More annual reports from Siemens Energy:
2023 ReportABN 47 109 815 796
annual reporT
2014
ABN 47 109 815 796
Corporate Directory
Directors
Paul Chapman
Will Robinson
Peter Bewick
Jonathan Hronsky
Non-Executive Chairman
Managing Director
Exploration Director
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
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
Certain exploration drilling results for BM1 are first disclosed under
JORC code 2004. It has not been updated since to comply with the JORC
code 2012 on the basis that the information has not materially changed.
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 holder of
shares and options in, and 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 presentation of the matters based on
his information in the form and context in which it appears.
The Company confirms that it is not aware of any new information or
data that materially affects the information in this report and the form
and context of the information in this report has not materially changed.
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 T E R R E S O U R C E S L I M I T E D
E N C O U N T E R R E S O U R C E S L I M I T E D
letter from the Chairman & Managing Director
Dear Fellow Shareholder,
The 2013/14 year was an evolving one for Encounter. New areas of high grade copper and zinc were discovered
at separate prospects within the Yeneena project. In spite of difficult commodity and equity markets for exploration,
Encounter remains one of the most committed and active greenfield exploration companies in Australia. We remain
steadfast in our view of the substantial value that can be unlocked for our shareholders through large scale,
frontier exploration in highly prospective under cover terrains in Australia.
In 2013/14 we invested over $4.5m in exploration. This was mostly at the expanding Yeneena project in the Proterozoic
Paterson Province in northern Western Australia. The Yeneena project continues to deliver exciting exploration results
for Encounter and has the attention of major mining companies around the world.
We continue to work closely with our earn-in partner, Antofagasta plc, one of the world’s largest copper producers,
to progress the BM1/BM7 copper discoveries located in the southern portion of the Yeneena project. Progress during
the year included the highest grade copper sulphide intersection to date at BM7. We look forward to building on this
solid platform.
Recent drilling has expanded the BM1 near surface, high grade oxide zone within the Antofagasta earn-in area.
This year’s RC drill program at BM1 delivered some of the thickest and highest grade copper oxide intervals so
far at the Yeneena project. Work continues in interpreting this expanding near surface secondary copper zone and
narrowing the search for a primary copper source.
Adding to the emerging picture at Yeneena, in November 2013 Encounter discovered high grade zinc sulphide
mineralisation at its 100% owned BM2/Millennium prospect located 35km north east of the BM1/BM7 copper
discoveries. This zinc discovery enhances the already well-established mineral potential of our 1,850km2
land holding at the Yeneena project.
The progress achieved throughout the year continues to build our confidence
in the potential for major new greenfield discoveries at the Yeneena Project.
A N N U A L R E P O R T 20 14
1
Letter from the Chairman & Managing Director continued
Encounter remains one of the most committed
and active greenfield exploration companies in Australia.
Encounter continues to expand and advance new opportunities at the Yeneena project. The 2014 field season saw
the first systematic exploration completed at the 100% owned Fishhook copper prospect located 20km north of the
BM1/BM7 copper discovery.
The progress achieved throughout the year continues to build our confidence in the potential for major new greenfield
discoveries at the Yeneena Project.
Encounter has accumulated a dominant land position in the highly prospective Paterson Province and is well placed
to unlock the potential of the priority targets. Our exploration plans are well funded and we have a major in the copper
industry as a partner. Importantly, we have a capable and experienced team that is realising the potential of the
Yeneena project.
In closing we would like to thank our committed team for their professionalism and dedication. We are fortunate to
have such a talented and enthusiastic team who are leaders in the field. We would also like to thank our earn-in partner,
Antofagasta plc and its representatives, 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 T E R R E S O U R C E S L I M I T E D
Exploration Review
Paterson Province
YENEENA COPPER – COBALT PROJECT
n 100% Encounter – E45/2500, E45/2501, E45/2502, E45/2503, E45/2561, E45/2657, E45/2806, E45/4230
and ELA45/4408
n Antofagasta earning into E45/2658 and E45/2805
n Encounter 100%, Independence Group NL (IGO) Option ELA45/4316
n Encounter earning into E45/3232 and E45/3308 from St Barbara Ltd (SBM)
n Encounter earning into E45/3768 and E45/4091 from Hammer Metals Ltd (HMX)
formerly Midas Resources Ltd
Yeneena covers a 1,850km2 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).
Encounter significantly advanced the Yeneena Project during the past 12 months.
RC drilling completed in 2013 has tripled the size of the BM7 Prospect footprint which is now 6km x 3km and is still
growing. A new zone of copper mineralisation was also intersected in RC drilling over 1-2km east of previous drilling
at BM7 East.
Diamond drilling confirmed copper sulphide mineralisation extends to depth and has established the high grade
potential of the BM7 system (5.3m @ 2.5% Cu including 0.7m @ 10.7% Cu).
Figure 1: Yeneena project leasing and target areas with major regional faults
A N N U A L R E P O R T 20 14
3
Exploration Review continued
Introduction
Diamond drilling at BM2 (Encounter 100%) intersected 0.7m @ 36.5% zinc and 37g/t silver in brecciated and
laminated massive sulphide mineralisation in EPT1854. A 140m thick zone of highly oxidised, iron rich material
containing elevated zinc (grading approximately 1% zinc) was intersected 200m up-dip of the massive sulphide
mineralisation in EPT1854. This may represent the weathered remnants of a thick body of zinc sulphide mineralisation
In January 2014, Antofagasta confirmed the continued funding of the Yeneena earn-in exploration into 2014.
Antofagasta is required to spend a minimum of US$4M in the second year to maintain the earn-in.
The Company was awarded EIS co-funded diamond drilling grants amounting to $275,000 for two Yeneena regional
targets in 2014, Fishhook and Stirling. In June 2014 the Company was awarded a further grant for $150,000 for
diamond and RC drilling at the BM2/Millennium target.
Exploration activities conducted during 2013/14 include:
n Heritage surveys at the BM7, BM7 East and BM8 Prospects
n Heritage survey at the Stirling Prospect – St Barbara Mining earn-in tenements (Encounter earning in)
n VTEM survey over prospective Broadhurst Formation as part of the Hammer Metals Ltd earn-in
(Encounter earning in)
n Diamond drilling at BM2 and BM7 (15 holes for 7,730m)
n Extensional and metallurgical RC drilling at the BM1 Prospect (29 holes for 2,234m)
n RC/AC drilling at Fishhook, BM8, BM9 and BM10 corridor regional prospects
n EIS co funded drill programs at Fishhook and Millennium prospects commenced in September 2014
BM1-BM6-BM7-BM8-BM9-BM10 (Antofagasta Earning In)
The two earn-in tenements, E45/2658 and E45/2805, host the BM1, BM6, BM7, BM8, BM9 and BM10 prospects
(Figure 1).
The BM7 tenement, E45/2805 to the south of E45/2658, was granted in August 2012. Since then, Encounter has
outlined a large copper system that is still growing. The Company has attracted a quality partner in Antofagasta plc and
subsequent joint drill programs have produced high grade copper sulphide mineralisation and tripled the size of the
copper mineralised footprint. The mineralisation seen at BM7 shows geological similarities to the Nifty deposit located
65km to the north that contained a pre-mined resource of 2 million tonnes of copper metal.
The 2014 field season drilling targeted eastward extensions of high-grade copper mineralisation at BM7, extensional
and metallurgical RC drilling at the BM1 Prospect and the commencement of a large regional RC/aircore campaign
over new targets (BM8, BM9 and BM10) and the extensions of existing prospects.
Airborne EM crew – Geotech Airborne
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E N C O U N T E R R E S O U R C E S L I M I T E D
Photo 1: EPT1719 – ~387.6m to 392.9m – Veined and brecciated carbonate
with local massive copper sulphide breccia cement
BM7 Prospect
RC drilling completed at BM7 in April 2013 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. Within this dolomite alteration zone a number of the RC drill holes ended in sulphide copper
mineralisation.
