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9
C O R P O R AT E
D I R E C T O R Y
D IREC TOR S
Paul Chapman
Non-Executive Chairman
Will Robinson
Peter Bewick
Managing Director
Exploration Director
Johnathan Hronsky OAM
Non-Executive Director
Philip Crutchfield
Non-Executive Director
(appointed October 2019)
C OMPA NY SEC RE TARIE S
Kevin Hart
Dan Travers
PRINC IPA L A ND
REGI STERED OFFIC E
Level 7, 600 Murray Street
West Perth, Western Australia 6005
Telephone (08) 9486 9455
Facsimilie (08) 9486 8366
Web www.enrl.com.au
AUD I TOR
Crowe Horwath Perth
Level 5, 45 St Georges Terrace
Perth, Western Australia 6000
SHARE REGI STRY
Security Transfer Australia
770 Canning Highway
Applecross, Western Australia 6153
Telephone (08) 9315 2333
Facsimilie (08) 9315 2233
STOC K EXC HA NGE LI STING
The Company’s shares are quoted on the Australian
Securities Exchange. The home exchange is Perth,
Western Australia.
ASX C ODE
ENR – Ordinary shares
C OMPA NY INF ORMATI ON
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.
C O N T E N T S
Letter from the Chairman & Managing Director
2-3
Exploration Review
Summary of Tenements
Directors’ Report
Auditor’s Independence Declaration
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 Auditor’s Report
4-17
18-19
20-31
32
33
34
35
36
37-64
65
66-69
A N N U A L R E P O R T 2 0 1 9 P G 1
In addition to progressing these more advanced projects,
Encounter continues to build its portfolio of high quality
exploration projects. This includes:
• Intrusive related copper-gold opportunities at
the 100% owned Lamil project in the Paterson
Province of WA. Broad zones of copper-gold
anomalism have been drilled by historical explorers
and IP and AEM surveys have been recently
completed by Encounter. Lamil is located on a
regional scale gravity lineament in a structural
setting analogous to Rio Tinto’s Winu copper-gold
discovery located 120km to the north.
• The application for over 3,000sqkm of tenements
in the Northern Territory, leveraging new datasets
provided by the Federal Government’s $100m
Exploring for the Future Program.
L E T T E R F R O M T H E C H A I R M A N
A N D M A N AG I N G D I R E C T O R
Dear Fellow Shareholder,
We are pleased to present the 2019 Annual Report for
Encounter Resources Ltd (“Encounter”). Encounter is at the
forefront of a major exploration revival taking place in the
world class Paterson Province and Tanami regions in Western
Australia. At the same time Encounter continues to add to it
project pipeline assembling new exploration opportunities in
highly prospective regions around Australia.
Encounter’s project portfolio is focused on large gold
and base metals discoveries in Australia. Area selection
predominantly focuses on projects with shallow cover that
has concealed highly prospective geological potential.
To advance our extensive exploration portfolio, we are
collaborating with a number of major and mid-tier mining
companies through our project generator model. This model
allows us to engage in the exploration of large scale, first
mover opportunities. Encounter’s project generator model
provides our shareholders with leverage to multiple, well-
funded projects in world class mineral belts while minimising
the funding demands on shareholders. This approach also
provides access to multiple expert teams, technical specialists
and the latest technological advances.
During the past year Encounter commenced field activities
in conjunction with major gold producer Newcrest Mining
Limited (“Newcrest”) in the Tanami region of Western
Australia. Newcrest-funded exploration drilling activity is in
progress with first results expected in the December 2019
quarter.
There has been a resurgence in exploration activity in the
Tanami region. This activity is driven by the region’s inherent
gold prospectivity and the success of Newmont-Goldcorp’s
operations where their current US$700-750 million
expansion will make the Tanami one of Australia's largest gold
mining areas.
In 2019, we also commenced field activities in conjunction
with Independence Group NL at the Yeneena copper-cobalt
project in the Paterson Province. Initial activities include the
application of several advanced exploration technologies for
the first time, including a large-scale magnetotelluric (“MT”)
survey and the use of new surface geochemistry techniques.
ENCOUNTER RESOURCES LIMITED During the past year, we also welcomed Independence Group
In closing, we would like to thank our local communities,
NL (ASX:IGO) and Silver Lake Resources Ltd (ASX:SLR) as
substantial shareholders of Encounter. Both companies
are highly successful mining companies, which supports
Encounter’s project generator business model and the
potential of upcoming exploration programs in the Tanami
and Paterson Province.
Encounter remains one of the most dedicated and active
mineral exploration companies in Australia. We are focused on
generating value for our shareholders through leading edge
exploration for major mineral deposits in Australia.
Encounter is disciplined in its approach to capital
management and we are steadfast in our commitment to
systematic exploration that can create enduring value for our
shareholders. Our exploration plans remain well funded and,
importantly, we have an extremely capable and experienced
team that is dedicated to realising the potential of our
portfolio.
employees, joint venture and alliance partners, suppliers and
other business partners. We also would take this opportunity
to thank our fellow shareholders for your ongoing support.
Yours sincerely
Paul Chapman
Chairman
Will Robinson
Managing Director
A N N U A L R E P O R T 2 0 1 9 P G 3
E X P LO R AT I O N
R E V I E W
Highlights:
Tanami and West Arunta - Gold – 50:50 Joint Ventures with Newcrest Mining Ltd (“Newcrest”, ASX:NCM)
• Multiple joint ventures with Australia’s largest gold producer
Watts Joint Venture
• Hutch’s Find – significant zone of gold/arsenic anomalism in colluvium over 6km of strike. Limited historical
drilling has returned 19m @ 2.3g/t Au from 98m and 10m @ 5.4g/t Au from 123m
Selby Joint Venture
• Mohave Prospect – a +7km long gold/arsenic anomaly that includes thick mineralised drill intersections
strengthening at bottom of hole
• Afghan Prospect – a +7.5km long gold anomaly in shallow RAB drilling
• Camel – 7.2m @ 3.1g/t Au from 95m in last drilling completed almost a decade ago
• Joint Venture recently expanded by ~300km2 to cover new targets adjacent to the +7km long Mohave and
Afghan gold trends
Lewis - first mover opportunity into a newly defined area on a major Tanami regional structure
Aileron Joint Venture expanded by ~1,100km2 to include additional targets and now extends over
70km of the West Arunta
• Heritage surveys completed at the Watts, Selby, Lewis & Aileron joint ventures
• Newcrest-funded exploration drilling activity is in progress with first results expected in the December 2019 quarter.
Paterson Province – Copper/Cobalt – Independence Group NL (“IGO”, ASX:IGO) Earn in Option
• Exploration with IGO advancing the Yeneena Copper/Cobalt Project in the Paterson Province of Western Australia
• Applying a number of rapidly advancing geochemical and geophysical exploration technologies for the first time in a
highly fertile but extensively sand covered mineral belt to identify mineral deposit alteration footprints and define new drill
targets
• IGO has the right to enter into a $15m earn-in agreement to secure a 70% interest in Yeneena (Earn-in Option) any time
before 1 March 2020
• The Earn-in Option covers 1,250km2 of tenure and includes the 14km long BM1-BM7 copper/cobalt trend, Lookout Rocks
copper/cobalt prospect and Aria IOCG style target
Paterson Province – Copper/Gold - 100% Encounter
• High quality copper/gold opportunities identified at the Lamil Project in a structural setting analogous to Rio Tinto’s Winu
copper/gold discovery located 120km north
• Airborne Electromagnetic Survey completed to assist with geological interpretation and potentially provide direct
detection of conductive mineralised bodies
• An Induced Polarisation survey completed covering a 2km long zone of intense alteration as a precursor to future RC/
diamond drilling
Corporate
• In November 2018, IGO subscribed for a $1.8m share placement at a 60% premium to 20 trading day VWAP - to become
a new major shareholder in Encounter
• In July 2019, a share placement, supported by Silver Lake Resources Ltd (ASX:SLR) and IGO, raised ~$1.4 million - strong
endorsement of project generator model and potential of upcoming exploration programs in the Tanami and Paterson
Province
• Two year Project Generation Alliance with Newcrest successfully concluded in July 2019 with multiple large joint ventures
established
ENCOUNTER RESOURCES LIMITED
Tanami and West Arunta
Fast-tracking exploration via multiple
joint ventures with Newcrest
Paterson Province - Copper - Cobalt
New approach in a known Cu-Co district
with Independence Group
Paterson Province - Copper - Gold
Copper-Gold targets analogous to Rio
Tinto’s Winu discovery
Laverton Tectonic Zone
Innovative generative program in a world
class gold province
Figure 1 – Encounter Projects – Location Plan
A N N U A L R E P O R T 2 0 1 9 P G 5
E X P LO R AT I O N
R E V I E W ( C O N T. )
TANAMI AND WEST ARUNTA GOLD
50:50 JV Encounter/Newcrest – E80/5132, E80/5137, E80/5145, E80/5146, E80/5147, E80/5169 and E80/5186
Newcrest is sole funding exploration activities across a series of joint ventures in the Tanami and West Arunta Provinces. Three of
these Encounter-Newcrest joint ventures (Watts, Selby and Lewis) cover over 100km of strike along the major structural corridor
(Trans-Tanami Structure) that extends through the Tanami region in Western Australia. In addition, the Aileron joint venture in the
West Arunta district of Western Australia contains a number of structural targets identified through aerial magnetic surveying,
including a discrete magnetic anomaly consistent with the scale of an Ernest Henry or Carrapateena style system.
Newcrest-funded exploration activity, including the first phase of RC drilling, will be completed during the period from September to
November 2019. These exploration programs are targeting major gold and copper/gold mineral deposits.
1. Watts Joint Venture (Tanami)
The Watts joint venture covers the central corridor of targets where a regional scale north-north-east structure intersects the Trans-
Tanami Structure including the Hutch’s Find and Sunset Ridge prospects.
• Hutch’s Find – a significant zone of gold/arsenic anomalism over 5km of strike. The limited RC and diamond drilling that
has occurred is well mineralised and contains multiple high grade gold intersections that remain open down plunge and
along strike including:
HFDD4 – hole depth 184m
• 19m @ 2.3g/t Au from 98m;
• 10m @ 5.4 g/t Au from 123m; and
• 0.5m @ 17.2g/t Au from 164.3m.
