A B N 4 7 1 0 9 8 1 5 7 9 6
Annual Report 2015
CVR2
A B N 4 7 1 0 9 8 1 5 7 9 6
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
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
Contents
Letter from the Chairman & Managing Director
Exploration Review
Summary of Tenements
Directors’ Report
Auditor’s Independence Statement
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
ASX Additional Information
Page
1-2
3-19
20
21-30
31
32
33
34
35
36-64
65
66-67
68-69
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.
Letter from the Chairman
& Managing Director
1
1
1
Dear Fellow Shareholder,
I am pleased to present the 2015 Annual Report for Encounter Resources Ltd (“Encounter”). A number of important
developments have occurred over the last year as we strive to unlock the inherent value in our exploration portfolio.
Encounter remains one of the most dedicated and active greenfield explorers in Australia. We are focused on generating
value for our shareholders through leading edge greenfield exploration. It is clear that the next generation of major
mineral discoveries in Australia will be made under cover. This is where the industry is heading in the vital search for
new Tier 1 mineral assets in favourable mining jurisdictions like Australia.
The investor sentiment for mineral exploration is at multi-decade lows and this creates opportunities. Encounter has
continued to selectively add to its major land holding in the proven Proterozoic Paterson Province located in the north
of Western Australia.
Encounter believes that it is crucial for frontier mineral explorers to target opportunities of sufficient quality and scale
to attract major partners. We also believe it is important to share risk at appropriate points. This approach maximises
exploration upside for shareholders while minimising financial demands upon them.
With these objectives in mind, Encounter completed two new earn in agreements in 2015 covering the exciting
Millennium zinc discovery (Hampton Hill Mining NL) and the highly prospective Lookout Rocks copper prospect
(Antofagasta plc). These two transactions have delivered over $2m in exploration funding so far, with limited dilution at
the project level and no dilution to Encounter shareholders from the issue of new shares. Attracting these quality partners
is also emblematic of the significant exploration opportunities that continue to be generated by the Encounter team.
If your objective is to secure
a Tier 1 asset in the fiercely
competitive resource industry,
it is clear that you will
have to find it yourself.
A N N U A L R E P O R T 20 1 5
Letter from the Chairman
& Managing Director continued
2
Encounter has continued to selectively add to its major land holding in the
proven Proterozoic Paterson Province located in the north of Western Australia.
If your objective is to secure a Tier 1 asset in the fiercely competitive resource industry, it is clear that you will have to
find it yourself. Tier 1 assets are rare and highly sought-after as they generate value throughout the commodity price
cycle. These assets rarely come to market and when they do, they almost always change hands fully priced.
Encounter provides high quality access to large scale copper and zinc exploration opportunities in a region that has
demonstrated the capacity to produce major mineral deposits.
Encounter is disciplined in its approach to capital management and we are steadfast in our commitment to systematic
frontier exploration that can create enduring value for our shareholders.
In 2015, there were a number of significant achievements, including:
n Millennium Zinc: discovery of additional high grade zinc sulphide mineralisation located 3km along strike from the
initial high grade intersection as well as the identification of a large scale zinc gossan;
n BM1-BM7 Copper: broad spaced diamond drill program intersected thick zones of lower grade and narrow
high grade copper sulphide mineralisation that has generated a number of near surface, drill ready targets;
n Lookout Rocks Copper: commencement of the first phase of exploration activity under the new earn-in agreement
with Antofagasta; and
n Aria IOCG: identification of an exciting Iron Oxide Copper Gold (“IOCG”) opportunity within the
Lookout Rocks Project.
Encounter has accumulated a dominant and strategic land position in the highly prospective Paterson Province and is
well placed to unlock the potential of our priority targets. Our exploration plans remain well funded and 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 partners,
Antofagasta plc and Hampton Hill Mining NL and their 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
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
3
Yeneena Project
– Paterson Province
Paterson Province
Yeneena Copper / Zinc Project
n 100% Encounter – E45/2500, E45/2502, E45/2503,
E45/2657, E45/2658, E45/2805, E45/2806,
E45/3768, E45/4091, E45/4230 and E45/4408
n 90% Encounter / 10% HHM – E45/2501, E45/2561
and the four eastern sub-blocks of E45/2500
with HHM earning up to 25%
n Antofagasta earning into E45/3768, E45/4091,
E45/4230 and E45/4408
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).
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 1 5
4
Exploration Review continued
2014/15 Exploration Highlights:
Millennium Zinc (Hampton earning up to 25%)
n Earn-in agreement completed with Hampton Hill Mining NL (“Hampton”) to provide up to A$2 million exploration
funding at Millennium Zinc Project (“Millennium”).
n Five diamond drill holes completed under the earn-in agreement with Hampton.
n Assays results from drill holes EPT2201 and EPT2203 that intersected a depth extensive iron rich gossan zone have
confirmed broad intervals of weathered zinc mineralisation:
EPT2203 – 91.8m @ 1.6% Zn from 344.4m
EPT2201 – 38.7m @ 0.9% Zn from 255.8m
n This gossan unit has now been intersected in three drill holes, across two sections and is interpreted to be over
250m in strike extent and plunging to the south-east. This gossan unit may transition at depth into a body of
zinc sulphide mineralisation.
n
In the south east of Millennium the intersection of 7m @ 4.8% zinc remains open along strike and at depth and
will be drill tested in October 2015.
BM1-BM7 Copper Project (100% ENR)
n
In July 2015 Encounter regained 100% interest, unencumbered, in the advanced BM1 and BM7 Copper Projects
following the termination of the existing earn-in agreement with Antofagasta.
n Strong geochemical and structural vectors have been identified to direct follow up drilling at BM7. The final hole
in 2014 program at BM7 intersected 140m @ 0.2% Cu, including 1.3m @ 3.2% Cu from 250.4m. This hole
remains open for 750m down dip.
n BM6 and BM7 East alteration and copper mineralisation are similar to the hangingwall position at Nifty and deeper
drilling is required.
n At BM1, diamond drilling to the south-east of the BM1 oxide zone intersected copper sulphide mineralisation
which remains open to the south east.
Strike Drilling
– Rig 4 Support Unit
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
5
Fishhook Copper Project (100% ENR)
n The first diamond drill program at the Fishhook Project was successful with drilling intersecting disseminated and
blebby copper sulphide mineralisation within a sequence containing highly oxidised ‘red-rock altered’ sediments.
n These initial results are considered regionally significant and open up the potential for further copper occurrences
along this previously untested northern corridor.
Lookout Rocks Copper Project (Antofagasta earning in)
n New US$6 million earn-in agreement with Antofagasta covering the Lookout Rocks Copper Project completed
in July 2015.
n Heritage survey was completed to facilitate the initial aircore/RC program to commence under the new earn-in
agreement with Antofagasta.
n
Identification of a compelling IOCG target (“Aria Prospect”) within the Lookout Rocks Copper Project.
Exploration activities conducted during 2014/15 include:
n During the year diamond drilling was completed at BM1/BM7 as part of the Antofagasta earn-in with 3 holes
completed for a total of 1240 metres.
n Diamond drilling at the Fishhook Project with 2 holes drilled for a total of 865 metres (Oct 2014).
n Aircore (AC) and Reverse Circulation (RC) drilling at BM1, BM7 East, Fishhook, Stirling and Millennium totalling
162 holes for 14,321 metres.
n Four diamond drillholes were completed in the south-eastern part of Millennium for a total of 1,703 metres.
(Oct-Nov 2014).
n A review of public data over the Nifty copper deposit has defined a distinct geochemical halo to the deposit.
Geochemical anomalism and geological features as seen at Nifty have been identified within the BM1-BM7 region
and are being used to generate vectors to high grade copper mineralisation (Nov 2014-Jan 2015).
n Five diamond drill holes completed under the earn-in agreement with Hampton Hill Mining NL at the Millennium
Prospect for a total of 2242 metres (May-June 2015).
n A heritage survey was completed at Lookout Rocks in preparation for the aircore/RC drill program (June 2015).
n At the Fishhook prospect, a geological mapping, lag and rock chip sampling program was conducted (June 2015).
The Millennium, Stirling and Fishhook drill programs were partly funded through the WA Government EIS co-funded
drilling program.
A N N U A L R E P O R T 20 1 5
6
Exploration Review continued
ZINC
Millennium Zinc Prospect – Encounter 90%/HHM 10% in E45/2501, E45/2561 and the four eastern
sub blocks of E45/2500. HHM may earn up to 25% interest
The Millennium Prospect is located in the north-east of the Yeneena Project (see Figure 1) and is subject to an earn-in
agreement with Hampton Hill Mining (“HHM”) (refer to ASX announcement 23 April 2015).
The Millennium Prospect lies adjacent to the regionally-extensive Tabletop Fault. This structure is known to be
metallogenically important and is closely associated with the position of the Nifty copper deposit, 50km along strike
to the north-west.
Previous aircore and RC drilling by Encounter has defined a +3km long zinc regolith anomaly that remains open to the
south-east. Initial diamond drilling at the northern and southern ends of the regolith anomaly intersected high grade
zinc sulphide mineralisation including 0.7m @ 36.5% Zn in EPT1854 and 7m @ 5% Zn in EPT2198. A thick gossan
intersection in EPT1831 demonstrated intense preferential weathering of sulphides along the shale – carbonate contact
at Millennium (refer to ASX announcements 13 December 2013 and 12 January 2015).