A four hole diamond drill program designed to target below the 800m long zone of copper sulphide mineralisation
identified was completed in September 2013. All four diamond holes completed contain zones of primary copper
sulphide mineralisation 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, the last of the four hole
program. EPT1719 intersected a 5.3 metre zone, with locally massive copper sulphides forming as breccia cement near
the upper boundary of a narrow carbonate unit (Photo 1). This zone returned an assay of 5.3m @ 2.5% Cu from
387.6m including 0.7m @ 10.7% Cu from 388.6m.
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 immediately to the east of the previous drilling at BM7 and also south of BM7 to help to define
the full extent of the copper system at the project (see ASX announcement 27 November 2013).
Drilling successfully extended the BM7 system 3km to the south to the BM8 Prospect. Results include:
n EPT1753 – 22m @ 0.3% Cu from 18m including 2m @ 1.6% Cu from 18m
n EPT1755 – 50m @ 0.1% Cu from 32m to EOH including 2m @ 1.2% Cu from 58m
n EPT1829 – 4m @ 1.2% Cu from 70m
Shallow RC drilling on two 800m spaced sections, 2km to the east of the previous known mineralisation at BM7 resulted
in the discovery of the BM7 East regolith anomaly during the second half of 2013. The copper oxide blanket discovered
contains zones of high grade copper oxide mineralisation and the laterally extensive 0.5% copper regolith anomaly
extends over 2km in strike. Intersections from the BM7 East area include:
n EPT1820 – 34m @ 0.4% Cu from 52m including 8m @ 0.9% Cu from 54m
n EPT1844 – 18m @ 0.4% Cu from 46m including 6m @ 0.7% Cu from 54m
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
The BM7 East copper anomalism sits at the base of the weathered zone. The tenor and scale of the metal anomalism
at BM7 East is considered significant given the broad spacing of the initial drilling. It is interpreted that this anomalism
results from the direct weathering of a potential body, or bodies of copper sulphide mineralisation.
A N N U A L R E P O R T 20 14
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Exploration Review continued
BM7 Prospect (continued)
An additional zone of 0.5% copper regolith anomalism was defined in the central part of the 3km wide BM7 system.
The mineralisation within this area is closely associated with north-west trending conductive units that appear strongly
fault controlled.
Results from this area include:
n EPT1730 – 10m @ 0.4% Cu from 66m
n EPT1822 – 22m @ 0.4% Cu from 36m including 2m @ 2.3% Cu from 46m
Structural interpretation of the four diamond holes completed at BM7 in 2013 indicated that the copper mineralisation
occurs within multiple horizons, likely due to early thrusting of the shale/dolomite sequence. In addition, more
regional fold hinge zones may act as significant structural traps for mineralising fluids including both antiform and
synform (Nifty-style) hinge zones.
Figure 2: BM7/BM7 East Prospect – Diamond Drill Plan (Background image – VTEM CH40)
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E N C O U N T E R R E S O U R C E S L I M I T E D
Project review with
Antofagasta geologists
A heritage survey was completed in April 2014 to facilitate the drilling for the 2014 field season.
A drilling campaign of six diamond drill holes was completed in the June 2014 quarter at spacings from between 400m
to 1.6km. Holes were designed to test the area down dip and to the east of high grade copper sulphide mineralisation
in EPT1719, to refine the understanding of the 3D geology at BM7 and provide lithogeochemical and structural vectors
to high grade copper sulphide mineralisation.
Observations from these initial framework diamond holes indicate a flat lying, large-scale thrust forms a footwall to
the copper system (termed the “Footwall Shear”). The strongest copper sulphide mineralisation occurs just above
the Footwall Shear in the west of BM7 where the sedimentary sequence is dominated by sulphidic black shales and
carbonate interbeds. The chalcopyrite mineralisation hosted in the units directly above the Footwall Shear appears to be
zoned from a pyrite association in the south to a carbonate hosted, vein controlled assemblage and finally to pervasive,
shale hosted chalcopyrite in the north of BM7. This sulphide zonation indicates a prospectivity vector to the north of
the BM7 system.
BM1 Prospect (Antofagasta earning in)
Previous aircore and RC drilling at BM1 has defined two zones of coherent near surface copper oxide mineralisation
named the Northern and Central Areas. 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.
High grade copper mineralisation was first discovered in aircore drilling at the BM1 Northern Area in June 2010 and
included numerous thick intersections grading over 1% copper, intersected within 50 metres of the surface. Further
drilling confirmed a coherent zone of high grade, near surface copper mineralisation at BM1, seemingly bounded to the
south east by the interpreted NE trending King Fault, a splay fault off the regionally significant McKay Fault.
New aircore and RC drilling was completed at the BM1 Prospect in June 2014. Drilling was designed to collect
representative samples of the various species of oxide mineralisation for sequential copper analysis (an assaying method
designed to test copper recoveries utilising various acids). Drilling was completed inside and outside of areas of known
copper mineralisation at BM1.
Drilling discovered high grade copper mineralisation south-east of the King Fault, previously interpreted to be the
bounding structure to the high grade mineralisation at BM1.
A N N U A L R E P O R T 20 14
7
Exploration Review continued
BM1 Prospect (continued)
Highlights from RC drilling within the area of previously defined mineralisation include:
(see ASX announcement 15 July 2014)
n 18m @ 3.2% Cu from 32m including 9m @ 6.0% Cu from 37m (EPT2060)
n 25m @ 1.4% Cu from 31m including 6m @ 2.8% Cu from 47m (EPT2061)
n 34m @ 1.1% Cu from 28m including 8m @ 2.0% Cu from 46m (EPT2062)
Highlights from the first phase of RC drilling outside the area of previously defined mineralisation include:
(see ASX announcement 15 July 2014)
n 45m @ 1.4% Cu from 12m including 16m @ 3.2% Cu from 26m (EPT2063)
n 47m @ 1.0% Cu from 11m including 15m @ 1.5% Cu from 42m (EPT2066)
n 50m @ 1.1% Cu from 12m including 19m @ 2.3% Cu from 31m (EPT2072)
n 40m @ 0.9% Cu from 10m including 11m @ 2.0% Cu from 23m (EPT2073)
n 13m @ 0.6% Cu from 12m including 2m @ 2.5% Cu from 21m (EPT2074)
n 26m @ 1.1% Cu from 0m including 7m @ 2.0% Cu from 2m (EPT2075)
The drill program was extended to include a second phase of RC drilling at BM1 and further expanded the near surface
copper zone as well as intersected supergene copper below the base of oxidation. Results include:
n 12m @ 1.2% Cu from 50m including 4m @ 2.6% Cu from 56m (EPT2080)
n 42m @ 0.4% Cu from 18m including 4m @ 1.7% Cu from 48m (EPT2078)
n 18m @ 0.5% Cu from 16m including 2m @ 1.2% Cu from 22m (EPT2083)
Figure 4: BM1 Northern Zone Drill Hole Location Map with Max Copper in Hole (Section A-A’ see Figure 5)
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E N C O U N T E R R E S O U R C E S L I M I T E D
BM1 Prospect (continued)
Of particular interest is the identification of
shale hosted supergene copper mineralisation
at the end of holes EPT2079 and EPT2081,
interpreted to provide a possible vector to primary
copper sulphide mineralisation below the high
grade oxide and supergene mineralisation.
n 12m @ 0.4% Cu from 68m to EOH
(EPT2079)
n 10m @ 0.3% Cu from 70m to EOH
(EPT2081)
Diamond drilling in the second half of
2014 will test for copper sulphide mineralisation
down dip to the south east of the high grade
copper oxide mineralisation discovered at BM1.
