SILVER MINES LIMITED and its controlled entities
2016 Annual Report
CONTENTS
Directors ............................................................................................................................................................................ 4
INTRODUCTION ............................................................................................................................................................... 4
Projects .......................................................................................................................................................................... 4
Bowdens Silver Project ........................................................................................................................................... 4
Other Projects .......................................................................................................................................................... 7
Corporate ....................................................................................................................................................................... 8
Share Placement ...................................................................................................................................................... 8
Capital Consolidation .............................................................................................................................................. 8
Board of Directors and Management Changes .................................................................................................... 8
INFORMATION ON BOARD ............................................................................................................................................. 9
Directors ........................................................................................................................................................................ 9
Company Secretary ....................................................................................................................................................... 9
Bowdens Resource Estimation ............................................................................................................................ 10
Conrad Resource Estimation ............................................................................................................................... 10
Webbs Resource Estimation ................................................................................................................................ 10
REMUNERATION REPORT ........................................................................................................................................... 11
Remuneration policy .................................................................................................................................................... 11
Performance based remuneration ....................................................................................................................... 11
Group performance, shareholder wealth and directors' and executives' remuneration .............................................. 11
Key Service Agreements ............................................................................................................................................. 12
Director remuneration for the year ended 30 June 2016: ........................................................................................... 13
Remuneration of the Key Executives remuneration for the year ended 30 June 2016: ............................................. 13
Meetings of Directors ................................................................................................................................................... 13
Corporate governance ................................................................................................................................................. 14
Directors and officers indemnification ......................................................................................................................... 14
Auditor’s independence declaration ............................................................................................................................ 14
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ............................................................................... 16
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ......................................................................................... 17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ......................................................................................... 18
CONSOLIDATED STATEMENT OF CASH FLOWS ...................................................................................................... 19
NOTES TO THE FINANCIAL STATEMENTS ................................................................................................................ 20
FINANCIAL LIABILITIES ............................................................................................................................................. 33
Payables (current) ....................................................................................................................................................... 33
FINANCIAL LIABILITIES ............................................................................................................................................. 33
Payables (current) ....................................................................................................................................................... 33
Borrowings (current) .................................................................................................................................................... 33
DIRECTORS’ DECLARATION ........................................................................................................................................ 38
Directors ...................................................................................................................................................................... 41
Company Secretary ..................................................................................................................................................... 41
Website: www.silvermines.com.au .............................................................................................................................. 41
Additional securities exchange information as at 28th September 2016 ..................................................................... 42
20 Largest Holders of Ordinary Shares and their Holdings at 28th September 2016 .................................................. 42
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Distribution of Holders and Holdings at 28th September 2016 .................................................................................... 42
Substantial shareholders at 29th September 2016 ...................................................................................................... 43
Tenement Information as at 30th June 2016: .............................................................................................................. 43
CORPORATE GOVERNANCE STATEMENT ................................................................................................................ 44
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
The directors present their report on the Group for the year ended 30 June 2016.
Directors
The directors of Silver Mines Limited during the financial year and until the date of this report are:
Keith Perrett (Non-Executive Chairman) Appointed 20 June 2016
Anthony McClure (Managing Director) Appointed 20 June 2016
Peter Langworthy (Non-Executive director) Appointed 20 June 2016
Nathan Featherby (Non-Executive Chairman) Resigned 26 August 2016
Charles Straw (Executive Director) Resigned 20 June 2016
Darren Holden (Non-Executive Director) Resigned 20 June 2016
Saxon Ball (Non-Executive Director) Resigned 20 June 2016
James Naughton (Non-Executive Director) Resigned 19 February 2016
Douglas Flinn (Non-Executive Director) Resigned 31 December 2015
David Sutton (Non-Executive Chairman) Resigned 30 November 2015
Principal Activities
The principal activities of the Group during the financial period were acquiring the Bowdens Silver Project and
maintaining the 100% owned Webbs Silver Project in New South Wales Australia.
Highlights for 2016 Financial Year
Acquisition of Bowdens Silver Project, New South Wales, Australia.
Successful AUD$35 million capital raising.
Board and management restructure.
INTRODUCTION
Immediately prior to the end of the 2016 financial year, Silver Mines Limited (“Silver Mines” or the “Group”) undertook a
substantial corporate and business restructuring. The Group acquired the considerable Bowdens Silver Project and
successively completed an AUD$35 million financing along with a board and management restructure.
The restructuring plan was in line with the Group’s stated objective to consolidate quality silver deposits to form
Australia’s pre-eminent silver company.
Projects
Silver Mines controls the following projects located in New South Wales, Australia:
Bowdens Silver Project (silver/polymetallic);
Webbs Project (silver/polymetallic);
Conrad Project (silver/polymetallic); and
Tuena Project (gold/silver)
Bowdens Silver Project
The Bowdens Silver Project (“Bowdens Silver”) is located in central New South Wales, approximately 26 kilometres east
of Mudgee. (See Figure 1). The project area comprises 1,654 km2 (408,000 acres) of titles covering approximately 80
kilometres of strike in the highly mineralised Rylstone Volcanics. Multiple target styles and mineral occurrences have
potential throughout the district including analogues to Bowdens Silver, silver-lead-zinc epithermal and volcanogenic
massive sulphide (VMS) systems and copper-gold targets.
Bowdens Silver is the largest undeveloped silver deposit in Australia with substantial resources. A considerable body of
high quality technical work has been completed and the project boasts outstanding logistics for future mine development.
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
The Group holds 100% of Bowdens Silver comprising EL5920, EL6354, EL8159, EL8160, EL8160, EL8268, EL5674,
EL8403, EL8405 and ELA5235. In addition, the Group holds an 80% interest and manages a Joint Venture over EL7391
with Thomson Resources Limited.
Figure 1. Bowdens Silver tenement holdings in the Mudgee district.
Resources
MPR Geological Consultants, on behalf of the previous project owners, Kingsgate Consolidated Limited (“Kingsgate
Consolidated”), completed the Bowdens Minerals Resource Estimate in November 2012, as detailed below.