In May and June 2015 five diamond holes were completed at the Millennium Prospect (see Figure 2). Three diamond
holes (EPT2201, EPT2203 and EPT2206) were drilled in the north of the prospect and two holes have been drilled in
the south (EPT2200 and EPT2202)
EPT2201 was designed to target the carbonate-shale contact approximately 250m south-east of the high grade sulphide
intersection EPT1854. EPT2201 intersected a thick zone of zinc rich gossan (Photo 1) from 255m to 300m downhole,
before the hole failed at a depth of 334.2m above the targeted shale-carbonate contact. Assays from this intersection
returned 38.7m @ 0.9% Zn from 255.8m incl. 8.6m @ 2.2% Zn from 285.9m (refer to ASX announcement 9 July 2015).
Figure 2: Diamond drilling collar location – Millennium
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
7
Millennium Zinc Prospect continued
The gossan in this hole shows strong similarities to the
intersection in EPT1831 and confirmed a significant strike
extension of the gossan zone.
EPT2203 was drilled to test the mineralised contact
position 150m down dip of EPT2201, at a similar depth
from surface as the high grade zinc sulphide intersection
in EPT1854. EPT2203 intersected a thicker and more
competent zone of gossan material from 344m to 432m
downhole, again with highly elevated zinc anomalism (see
Photo 2). Assays from EPT2203 returned 91.8m @ 1.6%
Zn from 344.4m incl. 26.3m @ 2.1% Zn from 345.1m.
Photo 1: Gossan zone from ~ 281m in EPT2201
The three gossan intersections in EPT1831, EPT2201 and EPT2203 demonstrate that the targeted zone has a significant
thickness with continuous and consistent geometry (see Figures 3 and 4). The highly anomalous zinc mineralisation
contained within the gossan supports the interpretation that it is likely to have formed by the oxidation of primary
zinc sulphide mineralisation and that the gossan zone may transition at depth into a significant body of zinc sulphide
mineralisation.
The final hole on the northern section, EPT2206, was drilled 200m directly down dip of EPT2203 (Figure 3), to
target the sulphide zone following a possible steep plunge. This hole intersected a deformation zone/fluid conduit
with alteration similar to that in EPT1854 but intersected only traces of disseminated zinc sulphides. Accordingly, it is
interpreted that the mineralised shoot intersected in EPT1831, EPT2201 and EPT2203 has a shallow south-east plunge
and that EPT2206 has drilled beneath the plunging shoot (see Figure 4 long section).
Figure 3: Cross Section 389150mE (A-A’) – Millennium
A N N U A L R E P O R T 20 1 5
8
Exploration Review continued
Millennium Zinc Prospect continued
The gossan zone intersected at Millennium has
been preferentially oxidised down to a depth of
approximately 400m from surface. The sulphide
intersection in EPT1854, located approximately
250m north-west and along strike of EPT2201
and EPT2203, intersected narrow zones of
brecciated and laminated massive zinc sulphide
mineralisation that may be representative of
the primary precursor zone to the gossan. Its
occurrence at similar depths to that of the
gossan in EPT2203 indicates the potential for
accumulations of high-grade zinc sulphide within
500m of the surface at Millennium.
Photo 2: Gossan zone from 408.9m to 419.2m
in EPT2203
This interpretation is supported by the occurrence of transitional sulphides near the base of the gossan intersected
in EPT2203, which is interpreted to be close to the sulphide interface. The boundary between oxide and sulphide
mineralisation is expected to vary along strike at Millennium. This variation ranges from significant sulphide mineralisation
intersected within 200m from surface in the south of the prospect in EPT2198, to preferential weathering up to 400m
from surface in EPT2203 in the north.
An RC drilling program is being designed to test the undrilled gap along the shale-carbonate contact between the
mineralised sections in the north and south of the prospect. The RC holes will be designed to test for extensions to the
gossanous zone and provide pre-collars for future diamond drilling. Diamond drilling to test the interpreted south-east
plunge to the zinc mineralisation will commence following the completion of the RC program.
In addition, the planned RC drill program will provide an initial drill test down dip and along strike of EPT2198 where drilling
in November 2014 intersected 7m @ 4.76% Zn from 233m including 1.4m @ 10% Zn from 234.55 (see Figure 4).
Figure 4: Diamond drilling long section (B-B’) – Millennium
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
9
COPPER
BM1 – BM6 – BM7 – BM7 East Copper Prospects (100% ENR)
Background
In April 2013, Encounter completed its first earn-in agreement with a wholly owned subsidiary of Antofagasta plc,
covering two JV tenements (E45/2658 and E45/2805) that contain a number of advanced copper prospects including
BM1, BM6, BM7 and BM7 East. Subsequent to the end of the financial year, Antofagasta notified Encounter of their
withdrawal from this earn-in and refocused their exploration investment at Yeneena to the Lookout Rocks Prospect.
Since the commencement of the first earn-in, Antofagasta have sole funded over A$7.5M of exploration expenditure
on the two tenements. Encounter has regained a 100% unencumbered interest in the advanced BM1 & BM7 copper
targets located within a defined 14km long mineralised system.
A total 17 diamond drill holes have now been completed on the earn-in tenements since the commencement of the
Antofagasta funded program in April 2013. These holes provide a broad spaced, 3D dataset over an area that hosts
the BM1 and BM7 copper prospects and has a strike extent of over 7km.
The diamond drill program was designed to provide geological, geochemical and structural data to assist in the
identification of vectors to high grade copper sulphide mineralisation. During December 2014 / January 2015 a review
was conducted of the 3D structure, alteration signatures and trace element geochemistry of the Nifty copper deposit,
located 65km to the north. The review summarised all known literature pertaining to the Nifty deposit including the
PhD thesis written by Anderson (2000) as well as historical company, GA and GSWA reports.
The review of the Nifty copper sulphide deposit has identified siderite and apatite alteration associated with trace copper
sulphide mineralisation as the diagnostic halo that extends laterally from the Nifty sulphide deposit (see Figure 5).
This provides a template of key mineralisation vectors to high grade copper mineralisation in the Paterson Province.
The evaluation of the drill data from the BM1 to BM7 region has highlighted that a number of the key features of
the Nifty alteration signature are evident at Encounter’s Yeneena copper prospects. These geochemical vectors have
provided a new important tool in the definition of high quality drill targets.
Figure 5: Cross section through Nifty copper deposit after Anderson (2000)
A N N U A L R E P O R T 20 1 5
10
Exploration Review continued
BM7 Prospect
The BM7 prospect is located at the intersection of the north-east trending Queen Fault and a NNW to NNE trending
Windsor Fault that splays off the regionally-extensive McKay Fault (see Figure 12). A 6km long and up to 3km wide copper
regolith anomaly outlines the BM7 system that is also coincident with a broad area of electrically resistive geology.
Diamond drilling at BM7 has been primarily
focused on the western side of the regolith
anomaly in the zone of most resistive geology.
The broad spaced diamond drilling has
defined a gently east-dipping sequence of
interbedded carbonates and carbonaceous
to calcareous shales.
All diamond holes drilled along this western
margin have intersected zones of disseminated
copper sulphide mineralisation. The strongest
mineralisation to date has been intersected in
the northern half of the BM7 system in EPT1719
(5.3m @ 2.5% Cu from 387.6m including 0.7m @ 10.7% Cu from 388.6m).
(Reported pursuant to the 2004 Edition of the JORC Code – refer to ASX announcement 22 October 2013)
Photo 3: EPT2158 – 250.4m to 250.7m assays 8.9% copper
EPT2158, collared 400m north of EPT1719, intersected an anomalously thick package of carbonate stratigraphy
containing bands of carbonaceous shale. Copper sulphide mineralisation was noted over a broad interval downhole,
with stronger mineralised zones occurring at the margins of the carbonate bodies, including a narrow vein of massive
chalcopyrite mineralisation at ~250m (Photo 3 – refer to ASX announcement 31 October 2014).
Figure 6: BM7 Diamond drilling status plan over interpreted geology
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
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Figure 7: Interpreted cross section 7539700mN through BM7 with conceptual drill target
BM7 Prospect continued
The low grade copper sulphide mineralisation and phosphorous anomalism (proxy for apatite alteration) appear to
strengthen from west to east in the northern half of BM7, in the area around drill holes EPT1717 and EPT2158. This
alteration within the host carbonate stratigraphy provides a vector to the east towards interpreted steep NW trending
structures. It is interpreted that these NW trending structures are the primary fluid conduits to the BM7 system and is
therefore likely to be more proximal to the high grade mineralisation (see Figures 6 and 7).
Future drilling at BM7 will test the area immediately east of EPT2158 and EPT1717 where the geochemical alteration
vectors are strongest and indicative of the alteration seen proximal to the Nifty copper deposit.
BM7 East Prospect
The BM7 East Prospect was identified in 2013 during wide-spaced aircore drilling east of the BM7 Prospect. The copper
oxide blanket contains zones of higher grade copper oxide mineralisation and the laterally extensive copper regolith
anomaly extends over 2km in strike. Intersections from the BM7 East area include:
n EPT1820 – 34m @ 0.4% Cu from 52m incl. 8m @ 0.9% Cu from 54m
n EPT1844 – 18m @ 0.4% Cu from 46m incl. 6m @ 0.7% Cu from 54m
(refer to ASX announcement 27 November 2013)
Further RC drilling was conducted during the September 2014 quarter to infill the current drill-spacing to 400m spaced
sections. This program encountered similar copper grades to previous drilling, and confirmed the continuity of the copper
regolith anomaly.
Fe-Mg carbonate (siderite) and phosphorus alteration halos (apatite), that are proximal alteration signatures to the Nifty
hypogene high grade mineralisation, are strongly developed at BM7 East. The alteration halos underlie the core of a
laterally extensive copper oxide blanket found at BM7 East that extends over 2km in strike (see Figure 8).