A second target that will be tested in this program
is for potential high grade structurally controlled
copper sulphides directly below the near surface
copper mineralisation discovered at BM1.
Sunset at Yeneena
Figure 5: BM1 Northern Zone Cross Section A-A’ 368540mE (see Figure 4 for location)
A N N U A L R E P O R T 20 14
9
Exploration Review continued
BM8 Prospect (Antofagasta earning in)
During the September 2013 quarter, a total of 18 shallow RC holes
were drilled at the BM8 Prospect for a total of 1,478m, stepping south
from BM7 and extending its footprint by a further 3km southwards.
A review of the regional gravity data suggested that the McKay Fault
may be located further to the west than the interpreted location from
the electromagnetic data implying that the BM8 drill lines should be
extended to the west.
A heritage survey was competed in April 2014 to extend the drill lines at
BM8 further to the west to enable RC/aircore drilling to be completed.
The western extension drilling was completed in June 2014 and
consisted of 17 holes for 820m. Holes were drilled on a 400m x 800m
grid. Assay results from this drilling indicated no significant copper oxide
anomalism. Results will be reviewed to determine if further evaluation
is required.
DDH1 Diamond
Drilling at BM1
Figure 6: BM1-BM7 Max Copper in Hole
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E N C O U N T E R R E S O U R C E S L I M I T E D
BM2-Millennium 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.
Aircore drilling in 2011 defined a broad zone of copper anomalism (+0.25% Cu) over a strike extent of 800m. The
identification of this significant base metal anomaly was made in an area of no outcrop, with up to 20m of transported
overburden.
Drill hole EPT1140, collared in the core of the regolith copper anomaly (April 2012), returned the first sulphide copper
intersection at BM2 of 26m @ 0.60% Cu from 100m including 10m @ 0.92% Cu from 100m.
Diamond drill hole EPT1174 (May 2012) was designed to test for copper sulphide mineralisation at depth below
EPT1140. EPT1174 intersected a broad zone of carbonate alteration and veining in a shale unit that contained visible
zinc and lead sulphides. Assay results include 201m @ 0.6% Zn from 233m to end of hole including 13m @ 1.3% Zn
from 295m; 8m @ 1.5% Zn from 349m; and 29m @ 1.0% Zn from 400m.
Diamond drilling during the second half of 2013 (co-funded under the WA Government Exploration Incentive Scheme)
significantly advanced the BM2 Prospect with the discovery of high grade zinc and silver at the prospect. During this
period three holes were drilled at BM2 for a total of 1,824m. These holes were drilled on the north-south cross section
388,950mE (see ASX announcement 13 December 2013).
Diamond drill hole EPT1831 intersected a number of zones of highly oxidised, iron rich material containing elevated
zinc within an overall downhole length of 140m (Photo 2). These zones graded approximately 1.2% zinc and sit at the
contact between a brecciated carbonate and a sulphidic black shale. The ironstone, which starts from a depth of 175m,
is interpreted to represent the weathered remnants of a body of zinc sulphide mineralisation.
Figure 7: BM2 Prospect – Drill status plan and geochemical summary
A N N U A L R E P O R T 20 14
11
Exploration Review continued
BM2-Millennium Prospect (continued)
EPT1854 tested the down-dip extent of the ironstone in EPT1831, and intersected two narrow zones of massive
Zn-sulphide mineralisation (Photo 3). This zinc sulphide mineralisation (sphalerite) is located 200m down-dip from the
top of the iron rich gossanous material in EPT1831. The zinc sulphide mineralisation sits within a wide shear zone at
the contact between carbonaceous shale and a brecciated dolomite adjacent and parallel to the Tabletop Fault. Drillhole
EPT1854 was the first hole to test the shale/dolomite mineralised contact below the base of oxidation. Previous shallow
aircore and RC drilling along the mineralised contact has intersected Zn anomalism over a strike length of 2km which
remains open to the south-east.
Chemical assays from these zones combined returned 0.7m @ 36.5% Zn and 37g/t Ag and have confirmed the high
grade zinc/silver potential of the mineral system at BM2.
The diamond drilling program at BM2 re-commenced in April 2014. The initial hole in the program, EPT1855 was
designed to test the up dip position of high grade zinc sulphide mineralisation intersected in EPT1854. The hole
intersected a similar alteration zone and low grade zinc mineralisation was noted at the carbonate/shale contact
but no massive zinc sulphide mineralisation was intersected.
Photo 2: EPT1831 ~205.7 to 211.8m – Highly oxidised, iron rich material containing elevated zinc (~1% Zn)
Photo 3: EPT1854 – ~428.3 to 431.6m – 0.3m and 0.1m wide zones
of brecciated and laminated massive zinc sulphide mineralisation
12
E N C O U N T E R R E S O U R C E S L I M I T E D
Figure 8: BM2 Prospect – Schematic Section
A follow up drill program has commenced at BM2/Millennium to test the shale/carbonate contact at the interpreted
intersection with an anomalously thick package of shale sediments (the Millennium Target, Figure 9). It is interpreted
this position represents the intersection of the key mineralising structure and margin of a sub basin within the Broadhurst
sediments. This drilling will be co-funded under the WA Government Exploration Incentive Scheme and will consist of
orientation traverses of shallow RC drilling with follow-up diamond drilling.
Figure 9: VTEM – BM2/Millennium Prospect
A N N U A L R E P O R T 20 14
13
Exploration Review continued
Fishhook Copper Prospect (Encounter 100%)
The success of the copper exploration program at the
Yeneena project and the discovery of a large copper-
cobalt mineral system at BM1-BM7 has encouraged
Encounter to expand the early stage assessment activities
over the untested regional copper targets.
A 1,250 line km airborne VTEM survey was completed
over the regional targets located in the north-west of
the Yeneena project during 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. Final
data and images from the VTEM survey were delivered
in September 2013 and highlighted a number of targets
along the NE structural corridors.
The first reconnaissance drilling along the NE structural
corridor was completed during the September 2013
quarter with the objective of identifying evidence
of copper mineralising fluids. Eight shallow RC drill
holes were completed to provide initial sub-surface
geochemical and geological information along this
NE structural corridor. Chemical analysis of this drilling
confirmed low level but significant copper anomalism
is present along this splay structure between the
McKay and Vines Faults, which includes the Fishhook
target. Encouragingly, initial results indicate that
this NE structural corridor may have seen similar
copper mineralising fluids to the BM1-BM7 trend
located 20km south.
Encounter was awarded a WA Government Exploration
Incentive Scheme (EIS) drilling grant for $150,000 to
complete initial deeper drilling of the Fishhook target in
2014. The first systematic exploration along the Fishhook
project commenced in July 2014. The aircore program
highlighted a number of areas of interest including two
targets for immediate follow up (Figure 10).
The Moby Dick target is a 2km long copper geochemical
anomaly coincident with a resistive geophysical anomaly.
A diamond drill hole is planned for this target to identify the
source of the copper regolith anomaly and to determine if
similar mineralisation indicators occur in the Fishhook area
as we see in the BM1-BM7 corridor. This will be the first
diamond drilling completed in the Fishhook Prospect area.
The Orca target is located approximately 5km south
west of Moby Dick. Aircore and EIS co-funded RC drilling
in the area has outlined a north west trending, 800m
long copper geochemical anomaly located adjacent to
the regionally significant Vines Fault. Previous shallow
drilling indicates the anomaly contains copper with assays
up to 0.4% Cu, 104g/t silver and end of hole bedrock
copper anomalism grading above 0.1% Cu. This target
will also be followed up with a single diamond drill hole
(see ASX announcement 30 September 2014).