Bowdens Mineral Resource Estimate (30g/t Ag Eq cut-off), November 20121
Resource
Category
Measured
Indicated
Total (M & I)
Inferred
Total
Tonnes
(Million)
Silver (g/t)
23.6
28.4
52.0
36
88.0
56.6
48.0
51.9
41
47.4
Lead
(%)
0.31
0.27
0.29
0.3
0.29
Zinc (%)
Ag Eq (g/t)
Silver (Moz)
Ag Eq (Moz)
0.41
0.36
0.38
0.4
0.39
74.5
63.6
68.6
58
64.4
43.0
43.8
86.8
47.5
134.1
57
58
115
68
182
Bowdens Mineral Resource Estimate completed by MPR Geological Consultants. First reported under JORC Code 2004 in November 2012,
and re-reported in October 2013 to be compliant with JORC2012 guidelines. Refer to Kingsgate Consolidated press release dated 18th of
October, 2013 for full JORC2012 details and tables. Totals may vary due to rounding.
a)
Bowdens silver equivalent: Ag Eq (g/t) = Ag(g/t) + 27.5 x Pb (%) +22.8 x Zn (%) calculated from prices of US$26.33/oz Ag, US$2206/t Pb, US$2111//t Zn and NSR
metallurgical recoveries of 72% Ag, 75% Pb, and 66% Zn estimated from test work by Kingsgate Consolidated. NSR or net smelter return metallurgical recovery is
defined as the payable metal recovered after allowing for smelter deductions, which includes deductions for precious metals.
b)
As at reporting date, it was the Group’s opinion that the silver, lead and zinc included in the metal equivalent calculations have a reasonable potential to be recovered.
1.
Silver Mines confirms that it is not aware of any new information received since the original disclosure (Kingsgate Consolidated announcement 18th October 2013)
or data that materially affects the information included in this table. The Group confirms that all material assumptions and technical parameters underpinning the
mineral resource estimates continue to apply and have not materially changed.
Bowdens Silver Work Programs
Planning of work programs for the Bowdens Silver Project for the 2017 financial year has included the recommencement
work related to the Feasibility Study and the Environmental Impact Statement (EIS). A substantial exploration program
is also planned.
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Feasibility Study and Environmental Impact Statement
Bowdens Silver has had a very substantial body of work completed covering all aspects of the feasibility and
environmental examination of a considerable silver/zinc/lead mine development. Many elements requiring significant
lead time have mostly been completed or are well advanced. These works include;
Geology and mineral resources;
Mine planning and scheduling;
Metallurgical testing;
Flowsheet development;
Process and plant design;
Infrastructure;
Operations management;
Environmental management;
Water and tailings management; and
Financial analysis including capital and operating cost assessment.
The priority for Silver Mines is to fast-track mine development. Part of the reassessment of the project, the feasibility
and environmental works, is to examine a more capital cost effective development with enhanced project economics.
A comprehensive revision and modification of the mine feasibility and environmental effects is planned to result in the
completion of the Definitive Feasibility Study in mid calendar 2017.
Drilling and Exploration Programs
A significant drilling campaign is scheduled to commence early in the 2017 financial year. The focus of the program
includes:
Increase silver resources within and in the immediate vicinity of the current resource area;
Convert silver resources to higher levels of confidence as part of the Feasibility Study program;
Further drilling of advanced exploration targets where substantial silver mineralisation has been discovered
but is yet to be fully evaluated; and
Further explore the potential for high grade mineralisation including zones containing gold as well as silver
at depth below the current resource area.
An airborne geophysical survey covering over 20,000 line kilometres including the entirety of the Bowdens Silver
tenement area is planned for early in the 2017 financial year.
The Group is also planning regional geophysical surveys over prospective corridors and a number of sampling and
mapping programs over previously identified mineralised systems.
Government Commitment and Community Engagement
As part of the Environmental Impact Statement, Silver Mines will continue and expand upon all considerations with State
and Local Government along with all stakeholders and community and interest groups.
The Group has commenced a program of consultation with the local communities and all stakeholders to discuss the
potential impacts and benefits of exploration and development across the Bowdens Silver tenement portfolio.
Consultation processes focus on the current potential mine development area and also the wider area where the Group
plans active exploration programs. The community and stakeholder consultation program will have considerable
influence on the overall scale and nature of any potential future development and community participation and
acceptance is a critical component to Silver Mines’ future activities in the district.
Acquisition
On 3rd March 2016 Silver Mines announced that it had entered into a Heads of Agreement to acquire Silver Investments
Holdings Australia Limited (‘SIHA’). SIHA is a public unlisted company incorporated as a New South Wales dedicated
resources company with a particular emphasis on silver and related minerals. SIHA held various exploration and licence
application rights. Primarily, SIHA entered into a Sale and Purchase Agreement (“the Agreement”) whereby it would
acquire 85% of the Bowdens Silver from Kingsgate Consolidated Limited (“Kingsgate Consolidated”) for a total cash
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
consideration of AUD$20 million. As part of the acquisition of SIHA, the Group would assume the SIHA obligations for
the purchase of Bowdens Silver.
The purchase of SIHA and Bowdens Silver was completed on 29th June 2016 through the payment of AUD$20 million
to Kingsgate Consolidated.
Also on 29th June 2016, the Group advised that it had entered into a Deed of Variation with Kingsgate Consolidated
whereby the acquisition price for the purchase of 100% of Bowdens Silver was varied to AUD$25 million with the balance
of AUD$5 million to be paid by 30th September 2016. It was later agreed to change the payment timing to AUD$1.0
million on 30th September 2016 with the AUD$4.0 million balance on or before 30th December 2016.
As part of the consideration of the purchase of SIHA, 40,000,000 ordinary shares in the capital of the Group were issued
to SIHA shareholders in addition to a 1.0% Gross Royalty over the Group’s interests (via SIHA) in the Bowdens Silver
Project and all other current tenements that are 100% owned by the Group. Further, the previous owners of SIHA are
to be issued a deferred consideration of 40,000,000 shares in two instalments; 20,000,000 ordinary shares upon the
submission of the Environmental Impact Statement for the Bowdens Silver Project and 20,000,000 ordinary shares upon
to granting of a mining lease in relation to the tenement at the Bowdens Silver Project.