A N N U A L R E P O R T 20 1 5
12
Exploration Review continued
Figure 8: Plan view of alteration and mineralisation through BM7 East – background image Ch40 VTEM
BM7 East Prospect continued
RC drilling in the September 2014 quarter also identified primary copper sulphide (chalcopyrite) in one of the eastern RC
holes (EPT1879) adding further support to the interpretation that the extensive regolith copper anomalism results from
the direct weathering/oxidation of a body, or bodies of copper sulphide mineralisation.
The alteration and mineralisation intersected in the shallow drilling completed at BM7 East is similar to what is seen
in the immediate hangingwall of the Nifty copper deposit. Drilling at depth at BM7 East will identify the extent of the
alteration halos and potentially provide vectors to high grade hypogene copper mineralisation.
BM1 Prospect
The BM1 Northern Zone contains a significant accumulation of near surface, high grade copper oxide mineralisation over
an area approximately 500m by 250m. In the June 2014 quarter, RC drilling extended the area of oxide mineralisation to
the south east with intersections including:
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)
Of particular interest was the intersection of shale hosted supergene copper mineralisation in two of the holes on the
eastern margin of the RC program (refer to ASX announcement 15 July 2014).
A three hole diamond drilling program was also completed to test for copper sulphide mineralisation down dip to the
east of the recent high grade oxide intersections and to test for the possibility of structurally controlled, steeply dipping
mineralisation at depth. Diamond hole collar locations for the three hole diamond program are shown in Figure 9.
EPT2096, being the most south western of the 3 diamond holes, intersected a complex brecciated zone containing
strongly altered clasts. The breccia trends along a north south structural orientation and appears to be associated with
a zone a massive pyrite approximately 1km south at the BM1 Central Zone.
EPT2096 also intersected copper sulphide mineralisation, 5.8m @ 0.45% Cu from 70m, which remains open to
the south east. Future drilling at BM1 will test for copper sulphide down dip to the south east of EPT2096 and for
sub-horizontal layers of copper sulphide mineralisation adjacent to the strongly altered breccia zone.
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
13
Figure 9: BM1 Northern Zone drill hole grade thickness map (Copper grade % x metres)
Figure 10: BM1 Cross Section A-A’ 368540mE
A N N U A L R E P O R T 20 1 5
14
Exploration Review continued
BM6 Prospect
BM6, located 3km NNE of BM1 Northern Area
was discovered during reconnaissance aircore
drilling in 2011 which delineated an 800m long,
400m wide +0.1% copper regolith anomaly,
adjacent to the Windsor fault (with grades up to
1.4% Cu). The regolith anomaly coincides with a
VTEM conductor, which has been modelled to dip
shallowly to the west (towards the Windsor Fault).
Common pathfinder elements to sediment hosted
copper mineralisation are elevated at BM6, with
Bi assays up to 74ppm and Mo assays up to 17ppm
(similar to levels seen at BM1 and BM7).
A two hole RC drill program drilled in 2013 defined
a shallowing of the base of oxidation above a block
of conductive shale (see Figure 11). It is interpreted
that this block of shale is more resistant to weathering
as a result of localised silica alteration of the shale.
The RC holes also intersected elevated copper
anomalism, phosphorous anomalism and siderite
alteration below the base of oxidation, which is
considered highly significant.
The siderite alteration and phosphorous anomalism
at BM6 sits below the base of oxidation within
carbonaceous and dolomitic shales and can be traced
over 2km of strike. The alteration halo is coincident
with a broad and extensive hypogene Cu anomaly
that was intersected in drill hole EPT1691 (178m
@ 400ppm from 72m). This association is similar to the geochemical signature of the hangingwall shale at Nifty.
Figure 11: BM6 Prospect drill status plan
over Ch35 VTEM image
Additional RC drilling is required at BM6 to test the volume from 150m to 250m depth from the surface in order to
delineate the extents of the copper and siderite alteration halos. The successful delineation of a strengthening alteration
halo at BM6 will provide a vector toward primary high grade copper sulphides.
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
15
Photos 4 & 5: Chalcopyrite mineralisation from the Orca Prospect at Fishhook ~240m & 305m
Fishhook Copper Project
(E45/2657 and E45/2806
– 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 its activities
over untested regional copper
targets.
The Fishhook Project covers an
area of over 100km2 and is located
approximately 20km north of
BM1-BM7 (see Figure 1). The
project is predominantly sand
covered (typically 2-10m) with
limited outcrop. Beneath this sand
cover lies the prospective Broadhurst
Formation, the host to mineralisation
at the BM1-BM7 prospects and
the Nifty Copper Deposit, which
is located 45km to the north of
Fishhook.
In August 2014, Encounter
conducted a systematic, broad
spaced 8,000m regional AC drilling
program over the Fishhook Project.
The AC program highlighted a
number of areas of interest and
two follow up diamond drill holes
were subsequently completed for a total of 865m at the Moby Dick and Orca targets. Both drill holes intersected copper
sulphides hosted within a sequence of highly-oxidised “red rock altered” sandstones and shales and zones of sericite
altered shales/dolomites (see Photos 4-7).
Figure 12: Yeneena Project leasing over Ch35 VTEM image
A N N U A L R E P O R T 20 1 5
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Exploration Review continued
Fishhook Copper Project continued
The objective of the program was to obtain the first stratigraphic information in the Fishhook area and to determine
if similar mineralisation indicators occur in this area that we see at the BM1-BM7 copper discovery. The results have
positive implications for the Fishhook Project and open up the potential for further sediment hosted copper occurrences
along the northern corridor.
This initial diamond drilling program has been successful with the 2 diamond holes, spaced 5km apart, both exhibiting
key elements of the sediment hosted copper model in a traditional Central-African copper belt setting. At Fishhook, the
Broadhurst sediments are in close proximity to the underlying thickened sandstone sequence and have undergone
extensive red-rock alteration. Mineralisation appears to be concentrated along more reduced horizons within the
sequence which provides a focus for the copper mineralisation.
Photo 6: Chalcopyrite mineralisation from
the Moby Dick Prospect at Fishhook ~209m
Photo 7: Strong ‘red-rock’ altered sediments from
the Moby Dick Prospect at Fishhook 242-248m
Figure 13: Fishhook Project – Moby Dick and Orca prospects
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
17
Strike Drilling
– Rig 4
Lookout Rocks / Throssell Range Project
(E45/3768, E45/4091, E45/4408 and E45/4230
– 100% Encounter / Antofagasta earning in)
In July 2015, Encounter completed a new earn-in agreement with a wholly
owned subsidiary of Antofagasta plc whereby it may earn a 70% interest in
Lookout Rocks / Throssell tenements within the Yeneena Project by incurring
expenditures of US$6 million over a four year period.
The Lookout Rocks / Throssell Range Projects extends north-west of the
100% owned Fishhook prospect and cover over 30 strike kms of interpreted
Broadhurst sediments. Interpretation of the detailed airborne electromagnetic
data indicates the prospective structures and Broadhurst lithologies extend over
the entire length of the project in an area that contains very little previous exploration activity. Lookout Rocks includes
four tenements (~450km2) of highly prospective, untested exploration ground located in the north-west of Encounter’s
Yeneena Project (see Figure 14 ).
Encounter completed a detailed helicopter based VTEM survey over a large portion of Lookout Rocks in 2014
(see Figure 15). Interpretation of the data from this survey, in conjunction with detailed aerial photography, has
outlined a tightly folded, NNW trending belt of Broadhurst Formation sediments. These sedimentary units are offset
by interpreted NNE trending structures and are considered to be similar to the host units of the Nifty copper deposit
located 25km to the north.
Drilling under the new Lookout Rocks earn-in agreement commenced in August 2015 with a track mounted aircore
and slim-line RC program. This program will provide initial subsurface geochemistry at key structural locations identified
at Lookout Rocks.
Figure 14: Yeneena Project – Geological and
structural interpretation with leasing
Figure 15: Yeneena Project leasing over
TMIRTP 1VD Magnetic image
A N N U A L R E P O R T 20 1 5
18
Exploration Review continued
Aria Copper/Gold Prospect
In September 2015 the Company
announced the identification
of a compelling IOCG target
(“Aria Prospect”) within the Lookout
Rocks Copper Project.
A single diamond drill hole (PADD002A)
was completed at the Aria Prospect
by a previous explorer under the WA
Government EIS program. This drill
hole was located to test a discrete
magnetic anomaly within the GSWA
regional magnetic dataset (see Figures
16 and 17). The drill hole intersected a
package of hematite altered, polymictic
breccia (see Photos 8 and 9) from the
start of diamond core at 84.7m to EOH
(650.1m). Approximately 15% of the
core drilled in PADD002A was previously
submitted for chemical analysis,
including only 31 metres of the first
400 metres of drill core.
Zones of light disseminations and
occasional visible blebs of chalcopyrite,
bornite and possible chalcocite (copper
sulphide minerals) have been identified
in the drill core from approximately
120m and occur sporadically to the end
of the hole. A number of these zones
containing visible mineralisation were
not chemically assayed.
In 2014, Encounter collected detailed
magnetic data over the Aria prospect.
The historical drill hole (PADD002A)
was recently re-examined at the WA
Government Carlisle Core Library. A number of technical specialists with significant experience in IOCG exploration have
inspected the core and identified key characteristics of the IOCG model within the hole.