Figure 10: VTEM Fishhook target – NE Structural Corridor
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E N C O U N T E R R E S O U R C E S L I M I T E D
Lookout Rocks Project – ENR earning in from Hammer Metals Ltd
(formerly Midas Resources Ltd) (E45/3768 and E45/4091) and
E45/4230 (100% Encounter)
A 560 line km airborne VTEM survey covering the area of the Hammer
earn-in tenements was completed in April 2014. Final data from the survey
was received in August 2014, with preliminary images shown in Figures
11a and 11b. The survey has provided important information about the
conductivity and magnetic variability of the basement rocks in this area
of extensive sand cover.
An initial interpretation of the airborne geophysical data indicates the
prospective structures and Broadhurst lithologies extend northwest from
the Fishhook Prospect into the Hammer earn-in tenements. Historical exploration along the prospective trend is limited
to two shallow RAB drilling traverses completed in the 1980s. Results from these two traverses were successful in that
anomalous copper oxide mineralisation was identified at the base of the Broadhurst sequence at the Lookout Rocks
Prospect.
Strike Drilling – Rig 4
A structural interpretation and targeting program will be completed in the second half of 2014. Drilling at the Lookout
Rocks project is expected to be completed in mid 2015.
Figure 11a: VTEM Channel 40 – Lookout Rocks project
Figure 11b: Magnetic Image – Lookout Rocks project
A N N U A L R E P O R T 20 14
15
Exploration Review continued
Stirling Prospect – ENR earning in from St Barbara (E45/3308 and E45/3232)
The Stirling earn-in tenements are located within a prospective north-east structural corridor between the Yeneena project
and Telfer. The earn-in tenements cover an area of 60km2 located 10km north-east of the Company’s Yeneena project
and 15kms south-west of Newcrest’s giant Telfer gold-copper mine.
An airborne VTEM survey was conducted at the Stirling Prospect in September 2013, centering on a magnetic target
generated through the interpretation of broad-spaced aeromagnetic data. Modelling of the magnetic data from this
survey highlighted a north-north easterly plunging magnetic anomaly hosted within Lamil Group sediments. It is
interpreted that this anomaly may represent pyrrhotite or magnetite alteration associated with the Telfer-style Cu-Au
mineralisation event (see Figure 12b).
In December 2013 the Company was awarded an EIS co-funded drilling grant for $125,000 to complete initial
RC and diamond drilling of the Stirling target.
A heritage survey was completed in June 2014 to facilitate initial RC drilling that will test the target at a depth of
approximately 75m from surface. If successful a second phase of diamond drilling will test the anomaly at depth.
The first drilling at Stirling commenced in September 2014. No previous exploration has been conducted on this target.
Figure 12a: VTEM Channel 40 – Stirling project
Figure 12b: Magnetic TMI 1VD – Stirling project
16
E N C O U N T E R R E S O U R C E S L I M I T E D
E N C O U N T E R R E S O U R C E S L I M I T E D
Summary of Tenements
Lease
Lease Name
Project Name
Area
km2
Registered Holder
Encounter
Interest
ELA69/3258
Beyondie
Bangemall Basin
346.6
Encounter Resources Limited
ELA69/3259
Beyondie
Bangemall Basin
524.8
Encounter Resources Limited
ELA69/3260
Beyondie
Bangemall Basin
549.3
Encounter Resources Limited
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
E51/1570
Hillview
ELA37/1202
Darlot East
E45/2500
Yeneena
E45/2501
Yeneena
E45/2502
Yeneena
E45/2503
Yeneena
E45/2561
Yeneena
E45/2657
Yeneena
E45/2658
Yeneena
E45/2805
Yeneena
E45/2806
Yeneena
E45/3232
Yeneena
Yilgarn
Yilgarn
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
89
Encounter Resources Limited
200.3
Encounter Resources Limited
163.4
Encounter Operations Pty Ltd
41.4
Encounter Operations Pty Ltd
216.3
Encounter Operations Pty Ltd
76.3
Encounter Operations Pty Ltd
86
Encounter Operations Pty Ltd
222.8
Encounter Operations Pty Ltd
222.8
Encounter Operations Pty Ltd
209.7
Encounter Operations Pty Ltd
63.7
Encounter Operations Pty Ltd
22.33
Encounter Operations Pty Ltd
E45/3308
Yeneena
Paterson
38.3
Encounter Operations Pty Ltd
E45/3768
Yeneena
Paterson
181.50 Encounter Operations Pty Ltd
E45/4091
Yeneena
Paterson
136.5
Encounter Operations Pty Ltd
E45/4230
Yeneena
ELA45/4316
Yeneena
ELA45/4361
Yeneena
ELA45/4362
Yeneena
ELA45/4408
Yeneena
ELA45/4452
Yeneena
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
92
Encounter Yeneena Pty Ltd
114
Encounter Yeneena Pty Ltd
216
Encounter Yeneena Pty Ltd
282.6
Encounter Yeneena Pty Ltd
44.6
Encounter Yeneena Pty Ltd
51.1
Encounter Yeneena Pty Ltd
* Tenement subject to Antofagasta Earn-In Agreement see ASX announcement April 23, 2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%*
100%*
100%
0%, Encounter
earning 70%
0%, Encounter
earning 70%
0%, Encounter
earning 70%
0%, Encounter
earning 70%
100%
100%
100%
100%
100%
100%
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
17
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 2013/2014 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.
18
E N C O U N T E R R E S O U R C E S L I M I T E D
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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
19
Corporate Governance Statement continued
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.
20
E N C O U N T E R R E S O U R C E S L I M I T E D
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 2014:
Proportion of female/
total number of persons employed
Females employed in the Company as a whole
Females employed in the Company in senior executive positions
Females appointed as a Director of the Company
4/16
0/0
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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
21
Corporate Governance Statement continued
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.
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 web site, 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.
22
E N C O U N T E R R E S O U R C E S L I M I T E D
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.
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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
23
Corporate Governance Statement continued
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 g rant
of options was deemed appropriate by the Board to provide an incentive and to reward the Director.
24
E N C O U N T E R R E S O U R C E S L I M I T E D
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 2014.
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.
During the last 3 years, Mr Chapman was a director of
Rex Minerals Limited (resigned 31 December 2013),
and Phillips River Mining (resigned 26 March 2014).
Will Robinson – B.Comm, MAusIMM
Managing Director (Executive) appointed 30 June 2004
Mr Robinson is a resources industry commercial and
finance specialist with over twenty 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.
During the last 3 years Dr Hronsky has been a director
of Cassini Resources Limited (appointed 3 April 2014).
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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
25
Directors’ Report continued
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
Dividends
The number of meetings of the Company’s Directors
held during the year ended 30 June 2014, and the
number of meetings attended by each Director are
as follows:
No dividend has been paid since the end of the previous
financial year and no dividend is recommended for the
current year.
Board of Directors’ Meetings
Review of Activities
Director
Held
Attended
P Chapman
W Robinson
P Bewick
J Hronsky
7
7
7
7
7
7
7
7
Principal Activities
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 $484,481 (2013: $1,566,249).
Included in the consolidated loss for the current year
is a write-off of deferred and uncapitalised exploration
expenditure totalling $255,804 (2013: $907,172).
Exploration
Exploration activities for the financial year have been
focussed on the Company’s Yeneena Project in the
Paterson Province, principally at the BM1 and BM7
copper prospects and the BM2 copper/zinc prospect.
The Yeneena Project covers a 1,850km2 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
$3,836,543 (2013: $4,806,657) in cash and at call
deposits. Capitalised mineral exploration and evaluation
expenditure is $19,085,687 (2013: $17,774,406).
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
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.