(source Tanami Gold NL Quarterly Report September 2010)
• Sunset Ridge – a 2.5km long arsenic anomaly defined in shallow drilling
Figure 2 – Tanami Joint Venture areas with gold occurrences over regional gravity data
ENCOUNTER RESOURCES LIMITED 2. Selby Joint Venture (Tanami)
Selby includes a number of regional scale geochemical anomalies defined in shallow drilling, discrete geophysical targets and
historical high grade gold intersections in limited deeper drilling. Current high priority prospects at Selby include the Mohave, Afghan
and Camel prospects.
• Mohave Prospect – a +7km long gold/arsenic anomaly that includes thick mineralised drill intersections strengthening at
bottom of hole at the east of the prospect
• Afghan Prospect – a +7.5km long gold anomaly in shallow RAB drilling
• Camel – 7.2m @ 3.1g/t Au from 95m in last drilling completed almost a decade ago
(source Tanami Gold NL Quarterly Report September 2010)
During the year, the Selby joint venture expanded by ~300km2 to cover new targets adjacent to the Mohave and Afghan gold trends.
3. Lewis Joint Venture (Tanami)
The Lewis joint venture covers over 20km of strike of untested Trans-Tanami Structure. Vast areas along this highly prospective
structure have never seen a soil sample or a drill hole. This is a first mover opportunity into a newly defined area on a major regional
structure.
4. Aileron Joint Venture (West Arunta)
The Aileron joint venture is located in the West Arunta district of Western Australia, ~600km west of Alice Springs. There has been no
previous drilling within this undercover project, although gold/copper anomalism has been identified within the region. The project
contains a number of structural targets identified through aerial magnetic surveying, including a discrete magnetic anomaly in the
west of the project that is consistent with the scale of an Ernest Henry or Carrapateena style system (Figure 3).
Figure 3 – Aileron joint venture interpreted structures and targets on TMI background
Figure 4 – Modelled magnetic feature at Aileron with planned first drill hole
A N N U A L R E P O R T 2 0 1 9 P G 7
E X P LO R AT I O N
R E V I E W ( C O N T. )
PATERSON PROVINCE – COPPER/COBALT
E45/2500, E45/2502, E45/2657, E45/2658, E45/2805, E45/2806, E45/3768, ELA45/4861, ELA45/5333 and
ELA45/5334 – Independence Group NL (ASX:IGO) Earn in Option
The Yeneena Copper/Cobalt Project (“Yeneena”) is a major strategic land holding (1,250km2) in the emerging Proterozoic Paterson
Province covering a 70km long corridor south of the Nifty Copper Mine. The Paterson Province is a proven mineral district that is
experiencing a surge in exploration activity that includes a number of major mining companies.
BM1-BM7 - 14km long copper/cobalt system
BM1 - Coherent zone of near-surface copper oxide mineralization. Best intersections include:
• 10m @ 6.8% Cu from 32m*
• 20m @ 2.0% Cu from 22m*
• 8m @ 3.6% Cu from 18m*
• 16m @ 3.2% Cu from 26m
• 50m @ 1.1% Cu from 12m
BM7 - Large mineral system containing extensive copper sulphide mineralization. Best intersections include:
• 5m @ 2.5% Cu from 388m*
• 52m @ 0.6% Cu from 42m*
• 74m @ 0.4% Cu from 74m*
• 140m @ 0.2% Cu from 144m
BM1-BM7 also contains a number of high grade cobalt intersections including:
• 9m @ 1.0% Co & 1.5% Cu from 42m*
• 14m @ 0.45% Co and 0.38% Cu from 14m*
(refer ASX announcements 15 July 2014 & 30 January 2015)
(*Reported pursuant to the 2004 Edition of the JORC Code)
Lookout Rocks - Zambian copper-belt analogue
• First diamond drill hole intersected zones of disseminated copper mineralisation, up to 1% Cu and up to 0.1% Co
• Mineralisation is hosted by black, reduced carbonaceous sediments, located directly above an oxidised “red bed”
stratigraphic unit
• An interpreted 50km of strike of the stratigraphic contact position prospective for “first reductant” copper sulphide
mineralisation
Aria - IOCG style intrusion containing copper sulphides
• Regionally significant, 1.5km long oval shaped magnetic anomaly located on a major crustal scale structure
• Copper mineralisation (~1% Cu) intersected in both diamond holes drilled to-date, but the magnetic and gravity
anomalies remain unexplained
• Geology confirmed as hematite-altered, polymictic breccia of probable IOCG style
• Possible setting for large tonnage copper deposit e.g. Carrapateena
ENCOUNTER RESOURCES LIMITED
In April 2019, the latest phase of exploration at Yeneena commenced. This program has been designed together with IGO as part
of a partnership to advance activities at Yeneena. IGO is also a significant shareholder in Encounter and may, at any time before 1
March 2020, elect to enter an earn-in agreement to spend up to $15 million to earn a 70% interest in Yeneena.
The 2019 program is designed to define the 3D geology and identify large scale copper targets. The initial on-ground activity
included several advanced exploration technologies being used for the first time at the project, including:
• a large-scale magnetotelluric survey (~100 line-km) to advance 3D target definition, which was completed in July 2019;
• end-of-hole trace multi-element geochemistry of historical aircore drilling to define alteration footprints of copper
deposits and the host rocks, which remains in progress; and
• application of new surface geochemistry techniques to detect base metal anomalies through shallow sand cover, the trial
phase of which is complete with the results being evaluated.
The full integration and interpretation of these data will guide the follow-up geophysical and drilling programs
Figure 5 – Location of the Yeneena Project in the Paterson Province
A N N U A L R E P O R T 2 0 1 9 P G 9
E X P LO R AT I O N
R E V I E W ( C O N T. )
PATERSON PROVINCE COPPER/GOLD
100% Encounter – E45/4613, E45/3446, P45/2750 to P45/2752, P45/3032, E45/4757 and E45/4758
Encounter holds a highly prospective and strategic ground holding in the Paterson Province that hosts Newcrest’s major gold/copper
operation at Telfer.
1. Lamil Project
The Lamil Copper/Gold Project (“Lamil”) covers an area of ~61km2 and is located 25km northwest of the major gold/copper mine at
Telfer, owned by Newcrest.
Historical gold exploration in the vicinity of the Lamil magnetic anomalies was conducted by Newmont from 1983-1993. There has
been no exploration between that phase of exploration and the commencement of gold-focused exploration activities by Encounter
in late 2016.
Lamil is adjacent to a major regional gravity lineament which marks the location of a significant structure and deformation zone that
would have acted as a major pathway for ore forming fluids during the formation of the Proterozoic aged deposits (Figures 6 & 7).
Shallow drilling in the 1980s by Newmont intersected thick zones of strong copper/gold anomalism which may be significant given
the recent learnings from the Winu copper/gold discovery made by Rio Tinto Ltd (ASX:RIO). Newmont’s limited drilling specifically
targeted a series of magnetic features at Lamil (Figure 8).
Drill core from five holes drilled at Lamil in the 1980s by Newmont has recently been located by Encounter. The core has been
relogged and contains zones of pervasive alteration, extensive pyrrhotite development and copper bearing sulphides from within
50m of surface (Photos 1 and 2).
With the confirmation that strong copper anomalism is in sulphide form and within 50m from surface Induced Polarisation (IP)
survey of the area was the logical next step. IP was selected as it is likely to highlight the areas with the strongest sulphide
development within the larger zone of magnetic alteration at Lamil.
An Induced Polarisation (IP) survey was completed in August 2019 covering a 2km long zone of intense alteration as a precursor to
future RC/diamond drilling (Figures 8 & 9). An Airborne Electromagnetic Survey was completed in September 2019 to assist with
geological interpretation and potentially provide direct detection of conductive mineralised bodies.
Subject to the outcomes of the geophysical surveys, an RC/diamond drilling program is proposed to be undertaken. In addition,
there is potential to introduce a suitable joint venture partner for Lamil in the future, consistent with Encounter’s project generator
model.
Photo 1 – LSPC-3 ~44m. Veins and disseminations of pyrrhotite and minor
chalcopyrite within an altered calcareous sediment
Photo 2 – LHS 88-4 ~155m and 167m. Veined and brecciated siltstone with
pyrite and iron carbonate alteration
ENCOUNTER RESOURCES LIMITED Figure 6 – Regional gravity over Seebase depth to Proterozoic basement image
Figure 7 – Detailed aeromagnetics over regional gravity image showing the
location of magnetic anomalies on the margin of the Waukarlycarly rift basin
COMPLETED IP LINES
Figure 8 – Drill location plan max in hole Cu with aeromagnetic background (TMI
1VD pseudo colour image) and completed IP lines. Ineffective and unassayed
holes have been omitted from this image
Figure 9 - Preliminary chargeability inversion model cross sections (anomalous
chargeability values ranging from ~8 to 12 msec) and modelled magnetic
anomalies (purple bodies)
2. East Thomson’s Dome Project
East Thomson’s Dome is located 5km from Telfer. The domal structure at East Thomson’s Dome has a core of Malu Formation with
the fold axis trending WNW. The majority of surface gold and reef style mineralisation at East Thomson’s Dome has been discovered
in the overlying Telfer Formation sediments. This geological setting is similar to that of the high grade reefs at Telfer.
Zones of reef-style mineralisation have been identified by Encounter across the 200m by 200m drill area at the Fold Closure
prospect. Near surface intersections include (refer ASX release 21 December 2017):
• 6m @ 2.7g/t Au from 39m in ETG0125
• 4m @ 4.3g/t Au from surface in ETG0109
• 4m @ 3.5g/t Au from 17m in ETG0110
• 2m @ 5.4g/t Au from 46m in ETG0106
The reefs at the Fold Closure prospect remain open to the north-west and south-east. Future work programs at East Thomson’s
Dome are being considered and will be assessed against other opportunities in the project portfolio.
MT SEFTON - GOLD
100% Encounter – ELA38/3391, ELA38/3392 and ELA38/3393
The Company has applied for exploration tenements covering the southern and eastern portions of the Cosmo Newberry greenstone
belt. The 1,130km2 project is located midway between the Laverton and Yamarna greenstone belts. This under-explored greenstone
belt is prospective for orogenic gold and VMS base metal deposits.
