
pay rates in respect of an employee’s services up to that date. Current employee contracts do not entitle them to annual
leave and long service leave. A liability in respect of superannuation at the current superannuation guarantee rate has
been accrued at the reporting date.
Share-based payments
In addition to salaries, the Company provides benefits to certain employees (including Directors and Key Management
personnel) of the Company in the form of share-based payment transactions, whereby employees render services in
exchange for shares or rights over shares (“equity-settled transactions”). The Company intends to adopt an Employee
Share Option Plan prior to listing on the Stock Exchange in order to assist in the attraction, retention and motivation of
employees of the Company and its related bodies corporate (“Group”).
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which
they are granted. The fair value of the options is determined by using the Binomial option pricing model. In valuing
transactions settled by way of issue of options, no account is taken of any vesting limits or hurdles, or the fact that the
options are not transferable. The cost of equity-settled transactions is recognised, together with a corresponding increase
in equity, over the period in which the vesting conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the
extent to which the vesting period has expired and (ii) the Company’s best estimate of the number of equity instruments
that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect
of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a
period represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon
a market condition.
If the terms of an equity-settled award are modified, at a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based
payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-
settled award is cancelled, it is treated as if it had vested on the date of the cancellation, and any expense not yet
recognised is recognised immediately. However, if a new award is substituted for the cancelled award and designated a
replacement award on the date it is granted, the cancelled and the new award are treated as if there was a modification of
the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as
additional share dilution in the computation of earnings per share except where such dilution would serve to reduce a loss
per share.
Leases
Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased
item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of
the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged
28 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same bases as the lease income. Operating lease payments are recognised
as an expense in the income statement on a straight-line basis over the lease term.
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue
can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and
can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to
the customer.
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the
financial asset.
Dividends
Revenue is recognised when the shareholders’ right to receive the payment is established.
Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted
or substantively enacted at the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
Except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in
joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:
Except where the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests
in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can
be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to
be utilised.
29 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in
the income statement.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;
and
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from
investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating
cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
Currency
Functional currency translation
The functional and presentation currency for the parent company is Australian dollars ($). The functional currency of
overseas subsidiaries is the local currency.
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at
the date of the translation. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
Translation of Group Companies’ functional currency to presentation currency
The results of the New Zealand subsidiary are translated into Australian Dollars (presentation currency) as at the date of
each transaction. Assets and liabilities are translated at exchange rates prevailing at reporting date.
Investment in controlled entities
The Company’s investment in its controlled entities is accounted for under the equity method of accounting in the
Company’s financial statements.
Impairment of assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and
is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those
from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such
cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount
of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment
30 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
losses relating to continuing operations are recognised in those expense categories consistent with the function of the
impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation
decrease).
An assessment is also made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to
determine the asset’s recoverable amount since the last impairment loss was recognised.
If that is the case the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued
amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is
adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis
over its remaining useful life.
Significant accounting judgements, estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future
events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of certain assets and liabilities within the next annual reporting period are:
Share-based payment transactions
The Company measures the cost of cash-settled share-based payments at fair value at the grant date using the Binomial
formula taking into account the terms and conditions upon which the instruments were granted, as detailed in Notes 14
and 16.
Capitalisation and write-off of capitalised exploration costs
The determination of when to capitalise and write-off exploration expenditure requires the exercise of judgement based on
various assumptions and other factors such as historical experience, current and expected economic conditions.
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the Company, adjusted to exclude any costs
of servicing equity divided by the weighted average number of ordinary shares.
Diluted earnings per share is calculated as net profit attributable to members of the Company, adjusted for:
Costs of servicing equity;
The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element.
Accounting standards issued but not yet effective
Australian Accounting Standards and interpretations that have been issued or amended but are not yet effective have not
been adopted by the Consolidated Entity for the year ended 30 June 2017. The Consolidated Entity plans to adopt these
standards at their application dates as detailed below.
31 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
AASB 16 Leases (effective 1 January 2019)
AASB 16 removes the classification of leases as either operating leases or finance leases for the lessee effectively treating
all leases as finance leases. Short term leases (less than 12 months) and leases of a low value are exempt from the lease
accounting requirements. Lessor accounting remains similar to current practice. The Directors are yet to assess the full
impact of AASB 16 and will apply the new standard from 1 January 2019.
