ABN 47 109 815 796
A N N u Al r e p o r T 2 0 1 3
ABN 47 109 815 796
Corporate Directory
Directors
Paul Chapman
Non-Executive Chairman
Will Robinson
Managing Director
Peter Bewick
Exploration Director
Jonathan Hronsky
Non-Executive Director
Company Secretary
Kevin Hart
Dan Travers (Joint Company Secretary)
Principal and Registered Office
Level 7, 600 Murray Street
West Perth, Western Australia 6005
Telephone (08) 9486 9455
Facsimilie (08) 6210 1578
Web www.enrl.com.au
Auditor
Crowe Horwath Perth
Level 6, 256 St Georges Terrace
Perth, Western Australia 6000
Share Registry
Security Transfer Registrars Pty Ltd
770 Canning Highway
Applecross, Western Australia 6153
Telephone (08) 9315 2333
Facsimilie (08) 9315 2233
Stock Exchange Listing
The Company’s shares are quoted on the Australian
Securities Exchange. The home exchange is Perth,
Western Australia.
ASX Code
ENR – Ordinary shares
Company Information
The Company was incorporated and registered under
the Corporations Act 2001 in Western Australia on
30 June 2004 and became a public company on
26 May 2005. The Company is domiciled in Australia.
E n c o u n tE r r Es o u r c Es L I M ItE D
Sample from EPT1707 (2m @ 2.8% Cu)
Contents
Letter from the Chairman & Managing Director
Exploration Review
Summary of Tenements
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
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Competent person’s Statement
The information in this report that relates to Exploration Results is based
on information compiled by Mr Peter Bewick who is a Member of the
Australasian Institute of Mining and Metallurgy. Mr Bewick is a full time
employee of Encounter Resources Ltd and has sufficient experience which
is relevant to the style of mineralisation under consideration to qualify as a
Competent Person as defined in the 2004 Edition of the ‘Australian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.
Mr Bewick consents to the inclusion in the report of the matters based on
the information compiled by him, in the form and context in which it appears.
Letter from the Chairman & Managing Director
Dear Fellow Shareholder,
The last year has been an important one for the Company as it advances the exciting Yeneena Project (“Yeneena”) in the
Paterson Province in Western Australia (“WA”).
During 2012 and 2013 Encounter strategically added to its ground position along the prospective corridor adjacent to
the Yeneena Project by completing earn-in agreements with St Barbara Limited, Independence Group NL and Midas
Resources Limited.
The Yeneena Project now covers 1,900km2 of the Paterson Province in Western Australia and is located 40km SE of the
Nifty copper mine and 30km SW of the Telfer gold/copper deposit. The Company has secured a huge foothold in this
region containing an extensive pipeline of exploration opportunities.
The targets identified by the Company are located adjacent to major regional faults and have been identified through
electromagnetics, geochemistry and structural targeting. The copper targets are hosted within sediments of the Broadhurst
Formation in a similar geological setting to the 2 million copper tonne Nifty deposit.
In April 2013, the Company completed an earn-in agreement with a wholly owned subsidiary of Antofagasta plc, one of
the world’s largest copper producers, whereby it may earn a 51% interest in two tenements within the Yeneena Project
by incurring expenditures of US$20 million over a five year period.
Recent RC drilling at the project has significantly increased the
scale of the BM7 prospect with a new zone of copper
mineralisation intersected in multiple drill holes
Spinifex covered sand dune at Yeneena
A n n uA L r E p o r t 2 0 1 3
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Letter from the Chairman & Managing Director continued
Targets identified by the Company
are located adjacent to major regional faults
and have been identified through electromagnetics,
geochemistry and structural targeting
Dusk at Yeneena
The Company is delighted to welcome Antofagasta onto the Company’s share register and into an earn-in agreement
over two tenements within the Yeneena project (approximately 25% of the Yeneena project area). The transaction
is a significant endorsement of the large scale copper potential at Yeneena. Antofagasta brings considerable financial,
technical and operating resources to progress the exciting copper discoveries made by Encounter. This relationship
will ensure a fully funded exploration programme and if successful, provides a path towards production with a major
copper producer.
Recent RC drilling at the project has significantly increased the scale of the BM7 prospect with a new zone of
copper mineralisation intersected in multiple drill holes 1 to 2km east of previous drilling. In addition all four diamond
drill holes completed at BM7 in 2013 contain zones of primary copper sulphide mineralisation, with the strongest
copper sulphide mineralisation seen at the project to date intersected in the last of the four diamond drill holes completed
in 2013.
The focus for the upcoming year is to advance the copper discoveries along the 13km long BM1-BM6-BM7 copper
system within the Antofagasta earn-in agreement, to test the first order targets on the 100% owned Encounter ground and
the earn-in agreements completed by the Company in the region.
The Company has secured a dominant land position in the highly prospective Paterson Province and is well placed to
unlock the potential of the priority targets. The Company’s exploration plans are well funded, we have a great in-house
technical team and a major in the copper industry as a partner.
In closing we would like to thank our committed team for their professionalism and dedication. The Company is
fortunate to have such a talented team who are leaders in the field. We would also like to thank our suppliers and other
business partners. Finally, we would take this opportunity to thank our fellow shareholders for their ongoing support.
Yours sincerely
Paul Chapman
Chairman
Will Robinson
Managing Director
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E n c o u n tE r r Es o u r c Es L I M ItE D
Exploration Review
Encounter Resources Limited (Encounter) is a Western Australian (WA) based exploration and resource development
company with projects in three geological regions of WA. Encounter’s portfolio covers approximately 4,000km² of
strategically located and highly prospective exploration projects. The portfolio includes:
n The Yeneena project (“Yeneena”) – a major ground position between the Nifty copper mine, the Telfer gold/copper
mine and the Kintyre uranium deposit where Encounter has made a series of new copper discoveries that have
demonstrated the potential for large tonnage copper deposits;
n
Inferred Resources of 11 million pounds of near surface, calcrete style uranium in the Yilgarn Province; and
n Base metal targets in the Bangemall Basin.
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Exploration Review continued
Paterson Province
YeNeeNA Copper – CoBAlT proJeCT
n 100% Encounter – E45/2500, E45/2501, E45/2502, E45/2503, E45/2561, E45/2657, E45/2806, ELA45/4216,
ELA45/4230, ELA45/4232
n Antofagasta earning into E45/2658 and E45/2805
n Encounter 70%, Independence Group NL (IGO) 30% ELA45/4215
n Encounter earning into E45/3232 and E45/3308 from St Barbara Ltd (SBM)
n Encounter earning into E45/3768 and E45/4091 from Midas Resources Ltd (MDS)
Yeneena covers a 1,900km2 tenement package in the Paterson Province of WA located between the Nifty copper mine, the
Woodie Woodie manganese mine, the Telfer gold-copper mine and the Kintyre uranium deposit (Figure 1). In 2012/2013,
Encounter has expanded its ground holding with earn-ins with St Barbara Mines Ltd, Independence Group NL and
Midas Resources Ltd.
In April 2013, the Company completed an earn-in agreement with a wholly owned subsidiary of Antofagasta plc, one of
the world’s largest copper producers, whereby it may earn a 51% interest in tenements E45/2658 and E45/2805 within
the Yeneena Project by incurring expenditures of US$20 million over a five year period. Exploration under the farm-in
agreement with Antofagasta commenced in April 2013.
Exploration activities during 2012/2013 focused on the BM6/BM1/BM7 corridor and the T4 prospect. Work included
diamond, RC and aircore drilling together with airborne and ground geophysical surveys. Other activities included heritage
surveying, hyperspectral data logging, regional reconnaissance field work, historical data compilation and rehabilitation work.
Figure 1: Location and leasing map
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E n c o u n tE r r Es o u r c Es L I M ItE D
BM7 prospect (Antofagasta earning in)
The BM7 prospect is located 3km south of the BM1
discovery and is situated at the intersection of the
north-east trending Queen fault and the regionally-
extensive McKay fault (Figure 2).
Initial RC and diamond drilling in the northern part
of BM7 was completed during April-August 2012
on granted tenement E45/2658 and returned
results including:
n 73m @ 0.4% Cu and 100ppm Co from 74m
including:
• 8m @ 1.0% Cu and 120ppm Co and
0.9m at 4.9% Cu and 350ppm Co
n 279m @ 0.1% Cu and 100ppm Co from
172m including:
• 23m @ 0.31% Cu and 170ppm Co and
6m @ 0.7% Cu and 435ppm Co
n 34m @ 0.64% Cu and 793ppm Co from
156m including:
• 10m @ 1.64% Cu and 1616ppm Co
from 166m
n 22m @ 0.38% Cu and 185ppm Co including:
• 2m @ 2.87% Cu and 518ppm Co
n 34m @ 0.48% Cu from 20m including:
• 14m @ 0.83% Cu from 28m
n 18m @ 0.38% Cu and 298ppm Co from
46m including:
• 2m @ 2.24% Cu from 50m
At this point the BM7 mineralisation remained
open to the south of E45/2658. The southernmost
section of drilling on E45/2658 defined a corridor
of copper mineralisation in excess of 1km wide
along the tenement’s southern boundary.
The tenement directly to the south of the initial BM7
drilling, E45/2805, was granted in August 2012. A
heritage survey was completed in September 2012
to facilitate a program of aircore and RC drilling.
Aircore drilling in late 2012 delineated a 3.5km
long, 1.5km wide +0.1% copper regolith anomaly
at BM7 that contains locally higher-grade (+0.5%
copper) cores. Significant cobalt enrichment is
associated with the copper oxide mineralisation.
The average hole depth of the aircore holes was
approximately 40 metres.
Figure 2: BM1, BM7 and BM6 Prospects
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Exploration Review continued
BM7 prospect (continued)
Significant intersections included:
n 8m @ 0.52% Cu and 364ppm Co from 76m to EOH (end of hole)
n 2m @ 0.61% Cu and 804ppm Co from 32m to EOH
n 9m @ 1.54% Cu and 1.0% Co from 42m to EOH including:
• 4m @ 2.56% Cu and 1.74% Co from 44m
n 5m @ 0.62% Cu and 821ppm Co from 36m to EOH including:
• 1m @ 1.2% Cu and 0.18% Co from 40m to EOH
n 13m @ 0.47% Cu and 32ppm Co from 36m to EOH
A small RC drilling campaign was completed in November 2012 to test areas where the aircore drilling was ineffective and
test below some of the more significant regolith anomalies. Significant intersections from this program included:
n EPT1689 – 52m @ 0.55% Cu and 378ppm Co from 42m including 8m @ 1.97% Cu and 1,076ppm Co
n EPT1679 – 104m @ 0.2% Cu and 175ppm Co from 62m to EOH.
An IP orientation survey was conducted in the December 2012 quarter, and resulted in the identification of the Western IP
anomaly at BM7, which broadly follows the orientation of the McKay fault and extends over 2.5km of strike. The anomaly
is also semi-coincident with an EM anomaly located adjacent to an interpreted coherent zone of high grade supergene
copper mineralisation (Figure 3).
Figure 3: BM7 Prospect Cross Section (7539700mN)
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E n c o u n tE r r Es o u r c Es L I M ItE D
BM7 prospect (continued)
Intense dolomite alteration and highly anomalous pathfinder
elements (Bi, As, Mo, Co) observed at BM7 map out a large-scale
hydrothermal alteration system which is expressed in VTEM data
as an area of subdued EM response (Figure 4). The dolomitisation
event at BM7 associated with the copper-cobalt mineralisation event
is interpreted to have reduced the conductivity of the host rock.
Exploration under the Antofagasta earn-in agreement for tenements
E45/2658 and E45/2805, hosts to the BM1, BM6, BM7 and BM8
prospects commenced in April 2013.
A 15 hole, 3200m RC drill program was completed within the earn-in
area with two holes drilled at both BM1 and BM6 and the remaining
11 holes drilled at BM7.
The 11 hole RC drill program at BM7 was designed to test for primary
copper sulphides beneath the broad regolith anomaly and along the
margins of the dolomite alteration zone. A number of the RC holes
did not reach their planned target depth with several holes finishing
in altered sediments containing disseminated copper sulphide
mineralisation.
Assay results received for the April 2013 RC program confirmed that
the zone of intensely dolomite altered shale at BM7 is anomalous in
primary copper sulphide mineralisation over at least 800m in strike
and remains open north and south and at depth (Figure 4). Within
this dolomite alteration zone a number of the RC drill holes ended
in sulphide copper mineralisation including:
n EPT1709 – 6m @ 0.7% Cu from 150m to EOH
n EPT1712 – 30m @ 0.4% Cu from 118m to EOH
Figure 4: BM7 Prospect Plan View
A four hole diamond drill program designed to target below the 800m long zone of copper sulphide mineralisation
identified in the April 2013 RC drill program was completed in September 2013 (Figure 4).
Diamond Drilling at BM7
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Exploration Review continued
Figure 5: EPT1719 (387.1m to 392.9m)
BM7 prospect (continued)
All four diamond holes completed contain zones of primary copper sulphide mineralisation. The copper sulphides are
hosted within, and often at the margins of dolomite veined and brecciated carbonate units.
The strongest copper sulphide mineralisation at the project to date was intersected in EPT1719, which was the last of the
four hole program. This zone extended over approximately 5m, with locally massive copper sulphides forming as breccia
cement near the upper boundary of a narrow carbonate unit (Figure 5). The remainder of the carbonate unit contains fine
disseminations and coarse blebs of chalcopyrite throughout. Assay results from EPT1719 are expected in October 2013.
The initial interpretation of the diamond drilling at
BM7 supports the deposit target model. Consistent
with this model, the mineralisation within the veins
becomes stronger and more massive, with the
sulphide assemblage within the veins becoming more
chalcopyrite dominant as we approach the interpreted
centre of the large mineral system at BM7.
In August 2013, a first pass RC drill program
(60 vertical holes, average hole depth 80m)
commenced to provide an initial test of the area to
the east of the previous drilling at BM7 and also to
complete the first drilling south of BM7 to help to
define the full extent of the copper system at the
project.
The program was successful and has extended the
BM7 system over 1km to the east and by at least
1.6km south and remains open to the south. The
first pass, broad spaced (800m x 400m) program
(Figure 6) intersected a number of highly anomalous
copper oxide and copper sulphide intersections.
Assay results have been received from the first eight
holes of the RC program. Assays have confirmed a
new zone of near surface copper oxide and copper
sulphide mineralisation to the east of BM7.
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E n c o u n tE r r Es o u r c Es L I M ItE D
Figure 6: BM7 Prospect Drill Hole Location Plan
BM7 prospect (continued)
Assays received within this zone include:
n EPT1726 – 18m @ 0.4% Cu from 38m including
2m @ 1.2% Cu from 46m
n EPT1734 – 22m @ 0.2% Cu from 42m including
2m @ 1.2% Cu from 58m
n EPT1736 – 36m @ 0.2% Cu from 46m to EOH
These results are considered important given the broad
spacing of the first pass drill program. Initial observations
are that the size and grade of this latest copper oxide
blanket is potentially more significant than the initial BM7
oxide discovery holes.
Initial observations from the four diamond holes indicate a
shallow easterly dip to the stratigraphy and the mineralised
horizons appear to be stratabound in nature. This
observation, together with the copper oxides intersected
to the 1-2km east of BM7 support an interpretation of a
potential synformal structure. This interpretation and the
style of mineralisation seen at BM7, shows similarities to
the Nifty copper deposit located 65km north of BM7.
RC drilling is scheduled to recommence October 2013
to complete the deeper infill holes and the expanded
program further to the south of BM7.