A N N U A L R E P O R T 2 0 1 9 P G 1 1
E X P LO R AT I O N
R E V I E W ( C O N T. )
LAVERTON TECTONIC ZONE - GOLD
100% Encounter – E28/2709, E28/2762, E28/2763
and E28/2878
The Laverton Tectonic Zone is one of Australia’s most
productive and prospective gold regions that hosts major gold
mines at Laverton (>2Moz), Granny Smith (>2Moz), Wallaby
(>8Moz) and Sunrise Dam (>10Moz). Southern extensions
of this corridor under shallow cover have been a focus of
Encounter’s targeting and project generation activities. The
Nazare Gold Project (“Nazare”) now covers an area of >600km2
that is predominantly undercover and has seen little to no
previous exploration activity.
Nazare is at the southern extension of the Laverton Tectonic
Zone (see Figure 10). The project is located ~150km east-
north-east of Kalgoorlie.
Nazare was selected for an initial trial of an innovative new
CSIRO-developed geochemical sampling technique, UltraFine+.
This new geochemical sampling technique separates and
analyses the -2 micron fraction of a surface soil sample and
is being trialled in areas of thin cover where traditional soil
geochemistry is largely ineffective.
Two 400m spaced lines of aircore drilling were completed to
test a discrete ~1km long gold anomaly generated through the
Ultrafine+ geochemical sampling technique.
The aircore drill program intersected subtle gold anomalism
within the overlying cover sediments that was broadly
coincident with the location of the Ultrafine+ geochemical
anomaly. However, the drilling did not intersect material gold
anomalism within the basement. The results of this trial and
implications for the application of this technology in the region
are being evaluated
Future work programs at Nazare are being considered and
Encounter is seeking a potential partner to advance the project.
Figure 10 – Nazare regional location plan, regional TMI magnetics and major
gold mines
New geochemical
sampling technique
trial area
Figure 11 – Nazare target summary over airborne TMI (magnetics) image
ENCOUNTER RESOURCES LIMITED
PATERSON PROVINCE - ZINC
Encounter 75% / Hampton Hill Mining (“HHM”) 25% in E45/2501, E45/2561 and the four eastern sub-blocks of
E45/2500
The Millennium Zinc Project (“Millennium”) is located in the north-east of Yeneena where previous aircore and RC drilling by Encounter
defined a +3km long zinc regolith anomaly that remains open to the SE. Diamond drilling at Millennium has intersected a thick zinc
ironstone gossan at the contact between a brecciated carbonate and a thick sequence of carbonaceous shales of the Broadhurst
Formation.
During the year, a Magnetotellurics (MT) geophysical survey line was completed at the Millennium zinc project to investigate the
structure of the Tabletop Fault and the geological controls on previously identified mineralisation. Additional data was collected at the
eastern end of the MT line at Millennium to try to explain a conductive response to the east of the Tabletop fault in the initial survey line.
A more detailed follow up Magnetotellurics survey at Millennium is being assessed.
Figure 12 – Drill hole collar location over Bouguer Gravity and completed MT / AMT lines – Millennium
A N N U A L R E P O R T 2 0 1 9 P G 1 3
S U M M A R Y O F
T E N E M E N T S
Lease Name
Project Name
Area km2
Managing Company
Encounter Interest
Lease
E45/2500
E45/2501
E45/2502
E45/2561
E45/2657
E45/2658
E45/2805
E45/2806
E45/4757
E45/4758
ELA45/4861
ELA45/5333
ELA45/5334
E45/3768
E45/4613
E45/3446
P45/2750
P45/2751
P45/2752
P45/3032
E28/2709
E28/2762
E28/2763
E28/2878
E80/5132
E80/5137
E80/5145
E80/5146
E80/5147
E80/5152
E80/5169
E80/5186
E80/5323
ELA80/5339
ELA80/5357
ELA80/5358
ELA38/3391
ELA38/3392
ELA38/3393
ELA80/5360
ELA32156
ELA32157
ELA32158
ELA32159
ELA32160
ELA32226
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Yeneena
Sussex
Sussex
Yeneena
Yeneena
Yeneena
Yeneena
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson
Paterson Cu/Au
Paterson Cu/Au
Paterson
Paterson
Paterson
Paterson
Telfer West
Paterson Cu/Au
Paterson
Paterson
Paterson
Paterson
Paterson
Yilgarn
Yilgarn
Yilgarn
Yilgarn
Tanami
Tanami
Tanami
Tanami
Tanami
Tanami
West Arunta
Tanami
Tanami
Tanami
West Arunta
West Arunta
Yilgarn
Yilgarn
Yilgarn
Tanami
East Thomson’s Dome
East Thomson’s Dome
East Thomson’s Dome
East Thomson’s Dome
East Thomson’s Dome
Nazare
Nazare
Nazare
Nazare
Selby JV
Selby JV
Watts JV
Lewis JV
Selby JV
Phillipson Range
Aileron JV
Lewis JV
Selby JV
Hazlett
Aileron JV
Aileron JV
Mt Sefton
Mt Sefton
Mt Sefton
Stansmore Range
Elliot
Elliot
Elliot
Elliot
Elliot
Elliot
107.3
19.12
117.8
50.95
156
95.4
85.8
35
12.8
19.2
328
254.6
102.1
149.7
60.7
6
198 HA
177 HA
199 HA
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Operations Pty Ltd
Encounter Yeneena Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
113.80 HA
Hamelin Resources Pty Ltd
98
206.8
206.9
100.7
646
613
552
548
275
238.3
187.6
70.96
330
462.2
534.3
575.7
498.8
415.1
212.4
640.7
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Hamelin Resources Pty Ltd
Baudin Resources Pty Ltd
Baudin Resources Pty Ltd
Baudin Resources Pty Ltd
Baudin Resources Pty Ltd
Northern Territory
810.75
Baudin Resources Pty Ltd
Northern Territory
Northern Territory
Northern Territory
Northern Territory
734.7
806.6
723.9
590.6
Baudin Resources Pty Ltd
Baudin Resources Pty Ltd
Baudin Resources Pty Ltd
Baudin Resources Pty Ltd
Northern Territory
759.45
Baudin Resources Pty Ltd
Summary of tenements as of 26th September 2019.
* Tenement subject to Hampton Hill JV (only includes 4 eastern blocks on E45/2500) see ASX announcement April 23, 2015
75%*
75%*
100%
75%*
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
50%
50%
50%
100%
50%
50%
50%
100%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
ENCOUNTER RESOURCES LIMITED A N N U A L R E P O R T 2 0 1 9 P G 1 5
CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED D I R E C T O R S
R E P O R T
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 2019.
D I RE C TOR S
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 30 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 and has held managing director and other senior management roles in public companies. Mr Chapman was a
founding shareholder/director of the following ASX listed companies: Reliance Mining; Encounter Resources; Rex Minerals; Paringa
Resources; Silver Lake Resources and Black Cat Syndicate.
Mr Chapman is currently a director of Western Australia based explorers, Black Cat Syndicate Limited (ASX:BC8) and Dreadnought
Resources Limited (ASX:DRE) and resigned as non-executive director of Brazilian copper/gold producer Avanco Resources Limited
(ASX:AVB) on 10 August 2018 following a successful takeover by OZ Minerals Limited.
Will Robinson – B.Comm, MAusIMM
Managing Director (Executive) appointed 30 June 2004
Mr Robinson has worked in the resources industry in Australia and Canada for over twenty years. Mr Robinson’s experience includes
senior management roles at a large international resources company and executive roles in the junior mining and exploration sector.
Mr Robinson is former president of the resources industry advocacy body, the Association of Mining and Exploration Companies
(AMEC) and was a member of the Australian Government’s Resources 2030 Taskforce
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.
Johnathan Hronsky OAM - BAppSci, PhD, MAusIMM, FSEG
Non-executive director appointed 10 May 2007
Dr. Hronsky has more than thirty 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 former 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).
A N N U A L R E P O R T 2 0 1 9 P G 1 7
D I R E C T O R S
R E P O R T ( C O N T. )
C OM PA NY SEC RE TA RIE S
Kevin Hart – B.Comm, FCA
Mr Hart is a Chartered Accountant and was appointed to the position of Company Secretary on 4 November 2005. Mr Hart has over
30 years experience in accounting and the management and administration of public listed entities in the mining and exploration
industry.
Mr Hart 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. Mr Travers 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.
D I RE C TOR S’ INTERE STS
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
9,422,500
25,169,098
7,200,000
200,000
-
-
5,250,000
1,500,000
-
-
5,250,000
1,500,000
Included in the Directors’ Interests in Unlisted Options are 6,750,000 options that are vested and exercisable as at the date of
signing this report.
D I RE C TOR S’ MEE TINGS
The number of meetings of the Company’s Directors held during the year ended 30 June 2019, and the number of meetings attended
by each Director are as follows:
Director
P Chapman
W Robinson
P Bewick
J Hronsky
Board of Directors’ Meetings
Held
Attended
9
9
9
9
9
9
9
9
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED PR IN C IPA L AC TIVI TIE S
The principal activity of the Company during the financial year was mineral exploration in Western Australia.
There were no significant changes in these activities during the financial year.
RE S ULTS OF OPERATI ON S
The consolidated net loss after income tax for the financial year was $1,064,491 (2018: $10,136,263).
Included in the consolidated loss for the current year is a write-off of deferred and uncapitalised exploration and joint venture
expenditure totalling $294,359 (2018: $9,975,754).
RE V IE W OF AC TIVI TIE S
Exploration
Exploration activities during the financial year have been primarily focussed on the Company’s wholly owned copper-cobalt and
copper-gold projects in the Paterson Province of Western Australia, joint ventures in the Tanami and West Arunta regions and new
project generation activities.
To advance the extensive exploration portfolio we are collaborating with a number of major and mid-tier mining companies.
In November 2018 the Company welcomed Independence Group NL as a new major shareholder and partner in advancing the
Yeneena Copper-Cobalt Project in the Paterson Province of WA. Exploration activity at Yeneena included several advanced
exploration technologies being used for the first time at the project, including a large-scale magnetotelluric (“MT”) survey and the
application of new surface geochemistry techniques.