AASB 9 Financial Instruments (applicable for annual reporting periods commencing on or after 1 January 2018)
AASB 9 includes requirements for the classification and measurement of financial assets, the accounting requirements for
financial liabilities, impairment testing requirements and hedge accounting requirements.
The changes made to accounting requirements by these standards which may impact on the Group include:
simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
allowing an irrevocable election on initial recognition to present gains and losses on investments in equity
instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments
that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal
of the instrument
financial assets will need to be reclassified where there is a change in an entity’s business model as they are initially
classified based on (a) the objective of the entity’s business model for managing the financial assets; and (b) the
characteristics of the contractual cash flows
requirements for impairment of financial assets
The Group is yet to assess its full impact however initial indications are that it may affect the Group’s accounting of its
available-for-sale financial assets.
The Director’s assessment of the impact of all other new standards and interpretations is that they will not have a material
impact on the financial report of the Company.
3. Revenue from ordinary activities
Joint venture and consulting income
Government grant
R&D tax concession
Interest received – other financial institutions
4.
Income tax
Prima facie income tax (credit) on operating profit/(loss) at 27.5% (2017:
30%)
Future income tax benefit in respect of timing differences – not recognised
Deferred income tax liability in respect of carried forward tax losses – not
recognised
Income tax expense
Consolidated
2018
$
Consolidated
2017
$
507,837
-
120,468
17,071
645,376
36,383
79,197
35,139
34,708
185,427
Consolidated
2018
$
Consolidated
2017
$
11,968
-
(11,968)
-
(502,090)
502,090
-
-
No provision for income tax is considered necessary in respect of the Company for the period 30 June 2018.
The Group has a deferred income tax liability of Nil (2017: Nil) associated with exploration costs deferred for accounting
purposes but expensed for tax purposes. This liability has been brought to account and offset by deferred tax assets
attributed to available tax losses. No recognition has been given to any deferred income tax asset which may arise from
32 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
available tax losses, except to the extent offset against deferred tax liabilities. The Company has estimated its losses at
$15,695,890 (2017: $13,828,567) as at 30 June 2018.
A benefit of 27.5% (2017: 30%) of approximately $4,316,370 (2017: $4,148,570) associated with the tax losses carried
forward will only be obtained if:
The Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the
deductions for the losses to be realised;
The Company continues to comply with the conditions for deductibility imposed by the law; and
No changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.
Silver City and its 100% owned subsidiary (MEPL) formed a tax consolidated group of which Silver City is the head
entity.
5. Cash and cash equivalents
Cash at bank
Money market securities – bank deposits
Consolidated
2018
$
Consolidated
2017
$
83,601
1,087,063
1,170,664
77,869
820,832
898,701
Bank negotiable certificates of deposit, which are normally invested between 7 and 120 days were used during the period
and are used as part of the cash management function.
6. Receivables
Current
GST receivables
Interest receivable
Prepayments
Trade and other debtors
Non - current
Rental bonds
7. Tenement security deposits
Cash at bank – bank deposits
Consolidated
2018
$
Consolidated
2017
$
30,159
999
33,347
75,970
140,475
4,806
1,560
23,508
22,385
52,259
1,280
1,600
Consolidated
2018
$
Consolidated
2017
$
150,000
150,000
160,000
160,000
These deposits are restricted so that they are available for any rehabilitation that may be required on exploration tenements
(refer to Note 21). The bank deposits are interest bearing.
33 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
8. Property, plant and equipment
Motor vehicle
Plant and
equipment
Year ended 30 June 2017 (Consolidated)
Opening net book amount
Additions
Depreciation expense
Closing net book amount
At 30 June 2017
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2018 (Consolidated)
Opening net book amount
Additions
Depreciation expense
Closing net book amount
At 30 June 2018
Cost
Accumulated depreciation
Net book amount
6,239
-
(6,239)
-
93,101
(93,101)
-
-
-
-
-
93,101
(93,101)
-
15,093
5,309
(8,604)
11,798
157,110
(145,312)
11,798
11,798
6,856
(8,804)
9,850
119,699*
(109,849)*
9,850
Total
21,332
5,309
(14,843)
11,798
250,211
(238,413)
11,798
11,798
6,856
(8,804)
9,850
212,800
(202,950
9,850
*Note: An amount of $37,411 was written off for obsolete plant and equipment with a written down value of Nil at 30 June
2018.