BM1 prospect (Antofagasta earning in)
Aircore and RC drilling at BM1 has defined two zones of
coherent near surface copper oxide mineralisation named
the Northern and Central Areas (Figure 2). At the Northern
Area, the flat lying copper oxide mineralisation extends
over an area 500m by 250m and is interpreted to be the
weathered remnants of a primary copper sulphide position.
Re-appraisal of drilling data has identified a target north of
the BM1 Northern Area down plunge of a copper oxide
position. A zone of copper sulphide mineralisation (12m @
0.12% Cu from 90m to EOH) intersected at the base of a
previous aircore hole is interpreted to be fault leakage from
a potential primary source plunging shallowly northwards
from the BM1 Northern Zone copper oxide position. The
target is located in the fold hinge of the BM1 anticline, a
conceptually prospective zone for copper-cobalt sulphide
accumulation. Importantly, this zone has not been drill
tested beyond the depth of aircore drilling (around 100m).
Two deep RC holes totaling 656m were drilled at BM1
during the June 2013 quarter. The holes were drilled
to test a target approximately 500m north of the BM1
Northern Zone (high grade copper oxide zone) at the
Kristian Hendricksen (Senior Exploration Geologist)
intersection of an interpreted NNE trending structure and
the northerly plunging fold hinge of the BM1 anticline.
The holes intersected broad zones of low level (100-
500ppm Cu) primary copper anomalism within weakly
altered black shales. The holes ended at the depth capacity
of the rig with the last 50m of the hole showing an increase
in copper anomalism and alteration of the sediments.
This level of copper sulphide anomalism is encouraging
with the last 2m sample in EPT1693 returning 0.12%
copper. The drilling has confirmed the merits of the
conceptual target for primary copper mineralisaion north
of the BM1 copper oxide discovery and further work is
required to determine the potential of the area.
BM6 prospect (Antofagasta earning in)
Located 3km NNE of BM1 Northern Area (Figure 2),
BM6 was discovered during reconnaissance aircore
drilling in 2011, which delineated an 800m long, 400m
wide +0.1% copper regolith anomaly adjacent to the
McKay fault (with grades up to 1.4% Cu). The regolith
anomaly coincides with a VTEM conductor, which has
been modeled to dip shallowly to the west (towards the
McKay Fault). Pathfinder elements are elevated at BM6,
with Bi assays up to 74 ppm and Mo assays up to 17 ppm
(similar to levels seen at BM1 and BM7).
An RC program was designed to test the depth extent of
the copper mineralisation at BM6, and determine if the
VTEM conductor represents primary copper sulphides. The
two hole, RC drill program completed in the June 2013
quarter confirmed the modelled conductor appeared to
map out a block of shallower conductive shale. The holes
intersected elevated copper anomalism below the base
of oxidation which is considered highly anomalous and
confirms the copper system remains open to the north of
BM6. A detailed review of the downhole geochemistry will
be completed to define vectors to potential higher grade
mineralisation.
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Exploration Review continued
BM2 prospect (encounter 100%)
The BM2 prospect is located on the regionally-extensive Tabletop Fault. This structure is known to be metallogenically important
and is closely associated with the position of the Nifty Copper deposit, 50km along strike to the north-west. Previous aircore
drilling defined a broad zone of copper anomalism (+0.25% Cu) over a strike extent of 800m (Figure 7). The identification
of this significant base metal anomaly was made in an area of no outcrop, with up to 20m of transported overburden.
RC and diamond drilling in June 2012 confirmed a heavily leached oxide profile with many holes showing a strengthening
of zinc mineralisation at depth. RC holes EPT1136A through to EPT1141 all ended in anomalous zinc and lead sulphides
and have mapped out what is interpreted as the upper contact of a stratabound base metal horizon that extends over 1km
in strike.
Drill hole EPT1140, collared in the centre of the regolith copper anomaly, returned the first sulphide copper intersection
at BM2:
n 26m @ 0.60% Cu from 100m incl. 10m @ 0.92% Cu from 100m
Diamond drill hole EPT1174 (Figure 8) was collared from surface and drilled to the north at -60˚. The hole was designed
to test for copper sulphide mineralisation at depth below EPT1140. The hole intersected a broad zone of carbonate
alteration and veining in the shale unit that contained visible zinc and lead sulphides. Assay results include:
n 201m @ 0.6% Zn from 233m to end of hole including:
• 13m @ 1.3% Zn from 295m; and
• 8m @ 1.5% Zn from 349m; and
• 29m @ 1.0% Zn from 400m.
The Company completed 7 RC holes in April 2013 at BM2 adjacent to the copper sulphide intercept in EPT1140. The
program was designed to test for both lateral and depth extensions of the copper sulphides previously intersected.
Drilling intersected copper oxide mineralisation adjacent to EPT1140 but no extensions to the copper sulphide zone
were encountered.
Three of the RC holes were extended to determine geometry of the upper contact of the stratabound zinc sulphide
mineralisation. Zinc sulphide mineralisation was intersected near the base of all three holes with the upper contact of the
stratabound mineralisation interpreted to be dipping gently to the north.
Yeneena Project entrance
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E n c o u n tE r r Es o u r c Es L I M ItE D
Figure 7: BM2 Prospect Drill Hole Location Plan
Figure 8: BM2 Prospect Schematic Cross Section
A n n uA L r E p o r t 2 0 1 3
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Exploration Review continued
BM2 prospect (continued)
During the June 2013 quarter, the Company was successful
in an application for EIS co-funded diamond drilling of the
BM2 prospect. Funding was approved for deep drilling
at BM2 to test the basal contact of the zinc bearing
unit. Traditionally this contact is considered the principle
target for the accumulation of high grade base metals
mineralisation. The EIS co-funded 1,300m diamond drilling
will be completed in October 2013 (Figure 9).
T4 prospect (encounter 100%)
Previous stratigraphic diamond drilling at the T4 prospect,
an area totally covered by sand dunes, has confirmed
the presence of copper sulphides within Rudall Complex
metamorphic rocks. A magnetic anomaly with a strike-
length of approximately 4km is present at T4. It is
interpreted that this large anomaly represents magnetite
alteration associated with copper mineralisation.
Assays received from two diamond drill holes drilled at
T4 designed to target the magnetic anomaly confirm that
elevated copper anomalism (300-1000ppm copper) is
associated with more intense magnetite and pyrrhotite
alteration.
A total of 125 shallow aircore drillholes were completed
over the T4 prospect in September 2012. Widespread low-
level copper anomalism (+100ppm) was observed in a
highly variable regolith profile (0 to 30m thick). Significantly,
copper anomalism commonly occurs at end-of-hole,
with EPT1391 ending in 270ppm copper and 246ppm
molybdenum (two orders of magnitude above background
values for molybdenum), and EPT1270 ending in 441ppm
copper (Figure 10).
The regolith profile at T4 is poorly developed and is often
“stripped” by erosion. This would result in tight regolith
footprints over primary mineralisation, with poor lateral
dispersion of copper. Considering the limited regolith
profile, any results above 100ppm copper are considered
significant and warrant follow-up drilling.
A program of hyperspectral logging and multi-element
analysis was conducted in the March 2013 quarter, with
results used to plan drillhole locations around the copper
and molybdenum anomalies. Further reconnaissance
drilling is also planned around the edges of the T4 Inlier as
conceptually, packages of Broadhurst Formation adjacent
to highly tectonised and structurally complex zones are
prospective for base metal deposits.
Figure 9: BM2 Prospect proposed EIS Drilling 2013
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Figure 10: T4 Prospect
Yeneena regional North West Targets
(encounter 100%)
The success of the copper exploration program at the Yeneena
project and the discovery of the large scale BM1-BM6-BM7
mineral system has encouraged Encounter to expand the early
stage assessment activities over the untested regional copper
targets.
Three untested regional scale copper targets are located to
the NW of the BM1- BM6-BM7 mineral system. These targets
are hosted within Broadhurst sediments and located along NE
trending structures between the McKay and Vines Faults. These
NE structures are highly prospective as they represent potential
dilational zones within the structural architecture of the basin
during inversion. These dilational zones allow basin fluids to
migrate upwards into suitable trap sites for base metal deposits.
A 1,250 line km airborne VTEM survey was completed over
the regional targets located in the northwest of the Yeneena
project in June 2013. Approximately 500 line km of the survey
was completed over the Antofagasta earn in tenements and the
remaining 750 line km over ground held 100% by Encounter.
Preliminary images from this survey have highlighted a number
of targets along the NE structural corridors (Figure 11). Detailed
aerial photography has been acquired, initial reconnaissance
and some geochemical sampling occurred in August 2013.
The company plans to complete a reconnaissance RC drill
program in October 2013 to provide initial geochemical and
geological information along the NE structural corridor highlighted
in the VTEM survey. No previous systematic exploration has been
conducted on the area of interest.
Figure 11: Yeneena Project Preliminary YTEM results
Yeneena Exploration Camp
Dust storm at Yeneena
A n n uA L r E p o r t 2 0 1 3
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Exploration Review continued
Yilgarn District
Minimal exploration work was completed on the Yilgarn and Bangemall Basin projects over the previous year due to the
prioritisation of the exploration activities at Yeneena.
HIllVIeW (elA51/1570 – 100% encounter)
The Hillview uranium project is located 50km south east of Meekatharra and contains an Inferred Resource of 27.6 million
tonnes, averaging 174ppm U3O8 for a contained 10.6 million pounds of U3O8. This historical Inferred Resource is reported
in accordance with the JORC code (2004) and guidelines.
The main mineralised zone at Hillview is 7km long by 1.4km wide with an average thickness of 3.15m. The resource is a
flat lying, consistent body of near surface uranium mineralisation with minimal internal dilution.
lAKe WAY SouTH (e53/1232 – 60% encounter, 40% Avoca uranium rights only)
The Lake Way South project is located approximately 10kms south of Wiluna, between Toro Energy’s Lake Way and
Centipede uranium deposits. An Inferred Resource for the area of the Centipede Extension resource within the JV tenement
has been calculated. This resource contains 220,000t @ 244ppm U3O8 for 120,000lbs of U3O8. The Inferred Resource is
reported in accordance with the JORC code (2004) and guidelines.
YeelIrre (e36/769 and e53/1685 – 100% encounter)
The Bellah Bore East is situated in the upper reaches of the Yeelirrie Channel. An Inferred Resource of 350,000t averaging
210ppm U3O8 for 160,000lb of U3O8 has been calculated for the Bellah Bore East prospect. The Inferred Resource is
reported in accordance with the JORC code (2004) and guidelines.
DArloT eAST proJeCT – Gold (e37/1148 – 100% encounter)
The Darlot East project covers 285km2 and is located approximately 6kms east of the Darlot Gold mine, 70km east of the
township of Leinster.
The project is situated within an area of interpreted granite gneiss between the Yandal Greenstone Belt to the west and
the Duketon Greenstone Belt to the east. Interpretation of the regional aeromagnetics has identified an extensive NNW
trending structural corridor that ‘horsetails’ as it flexes along the margin of a major granite intrusion located in the east of
the project. Drilling to the north of the project by Encounter has identified a +1km wide zone of greenstone lithologies that
is interpreted to extend south into the Darlot East project.
Regional geochemical datasets collect by CSIRO have highlighted minor gold anomalism within the project area in
association with lithological indicators similar to other mapped greenstone terrains.
Exploration licence E37/1148 was granted in April 2013.
Bangemall Basin
BeYoNDIe (elA69/3087, elA69/3088 and elA69/3089 – 100% encounter)
The Company completed a regional targeting exercise incorporating key learnings from the work completed at the Yeneena
project and building on our understanding of the formation of large scale base metal systems.
The targeting program highlighted an area on the eastern margin of the Bangemall Basin that demonstrates a number
of key structural ingredients. Applications have been lodged over an area of 1500km2 located approximately 150km
south south east of Newman. The tenements capture the intersection of the Tangadee Lineament with the margin of the
Bangemall Basin and northern Yilgarn block.
1 4
E n c o u n tE r r Es o u r c Es L I M ItE D
Hillview Qualifying Statement
The information in this report that relates to Exploration Results
is based on information compiled by Mr Peter Bewick who is a
Member of the Australasian Institute of Mining and Metallurgy.
Mr Bewick is a full time employee of Encounter Resources Ltd
(Encounter) and has sufficient experience which is relevant to
the style of mineralisation under consideration to qualify as a
Competent Person as defined in the 2004 Edition of the
‘Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’.
The Mineral Resource is based on information compiled by Mr
Neil Inwood who is employed by Coffey Mining Ltd. Mr Peter
Bewick from Encounter has consented to a joint sign off for the
Resource, Mr Bewick taking responsibility for the quality and
reliability of the drillhole database and Mr Inwood is responsible
for the grade estimate and classification of the resource. Messrs
Inwood and Bewick have sufficient experience which is relevant
to the style of mineralisation and type of deposit under
consideration and to the activity which they have undertaking
to qualify as a Competent Person as defined in the 2004 Edition
of the “Australasian Code for Reporting of Mineral Resources
and Ore Reserves”.
The information in this report that relates to gamma uranium
grades is based on information compiled by David Wilson BSc
MSc MAusIMM from 3D Exploration Ltd based in Western
Australia.
Holes were logged with an Auslog A75 total count gamma tool.
The gamma tool was calibrated in Adelaide at the Department
of Water, Land and Biodiversity Conservation in calibration pits
constructed under the supervision of the CSIRO. These calibration
pits have been shown to provide calibration standards for drill
hole logging tools that are comparable to those at the DOE
facility in Grand Junction, Colorado USA. The gamma tool
measures the total gamma ray flux in the drill hole. Readings
were averaged over 2 centimetre intervals and the reading and
depth recorded on a portable computer. The gamma ray
readings were then converted to equivalent U3O8 readings by
using the calibration factors derived in the Adelaide calibration
pits. These factors also take into account differences in hole size
and water content.
The gamma radiation used to calculate the equivalent U3O8
is predominately from the daughter products in the uranium
decay chain. When a deposit is in equilibrium, the measurement
of the gamma radiation from the daughter products is
representative of the uranium present. It takes approximately
2.4M years for the uranium decay series to reach equilibrium.
Thus, it is possible that these daughter products, such as radium,
may have moved away from the uranium or not yet have
achieved equilibrium if the deposit is younger than 2.4M years.
In these cases the measured gamma radiation will over or
under estimate the amount of uranium present. At Hillview,
the calculated U3O8 from the measured gamma radiation
appears to be under reporting, by 20%, the true grades when
compared to the ICP assays from 42 holes. Further studies on this
apparent disequilibrium are being conducted.
Mr Wilson is a full-time employee of 3D Exploration Pty Ltd, a
consultant to Encounter Resources Limited. Mr Wilson 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
in the 2004 Edition of the ‘Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves’.
Bellah Bore east Qualifying Statement
The information in this report that relates to Exploration Results
is based on information compiled by Mr Peter Bewick who is a
Member of the Australasian Institute of Mining and Metallurgy.
Mr Bewick is a full time employee of Encounter Resources Ltd
(Encounter) and has sufficient experience which is relevant to
the style of mineralisation under consideration to qualify as a
Competent Person as defined in the 2004 Edition of the
‘Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’.
Resource numbers are rounded to reflect the accuracy of the
estimation process and as a consequence exhibit rounding
errors. Both Contained U3O8 tonnes and Contained U3O8 pounds
are based on contained metal content and at this stage do not
consider any mining, metallurgical or economic parameters.