During the year the company commenced exploration activities in joint venture with major gold producer Newcrest Mining Limited
(“Newcrest”) in the Tanami region and West Arunta regions of Western Australia.
The Company also continued to carry out exploration pursuant to the farm-in agreement with Hampton Hill NL (HHM) during the year
at the Millennium zinc project.
Financial Position
At the end of the financial year the Group had $2,480,280 (2018: $2,860,071) in cash and at call deposits. Capitalised mineral
exploration and evaluation expenditure is $13,008,555 (2018: $11,638,428).
S IGN IF IC A NT C HA NGE S IN TH E STATE O F AF FAIR S
Other than the below, 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.
• During the year the Company issued 24,000,000 ordinary fully paid shares to Independence Group NL pursuant to a share
placement.
A N N U A L R E P O R T 2 0 1 9 P G 1 9
D I R E C T O R S
R E P O R T ( C O N T. )
OP TI O N S OVER UNI SSUED CAPI TA L
Unlisted Options
As at the date of this report 9,725,000 unissued ordinary shares of the Company are under option as follows:
Number of Options Granted
Exercise Price
Expiry Date
750,000
325,000
1,850,000
750,000
675,000
725,000
3,150,000
1,500,000
31 cents
14 cents
13 cents
17.5 cents
10.5 cents
10 cents
9 cents
12 cents
27 November 2019
28 February 2020
24 November 2020
24 November 2021
1 November 2021
31 May 2022
30 November 2022
30 November 2022
All options on issue at the date of this report are vested and exercisable. No options on issue are listed.
During the financial year:
• 4,650,000 options (2018: 1,625,000) were granted over unissued shares to employees, directors and consultants of the
Company;
• 475,000 options (2018: nil) were cancelled on the cessation of employment;
• 7,191,429 options (2018: 1,245,000) were cancelled on expiry of the exercise period; and
• no (2018: 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; and
• no options have been cancelled due to the lapse of the 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.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED I S S UE D C API TA L
Number of Shares on Issue
Ordinary fully paid shares
2019
262,375,092
2018
238,375,092
Subsequent to 30 June 2019, the Company issued 18,449,876 shares at 7.5 cents per share pursuant to a share placement.
MAT TE R S SUB SEQUE NT TO TH E E N D O F THE F I NA NC I A L YEA R
Subsequent to the end of the reporting period the Company issued 18,449,876 ordinary fully paid shares pursuant to a share
placement at 7.5 cents per share, raising $1,383,741, before costs. ASX listed mid-tier gold producer Silver Lake Resources Ltd
(“Silver Lake”) participated in the raising and became as a new substantial shareholder in the Company.
The Company’s two year Project Generation Alliance with Newcrest successfully concluded in July 2019 with multiple large joint
ventures established.
Other than as already stated in this report, 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.
LIK ELY DE VELOPME NTS A ND EXPEC TED RE S ULTS OF O PERAT I ON S
The Company expects to maintain exploration programs at its Paterson copper-gold and Yeneena copper-cobalt-zinc projects
(Yeneena) and undertake exploration in joint venture with Newcrest Mining Limited in the Tanami and West Arunta regions of Western
Australia.
At any time before 1 March 2020, IGO may elect to enter an earn-in agreement to spend up to $15 million to earn a 70% interest in
Yeneena.
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.
D I VID E NDS
No dividend has been paid since the end of the previous financial year and no dividend is recommended for the current year.
E N VIRONME NTA L R EGU LATI ON A N D PERF OR MA NC E
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.
REM UNERATI ON REPOR T (AUD I TED)
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 financial position
of the Company and 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.
A N N U A L R E P O R T 2 0 1 9 P G 2 1
D I R E C T O R S
R E P O R T ( C O N T. )
Remuneration Committee
The Board has adopted a formal Remuneration Committee Charter which provides a framework for the consideration of remuneration
matters.
The Company does not have a separate remuneration committee and as such all remuneration matters are considered by the Board
as a whole, with no Member deliberating or considering such matter in respect of their own remuneration.
In the absence of a separate Remuneration Committee, the Board is responsible for:
1.
Setting remuneration packages for Executive Directors, Non-Executive Directors and other Key Management
Personnel; and
2.
Implementing employee incentive and equity based plans and making awards pursuant to those plans.
Non-Executive Remuneration
The Company’s policy is to remunerate Non-Executive Directors, at rates comparable to other ASX listed companies in the same
industry, for their time, commitment and responsibilities.
Non-Executive Remuneration is not linked to the performance of the Company, however to align Directors’ interests with
shareholders’ interests, remuneration may be provided to Non-Executive Directors in the form of equity based long term incentives.
1.
Fees payable to Non-Executive Directors are set within the aggregate amount approved by shareholders at the
Company’s Annual General Meeting;
2. Non-Executive Directors’ fees are payable in the form of cash and superannuation benefits;
3. Non-Executive superannuation benefits are limited to statutory superannuation entitlements; and
4.
Participation in equity based remuneration schemes by Non-Executive Directors is subject to consideration and
approval by the Company’s shareholders.
The maximum Non-Executive Directors fees, payable in aggregate are currently set at $200,000 per annum.
Executive Director and Other Key Management Personnel Remuneration
Executive remuneration consists of base salary, plus other performance incentives to ensure that:
1.
Remuneration packages incorporate a balance between fixed and incentive pay, reflecting short and long term
performance objectives appropriate to the Company’s circumstances and objectives; and
2.
A proportion of remuneration is structured in a manner to link reward to corporate and individual performances.
Executives are offered a competitive level of base salary at market rates (based on comparable ASX listed companies) and are
reviewed regularly to ensure market competitiveness. To date, the Company has not engaged external remuneration consultants to
advise the Board on remuneration matters.
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 2018.
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;
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED
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 their 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 a 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. During the previous financial year ended 30 June 2018, $20,000 in fees were voluntarily and
permanently foregone by Mr Chapman.
Mr Chapman and Dr 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 2019.
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 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.
A N N U A L R E P O R T 2 0 1 9 P G 2 3
D I R E C T O R S
R E P O R T ( C O N T. )
Shareholding Qualifications
The Directors are not required to hold any shares in Encounter Resources under the terms of the Company’s constitution. However,
Directors have made their own investment decisions to hold shares in Encounter Resources which are shown in this report.
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:
Profit/(Loss) for the
year attributable to
shareholders
Closing share price at 30
June
2019
2018
2017
2016
2015
$(1,064,491)
$(10,129,591)
$(1,313,269)
$(5,803,036)
$523,915
$0.07
$0.053
$0.115
$0.13
$0.19
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 economic and technical exploration success, the Board
considers more appropriate indicators of management performance for the 2019 financial period to include:
• corporate management and business development (including the acquisition of high quality projects);
• project and operational performance (including safety and environmental management);
• management of the Company’s farm-in and alliance arrangements;
• cash flow and funding management; and
• share price performance.
Remuneration Disclosures
The Key Management Personnel of the Company have been identified as:
Mr Paul Chapman
Non-Executive Chairman
Mr Will Robinson
Managing Director
Mr Peter Bewick
Exploration Director
Dr Jon Hronsky
Non-Executive Director
The details of the remuneration of each Director and member of Key Management Personnel of the Company is as follows:
30 June 2019
Short Term
Post
Employment
Other Long
Term
Base Salary
$
Short Term
Incentive
$
Superannuation
Contributions
$
Value of Options
$
Total
$
Value of Options
as Proportion of
Remuneration
%
Paul Chapman
60,000
Will Robinson
267,135
Peter Bewick
246,635
Jon Hronsky
50,000
Total
623,770
-
-
-
-
-
5,700
25,380
23,430
4,750
59,260
-
-
51,022
17,579
68,601
65,700
292,515
321,087
72,329
751,631
-
-
-
-
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED
30 June 2018
Short Term
Post
Employment
Other Long
Term
Base Salary
$
Short Term
Incentive
$
Superannuation
Contributions
$
Value of Options
$
Total
$
Paul Chapman1
Will Robinson
Peter Bewick
Jon Hronsky
Total
40,000
266,019
259,096
50,000
615,115
-
29,000
27,000
-
56,000
3,800
28,117
27,179
4,750
63,846
-
-
-
-
-
43,800
323,136
313,275
54,750
734,961
1 During the year ended 30 June 2018, $20,000 in fees were voluntarily and permanently foregone by Mr Chapman.
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
Will Robinson
Peter Bewick
$nil
$nil
$29,000
$27,000
2018/19 financial year
2017/18 financial year
In addition to economic and technical exploration success, the Board considers more appropriate indicators of management
performance for the 2019 financial period to include:
• corporate management and business development (including the acquisition of high quality projects);
• project and operational performance (including safety and environmental management);
• management of the Company’s farm-in and alliance arrangements;
• cash flow and funding management; and
• share price performance.
Options Granted as Remuneration
During the financial year ended 30 June 2019 4,000,000 (2018: nil) were granted to Directors or Key Management Personnel of the
Company.
The fair value of options issued as remuneration is allocated to the relevant vesting period of the options. Options are provided at no
cost to the recipients.
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.
A N N U A L R E P O R T 2 0 1 9 P G 2 5
D I R E C T O R S
R E P O R T ( C O N T. )
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.
2019
Name
DIRECTORS
Paul Chapman1
Will Robinson
Peter Bewick
Jon Hronsky
2018
Name
DIRECTORS
Paul Chapman1
Will Robinson
Peter Bewick
Jon 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
-
-
-
-
-
-
-
-
-
-
3,000,000
3,000,000
1,000,000
1,000,000
(750,000)
(550,000)
5,250,000
5,250,000
1,500,00
1,500,00
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
-
-
3,750,000
1,000,000
-
-
-
-
-
-
-
-
-
-
(750,000)
3,000,000
3,000,000
-
1,000,000
1,000,000
1 Options lapsing unexercised at the end of the exercise period.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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.