9. Deferred exploration and evaluation expenditure
Costs brought forward
Costs incurred during the period
Expenditure written off during period
Costs carried forward
Exploration expenditure costs carried forward are made up of:
Expenditure on joint venture areas
Expenditure on non joint venture areas
Costs carried forward
Consolidated
2018
$
Consolidated
2017
$
3,892,787
2,233,464
3,845,267
1,258,723
(12,287)
(1,211,203)
6,113,964
3,892,787
4,660,725
2,546,282
1,453,239
6,113,964
1,346,505
3,892,787
The above amounts represent costs of areas of interest carried forward as an asset in accordance with the accounting
policy set out in Note 2. The ultimate recoupment of deferred exploration and evaluation expenditure in respect of an area
of interest carried forward is dependent upon the discovery of commercially viable reserves and the successful
development and exploitation of the respective areas or alternatively sale of the underlying areas of interest for at least
their carrying value. Amortisation, in respect of the relevant area of interest, is not charged until a mining operation has
commenced.
34 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
10. Current liabilities – payables
Trade creditors
Accrued expenses
GST payable
PAYG payable
11. Liabilities – provisions
Current
Annual leave
Non-current
Long Service Leave
12. Contributed equity
Share capital
245,839,883 fully paid ordinary shares (2017: 158,578,962)
Fully paid ordinary shares carry one vote per share and carry the
right to dividends.
Share issue costs
Option issue consideration reserve
18,722,540 unlisted options on issue (2017: 11,722,540)
(a) Movements in ordinary shares on issue
At 30 June 2016
Shares issued
Shares issued
At 30 June 2017
Shares issued
Shares issued
Shares issued
Shares issued
Shares issued
At 30 June 2018
Consolidated
2018
$
Consolidated
2017
$
96,992
45,378
6,832
9,572
158,774
48,919
22,590
2,037
12,975
86,521
Consolidated
2018
$
Consolidated
2017
$
9,112
27,617
33,731
45,087
Consolidated
2018
$
Consolidated
2017
$
(a)
19,122,464
16,461,005
(1,369,019)
(1,049,646)
313,995
172,321
18,067,440
15,583,680
Number
$
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
133,745,691
24,833,271
15,471,729
1,117,497
-
(128,221)
158,578,962
16,461,005
23,785,844
13,916,632
49,070,350
250,000
238,095
428,145
250,500
1,962,814
10,000
10,000
245,839,883
19,122,464
(i)
In July 2016, 24,833,271 shares were issued at $0.045 per share under a Share Purchase Plan.
35 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
(ii)
In July 2016, 8,722,540 unlisted options were granted with an exercise price of $0.067 per option and expiry date of
21 July 2019. These options were issued in pursuant to the placement of shares above (i) which entitled the
subscribers to one unlisted option for every two shares issued. The value of these options ($128,221) has been
transferred to an option issue consideration reserve.
(iii) In July 2017, 23,785,844 shares were issued at $0.018 per share under a share placement.
(iv) In August 2017, 13,916,632 shares were issued at $0.018 per share under a Share Purchase Plan.
(v) In March 2018, 49,070,350 shares were issued at $0.04 per share under a share placement.
(vi) In March 2018, 250,000 shares were issued on exercise of $0.04 options expiring 24 November 2018.
(vii) In May 2018, 238,095 shares were issued at $0.042 per share as approved at the Company’s General Meeting on 24
May 2018 in lieu of a creditor payment.
Terms and conditions of contributed equity
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate
in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Options
Options do not carry voting rights or rights to dividend until options are exercised.
13. Accumulated losses
Balance at 1 July
Operating loss/(profit) after income tax expense
Expired option value transferred to Accumulated Losses
Balance at 30 June
14. Reserves/share-based payments
Reserves
Balance at 1 July
Share-based payment expensed during the financial year
Expired option value transferred to Accumulated Losses
Foreign currency translation reserve
Balance at 30 June
Share-based compensation
Employee share option plan
Consolidated
2018
$
Consolidated
2017
$
10,907,223
(43,520)
(101,940)
9,259,810
1,673,633
(26,220)
10,761,763
10,907,223
Consolidated
2018
$
Consolidated
2017
$
181,463
-
(101,940)
(584)
78,939
127,801
79,900
(26,220)
(18)
181,463
The Company has established the Silver City Minerals Employee Share Option Plan (Plan) to assist in the attraction,
retention and motivation of employees of the Company and its related bodies corporate (Group). Subsequent to 30 June
2018 there were no options granted under the Plan. The Plan will be administered by the Board in accordance with the
rules of the Plan, and the rules are subject to the ASX Listing Rules. There have been no cancellations or modifications to
any of the plans during 2018 and 2017.