The estimate is based on a cut off of 100ppm U3O8 over a
minimum downhole distance of 1m. Shallow aircore drilling has
been completed on a nominal 150m by 150m grid. All grade
values used in the calculation are based on chemical analysis of
representative drill samples. A specific gravity of 2.1 was used in the
calculation which is an assumed figure based on a literature search
of similar deposits found in Western Australia and Namibia.
The mineralised zone varies in vertical thickness from 1m to
6m. The main uranium mineral identified in drilling is carnotite
which is a common mineral found in Surficial style deposit
in Western Australia. All mineralised intervals in the modelled
area are within 10m of surface and, therefore, are potentially
easily mined.
Additional drilling is required determine the extent of the higher
grade core of
the mineralisation centred on EYN064
(3m@781ppm U3O8 including 1m@2111ppm U3O8). The assay
interval of 1m@2111ppm U3O8 in EYN064 was treated as an
outlier in the resource model and cut to 500ppm U3O8. If further
drilling can extend the high grade area it is anticipated that the
resource grade will increase.
Mr Bewick consents to the inclusion in the report of the matters
based on the information compiled by him, in the form and
context in which it appears.
lake Way Qualifying Statement
The information in this report that relates to Exploration Results is
based on information compiled by Mr Peter Bewick who is a
Member of the Australasian Institute of Mining and Metallurgy.
Mr Bewick is a full time employee of Encounter Resources Ltd
(Encounter) and has sufficient experience which is relevant
to the style of mineralisation under consideration to qualify as a
Competent Person as defined in the 2004 Edition of the
‘Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’.
The figures are rounded to reflect the accuracy of the estimation
process and as a consequence exhibit rounding errors. Both
Contained U3O8 tonnes and Contained U3O8 pounds are based
on contained metal content and at this stage do not consider
any mining, metallurgical or economic parameters.
The estimate is based on a cut off of 70ppm U3O8 over a
minimum downhole distance of 1m. Shallow aircore drilling has
been completed on a nominal 200m by 200m grid. All grade
values used in the calculation are based on chemical analysis
of representative drill samples.
Messrs Wilson, Inwood and Bewick consent to the inclusion in the
report of the matters based on the information compiled by them,
in the form and context in which it appears.
Mr Bewick consents to the inclusion in the report of the matters
based on the information compiled by him, in the form and
context in which it appears.
A n n uA L r E p o r t 2 0 1 3
1 5
Summary of Tenements
Lease
Lease Name
Project Name
Area
km2 Managing Company
Encounter Interest
ELA69/3087
Beyondie
Bangemall Basin
346.6 Hamelin Resources Pty Ltd
ELA69/3088 Beyondie
Bangemall Basin
524.8 Hamelin Resources Pty Ltd
ELA69/3089 Beyondie
Bangemall Basin
549.3 Hamelin Resources Pty Ltd
E53/1232
Wiluna South
Lake Way South JV
30.17 Encounter Resources Limited
100%
100%
100%
60% of
uranium rights
E36/769
Yeelirrie South
Yilgarn
48.83 Encounter Resources Limited
E53/1685
Bellah Bore East
Yilgarn
45.96 Encounter Resources Limited
E37/1148
Darlot
ELA51/1570 Hillview
Yilgarn
Yilgarn
212.4 Encounter Resources Limited
89
Encounter Resources Limited
E45/2500
Yeneena
Paterson
163.4 Encounter Operations Pty Ltd
E45/2501
Yeneena
Paterson
41.4
Encounter Operations Pty Ltd
E45/2502
Yeneena
Paterson
216.3 Encounter Operations Pty Ltd
E45/2503
Yeneena
Paterson
76.3
Encounter Operations Pty Ltd
E45/2561
Yeneena
Paterson
86
Encounter Operations Pty Ltd
E45/2657
Yeneena
Paterson
222.8 Encounter Operations Pty Ltd
E45/2658
Yeneena
Paterson
222.8 Encounter Operations Pty Ltd
E45/2805
Yeneena
Paterson
209.7 Encounter Operations Pty Ltd
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%*
100%*
E45/2806
Yeneena
Paterson
63.7
Encounter Operations Pty Ltd
100%
E45/3232
Yeneena
Paterson
22.33 Encounter Operations Pty Ltd
E45/3308
Yeneena
Paterson
38.3
Encounter Operations Pty Ltd
E45/3768
Yeneena
Paterson
187.8
Encounter Operations Pty Ltd
E45/4091
Yeneena
Paterson
257.7
Encounter Operations Pty Ltd
ELA45/4215
Yeneena
Paterson
114
Encounter Yeneena Pty Ltd
ELA45/4216
Yeneena
Paterson
370
Encounter Yeneena Pty Ltd
ELA45/4230
Yeneena
Paterson
92
Encounter Yeneena Pty Ltd
ELA45/4232
Yeneena
Paterson
114
Encounter Yeneena Pty Ltd
* Tenement subject to Antofagasta Earn-In Agreement see ASX announcement April 23, 2013
0%, Encounter
earning 70%
0%, Encounter
earning 70%
0%, Encounter
earning 70%
0%, Encounter
earning 70%
70% ENR 30%
Newsearch
100%
100%
100%
1 6
E n c o u n tE r r Es o u r c Es L I M ItE D
Corporate Governance Statement
Introduction
Since the introduction of the ASX Corporate Governance Council’s Principles of Good Corporate Governance and
Best Practice Recommendations (“ASX Guidelines” or “the Recommendations”), Encounter Resources Limited (“Company”)
has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate
governance. Some of these policies and procedures are summarised in this report. Commensurate with the spirit of the
ASX Guidelines, the Company has followed each Recommendation where the Board has considered the Recommendation
to be an appropriate benchmark for corporate governance practices, taking into account factors such as the size of the
Company, the Board, resources available and activities of the Company. Where, after due consideration, the Company’s
corporate governance practices depart from the Recommendations, the Board has offered full disclosure of the nature of,
and reason for, the adoption of its own practice.
The Company has adopted systems of control and accountability as the basis for the administration of corporate governance.
The Board of the Company is committed to administering the policies and procedures with openness and integrity,
pursuing the true spirit of corporate governance commensurate with the Company’s needs.
Further information about the Company’s corporate governance practices is set out on the Company’s website at
www.enrl.com.au. In accordance with the recommendations of the ASX, information published on the Company’s
website includes:
Board Charter
Nomination Committee Charter
Remuneration Committee Charter
Audit Committee Charter
Code of Conduct
Diversity Policy
Policy and Procedure for Selection and Appointment of New Directors
Summary of Policy for Trading in Company Securities
Summary of Compliance Procedures
Procedure for the Selection, Appointment and Rotation of External Auditor
Shareholder Communication Strategy
Summary of Company’s Risk Management Policy
Explanation for Departures from Best Practice Recommendations
During the Company’s 2012/2013 financial year the Company has complied with the Corporate Governance Principles
and the corresponding Best Practice Recommendations as published by the ASX Corporate Governance Council
(“Corporate Governance Principles and Recommendations”), other than as stated below. Significant policies and details
of any significant deviations from the principles are specified below.
Corporate Governance Council Recommendation 1
Lay Solid Foundations for Management and Oversight
Role of the Board of Directors
The role of the Board is to increase shareholder value within an appropriate framework which safeguards the rights and
interests of the Company’s shareholders and ensure the Company is properly managed.
In order to fulfil this role, the Board is responsible for the overall corporate governance of the Company including formulating
its strategic direction, setting remuneration and monitoring the performance of Directors and executives. The Board relies
on senior executives to assist it in approving and monitoring expenditure, ensuring the integrity of internal controls and
management information systems and monitoring and approving financial and other reporting.
In complying with Recommendation 1.1 of the Corporate Governance Council, the Company has adopted a Board Charter
which clarifies the respective roles of the Board and senior management and assists in decision making processes. A copy
of the Board Charter is available on the Company’s website.
A n n uA L r E p o r t 2 0 1 3
1 7
Corporate Governance Statement continued
Board Processes
An agenda for the meetings has been determined to ensure certain standing information is addressed and other items
which are relevant to reporting deadlines and or regular review are scheduled when appropriate. The agenda is regularly
reviewed by the Chairman, the Managing Director and the Company Secretary.
Evaluation of Senior Executive Performance
The Company has not complied with Recommendation 1.2 of the Corporate Governance Council. Due to the early
stage of development of the Company it is difficult for quantitative measures of performance to be established. As
the Company progresses its projects, the board intends to establish appropriate evaluation procedures. The Chairman
assesses the performance of the Executive Directors on an informal basis.
Corporate Governance Council Recommendation 2
Structure the Board to Add Value
Board Composition
The Constitution of the Company provides that the number of Directors shall not be less than three. There is no
requirement for any share holding qualification.
The membership of the Board, its activities and composition is subject to periodic review. The criteria for determining the
identification and appointment of a suitable candidate for the Board shall include the quality of the individual, background
of experience and achievement, compatibility with other Board members, credibility within the scope of activities of the
Company, intellectual ability to contribute to Board duties and physical ability to undertake Board duties and responsibilities.
Directors are initially appointed by the Board and are subject to re election by shareholders at the next general meeting.
In any event one third of the Directors are subject to re election by shareholders at each general meeting.
The Board is comprised of four members, two Non-Executive and two Executive. The Non-Executive Directors are
Mr Paul Chapman (Chairman) and Dr Jonathan Hronsky. The skills, experience and expertise of all Directors is set out in
the Directors’ Report section of this Annual Report.
The Board has assessed the independence of its non executive directors according to the definition contained within
the ASX Corporate Governance Guidelines and has concluded that both of the current Non-Executive Directors meet the
recommended independence criteria.. As a result the Company complies with Recommendation 2.1 of the Corporate
Governance Council. The Board considers that both its structure and composition are appropriate given the size of the
Company and that the interests of the Company and its shareholders are well met.
Independent Chairman
The Chairman is considered to be an independent director and as such Recommendation 2.2 of the Corporate Governance
Council has been complied with. The Board believes that Mr Chapman is the most appropriate person for the position
as Chairman because of his industry experience and proven track record as a public company director.
Roles of Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer are exercised by different individuals, and as such the Company
complies with Recommendation 2.3 of the Corporate Governance Council.
Nomination Committee
The Board does not have a separate Nomination Committee comprising of a majority of independent Directors and
as such does not comply with Recommendation 2.4 of the Corporate Governance Council. The selection and appointment
process for Directors is carried out by the full Board. The Board considers that given the importance of Board composition
it is appropriate that all members of the Board partake in such decision making. The Company adopted the Nomination
Committee Charter on 8 February 2006.
1 8
E n c o u n tE r r Es o u r c Es L I M ItE D
Evaluation of Board Performance
The Company does not have a formal process for the evaluation of the performance of the Board and as such does
not comply with Recommendation 2.5 of the Corporate Governance Council. The Board is of the opinion that the
competitive environment in which the Company operates will effectively provide a measure of the performance of the
Directors, in addition the Chairman assesses the performance of the Board, individual directors and key executives on an
informal basis.
Education
All Directors are encouraged to attend professional education courses relevant to their roles.
Independent Professional Advice and Access to Information
Each Director has the right to access all relevant information in respect of the Company and to make appropriate
enquiries of senior management. Each Director has the right to seek independent professional advice at the Company’s
expense, subject to the prior approval of the Chairman, which shall not be unreasonably withheld.
Corporate Governance Council Recommendation 3
Promote Ethical and Responsible Decision Making
The Board actively promotes ethical and responsible decision making.
Code of Conduct
The Board has adopted a Code of Conduct that applies to all employees, executives and Directors of the Company, and
as such complies with Recommendation 3.1 of the Corporate Governance Council. This Code addresses expectations
for conduct in accordance with legal requirements and agreed ethical standards. A copy of the Code is available on the
Company’s website.
Guidelines for Trading in Company Securities
The Board has committed to ensuring that the Company, its Directors and executives comply with their legal obligations
as well as conducting their business in a transparent and ethical manner. The Board has adopted a procedure on dealing
in the Company’s securities by directors, officers and employees which prohibits dealing in the Company’s securities
when those persons possess inside information.
The guidelines also provide that the acknowledgement of the Chairman or the Board should be obtained prior to trading.
A summary of the Guidelines are available on the Company’s website.
The Company’s policy restricts, notwithstanding exceptional circumstances, the trading in Company’s securities by those
individuals covered by the policy to trading windows that are open for 10 days following the hosting of General Meetings
of the Company, the release of annual, half yearly results and quarterly reports and after any other public announcement
on ASX.
Diversity
The Board has adopted a diversity policy that details the purpose of the policy and the employee selection and appointment
guidelines, consistent with the recommendations of the Corporate Governance Council. The Board believes that the
adoption of an efficient diversity policy has the effect of broadening the employee recruitment pool, supporting employee
retention, including different perspectives and is socially and economically responsible governance practice.
The Company employs new employees and promotes current employees on the basis of performance, ability and attitude.
The Board is continually reviewing its practices with a focus on ensuring that the selection process at all levels within the
organisation is formal and transparent and that the workplace environment is open, fair and tolerant.
A n n uA L r E p o r t 2 0 1 3
1 9
Corporate Governance Statement continued
The Company, in keeping with the recommendations of the Corporate Governance Council provides the following
information regarding the proportion of gender diversity in the organisation as at 30 June 2013:
Females employed in the Company as a whole
Females employed in the Company in senior positions
Females appointed as a Director of the Company
Proportion of female/
total number of persons employed
4/11
1/3
0/4
The recommendations of the Corporate Governance Council relating to reporting require a Board to set measurable
objectives for achieving diversity within the organisation, and to report against them on an annual basis. The Company
has implemented measurable objectives as follows:
Measurable Objective
Adoption and promotion of a Formal
Diversity Policy
To ensure Company policies are consistent with
and aligned with the goals of the Diversity Policy
To provide flexible work and salary arrangements
to accommodate family commitments, study
and self-improvement goals, cultural traditions
and other personal choices of current and
potential employees.
To implement clear and transparent policies
governing reward and recognition practices.
To provide relevant and challenging professional
development and training opportunities for all
employees.
Objective
Satisified
Comment
Yes
Yes
Yes
Yes
Yes
The Company has adopted a formal diversity policy
which has been made publicly available via the
ASX and the Company’s website.
The Company’s selection, remuneration and
promotion practices are merit based and as such
are consistent with the goals of the Company’s
Diversity Policy.
The Company does, where considered reasonable,
and without prejudice, accommodate requests for
flexible working arrangements.
The Company grants reward and promotion based
on merit and responsibility as part of its annual and
ongoing review processes.
The Company seeks to continually encourage
self-improvement in all employees, irrespective of
seniority, ability or experience, through external and
internal training courses, regular staff meetings and
relevant on job mentoring.
The Company has not implemented specific measurable objectives regarding the proportion of females to be
employed within the organisation or implement requirements for a proportion of female candidates for employment and
Board positions. The Board considers that the setting of quantitative gender based measurable targets is not consistent
with the merit and ability based policies currently implemented by the Company.
The Board will consider the future implementation of gender based diversity measurable objectives when more appropriate
to the size and nature of the Company’s operations.
2 0
E n c o u n tE r r Es o u r c Es L I M ItE D
Corporate Governance Council Recommendation 4
Safeguarding Integrity in Financial Reporting
Audit Committee
The Company has a separate Audit Committee and as such complies with Recommendation 4.1 of the Corporate
Governance Council.