26
E N C O U N T E R R E S O U R C E S L I M I T E D
Options over Unissued Capital
Unlisted Options
As at the date of this report 10,170,000 unissued ordinary shares of the Company are under option as follows:
Number of Options Granted
Exercise Price
Expiry Date
5,375,000
500,000
500,000
1,450,000
650,000
750,000
200,000
745,000
$1.35
80 cents
40 cents
30 cents
39 cents
21 cents
31 cents
22 cents
22 November 2014
30 September 2015
31 May 2016
30 November 2016
30 November 2017
31 May 2017
31 January 2018
31 May 2018
All options on issue at the date of this report are vested
and exercisable.
Matters Subsequent to
the End of the Financial Year
During the financial year the Company granted 945,000
unlisted options (2013: 2,950,000) over unissued
shares to employees, directors and consultants of
the Company.
During the year 250,000 options were cancelled
(2013: nil) on the cessation of employment, and nil
options were cancelled on expiry of the exercise period
(2013: 1,550,000).
During the financial year no (2013: 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.
Issued Capital
Number of Shares on Issue
2014
2013
Ordinary fully
paid shares
132,543,350
132,543,350
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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
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Directors’ Report continued
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.
28
E N C O U N T E R R E S O U R C E S L I M I T E D
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 Company’s shareholders, 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 2014.
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. 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. 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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
29
Directors’ Report continued
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.
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:
2014
$
2013
$
2012
$
2011
$
2010
$
Loss for the year
attributable to shareholders
(484,481) (1,566,249)
(758,706) (4,933,106)
(918,288)
Closing share price at 30 June
$0.20
$0.16
$0.18
$0.93
$0.25
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 effective management of safety, environmental and operational matters and successful management of the
farm-in arrangement securing project funding with Antofagasta Minerals Perth Pty Ltd, the acquisition and consolidation
of Yeneena landholdings, as more appropriate indicators of management performance for the 2014 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
30
E N C O U N T E R R E S O U R C E S L I M I T E D
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 2014
Paul Chapman
Will Robinson
Peter Bewick
Jon Hronsky
Total
30 June 2013
Paul Chapman
Will Robinson
Peter Bewick
Jon Hronsky
Total
Base Salary
$
60,000
283,958
270,000
50,000
Base Salary
$
60,000
290,000
261,692
50,000
661,692
Short Term
Incentive
$
Superannuation
Contributions
$
Value of
Options
$
–
14,500
13,500
–
5,550
27,607
26,224
4,625
663,958
28,000
64,006
–
–
–
–
–
Short Term
Post Employment Other Long Term
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
Value of
Options as
Proportion of
Remuneration
%
–
–
–
–
Value of
Options as
Proportion of
Remuneration
%
–
–
35.1
48.0
Total
$
65.550
326,065
309,724
54,625
755,964
Total
$
65,400
316,100
439,450
104,800
Details of Performance Related Remuneration
During the period, short term incentive payments were paid to the executive directors as follows:
Short term incentive payments – cash bonuses paid
2013/14 financial year
2012/13 financial year
Will Robinson
Peter Bewick
$14,500
$13,500
$nil
$nil
Performance indicators for the 2013/14 financial year included corporate management, project and operational
performance (including safety and environmental management and results of exploration activity) and share price
performance.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
31
Directors’ Report continued
Remuneration Report (Audited) continued
Options Granted as Remuneration
During the financial year ended 30 June 2014 there were no options granted to Directors or Key Management Personnel
of the Company.
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.
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.
Equity instrument disclosures relating to key management personnel
Option holdings
Key Management Personnel have the following interests in unlisted options over unissued shares of the Company.
2014
Names – Directors
P Chapman
W Robinson
P Bewick
J Hronsky
2013
Names – Directors
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
–
–
5,000,000
1,300,000
–
–
–
–
–
–
–
–
Vested and
exercisable
at the end
of the year
–
–
–
–
5,000,000
5,000,000
1,300,000
1,300,000
Balance
at start
of the year
Received during
the year as
remuneration
Other changes
during the year1
Balance
at the end
of the year
–
–
–
–
–
–
–
–
Vested and
exercisable
at the end
of the year
–
–
4,300,000
1,500,000
(800,000)
5,000,000
5,000,000
1,300,000
500,000
(500,000)
1,300,000
1,300,000
1 Options lapsing unexercised at the end of the exercise period.
32
E N C O U N T E R R E S O U R C E S L I M I T E D
Remuneration Report (Audited) continued
Equity instrument disclosures relating to key management personnel 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.
2014
Names – Directors
P Chapman
W Robinson
P Bewick
J Hronsky
2013
Names – Directors
P Chapman
W Robinson
P Bewick
J Hronsky
Balance
at start
of the year
Received during
the year
on exercise
of options
Other changes
during
during the year
Balance
at the end
of the year
5,600,000
22,168,328
5,102,000
–
–
–
–
–
–
–
–
–
5,600,000
22,168,328
5,102,000
–
Balance
at start
of the year
5,394,900
22,096,900
4,975,000
–
Received during
the year
on exercise
of options
Other changes
during
during the year
Balance
at the end
of the year
–
–
–
–
205,100
5,600,000
71,428
22,168,328
127,000
5,102,000
–
–
Loans made to key management personnel
No loans were made to key personnel, including personally related entities during the reporting period.
Other transactions with key management personnel
There were no other transactions with key management personnel.
End of Remuneration Report
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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
33
Directors’ Report continued
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.
AUDITOR’S INDEPENDENCE DECLARATION
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for
AUDITOR’S INDEPENDENCE DECLARATION
the audit of Encounter Resources Limited for the year ended 30 June 2014, I declare that, to the best
of my knowledge and belief, there have been:
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 2014, I declare that, to the best
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
(a)
of my knowledge and belief, there have been:
relation to the audit; and
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
no contraventions of any applicable code of professional conduct in relation to the audit.
relation to the audit; and
Corporate Governance
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
CROWE HORWATH PERTH
CROWE HORWATH PERTH
SEAN MCGURK
Partner
SEAN MCGURK
Signed at Perth, 18 September 2014
Partner
Signed at Perth, 18 September 2014
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
2014
$
33,000
–
33,000
2013
$
28,500
–
28,500
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.
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 18th day of September 2014.
W Robinson
Managing Director
34
E N C O U N T E R R E S O U R C E S L I M I T E 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. 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 INDEPENDENCE DECLARATION
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for
AUDITOR’S INDEPENDENCE DECLARATION
the audit of Encounter Resources Limited for the year ended 30 June 2014, I declare that, to the best
of my knowledge and belief, there have been:
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 2014, I declare that, to the best
(a)
of my knowledge and belief, there have been:
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
no contraventions of any applicable code of professional conduct in relation to the audit.