36 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Summary of options granted
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Consolidated
2018
no.
18,000,000
-
-
(250,000)
Consolidated
2017
no.
10,500,000
8,500,000
-
-
(8,500,000)
(1,000,000)
9,250,000
18,000,000
The outstanding balance as at 30 June 2018 is represented by:
750,000 options exercisable at $0.04, expiry 24 November 2018
8,500,000 options exercisable at $0.06, expiry 24 November 2019
Option pricing model and terms of options
The following table lists the inputs to the options model and the terms of options granted:
Number of
options
issued
Issue date
Director and KMP options
Exercise
price
Expiry
date
Expected
volatility
Risk-
free
rate
Expected
life
Estimated
fair value
Model
used
Nov 15
Nov 16
750,000
8,500,000
9,250,000
$0.04
$0.06
24 Nov 18
80.00%
1.93%
3.0 years
$0.0066
Binomial
24 Nov 19
73.60%
1.89%
3.0 years
$0.0094
Binomial
(a)
(b)
(a)
(b)
1,000,000 options were granted to the Managing Director of the Company which were approved by shareholders
at the AGM in November 2015. The options vested immediately. 250,000 of these options were exercised during
the period.
8,500,000 options were granted to Directors and employees of the Company which were approved by shareholders
at the AGM in November 2016. The options vested immediately.
Weighted average disclosures on options
Weighted average exercise price of options at 1 July
Weighted average exercise price of options granted during period
Weighted average exercise price of options outstanding at 30 June
Weighted average exercise price of options exercisable at 30 June
Weighted average contractual life
Range of exercise price
2018
$0.08
-
$0.06
$0.06
2017
$0.09
$0.06
$0.08
$0.08
1.32 years
1.39 years
$0.04 - $0.06
$0.04 - $0.10
37 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
15. Earnings per share
Net profit/(loss) used in calculating basic and diluted gain/(loss) per share
Weighted average number of ordinary shares outstanding during the period
used in calculation of basic EPS
Basic earnings (loss) per share
Diluted earnings (loss) per share
2018
2017
43,520
Number
(1,673,633)
Number
208,521,531
158,578,962
Cents per share Cents per share
0.02
0.02
(1.06)
(1.06)
16. Key management personnel
Key management personnel compensation
The aggregate compensation made to key management personnel of the Company is set out below:
Short term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Share-based payments
Consolidated
2018
$
402,696
30,059
Consolidated
2017
$
409,286
34,427
-
-
-
432,755
-
-
70,500
514,213
Shareholdings of key management personnel
Fully paid ordinary shares held in Silver City Minerals Limited
Balance at
1 July
no.
Granted as
compensation
no.
Received on
exercise of
options
no.
Net change
other *
no.
Balance at
30 June
no.
Balance held
nominally
no.
2018
B Besley
C Torrey
I Plimer (a)
Total
2017
B Besley
C Torrey
I Plimer
I Hume (b)
Total
1,407,044
1,097,556
1,554,600
4,059,200
1,129,267
754,223
1,221,267
290,845
3,395,602
-
-
-
-
-
-
-
-
-
-
1,250,000
250,000
83,333
2,657,044
1,430,889
-
-
1,554,600
250,000
1,333,333
5,642,533
-
-
-
-
-
277,777
343,333
333,333
1,407,044
1,097,556
1,554,600
-
290,845
954,443
4,350,045
-
-
-
-
-
-
-
-
-
*2018 Net change other consists of shares purchased under the Company’s SPP and on market trades (2017: Net change
other consists of shares purchased under the Company’s SPP and an off market transfer).
(a)
(b)
Resigned 20 November 2017.
Resigned 31 January 2017.
38 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Option holdings of key management personnel
Share options held in Silver City Minerals Limited
Balance
at
1 July
no.