The Audit Committee is comprised of the Company’s Non-Executive Directors, who are also considered to be independent,
and the Committee is chaired by Dr Jon Hronsky who is not the Chairman of the Board. The Board believes that with the
composition of the Audit Committee being of Independent Non-Executive Directors, the Company is able to meet the
objectives of Recommendation 4.2, and discharge its duties in this area. The relevant experience of members is detailed
in the Directors’ section of the Directors’ Report.
The Audit Committee has adopted a formal Audit Committee Charter which sets its role and responsibilities, as per
Recommendation 4.3. A copy of the Audit Committee Charter is available on the Company’s website.
Financial reporting
The Board relies on senior executives to monitor the internal controls within the Company. Financial performance is
monitored on a regular basis by the Managing Director who reports to the Board at the scheduled Board meetings.
The Board reviews the performance of the external auditors on an annual basis and meets with them during the year to
review findings and assist with Board recommendations.
In the absence of a formal audit committee the Non-Executive Directors of the Company are available for correspondence
with the auditors of the Company.
Corporate Governance Council Recommendation 5
Make Timely and Balanced Disclosure
Continuous Disclosure
The Board is committed to the promotion of investor confidence by providing full and timely information to all security
holders and market participants about the Company’s activities and to comply with the continuous disclosure requirements
contained in the Corporations Act 2001 and the Australian Securities Exchange’s Listing Rules. The Company has established
written policies and procedures, designed to ensure compliance with the ASX Listing Rule Requirements, in accordance
with Recommendation 5.1 of the Corporate Governance Council.
Continuous disclosure is discussed at all regular Board meetings and on an ongoing basis the Board ensures that all
activities are reviewed with a view to the necessity for disclosure to security holders.
In accordance with ASX Listing Rules the Company Secretary is appointed as the Company’s disclosure officer.
A n n uA L r E p o r t 2 0 1 3
2 1
Corporate Governance Statement continued
Corporate Governance Council Recommendation 6
Respect the Rights of Shareholders
Communications
The Board fully supports security holder participation at general meetings as well as ensuring that communications with
security holders are effective and clear. This has been incorporated into a formal shareholder communication strategy,
in accordance with Recommendation 6.1 of the Corporate Governance Council. A copy of the policy is available on the
Company’s website.
In addition to electronic communication via the ASX website, the Company publishes all significant announcements
together with all quarterly reports. These documents are available in both hardcopy on request and on the Company
website at www.enrl.com.au.
Shareholders are able to pose questions on the audit process and the financial statements directly to the independent
auditor who attends the Company Annual General Meeting for that purpose.
Corporate Governance Council Recommendation 7
Recognise and Manage Risk
Risk management policy
The Board has adopted a risk management policy that sets out a framework for a system of risk management and
internal compliance and control, whereby the Board delegates day-to-day management of risk to the Managing Director,
therefore complying with Recommendation 7.1 of the Corporate Governance Council. The Board is responsible for
supervising management’s framework of control and accountability systems to enable risk to be assessed and managed.
Risk management and the internal control system
The Managing Director, with the assistance of senior management as required, has responsibility for identifying, assessing,
treating and monitoring risks and reporting to the Board on risk management.
In order to implement the Company’s Risk Management Policy, it was considered important that the Company establish
an internal control regime in order to:
n Assist the Company to achieve it’s strategic objectives;
n Safeguard the assets and interests of the Company and its stakeholders; and
n Ensure the accuracy and integrity of external reporting.
Key identified risks to the business are monitored on an ongoing basis as follows:
n Business risk management
The Company manages its activities within budgets and operational and strategic plans.
n
Internal controls
The Board has implemented internal control processes typical for the Company’s size and stage of development.
It requires the senior executives to ensure the proper functioning of internal controls and in addition it obtains advice
from the external auditors as considered necessary.
n Financial reporting
Directors approve an annual budget for the Company and regularly review performance against budget at Board
Meetings.
n Operations review
Members of the Board regularly visit the Company’s exploration project areas, reviewing both geological practices, and
environmental and safety aspects of operations.
2 2
E n c o u n tE r r Es o u r c Es L I M ItE D
n Environment and safety
The Company is committed to ensuring that sound environmental management and safety practices are maintained
on its exploration activities.
The Company’s risk management strategy is evolving and will be an ongoing process and it is recognised that the level
and extent of the strategy will develop with the growth and change in the Company’s activities.
Risk Reporting
As the Board has responsibility for the monitoring of risk management it has not required a formal report regarding the
material risks and whether those risks are managed effectively therefore not complying with Recommendation 7.2 of the
Corporate Governance Council. The Board believes that the Company is currently effectively communicating its significant
and material risks to the Board and its affairs are not of sufficient complexity to justify the implementation of a more formal
system for identifying, assessing monitoring and managing risk in the Company.
The Company does not have an internal audit function.
Managing Director and Chief Financial Officer Written Statement
The Board requires the Managing Director and the Company Secretary provide a written statement that the financial
statements of company present a true and fair view, in all material aspects, of the financial position and operational results
and have been prepared in accordance with Australian Accounting Standards and the Corporation Act. The Board also
requires that the Managing Director and Company Secretary provide sufficient assurance that the declaration is founded on
a sound system of risk management and internal control, and that the system is working effectively.
The declarations have been received by the Board, in accordance with Recommendation 7.3 of the Corporate Governance
Council.
Corporate Governance Council Recommendation 8
Remunerate Fairly and Responsibly
Remuneration Committee
The Board does not have a separate Remuneration Committee and as such does not comply with Recommendation 8.1
of the Corporate Governance Council. Remuneration arrangements for Directors are determined by the full Board. The
Board is also responsible for setting performance criteria, performance monitors, share option schemes, superannuation,
termination and retirement entitlements, and professional indemnity and liability insurance cover.
The Board considers that the Company is effectively served by the full Board acting as a whole in remuneration matters, and
ensures that all matters of remuneration continue to be decided upon in accordance with Corporations Act requirements,
by ensuring that no Director participates in any deliberations regarding their own remuneration or related issues.
Distinguish Between Executive and Non-Executive Remuneration
The Company does distinguish between the remuneration policies of its Executive and Non-Executive Directors in
accordance with Recommendation 8.2 of the Corporate Governance Council.
Executive Directors receive salary packages which may include performance based components, designed to reward
and motivate, including the granting of share options, subject to shareholder approval and vesting conditions relating to
continuity of engagement.
Non-Executive Directors receive fees agreed on an annual basis by the Board, within total Non-Executive remuneration
limits voted upon by shareholders at Annual General Meetings. Share options which were issued to a Non-Executive
Director, were subject to shareholder approval and a vesting condition based upon continuity of engagement. The grant of
options was deemed appropriate by the Board to provide an incentive and to reward the Director.
A n n uA L r E p o r t 2 0 1 3
2 3
Directors’ Report
The Directors present their report on Encounter Resources Limited (the Company) and the entities it controlled (the
Group) at the end of, and during the year ended 30 June 2013.
Directors
The names and details of the Directors of Encounter
Resources Limited during the financial year and until the
date of this report are:
Paul Chapman – B.Comm, ACA, Grad. Dip. Tax, MAICD, MAusIMM
Non-Executive Chairman appointed 7 October 2005
Mr Chapman is a chartered accountant with over twenty-
five years experience in the resources sector gained
in Australia and the United States. Mr Chapman has
experience across a range of commodity businesses
including gold, nickel, uranium, manganese, bauxite/
alumina and oil/gas. Mr Chapman has held managing
director and other senior management roles in public
companies of various sizes. Mr Chapman is the chairman
of ASX listed gold producer Silver Lake Resources Ltd,
minerals explorer and developer Rex Minerals Ltd and
Phillips River Mining Ltd.
Will Robinson – B.Comm, MAusIMM
Managing Director (Executive) appointed 30 June 2004
Mr Robinson is a resources industry commercial and
finance specialist with over nineteen years experience
in commercial management, transaction structuring and
negotiation, business strategy development and London
Metals Exchange metals trading. Mr Robinson held various
senior commercial positions with WMC in Australia and
North America from 1994 to 2003. Mr Robinson has
extensive experience in the sale and distribution of
commodities and was Vice President – Marketing for
WMC’s nickel business from 2001 to 2003. Mr Robinson
founded Encounter Resources Limited in 2004 and
has overseen the development of the Company as its
Managing Director. Mr Robinson is the President of the
Association of Mining and Exploration Companies (AMEC).
Peter Bewick – B.Eng (Hons), MAusIMM
Exploration Director (Executive) appointed 7 October 2005
Mr Bewick is an experienced geologist and has held a
number of senior mine and exploration geological roles
during a fourteen year career with WMC. These roles
include Exploration Manager and Geology Manager of
the Kambalda Nickel Operations, Exploration Manager
for St Ives Gold Operation, Exploration Manager for
WMC’s Nickel Business Unit and Exploration Manager
for North America based in Denver, Colorado. Whilst at
WMC, Mr Bewick gained extensive experience in project
generation for a range of commodities including nickel,
gold and bauxite. Mr Bewick has been associated with
a number of brownfields exploration successes at
Kambalda and with the greenfield Collurabbie Ni-Cu-PGE
discovery.
Jonathan Hronsky – BAppSci, PhD, MAusIMM, FSEG
Non-Executive Director appointed 10 May 2007
Dr Hronsky has more than twenty five years of experience
in the mineral exploration industry, primarily focused on
project generation, technical innovation and exploration
strategy development. Dr Hronsky has particular expertise
in targeting for nickel sulfide deposits, but has worked
across a diverse range of commodities. His work led
to the discovery of the West Musgrave nickel sulfide
province in Western Australia. Dr Hronsky was most
recently Manager – Strategy & Generative Services for
BHP Billiton Mineral Exploration. Prior to that, he was
Global Geoscience Leader for WMC Resources Ltd. He
is currently a Director of exploration consulting group
Western Mining Services and Chairman of the board of
management of the Centre for Exploration Targeting at the
University of Western Australia.
Company Secretary
Kevin Hart – B.Comm, FCA
Mr Hart is a Chartered Accountant and was appointed to
the position of Company Secretary on 4 November 2005.
He has over 20 years experience in accounting and the
management and administration of public listed entities
in the mining and exploration industry.
He is currently a partner in an advisory firm, Endeavour
Corporate, which specialises in the provision of company
secretarial and accounting services to ASX listed entities.
Dan Travers – BSc (Hons), FCCA
Mr Travers is a Fellow of the Association of Chartered
Certified Accountants and was appointed to the position
of Joint Company Secretary on 20 November 2008.
He is an employee of Endeavour Corporate, which
specialises in the provision of company secretarial and
accounting services to ASX listed entities in the mining and
exploration industry.
2 4
E n c o u n tE r r Es o u r c Es L I M ItE D
Directors’ Interests
As at the date of this report the Directors’ interests in shares and unlisted options of the Company are as follows:
Director
P Chapman
W Robinson
P Bewick
J Hronsky
Directors’ Interests
in Ordinary Shares
Directors’ Interests
in Unlisted Options
Options vested at
the reporting date
5,600,000
22,168,328
5,102,000
–
–
–
5,000,000
1,300,000
–
–
5,000,000
1,300,000
Included in the Directors’ interests in Unlisted Options, there are 6,300,000 options that are vested and exercisable as at
the date of signing this report.
Directors’ Meetings
Review of Activities
The number of meetings of the Company’s Directors held
during the year ended 30 June 2013, and the number of
meetings attended by each Director are as follows:
Director
Held
Attended
Board of Directors’ Meetings
P Chapman
W Robinson
P Bewick
J Hronsky
9
9
9
9
Principal Activities
9
9
9
9
The principal activity of the Company during the financial
year was mineral exploration in Western Australia.
There were no significant changes in these activities during
the financial year.
Results of Operations
The consolidated net loss after income tax for the financial
year was $1,566,249 (2012: $758,706).
Included in the consolidated loss for the current year is
a write-off of deferred exploration expenditure totalling
$907,172 (2012: $234,086).
Dividends
No dividend has been paid since the end of the previous
financial year and no dividend is recommended for the
current year.
Exploration
Exploration activities for the financial year have been
focussed on the Company’s Yeneena Project in the
Paterson Province, principally at the BM1, BM6 and BM7
copper prospects and the BM2 copper/zinc prospect.
The Yeneena Project covers a 1,900km2 area of the
Paterson Province in Western Australia.
Full details of the Company’s exploration activities are
available in the Exploration Review in the Annual Report.
Financial Position
At the end of the financial year the Group had $4,806,657
(2012: $5,185,337) in cash and at call deposits.
Capitalised mineral exploration and evaluation expenditure
is $17,774,406 (2012: $15,219,430).
Expenditure was principally focused on the exploration
for base metals at the Company’s Yeneena Project in the
Paterson Province of Western Australia.
Significant Changes in the State of Affairs
The following significant change in the state of affairs of
the Company occurred during the financial year ended
30 June 2013:
n On 23 April 2013 the Company announced that it
had entered into a US$20 million farm-in agreement
with Antofagasta Minerals Perth Pty Ltd a subsidiary
of Antofagasta plc, under which Antofagasta may
earn up to a 51% interest in two tenements which
comprise part of the Company’s Yeneena Project.
Other than the above, there have been no significant
changes in the state of affairs of the Company and Group
during or since the end of the financial year.
A n n uA L r E p o r t 2 0 1 3
2 5
Directors’ Report continued
Options over Unissued Capital
Unlisted Options
As at the date of this report 9,475,000 unissued ordinary shares of the Company are under option as follows:
Number of Options Granted
Exercise Price
Expiry Date
5,425,000
550,000
550,000
1,450,000
750,000
750,000
$1.35
80 cents
40 cents
30 cents
39 cents
21 cents
22 November 2014
30 September 2015
31 May 2016
30 November 2016
30 November 2017
31 May 2017
All options on issue at the date of this report are vested and exercisable.
During the financial year the Company granted 2,950,000 unlisted options (2012: 1,250,000) over unissued shares
to employees, directors and consultants of the Company.
During the year nil options were cancelled (2012: 50,000) on the cessation of employment. 1,550,000 options were
cancelled on expiry of the exercise period (2012: nil).
During the financial year nil (2012: Nil) ordinary shares were issued on the exercise of options.
Since the end of the financial year no options have been issued by the Company. No options have been exercised since
the end of the financial year.
Since the end of the financial year no options have been cancelled due to the lapse of exercise period.
Options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
The holders of unlisted options are not entitled to any voting rights until the options are exercised into ordinary shares.
Matters Subsequent to the End of the Financial Year
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the
operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
Likely Developments and Expected Results of Operations
Disclosure of any further information has not been included in this report because, in the reasonable opinion of the
Directors to do so would be likely to prejudice the business activities of the Group and is dependent upon the results of
the future exploration and evaluation.
Environmental Regulation and Performance
The Group holds various exploration licences to regulate its exploration activities in Australia. These licences include
conditions and regulations with respect to the rehabilitation of areas disturbed during the course of its exploration activities.
So far as the Directors are aware, all exploration activities have been undertaken in compliance with all relevant
environmental regulations.
2 6
E n c o u n tE r r Es o u r c Es L I M ItE D
Remuneration Report (Audited)
Remuneration paid to Directors and Officers of the Company is set by reference to such payments made by other
ASX listed companies of a similar size and operating in the mineral exploration industry. In addition reference is made
to the specific skills and experience of the Directors and Officers.
Details of the nature and amount of remuneration of each Director, and other Key Management Personnel if applicable,
are disclosed annually in the Company’s Annual Report.
Remuneration Committee
The Board has adopted a formal Remuneration Committee Charter which provides a framework for the consideration of
remuneration matters.