Other Projects
Webbs Silver Project
The Webbs Silver Project (EL 5674) is located in the New England region of northern New South Wales approximately
45 kilometres north of Glen Innes.
The project lies within the New England Orogen which extends from north-eastern New South Wales into eastern
Queensland.
The dominant geological feature in the region is the Mole Granite which is related to extensive mineralisation in the
region with over 2,000 separate mineral occurrences. Mineralisation in the project area consists of polymetallic single
and multiple vein lode zones in a narrow two kilometre long north trending zone which is marked by scattered historic
workings.
The project is one of the highest grade undeveloped silver projects in Australia. During the 2016 financial year, Silver
Mines continued to review the near mine exploration with the aim of targeting new deposit extensions in order to increase
the potential project scale prior to further economic evaluation.
Resource
Category
Measured
Indicated
Inferred
Total
Webb’s Mineral Resource Estimate February 20121
Tonnes
(Million)
Silver
(g/t)
Copper
(%)
0.194
0.775
0.522
1.49
364
245
201
245
0.29
0.26
0.27
0.27
Lead
(%)
0.75
0.70
0.71
0.71
Zinc
(%)
1.67
1.49
1.61
1.56
Ag Eq
(g/t)
Ag Eq
(Moz)
470
341
302
345
2.9
8.5
5.1
16.5
Webbs Mineral Resource estimate as released by Silver Mines Limited on 27thFebruary 2012. Based on work compiled by GeoRes Pty Ltd. Totals
may vary due to rounding.
[1] The Group confirms that it is not aware of any new information received since the original disclosure (27th February 2012) or data that materially
affects the information included in this table. The Group confirms that all material assumptions and technical parameters underpinning the mineral
resource estimates continue to apply and have not materially changed.
[2] Webbs silver equivalent calculation based on equal recoveries of all metals based on silver price of US$17.30 per ounce, copper price of US$4935
per tonne, lead price of US$1773 per tonne and zinc price of US$1871 per tonne as recorded as spot prices on 27th April 2016.
[3] In the Group’s opinion, the silver, lead, copper and zinc included in the metal equivalent calculations have a reasonable potential to be recovered.
Conrad Silver Project
The Conrad Silver Project (EPL1050, EL5977, ML6040, ML6041 and ML 5992) is located in the New England region of
northern New South Wales approximately 25 kilometres south of Inverell.
The project is also located in the New England Orogen and is hosted in the Gilgai Granite with the nearby Tingha Granite
being the assumed mineralising source. Historically, Conrad was mined underground over a 1.4 kilometre strike length
and to a maximum depth of 260 metres. The mineralisation is hosted in sulphide bearing narrow veins. A body of near-
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
surface disseminated and veinlet sulphide mineralisation, from 20 metres to 40 metres wide, is referred to as the
‘Greisen Zone’.
During the 2016 financial year, the Group completed the required terms of the acquisition of the Conrad Project from
Malachite Resources Limited. The transaction has now been completed, subsequent to 30th June 2016, and the
tenements are pending transfer to Silver Mines. During the year, the Group carried out targeting and review of the
project with the aim of conducting further on-ground exploration. There are numerous other silver occurrences on the
wider project area including several associated with structures parallel to the main Conrad structure.
Conrad Mineral Resource Estimate December 20081
Resource
Category
Indicated
Inferred
Total
Tonnes
(Million)
0.658
1.994
2.652
Silver
(g/t)
128.8
97.6
105.4
Copper
(%)
0.24
0.19
0.20
Lead
(%)
1.69
1.21
1.33
Zinc
(%)
0.68
0.48
0.53
Tin
(%)
0.28
0.21
0.22
Ag Eq
(g/t)
254.0
190.2
206.1
Ag Eq
(Moz)
5.37
12.19
17.5
Conrad Mineral Resource estimate as released by Malachite Resources Limited on 16th December 2008. Based on work compiled by Hellman &
Schofield Pty Ltd, Geological Consultants. Totals may vary due to rounding.
[1] The Group confirms that it is not aware of any new information received since the original disclosure (16th December 2008 or data that materially
affects the information included in this table. The Group confirms that all material assumptions and technical parameters underpinning the mineral
resource estimates continue to apply and have not materially changed.
[2] Conrad silver equivalent is presented as calculated in the original release 16th December 2008 which were AgEq = Ag (g/t) + 22.5 Pb (%) + 20.0
Zn (%) + 73.3 Cu (%)+203.1 Sn (%)
Based on a ratio of metal prices on 8th December 2008 of US$9.50 per oz Ag, US$1000/t Pb, US$1100/t Zn, US$3100/t Cu,US$11600/t Sn, estimated
Net Smelter Return with factored process recoveries estimated by Malachite Resources on metallurgical testing and previous experience.
[3] In the Group’s opinion, the silver, lead, copper, tin and zinc included in the metal equivalent calculations have a reasonable potential to be
recovered.
Tuena Project
The Tuena Project tenement application is located to the south of Orange, New South Wales. The area is targeted for
precious metals.
Corporate
Share Placement
As announced on 21st June 2016, Silver Mines successfully completed a capital raising of AUD$35.0 million.
The financing was undertaken for the completion of the acquisition of Bowdens Silver and for working capital purposes.
Capital Consolidation
As approved by Shareholders at a General Meeting on 6th June 2016, Silver Mines Limited’s capital was consolidated
on a 100:1 basis.
Board of Directors and Management Changes
As detailed below, at the completion of the 2016 financial year and subsequent to year end, certain Board of Directors
and Management appointments and changes were effected.
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INFORMATION ON BOARD
Directors
Mr Keith Perrett, Non-Executive Chairman
Mr Perrett has had a long involvement in agriculture as a producer and industry leader at local, state, national and
international levels. He was formerly Chairman of the Grains Research and Development Corporation (GRDC), the
National Rural Advisory Council (NRAC), the Wheat Research Foundation, and President of the Grains Council of
Australia. Mr Perrett brings substantial experience in stakeholder and government relations, governance and holds
substantial agricultural interests in north-west New South Wales.
Mr Perrett joined the Board of Silver Mines as Chairman in August 2016 and has been a Non-Executive Director since
June 2016.