Granted
as
compen-
sation
no.
Net
other
change
no.
Balance
at
30 June
no.
Balance
vested at
30 June
no.
Exercised
no.
Vested
but not
exercis-
able
no.
Vested
and
exercis-
able
no.
Options
vested
during
year
no.
2018
B Besley
2,500,000
C Torrey
5,000,000
G Jones
2,000,000
I Plimer (a)
2,000,000
I Polovineo
2,000,000
Total
2017
13,500,000
-
-
-
-
-
-
-
(1,000,000)
1,500,000
1,500,000
( 2 5 0 , 0 0 0 )
(2,000,000)
2,750,000
2,750,000
-
-
-
(1,000,000)
1,000,000
1,000,000
(1,000,000)
1,000,000
1,000,000
(1,000,000)
1,000,000
1,000,000
( 2 5 0 , 0 0 0 )
(6,000,000)
7,250,000
7,250,000
B Besley
1,000,000
1,500,000
C Torrey
4,000,000
2,000,000
G Jones
1,000,000
1,000,000
I Plimer
1,000,000
1,000,000
I Hume (b)
1,000,000
1,000,000
I Polovineo
1,000,000
1,000,000
Total
(a)
(b)
9,000,000
7,500,000
Resigned 20 November 2017.
Resigned 31 January 2017.
-
-
-
-
-
-
-
-
2,500,000
2,500,000
(1,000,000)
5,000,000
5,000,000
-
-
-
-
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
(1,000,000)
15,500,000
15,500,000
17. Related party disclosures
Subsidiaries
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
2,750,000
1,000,000
1,000,000
1,000,000
7,250,000
-
-
-
-
-
-
2,500,000
1,500,000
5,000,000
2,000,000
2,000,000
1,000,000
2,000,000
1,000,000
2,000,000
1,000,000
2,000,000
1,000,000
15,500,000
7,500,000
The consolidated financial statements include the financial statements of Silver City Minerals Limited (the Parent Entity)
and the following subsidiaries:
Name
Mining Exploration Pty Ltd (MEPL)
Country of incorporation
Australia
Silver City NZ PTY Limited
New Zealand
2018
100
100
2017
100
100
% Equity interest
18. Auditors’ remuneration
Total amounts receivable by the current auditors of the Company for:
Audit of the Company’s accounts
Other services
Consolidated
2018
$
Consolidated
2017
$
26,300
-
26,300
26,500
-
26,500
39 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
19. Joint ventures
The Company is a party to a number of exploration joint venture agreements to explore for copper, gold, zinc and lead.
Under the terms of the agreements the Company will be required to contribute towards the exploration and other costs if it
wishes to maintain or increase its percentage holdings. The joint ventures are not separate legal entities. There are
contractual arrangements between the participants for sharing costs and future revenues in the event of exploration
success. There are no assets and liabilities attributable to the Company at the balance date resulting from these joint
ventures other than exploration expenditure costs carried forward as detailed in Note 9. Costs are accounted for in
accordance with the terms of joint venture agreements and in accordance with Note 2(i). Percentage equity interests in
joint ventures at 30 June 2018 were as follows:
Joint Venture
Silver City Farm In and Joint Venture Agreement
EL 7300
EL 8075
Silver City Broken Hill Project Sale Agreement – Variscan Mines
Limited
ELs 8236 and 8075
EL 8078
Agreement relating to EL 8078 (Yalcowinna – formerly Ziggys EL 6036
and Euriowie 7319) with Eaglehawk Geological Consulting Pty Ltd
EL 8078 (Eaglehawk has an 8% interest in this EL)
Broken Hill Base Metals Project with Impact Minerals Limited*
EL 7390
Silver City JV with CBH
ELs 8076, 8074 and 8255
EL 8629
EL 8495
EL 8236
*
Silver City’s interest is free-carried to a decision to mine.
20. Segment information
The operating segments identified by management are as follows:
Percentage
interest 2018
Percentage
interest 2017
85%
75%
75%
100%
92%
20%
75%
75%
75%
75%
85%
75%
75%
100%
92%
20%
75%
0%
100%
75%
Exploration projects funded directly by Silver City Minerals Limited (“Exploration”)
Regarding the Exploration segment, the Chief Operating Decision Maker (the Board of directors) receives information on
the exploration expenditure incurred. This information is disclosed in Note 9 of this financial report. No segment revenues
are disclosed as each exploration tenement is not at a stage where revenues have been earned. Furthermore, no segment
costs are disclosed as all segment expenditure is capitalised, with the exception of expenditure written off which is
disclosed in Note 9.