The Company does not have a separate remuneration committee and as such all remuneration matters are considered
by the Board as a whole, with no Member deliberating or considering such matter in respect of their own remuneration.
In the absence of a separate Remuneration Committee, the Board is responsible for:
1. Setting remuneration packages for Executive Directors, Non-Executive Directors and other Key Management
Personnel; and
2.
Implementing employee incentive and equity based plans and making awards pursuant to those plans.
Non-Executive Remuneration
The Company’s policy is to remunerate Non-Executive Directors, at rates comparable to other ASX listed companies in the
same industry, for their time, commitment and responsibilities.
Non-Executive Remuneration is not linked to the performance of the Company, however to align Directors’ interests with
shareholders’ interests, remuneration may be provided to Non-Executive Directors in the form of equity based long term
incentives.
1. Fees payable to Non-Executive Directors are set within the aggregate amount approved by shareholders at the
Company’s Annual General Meeting;
2. Non-Executive Directors’ fees are payable in the form of cash and superannuation benefits;
3. Non-Executive superannuation benefits are limited to statutory superannuation entitlements; and
4. Participation in equity based remuneration schemes by Non-Executive Directors is subject to consideration and
approval by the Company’s shareholders.
The maximum Non-Executive Directors fees, payable in aggregate are currently set at $200,000 per annum.
Executive Director and Other Key Management Personnel Remuneration
Executive remuneration consists of base salary, plus other performance incentives to ensure that:
1. Remuneration packages incorporate a balance between fixed and incentive pay, reflecting short and long term
performance objectives appropriate to the Company’s circumstances and objectives; and
2. A proportion of remuneration is structured in a manner to link reward to corporate and individual performances.
Executives are offered a competitive level of base salary at market rates (based on comparable ASX listed companies)
and are reviewed regularly to ensure market competitiveness. To date the Company has not engaged external
remuneration consultants to advise the Board on remuneration matters.
A n n uA L r E p o r t 2 0 1 3
2 7
Directors’ Report continued
Remuneration Report (Audited) continued
Incentive Plans
The Company provides long term incentives to Directors and Employees pursuant to the Encounter Resources Employee
Share Option Plan, which was last approved by shareholders at the Annual General Meeting held on 30 November 2012.
The Board, acting in remuneration matters:
1. Ensures that incentive plans are designed around appropriate and realistic performance targets and provide rewards
when those targets are achieved;
2. Reviews and approves existing incentive plans established for employees; and
3. Approves the administration of the incentive plans, including receiving recommendations for, and the consideration
and approval of grants pursuant to such incentive plans.
Engagement of Non-Executive Directors
Non-Executive Directors conduct their duties under the following terms:
1. A Non-Executive Director may resign from his/her position and thus terminate their contract on written notice to the
Company; and
2. A Non-Executive Director may, following resolution of the Board, be removed before the expiration of their period of
office (if applicable). Payment is made in lieu of any notice period if termination is initiated by the Company, except
where termination is initiated for serious misconduct.
In consideration of the services provided by Dr Jon Hronsky as Non-Executive Director the Company will pay him $50,000
plus statutory superannuation per annum.
In consideration of the services provided by Mr Paul Chapman as Non-Executive Chairman the Company will pay him
$60,000 plus statutory superannuation per annum.
Messrs Chapman and Hronsky are also entitled to fees for other amounts as the Board determines where they perform
special duties or otherwise perform extra services or make special exertions on behalf of the Company. There were no such
fees paid during the financial year ended 30 June 2013.
Engagement of Executive Directors
The Company has entered into executive service agreements with Mr Will Robinson and Mr Peter Bewick on the following
material terms and conditions:
Mr Robinson’s current service agreement with the Company, in respect of his engagement as Managing Director, is
effective from 23 January 2013, and is subject to a review on 1 January 2014. Mr Robinson will receive a base salary of
$290,000 per annum plus statutory superannuation.
Mr Bewick’s current service agreement with the Company, in respect of his engagement as Exploration Director, is effective
from on 23 January 2013, and is subject to a review on 1 January 2014. Mr Bewick will receive a base salary of $270,000
per annum plus statutory superannuation.
Messrs Robinson and Bewick may also receive an annual short term performance based bonus which may be calculated
as a percentage of their current base salary, the performance criteria, assessment and timing of which is negotiated
annually with the Non-Executive Directors.
Messrs Robinson and Bewick may, subject to shareholder approval, participate in the Encounter Resources Employee Share
Option Plan and other long term incentive plans adopted by the Board.
2 8
E n c o u n tE r r Es o u r c Es L I M ItE D
Remuneration Report (Audited) continued
Short Term Incentive Payments
Each year, the Non-Executive Directors set the Key Performance Indicators (KPI’s) for the Executive Directors. The KPI’s are
chosen to align the reward of the individual Executives to the strategy and performance of the Company.
Performance objectives, which may be financial or non-financial, or a combination of both, are weighted when
calculating the maximum short term incentives payable to Executives. At the end of the year, the Non-Executive Directors
will assess the actual performance of the Executives against the set Performance Objectives. The maximum amount of
the Short Term Incentive, or a lesser amount depending on actual performance achieved is paid to the Executives as a
cash payment.
No Short Term incentives are payable to Executives where it is considered that the actual performance has fallen below
the minimum requirement.
Executive Directors set the KPI’s for other members of staff, monitor actual performance and recommend payment of
short term bonuses to certain employees to the Board for approval.
Shareholding Qualifications
The Directors are not required to hold any shares in Encounter Resources under the terms of the Company’s constitution.
Group Performance
In considering the Company’s performance, the Board provides the following indices in respect of the current financial
year and previous financial years:
2013
$
2012
$
2011
$
2010
$
2009
$
Loss for the year
attributable to shareholders
(1,566,249)
(758,706) (4,933,106)
(918,288)
(1,987,843)
Closing share price at 30 June
0.16
0.18
0.93
0.25
0.20
As an exploration company the Board does not consider the loss attributable to shareholders as one of the performance
indicators when implementing Short Term Incentive Payments. In addition to technical exploration success, the Board
considers the successful negotiation of the farm-in arrangement securing project funding of up to US$20 million over
five years with Antofagasta Minerals Perth Pty Ltd, and the expansion of its Yeneena landholdings through a number of
other farm in arrangements in adverse capital markets, as more appropriate indicators of management performance for
the 2013 financial period.
Remuneration Disclosures
The Key Management Personnel of the Company have been identified as:
Mr Paul Chapman
Non-Executive Chairman
Mr Will Robinson
Managing Director
Mr Peter Bewick
Exploration Director
Dr Jon Hronsky
Non-Executive Director
A n n uA L r E p o r t 2 0 1 3
2 9
Directors’ Report continued
Remuneration Report (Audited) continued
Remuneration Disclosures continued
The details of the remuneration of each Director and member of Key Management Personnel of the Company is as follows:
Short Term
Post Employment Other Long Term
30 June 2013
Paul Chapman
Will Robinson
Peter Bewick
Jon Hronsky
Total
30 June 2012
Paul Chapman
Will Robinson
Peter Bewick
Jon Hronsky
Total
Base Salary
$
60,000
290,000
261,692
50,000
661,692
Short Term
Incentive
$
Superannuation
Contributions
$
Value of
Options
$
5,400
26,100
23,552
4,500
–
–
154,206
50,300
–
–
–
–
–
59,552
204,506
925,750
Total
$
65,400
316,100
439,450
104,800
Short Term
Post Employment Other Long Term
Base Salary
$
60,000
280,000
260,000
50,000
650,000
Short Term
Incentive
$
Superannuation
Contributions
$
Value of
Options
$
–
–
–
–
–
5,400
25,200
23,400
4,500
58,500
–
–
–
–
–
Total
$
65,400
305,200
283,400
54,500
708,500
Value of
Options as
Proportion of
Remuneration
%
–
–
35.1
48.0
Value of
Options as
Proportion of
Remuneration
%
–
–
–
–
Details of Performance Related Remuneration
There have been no Short Term Incentive payments made to Directors or Key Management Personnel of the Company
during the financial year ended 30 June 2013.
Options Granted as Remuneration
During the financial year ended 30 June 2013 the following options over unissued shares were issued to Directors or Key
Management Personnel of the Company:
Number of
Options Granted
Grant Date
Exercise Date
Exercise Price
per option
Peter Bewick
750,000
750,000
30 Nov 2012
30 Nov 2012
30 Nov 2016
30 Nov 2017
30 cents
39 cents
Jon Hronsky
500,000
30 Nov 2012
30 Nov 2016
30 cents
All options granted as remuneration during the year ended 30 June 2013 vested immediately.
Value of
Options
$75,450
$78,756
$50,300
Exercise of Options Granted as Remuneration
During the year, no ordinary shares were issued in respect of the exercise of options previously granted as remuneration
to Directors or Key Management Personnel of the Company.
End of Remuneration Report
3 0
E n c o u n tE r r Es o u r c Es L I M ItE D
Officers’ Indemnities and Insurance
During the year the Company paid an insurance premium to insure certain officers of the Company. The officers of the
Company covered by the insurance policy include the Directors named in this report.
The Directors and Officers Liability insurance provides cover against all costs and expenses that may be incurred in
defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the
officers in their capacity as officers of the Company. The insurance policy does not contain details of the premium paid in
respect of individual officers of the Company. Disclosure of the nature of the liability cover and the amount of the premium
is subject to a confidentiality clause under the insurance policy.
The Company has not provided any insurance for an auditor of the Company.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company or Group, or to intervene in any proceedings to which the Company or Group is a party, for the
purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company or Group with leave of the Court under
section 237 of the Corporations Act 2001.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Company
support and have adhered to the principles of corporate governance. The Company’s corporate governance statement
is contained in the Annual Report.
Non-audit Services
During the year Crowe Horwath the Company’s auditor, has not performed any other services in addition to their
statutory duties:
Total remuneration paid to auditors during the financial year:
Audit and review of the Company’s financial statements
Other services
Total
2013
$
28,500
–
28,500
2012
$
39,240
–
39,240
The board considers any non-audit services provided during the year by the auditor and satisfies itself that the provision
of any non-audit services during the year by the auditor is compatible with, and does not compromise, the auditor
independence requirements of the Corporations Act 2001 for the following reasons:
n
n
all non-audit services are reviewed by the board to ensure they do not impact the impartiality and objectivity of
the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set out
in APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s
own work, acting in a management or decision making capacity for the Company, acting as an advocate for the
Company or jointly sharing risks and rewards.
A n n uA L r E p o r t 2 0 1 3
3 1
Directors’ Report continued
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act is set out
on the following page.
This report is made in accordance with a resolution of the Directors.
Dated at Perth this 25th day of September 2013.
W Robinson
Managing Director
3 2
E n c o u n tE r r Es o u r c Es L I M ItE D
AUDITOR’S INDEPENDENCE DECLARATION
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for
the audit of Encounter Resources Limited for the year ended 30 June 2013, I declare that, to the best
of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
CROWE HORWATH PERTH
SEAN MCGURK
Partner
Signed at Perth, 25 September 2013
A n n uA L r E p o r t 2 0 1 3
3 3
Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.
Consolidated Statement of Comprehensive Income
For the financial year ended 30 June 2013
Revenue
Total revenue
Employee expenses
Employee expenses recharged to exploration
Equity based remuneration expense
Non-Executive Director’s fees
Depreciation expense
Corporate expenses
Administration and Other expenses
Exploration costs written off and expensed
Loss before income tax
Income tax benefit/(expense)
Loss after tax
Consolidated
2013
$
2012
$
308,841
308,841
(1,415,203)
1,199,237
(273,039)
(110,000)
(12,844)
(69,402)
(523,004)
(907,172)
(1,802,586)
236,337
371,715
371,715
(1,417,955)
1,143,686
(207,409)
(110,000)
(11,509)
(87,823)
(425,511)
(234,086)
(978,892)
220,186
(1,566,249)
(758,706)
Note
5
17
6
6
7
17
Other comprehensive income
–
–
Total comprehensive income for the year
(1,566,249)
(758,706)
Earnings per share for loss attributable to the
ordinary equity holders of the Company
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Cents
Cents
27
27
(1.3)
(1.3)
(0.7)
(0.7)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
3 4
E n c o u n tE r r Es o u r c Es L I M ItE D
Consolidated Statement of Financial Position
As at 30 June 2013
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Capitalised mineral exploration and evaluation expenditure
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Equity remuneration reserve
Total equity
Note
8
9(a)
9(b)
Consolidated
2013
$
2012
$
4,806,657
265,643
78,427
5,185,337
407,678
77,994
5,150,727
5,671,009
11
12
279,940
17,774,406
381,585
15,219,430
18,054,346
15,601,015
23,205,073
21,272,024
14(a)
14(b)
717,037
66,584
1,308,509
41,692
783,621
1,350,201
783,621
1,350,201
22,421,452
19,921,823
15
17
17
31,113,384
(11,429,023)
2,737,091
27,320,545
(10,178,761)
2,780,039
22,421,452
19,921,823
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
A n n uA L r E p o r t 2 0 1 3
3 5
Consolidated Statement of Changes in Equity
For the financial year ended 30 June 2013
Consolidated
Issued
capital
$
Accumulated
losses
$
Equity
remuneration
reserve
$
Total
$
2012
Balance at the start of the financial year
21,660,547
(9,448,420)
2,600,995
14,813,122
Comprehensive income for the financial year
Movement in equity remuneration reserve
–
–
(758,706)
–
(758,706)
28,365
179,044
207,409
Transactions with equity holders in their
capacity as equity holders:
Shares issued
5,659,998
–
–
5,659,998
Balance at the end of the financial year
27,320,545
(10,178,761)
2,780,039
19,921,823
2013
Balance at the start of the financial year
27,320,545
(10,178,761)
2,780,039
19,921,823
Comprehensive income for the financial year
Movement in equity remuneration reserve
–
–
(1,566,249)
–
(1,566,249)
315,987
(42,948)
273,039
Transactions with equity holders in their
capacity as equity holders:
Shares issued
3,792,839
–
–
3,792,839
Balance at the end of the financial year
31,113,384
(11,429,023)
2,737,091
22,421,452
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
3 6
E n c o u n tE r r Es o u r c Es L I M ItE D
Consolidated Statement of Cash Flows
For the financial year ended 30 June 2013
Cash flows from operating activities
Sundry income
State Government funded drilling rebate
R&D tax concession tax refund
Interest received
Payments to suppliers and employees
Note
Consolidated
2013
$
2012
$
6,385
133,699
209,250
190,211
(908,268)
–
130,552
10,936
241,163
(838,919)
Net cash used in operating activities
26
(368,723)
(456,268)
Cash flows from investing activities
Contributions received from farm-in partners
Proceeds from sale of exploration assets
Payments for exploration and evaluation
Payments for plant and equipment
1,378,711
20,000
(5,172,631)
(28,875)
–
–
(7,072,265)
(187,425)
Net cash used in investing activities
(3,802,795)
(7,259,690)
Cash flows from financing activities
Proceeds from the issue of shares
Payments for share issue costs
3,853,286
5,940,000
(60,448)
(280,001)
Net cash provided by financing activities
3,792,838
5,659,999
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
(378,680)
5,185,337
(2,055,959)
7,241,296
Cash at the end of the financial year
8(a)
4,806,657
5,185,337
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
A n n uA L r E p o r t 2 0 1 3
3 7
Notes to the Financial Statements
For the financial year ended 30 June 2013
Note 1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated. The financial report includes financial
statements for the consolidated entity consisting of Encounter Resources Limited and its subsidiaries (“Group”).