Figure 16: Lookout Rocks Project leasing over Magnetics
(1VDRTP pseudocolour image – NE sun angle);
Background image of Lookout Rocks Interpreted bedrock geology
Exploration Plan
1. The entire (PADD002A) hole is being cut and will be submitted for multi-element analysis.
2. A heritage survey will be completed at Aria (Sep/Oct 2015) to facilitate an on-ground geophysical survey
and follow up drilling program.
3. The 2014 detailed magnetic data will be modelled and a detailed ground gravity survey will be completed
in the coming weeks to refine the planned drill program (Sep 2015).
4. Drilling, RC or diamond, at the Aria Prospect of priority targets (Oct/Nov 2015).
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
19
Photo 8: PADD002A 180.4m to 184.0m – Hematite altered, polymictic breccia containing
clasts of felsic porphyry, gneissic and mafic igneous rocks
Photo 9: PADD002A 610.8.4m to 615.3m – Hematite altered, polymictic breccia containing
clasts of felsic porphyry, gneissic and mafic igneous rocks
Figure 17: Aria IOCG Residual Gravity with RTP1VD Magnetic Contours showing
location of PADD002A (NB – no other drilling completed over target area)
A N N U A L R E P O R T 20 1 5
20
Summary of Tenements
Lease
Lease Name
Project Name
Area km2 Managing Company
E51/1570
Hillview
Yilgarn
89
Encounter Resources Limited
E70/4667
Bindi Bindi
South West
316.9
Encounter Resources Limited
Encounter
Interest
100%
100%
E45/2500
Yeneena
Paterson
163.4
Encounter Operations Pty Ltd
90-100%**
E45/2501
Yeneena
Paterson
41.4
Encounter Operations Pty Ltd
90%**
E45/2502
Yeneena
Paterson
216.3
Encounter Operations Pty Ltd
E45/2503
Yeneena
Paterson
76.3
Encounter Operations Pty Ltd
100%
100%
E45/2561
Yeneena
Paterson
86
Encounter Operations Pty Ltd
90%**
E45/2657
Yeneena
Paterson
222.8
Encounter Operations Pty Ltd
E45/2658
Yeneena
Paterson
222.8
Encounter Operations Pty Ltd
E45/2805
Yeneena
Paterson
209.7
Encounter Operations Pty Ltd
E45/2806
Yeneena
Paterson
63.7
Encounter Operations Pty Ltd
ELA45/4612
Yeneena
Paterson
153.0
Encounter Operations Pty Ltd
ELA45/4564
Dora
Paterson Cu/Au
194.2
Encounter Operations Pty Ltd
ELA45/4613
Telfer West
Paterson Cu/Au
121.4
Encounter Operations Pty Ltd
E45/3768
Lookout Rocks
Paterson
181.50
Encounter Yeneena Pty Ltd
E45/4091
Lookout Rocks
Paterson
136.5
Encounter Yeneena Pty Ltd
E45/4230
Lookout Rocks
Paterson
92.4
Encounter Yeneena Pty Ltd
E45/4408
Lookout Rocks
Paterson
41.7
Encounter Yeneena Pty Ltd
P45/3001
Lookout Rocks
Paterson
0.8
Encounter Yeneena Pty Ltd
100%
100%
100%
100%
100%
100%
100%
100%*
100%*
100%*
100%*
100%
* Tenement subject to Antofagasta Earn-In Agreement refer to ASX announcement 30 July 2015
** Tenement subject to Hampton Hill Mining NL Earn-In Agreement (only includes 4 eastern blocks on E45/2500)
refer to ASX announcement 23 April 2015
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
21
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 2015.
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 Secretaries
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.
A N N U A L R E P O R T 20 1 5
22
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
–
–
–
3,000,000
1,000,000
–
–
3,000,000
1,000,000
Included in the Directors’ interests in Unlisted Options, there are 4,000,000 options that are vested and exercisable
as at the date of signing this report.
Directors’ Meetings
The number of meetings of the Company’s Directors
held during the year ended 30 June 2015, and the
number of meetings attended by each Director are
as follows:
Director
Held
Attended
Board of Directors’ Meetings
P Chapman
W Robinson
P Bewick
J Hronsky
7
7
7
7
Principal Activities
7
7
7
7
During the year the Company continued its exploration
programs at BM1 and BM7 pursuant to the farm-in
agreement with a wholly owned subsidiary of Antofagasta
plc. The Company also entered into a farm-in agreement
with Hampton Hill NL (HHM) during the year, pursuant
to which HHM may earn up to a 25% interest in the
Millennium zinc project.
During the year the Company also undertook exploration
programs at its Fishhook prospect and also acquired
a 100% interest in a prospective tenement package
to the north-west of its main project area, which the
Company was previously earning in to pursuant to
a farm-in arrangement with Hammer Metals Limited
(formerly Midas Resources Limited).
The principal activity of the Company during the financial
year was mineral exploration in Western Australia.
Full details of the Company’s exploration activities are
available in the Exploration Review in the Annual Report.
There were no significant changes in these activities
during the financial year.
Financial Position
At the end of the financial year the Group had
$1,372,033 (2014: $3,836,543) in cash and at call
deposits. Capitalised mineral exploration and evaluation
expenditure is $19,703,415 (2014: $18,822,002).
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.
Results of Operations
The consolidated net profit after income tax for the
financial year was $523,915 (2014: $748,166 loss).
Included in the consolidated loss for the current year
is a write-off of deferred and uncapitalised exploration
and joint venture expenditure totalling $555,286
(2014: $255,804).
Review of Activities
Exploration
Exploration activities for the financial year have been
focussed on the Company’s Yeneena Project in the
Paterson Province of Western Australia, principally at the
BM1 and BM7 copper prospects and the Millennium
copper/zinc prospect.
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
23
Options over Unissued Capital
Unlisted Options
As at the date of this report 7,370,000 unissued ordinary shares of the Company are under option as follows:
Number of Options Granted
Exercise Price
Expiry Date
450,000
450,000
1,450,000
600,000
750,000
200,000
670,000
1,250,000
750,000
800,000
80 cents
40 cents
30 cents
39 cents
21 cents
31 cents
22 cents
23 cents
31 cents
16 cents
30 September 2015
31 May 2016
30 November 2016
30 November 2017
31 May 2017
31 January 2018
31 May 2018
27 November 2018
27 November 2019
3 January 2019
All options on issue at the date of this report are vested and exercisable.
During the financial year the Company granted
2,800,000 unlisted options (2014: 945,000)
over unissued shares to employees, directors
and consultants of the Company.
During the year 225,000 options were cancelled
(2014: 250,000) on the cessation of employment,
and 5,375,000 options were cancelled on expiry
of the exercise period (2014: nil).
During the financial year no (2014: 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
2015
2014
Ordinary fully
paid shares
134,543,350
132,543,350
Dividends
No dividend has been paid since the end of the previous
financial year and no dividend is recommended for the
current year.
Matters Subsequent to
the End of the Financial Year
Other than the matters below, 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.
− On 29 July 2015 the Company’s existing farm-in
arrangement with Antofagasta plc was terminated.
On the same date the Company entered into a
separate up to US$6 million earn-in arrangement
at the Company’s Lookout Rocks copper prospect
within the Yeneena Project.
− On 22 September 2015 the Company announced
that it had received firm commitments of
$1.5 million from investors in respect of a share
placement, and was also undertaking a Share
Purchase Plan to existing eligible shareholders
to raise up to a further $1.4 million.
A N N U A L R E P O R T 20 1 5
24
Directors’ Report continued
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.
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.
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
25
Remuneration Report (Audited) continued
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.
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 2015.
A N N U A L R E P O R T 20 1 5
26
Directors’ Report continued
Remuneration Report (Audited) continued
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.
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:
2015
2014
2013
2012
2011
Profit/(Loss) for the year
attributable to shareholders
$523,915
$(748,166) $(1,566,249)
$(758,706) $(4,933,106)
Closing share price at 30 June
$0.19
$0.20
$0.16
$0.18
$0.93
As an exploration company the Board does not consider the profit/(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 Company’s farm-in arrangements, the acquisition and consolidation of Yeneena landholdings,
as more appropriate indicators of management performance for the 2015 financial period.
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
27
Remuneration Report (Audited) continued
Remuneration Disclosures
The Key Management Personnel of the Company have been identified as:
Mr Paul Chapman
Mr Will Robinson
Mr Peter Bewick
Dr Jon Hronsky
Non-Executive Chairman
Managing Director
Exploration Director
Non-Executive Director
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 2015
Paul Chapman
Will Robinson
Peter Bewick
Jon Hronsky
Total
30 June 2014
Paul Chapman
Will Robinson
Peter Bewick
Jon Hronsky
Total
Base Salary
$
60,000
271,596
260,654
50,000
Short Term
Incentive
$
Superannuation
Contributions
$
Value of
Options
$
–
36,250
33,750
–
5,700
29,245
27,968
4,750
–
–
111,097
36,289
Total
$
65,700
337,091
433,469
91,039
642,250
70,000
67,663
147,386
927,299
Short Term
Post Employment Other Long Term
Short Term
Incentive
$
Superannuation
Contributions
$
Value of
Options
$
Base Salary
$
60,000
283,958
270,000
50,000
–
14,500
13,500
–
5,550
27,607
26,224
4,625
663,958
28,000
64,006
Total
$
65,550
326,065
309,724
54,625
755,964
–
–
–
–
–
Value of
Options as
Proportion of
Remuneration
%
–
–
25.6%
39.9%
Value of
Options as
Proportion of
Remuneration
%
–
–
–
–
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
2014/15 financial year
2013/14 financial year
Will Robinson
Peter Bewick
$36,250
$33,750
$14,500
$13,500
Performance indicators for the 2014/15 financial year included corporate management, project and operational
performance (including safety and environmental management and results of exploration activity) and share
price performance.