Mr Anthony McClure, Managing Director
Mr McClure graduated with a Bachelor of Science (Geology) degree from Macquarie University in 1986. He has had 30
years technical, management and financial experience in the resource sector worldwide in project management and
executive development roles. He has also worked in the financial services sector within the mineral and energy sectors.
Mr McClure is currently a director of listed company Planet Gas Limited (since August 2003) and unlisted public
companies Nickel Mines Limited and Mekong Minerals Limited. He is also a past director of Bolnisi Gold NL and
European Gas Limited.
Mr McClure joined the Board of Silver Mines as Managing Director in June 2016.
Mr Peter Langworthy, Non-Executive Director
Mr Langworthy graduated with a Bachelor of Science (Geology) degree (Hons) from Macquarie University in 1986. His
career spans 30 years in mineral exploration and project development both in Australia and internationally. His industry
experience includes senior management roles with WMC Resources Limited, PacMin Mining Limited, and Jubilee Mines
NL. Mr Langworthy headed the management team that was responsible for numerous discoveries that led to the
outstanding success of Jubilee Mines.
Mr Langworthy is currently Chairman of Syndicated Metals Limited (since March 2012), and Technical Director at
Capricorn Metals Limited (since July 2013.) Mr Langworthy previously held non-executive directorships with Northern
Star Resources Limited, Talisman Mining Limited, Falcon Minerals Limited and Pioneer Resources Limited.
Mr Langworthy joined the Board of Silver Mines as a Non-Executive Director in June 2016.
Company Secretary
Mr Trent Franklin
Mr Franklin holds qualifications in finance, financial planning and insurance broking, he has a Bachelor of Science
(Geology/Geophysics) from the University of Sydney, and is a graduate of the Australian Institute of Company Directors.
Mr Franklin is Managing Director of financial services company Enrizen Pty Ltd and Enrizen Accounting Pty Ltd. He
has served as a director on the Board of the Australian Olympic Committee Inc.
Director Resignations
In August 2016, Nathan Featherby resigned as Chairman of the Group.
In June 2016, Mr Darren Holden, Mr Charles Straw and Mr Saxon Ball resigned as directors of the Group.
In February 2016, Mr James Naughton resigned as non-executive director of the Group.
In December 2015, Mr Douglas Flinn resigned as non-executive director of the Group.
In November 2015, Mr David Sutton resigned as non-executive Chairman of the Group.
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COMPETENT PERSONS STATEMENTS
Bowdens Resource Estimation
The information in this report that relates to the Bowdens Mineral Resources estimation is based on information compiled
by Jonathon Abbott who is a full time employee of MPR Geological Consultants Pty Ltd and a member of the Australian
Institute of Geoscientists. Mr Abbott has sufficient experience that is relevant to the style of mineralisation and type of
deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the
2012 edition of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves’ (JORC
Code). Mr Abbott consents to the inclusion in this report of the matters based on his information in the form and context
in which it appears.
Conrad Resource Estimation
The resource estimates quoted for the Conrad deposit were originally estimated for Malachite Resources NL by Mr
Simon Tear of Hellman & Schofield Pty Ltd, an international and independent geological consultancy, under the 2004
JORC Code. The estimates have not been updated to comply with the JORC Code 2012 on the basis that the information
has not materially changed since last reported. The information in this report that relates to the Conrad Mineral Resource
Estimates is based on information compiled by Mr Simon Tear who is a director of H&S Consultants Pty Ltd and is a
Member of the Australasian Institute of Mining and Metallurgy (MAusIMM). Mr Tear has sufficient experience that is
relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking
to qualify as a Competent Person as defined in the 2012 edition of the ‘Australasian Code for Reporting Exploration
Results, Mineral Resources and Ore Reserves’ (JORC code). Mr Tear consents to the inclusion in this report of the
matters based on his information in the form and context in which it appears.
Webbs Resource Estimation
The resource estimates quoted for the Webbs deposit have been estimated for Silver Mines Limited by GeoRes Pty Ltd,
an independent resource consultancy under the 2004 JORC Code. This resource estimation has not been updated
since to comply with the JORC Code 2012 on the basis that the information has not materially changed since last
reported. The information in this document that relates to Webbs mineral resource estimations is based on information
compiled by Mr Robin Rankin, who is a Member of the Australian Institute of Mining and Metallurgy (MAusIMM) and
registered as a Chartered Professional Geologist (CPGeo). Mr Rankin is Principal Consulting Geologist and operator of
the independent geological consultancy of GeoRes Pty Ltd. He has sufficient experience, which is relevant to the style
of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a
Competent Person as defined in the 2012 Edition of the ‘Australian Code for Reporting of Exploration Results, Minerals
Resources and Ore Reserves’ (The JORC Code). Mr Rankin consents to and has provided consent to the inclusion in
this report of these matters based on the documentation in the form and in the context in which it appears.
Other
Other technical information in this report that relates to Exploration Results is based on information compiled by Mr
Darren Holden, Consultant to Silver Mines. Mr Holden is a Member of The Australasian Institute of Mining and Metallurgy
(MAusIMM). Mr Holden has sufficient experience relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition
of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). Mr
Holden consents to the inclusion in this report of the matters based on his information in the form and context in which
it appears.
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2016 Annual Report
REMUNERATION REPORT
Remuneration policy
The remuneration policy of Silver Mines Limited has been designed to align director and executive objectives with
shareholder and business objectives by providing a fixed remuneration component and offering specific long term
incentives based on key performance indicators affecting the Group's financial results. The Board of Silver Mines
Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best
executives and directors to run and manage the Group.
The Board's policy for determining the nature and amount of remuneration for board members and senior executives
of the Group is as follows:
The remuneration policy, setting the terms and conditions for the executive directors and other senior executives,
was developed by the Board. All executives receive a base salary (which is based on factors such as length of service
and experience) and superannuation. The Board reviews executive packages annually by reference to the Group's
performance, executive performance and comparable information from industry sectors and other listed companies
in similar industries.
The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed
to attract the highest calibre of executives and reward them for performance that results in long term growth in
shareholder wealth.
Executives are also entitled to participate in the employee share and option arrangements.