Financial information about each of these tenements is reported to the Managing Director on an ongoing basis.
Corporate office activities are not allocated to operating segments as they are not considered part of the core operations
of any segment and comprise of the following:
Interest revenue.
Corporate costs.
Depreciation and amortisation of non-project specific property, plant and equipment.
The Company’s accounting policy for reporting segments is consistent with that disclosed in Note 2.
40 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
21. Contingent liabilities
The Group has provided guarantees totalling $150,000 (2017: $160,000) in respect of exploration tenements in NSW.
These guarantees in respect of exploration tenements are secured against deposits with a banking institution. The
Company does not expect to incur any material liability in respect of the guarantees.
22. Financial instruments
The Board as a whole is responsible for reviewing the Company’s policies on risk oversight and management and satisfying
itself that Senior Management have developed and implemented a sound system of risk management and internal control.
The Company’s risk management policy has been designed to identify, assess, monitor and manage material business
risks to ensure effective management of risk. These policies are reviewed regularly to reflect material changes in market
conditions and the Company’s risk profile.
The main risks identified in the Company’s financial instruments are capital risk, credit risk, liquidity risk, interest rate risk
and commodity price risk. Summarised below is information about the Company’s exposure to each of these risk, their
objectives, policies and processes for measuring and managing risk, the management of capital and financial instruments.
Capital risk management
The Company manages its capital to ensure that it will be able to continue as a going concern. The Board’s policy is to
maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development
of the Company. In order to achieve this objective, the Company seeks to maintain a sufficient funding base to enable the
Company to meet its working capital and strategic investment needs.
The Board ensures costs are not incurred in excess of available funds and will seek to raise additional funding through the
issue of shares for the continuation of the Company’s operations when required.
The Company considers its capital to comprise of its ordinary share capital, option reserve and accumulated losses. There
were no changes in the Company’s approach to capital management during the period. The Company is not subject to
externally imposed capital requirements.
Financial risk management objectives
In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This
note describes the Company’s objectives, policies and processes for managing those risks and the methods used to
measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
During the period there have been no substantive changes in the Company’s exposure to financial instrument risks, its
objectives, policies and processes for managing those risks or the methods used to measure them from previous periods
unless otherwise stated in this note.
The Board has overall responsibility for the determination of the Company’s risk management objectives and policies and,
whilst retaining ultimate responsibility for them it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the Company’s finance function. The Company’s risk
management policies and objectives are designed to minimise the potential impacts of these risks on the results of the
Company where such impacts may be material. The Board receives regular reports from the Financial Controller through
which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it
sets. These risks include credit risk, liquidity risk, interest rate risk and commodity price risk. The Company does not use
derivative financial instruments to hedge these risk exposures.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Company’s competitiveness and flexibility. Further details regarding these risks are set out below.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Company.
The Company mitigates credit risk on cash and cash equivalents by dealing with banks that have high credit-ratings
assigned by Standard and Poors. There are two counterparties for Cash and Cash equivalents which are Commonwealth
41 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Bank of Australia and Bank of Western Australia Limited. Credit risk of receivables is low as it consists predominantly of
GST recoverable from the Australian Taxation Office and interest receivable from deposits held with regulated banks.
The maximum exposure to credit risk at balance date is as follows:
Cash and cash equivalents
Receivables
Deposits with banks and Joint Venture Partner
Consolidated
2018
$
Consolidated
2017
$
1,170,664
141,755
150,000
898,701
53,859
160,000
1,462,419
1,112,560
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligation as they fall due. The Company’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due.
Ultimate responsibility for liquidity risk rests with the Board of Directors, who have built an appropriate risk management
framework for the management of the Company’s short, medium and long-term funding and liquidity requirements. The
Company manages liquidity by maintaining adequate cash reserves by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and liabilities.