A N N U A L R E P O R T 20 1 5
28
Directors’ Report continued
Remuneration Report (Audited) continued
Options Granted as Remuneration
During the financial year ended 30 June 2015 the following options were granted to Directors or Key Management
Personnel of the Company (2014: nil):
Key Management Personnel
Number of options
Exercise price
Expiry date
Peter Bewick
Peter Bewick
Jon Hronsky
750,000
750,000
500,000
23 cents
31 cents
23 cents
27 November 2018
27 November 2019
27 November 2018
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.
2015
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
–
–
–
–
–
–
–
–
Vested and
exercisable
at the end
of the year
–
–
5,000,000
1,500,000
(3,500,000)
3,000,000
3,000,000
1,300,000
500,000
(800,000)
1,000,000
1,000,000
1 Options lapsing unexercised at the end of the exercise period.
2014
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
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
29
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.
2015
Names – Directors
P Chapman
W Robinson
P Bewick
J Hronsky
2014
Names – Directors
P Chapman
W Robinson
P Bewick
J Hronsky
Balance
at start
of the year
5,600,000
22,168,328
5,102,000
–
Balance
at start
of the year
5,600,000
22,168,328
5,102,000
–
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
–
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
–
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.
A N N U A L R E P O R T 20 1 5
30
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.
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
2015
$
31,000
–
31,000
2014
$
33,000
–
33,000
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 24th day of September 2015.
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
AUDITOR’S INDEPENDENCE DECLARATION
31
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 2015, I declare that, to the best
of my knowledge and belief, there have been:
AUDITOR’S INDEPENDENCE DECLARATION
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(a)
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 2015, I declare that, to the best
of my knowledge and belief, there have been:
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
(b)
Crowe Horwath Perth
Crowe Horwath Perth
Sean McGurk
Partner
Signed at Perth, 24 September 2015
Sean McGurk
Partner
Signed at Perth, 24 September 2015
Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member 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 of Crowe Horwath is a separate and
A N N U A L R E P O R T 20 1 5
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 Profit or Loss
and Other Comprehensive Income
For the financial year ended 30 June 2015
32
Other income
Total income
Employee expenses
Employee expenses recharged to exploration
Equity based remuneration expense
Non-Executive Director’s fees
Gain in fair value of financial assets
Depreciation expense
Corporate expenses
Administration and Other expenses
Exploration costs written off and expensed
Profit/(Loss) before income tax
Income tax benefit
Profit/(Loss) after tax
Note
2015
$
5
1,633,716
1,633,716
Consolidated
Re-stated
2014
$
477,366
477,366
(1,609,385)
(1,676,334)
1,347,908
1,316,785
(187,033)
(110,000)
368,987
(10,329)
(62,953)
(291,710)
(555,286)
(71,760)
(110,000)
–
(9,740)
(61,432)
(357,247)
(255,804)
523,915
(748,166)
–
–
523,915
(748,166)
19
6
6
6
7
19
Other comprehensive income
–
–
Total comprehensive income/(loss) for the year
523,915
(748,166)
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
29
29
0.39
0.37
(0.56)
(0.56)
The above consolidated statement of profit or loss and other comprehensive income 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
Consolidated Statement of
Financial Position As at 30 June 2015
33
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Other financial 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)
11
12
13
Consolidated
2015
$
Re-stated
2014
$
1,372,033
852,086
15,018
3,836,543
58,494
93,640
2,239,137
3,988,677
1,568,194
204,652
19,703,415
–
304,989
18,822,002
21,476,261
19,126,991
23,715,398
23,115,668
15
16(a)
668,552
125,754
1,207,619
77,397
794,306
1,285,016
16(b)
106,569
106,569
85,606
85,606
900,875
1,370,622
22,814,523
21,745,046
17
19
19
31,471,913
(9,306,923)
649,533
31,113,384
(12,135,860)
2,767,522
22,814,523
21,745,046
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
A N N U A L R E P O R T 20 1 5
Consolidated Statement of
Changes in Equity For the financial year ended 30 June 2015
34
Consolidated
Re-stated
Accumulated
losses
$
Equity
remuneration
reserve
$
Issued
capital
$
Total
$
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
–
–
–
(748,166)
–
(748,166)
–
71,760
71,760
41,329
(41,329)
–
Balance at the end of the financial year
31,113,384
(12,135,860)
2,767,522
21,745,046
2015
Balance at the start of the financial year
31,113,384
(12,135,860)
2,767,522
21,745,046
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
Transactions with equity holders in
their capacity as equity holders:
–
–
–
523,915
–
523,915
–
187,033
187,033
2,305,022
(2,305,022)
–
Shares issued
358,529
–
–
358,529
Balance at the end of the financial year
31,471,913
(9,306,923)
649,533
22,814,523
The above consolidated statement of changes in equity 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
Consolidated Statement of
Cash Flows For the financial year ended 30 June 2015
35
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
2015
$
2014
$
14,284
287,018
–
75,929
(792,689)
9,809
175,925
500,022
134,768
(819,553)
Net cash provided/(used in) from operating activities
28
(415,458)
971
Cash flows from investing activities
Contributions received from farm-in partners
Proceeds from disposal of assets
Payments for exploration and evaluation
Payments for plant and equipment
2,908,246
49,033
(4,968,272)
(34,088)
3,725,847
–
(4,564,128)
(132,804)
Net cash used in investing activities
(2,045,081)
(971,085)
Cash flows from financing activities
Proceeds from the issue of shares
Payments for share issue costs
Net cash used in financing activities
Net decrease in cash held
Cash at the beginning of the financial year
–
(3,971)
(3,971)
–
–
–
(2,464,510)
(970,114)
3,836,543
4,806,657
Cash at the end of the financial year
8(a)
1,372,033
3,836,543
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015
36
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 24 September 2015.
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 2015, 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 2015, 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.
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
37
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.
Option fee income
Revenue is recognised for option fee income at such time that the option fee becoming receivable by the
Company occurs.
(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.
(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 25). 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.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
38
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.
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. Amounts receivable are allocated
in the financial statements against the corresponding expense or asset in respect of which the research and
development concession claim has arisen.
(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.
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
39
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.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
40
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 at the corporate bond rate
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.
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
41
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
A financial asset designated on initial recognition as one to be measured at fair value with fair value changes
in profit and loss is 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.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
42
Note 1 Summary of significant accounting policies continued
(s) Investments and other financial assets continued
(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.
Fair value hierarchy
The Group’s investments and other financial assets, are measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
(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.
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
43
Note 1 Summary of significant accounting policies continued
(t) Fair value estimation continued
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes,
the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date; and assumes that the transaction will take place
either: in the principal market; or in the absence of a principal market, in the most advantageous market
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on
its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the
use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date
and transfers between levels are determined based on a reassessment of the lowest level of input that is significant
to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is
either not available or when the valuation is deemed to be significant. External valuers are selected based on market
knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period
to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation
and a comparison, where applicable, with external sources of data
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 its 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.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
44
Note 2 Financial risk management continued
(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.
Equity risk
The Group has exposure to price risk in respect of its holding of ordinary securities in Hampton Hill NL (ASX: HHM),
which has a carrying value at 30 June 2015 of $1,568,194 (2014: Nil). The investment is classified at fair value through
profit or loss and as such any movement in the market value of HHM shares will be recognised as a benefit of expense
in profit or loss. No specific hedging activities are undertaken into this investment.
Foreign exchange risk
The Group enters into earn-in arrangements that may be denominated in currencies other than Australian Dollars.
Whilst the Group does not recognise assets or liabilities in respect of these earn-in arrangements and accordingly
fluctuations in foreign exchange rates will have no direct impact on the Group’s net assets, movements in foreign
exchange may favourably or adversely affect future amounts to be incurred by the Group or its earn-in partners pursuant
to such agreements.
Other than the above, the Group does not have any direct contact with foreign exchange fluctuations 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
45
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 18 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 Other income
Operating activities
Earn-in option fee1
Management fees from farm-in partners
Gain on disposal of assets
Interest receivable
Other income
Consolidated
2015
$
2014
$
1,199,207
321,470
22,826
75,929
14,284
1,633,716
–
332,789
–
134,768
9,809
477,366
1 Fair value of shares received from Hampton Hill NL in relation to an option fee pursuant to an election made under
an earn-in agreement in respect of the Company’s Millennium project. Refer Note 11.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
46
Consolidated
Re-stated
2014
$
2015
$
Note 6 Loss for the year
Loss before income tax includes the following specific benefits/(expenses):
Depreciation:
Office equipment
(10,329)
(9,740)
Total exploration and joint venture costs not capitalised and written off
(555,286)
(255,804)
Gain in fair value of financial assets1
368,987
–
1 Adjustment to carrying value of investment in Hampton Hill NL,
based on ASX closing price as at 30 June 2015. The gain on investment
has been recognised in the Statement of Profit or Loss. Refer Note 11.
Note 7 Income tax
(a) Income tax expense
Current income tax:
Current income tax charge (benefit)
Current income tax not recognised
Deferred income tax:
Relating to origination and reversal of timing differences
Deferred income tax benefit not recognised
Income tax expense/(benefit) reported in the income statement
Refer Note 30 for details of prior period adjustment in relation to
the accounting of research and development tax concession credits.