The executive directors and executives receive a superannuation guarantee contribution required by the government,
which is currently 9.5%, and do not receive any other retirement benefits. All remuneration paid to directors and
executives is valued at the cost to the Group and expensed. Options are valued using the Black & Scholes
methodology.
The Board policy is to remunerate non-executive directors at market rates for comparable companies for time,
commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their
remuneration annually, based on market practice, duties and accountability. Independent external advice is sought
when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to
approval by shareholders at the Annual General Meeting (currently $250,000). Fees for non-executive directors are
not linked to the performance of the Group. However, to align directors' interests with shareholder interests, the
directors are encouraged to hold shares in the Group and are able to participate in employee share option plans.
Performance based remuneration
The Group currently has no performance based remuneration component built into the managing director’s executive
remuneration package.
Group performance, shareholder wealth and directors' and executives' remuneration
The remuneration policy has been tailored to increase goal congruence between shareholders and directors and
executives. Currently, this is facilitated through the issue of options to the majority of directors and executives to
encourage the alignment of personal and shareholder interests. The Group believes this policy will be effective in
increasing shareholder wealth. At commencement of mine production, performance based bonuses based on key
performance indicators are expected to be introduced. The Group has not employed any executive officers, other
than directors, who were involved in, concerned in, or who took part in the management of the Group’s affairs.
The Group does not have any schemes for retirement benefits for non-executive directors.
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Key Service Agreements
Mr Keith Perrett. The service agreement with Lehavo Pty Ltd provides non-executive chairman services to the Group
for non-executive chairman’s fees of $80,000 per annum. Mr Perrett provides services to the Group on behalf of
Lehavo Pty Ltd. The agreement is ongoing on a month-to-month basis and Mr Perrett is required to provide 90 days’
written notice if he wishes to resign from the Group.
Mr Anthony McClure has entered into a managing director’s agreement with the Group in which he receives total
remuneration of $450,000 per annum for a period of two years. The agreement provides a notice period of six months
in the event of termination.
Mr Peter Langworthy has entered into a non-executive director service agreement with the Group whereby he
receives a non-executive directors’ fee of $60,000 per annum. The agreement between Mr Langworthy and the Group
is ongoing on a month-to-month basis. Mr Langworthy is required to provide 90 days’ written notice if he wishes to
resign from the Group.
Mr Trent Franklin. The service agreement with Enrizen Accounting Pty Ltd provides company secretarial and
accounting services to the Group for a fee of $8,500 per month. Mr Franklin provides services to the Group on behalf
of Enrizen Accounting Pty Ltd.
Mr Darren Holden. The service agreement with GeoSpy Pty Limited provided non-executive director’s services to
the Group for a fee of $5,000 per month. During the term of this agreement, Mr Holden acted as non-executive director
to the Group on behalf of GeoSpy Pty Ltd. Mr Holden resigned from his position as director on 20th June 2016 and
so the service agreement was terminated.
Mr Saxon Ball entered into a non-executive director service agreement with the Group whereby he received a non -
executive directors fee of $5,000 per month. The agreement between Mr Ball and the Group was terminated upon Mr
Ball’s resignation on 20th June 2016.
Mr Charles Straw. The service agreement with Centric Minerals Management Pty Ltd provided for Centric Minerals
Management Pty Ltd to provide technical database management, technical advice and project management for a
monthly retainer of $3,500. Additionally, Mr Straw was paid executive directors fees of $12,000 per month. The
agreement between Centric Minerals Management Pty Ltd was terminated upon Mr Straw’s resignation on 20th June
2016.
Mr Nathan Featherby. The service agreement with Mancora Capital Pty Ltd provided for the engagement of Nathan
Featherby as executive chairman of the Group for a monthly fee of $3,000. The agreement between Mr Featherby
and the Group was terminated upon Mr Featherby’s resignation on 26 th August 2016.
12
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Director remuneration for the year ended 30 June 2016:
2016
A McClure
K Perrett
2016
P Langworthy 2016
2016
N Featherby
Resigned
2015
2016
D Holden
Resigned
S Ball
Resigned
2016
C Straw
Resigned
2015
2016
J Naughton
Resigned
2015
2016
2016
D Sutton
Resigned
2015
2016
D Flinn
Resigned 2015
Salary &
Fees
-
-
-
248,750
81,000
15,000
-
25,000
144,000
219,000
-
-
941
24,000
45,000
15,000
Non-
monetary
-
-
-
-
-
-
-
-
-
-
-
-
-
Super-
annuation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Retirement
benefits
Non-cash
share-based
payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,906
7,500
-
-
-
-
Other
bonuses
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
-
-
-
248,750
81,000
15,000
-
25,000
-
144,000
219,000
47,906
7,500
941
24,000
45,000
15,000
Remuneration of the Key Executives remuneration for the year ended 30 June 2016:
Salary
&
Fees
V Hovanessian
2016 59,500
Resigned 2015 60,416
-
R Holstein
Resigned
T Franklin*
2016 51,000
2016
Non-
monetary
Super-
annuation
Retirement
benefits
Non-cash
share-based
payments
-
-
-
-
-
-
-
-
-
-
-
-
Other
bonuses
Total
59,500
- 60,416
-
-
- 51,000
* See Note 15 regarding related party transactions.
Meetings of Directors
During the financial year, 24 meetings of directors were held:
Meetings eligible to attend
N Featherby
C Straw
J Naughton
D Holden
D Sutton
D Flinn
S Ball
A McClure
K Perrett
P Langworthy
24
23
14
13
10
10
5
1
1
1
Meetings attended
24
22
14
13
10
10
4
1
1
1
13
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Corporate governance
In recognising the need for the highest standards of corporate behaviour and accountability, the directors support and
have adhered to the principles of corporate governance, as described in the Corporate Governance Statement, which
is attached to this report and located on the Company’s website at http://www.silverminesltd.com.au/about/corporate-
governance.aspx.
Directors and officers indemnification
The Group has agreed to indemnify and keep indemnified the directors and officers of the Group against all liabilities
incurred by the directors or officers as a director or officer of the Group and all legal expenses incurred by the directors
or officers as a director or officer of the Group.