The following table details the Company’s contractual maturities of financial liabilities:
Financial liabilities
2018
Payables
2017
Payables
Carrying
amount
$
158,774
158,774
86,521
86,521
< 12 months
$
1-3 years
$
>3 years
$
158,774
158,774
86,521
86,521
-
-
-
-
-
-
-
-
The following table details the Company’s expected maturity for financial assets:
Financial assets
2018
Cash at bank and term deposits
Receivables
Deposits with banks and Joint Venture Partner
2017
Cash at bank and term deposits
Receivables
Deposits with banks and Joint Venture Partner
Carrying
amount
$
< 12 months
$
1-3 years
$
>3 years
$
1,170,664
1,170,664
141,755
150,000
140,475
-
1,462,419
1,311,139
898,701
53,859
160,000
898,701
52,259
-
1,112,560
950,960
-
1,280
-
1,280
-
1,600
-
1,600
-
-
150,000
150,000
-
-
160,000
160,000
42 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
Interest rate risk
The Company’s exposure to the risks of changes in market interest rates relates primarily to the Company’s cash holdings
and short term deposits. These financial assets with variable rates expose the Company to cash flow interest rate risk. All
other financial assets and liabilities in the form of receivables and payables are non-interest bearing. The Company does
not engage in any hedging or derivative transactions to manage interest rate risk.
At balance date, the Company was exposed to floating weighted average interest rates as follows:
Weighted average rate of cash balances
Cash balances
Weighted average rate of term deposits
Term deposits
Consolidated
2018
Consolidated
2017
0.03%
$83,601
1.94%
0.02%
$77,869
2.05%
$1,087,063
$820,832
The Company invests surplus cash in interest-bearing term deposits with financial institutions and in doing so it exposes
itself to the fluctuations in interest rates that are inherent in such a market. Term deposits are normally invested between
7 to 90 days and other cash at bank balances are at call.
The Company’s exposure to interest rate risk is set out in the table below:
Sensitivity analysis
2018
Cash and cash equivalents
Tax charge of 30%
Carrying
amount
$
1,170,664
-
After tax profit increase/(decrease)
1,170,664
2017
Cash and cash equivalents
Tax charge of 30%
898,701
-
After tax profit increase/(decrease)
898,701
+1.0% of AUD IR
-1.0% of AUD IR
Profit
$
11,707
(3,512)
8,195
8,987
(2,696)
6,291
Other
equity
$
-
-
-
-
-
-
Profit
$
(11,707)
3,512
(8,195)
(8,987)
2,696
(6,291)
Other
equity
$
-
-
-
-
-
-
The above analysis assumes all other variables remain constant.
Commodity price risk
The Company is exposed to commodity price risk. This risk arises from its activities directed at exploration and
development of mineral commodities. If commodity prices fall, the market for companies exploring for these commodities
is affected. The Company does not hedge its exposures.
Net fair value of financial assets and liabilities
The carrying amounts of financial assets and liabilities of the Company approximate their net fair values, given the short
time frames to maturity and or variable interest rates.
43 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
23. Commitments
In order to maintain the Company’s tenements in good standing with the New South Wales Department of Planning and
Environment – Resources and Geoscience, the Company may be required to incur exploration expenditure under the
terms of each licence. Exploration licences renewed or granted in NSW after 1 July 2016 have no exploration expenditure
commitment. These commitments are not binding as exploration tenements can be reduced or relinquished at any time.
Payable not later than one year
Payable later than one year but not later than two years
Consolidated
2018
$
Consolidated
2017
$
0
0
0
40,766
0
40,766
It is likely that the granting of new licences and changes in licence areas at renewal or expiry will change the expenditure
commitment to the Company from time to time.
24. Events after the balance sheet date
There were, at the date of this report, no matters or circumstances which have arisen since 30 June 2018 that have
significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.
25. Statement of cash flows
Reconciliation of net cash outflow from operating activities to operating loss
after income tax
(a)
Operating profit/(loss) after income tax
Depreciation
Share based payments
Exploration costs in opening and closing creditors
Annual and long service leave expensed
Exploration expenditure written off
Other
Change in assets and liabilities:
(Increase)/decrease in receivables
(Decrease)/increase in trade and other creditors (excluding
exploration costs in creditors
Net cash outflow from operating activities
Consolidated
2018
$
Consolidated
2017
$
43,520
8,804
-
69,033
(29,861)
12,287
25,922
(87,896)
72,253
(1,673,633)
14,843
79,900
65,338
15,416
1,211,203
13
29,425
(58,516)
(114,062)
(316,011)
(b)
For the purpose of the Statement of Cash Flows, cash includes cash on hand, at bank, deposits and bank bills
used as part of the cash management function. The Company does not have any unused credit facilities.