2019
Name
DIRECTORS
P. Chapman
W. Robinson
P. Bewick
J. Hronsky
2018
Name
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 year
Balance at the end
of the year
8,622,500
24,769,098
6,800,000
200,000
-
-
-
-
-
-
-
-
8,622,500
24,769,098
6,800,000
200,000
Balance at start of
the year
Received during
the year as
remuneration
Other changes
during the year
Balance at the end of
the year
5,707,142
22,275,470
5,209,142
-
-
-
-
-
2,915,358
8,622,500
2,493,628
24,769,098
1,590,858
6,800,000
200,000
200,000
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
A N N U A L R E P O R T 2 0 1 9 P G 2 7
D I R E C T O R S
R E P O R T ( C O N T. )
PR O C E ED INGS ON BEHA L F OF THE C O MPA N Y
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.
OF F IC ER S’ INDEMNI TIE S A ND IN SUR A NC E
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.
N ON - AUD I T SERVIC E S
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
2019
$
31,250
2018
$
29,100
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:
• 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.
AUD I TOR’S INDEPE NDE NC E DEC LA R ATI ON
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 26th day of September 2019.
W Robinson
Managing Director
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED
Crowe Perth
ABN 96 844 819 235
Level 5 45 St Georges Terrace
Perth WA 6000
PO Box P1213
Perth WA 6844
Australia
Main +61 (8) 9481 1448
Fax +61 (8) 9481 0152
www.crowe.com.au
AUDITOR’S INDEPENDENCE DECLARATION
Crowe Perth
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for
ABN 96 844 819 235
the audit of Encounter Resources Limited for the year ended 30 June 2019, I declare that, to the best
Level 5 45 St Georges Terrace
of my knowledge and belief, there have been:
Perth WA 6000
PO Box P1213
Perth WA 6844
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
Australia
Main +61 (8) 9481 1448
Fax +61 (8) 9481 0152
www.crowe.com.au
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
relation to the audit; and
AUDITOR’S INDEPENDENCE DECLARATION
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for
the audit of Encounter Resources Limited for the year ended 30 June 2019, I declare that, to the best
Crowe Perth
of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
Cyrus Patell
Partner
Signed at Perth dated this 26th day of September 2019
Crowe Perth
Cyrus Patell
Partner
Signed at Perth dated this 26th day of September 2019
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an
equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is
the Crowe Australasia external audit division. All other professional services offered by Findex Group Limited are conducted by a privately owned
organisation and/or its subsidiaries.
Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate
and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any
other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in
Findex (Aust) Pty Ltd. Services are provided by Crowe Perth, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a scheme approved under
Professional Standards Legislation. Liability limited other than for acts or omissions of financial services licensees.
© 2019 Findex (Aust) Pty Ltd
A N N U A L R E P O R T 2 0 1 9 P G 2 9
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an
equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is
the Crowe Australasia external audit division. All other professional services offered by Findex Group Limited are conducted by a privately owned
organisation and/or its subsidiaries.
Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate
and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any
other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in
Findex (Aust) Pty Ltd. Services are provided by Crowe Perth, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a scheme approved under
Professional Standards Legislation. Liability limited other than for acts or omissions of financial services licensees.
© 2019 Findex (Aust) Pty Ltd
C O N S O L I D AT E D S T AT E M E N T O F P R O F I T O R LO S S
A N D OT H E R C O M P R E H E N S I V E I N C O M E
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9
Interest income
Other income
Total income
Employee expenses
Employee expenses recharged to exploration
Equity based remuneration expense
Non-executive Directors’ fees
Notes
5
19
Profit/(loss) on disposal of 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
Other comprehensive income
6
6
7
19
Consolidated
2019
$
54,446
467,601
522,047
2018
$
20,275
123,243
143,518
(1,115,069)
(1,280,225)
908,337
(86,528)
(110,000)
-
(593)
1,001,607
(37,922)
(90,000)
522,731
296
(288)
(65,807)
(67,034)
(361,285)
(353,192)
(294,359)
(9,975,754)
(1,064,491)
(10,136,263)
-
-
(1,064,491)
(10,136,263)
-
-
Gain/(loss) in fair value of financial assets
6,11
(461,234)
Total comprehensive income/(loss) for the year
(1,064,491)
(10,136,263)
Earnings per share for loss attributable to the ordinary equity holders of the Company
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
29
29
(0.4)
(0.4)
(5.2)
(5.2)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED C O N S O L I D AT E D S T AT E M E N T O F F I N A N C I A L
P O S I T I O N A S AT 3 0 J U N E 2 0 1 9
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
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
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Equity remuneration reserve
Total equity
Notes
8
9(a)
9(b)
11
12
13
15
16
17
19
19
Consolidated
2019
$
2018
$
2,480,280
2,860,071
70,692
149,216
80,844
242,614
2,700,188
3,183,529
491,982
37,009
953,216
55,515
13,008,555
11,638,248
13,537,546
12,646,979
16,237,734
15,830,508
199,282
315,096
514,378
514,378
629,889
288,568
918,457
918,457
15,723,356
14,912,051
42,465,654
40,676,386
(27,011,196)
(26,075,127)
268,898
310,792
15,723,356
14,912,051
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 2 0 1 9 P G 3 1
C O N S O L I D AT E D S T AT E M E N T O F C H A N G E S I N E Q U I T Y
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9
2018
Consolidated
Issued capital
$
Accumulated
losses
$
Equity
remuneration
reserve
$
Total
$
Balance at the start of the financial year
37,678,887
(16,052,305)
386,311
22,012,893
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:
Shares issued (net of costs)
-
-
-
(10,136,263)
-
(10,136,263)
-
37,922
37,922
113,441
(113,441)
-
2,997,499
-
-
2,997,499
Balance at the end of the financial year
40,676,386
(26,075,127)
310,792
14,912,051
2019
Consolidated
Issued capital
$
Accumulated
losses
$
Equity
remuneration
reserve
$
Total
$
Balance at the start of the financial year
40,676,386
(26,075,127)
310,792
14,912,051
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:
Shares issued (net of costs)
-
-
-
(1,064,491)
-
(1,064,491)
-
86,528
86,528
128,422
(128,422)
-
1,789,268
-
-
1,789,268
Balance at the end of the financial year
42,465,654
(27,011,196)
268,898
15,723,356
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED C O N S O L I D AT E D S T AT E M E N T O F C A S H F LOW S F O R
T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9
Cash flows from operating activities
Other income
Project generation fee received
State Government funded drilling rebate
R&D tax concession tax refund
Interest received
Notes
Consolidated
2019
$
2018
$
2,903
400,000
112,674
127,686
54,446
-
100,000
384,878
127,640
20,275
Payments to suppliers and employees
(783,237)
(681,812)
Net cash from/(used in) operating activities
28
(85,528)
(49,019)
Cash flows from investing activities
Contributions received from project generation alliance and farm-in
partners
417,286
491,423
Payments for exploration and evaluation
(2,501,617)
(4,089,333)
Proceeds from sale of plant and equipment
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of shares
Payments for share issue costs
Net cash from/(used in) financing activities
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
-
-
6,364
(5,119)
(2,084,331)
(3,596,665)
1,800,800
2,960,326
(10,732)
(85,662)
1,790,068
2,874,664
(379,791)
(771,020)
2,860,071
3,631,091
Cash at the end of the financial year
8(a)
2,480,280
2,860,071
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 2 0 1 9 P G 3 3
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9
N OTE 1 SUMMA RY OF SIGNIF I CA NT ACC O UNTING PO LIC IE S
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”).
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 24th September 2019.
Statement of Compliance
The consolidated financial report of Encounter Resources Limited complies with Australian Accounting Standards, which include
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 Accounting Standards
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (“AASB”) that are mandatory for the current reporting period. The adoption of these Accounting
Standards and Interpretations did not have any significant impact on the financial performance or position of the Group during the
financial year.
AASB 9 Financial Instruments
The Company has adopted AASB 9 from 1 July 2018 which have resulted in changes to accounting policies and the analysis for
possible adjustments to amounts recognised in the financial statements. In accordance with the transitional provisions in AASB 9,
the reclassifications and adjustments are not reflected in the statement of financial position as at 30 June 2018. The Company has
not recognised a loss allowance on trade and other receivables following assessment of the impact of the expected credit loss model
introduced by AASB 9.Classification and Measurement.
On 1 July 2018, the Company has assessed which business models apply to the financial instruments held by the Company and have
classified them into the appropriate AASB 9 categories. The main effects resulting from this reclassification are shown in the table
below.
On adoption of AASB 9, the Company classified financial assets and liabilities as measured at either amortised cost or fair value,
depending on the business model for those assets and on the asset’s contractual cash flow characteristics. There were no changes in
the measurement of the Company’s financial instruments.
There was no impact on the statement of comprehensive income or the statement of changes in equity on adoption of AASB 9 in
relation to classification and measurement of financial assets and liabilities.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED The following table summarises the impact on the classification and measurement of the Company’s financial instruments at
1 July 2018:
Presented in statement of
financial position
Financial Asset /
Liability
AASB 139
AASB 9
Reported $
Restated $
Trade and other receivables
Loans and
receivables
Loans and
receivables
Amortised Cost
No change
No change
Other financial assets
Equity investment
Fair value through
profit or loss
Fair value through
profit or loss
No change
No change
Trade and other payables
Loans and
payables
Amortised Cost
Amortised Cost
No change
No change
The Group does not currently enter into any hedge accounting and therefore there is no impact to the Group’s financial statements.
Impairment
AASB 9 introduces a new expected credit loss (“ECL”) model that requires the Company to adopt an ECL position across the
Company’s financial assets from 1 July 2018. The Company’s receivables balance consists of GST refunds from the Australian
Taxation Office and interest receivables from recognised Australian banking institutions.
The loss allowances for financial assets are based on the assumptions about risk of default and expected loss rates. The Company
uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company’s past
history, existing market conditions as well as forward looking estimates at the end of each reporting period. Given the Company’s
receivables are from the Australian Taxation Office and recognised Australian banking institutions, the Company has assessed that
the risk of default is minimal and as such, no ECL has been recognised against these receivables as at 30 June 2019.
AASB15 Revenue from Contracts with Customers
The impact of this standard on the Group’s financial statements is not material as the Group is not party to such contracts.