(b) Reconciliation of income tax expense to prima facie tax payable
Profit/(Loss) from continuing operations
before income tax expense
Tax at the Australian rate of 30% (2014: 30%)
Tax effect of permanent differences:
Non-deductible share based payment
Exploration costs written off
Capital raising costs claimed
Net deferred tax asset benefit not brought to account
Tax (benefit)/expense
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
(1,223,082)
1,223,082
–
–
–
523,915
157,175
56,110
166,586
(40,974)
(338,897)
–
(598,861)
598,861
(150,457)
150,457
–
(748,166)
(224,450)
21,528
76,741
(41,396)
167,577
–
47
Consolidated
Re-stated
2014
$
2015
$
(4,505)
(5,911,025)
(28,092)
(5,646,601)
(5,915,530)
(5,674,693)
8,302,034
69,697
–
40,974
8,273,990
48,901
56,727
64,790
8,412,705
8,444,408
2,497,175
2,769,715
23,587
(264,424)
(4,564)
(314,279)
(23,816)
(56,727)
28,044
20,796
(41,395)
47,380
513,494
28,926
Note 7 Income tax continued
(c) Deferred tax – Balance Sheet
Liabilities
Prepaid expenses
Capitalised exploration expenditure
Assets
Revenue losses available to offset against future taxable income
Employee provisions
Accrued expenses
Deductible equity raising costs
Net deferred tax asset not recognised
(d) Deferred tax – Income Statement
Liabilities
Prepaid expenses
Capitalised exploration expenditure
Assets
Deductible equity raising costs
Accruals
Increase in tax losses carried forward
Employee provisions
Deferred tax benefit/(expense) movement for the period not recognised
(272,540)
229,562
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 $27,673,446 (2014: $27,579,967) were incurred by Australian entities.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
48
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
2015
$
2014
$
948,676
423,357
1,836,543
2,000,000
1,372,033
3,836,543
Cash and cash equivalents per statement of cash flows
1,372,033
3,836,543
(b) Deposits at call
Amounts classified as deposits at call are short term deposits
depending upon the immediate cash requirements of the Group,
and earn interest at the respective short term interest rates.
(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
Office lease bond guarantee (Note 24)
Corporate credit card security deposit (Note 24)
–
23,000
50,000
73,000
34,000
22,629
147,520
204,149
The $34,000 environmental bond guarantee in respect of tenement E51/1127 has been cancelled
upon relinquishment of the lease.
Cash assets include an amount of $59,549 (2014: $320,081) in respect of unspent farm-in contributions received.
The Company has recognised liabilities in the financial statements for unspent farm-in contributions (Note 15).
Note 9 Current assets – Receivables
(a) Trade and other receivables
Funds due from farm-in partner
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 20.
223,234
536,952
818
–
91,082
852,086
–
–
6,166
9,296
43,032
58,494
15,018
93,640
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
49
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
2015
$
2
1
2
2015
%
100%
100%
100%
Company
2014
$
2
1
2
Ownership Interest
2014
%
100%
100%
100%
Country of
Incorporation
Australia
Australia
Australia
Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006.
n
n Hamelin Resources Pty Ltd was incorporated in Western Australia on 24 November 2009.
Encounter Yeneena Pty Ltd was incorporated in Western Australia on 23 May 2013.
n
The ultimate controlling party of the group is Encounter Resources Limited.
(b) Loans to controlled entities
The following amounts are payable to the parent company,
Encounter Resources Limited at the reporting date:
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Encounter Yeneena Pty Ltd
Company
2015
$
2014
$
19,480,080
18,082,774
357
452,574
237
110
The loans to Encounter Operations Pty Ltd, Hamelin Resources Pty Ltd and Encounter Yeneena Pty Ltd, to fund
exploration activity are non interest bearing. The Directors of Encounter Resources Limited do not intend to call
for repayment within 12 months.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
50
Note 11 Other financial assets –
Investments Designated at Fair Value through Profit or Loss
Balance at the start of the financial year
Investments acquired1
Gain on investments recognised through profit & loss2
Balance at the end of the financial year
Consolidated
2015
$
2014
$
–
1,199,207
368,987
1,568,194
–
–
–
–
1 Fair value of shares received from Hampton Hill NL in relation to an option fee pursuant to an election made under
an earn-in agreement in respect of the Company’s Millennium project. Refer Note 5.
2 Adjustment to carrying value of investment in Hampton Hill NL, based on ASX closing price as at 30 June 2015.
The gain on investment has been recognised in the Statement of Profit or Loss. Refer Note 5.
Investments designated at fair value through profit or loss have been measured at level 1 in the fair value measurement
hierarchy, refer accounting policy 1(s).
Note 12 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
Net book value of assets disposed
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
898,825
(706,082)
905,819
(623,068)
192,743
282,751
109,035
(97,126)
11,909
22,137
(22,137)
–
109,035
(86,797)
22,238
22,137
(22,137)
–
204,652
304,989
282,751
34,088
(26,207)
(97,889)
192,743
22,238
–
(10,329)
11,909
251,715
129,052
–
(98,016)
282,751
28,225
3,753
(9,740)
22,238
No items of property, plant and equipment have been pledged as security by the Group.
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
51
Consolidated
Re-stated
2014
$
2015
$
Note 13 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)
Costs capitalised by Encounter Yeneena Pty Ltd
in respect of the Yeneena Project (iii)
–
136,216
19,255,004
18,506,190
448,411
–
Capitalised share of exploration assets under JV Agreements (iv)
–
179,596
Cost carried forward
19,703,415
18,822,002
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), (iii) Exploration and evaluation expenditure recognised incurred by Encounter Operations Pty Ltd and Encounter
Yeneena Pty Ltd on tenements at the Yeneena Project.
(iv) 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 acquisition and exploration costs for the period (v)
Exploration costs funded by EIS grant
Research and development tax concessions (vi)
Total exploration and joint venture costs written off
and expensed for the period
18,822,002
2,260,668
(287,017)
(536,952)
17,774,406
1,743,010
(175,925)
(263,685)
(555,286)
(255,804)
Capitalised exploration costs at the end of the period
19,703,415
18,822,002
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
52
Note 13 Non-current assets – Capitalised mineral
exploration and evaluation expenditure continued
(v) 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 14b)
incurred costs of $2,530,551 (2014: $3,436,990) in respect of exploration and evaluation costs on the Company’s
assets in addition to the amounts stated above.
During the financial period, the Company’s farm-in partner Hampton Hill NL (see Note 14b) incurred costs of
$654,819 in respect of exploration and evaluation costs on the Company’s assets in addition to the amounts
stated above.
(vi) Amounts receivable pursuant to research and development tax concession claims lodged during the period.
Refer Note 30 for details of prior period adjustment.
Note 14 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 13) 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.
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 Nil (2014: $179,596 (Note 13).
(b) Farm-in Arrangements
The Company is party to the following farm-in arrangements:
Antofagasta Yeneena farm-in – Antofagasta Minerals Perth Pty Ltd earning-in
Antofagasta Minerals Perth Pty Ltd entered into a farm-in and joint venture agreement with the Company in respect
of granted tenements EL45/2658 and EL45/2805 that form part of the Company’s wholly owned Yeneena Project.
The agreement covered 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 were 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;
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
53
Note 14 Interest in joint ventures and farm-in arrangements continued
(b) Farm-in Arrangements continued
Antofagasta Yeneena farm-in – Antofagasta Minerals Perth Pty Ltd earning-in continued
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;
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.
n On 29 July 2015 this farm-in arrangement was terminated with Encounter retaining a 100% interest in the
granted tenements.
Encounter Yeneena Lookout Rocks Farm-in – Antofagasta Minerals Perth Pty Ltd earning-in
Antofagasta Minerals Perth Pty Ltd has entered into a farm-in and joint venture agreement with the Company
in respect of granted tenements EL45/4091, EL45/4408, EL45/4230 and EL45/3768 that form part of the
Company’s wholly owned Yeneena Project. The agreement covers an area of 450km2 untested exploration ground
located in the north-west of the Yeneena Project.
Significant terms of the farm-in arrangement as follows:
n 2 year initial earn-in phase under which Antofagasta may acquire a 51% joint venture interest by expenditure
of US$2 million and may withdraw at any time subject to a meeting a minimum spend of US$500,000;
n A second earn-in phase, under which Antofagasta may acquire a further 19% interest by contributing
expenditure of US$4 million within 2 years;
n
In the event of a decision to mine Antofagasta will pay the Company US$3 million.
St Barbara Limited (SBM) – ENR earning-in
Encounter Resources Limited 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 covered
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
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.
Subsequent to the end of the financial year Encounter notified SBM of its withdrawal from the earn-in
agreement without earning an interest in the tenements.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
54
Note 14 Interest in joint ventures and farm-in arrangements continued
(b) Farm-in Arrangements continued
Hammer Metals Limited (HMX) (formerly Midas Resources Limited (MDS)) – ENR Earning-in
Encounter Resources Limited 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 covered 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.
During the year the farm-in agreement was terminated and the Company acquired a 100% interest in the HMX
farm-in tenements by the issue of 750,000 ordinary fully paid shares to Hammer Metals Limited, at a fair value
of $112,500 (Note 17c).
Millennium Zinc Project – Hampton Hill NL (HHM) Earning-in
Encounter Resources Limited has entered into a farm-in agreement with Hampton Hill Limited pursuant to which
HHM may earn up to a 25% interest in the Company’s Millennium zinc project, comprising exploration licences
EL45/2501, EL45/2561 and four blocks of EL45/2500 in the Paterson Province of Western Australia.