The indemnity only applies to the extent and in the amount that the directors or officers are not indemnified under any
other indemnity, including an indemnity contained in any insurance policy taken out by the Group, under the general law
or otherwise. The Group has taken out directors and officers liability insurance on behalf of the directors, and is unable
to disclose costs due to the terms of the policy. See previous Annual Reports for further information.
The indemnity does not extend to any liability:
to Silver Mines Limited or a related body corporate of Silver Mines Limited; or
arising out of conduct of the directors or officers involving a lack of good faith; or
which was incurred prior to 1st February 1996 and which is in respect of any negligence, default, breach of duty or
breach of trust of which the directors or officers may be guilty in relation to Silver Mines Limited or related body
corporate.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act is set out on
page 15 and forms part of the Director’s Report.
This report is made in accordance with a resolution of the Directors.
Keith Perrett
Chairman
30th September 2016
Anthony McClure
Managing Director
14
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
15
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2016
Interest received – non related
Share registry
Securities exchange fees
Finance charges
Bank fees
Auditors
Office expenses
IT & communications
Management fees
Option expense
Depreciation
Insurance
Marketing
Professional and technical advisors
Other expenses from ordinary activities
Impairment/write-off of exploration asset
Write-off of investment
Loss on investment
(Loss)/profit before income tax expense
Income tax expense
(Loss)/profit for the year
Other comprehensive income
Total comprehensive (loss)/profit for the
year net of tax
Notes
2016
$
2015
$
12,962
(45,277)
(112,384)
(255,413)
(4,678)
(27,300)
(311,730)
(14,224)
(204,030)
(18,182)
(8,949)
(38,420)
(247,239)
(3,434,690)
(576,121)
(45,106)
(50,000)
(97,702)
(5,491,445)
3,518
(30,393)
(32,021)
(19,495)
(2,395)
(25,350)
(52,533)
(4,324)
(215,600)
-
(10,645)
(10,598)
(220,995)
(311,079)
(76,121)
(24,667)
(237,684)
-
(1,273,900)
4
-
(5,478,483)
-
-
(1,270,382)
-
(5,478,483)
(1,270,382)
Cents
Cents
Basic earnings per share
Diluted earnings per share
20
20
(12.22)
(12.15)
(0.18)
(0.18)
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial
statements.
16
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Notes
2016
$
2015
$
Current assets
Cash and cash equivalents
Receivables
Inventory - livestock
Total current assets
Non-current assets
Financial assets
Deferred exploration & development
Other debtors
Property, plant & equipment
Land & buildings
Investments
Total non-current assets
Total assets
Current liabilities
Payables
Borrowings
Employee provisions
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Total equity
5
6
7
8
9
10
11
12
11,557,239
2,472,002
117,550
50,418
55,447
-
14,146,791
105,865
150,000
28,043,486
-
180,896
7,805,381
-
110,000
5,170,000
1,175
8,949
-
50,000
36,179,763
5,340,124
50,326,554
5,445,989
7,406,458
-
46,577
422,066
289,300
-
7,453,035
711,366
7,453,035
711,366
42,873,519
4,734,623
13
63,502,086
(20,628,567)
19,884,707
(15,150,084)
42,873,519
4,734,623
The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements.
17
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Ordinary
shares
$
Notes
Share-
based
payment
reserve
$
Share
option
reserve
$
Accumulated
losses
$
Total
$
Share-based payments during
the year
Converting note – face value
Costs of funds raised
Loss attributable to members
of the Group
Balance at 30 June 2013
Share-based payments during
the year
Converting note – face value
Partial conversion of converting
note
Partial repayment of converting
note
Costs of funds raised
Loss attributable to members
of the Group
Balance at 30 June 2014
Share-based payments during
the year
Converting note – face value
Partial conversion of converting
note
Placement of shares
Loss attributable to members
of the Group
Balance at 30 June 2015
Share-based payments during
the year
Converting note – face value
Partial conversion of converting
note
Placement of shares
Costs of funds raised
Loss attributable to members
of the Group
Balance at 30 June 2016
2,370,518
406,000
(120,391)
-
18,524,988
1,236,053
174,000
(404,052)
(96,550)
(1,932)
-
19,432,507
395,398
116,000
(195,398)
136,200
-
19,884,707
-
-
-
45,957,167
(2,339,787)
-
63,502,087
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,242,830)
(4,606,016)
2,370,518
406,000
(120,391)
(1,242,830)
13,918,972
1,236,053
174,000
(404,052)
(96,550)
(1,932)
(9,273,686)
(13,879,702)
(9,273,686)
5,552,805
395,398
116,000
(195,398)
136,200
(1,270,382)
(15,150,084)
(1,270,382)
4,734,623
-
-
-
45,957,167
(2,339,787)
(5,478,483)
(5,478,483)
(20,628,567) 42,873,520
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial
statements.
18
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2016
Notes
2016
$
2015
$
Cash flows from operating activities
Interest received
Payments to suppliers and employees
12,962
(3,121,329)
3,518
(789,485)
Net cash outflows from operating activities
18
(3,134,291)
(785,967)
Cash flows from investing activities
Payment for purchase of inventory
Payments for purchase of land, buildings, plant &
equipment
Payments for exploration expenditure
Payments for investments
(117,550)
-
(7,986,277)
(16,482,017)
(102,298)
-
(83,059)
-
Net cash outflows from investing activities
(24,688,142)
(83,059)
Cash flows from financing activities
Proceeds from the issue of equity instruments
Payments for fund raising costs
Receipts/expenses from borrowings
41,957,167
(2,339,787)
(288,126)
436,200
-
288,126
Net cash inflows from financing activities
39,329,254
724,326
Net (decrease)/increase in cash held
Cash at the beginning of the financial year
11,506,821
(144,700)
50,418
195,118
Cash at the end of the financial year
5
11,557,239
50,418
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial
statements.
19
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Preparation
The financial statements are general purpose financial statements that have been prepared in accordance with
Australian Accounting Standards (AASB) and the requirements of Corporations Act 2001 and International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board as applicable
to a for-profit entity. The Group is a for-profit entity for financial reporting purposes under Australian Accounting
Standards.
The financial report is intended to provide users with an update on the latest annual financial statements of Silver
Mines Limited and its controlled entities.