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian equivalents to International
Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards
Board and the Corporations Act 2001.The Group is a for-profit entity for financial reporting purposes under Australian
Accounting Standards.
The financial report is presented in Australian dollars and all values are rounded to the nearest dollar.
The separate financial statements of the parent entity have not been presented within this financial report as permitted
by the Corporations Act 2001.
The financial report of the Group was authorised for issue in accordance with a resolution of Directors on
25th September 2013.
Statement of Compliance
The consolidated financial report of Encounter Resources Limited complies with Australian Accounting Standards, which
include Australian Equivalents to International Financial Reporting Standards (AIFRS), in their entirety. Compliance
with AIFRS ensures that the financial report also complies with International Financial Reporting Standards (IFRS) in
their entirety.
Adoption of New and Revised Standards –
Changes in accounting policies on initial application of accounting standards
In the year ended 30 June 2013, the Group has reviewed all of the new and revised Standards and Interpretations
issued by the AASB that are relevant to its operations and effective for the current annual reporting period. It has
been determined by the Group that there is no impact, material or otherwise, of the new and revised Standards and
Interpretations on its business and, therefore, no change is necessary to Group accounting policies.
A number of new standards, amendments to standards and interpretations are effective for annual reporting periods
beginning after 1 July 2013, and have not been applied in preparing these financial statements. None of these are
expected to have a significant effect on the Group except for:
n AASB 9 Financial Instruments;
n AASB 10: Consolidated Financial Statements;
n AASB 11: Joint Arrangements: and
n AASB 12: Disclosure of involvements in other entities.
The Group does not plan to adopt these standard early and the extent of the impact has not been determined.
Reporting basis and conventions
These financial statements have been prepared under the historical cost convention, and on an accrual basis.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant
to the financial statements, are disclosed in Note 3.
3 8
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 1 Summary of significant accounting policies continued
(a) Basis of preparation continued
Principles of consolidation
The financial statements of subsidiary companies are included in the consolidated financial statements from the date
control commences until the date control ceases. The financial statements of subsidiary companies are prepared for
the same reporting period as the parent company, using consistent accounting policies.
Inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.
Investments in subsidiary companies are accounted for at cost in the individual financial statements of the Company.
(b) Segment reporting
Operating segments are identified and segment information disclosed, where appropriate, on the basis of internal
reports reviewed by the Company’s board of directors, being the Group’s Chief Operating Decision Maker, as defined
by AASB 8. Adoption of AASB 8 by the Group has not resulted in a redefinition of previously reported operating
segments.
(c) Revenue recognition and receivables
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue
are net of returns, allowances and amounts collectable on behalf of third parties.
Interest income
Interest income is recognised on a time proportion basis and is recognised as it accrues.
(d) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable
to the temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary timing differences at the tax rates expected to apply
when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially
enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable
temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary
differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in
relation to those timing differences if they arose in a transaction, other than a business combination, that at the time
of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in controlled entities where the parent is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly
in equity.
Amounts receivable from the Australian Tax Office in respect of research and development tax concession claims are
recognised in the year in which the expenditure on which the claim was incurred.
A n n uA L r E p o r t 2 0 1 3
3 9
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 1 Summary of significant accounting policies continued
(e) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases (Note 23). Payments made under operating leases (net of any incentives received from the lessor)
are charged to the income statement on a straight line basis over the period of the lease.
(f) Impairment of assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of
assets (cash generating units). Non financial assets, other than goodwill, that suffered an impairment are reviewed for
possible reversal of the impairment at each reporting date.
(g) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short term, highly liquid investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(h) Government grants
Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and
all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary
to match the grant to the costs they are compensating. Grants relating to assets is deducted from the carrying value
of the asset.
(i) Fair value estimation
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate
their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
(j) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance
are charged to the income statement during the financial period in which they are incurred.
Depreciation of property, plant and equipment is calculated using the straight line and diminishing value methods to
allocate their cost, net of residual values, over their estimated useful lives, as follows:
Field equipment
Office equipment
Leasehold improvements
33.3%
33.3%
Over the term of the lease
The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount (Note 1(f)). Gains and losses on disposal are determined by comparing
proceeds with the carrying amount. These gains and losses are included in the income statement.
4 0
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 1 Summary of significant accounting policies continued
(k) Mineral exploration and evaluation expenditure
Mineral exploration and evaluation expenditure is written off as incurred or accumulated in respect of each identifiable
area of interest and capitalised. These costs are carried forward only if they relate to an area of interest for which rights
of tenure are current and in respect of which:
n such costs are expected to be recouped through the successful development and exploitation of the area of
interest, or alternatively by its sale; or
n exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable assessment
of the existence or otherwise of economically recoverable reserves and active or significant operations in, or in
relation to, the area of interest are continuing.
In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced value,
accumulated costs carried forward are written off in the year in which that assessment is made. A regular review is
undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation
to that area of interest.
Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are
expensed as incurred and treated as exploration and evaluation expenditure. Exploration activities resulting in future
obligations in respect of restoration costs result in a provision to be made by capitalising the estimated costs, on a
discounted cash basis, of restoration and depreciating over the useful life of the asset. The unwinding of the effect of
the discounting on the provision is recorded as a finance cost in the income statement.
Farm-outs – in the exploration and evaluation phase
The Group does not record any expenditure made by the farmee on its account. It also does not recognise any gain
or loss on its exploration and evaluation farm-out arrangements but redesignates any costs previously capitalised in
relation to the whole interest as relating to the partial interest retained. Any cash consideration received directly from
the farmee is credited against costs previously capitalised in relation to the whole interest with any excess accounted
for by the farmor as a gain on disposal.
(l) Joint ventures
Interests in joint ventures have been brought to account by including the appropriate share of the relevant assets,
liabilities and costs of the joint ventures in their relevant categories in the financial statements. Details of these interests
are shown in Note 13.
(m) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year
which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition.
(n) Employee benefits
Wages, salaries and annual leave.
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within
12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting
date and are measured at the amounts expected to be paid when the liabilities are settled.
Long service leave.
The liability for long service leave is recognised in the provision for employee benefits and measured as the present
value of expected future payments to be made in respect of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is given to expected future salaries, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date
on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated
future cash outflows.
A n n uA L r E p o r t 2 0 1 3
4 1
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 1 Summary of significant accounting policies continued
(n) Employee benefits continued
Share based payments
Share based compensation payments are made available to Directors and employees.
The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in
equity. The fair value is measured at grant date and recognised over the period during which the employees become
unconditionally entitled to the options.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into
account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option.
A discount is applied, where appropriate, to reflect the non-marketability and non-transferability of unlisted options,
as the Black-Scholes option pricing model does not incorporate these factors into its valuation.
The fair value of the options granted is adjusted to reflect market vesting conditions. Non-market vesting conditions are
included in assumptions about the number of options that are expected to become exercisable. At each balance sheet
date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee
benefit expense recognised each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred
to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital.
Upon the cancellation of options on expiry of the exercise period, or lapsing of vesting conditions, the balance of the
share based payments reserve relating to those options is transferred to accumulated losses.
(o) 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.
(p) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares.
(q) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as
a part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash flow.
4 2
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 1 Summary of significant accounting policies continued
(r) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
(s) Investments and other financial assets
Recognition
When financial assets are recognised initially, they are measured at fair value, plus in the case of investments not
at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of
its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each
financial year-end.
All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group
commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under
contracts that require delivery of the assets within the period established generally by regulation or convention in the
marketplace.
(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or
loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term.
Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or
losses on investments held for trading are recognised in profit or loss.
(ii) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity
when the Group has the positive intention and ability to hold to maturity. Investments included to be held for an
undefined period are not included in this classification. Investments that are intended to be held-to-maturity, such as
bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus
principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference
between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or
received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all
other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or
loss when the investments are derecognised or impaired, as well as through the amortisation process.
(iii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market and are stated at amortised cost using the effective interest rate method.
(iv) Financial liabilities
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments
and amortisation.
A n n uA L r E p o r t 2 0 1 3
4 3
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 1 Summary of significant accounting policies continued
(t) Fair value estimation
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes
based on the following methods:
Investments in equity and debt securities
The fair value of financial assets at fair value through profit or loss, held to maturity investments and available for sale
financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held to
maturity investments is determined for disclosure purposes only. For investments with no active market, fair value
is determined using valuation techniques. Such techniques include using recent arm’s length market transactions,
reference to the current market value of another instrument that is substantially the same, discounted cash flow
analysis and option pricing models.
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at
the market rate of interest at the reporting date.
Note 2 Financial risk management
The Group has exposure to a variety of risks arising from its use of financial instruments. This note presents information
about the Company’s exposure to the specific risks, and the policies and processes for measuring and managing those
risks. The Board of Directors has the overall responsibility for the risk management framework and has adopted a Risk
Management Policy.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from transactions with customers and investments.
Trade and other receivables
The nature of the business activity of the Group does not result in trading receivables. The receivables that the Group
does experience through it’s normal course of business are short term and the most significant recurring by quantity
is receivable from the Australian Taxation Office, the risk of non-recovery of receivables from this source is considered
to be negligible.
Cash deposits
The Directors believe any risk associated with the use of predominantly only one bank is addressed through the use
of at least an A-rated bank as a primary banker and by the holding of a portion of funds on deposit with alternative
A-rated institutions. Except for this matter the Group currently has no significant concentrations of credit risk.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’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, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
The Group manages its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant
of the future demands for liquid finance resources to finance the Company’s current and future operations, and
consideration is given to the liquid assets available to the Company before commitment is made to future expenditure
or investment.
4 4
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 2 Financial risk management continued
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising any return.
Interest rate risk
The Group has significant cash assets which may be susceptible to fluctuations in changes in interest rates. Whilst the
Group requires the cash assets to be sufficiently liquid to cover any planned or unforeseen future expenditure, which
prevents the cash assets being committed to long term fixed interest arrangements; the Group does mitigate potential
interest rate risk by entering into short to medium term fixed interest investments.
The Group does not have any direct contact with foreign exchange or equity risks other than their effect on the
general economy.
Note 3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under
the circumstances.
Accounting for capitalised exploration and evaluation expenditure
The Group’s accounting policy is stated at 1(k). There is some subjectivity involved in the carrying forward as capitalised or
writing off to the income statement exploration and evaluation expenditure, however management give due consideration
to areas of interest on a regular basis and are confident that decisions to either write off or carry forward such expenditure
reflect fairly the prevailing situation.
Accounting for share based payments
The values of amounts recognised in respect of share based payments have been estimated based on the fair value of the
equity instruments granted. Fair values of options issued are estimated by using an appropriate option pricing model. There
are many variables and assumptions used as inputs into the models. If any of these assumptions or estimates were to
change this could have a significant effect on the amounts recognised. See Note 16 for details of inputs into option pricing
models in respect of options issued during the reporting period.
Note 4 Segment information
The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of
directors in assessing performance and determining the allocation of resources. Reportable segments disclosed are based
on aggregating operating segments, where the segments have similar characteristics. The Group’s sole activity is mineral
exploration and resource development wholly within Australia, therefore it has aggregated all operating segments into the
one reportable segment being mineral exploration.
The reportable segment is represented by the primary statements forming these financial statements.
A n n uA L r E p o r t 2 0 1 3
4 5
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 5 Revenue
Operating activities
Contribution to overheads from farm-in partner
Gain on sale of exploration assets
State Government funded drilling rebate
Interest receivable
Other income
Note 6 Loss for the year
Loss before income tax includes the following specific expenses:
Depreciation:
Office equipment
Rental expenses on operating leases – minimum lease payments
Consolidated
2013
$
2012
$
92,245
20,000
–
189,287
7,309
308,841
–
–
130,552
240,026
1,137
371,715
12,844
–
11,509
63,606
Total exploration costs not capitalised and written off
907,172
234,086
Note 7 Income tax
(a) Income tax expense
Current income tax:
Current income tax charge (benefit)
Current income tax not recognised
R&D tax refund receivable
Deferred income tax:
Relating to origination and reversal of timing differences
Deferred income tax benefit not recognised
(1,353,650)
1,353,650
(236,237)
(2,556,703)
2,556,703
(220,186)
(309,673)
309,673
(269,215)
269,215
Income tax expense/(benefit) reported in the income statement
(236,237)
(220,186)
The Group submitted a claim to the Australian Taxation Office for a Research and Development tax concession in respect
of qualifying transactions which occurred during the year ended 30 June 2012.
(b) Reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
(1,802,586)
(978,892)
Tax at the Australian rate of 30% (2012: 30%)
(540,776)
(293,668)
Tax effect of permanent differences:
Non-deductible share based payment
R&D tax refund receivable
Exploration costs written off
Capital raising costs claimed
Net deferred tax asset benefit not brought to account
81,912
(236,237)
170,573
(41,396)
329,687
62,223
(220,186)
70,226
(37,769)
198,988
Tax (benefit)/expense
(236,237)
(220,186)
4 6
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 7 Income tax continued
(c) Deferred tax – Balance Sheet
Liabilities
Prepaid expenses
Capitalised exploration expenditure
Assets
Revenue losses available to offset against future taxable income
Employee provisions
Accrued expenses
Deductible equity raising costs
Net deferred tax asset not recognised
(d) Deferred tax – Income Statement
Liabilities
Prepaid expenses
Capitalised exploration expenditure
Assets
Deductible equity raising costs
Accruals
Increase in tax losses carried forward
Employee provisions
Consolidated
2013
$
2012
$
(23,528)
(5,332,322)
(23,398)
(4,565,829)
(5,355,850)
(4,589,227)
7,760,496
19,975
9,346
106,185
6,621,346
12,508
16,295
129,447
7,896,003
6,779,596
2,540,153
2,190,369
(130)
(766,493)
6,178
(2,305,105)
(23,262)
(6,949)
1,139,150
7,467
–
10,295
2,556,703
1,144
Deferred tax benefit/(expense) not recognised
349,783
269,215
The deferred tax benefit of tax losses not brought to account will only be obtained if:
(i) The Company derives future assessable income of a nature and an amount sufficient to enable the benefit from the
tax losses to be realised;
(ii) The Company continues to comply with the conditions for deductibility imposed by tax legislation; and
(iii) No changes in tax legislation adversely affect the Company realising the benefit from the deduction of the losses.
All unused tax losses of $25,868,320 (2012: $22,071,152) were incurred by Australian entities.
A n n uA L r E p o r t 2 0 1 3
4 7
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 8 Current assets – Cash and cash equivalents
Cash at bank and on hand
Deposits at call
(a) Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of the financial year
as shown in the statement of cash flows as follows:
Consolidated
2013
$
2012
$
1,306,657
3,500,000
1,185,337
4,000,000
4,806,657
5,185,337
Cash and cash equivalents per statement of cash flows
4,806,657
5,185,337
(b) Deposits at call
The term deposits are bearing fixed interest rates of 4.15% (2012: 5.9%). These deposits have an average maturity of
9 months.
Included in deposits at call is a deposit of $2 million with no fixed term that earns interest between 2.2% and 3.6%.
Note 9 Current assets – Receivables
(a) Trade and other receivables
R&D tax concession receivable
Other receivables
Recoverable joint venture expenses
GST recoverable
(b) Other current assets
Prepaid tenement costs
Details of fair value and exposure to interest risk are included at Note 18.