The balance at 30 June 2016 comprised:
Cash assets
Bank deposits (Note 5)
Cash on hand
83,601
1,087,063
1,170,664
77,869
820,832
898,701
44 > Silver City Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
26. Parent entity information
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Reserves
Total shareholders’ equity
Profit/(loss) of the parent entity
Total comprehensive income/(loss) of the parent entity
2018
$
1,306,000
7,856,877
167,032
200,763
2017
$
944,950
5,286,664
114,138
159,225
18,067,440
15,583,680
(10,496,176)
(10,643,031)
84,850
7,656,114
186,790
5,127,439
44,915
44,915
(1,672,076)
(1,672,076)
45 > Silver City Minerals Limited Annual Report 2018
Directors’ Declaration
In accordance with a resolution of the directors of Silver City Minerals Limited, I state that:
In the opinion of the directors:
(a)
The financial statements and notes of the Group are in accordance with the Corporations Act 2001, including:
(i)
(ii)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for
the year ended on that date; and
Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001;
The financial statements and notes also comply with International Financial Reporting Standards as disclosed in
note 2; and
There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance
with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2018.
(b)
(c)
(d)
On behalf of the Board
Chris Torrey
Managing Director
Sydney, 26 September 2018
46 > Silver City Minerals Limited Annual Report 2018
Independent Auditor’s Report
Independent Auditor’s Report
To the members of Silver City Minerals Limited
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Silver City Minerals Limited (the company and its subsidiaries)
(the group), which comprises the consolidated statements of financial position as at 30 June 2018, the consolidated
statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the
consolidated statements of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration.
In our opinion the accompanying financial report of the group is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the group’s financial position as at 30 June 2018 and of its 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 auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
47 > Silver City Minerals Limited Annual Report 2018
Independent Auditor’s Report
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.
Key audit matter
How our audit addressed the key audit matter
Capitalised Deferred Exploration and Evaluation Expenditure
$6.1m
Refer to Note 9
The group owns the rights to several exploration
licences in New South Wales. Expenditure relating to
these areas of interest is capitalised and carried
forward to the extent they are expected to be
recovered through the successful development of the
respective area or where activities in the area have
not yet reached a stage that permits reasonable
assessment of the existence of economically
recoverable reserves.
This area is a key audit matter due to:
•
•
•
The significance of the balance;
The inherent uncertainty of the recoverability of
the amount involved; and
The substantial amount of audit work performed.
Our audit procedures included amongst others:
•
• Assessing whether any facts or circumstances
exist that may indicate impairment of the
capitalised assets;
Performing detailed testing of source
documents to ensure capitalised expenditure
was allocated to the correct area of interest;
Performing detailed testing of source
documents to ensure expenditure was
capitalised in accordance with Australian
Accounting Standards;
•
• Obtaining external confirmations to ensure the
exploration licences are current and accurate;
and
• Assessing the reasonableness of the
capitalisation of the employees’ salaries.
Other Information
The directors are responsible for the other information. The other information comprises the information included in
the group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form
of assurance conclusion thereon.
In connection with our audit of the 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.
48 > Silver City Minerals Limited Annual Report 2018
Independent Auditor’s Report
Directors' Responsibility 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 Responsibility 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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the group to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
49 > Silver City Minerals Limited Annual Report 2018
Independent Auditor’s Report
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the
audit of the financial report of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration Report
Opinion
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of Silver City Minerals Limited for the year ended 30 June 2018 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
BDJ Partners
Chartered Accountants
................................................
Anthony J Dowell
Partner
26 September 2018
50 > Silver City Minerals Limited Annual Report 2018
Additional Information
Information relating to shareholders
Information relating to shareholders at 10 September 2018 (per ASX Listing Rule 4.10)
Ordinary fully paid shares
There was a total of 245,839,883 fully paid ordinary shares on issue.
Options
There was a total of 27,972,540 unlisted options on issue.
Substantial shareholders
L&M GROUP LIMITED
Shareholding
13,250,000
Top 20 shareholders of ordinary shares
L&M GROUP LIMITED
UPSKY EQUITY PTY LTD
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