A N N U A L R E P O R T 2 0 1 9 P G 3 5
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 1 SUMMA RY OF SIGNIF I CA NT ACC O UNTING PO LIC IE S (C ONT.)
New standards and interpretations not yet adopted
The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application date or future
reporting periods and which the Group has decided not to early adopt. A discussion of those future requirements and their impact on
the Group is as follows:
AASB 16 Leases
AASB 16 Leases will replace existing accounting requirements for leases under AASB 117 Leases. Under current requirements,
leases are classified based on their nature as either finance leases which are recognised on the statement of financial position, or
operating leases, which are not recognised on the statement of financial position.
Under AASB 16, the Group’s accounting for operating leases as a lessee will result in the recognition of a right-of-use (ROU) asset
and an associated lease liability on the statement of financial position. The lease liability represents the present value of future lease
payments, with the exception of short term and low value leases. An interest expense will be recognised on the lease liabilities and
a depreciation charge will be recognised for the ROU assets. There will also be additional disclosure requirements under the new
standard.
Although the Group has yet to complete its formal assessment, the adoption of AASB 16 is expected to have an immaterial impact on
the financial statements of the Company due to the minimal number, if any, of non-cancellable leases currently entered into by the
Company which would not fall under a short term or low value exception.
Transition
The Group will initially apply AASB 16 on 1 July 2019 using the modified retrospective approach. Therefore, the cumulative effect
of adopting AASB 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 July 2019 with no
restatement of comparative information.
When applying the modified retrospective approach to leases previously classified as operating leases under AASB 117, the Group
can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Group is assessing the
potential impact of using these practical expedients.
Although the Group has yet to complete its formal assessment, it is expected that the adoption of AASB 16 will have minimal impact
if any on the financial statements of the Group. The actual impact of applying AASB 16 on the financial statements in the period of
initial application will depend however on future economic conditions, including the Group’s borrowing rate, the composition of the
Group’s lease portfolio, the extent to which the Group elects to use practical expedients and recognition exemptions, and the new
accounting policies, which are subject to change until the Group presents its first financial statements that include the date of initial
application.
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.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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.
(a) 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.
(b) Other income
Interest income
Interest income is recognised on a time proportion basis and is recognised as it accrues.
Option fee income
Recognised for option fee income at such time that the option fee becoming receivable by the Company occurs.
Management fee income
Recognised for management fees from farm-in and alliance partners during the period in which the Company provided the relevant
service.
(c) 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.
A N N U A L R E P O R T 2 0 1 9 P G 3 7
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 1 SUMMA RY OF SIGNIF I CA NT ACC O UNTING PO LIC IE S (C ONT.)
(d) 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.
(e) 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 impairment are reviewed for possible reversal of the impairment at each reporting date.
(f) 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.
(g) 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 are deducted from the carrying value of the relevant 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.
(h) 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.
(i) 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.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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
33%
33%
Leasehold improvements
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.
(j) 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:
• such costs are expected to be recouped through the successful development and exploitation of the area of interest, or
alternatively by its sale; or
• 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.
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 designates 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.
A N N U A L R E P O R T 2 0 1 9 P G 3 9
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 1 SUMMA RY OF SIGNIF I CA NT ACC O UNTING PO LIC IE S (C ONT.)
(k) 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
reduces 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 14.
(l) 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.
(m) 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.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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.
(n) 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.
(o) 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.
(p) 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.
A N N U A L R E P O R T 2 0 1 9 P G 4 1
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 1 SUMMA RY OF SIGNIF I CA NT ACC O UNTING PO LIC IE S (C ONT.)
(q) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the
current financial year.
(r) Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either
amortised cost or fair value depending on their classification.
Classification is determined based on both the business model within which such assets are held and the contractual cash flow
characteristics of the financial asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated
entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering
part or all of a financial asset, it’s carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial
assets at fair value through profit or loss. Typically, such financial assets will be either:
(i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a
profit, or a derivative; or
(ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at
amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the
consolidated entity’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has
increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue
cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss
allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event
that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit
risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected
credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of
the instrument discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other
comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.
(s) 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:
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED
Investments in equity securities
The fair value of financial assets at fair value through profit or loss, is determined by reference to their quoted bid price at the
reporting date. 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.
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.
(t) Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on a current or non-current classification.
An asset is current when it is:
• Expected to be realized, or intended to be sold or consumed in the Group’s normal operating cycle;
• Expected to be realized within twelve months after the reporting period; or
• Cash or a cash equivalents (unless restricted for at least twelve months after the reporting period.
A liability is current when it is:
• Expected to be settled in the Group’s normal operating cycle;
• It is due to be settled within twelve months after the reporting date; or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other assets and liabilities are classed as non-current.
A N N U A L R E P O R T 2 0 1 9 P G 4 3
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 2 F INA NC IA L RI SK MA N AG EM E NT
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.
(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.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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 2019 of $491,982 (2018: $953,216). 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.
N OTE 3 C RI TICA L ACC OUNTING E S TI MATE S A ND JUDG EM E NTS
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(j). There is some subjectivity involved in the carrying forward as capitalised or writing
off to the income statement exploration and evaluation expenditure. Key judgements applied include determining which expenditures
relate directly to exploration and evaluation activities and allocating overheads between those that are expensed and capitalised.
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.
N OTE 4 SEGME NT INF ORMATI O N
The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors
in assessing performance and determining the allocation of resources. Reportable segments disclosed are based on aggregating
operating segments, where the segments have similar characteristics. The Group’s sole activity is mineral exploration and resource
development wholly within Australia, therefore it has aggregated all operating segments into the one reportable segment being
mineral exploration.
The reportable segment is represented by the primary statements forming these financial statements.
A N N U A L R E P O R T 2 0 1 9 P G 4 5
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 5 OTHER INC OME
Operating activities
Project generation fees
Management fees from farm-in and project generation alliance partners
Other income
N OTE 6 LO SS F OR THE YEA R
Loss before income tax includes the following specific benefits/(expenses):
Depreciation: Office equipment
Total exploration and joint venture costs not capitalised and written off
(Loss)/Gain in fair value of financial assets1
Consolidated
2019
$
400,000
63,647
3,954
467,601
2018
$
100,000
19,183
4,060
123,243
Consolidated
2019
$
(593)
(294,359)
(461,234)
2018
$
(288)
(9,975,754)
522,731
1 Adjustment to carrying value of investment in Hampton Hill NL, based on ASX closing price as at 30 June 2019. The gain/(loss) on investment has been recognised in the
Statement of Profit or Loss. Refer note 11.
N OTE 7 INC OME TAX
a) Income tax expense
Current income tax:
Current income tax charge (benefit)
Current income tax not recognised
Deffered income tax:
Relating to origination and reversal of timing differences
Deferred income tax benefit/(liability) not recognised
Consolidated
2019
$
2018
$
(516,515)
(1,033,689)
516,515
1,033,689
1,019,703
(1,447,464)
(1,019,703)
1,447,464
Income tax expense/(benefit) reported in the income statement
-
-
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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 27.5% (2018 – 27.5%)
(1,064,491)
(10,136,263)
(292,735)
(2,787,472)
Consolidated
2019
$
2018
$
Tax effect of permanent differences:
Non-deductible share based payment
Unrealised movement in fair value of financial assets
Exploration costs written off
Capital raising costs claimed
Net deferred tax asset benefit not brought to account
Tax (benefit)/expense
c) Deferred tax – Balance Sheet
Liabilities
Prepaid expenses
Capitalised exploration expenditure
Assets
23,795
126,839
-
(9,597)
151,698
-
10,429
(143,751)
2,684,744
(9,006)
245,056
-
(41,034)
(3,577,353)
(3,618,387)
(66,719)
(3,200,518)
(3,267,237)
Revenue losses available to offset against future taxable income
7,675,789
8,324,029
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/(decrease) in tax losses carried forward
Employee provisions
Deferred tax benefit/(expense) movement for the period not recognised
86,651
1,089
23,319
7,786,849
4,168,462
25,685
(376,834)
(6,646)
(20,963)
(648,240)
7,295
(1,019,703)
79,356
22,052
29,965
8,455,402
5,188,165
(57,581)
2,386,882
13,149
21,616
(921,973)
5,371
1,447,464
A N N U A L R E P O R T 2 0 1 9 P G 4 7
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 7 INC OME TAX (C ONT.)
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 $27,911,961 (2018: $27,746,763) were incurred by Australian entities.
The Company will issue Junior Mineral Exploration Incentive (JMEI) credits to eligible shareholders in respect of the 2019 financial
year amounting to $495,000 (2018: $750,000), a total of $1,800,000 (2018: $2,727,273) in tax losses has been cancelled as at 30
June 2019 in the above notes in respect of this issue.
N OTE 8 C URRE NT ASSE TS - CASH A ND CASH EQUI VA LE NTS
Cash at bank and on hand
Deposits at call
Consolidated
2019
$
907,780
1,573,000
2,480,280
2018
$
2,785,821
74,250
2,860,071
(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:
Cash and cash equivalents per statement of cash flows
2,480,280
2,860,071
(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:
Office lease bond guarantee (Note 24)
23,000
23,000
The Company recognises liabilities in the financial statements for unspent farm-in contributions (Note 15).
N OTE 9 C URRE NT ASSE TS – RE C EI VABLE S
a) Trade and other receivables
Funds due from project generation alliance partner
Funds due from farm-in partner
Other receivables
GST recoverable
b) Other current assets
Prepaid tenement costs
Details of fair value and exposure to interest risk are included at note 20.
Consolidated
2019
$
34,522
13,461
11,207
11,502
70,692
2018
$
-
7,677
31,912
41,255
80,844
149,216
242,614
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED
NOTE 10 NON-C URRE NT ASSE TS – INVE STME NT IN C ONTROLLED E NTI TIE S
The following amounts represent the respective investments in the share capital of Encounter Resources Limited’s wholly owned
subsidiary companies:
a) Investment in controlled entities
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Encounter Yeneena Pty Ltd
Baudin Resources Pty Ltd
Subsidiary Company
Encounter Operations Pty Ltd
Hamelin Resources Pty Ltd
Encounter Yeneena Pty Ltd
Baudin Resources Pty Ltd
Consolidated
2019
$
2
1
2
10
2018
$
2
1
2
10
Country of
Incorporation
Australia
Australia
Australia
Australia
Ownership Interest
2019
100%
100%
100%
100%
2018
100%
100%
100%
100%
• Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006.