Note 10 Non-current assets – Investment in controlled entities
(a) Investment in controlled entities
The following amounts represent the respective investments in the share
capital of Encounter Resources Limited’s wholly owned subsidiary companies:
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Encounter Yeneena Pty Ltd
236,337
9,282
8,943
11,081
265,643
209,250
110,600
7,449
80,379
407,678
78,427
77,994
Company
2013
$
2
1
2
2012
$
2
1
Nil
4 8
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 10 Non-current assets – Investment in controlled entities continued
(a) Investment in controlled entities continued
Subsidiary Company
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Encounter Yeneena Pty Ltd
Country of
Incorporation
Australia
Australia
Australia
Ownership Interest
2013
%
100%
100%
100%
2012
%
100%
100%
Nil
Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006.
n
n Hamelin Resources Pty Ltd was incorporated in Western Australia on 24 November 2009.
Encounter Yeneena Pty Ltd was incorporated in Western Australia on 23 May 2013.
n
The ultimate controlling party of the group is Encounter Resources Limited.
(b) Loans to controlled entities
The following amounts are payable to the parent company,
Encounter Resources Limited at the reporting date:
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Encounter Yeneena Pty Ltd
Company
2013
$
2012
$
17,308,738
126
–
14,630,795
–
–
The loan to Encounter Operations Pty Ltd, to fund exploration activity is non interest bearing. The Directors of Encounter
Resources Limited do not intend to call for repayment within 12 months.
Note 11 Non-current assets –
Property, plant and equipment
Field equipment
At cost
Accumulated depreciation
Office equipment
At cost
Accumulated depreciation
Leasehold improvements
At cost
Accumulated depreciation
Consolidated
2013
$
2012
$
776,767
(525,052)
759,949
(407,376)
251,715
352,573
105,281
(77,056)
28,225
22,137
(22,137)
–
93,225
(64,213)
29,012
22,137
(22,137)
–
279,940
381,585
A n n uA L r E p o r t 2 0 1 3
4 9
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 11 Non-current assets –
Property, plant and equipment continued
Reconciliation
Field equipment
Net book value at start of the year
Additions
Depreciation
Net book value at end of the year
Office equipment
Net book value at start of the year
Additions
Depreciation
Net book value at end of the year
Leasehold improvements
Net book value at the start of the year
Additions
Depreciation
Net book value at the end of the year
Consolidated
2013
$
2012
$
352,573
16,818
(117,676)
316,458
167,640
(131,525)
251,715
352,573
29,012
12,057
(12,844)
28,225
–
–
–
–
20,737
19,784
(11,509)
29,012
–
–
–
–
No items of property, plant and equipment have been pledged as security by the Group.
Note 12 Non-current assets –
Capitalised mineral exploration and evaluation expenditure
In the exploration and evaluation phase
Cost carried forward in respect of:
Incurred at cost by Encounter Resources Limited on assets
not governed by joint venture agreements (i)
Costs capitalised by Encounter Operations Pty Ltd
in respect of the Yeneena Project (ii)
113,721
123,494
17,482,009
14,385,971
Capitalised share of exploration assets under JV Agreements (iii)
178,676
709,965
Cost carried forward
17,774,406
15,219,430
The recoverability of the carrying amount of the exploration and evaluation assets is dependent upon successful
development and commercial exploitation, or alternatively, sale of the respective areas of interest.
(i) Exploration and evaluation expenditure recognised on exploration assets held solely by Encounter Resources Limited.
(ii) Exploration and evaluation expenditure recognised incurred by Encounter Operations Pty Ltd on tenements at the
Yeneena Project.
(iii) Exploration and evaluation expenditure recognised on tenements under joint venture agreements with Avoca Resources
Limited. This amount includes Encounter Resources Limited’s proportionate share of exploration assets held by the
respective joint venture entities.
5 0
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 12 Non-current assets –
Capitalised mineral exploration and evaluation expenditure continued
The capitalised exploration expenditure written off includes expenditure written off on surrender of, or intended surrender
of tenements for both the group entities and the Group’s proportionate share of the exploration written off by the joint
venture entities.
Capitalised exploration costs at the start of the period
Total exploration costs for the period
Exploration costs funded by EIS grant
Total exploration costs written off and expensed for the period
Consolidated
2013
$
2012
$
15,219,430
3,595,847
(133,699)
(907,172)
7,535,748
7,917,768
–
(234,086)
Capitalised exploration costs at the end of the period
17,774,406
15,219,430
Note 13 Interest in joint ventures and farm-in arrangements
Joint venture agreements have been entered into with third parties. Details of joint venture agreements are disclosed
below.
Assets employed by these joint ventures and the Group’s expenditure in respect of them is brought to account initially as
capitalised exploration and evaluation expenditure (Refer Note 12) until a formal joint venture agreement is entered into.
Thereafter, investment in joint ventures is recorded distinctly from capitalised exploration costs incurred on the company’s
100% owned projects.
Regional Uranium Joint Venture Agreement
Under a Joint Venture and Exploration Agreement dated 1 April 2005 the Company and Avoca Resources Limited (“Avoca”)
agreed to establish an unincorporated joint venture for the purposes of identifying, acquiring, evaluating and developing or
selling mining tenements with potential uranium deposits within Western Australia.
On 5 June 2013 the Regional Uranium Joint Venture Agreement was terminated. All exploration costs capitalised by the
joint venture arrangement have been previously written off.
Lake Way Uranium Joint Venture Agreement
Under the Lake Way Uranium Joint Venture dated 1 July 2007 between Avoca Resources Limited and the Company, the
Company has a 60% joint venture interest in the Uranium at the Lake Way South tenement. The parties are contributing to
expenditure in accordance with their equity interest. Encounter is the manager of the joint venture. The company’s interest
in the joint venture may increase to 75% if Avoca elects to dilute its interest in the tenement and be free carried though
to decision to mine.
Included in the assets and liabilities of the Group were the items below which represented the Group’s interest in the
assets and liabilities employed in joint ventures.
Joint Ventures – Financial Results and Carrying Values
The total amount of the Group’s capitalised exploration and evaluation expenditure capitalised and employed under joint
venture agreements at the reporting date is $178,676 (2012: $709,965 (Note 12). During the reporting period the Group
recognised an expense of $543,115 (2012: $55,560) being its share of the exploration expenditure written off by the joint
venture entities during the period.
A n n uA L r E p o r t 2 0 1 3
5 1
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 13 Interest in joint ventures and farm-in arrangements continued
Farm-in Arrangements
The Company is party to the following farm-in arrangements:
Antofagasta plc – Antofagasta Earning-in
Antofagasta PLC and Antofagasta Minerals Perth Pty Ltd has entered into a farm-in and joint venture agreement with the
Company in respect of granted tenements applications EL45/2658 and EL45/2805 that form part of the Company’s
wholly owned Yeneena Project. The agreement covers an area of 433km2 and comprises the southern extents of the
Yeneena Project that incorporate the BM1, BM7 and BM8 copper prospects. Significant terms of the farm-in arrangement
as follows:
n 5 year initial earn-in phase under which Antofagasta may acquire a 51% joint venture interest by expenditure of
US$20 million and may withdraw at any time subject to a meeting a minimum spend of US$3 million;
n A second earn-in phase, should Encounter not elect to contribute to exploration costs under the joint venture, under
which Antofagasta may acquire a further 19% interest by completion of a pre-feasibility study within 4 years of
Encounter electing not to contribute;
n
n
If Antofagasta completes a pre-feasibility study during the second earn-in phase it must pay Encounter US$15 million
or contribute US$15 million in lieu of Encounter’s contribution to its proportionate share of feasibility study costs;
If a decision to mine is made subsequent to the completion of a feasibility study and Encounter elects not to proceed,
Antofagasta may acquire Encounter’s interest at 90% of an agreed value determined by independent expert valuation.
n Amounts set out in the Earn-in and Joint Venture Agreement are in United States dollars, provided that the Australia
dollar to United States dollar exchange rate published by the Reserve Bank of Australia is between 1.15 and 0.95
(the “Acceptable Range”). If the Exchange Rate is outside the Acceptable Range on the date cash payment is due, the
Exchange Rate will be set at 1.05 United States dollar for each 1 Australian dollar.
St Barbara Limited (SBM) – ENR Earning-in
Encounter Resources Limited has entered into a farm-in agreement with St Barbara Limited in respect of tenement
applications ELA45/3232 and ELA45/3308 in the Paterson Province of Western Australia. The agreement covers an area
of 60km2 and is located to the north-east of the Company’s Yeneena Project.
Significant terms of the farm-in arrangement as follows:
n 4 year initial earn-in phase under which ENR may acquire a 51% joint venture interest by expenditure of $500,000,
and may withdraw at any time subject to a meeting statutory minimum required spends;
n 2 year second phase, should SBM not elect to contribute to joint venture exploration costs, under which ENR may
acquire a further 15% interest by sole funding expenditure of a further $500,000;
n
If SBM elects not to contribute at the end of the second phase standard industry dilution formulas will apply down to
a 5% interest. If SBM’s interest dilutes below 5% it will automatically revert to a 1.5% net smelter royalty.
Midas Resources Limited (MDS) – ENR Earning-in
Encounter Resources Limited has entered into a farm-in agreement with Midas Resources Limited in respect of granted
tenements EL45/3768 and EL45/4091 in the Paterson Province of Western Australia. The agreement covers an area of
316km2 and is located adjacent to the Company’s Yeneena Project.
Significant terms of the farm-in arrangement as follows:
n 4 year initial earn-in phase under which ENR may acquire a 70% joint venture interest by expenditure of $500,000,
and may withdraw at any time subject to a meeting statutory minimum expenditure required spend for the first year;
n 2 year second phase, should MDS not elect to contribute to joint venture exploration costs during this second phase,
under which ENR may acquire a further 15% interest by sole funding expenditure of a further $500,000;
n
If MDS elects not to contribute at the end of the second phase MDS may elect to convert its participating interest into
a 1.5% net smelter royalty.
5 2
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 13 Interest in joint ventures and farm-in arrangements continued
Independence Group NL (IGO) – ENR 70%
Encounter Resources Limited has entered into a farm-in agreement with Independence Group NL in respect of tenement
application ELA45/4215 in the Paterson Province of Western Australia. The agreement covers an area located adjacent to
the Company’s Yeneena Project.
Significant terms of the farm-in arrangement as follows:
n 3 year initial earn-in phase under which ENR will sole fund expenditure of $500,000 to maintain a 70% interest, and
may withdraw at any time subject to spending a minimum of $100,000;
n 2 year second phase, should IGO not elect to contribute to joint venture exploration costs during this second phase,
under which ENR may acquire a further 15% interest by sole funding expenditure of a further $500,000;
n
n
If IGO elects not to contribute at the end of the first or second phases standard industry dilution formulas will apply;
If either ENR or IGO elects not to contribute after the formation of a joint venture standard industry dilution formulas will
apply down to a 10% interest, at which point the relevant participating interest will revert to a 1.5% net smelter royalty.
Note 14 Current liabilities – Trade and other payables
(a) Trade and other payables
Unspent farm-in contributions
Trade payables and accruals
Other payables
(b) Employee benefits
Liability for annual leave
Consolidated
2013
$
2012
$
364,013
318,811
34,213
–
1,267,846
40,663
717,037
1,308,509
66,584
41,692
Liabilities are not secured over the assets of the Group. Details of fair value and exposure to interest risk are included at
Note 18.
Note 15 Issued capital
(a) Ordinary shares
The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia. The
Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on the shares
respectively held by them.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion
to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value. There is no limit to the authorised share capital of the Company.
A n n uA L r E p o r t 2 0 1 3
5 3
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 15 Issued capital continued
(b) Share capital
Issued share capital
(c) Share movements during the year
Balance at the start of the financial year
Share placement
Share placement
Share placement
Share purchase plan
Less share issue costs
2013
No.
2012
No.
2013
$
2012
$
132,543,350
114,194,360
31,113,384
27,320,545
$0.40
$0.21
$0.21
$0.21
114,194,360
–
9,241,931
2,380,952
6,726,107
–
99,344,360
14,850,000
–
–
–
–
27,320,545
–
1,940,806
500,000
1,412,482
(60,449)
21,660,547
5,940,000
–
–
–
(280,002)
Balance at the end of the financial year
132,543,350
114,194,360
31,113,384
27,320,545
(d) Option plan
Information relating to the Encounter Resources Limited Directors, Officers and Employees Option Plan is set out in
Note 16.
Note 16 Options and share based payments
The establishment of the Encounter Resources Limited Directors, Officers and Employees Option Plan (‘the Plan”) was
last approved by a resolution at the Annual General Meeting of shareholders of the Company on 30 November 2009.
All eligible Directors, executive officers and employees of Encounter Resources Limited who have been continuously
employed by the Company are eligible to participate in the Plan.
The Plan allows the Company to issue free options to eligible persons. The options can be granted free of charge and are
exercisable at a fixed price in accordance with the Plan.
Options issued under the Plan have a 12 month vesting period prior to exercise, except under certain circumstances
whereby options may be capable of exercise prior to the expiry of the vesting period.
(a) Options issued during the year
During the financial year the Company granted 2,950,000 options over unissued shares (2012: 1,250,000).
(b) Options exercised during the year
During the financial year the Company issued no shares on the exercise of unlisted employee options (2012: Nil).
(c) Options cancelled during the year
During the year nil options (2012: 50,000) were cancelled upon termination of employment. 1,550,000 options were
cancelled on expiry of exercise period (2012: nil).
5 4
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 16 Options and share based payments continued
(d) Options on issue at the balance date
The number of options outstanding over unissued ordinary shares at 30 June 2013 is 9,475,000 (2012: 8,075,000).
The terms of these options are as follows:
Number of options outstanding
Exercise price
Expiry date
5,425,000
550,000
550,000
1,450,000
750,000
750,000
9,475,000
$1.35
80 cents
40 cents
30 cents
39 cents
21 cents
22 November 2014
30 September 2015
31 May 2016
30 November 2016
30 November 2017
31 May 2017
(e) Subsequent to the balance date
No options have been granted subsequent to the balance date and to the date of signing this report.
No options have been exercised subsequent to the balance date to the date of signing this report.
Subsequent to the balance date no options have been cancelled on expiry of the exercise period.
Reconciliation of movement of options over unissued shares
during the period including weighted average exercise price (WAEP)
2013
2012
No.
WAEP
(cents)
No.
Options outstanding at the start of the year
8,075,000
109.4
6,875,000
Options granted during the year
Options exercised during the year
Options expiring unexercised during the year
2,950,000
–
(1,550,000)
30.0
–
55.2
1,250,000
–
(50,000)
Options outstanding at the end of the year
9,475,000
93.6
8,075,000
Weighted average contractual life
The weighted average contractual life for un-exercised options is 27.5 months (2012: 26.5 months).
Basis and assumptions used in the valuation of options.
The options issued during the year were valued using the Black-Scholes option valuation methodology.
WAEP
(cents)
117.0
69.0
–
135.0
109.4
Date granted
Number of
options granted
Exercise price
(cents)
Expiry date
30 November 2012
30 November 2012
27 June 2013
1,450,000
750,000
750,000
30
39
21
30 November 2016
30 November 2017
31 May 2017
Risk free
interest
rate used
2.74%
2.74%
3.17%
Volatility
applied
108%
108%
105%
Option
valuation
(cents)
$145,871
$78,756
$48,412
Historical volatility has been used as the basis for determining expected share price volatility, as it is assumed that this is
an indicator of future tender, which may not eventuate.
A discount of 30% in respect of a lack of marketability has been applied to the Black-Scholes option valuation to reflect the
non-negotiability and non-transferability of the unlisted options granted.