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
CROWE HORWATH PERTH
CROWE HORWATH PERTH
SEAN MCGURK
Partner
SEAN MCGURK
Signed at Perth, 18 September 2014
Partner
Signed at Perth, 18 September 2014
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
35
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. 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 2014
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
2014
$
2013
$
477,366
477,366
(1,676,334)
1,316,785
(71,760)
(110,000)
(9,740)
(61,432)
(357,247)
(255,804)
308,841
308,841
(1,415,203)
1,199,237
(273,039)
(110,000)
(12,844)
(69,402)
(523,004)
(907,172)
(748,166)
(1,802,586)
263,685
236,337
(484,481)
(1,566,249)
Note
5
18
6
6
7
18
Other comprehensive income
–
–
Total comprehensive income for the year
(484,481)
(1,566,249)
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
28
28
(0.4)
(0.4)
(1.3)
(1.3)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
36
E N C O U N T E R R E S O U R C E S L I M I T E D
Consolidated Statement of Financial Position
As at 30 June 2014
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
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Equity remuneration reserve
Total equity
Note
8
9(a)
9(b)
Consolidated
2014
$
2013
$
3,836,543
58,494
93,640
4,806,657
265,643
78,427
3,988,677
5,150,727
11
12
304,989
19,085,687
279,940
17,774,406
19,390,676
18,054,346
23,379,353
23,205,073
14
15(a)
15(b)
1,207,619
77,397
1,285,016
85,606
85,606
717,037
66,584
783,621
–
–
1,370,622
783,621
22,008,731
22,421,452
16
18
18
31,113,384
(11,872,175)
2,767,522
31,113,384
(11,429,023)
2,737,091
22,008,731
22,421,452
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
37
Consolidated Statement of Changes in Equity
For the financial year ended 30 June 2014
Consolidated
Issued
capital
$
Accumulated
losses
$
Equity
remuneration
reserve
$
Total
$
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
2014
Balance at the start of the financial year
31,113,384
(11,429,023)
2,737,091
22,421,452
Comprehensive income for the financial year
Movement in equity remuneration reserve
in respect of options vested
Transfer to accumulated losses on
cancellation of vested options
–
–
–
(484,481)
–
(484,481)
–
71,760
71,760
41,329
(41,329)
–
Balance at the end of the financial year
31,113,384
(11,872,175)
2,767,522
22,008,731
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
38
E N C O U N T E R R E S O U R C E S L I M I T E D
Consolidated Statement of Cash Flows
For the financial year ended 30 June 2014
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
2014
$
2013
$
9,809
175,925
500,022
134,768
(819,553)
6,385
133,699
209,250
190,211
(908,268)
Net cash from/(used in) operating activities
27
971
(368,723)
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
3,725,847
–
(4,564,128)
(132,804)
1,378,711
20,000
(5,172,631)
(28,875)
Net cash used in investing activities
(971,085)
(3,802,795)
Cash flows from financing activities
Proceeds from the issue of shares
Payments for share issue costs
Net cash provided by financing activities
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
–
–
–
(970,114)
4,806,657
3,853,286
(60,448)
3,792,838
(378,680)
5,185,337
Cash at the end of the financial year
8(a)
3,836,543
4,806,657
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
39
Notes to the Financial Statements
For the financial year ended 30 June 2014
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
18th September 2014.
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 2014, 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 2014, and have not been applied in preparing these financial statements. None of these are
expected to have a significant effect on the Group.
The Group does not plan to adopt any standards 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.
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.
40
E N C O U N T E R R E S O U R C E S L I M I T E D
Note 1 Summary of significant accounting policies continued
(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 claim is lodged with the Australian Tax Office.
(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 24). 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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
41
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 1 Summary of significant accounting policies continued
(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:
Asset Class
Depreciation Rate
Field Equipment and Vehicles
Office Equipment
Leasehold Improvements
33%
33%
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.
42
E N C O U N T E R R E S O U R C E S L I M I T E 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-in arrangements (in the exploration and evaluation phase)
For exploration and evaluation asset acquisitions (farm-in arrangements) in which the Group has made
arrangements to fund a portion of the selling partner’s (farmor’s) exploration and/or future development
expenditures (carried interests), these expenditures are reflected in the financial statements as and when the
exploration and development work progresses.
Farm-out arrangements (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.
Monies received pursuant to farm-in agreements are treated as a liability on receipt and until such time as the
relevant expenditure is incurred.
(l) Joint ventures and joint operations
Joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the arrangement. Investments in joint ventures are accounted for using the equity method. Under
the equity method, the share of the profits or losses of the joint venture is recognised in profit or loss and the share
of the movements in equity is recognised in other comprehensive income. Investments in joint ventures are carried
in the statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of
the joint venture. Goodwill relating to the joint venture is included in the carrying amount of the investment and
is neither amortised nor individually tested for impairment. Income earned from joint venture entities reduce the
carrying amount of the investment.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the assets, and obligations for the liabilities, relating to the arrangement. The Group has recognised its share
of jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the
financial statements under the appropriate classifications.
Details of these interests are shown in Note 13.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
43
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 1 Summary of significant accounting policies continued
(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.
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.
44
E N C O U N T E R R E S O U R C E S L I M I T E D
Note 1 Summary of significant accounting policies continued
(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.
(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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
45
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 1 Summary of significant accounting policies continued
(s) Investments and other financial assets
(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.
(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.
46
E N C O U N T E R R E S O U R C E S L I M I T E D
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.
(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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
47
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
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.
Note 5 Revenue
Operating activities
Contribution to overheads from farm-in partner
Gain on sale of exploration assets
Interest receivable
Other income
Note 6 Loss for the year
Loss before income tax includes the following specific expenses:
Depreciation:
Office equipment
Consolidated
2014
$
2013
$
332,789
–
134,768
9,809
477,366
92,245
20,000
189,287
7,309
308,841
9,740
12,844
Total exploration costs not capitalised and written off
255,804
907,172
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E N C O U N T E R R E S O U R C E S L I M I T E D
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
Consolidated
2014
$
2013
$
(598,861)
598,861
(263,685)
(1,353,650)
1,353,650
(236,237)
(150,457)
150,457
(309,673)
309,673
Income tax expense/(benefit) reported in the income statement
(263,685)
(236,237)
The Group intends to submit 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 2014.
(b) Reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
(748,166)
(1,802,586)
Tax at the Australian rate of 30% (2013: 30%)
(224,450)
(540,776)
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
21,528
(263,685)
76,741
(41,396)
167,577
81,912
(236,237)
170,573
(41,396)
329,687
Tax (benefit)/expense
(263,685)
(236,237)
(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
(28,092)
(5,725,706)
(23,528)
(5,332,322)
(5,753,798)
(5,355,850)
8,273,990
48,901
56,727
64,790
7,760,496
19,975
9,346
106,185
8,444,408
7,896,003
2,690,610
2,540,153
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
49
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 7 Income tax continued
(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
2014
$
2013
$
(4,564)
(393,384)
(130)
(766,493)
(41,395)
47,380
513,494
28,926
(23,262)
(6,949)
1,139,150
7,467
Deferred tax benefit/(expense) not recognised
150,457
349,783
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 $27,579,967 (2013: $25,868,320) were incurred by Australian entities.
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
2014
$
2013
$
1,836,543
2,000,000
1,306,657
3,500,000
3,836,543
4,806,657
Cash and cash equivalents per statement of cash flows
3,836,543
4,806,657
(b) Deposits at call
The term deposits are bearing fixed interest rates of 3.6% (2013: 4.15%).
These deposits have an average maturity of 8 months.
(c) Cash balances not available for use
Included in cash and cash equivalents above are
amounts pledged as guarantees for the following:
Environmental bond guarantee (Note 23)
Office lease bond guarantee (Note 23)
Corporate credit card security deposit
34,000
22,629
147,520
204,149
34,000
22,629
144,102
200,731
Cash assets include an amount of $320,081 in respect of unspent farm-in contributions received (Note 14).
50
E N C O U N T E R R E S O U R C E S L I M I T E D
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 19.
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
Subsidiary Company
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Encounter Yeneena Pty Ltd
Country of
Incorporation
Australia
Australia
Australia
Consolidated
2014
$
2013
$
–
6,166
9,296
43,032
58,494
236,337
9,282
8,943
11,081
265,643
93,640
78,427
2014
$
2
1
2
2014
%
100%
100%
100%
Company
2013
$
2
1
2
Ownership Interest
2013
%
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
2014
$
18,082,774
237
110
Company
2013
$
17,308,795
126
100
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.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
51
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
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
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
Consolidated
2014
$
2013
$
905,819
(623,068)
776,767
(525,052)
282,751
251,715
109,035
(86,797)
22,238
22,137
(22,137)
–
105,281
(77,056)
28,225
22,137
(22,137)
–
304,989
279,940
251,715
129,052
(98,016)
352,573
16,818
(117,676)
282,751
251,715
28,225
3,753
(9,740)
22,238
29,012
12,057
(12,844)
28,225
No items of property, plant and equipment have been pledged as security by the Group.