• 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.
• Baudin Resources Pty Ltd was incorporated in Western Australia on 7 April 2017.
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
2019
$
2018
$
21,783,786
21,170,709
4,280,398
803,052
3,684,164
662,128
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 2 0 1 9 P G 4 9
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 11 F INA NC IA L ASSE TS – IN VE STME NTS DE SI GNATED AT F AIR
VA LUE THROUGH PROF I T OR LO SS
Balance at the start of the financial year1
Gain on investments recognised through profit & loss2
Balance at the end of the financial year
Consolidated
2019
$
953,216
(461,234)
491,982
2018
$
430,485
522,731
953,216
1 The investment relates to the 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.
2 Adjustment to carrying value of investment in Hampton Hill NL, based on ASX closing price as at 30 June. The gain on investment has been recognised in the Statement of
Profit or Loss. Refer note 6.
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).
N OTE 1 2 N O N-C URRE NT ASS E TS – PR OPER T Y, PLA NT A ND EQ U I PME N T
Field equipment
At cost
Accumulated depreciation
Office equipment
At cost
Accumulated depreciation
Leasehold improvements
At cost
Accumulated depreciation
Consolidated
2019
$
844,631
(808,813)
35,818
111,107
(109,916)
1,191
22,137
(22,137)
2018
$
844,631
(790,900)
53,731
111,107
(109,323)
1,784
22,137
(22,137)
Total
37,009
55,515
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED
Reconciliation
Field equipment
Net book value at start of the year
Cost of additions
Net book value of disposals
Depreciation charged
Net book value at end of the year
Office equipment
Net book value at start of the year
Cost of additions
Depreciation charged
Net book value at end of the year
Consolidated
2019
$
2018
$
53,731
-
-
(17,913)
35,818
1,784
-
(593)
1,191
82,855
3,046
(6,068)
(26,102)
53,731
-
2,072
(288)
1,784
No items of property, plant and equipment have been pledged as security by the Group.
N OTE 1 3 N O N-C URRE NT ASS E TS – C API TA LI SED MI NER A L EXP LORAT I ON
A N D E VA LUATI ON EXPE ND I T UR E
In the exploration and evaluation phase
Capitalised exploration costs at the start of the period
Total acquisition and exploration costs for the period (i)
Exploration costs funded by EIS grant
Research and development tax credits (ii)
Total exploration and joint venture costs written off and expensed for the period
Capitalised exploration costs at the end of the period
Consolidated
2019
$
2018
$
11,638,248
18,624,668
1,899,443
(107,090)
(126,687)
(294,359)
13,008,555
3,317,996
(204,052)
(127,640)
(9,972,724)
11,638,248
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.
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.
(i) 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 joint venture partner Hampton Hill NL (see Note 14b) incurred costs of $24,751
(2018: $112,021) in respect of exploration and evaluation costs on the Company’s assets in addition to the amounts
stated above.
(ii) Amounts receivable pursuant to research and development tax credit (R&D) claims lodged during the period. The activities
the subject of the R&D claims are subject to review by AusIndustry prior to being submitted. R&D submissions may or may
not be subject to future review or audit by AusIndustry or the Australian Taxation Office.
A N N U A L R E P O R T 2 0 1 9 P G 5 1
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 1 4 INTERE ST IN JOINT VE NT UR E S A ND F A R M-IN A RRA N GEM E NT S
a) Joint Venture Agreements – Joint Operations
Joint venture agreements may be entered into with third parties.
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 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.
The Company was party to the following farm-in, option and joint venture arrangements during the financial year ended 30 June
2019:
b) Farm-in Arrangements
Millennium Zinc Project – Hampton Hill NL (HHM) Joint Venture
Encounter Resources Limited has a 75:25 contributing joint venture with HHM covering 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.
• HHM hold a 25% and Encounter holds a 75% interest in the joint venture.
• 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 is the Operator.
Earn-in and Joint Venture Agreement Option - Yeneena Copper-Cobalt Project (“Yeneena”)
– Independence Group NL (IGO)
At any time before 1 March 2020, IGO may elect to enter an earn-in agreement in Yeneena.
The key terms of the earn-in and joint venture agreement (should IGO exercise its right to form a joint venture under the earn-in
agreement) are as follows:
• IGO may earn a 70% interest in the project by sole funding $15 million of expenditure over 7 years;
• During the earn-in, IGO shall have the right to be the Manager of the project;
• Upon IGO completing the earn-in a 70:30 joint venture will be formed, and the parties must contribute funds based on
their percentage interest to maintain their respective interests; and
• Standard dilution clauses will apply to the parties’ interests. Should a party’s interest dilute to below 10% it shall
automatically convert to a Net Smelter Royalty.
N OTE 1 5 C URRE NT LIABILI TIE S – TRA DE A ND OTHER PAYABLE S
Unspent project generation alliance contributions (includes prepaid tenement rents)
Trade payables and accruals
Other payables
Net book value at end of the year
Consolidated
2019
$
-
151,051
48,231
199,282
2018
$
223,741
344,847
61,301
629,889
Liabilities are not secured over the assets of the Group. Details of fair value and exposure to interest risk are included at note 20.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED N OTE 1 6 C URRE NT LIABIL I TIE S - EMPLOYEE BE NEF I TS
Liability for annual leave
Liability for long service leave
N OTE 17 I SSUED CAPI TA L
a) Ordinary shares
Consolidated
2019
$
125,575
189,521
315,096
2018
$
147,007
141,561
288,568
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
Issue price
2019
No.
2018
No.
2019
No.
2018
No.
262,375,092
238,375,092
42,465,654
40,676,386
Balance at the start of the financial year
238,375,092
2,806,216
40,676,386
Share placement
Shares issued to acquire exploration assets
Share placement
Share placement
Less share issue costs
$0.10
$0.082
$0.06
$0.075
-
-
-
2,806,216
250,000
46,367,332
-
-
-
24,000,000
-
-
-
1,800,000
(10,732)
280,622
280,622
20,500
2,782,040
-
(85,662)
Balance at the end of the financial year
262,375,092
238,375,092
42,465,654
40,676,386
N OTE 1 8 OPTI ON S A ND SHA RE BASED PAYME NTS
The establishment of the Encounter Resources Limited Employee Share Option Plan (“the Plan”) was last approved by a resolution
at the Annual General Meeting of shareholders of the Company on 30 November 2018. 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 4,650,000 options (2018: 1,625,000) over unissued shares.
A N N U A L R E P O R T 2 0 1 9 P G 5 3
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 1 8 OPTI ON S A ND SHA RE BASED PAYME NTS (C O NT.)
b) Options exercised during the year
During the financial year the Company issued no shares (2018: Nil) on the exercise of unlisted employee options.
c) Options cancelled during the year
During the year: 475,000 options (2018: nil) were cancelled upon termination of employment; and 7,191,429 options
(2018: 1,245,000) were cancelled on expiry of exercise period.
d) Options on issue at the balance date
The number of options outstanding over unissued ordinary shares at 30 June 2019 is 9,725,000 (2018: 12,741,429).
The terms of these options are as follows:
Number of options outstanding
Exercise price
750,000
325,000
1,850,000
750,000
675,000
725,000
3,150,000
1,500,000
9,725,000
31 cents
14 cents
13 cents
17.5 cents
10.5 cents
10 cents
9 cents
12 cents
Expiry date
27 November 2019
28 February 2020
24 November 2020
24 November 2021
1 November 2021
31 May 2022
30 November 2022
30 November 2023
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)
2019
2018
Options outstanding at the start of the year
Options granted during the year
Options exercised during the year
No.
12,741,429
4,650,000
Options cancelled and expired unexercised during the year
(7,666,429)
Options outstanding at the end of the year
9,725,000
WAEP
(cents)
18.5
10.0
20.4
12.9
No.
12,361,429
1,625,000
-
(1,245,000)
12,741,429
WAEP
(cents)
20.3
10.3
-
32.2
18.5
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED Weighted average contractual life
The weighted average contractual life for un-exercised options is 31.7 months (2018: 25.3 months).
Basis and assumptions used in the valuation of options.
The remuneration related 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
Risk free
interest rate
used
3 Dec 2018
3 Dec 2018
5 Feb 2019
2,500,000
1,500,000
650,000
9
12
9
30 Nov 2022
30 Nov 2023
30 Nov 2022
2.27%
2.27%
1.85%
Historical volatility has been used as the basis for determining expected share price volatility.
Volatility
applied
53.0%
53.0%
82.3%
Value of Options
$43,948
$24,653
$17,927
N OTE 1 9 RE SERVE S A ND ACC UM ULATED LO SSE S
Consolidated
2019
2018
Accumulated
losses
$
Equity
remuneration
reserve (i)
$
Accumulated
losses
$
Equity
remuneration
reserve (i)
$
Balance at the beginning of the year
(26,075,127)
310,792
(16,052,305)
386,311
Profit/(Loss) for the period
(1,064,491)
-
(10,136,263)
-
Movement in equity remuneration reserve in respect of
options issued
-
86,528
-
37,922
Transfer to accumulated losses on cancellation of options
128,422
(128,422)
113,441
(113,441)
Balance at the end of the year
(27,011,196)
268,898
(26,075,127)
310,792
(i) The equity remuneration reserve is used to recognise the fair value of options issued and vested but not exercised.
N OTE 20 F INA NC IA L IN STR U ME N TS
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.
A N N U A L R E P O R T 2 0 1 9 P G 5 5
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 20 F INA NC IA L IN STR U ME N TS (C ONT.)
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 ($)
2019
-
2018
-
2,480,280
2,860,071
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.