Except for the cash flow information, the financial statements have been prepared on an accruals basis and are
based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current
assets, financial assets and financial liabilities. The financial statements are presented in Australian dollars which
is the Group’s functional currency.
b. Going Concern
The directors believe that the going concern basis is appropriate for the preparation and presentation of the
financial statements, notwithstanding continued operating losses, negative operating cash flows, and no ongoing
revenue streams, as the directors believe that the Group has sufficient cash and liquid assets or can access cash
to continue operations. The cash is managed through:
a) Tight control of administrative expenses.
b) Raising additional share capital, for which the company has a history of raising funds.
The directors have prepared a forecast for the foreseeable future reflecting the above mentioned expectations
and their effect on the Group. The forecast is conservative, and reflects current market prices, reduction in
interest income, costs based on the progression of the recent acquisition of Bowdens Silver Pty Limited and the
further development of the Group’s purchase of tenements along with exploration.
In the unlikely event that the above results in a negative outcome, then the going concern basis may not be
appropriate with the result that the Group may have to realise its assets and extinguish its liabilities other than in
the ordinary course of business and in amounts different from those stated in the Financial Report. No allowance
for such circumstances has been made in the Financial Report.
c. Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Silver Mines
Limited as at 30th June 2016 and the results of its subsidiaries for the period then ended. Silver Mines Limited
and its subsidiaries together are referred to in these financial statements as the 'consolidated entity' or ‘the Group’.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls
an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power to direct the activities of the entity.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated
entity are eliminated.
20
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (continued)
d. Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest.
These costs are only carried forward to the extent that they are expected to be recouped through the successful
development of an area or where activities in the area have not yet reached a stage which permits reasonable
assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profits in the year in which the
decision to abandon the area 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.
Costs of site restoration are provided over the life of the facility from where exploration commences and are
included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant
equipment and building structures, waste removal and rehabilitation of the site in accordance with clauses of the
mining permits. Such costs have been determined using estimates of future costs, current legal requirements and
technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site
restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations
and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be
completed within one year of abandoning the site.
Exploration and evaluation assets are tested for impairment each year. When the facts and circumstances
suggest that the carrying amount exceeds the recoverable amount, the carrying amount is written down to its
likely recoverable amount.
a. New Accounting Standards and Interpretations not yet mandatory or early adopted.
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30th
June 2016. The consolidated entity's assessment of the impact of these new or amended Accounting Standards
and Interpretations which are most relevant to the consolidated entity are set out below.
.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1st January 2018. The standard
replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments:
Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial
assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective
is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely principal and
interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss
unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity
instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial liabilities, the
standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented
in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended
to more closely align the accounting treatment with the risk management activities of the entity. New impairment
requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be
measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly
since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new
disclosures. The consolidated entity will adopt this standard from 1 July 2018 but the impact of its adoption is yet
to be assessed by the consolidated entity.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1st January 2018. The standard
provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise
revenue to depict the transfer of promised goods or services to customers in an amount that reflects
21
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard
will require: contracts (either written, verbal or implied) to be identified, together with the separate performance
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (continued)
obligations within the contract; determine the transaction price, adjusted for the time value of money excluding
credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-
alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist;
and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately
as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the
customer obtains control of the goods. For services, the performance obligation is satisfied when the service has
been provided, typically for promises to transfer services to customers. For performance obligations satisfied over
time, an entity would select an appropriate measure of progress to determine how much revenue should be
recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is
required to enable users to understand the contracts with customers; the significant judgments made in applying
the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a
customer. The consolidated entity will adopt this standard from 1st July 2018 but the impact of its adoption is yet to
be assessed by the consolidated entity.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1st January 2019. The standard
replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases.
Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured as
the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate
to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small
office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease
payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be
recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate
of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be
replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on
the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated
with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense
is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the
statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest
(either operating or financing activities) component. For lessor accounting, the standard does not substantially
change how a lessor accounts for leases. The consolidated entity will adopt this standard from 1st July 2019 but
the impact of its adoption is yet to be assessed by the consolidated entity.
NOTE 2: CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its
judgements, estimates and assumptions on historical experience and on other various factors, including
expectations of future events, management believes to be reasonable under the circumstances. The resulting
accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life
intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the
particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset
is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a
number of key estimates and assumptions.
22
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 2: CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
(continued)
It is reasonably possible that the underlying metal price assumption may change which may then impact the
estimated life of mine determinant and may then require a material adjustment to the carrying value of mining plant
and equipment, mining infrastructure and mining development assets. Furthermore, the expected future cash flows
used to determine the value-in-use of these assets are inherently uncertain and could materially change over time.
They are significantly affected by a number of factors including reserves and production estimates, together with
economic factors such as metal spot prices, discount rates, estimates of costs to produce reserves and future
capital expenditure.
NOTE 3: OPERATING SEGMENTS
Identification of reportable operating segments
During the period, the consolidated entity was organised into one operating segment, being exploration operations.
This operating segment is based on the internal reports that are reviewed and used by the directors (who are
identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the
allocation of resources.
The CODM reviews operating expenses in relation to the exploration activities and the Group’s cash position. The
accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial
statements.
The information reported to the CODM is on at least a monthly basis. Information is presented on a consolidated
cash flow basis. Cash flow funding is treated as one pool of liquid assets noting relevant terms of any maturity or
exercise of any investments for the purpose of funding exploration.
Types of products and services – the principal products and services of this operating segment are in exploration
operations and mine development in Australia.
NOTE 4: INCOME TAX
(a) Reconciliation of income tax expense to prima
facie tax payable
2016
$
2015
$
Operating (loss)/profit before income tax
(5,478,483)
(1,270,382)
Prima facie income tax benefit/(expense) at 30% on
operating profit/(loss)
Add tax effect of:
Tax losses and temporary differences not recognised
Non temporary differences
1,643,545
381,115
(1,643,545)
-
(381,115)
-
Income tax attributable to operating (loss)/profit
-
-
Directors are of the view that there is insufficient probability that the Group will derive sufficient income in the
foreseeable future to justify booking the tax losses and temporary differences as deferred tax assets and deferred
tax liabilities.