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E N C O U N T E R R E S O U R C E S L I M I T E D
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)
Consolidated
2014
$
2013
$
136,216
113,721
18,769,875
17,482,009
Capitalised share of exploration assets under JV Agreements (iii)
179,596
178,676
Cost carried forward
19,085,687
17,774,406
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.
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 (iv)
Exploration costs funded by EIS grant
Total exploration costs written off and expensed for the period
2014
$
17,774,406
1,743,010
(175,925)
(255,804)
Consolidated
2013
$
15,219,430
3,595,847
(133,699)
(907,172)
Capitalised exploration costs at the end of the period
19,085,687
17,774,406
(iv) Does not include costs incurred by farm-in partners in respect of spend incurred on assets the subject of farm-in
arrangements.
During the financial period, the Company’s farm-in partner Antofagasta Minerals Perth Pty Ltd (see Note 13b) incurred
costs of $3,436,990 in respect of exploration and evaluation costs on the Company’s assets in addition to the amounts
stated above.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
53
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 13 Interest in joint ventures and farm-in arrangements
(a) Joint Venture Agreements – Joint Operations
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 – Joint Operation
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 rights 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 operation.
The company’s interest in the joint operation 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 operations.
Joint Operations – 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 $179,596 (2013: $178,676 (Note 12). During the reporting period the
Group recognised an expense of $nil (2013: $543,115) being its share of the exploration expenditure written off by the
joint venture entities during the period.
(b) 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
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;
54
E N C O U N T E R R E S O U R C E S L I M I T E D
Note 13 Interest in joint ventures and farm-in arrangements continued
(b) Farm-in Arrangements continued
n
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 19% 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.
Hammer Metals Limited (HMX) (formerly Midas Resources Limited (MDS)) – ENR Earning-in
Encounter Resources Limited has entered into a farm-in agreement with Hammer Metals 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 HMX 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 HMX elects not to contribute at the end of the second phase HMX may elect to convert its participating interest
into a 1.5% net smelter royalty.
Note 14 Current liabilities – Trade and other payables
Unspent farm-in contributions (Note 8)
Trade payables and accruals
Other payables
Consolidated
2014
$
2013
$
320,081
823,874
63,664
1,207,619
364,013
318,811
34,213
717,037
Liabilities are not secured over the assets of the Group. Details of fair value and exposure to interest risk are included
at Note 19.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
55
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 15 Employee benefits
(a) Current liabilities
Liability for annual leave
(b) Non-current liabilities
Liability for long service leave
Note 16 Issued capital
Consolidated
2014
$
2013
$
77,397
66,584
85,606
–
(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.
(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 purchase plan
Less share issue costs
Issue
Price
2014
No.
2013
No.
2014
$
2013
$
132,543,350
132,543,350
31,113,384
31,113,384
$0.21
$0.21
$0.21
132,543,350
–
–
–
–
114,194,360
9,241,931
2,380,952
6,726,107
–
31,113,384
–
–
–
–
27,320,545
1,940,806
500,000
1,412,482
(60,449)
Balance at the end of the financial year
132,543,350
132,543,350
31,113,384
31,113,384
(d) Option plan
Information relating to the Encounter Resources Limited Directors, Officers and Employees Option Plan is set out
in Note 17.
56
E N C O U N T E R R E S O U R C E S L I M I T E D
Note 17 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 2012.
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.
(a) Options issued during the year
During the financial year the Company granted 945,000 options over unissued shares (2013: 2,950,000).
(b) Options exercised during the year
During the financial year the Company issued no shares on the exercise of unlisted employee options (2013: Nil).
(c) Options cancelled during the year
During the year 250,000 options (2013: nil) were cancelled upon termination of employment. No options were
cancelled on expiry of exercise period (2013: 1,550,000).
(d) Options on issue at the balance date
The number of options outstanding over unissued ordinary shares at 30 June 2014 is 10,170,000 (2013: 9,475,000).
The terms of these options are as follows:
Number of options outstanding
Exercise price
Expiry date
5,375,000
500,000
500,000
1,450,000
650,000
750,000
200,000
745,000
10,170,000
$1.35
80 cents
40 cents
30 cents
39 cents
21 cents
31 cents
22 cents
22 November 2014
30 September 2015
31 May 2016
30 November 2016
30 November 2017
31 May 2017
31 January 2018
31 May 2018
(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)
2014
2013
No.
WAEP
(cents)
No.
WAEP
(cents)
Options outstanding at the start of the year
9,475,000
93.6
8,075,000
109.4
Options granted during the year
Options exercised during the year
Options expiring unexercised during the year
945,000
–
(250,000)
23.9
–
59.4
2,950,000
–
(1,550,000)
Options outstanding at the end of the year
10,170,000
87.8
9,475,000
30.0
–
55.2
93.6
Weighted average contractual life
The weighted average contractual life for un-exercised options is 18.1 months (2013: 27.5 months).
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
57
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 17 Options and share based payments continued
(e) Subsequent to the balance date continued
Basis and assumptions used in the valuation of options.
The options issued during the year were valued using the Black-Scholes option valuation methodology.
Date granted
Number of
options granted
Exercise price
(cents)
Expiry date
17 February 2014
27 June 2014
200,000
745,000
31
22
31 January 2018
31 May 2018
Risk free
interest
rate used
3%
2.99%
Volatility
applied
Option
valuation
98.5%
96.4%
$19,558
$52,202
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.
Note 18 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
2014
Equity
remuneraton
reserve (i)
$
2013
Equity
remuneration
reserve (i)
$
Accumulated
losses
$
Accumulated
losses
$
(11,429,023)
(484,481)
2,737,091 (10,178,761)
(1,566,249)
–
2,780,039
–
–
41,329
71,760
(41,329)
–
315,987
273,039
(315,987)
Balance at the end of the year
(11,872,175)
2,767,522 (11,429,023)
2,737,091
(i) The equity remuneration reserve is used to recognise the fair value of options issued but not exercised.
Note 19 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
58
E N C O U N T E R R E S O U R C E S L I M I T E D
Carrying amount ($)
2014
–
2013
–
3,836,543
4,806,657
Note 19 Financial instruments continued
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.
2014
Variable rate instruments
2013
Variable rate instruments
Profit or loss
Equity
1%
increase
$
1%
decrease
$
1%
increase
$
1%
decrease
$
38,365
(38,365)
38,365
(38,365)
48,066
(48,066)
48,066
(48,066)
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
2014
Trade and other payables
2013
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
$
954,866
954,866
954,866
954,866
954,866
954,866
651,670
651,670
651,670
651,670
651,670
651,670
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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:
Consolidated
Cash and cash equivalents
Trade and other payables
2014
2013
Carrying
amount
$
Fair value
$
Carrying
amount
$
Fair value
$
3,836,543
(954,866)
3,836,543
(954,866)
4,806,657
(651,670)
4,806,657
(651,670)
2,881,677
2,881,677
4,154,987
4,154,987
The Group’s policy for recognition of fair values is disclosed at Note 1(s).
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
59
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 20 Dividends
No dividends were paid or proposed during the financial year ended 30 June 2014 or 30 June 2013.
The Company has no franking credits available as at 30 June 2014 or 30 June 2013.
Note 21 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.
(b) Key management personnel compensation
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
Note 22 Remuneration of auditors
Audit and review of the Company’s financial statements
Other services
Total
2014
$
2013
$
691,958
–
64,006
755,964
33,000
–
33,000
661,692
204,506
59,552
925,750
28,500
–
28,500
60
E N C O U N T E R R E S O U R C E S L I M I T E D
Note 23 Contingencies
(i) Contingent liabilities
There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2014
or 30 June 2013 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.