2019
Variable rate instruments
2018
Variable rate instruments
Liquidity risk
Profit or loss
Equity
1%
increase
1%
decrease
1%
increase
1%
decrease
24,803
(24,803)
24,803
(24,803)
28,601
(28,601)
28,601
(28,601)
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements, note 2(b):
Consolidated
Carrying
amount
Contractual
cash flows
< 6 months
6-12
months
1-2 years
2-5 years
> 5 years
$
$
$
2019
Trade and other payables
151,051
151,051
151,051
151,051
151,051
151,051
2018
Trade and other payables
344,847
344,847
344,847
344,847
344,847
344,847
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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
2019
2018
Carrying
amount
$
Fair value
$
Carrying
amount
$
Fair value
$
2,480,280
2,480,280
2,860,071
2,860,071
491,982
491,982
953,216
953,215
(151,051)
(151,051)
(344,847)
(344,847)
2,821,211
2,821,211
3,468,440
3,468,440
Cash and cash equivalents
Financial assets
Trade and other payables
The Group’s policy for recognition of fair values is disclosed at note 1(s).
N OTE 21 D IVIDE NDS
No dividends were paid or proposed during the financial year ended 30 June 2018 or 30 June 2019.
The Company has no franking credits available as at 30 June 2018 or 30 June 2019.
N OTE 22 KE Y MA NAGEME NT PER SO NNEL D I SC LO SUR E S
(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 director
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
2019
$
623,770
68,601
59,260
751,631
2018
$
671,115
-
63,846
734,961
A N N U A L R E P O R T 2 0 1 9 P G 5 7
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 23 REMUNERATI ON OF AUD I TO R S
Audit and review of the Company’s financial statements
N OTE 24 C ONTINGE NC IE S
(i) Contingent liabilities
2019
$
31,250
2018
$
29,100
There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2018 or 30 June
2019 other than:
Yeneena Project Gold Claw-back
Included in the agreement for the Group’s acquisition of the remaining 25% interest of certain licences 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.
The Yeneena Project Gold Claw-back relates to the following exploration licences: E45/2500, E45/2501, E45/2502, E45/2561,
E45/2657, E45/2658, E45/2805 and E45/2806.
Yeneena Copper-Cobalt Project (“Yeneena”) - Earn-in Option
In November 2018, Independence Group NL (“IGO”) subscribed for a placement of 24 million ordinary shares to raise a total of $1.8
million. Encounter shall apply a minimum of 80% of the funds raised towards advancing Yeneena. At any time before 1 March 2020,
IGO may elect to enter an earn-in agreement to spend up to $15 million to earn a 70% interest in Yeneena.
Telfer West Production Royalty
The Group is subject to a production unit royalty of $1 per dry metric tonne of ore mined and sold from licence E45/4613 at its Telfer
West Gold Project.
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 Base Metals Project and the Paterson Gold Projects. 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.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED 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.
(ii) Contingent assets
There were no material contingent assets as at 30 June 2018 or 30 June 2019.
N OTE 25 C OMMI TME NTS
(a) Exploration
The Group has certain obligations to perform minimum exploration work on mineral leases held. These obligations may be varied as
a result of renegotiations of the terms of the exploration licences or their relinquishment. The minimum exploration obligations are
less than the normal level of exploration expected to be undertaken by the Group.
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 $1,214,770 (2018: $1,231,520).
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
There are no material operating lease commitments as at 30 June 2018 or 30 June 2019 not otherwise disclosed in the Financial
Statements.
(c) Contractual Commitment
There are no material contractual commitments as at 30 June 2018 or 30 June 2019 not otherwise disclosed in the Financial
Statements.
N OTE 26 RELATED PA R T Y TR A N SAC TI O N S
Transactions with Directors during the year are disclosed at Note 22 – Key Management Personnel.
There are no other related party transactions, other than those already disclosed elsewhere in this financial report.
N OTE 27 E VE NTS OCC URRING AF TER THE BA LA N C E SHEE T D AT E
Subsequent to the end of the reporting period the Company issued 18,449,876 ordinary fully paid shares pursuant to a share
placement at 7.5 cents per share, raising $1,383,741, before costs. ASX listed mid-tier gold producer Silver Lake Resources Ltd
(“Silver Lake”) participated in the raising and became as a new substantial shareholder in the Company.
Other than as already stated in this report , 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.
A N N U A L R E P O R T 2 0 1 9 P G 5 9
N OT E S T O T H E F I N A N C I A L S T AT E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 9 ( C O N T. )
N OTE 28 REC ONC ILIATI ON OF LO SS AF TER TAX TO NE T CAS H I NF LOW
FR O M OPERATING AC TIVI TIE S
Profit/(Loss) from ordinary activities after income tax
(1,064,491)
(10,136,263)
Consolidated
2019
$
2018
$
Research and development tax credit
Depreciation
Exploration cost written off and expensed
Share based payments expense
Unrealised gain/(loss) on investments
Contribution to overheads from farm-in and project alliance partners
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
N OTE 29 EA RNINGS PER SHA R E
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
127,686
593
294,359
86,528
461,234
(63,647)
112,674
5,690
(46,154)
(85,528)
127,640
288
9,975,754
37,922
(522,731)
(19,183)
219,053
178,041
90,460
(49,019)
Consolidated
2019
Cents
(0.4)
(0.4)
$
2018
Cents
(5.2)
(5.2)
$
c) Loss used in calculation of basic and diluted loss per share
Consolidated profit/(loss) after tax from continuing operations
(1,064,491)
(10,136,236)
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
No.
No.
253,498,380
195,825,899
253,498,380
195,825,899
At 30 June 2019, the Company has on issue 9,725,000 options (2018: 12,741,429) over ordinary shares that are not considered to be dilutive.
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED N OTE 30 P A RE NT E NTI T Y INF OR MATI ON
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
Consolidated
2019
$
2018
$
2,680,979
3,134,397
2,680,979
3,134,397
13,556,755
12,700,711
16,237,734
15,835,108
514,378
923,057
-
-
514,378
923,057
15,723,356
14,912,051
42,465,654
40,676,386
268,898
310,792
(27,011,196)
(26,075,127)
15,723,356
14,912,051
(1,064,391)
(10,136,263)
-
-
(1,064,391)
(10,136,263)
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.
A N N U A L R E P O R T 2 0 1 9 P G 6 1
D I R E C T O R S ’
D E C L A R AT I O N
In the opinion of the Directors of Encounter Resources Limited (“the Company”)
(a)
the financial statements and notes set out on pages 30 to 61 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(ii)
give a true and fair view of the financial position as at 30 June 2019 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 2019.
This declaration is made in accordance with a resolution of the Directors.
Signed at Perth this 26th day of September 2019.
W Robinson
Managing Director
LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED
Crowe Perth
ABN 96 844 819 235
Level 5 45 St Georges Terrace
Perth WA 6000
PO Box P1213
Perth WA 6844
Australia
Main +61 (8) 9481 1448
Fax +61 (8) 9481 0152
www.crowe.com.au
INDEPENDENT AUDITORS REPORT
TO THE MEMBERS OF ENCOUNTER RESOURCES LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Encounter Resources Limited (the Company) and its
subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30
June 2019, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial statements, including a summary of significant accounting
policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(a)
(b)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an
equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership
is the Crowe Australasia external audit division. All other professional services offered by Findex Group Limited are conducted by a privately
owned organisation and/or its subsidiaries.
Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a
separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe
Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or
partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Perth, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a
scheme approved under Professional Standards Legislation. Liability limited other than for acts or omissions of financial services licensees.
© 2019 Findex (Aust) Pty Ltd
A N N U A L R E P O R T 2 0 1 9 P G 6 3
Key Audit Matter
How we addressed the Key Audit Matter
Consideration of impairment of capitalised mineral exploration and evaluation expenditure
Our procedures included, but were not limited to:
•
Evaluating management’s documented
assessment of the existence or otherwise of
impairment indicators from both internal and
external sources;
• Corroborating representations made by
management with available external data
and evidence obtained by us during the
course of our audit; and
• Considering the appropriateness of relevant
disclosures in the notes to the financial
statements.
The consideration of impairment of the
carrying value of the Group’s Capitalised
Mineral Exploration and Evaluation
Expenditure assets was material to our audit
and represented an area of significant
estimate and judgement within the financial
report.
This matter is considered a key audit matter
due to the high degree of judgement required
by the directors to assess whether
impairment indicators are present for
specified tenements held and due to the
significance of the capitalised amount of
$13.09m at 30 June 2019.
The conditions and assessment undertaken
in relation to impairment are disclosed in the
Group’s accounting policy in Notes 1 and 13
of the financial report.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2019, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information; we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards, International Financial Reporting
Standards and the Corporations Act 2001 and for such internal control as the directors determine is
necessary to enable the preparation of the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
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LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting in
the preparation of the financial report. We also conclude, based on the audit evidence obtained
whether a material uncertainty exists related to events and conditions that may cast significant
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in
the financial report about the material uncertainty or, if such disclosures are inadequate, to modify
the opinion on the financial report. However, future events or conditions may cause an entity to
cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We are also required to provide the directors with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
A N N U A L R E P O R T 2 0 1 9 P G 6 5
3
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 21 to 27 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Encounter Resources Limited for the year ended 30 June
2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Group are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express
an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Crowe Perth
Cyrus Patell
Partner
Dated at Perth this 26th day of September 2019
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LETTER FROM THE CHAIRMANAND MANAGING DIRECTORENCOUNTER RESOURCES LIMITED A S X A D D I T I O N A L I N F O R M AT I O N
Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was
applicable as at 27 September 2019.
A. DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of shareholders by size of holding:
Ordinary Fully Paid Shares
Distribution
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
More than 100,000
Totals
Number of shareholders
Securities held
106
182
146
489
241
1,164
40,622
561,019
1,211,822
20,018,793
258,992,712
280,824,968
There are 220 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
Zero Nom PL
William Michael Robinson
Deutsche Balaton Aktiengesellschaft
Silver Lake Resources Limited
Issued Ordinary Shares
Number of shares
% of shares
25,700,000
25,169,098
15,833,334
15,000,000
9.15%
8.96%
5.64%
5.34%
C. TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest holders of quoted shares are listed below:
Shareholder Name
Zero Nom PL
William Michael Robinson
Deutsche Balaton Aktiengesellschaft
Silver Lake Resources Limited
UBS Nominees Pty Ltd
HSBC Custody Nominees Australia Limited
HSBC Custody Nominees Australia Ltd
Stone Poneys Nominees Pty Ltd
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