Significant terms of the farm-in arrangement as follows:
n HHM must spend a minimum of $500,000 on exploration before withdrawal. Upon meeting this minimum
commitment, HHM will acquire a 10% interest in Millennium (“Initial Earn-in Phase”). At that point, HHM
(10%) and Encounter (90%) will form a joint venture.
n
To preserve its initial 10% interest and maintain the right to earn a further 15% interest, HHM may then elect to
sole fund an additional $500,000 (“Second Earn-in Phase”).
At completion, HHM will have contributed $1,000,000 and retained its 10% interest in Millennium. The timing
of this additional expenditure will be as determined by Encounter.
n HHM may then elect to contribute a further $1,000,000 out of the next $2,000,000 of exploration expenditure
to earn a further 15% interest in Millennium (“Additional Earn-in Phase”). The timing of this expenditure will be
determined by Encounter.
n At that point, after contribution of a total of $2,000,000 of exploration expenditure, HHM would hold a 25%
and Encounter would hold a 75% interest in the joint venture.
n
n
n
n
n
Industry standard expenditure contribution or dilution formulas would apply. If a party’s interest is diluted to less
than 10%, that interest would convert to a 1% Net Profit Royalty.
Encounter will be the Operator
If, after the Initial Earn-in Phase, HHM elects to maintain its 10% interest, but forfeit their right to further earn-in,
then at that point, HHM will issue 5% of the issued capital of Hampton to Encounter.
If, after the Initial Earn in Phase, HHM elects to proceed with the Second Earn-in Phase, then at that point, HHM
will issue 15% of the issued capital of HHM to Encounter. If this election is made then Encounter will have the
right to appoint a member to the board of HHM.
The earn-in and joint venture agreement is conditional upon Encounter obtaining all necessary consents and
approvals to the grant of the earn-in rights to HHM.
As at 30 June 2015 HHM had acquired a 10% interest in the Millennium project pursuant to the Initial Earn-in
Phase, and had elected to proceed with the Second Earn-in Phase.
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
55
Consolidated
2015
$
2014
$
59,549
573,904
35,099
320,081
823,874
63,664
668,552
1,207,619
125,754
77,397
106,569
85,606
Note 15 Current liabilities – Trade and other payables
Unspent farm-in contributions (Note 8c)
Trade payables and accruals
Other payables
Liabilities are not secured over the assets of the Group. Details of
fair value and exposure to interest risk are included at Note 20.
Note 16 Employee benefits
(a) Current liabilities
Liability for annual leave
(b) Non-current liabilities
Liability for long service leave
Note 17 Issued capital
(a) Ordinary shares
The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia.
The Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on
the shares respectively held by them.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares
present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value. There is no limit to the authorised share capital of the Company.
(b) Share capital
Issued share capital
(c) Share movements during the year
Balance at the start of the financial year
Shares issued as consideration
for drilling services
Shares issued to acquire
exploration assets (Note 14b)
Less share issue costs
Issue
Price
2015
No.
2014
No.
2015
$
2014
$
134,543,350
132,543,350
31,471,913
31,113,384
132,543,350
132,543,350
31,113,384
31,113,384
$0.20
1,250,000
$0.15
750,000
–
–
–
–
250,000
112,500
(3,971)
–
–
–
Balance at the end of the financial year
134,543,350
132,543,350
31,471,913
31,113,384
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
56
Note 18 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 2,800,000 options over unissued shares (2014: 945,000).
(b) Options exercised during the year
During the financial year the Company issued no shares on the exercise of unlisted employee options (2014: Nil).
(c) Options cancelled during the year
During the year 225,000 options (2014: 250,000) were cancelled upon termination of employment. 5,375,000 options
were cancelled on expiry of exercise period (2014: Nil).
(d) Options on issue at the balance date
The number of options outstanding over unissued ordinary shares at 30 June 2015 is 7,370,000 (2014: 10,170,000).
The terms of these options are as follows:
Number of options outstanding
Exercise price
Expiry date
450,000
450,000
1,450,000
600,000
750,000
200,000
670,000
1,250,000
750,000
800,000
7,370,000
80 cents
40 cents
30 cents
39 cents
21 cents
31 cents
22 cents
23 cents
31 cents
16 cents
30 September 2015
31 May 2016
30 November 2016
30 November 2017
31 May 2017
31 January 2018
31 May 2018
27 November 2018
27 November 2019
3 January 2019
(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)
2015
2014
No.
WAEP
(cents)
No.
Options outstanding at the start of the year
10,170,000
87.8
9,475,000
Options granted during the year
Options exercised during the year
Options cancelled and expired unexercised during the year
2,800,000
–
(5,600,000)
23.1
–
131.3
945,000
–
(250,000)
Options outstanding at the end of the year
7,370,000
30.2 10,170,000
WAEP
(cents)
93.6
23.9
–
59.4
87.8
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
57
Note 18 Options and share based payments continued
(e) Subsequent to the balance date continued
Weighted average contractual life
The weighted average contractual life for un-exercised options is 29.8 months (2014: 18.1 months).
Basis and assumptions used in the valuation of options
The options issued during the year were valued using the Black-Scholes option valuation methodology.
Date granted
Number of
options granted
Exercise price
(cents)
Expiry date
28 November 2014
28 November 2014
12 February 2015
1,250,000
750,000
800,000
23 cents
31 cents
16 cents
27 November 2018
27 November 2019
31 January 2019
Risk free
interest
rate used
2.65%
2.65%
2.09%
Volatility
applied
Value of
Options
93.3%
93.3%
102.0%
$91,263
$56,123
$39,648
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 19 Reserves and accumulated losses
Balance at the beginning of the year
Profit/(Loss) for the period
Movement in equity remuneration reserve
in respect of options issued
Transfer to accumulated losses on cancellation of options
Consolidated
2015
2014 Re-stated
Accumulated
losses
$
Equity
remuneraton
reserve (i)
$
Accumulated
losses
$
Equity
remuneration
reserve (i)
$
(12,135,860)
523,915
2,767,522 (11,429,023)
(748,166)
–
2,737,091
–
–
2,305,022
187,033
(2,305,022)
–
41,329
71,760
(41,329)
Balance at the end of the year
(9,306,923)
649,533 (12,135,860)
2,767,522
(i) The equity remuneration reserve is used to recognise the fair value of options issued but not exercised.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
58
Note 20 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 13.
Interest rate risk
At the reporting date the interest profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial assets
Variable rate instruments
Financial assets
Carrying amount ($)
2015
–
2014
–
1,372,0233
3,836,543
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.
2015
Variable rate instruments
2014
Variable rate instruments
Profit or loss
Equity
1%
increase
$
1%
decrease
$
1%
increase
$
1%
decrease
$
13,720
(13,720)
13,720
(13,720)
38,365
(38,365)
38,365
(38,365)
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
2015
Trade and other payables
2014
Trade and other payables
Carrying
amount
$
Contractual
cash flows
$
< 6 months
$
6-12
months
$
1-2
years
$
2-5
years
$
> 5 years
$
609,033
609,033
609,033
609,033
609,033
609,033
954,866
954,866
954,866
954,866
954,866
954,866
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
59
Note 20 Financial instruments continued
Fair values
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
2015
2014
Carrying
amount
$
Fair value
$
Carrying
amount
$
Fair value
$
1,372,033
(609,033)
1,372,033
(609,033)
3,836,543
(954,866)
3,836,543
(954,866)
763,000
763,000
2,881,677
2,881,677
The Group’s policy for recognition of fair values is disclosed at Note 1(s).
Note 21 Dividends
No dividends were paid or proposed during the financial year ended 30 June 2014 or 30 June 2015.
The Company has no franking credits available as at 30 June 2014 or 30 June 2015.
Note 22 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
2015
$
2014
$
712,250
147,386
67,663
927,299
691,958
–
64,006
755,964
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
60
Note 23 Remuneration of auditors
Audit and review of the Company’s financial statements
Total
Note 24 Contingencies
2015
$
31,000
31,000
2014
$
33,000
33,000
(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 2015 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
ANZ Bank has provided unconditional bank guarantees (refer Note 8) as follows:
− $23,000 in relation to the lease over the Company’s office premises at Level 7, 600 Murray Street, West Perth; and
− $50,000 in relation to the Company’s corporate credit card facility.
(ii) Contingent assets
There were no material contingent assets as at 30 June 2014 or 30 June 2015.
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
61
Note 25 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 $1,408,500 (2014: $1,371,000).
The exploration expenditure obligations stated above include amounts that are funded by third parties pursuant
to various farm-in agreements (Note 14).
(b) Operating Lease Commitments
The Company has entered into a 2 year lease on its office at Level 7, 600 Murray Street, West Perth on effective from
1 July 2015 at $46,000 per annum, inclusive of variable outgoings. Operating lease commitments are as follows:
Due within 1 year
Due after 1 year but not more than 5 years
Due after more than 5 years
2015
$
46,000
46,000
–
92,000
2014
$
–
–
–
–
There were no operating lease commitments as at 30 June 2014 as the Company’s lease on the offices at that stage
was on a month by month basis.
(c) Contractual Commitment
There are no material contractual commitments as at 30 June 2015 or 30 June 2014 not otherwise disclosed
in the Financial Statements.
Note 26 Related party transactions
Transactions with Directors during the year are disclosed at Note 22 – 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:
Lake Way Uranium JV
3,375
920
Details of the Company’s interests under the joint venture
agreements are provided at Note 14.
As at the end of the financial year the Company had the following
amounts (due to)/owing to it by the joint ventures:
Lake Way Uranium JV1
–
23,240
1 During the 30 June 2015 financial year the Company has written off all
capitalised costs and receivables in relation to the Lake Way joint venture assets.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
62
Note 27 Events occurring after the balance sheet date
Other than the matters below, 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.