Native Title and Aboriginal Heritage
The Group has Land Access and Mineral Exploration Agreements with Western Desert Lands Aboriginal Corporation in
relation to the tenements comprising the Yeneena Project. Western Desert Lands Aboriginal Corporation ((Jamukurnu-
Yapalikunu/WDLAC) is the Prescribed Body Corporate for the Martu People of the Central Western Desert region in
Western Australia.
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.
Bank guarantees
St George Bank has provided unconditional bank guarantees (refer Note 8) as follows:
− $22,629 in relation to the lease over the Company’s office premises at Level 7, 600 Murray Street, West Perth; and
− $34,000 environmental bond over tenement E51/1127. The tenement was relinquished in the 2013 financial year
and the Company is in the process of cancelling the guarantee.
(ii) Contingent assets
There were no material contingent assets as at 30 June 2014 or 30 June 2013.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
61
Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 24 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 $1,371,000 (2013: $1,249,000).
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 2014 or 30 June 2013. The Company’s lease on the premises
at Level 7, 600 Murray Street, West Perth is on a month by month basis.
(c) Contractual Commitment
There are no material contractual commitments as at 30 June 2014 or 30 June 2013 not otherwise disclosed in the
Financial Statements.
Note 25 Related party transactions
Transactions with Directors during the year are disclosed at Note 21 – 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:
2014
$
–
920
2013
$
7,927
3,899
Regional Uranium JV
Lake Way Uranium JV
–
23,240
–
22,358
Note 26 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.
62
E N C O U N T E R R E S O U R C E S L I M I T E D
Note 27 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
Consolidated
2014
$
2013
$
(484,481)
138
9,740
255,804
71,760
–
(332,789)
175,925
236,337
–
(4,793)
73,330
(1,566,249)
1,774
12,844
907,172
273,039
(20,000)
(92,245)
133,699
(27,087)
–
20,789
(12,459)
Net cash outflow from operating activities
971
(368,723)
Note 28 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
(c) Loss used in calculation of basic and diluted loss per share
Consolidated loss after tax from continuing operations
(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
Consolidated
2014
Cents
(0.4)
(0.4)
2013
Cents
(1.3)
(1.3)
$
$
(484,481)
(1,566,249)
No.
No.
132,543,350
117,007,416
At 30 June 2014 the Company has on issue 10,170,000 (2013: 9,475,000) unlisted options over ordinary shares that
are not considered to be dilutive.
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
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Notes to the Financial Statements continued
For the financial year ended 30 June 2014
Note 29 Parent entity information
Financial position
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
2014
$
2013
$
3,983,107
18,703,922
4,894,955
17,881,203
22,687,029
22,776,158
1,370,623
1,370,623
783,621
783,621
21,316,406
21,992,537
31,113,384
2,767,522
(12,564,500)
31,113,384
2,737,091
(11,857,938)
21,316,406
21,992,537
(747,891)
–
(1,803,335)
–
(747,891)
(1,803,335)
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 23.
Commitments
For full details of commitments see Note 24.
64
E N C O U N T E R R E S O U R C E S L I M I T E 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 36 to 64 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 2014 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 2014.
This declaration is made in accordance with a resolution of the Directors.
Signed at Perth this 18th day of September 2014.
W Robinson
Managing Director
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
65
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ENCOUNTER RESOURCES
LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ENCOUNTER RESOURCES
Report on the Financial Report
LIMITED
We have audited the accompanying financial report of Encounter Resources Limited, which comprises
the consolidated statement of financial position as at 30 June 2014, the consolidated statement of
Report on the Financial Report
comprehensive income, the consolidated statement of changes in equity and the consolidated
We have audited the accompanying financial report of Encounter Resources Limited, which comprises
statement of cash flows for the year then ended, notes comprising a summary of significant
the consolidated statement of financial position as at 30 June 2014, the consolidated statement of
accounting policies and other explanatory information, and the directors’ declaration of the
comprehensive income, the consolidated statement of changes in equity and the consolidated
consolidated entity comprising the company and the entities it controlled at the year’s end or from time
statement of cash flows for the year then ended, notes comprising a summary of significant
to time during the financial year.
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
Directors’ Responsibility for the Financial Report
to time during the financial year.
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
Directors’ Responsibility for the Financial Report
and for such internal control as the directors determine is necessary to enable the preparation of the
The directors of the company are responsible for the preparation of the financial report that gives a
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
and for such internal control as the directors determine is necessary to enable the preparation of the
Statements, that the financial statements comply with International Financial Reporting Standards.
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
Auditor’s Responsibility
Statements, that the financial statements comply with International Financial Reporting Standards.
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
Auditor’s Responsibility
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
obtain reasonable assurance about whether the financial report is free from material misstatement.
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
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
obtain reasonable assurance about whether the financial report is free from material misstatement.
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.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
In making those risk assessments, the auditor considers internal control relevant to the entity’s
in the financial report. The procedures selected depend on the auditor’s judgement, including the
preparation of the financial report that gives a true and fair view in order to design audit procedures
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
In making those risk assessments, the auditor considers internal control relevant to the entity’s
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
preparation of the financial report that gives a true and fair view in order to design audit procedures
accounting policies used and the reasonableness of accounting estimates made by the directors, as
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
well as evaluating the overall presentation of the financial report.
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
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
well as evaluating the overall presentation of the financial report.
for our audit opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
Independence
for our audit opinion.
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
66
E N C O U N T E R R E S O U R C E S L I M I T E 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. 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:
Auditor’s Opinion
(a)
In our opinion:
the financial report of Encounter Resources Limited is in accordance with the Corporations Act
2001, including:
(a)
(b)
(ii)
(i)
the financial report of Encounter Resources Limited is in accordance with the Corporations Act
(i)
2001, including:
giving a true and fair view of the consolidated entity’s financial position as at 30 June
2014 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
giving a true and fair view of the consolidated entity’s financial position as at 30 June
and
2014 and of its performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001;
the consolidated financial report also complies with International Financial Reporting Standards
and
as disclosed in Note 1.
(b)
the consolidated financial report also complies with International Financial Reporting Standards
Report on the Remuneration Report
as disclosed in Note 1.
We have audited the Remuneration Report included in pages 28 to 33 of the directors’ report for the
year ended 30 June 2014. The directors of the company are responsible for the preparation and
Report on the Remuneration Report
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
We have audited the Remuneration Report included in pages 28 to 33 of the directors’ report for the
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
year ended 30 June 2014. The directors of the company are responsible for the preparation and
conducted in accordance with Australian Auditing Standards.
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
Auditor’s Opinion
conducted in accordance with Australian Auditing Standards.
In our opinion, the Remuneration Report of Encounter Resources Limited for the year ended 30 June
2014 complies with section 300A of the Corporations Act 2001.
Auditor’s Opinion
In our opinion, the Remuneration Report of Encounter Resources Limited for the year ended 30 June
2014 complies with section 300A of the Corporations Act 2001.
CROWE HORWATH PERTH
CROWE HORWATH PERTH
SEAN MCGURK
Partner
SEAN MCGURK
Signed at Perth, 18 September 2014
Partner
Signed at Perth, 18 September 2014
E N C O U N T E R R E S O U R C E S L I M I T E D
A N N U A L R E P O R T 20 14
67
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. 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 29 September 2014.
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
104
248
170
460
169
Securities held
50,213
781,137
1,412,792
16,755,493
113,543,715
Totals
1,151
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%
7.49%
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E N C O U N T E R R E S O U R C E S L I M I T E D
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
Citicorp Nominees Pty Ltd
Sundin Pty Ltd
Stone Poneys Nominees Pty Ltd
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