A n n uA L r E p o r t 2 0 1 3
5 5
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 17 Reserves and accumulated losses
Balance at the beginning of the year
Loss for the period
Movement in equity remuneration reserve
in respect of options issued
Transfer to accumulated losses on cancellation of options
Consolidated
2013
Equity
remuneraton
reserve (i)
$
2012
Equity
remuneration
reserve (i)
$
Accumulated
losses
$
Accumulated
losses
$
(10,178,761)
(1,566,249)
2,780,039
–
(9,448,420) 2,600,995
–
(758,706)
–
315,987
273,039
(315,987)
–
28,365
207,409
(28,365)
Balance at the end of the year
(11,429,023)
2,737,091 (10,178,761)
2,780,039
(i) The equity remuneration reserve is used to recognise the fair value of options issued but not exercised.
Note 18 Financial instruments
Credit risk
The Directors do not consider that the Group’s financial assets are subject to anything more than a negligible level of credit
risk, and as such no disclosures are made, Note 2(a).
Impairment losses
The Directors do not consider that any of the Group’s financial assets are subject to impairment at the reporting date.
No impairment expense or reversal of impairment charge has occurred during the reporting period, other than the write off
of deferred exploration assets at Note 12.
Interest rate risk
At the reporting date the interest profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial assets
Variable rate instruments
Financial assets
Carrying amount ($)
2013
–
2012
–
4,806,657
5,185,337
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit
or loss by the amounts shown below. This analysis assumes that all other variables remain constant.
Profit or loss
Equity
1%
increase
$
1%
decrease
$
1%
increase
$
1%
decrease
$
48,066
(48,066)
48,066
(48,066)
51,853
(51,853)
51,853
(51,853)
2013
Variable rate instruments
2012
Variable rate instruments
5 6
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 18 Financial instruments continued
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements, Note 2(b):
Consolidated
2013
Trade and other payables
2012
Trade and other payables
Fair values
Carrying
amount
$
Contractual
cash flows
$
6 months
or less
$
6-12
months
$
1-2
years
$
2-5
years
$
More than
5 years
$
651,670
651,670
651,670
651,670
651,670
651,670
1,213,531 1,213,531 1,213,531
1,213,531 1,213,531 1,213,531
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as
follows:
Cash and cash equivalents
Trade and other payables
Consolidated
2013
2012
Carrying
amount
$
Fair value
$
Carrying
amount
$
Fair value
$
4,806,657
(651,670)
4,806,657
(651,670)
5,185,337
(1,213,531)
5,185,337
(1,213,531)
4,154,987
4,154,987
3,971,806
3,971,806
The Group’s policy for recognition of fair values is disclosed at Note 1(t).
Note 19 Dividends
No dividends were paid or proposed during the financial year ended 30 June 2013 or 30 June 2012.
The Company has no franking credits available as at 30 June 2013 or 30 June 2012.
Note 20 Key management personnel disclosures
(a) Directors and key management personnel
The following persons were directors of Encounter Resources Limited during the financial year:
(i) Chairman – Non-Executive
Paul Chapman
(ii) Executive Directors
Will Robinson, Managing Director
Peter Bewick, Exploration Director
(iii) Non-Executive directors
Jonathan Hronsky, Director
There were no other persons employed by or contracted to the Company during the financial year, having responsibility for
planning, directing and controlling the activities of the Company, either directly or indirectly.
A n n uA L r E p o r t 2 0 1 3
5 7
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 20 Key management personnel disclosures continued
(b) Key management personnel compensation
Details of key management personnel remuneration are contained in the Audited Remuneration Report in the Directors’
Report. A summary of total compensation paid to key management personnel during the year is as follows:
Total short-term employment benefits
Total share based payments
Total post-employment benefits
2013
$
661,692
204,506
59,552
925,750
2012
$
650,000
–
58,500
708,500
(c) Equity instrument disclosures relating to key management personnel
Unlisted Options provided as remuneration and shares issued on exercise of such options
No options over unissued shares have been issued to key management personnel of the Company during the current or
prior financial year.
The fair value of options issued as remuneration is allocated to the relevant vesting period of the options.
Options are provided at no cost to the recipients. No options were exercised by Key Management Personnel during the
financial year.
Option holdings
Key Management Personnel have the following interests in unlisted options over unissued shares of the Company.
Name – Directors
2013
P Chapman
W Robinson
P Bewick
J Hronsky
Balance at
start of the year
Received during
the year as
remuneration
Other changes
during the year1
Balance at the
end of the year
–
–
4,300,000
1,300,000
–
–
1,500,000
500,000
–
–
(800,000)
(500,000)
–
–
5,000,000
1,300,000
Vested and
exercisable
at the end
of the year
–
–
5,000,000
1,300,000
1 Options lapsing unexercised at the end of the exercise period.
2012
P Chapman
W Robinson
P Bewick
J Hronsky
–
–
4,300,000
1,300,000
–
–
–
–
–
–
–
–
–
–
4,300,000
1,300,000
–
–
4,300,000
1,300,000
5 8
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 20 Key management personnel disclosures continued
Share holdings
The number of shares in the Company held during the financial year by key management personnel of the Company,
including their related parties are set out below. There were no shares granted during the reporting period as compensation.
Name – Directors
2013
P Chapman
W Robinson
P Bewick
J Hronsky
2012
P Chapman
W Robinson
P Bewick
J Hronsky
Balance at
start of the year
5,394,900
22,096,900
4,975,000
–
4,747,000
21,846,900
4,725,000
–
Received during
the year on exercise
of options
Other changes
during the year
Balance at the
end of the year
–
–
–
–
–
–
–
–
205,100
71,428
127,000
–
647,900
250,000
250,000
–
5,600,000
22,168,328
5,102,000
–
5,394,900
22,096,900
4,975,000
–
(d) Loans made to key management personnel
No loans were made to key personnel, including personally related entities during the reporting period.
(e) Other transactions with key management personnel
There were no other transactions with key management personnel.
Note 21 Remuneration of auditors
Audit and review of the Company’s financial statements
Other services
Total
Note 22 Contingencies
2013
$
28,500
–
28,500
Consolidated
2012
$
39,240
–
39,240
(i) Contingent liabilities
There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2013
or 30 June 2012 other than:
Yeneena Project Gold Claw-back
Included in the agreement for the Group’s acquisition of the remaining 25% interest in the Yeneena Project is a gold
claw-back right in the event of a major discovery of a deposit of minerals dominant in gold, with gold revenue measured
in a mining study equal to or exceeding 65% of total revenue and where a JORC compliant mineral resources exceeds
4,000,000 ounces of gold or gold equivalent, or is capable of producing at least 200,000 ounces of gold or gold equivalent
per year for 10 years. Under the agreement Barrick (Australia Pacific) Limited retains the right to regain an interest of
between 70 and 100% in the gold discovery at a price of between US$40-100 per ounce, with a 1.5% net smelter royalty
to Encounter Resources.
A n n uA L r E p o r t 2 0 1 3
5 9
Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 22 Contingencies continued
Native Title and Aboriginal Heritage
Native title claims have been made with respect to areas which include tenements in which the Group has an interest.
The Group is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not
and to what extent the claims may significantly affect the Group or its projects. Agreement is being or has been reached
with various native title claimants in relation to Aboriginal Heritage issues regarding certain areas in which the Group has
an interest.
(ii) Contingent assets
There were no material contingent assets as at 30 June 2013 or 30 June 2012.
Note 23 Commitments
(a) Exploration
The Group has certain obligations to perform minimum exploration work on mineral leases held. These obligations may
vary over time, depending on the Group’s exploration programmes and priorities. As at balance date, total exploration
expenditure commitments on tenements held by the Group have not been provided for in the financial statements and
which cover the following twelve month period amount to $1,249,000 (2012: $916,000). These obligations are also
subject to variations by farm-out arrangements or sale of the relevant tenements. This commitment does not include the
expenditure commitments which are the responsibility of the joint venture partners.
(b) Operating Lease Commitments
There are no operating lease commitments as at 30 June 2013.
(c) Contractual Commitment
There are no material contractual commitments as at 30 June 2013 other than those disclosed above and not otherwise
disclosed in the Financial Statements.
Note 24 Related party transactions
Transactions with Directors during the year are disclosed at Note 20 – Key Management Personnel.
The Company incurred the following amounts during the year in respect of exploration activities on under joint venture
agreements, for which it acts as manager:
Regional Uranium JV
Lake Way Uranium JV
Details of the Company’s interests under the joint venture
agreements are provided at Note 13.
As at the end of the financial year the Company had the following
amounts (due to)/owing to it by the joint ventures:
2013
$
7,927
3,899
2012
$
35,781
11,046
Regional Uranium JV
Lake Way Uranium JV
–
22,358
(5,033)
11,173
Note 25 Events occurring after the balance sheet date
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the
operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
6 0
E n c o u n tE r r Es o u r c Es L I M ItE D
Note 26 Reconciliation of loss after tax
to net cash inflow from operating activities
Loss from ordinary activities after income tax
Share of management fee to JV not capitalised
Depreciation
Exploration cost written off
Share based payments expense
Gain on sale of exploration assets
Contribution to overheads from farm-in partner
EIS grant funding offset against capitalised exploration
Movement in assets and liabilities:
(Increase)/decrease in R&D tax refundable
(Increase)/decrease in prepaid expenses
(Increase)/decrease in receivables
Increase/(decrease) in payables
Company
2013
$
2012
$
(1,566,249)
1,774
12,844
907,172
273,039
(20,000)
(92,245)
133,699
(27,087)
–
20,789
(12,459)
(758,706)
6,381
11,509
234,086
207,409
–
–
–
(209,250)
12,965
(2,596)
41,934
Net cash outflow from operating activities
(368,723)
(456,268)
Note 27 Earnings per share
(a) Basic earnings per share
Loss attributable to ordinary equity holders of the Company
(b) Diluted earnings per share
Loss attributable to ordinary equity holders of the Company
Consolidated
2013
Cents
2012
Cents
(1.3)
(0.7)
(1.3)
(0.7)
$
$
(c) Loss used in calculation of basic and diluted loss per share
Consolidated loss after tax from continuing operations
(1,566,249)
(758,706)
(d) Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator
in calculating basic and dilutive loss per share
No.
No.
117,007,416
104,761,710
At 30 June 2013 the Company has on issue 9,475,000 (2012: 8,075,000) unlisted options over ordinary shares that
are not considered to be dilutive.
A n n uA L r E p o r t 2 0 1 3
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Notes to the Financial Statements continued
For the financial year ended 30 June 2013
Note 28 Parent Entity Information
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Total Liabilities
NET ASSETS
Equity
Issued Capital
Equity remuneration reserve
Accumulated losses
TOTAL EQUITY
Financial performance
Loss for the year
Other comprehensive income
Total comprehensive income
Company
2013
$
2012
$
4,894,955
17,881,203
5,234,356
15,845,839
22,776,158
21,080,195
783,621
1,350,201
783,621
1,350,201
21,992,537
19,729,994
31,113,384
2,737,091
(11,857,938)
27,320,545
2,780,039
(10,370,590)
21,992,537
19,729,994
(1,803,335)
–
(950,535)
–
(1,803,335)
(950,535)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
No guarantees have been entered into by the parent entity in relation to the debts of its subsidiary companies.
Contingent liabilities
For full details of contingencies see Note 22.
Commitments
For full details of commitments see Note 23.
6 2
E n c o u n tE r r Es o u r c Es L I M ItE D
Directors’ Declaration
In the opinion of the Directors of Encounter Resources Limited (“the Company”)
(a)
the financial statements and notes set out on pages 34 to 62 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
give a true and fair view of the financial position as at 30 June 2013 and of the performance for the year
ended on that date of the Group.
(b)
the remuneration disclosures that are contained in the Remuneration Report in the Directors Report comply
with Australian Accounting Standard AASB 124 Related Party Disclosures, The Corporations Act 2001 and the
Corporations Regulations 2001.
(c)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become
due and payable.
(d)
the financial statements comply with International Financial Reporting Standards as set out in Note 1.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2013.
This declaration is made in accordance with a resolution of the Directors.
Signed at Perth this 25th day of September 2013.
W Robinson
Managing Director
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ENCOUNTER RESOURCES
LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Encounter Resources Limited, which comprises
the consolidated statement of financial position as at 30 June 2013, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from time
to time during the financial year.
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 is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
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E n c o u n tE r r Es o u r c Es L I M ItE D
Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. Auditor’s Opinion
In our opinion:
(a)
the financial report of Encounter Resources Limited is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June
2013 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
(b)
the consolidated financial report also complies with International Financial Reporting Standards
as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 27 to 30 of the directors’ report for the
year ended 30 June 2013. 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.
Auditor’s Opinion
In our opinion, the Remuneration Report of Encounter Resources Limited. for the year ended 30 June
2013 complies with section 300A of the Corporations Act 2001.
CROWE HORWATH PERTH
SEAN MCGURK
Partner
Signed at Perth, 25 September 2013
A n n uA L r E p o r t 2 0 1 3
6 5
Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. ASX Additional Information
Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below
was applicable as at 26 September 2013.
A. Distribution of Equity Securities
Analysis of numbers of shareholders by size of holding:
Distribution
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
More than 100,000
Number of
shareholders
103
266
177
507
171
Securities held
53,294
832,769
1,446,740
18,549,891
111,660,656
Totals
1,224
132,543,350
There are 153 shareholders holding less than a marketable parcel of ordinary shares.
B. Substantial Shareholders
An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued capital)
is set out below:
Shareholder Name
William Michael Robinson
Eye Investment Fund Limited
Antofagasta Investment Company Limited
Issued Ordinary Shares
Number of shares
22,168,328
11,247,698
9,241,931
Percentage
of shares
16.73%
8.49%
6.97%
6 6
E n c o u n tE r r Es o u r c Es L I M ItE D
ASX Additional Information continued
C. Twenty Largest Shareholders
The names of the twenty largest holders of quoted shares are listed below:
Listed Ordinary Shares
Shareholder Name
William Michael Robinson
HSBC Custody Nominees Australia Limited
Merrill Lynch Australia Nominees Pty Ltd
Jacmew Pty Ltd
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
UBS Nominees Pty Ltd
Jorge Bernhard
HSBC Custody Nominees Australia Limited
Samantha Hogg
Willstreet Pty Ltd
Pieter Los
J C O’Sullivan Pty Ltd
UBS Wealth Management Australia Nominees
Charles Robinson
Thirty-fifth Celebrations Pty Ltd
James Wallace
Stone Poneys Nominees Pty Ltd
Kiki Super Fund
Hakuna Matata Inv Pty Ltd
Total
D. Voting Rights
Number of shares
16,216,900
11,383,313
9,241,931
5,580,000
4,650,000
4,650,000
3,850,000
2,107,375
2,050,438
1,783,000
1,700,000
1,571,428
1,306,428
1,259,883
1,200,000
1,071,428
1,000,000
927,500
914,442
900,000
Percentage
of Shares
12.24%
8.59%
6.97%
4.21%
3.51%
3.51%
2.90%
1.59%
1.55%
1.35%
1.28%
1.19%
0.99%
0.95%
0.91%
0.81%
0.75%
0.70%
0.69%
0.68%
73,364,066
55.35%
In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of
hands whereby each member present in person or by proxy shall have one vote and upon a poll, each share
will have one vote.
E. Restricted Securities
There are no restricted securities.
A n n uA L r E p o r t 2 0 1 3
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E n c o u n tE r r Es o u r c Es L I M ItE D
www.enrl.com.au