− On 29 July 2015 the Company’s existing farm-in arrangement with Antofagasta plc was terminated. On the same
date the Company entered into a separate US$6 million earn-in arrangement at the Company’s Lookout Rocks
copper prospect within the Yeneena Project;
− On 22 September 2015 the Company announced that it had received firm commitments of $1.5 million from
investors in respect of a share placement, and was also undertaking a Share Purchase Plan to existing eligible
shareholders to raise up to a further $1.4 million.
Note 28 Reconciliation of loss after tax
to net cash inflow from operating activities
Profit/(Loss) from ordinary activities after income tax
Share of management fee to JV not capitalised
Depreciation
Gain on disposal of assets
Exploration cost written off
Share based payments expense
Share based option income revenue
Unrealised gain on investments
Contribution to overheads from farm-in partner
EIS grant funding offset against capitalised exploration
Movement in assets and liabilities:
(Increase)/decrease in receivables
Increase/(decrease) in payables
Net cash outflow from operating activities
Consolidated
Re-stated
2014
$
2015
$
523,915
193
10,329
(22,826)
555,286
187,033
(1,199,207)
(368,987)
(321,470)
287,018
(9,610)
(57,132)
(415,458)
(748,166)
138
9,740
–
255,804
71,760
–
–
(332,789)
175,925
(4,793)
73,330
971
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 29 Earnings per share
(a) Basic earnings per share
Profit/(Loss) attributable to ordinary equity holders of the Company
(b) Diluted earnings per share
Profit/(Loss) attributable to ordinary equity holders of the Company
(c) Loss used in calculation of basic and diluted loss per share
Consolidated profit/(loss) after tax from continuing operations
63
Consolidated
Re-stated
2014
Cemts
(0.56)
(0.56)
2015
Cents
0.39
0.37
$
$
523,915
(748,166)
No.
No.
(d) Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator
in calculating basic earnings per share
Weighted average number of shares used as the denominator
in calculating diluted earnings per share
133,766,616
132,543,350
141,136,616
132,543,350
At 30 June 2015 the Company has on issue 7,370,000 unlisted options over ordinary shares that are considered
to be dilutive.
At 30 June 2014 the Company has on issue 10,170,000 unlisted options over ordinary shares that are not considered
to be dilutive.
Note 30 Prior period adjustment – Research and development tax credits
The research and development tax concession credit recognised in the 2014 financial year has been re-stated in these
financial statements for the comparative period ended 30 June 2014 as follows:
Income tax benefit for the year ended 30 June 2014
Loss after tax
Capitalised mineral exploration and
evaluation expenditure as at 30 June 2014
Original
Comparative
Amount
$263,685
Re-stated
Comparative
Amount
$nil
$(484,481)
$(748,166)
$19,085,687
$18,822,002
Accumulated losses as at 30 June 2014
$(11,872,175)
$(12,135,860)
The Group has amended its accounting policy in respect of the accounting treatment of research and tax development
concession credits to comply with generally accepted practice during the 2015 financial year and has accordingly
reflected a corresponding amendment to the 2014 comparatives. Refer to Note 1(h) for the Group’s relevant
accounting policy.
A N N U A L R E P O R T 20 1 5
Notes to the Financial Statements
For the financial year ended 30 June 2015 continued
64
Note 31 Parent entity information
Financial position
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Non-current liabilities
Total Liabilities
NET ASSETS
Equity
Issued Capital
Equity remuneration reserve
Accumulated losses
TOTAL EQUITY
Financial performance
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income
Company
2015
$
2014
$
1,512,241
21,705,857
3,983,107
18,703,922
23,218,098
22,687,029
734,756
106,569
1,370,623
–
841,325
1,370,623
22,376,773
21,316,406
31,471,913
649,533
(9,744,673)
31,113,384
2,767,522
(12,564,500)
22,376,773
21,316,406
514,868
–
514,868
(747,891)
–
(747,891)
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 24.
Commitments
For full details of commitments see Note 25.
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
65
In the opinion of the Directors of Encounter Resources Limited (“the Company”)
(a)
the financial statements and notes set out on pages 32 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 2015 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 2015.
This declaration is made in accordance with a resolution of the Directors.
Signed at Perth this 24th day of September 2015.
W Robinson
Managing Director
A N N U A L R E P O R T 20 1 5
66
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ENCOUNTER RESOURCES LIMITED
Report on the Financial Report
INDEPENDENT AUDITOR’S REPORT
We have audited the accompanying financial report of Encounter Resources Limited, which comprises
TO THE MEMBERS OF ENCOUNTER RESOURCES LIMITED
the consolidated statement of financial position as at 30 June 2015, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity and
Report on the Financial Report
We have audited the accompanying financial report of Encounter Resources Limited, which comprises
the consolidated statement of cash flows for the year then ended, notes comprising a summary of
the consolidated statement of financial position as at 30 June 2015, the consolidated statement of
significant accounting policies and other explanatory information, and the directors’ declaration of the
profit or loss and other comprehensive income, the consolidated statement of changes in equity and
consolidated entity comprising the company and the entities it controlled at the year’s end or from time
the consolidated statement of cash flows for the year then ended, notes comprising a summary of
to time during the financial year.
significant accounting policies and other explanatory information, and the directors’ declaration of the
Directors’ Responsibility for the Financial Report
consolidated entity comprising the company and the entities it controlled at the year’s end or from time
The directors of the company are responsible for the preparation of the financial report that gives a
to time during the financial year.
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
Directors’ Responsibility for the Financial Report
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
Auditor’s Responsibility
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
Statements, that the financial statements comply with International Financial Reporting Standards.
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
Auditor’s Responsibility
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
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
in the financial report. The procedures selected depend on the auditor’s judgement, including the
obtain reasonable assurance about whether the financial report is free from material misstatement.
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
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
accounting policies used and the reasonableness of accounting estimates made by the directors, as
for our audit opinion.
well as evaluating the overall presentation of the financial report.
Independence
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
In conducting our audit, we have complied with the independence requirements of the Corporations
for our audit opinion.
Act 2001.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member 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 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.
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
Auditor’s Opinion
In our opinion:
67
(a)
Auditor’s Opinion
In our opinion:
the financial report of Encounter Resources Limited is in accordance with the Corporations Act
2001, including:
(a)
(b)
(i)
the financial report of Encounter Resources Limited is in accordance with the Corporations Act
2001, including:
(ii)
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June
2015 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
giving a true and fair view of the consolidated entity’s financial position as at 30 June
2015 and of its performance for the year ended on that date; and
the consolidated financial report also complies with International Financial Reporting Standards
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001;
as disclosed in Note 1.
and
the consolidated financial report also complies with International Financial Reporting Standards
as disclosed in Note 1.
Report on the Remuneration Report
(b)
We have audited the Remuneration Report included in pages 24 to 29 of the directors’ report for
the year ended 30 June 2015. The directors of the company are responsible for the preparation
and presentation of the Remuneration Report in accordance with section 300A of the Corporations
Report on the Remuneration Report
Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
We have audited the Remuneration Report included in pages 24 to 29 of the directors’ report for
audit conducted in accordance with Australian Auditing Standards.
the year ended 30 June 2015. The directors of the company are responsible for the preparation
and presentation of the Remuneration Report in accordance with section 300A of the Corporations
Auditor’s Opinion
Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
In our opinion, the Remuneration Report of Encounter Resources Limited for the year ended 30 June
audit conducted in accordance with Australian Auditing Standards.
2015 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
2015 complies with section 300A of the Corporations Act 2001.
Crowe Horwath Perth
Crowe Horwath Perth
Sean McGurk
Partner
Signed at Perth, 24 September 2015
Sean McGurk
Partner
Signed at Perth, 24 September 2015
Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member 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 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.
A N N U A L R E P O R T 20 1 5
68
ASX Additional Information
Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below
was applicable as at 4 October 2015.
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
105
225
151
469
171
Securities held
50,685
708,507
1,259,246
17,306,869
126,100,901
Totals
1,121
145,426,208
There are 263 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
15.24%
7.73%
6.36%
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
69
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
Merrill Lynch (Australia) Nominees Pty Ltd
HSBC Custody Nominees Australia Limited
Sundin Pty Ltd
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
Jorge Bernhard
Samantha Hogg
Mary Clare Los
Willstreet Pty Ltd
Kiki Super Fund
J C O’Sullivan Pty Ltd
DDH1 Drilling Pty Ltd
Charles Robinson
Tetramin Pty Ltd
Thirty-Fifth Celebrations Pty Ltd
Wythenshawe Pty Ltd
Andrew Bewick
Total
D. Voting Rights
Number of shares
16,216,900
11,473,126
9,900,031
7,200,000
6,682,665
5,580,000
4,650,000
4,650,000
2,190,000
1,850,000
1,815,473
1,700,000
1,530,203
1,400,000
1,250,000
1,200,000
1,100,000
1,071,428
1,057,060
1,054,698
Percentage
of shares
11.15%
7.89%
6.81%
4.95%
4.60%
3.84%
3.20%
3.20%
1.51%
1.27%
1.25%
1.17%
1.05%
0.96%
0.86%
0.83%
0.76%
0.74%
0.73%
0.73%
83,571,584
57.50%
In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of hands
whereby each member present in person or by proxy shall have one vote and upon a poll, each share will have
one vote.
E. Restricted Securities
There are no restricted securities.
A N N U A L R E P O R T 20 1 5
70
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
71
A N N U A L R E P O R T 20 1 5
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