23
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 4: INCOME TAX (continued)
2016
$
2015
$
(b) There is no amount of tax benefit recognised in
equity as the tax effect of temporary differences has
not been booked
(c) Tax losses
Unused tax losses for which no tax loss has been booked
as a deferred tax asset adjusted for non temporary
differences
26,952,694
21,569,317
Potential tax benefit at 30%
8,085,808
6,470,795
(d) Unrecognised temporary differences
Non deductible amounts as temporary differences
Accelerated deductions for book compared to tax
Total
-
-
8,085,808
-
-
6,470,795
Potential effect on future tax expense
8,085,808
6,470,795
(d) Unrecognised temporary differences
Non deductible amounts as temporary differences
Accelerated deductions for book compared to tax
Total
-
-
6,424,664
-
-
6,470,795
Potential effect on future tax expense
6,466,064
6,470,795
NOTE 5: CASH AND CASH EQUIVALENTS
Cash at bank and on hand
11,557,239
50,418
Cash at the end of the financial year as shown in the statement of cash flows is
reconciled in the related items in the statement of financial position as follows:
Cash assets
The effective interest rates on term deposits were 3.1%
(2015: 3.3%).
11,557,239
50,418
NOTE 6: RECEIVABLES
Outstanding deposit
Sundry debtors
1,973,972
498,030
2,472,002
55,447
-
55,447
Outstanding deposit relates to funds from June 2016 Placement received after 30 June 2016. These funds have
subsequently been received.
24
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTE 7: OTHER FINANCIAL ASSETS
Non-current
Performance guarantee bonds
NOTE 8: EXPLORATION
Non-current
Exploration expenditure
Costs carried forward in respect of areas of interest in:
Exploration and evaluation phase
Opening balance
Expenditure in the period
Expenditure written off
NOTE 9: PROPERTY, PLANT AND EQUIPMENT
Plant and equipment - at cost
Assets acquired – non current
Less: accumulated depreciation
NOTE 10: INVESTMENTS
Opening fair value
Investment in White Rock Minerals (WRM)
Amount recognised in profit and loss
NOTE 11: PAYABLES
Current
Trade creditors and accruals
Other creditors*
150,000
110,000
2016
$
2015
$
5,170,000
22,873,486
-
5,170,000
-
-
28,043,486
5,170,000
2016
$
8,949
180,896
(8,949)
2015
$
19,594
-
(10,645)
180,896
8,949
50,000
200,000
(250,000)
-
-
50,000
-
50,000
2,406,458
5,000,000
422,066
7,406,458
422,066
A further payment of $1,000,000 is to be paid to Kingsgate Consolidated Limited for the Bowdens Silver
Project on or by 30th September 2016, and the remaining $4,000,000 of the purchase price is to be paid on or
by 30th December 2016.
25
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 12: PROVISION
Current – Employee Provisions
46,577
-
NOTE 13: CONTRIBUTED EQUITY
(a) Issued and paid up capital
Balance at the beginning of the financial year
Issue of shares to raise capital
Conversion of options
Convertible security
Share issue costs
2016
$
2015
$
19,884,707
45,957,167
(2,339,787)
-
19,432,507
531,598
-
(79,398)
-
Balance at the end of the financial year
63,502,087
19,884,707
Consisting of 6,021,250 ordinary shares issued pre-consolidation and 273,333,567
ordinary shares issued post-consolidation (2015: 692,922,714 ordinary shares)
26
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(b) Movements in ordinary share capital
Date
Details
Number of
shares
Issue
price
$
1 July 2014
25 July 2014
8 August 2014
to
Conversion of convertible security
($value taken up in 2013-14 – It
Bergen Global
relates
Opportunity Fund II LLC refer (e)
below
Conversion of convertible security
($value taken up in 2013-14 – It
relates
Bergen Global
Opportunity Fund II LLC refer (e)
below
to
12 September 2014 Conversion of convertible security
19 September 2014 Conversion of convertible security
Conversion of convertible security
9 October 2014
Placement of shares
20 October 2014
Conversion of convertible security
28 November 2014
Placement of shares
8 December 2014
30 December 2014
30 December 2014
13 February 2015
30 June 2015
1 July 2015
15 July 2015
1 September 2015
19 October 2015
19 October 2015
2 December 2015
5 February 2016
5 February 2016
5 February 2016
9 February 2016
29 February 2016
7 April 2016
10 June 2016
21 June 2016
21 June 2016
30 June 2016
Placement of shares
Placement of shares
Placement of shares
Option Conversion
Rights Issue
Option Conversion
Rights Issue
Placement
Placement
Placement
Placement
Option Conversion
Placement
Placement
Pre-Consolidation 100:1*
Post-Consolidation 100:1*
Placement
Placement
450,356,714
19,432,507
10,000,000
$0.003
-
16,466,000
10,000,000
$0.003
$0.003
10,000,000
15,000,000
35,000,000
13,000,000
50,000,000
5,000,000
10,000,000
68,100,000
692,922,714
$0.003
$0.002
$0.002
$0.002
$0.002
$0.002
$0.002
$0.002
692,922,714
20,000
0.01
2,771,770,856
0.001
875
0.01
1,197,003,500
0.001
50,000,000
0.001
375,000,000
0.0015
150,000,000
0.001
77,056,191 0.001622
0.003
0.0015
0.0015
-
-
0.15
0.10
33,000
522,910,809
877,454,916
6,714,172,861
67,142,076
233,333,567
40,000,000
340,475,643
-
30,000
30,000
30,000
70,000
26,000
100,000
10,000
20,000
136,200
19,884,707
19,884,707
200
2,771,771
9
1,197,004
50,000
562,500
150,000
125,000
99
784,366
1,316,182
26,841,823
26,841,823
35,000,035
4,000,000
65,841,873
** On 6 June 2016 at an Extraordinary General Meeting of members of the Group, a 100:1 consolidation of the
Silver Mines Limited’s share capital was approved. Differences are due to post-consolidated rounding.
27
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 13: CONTRIBUTED EQUITY (Continued)
(c)
Issued and paid up capital
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in
proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of fully paid
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.
(d) Share options
At 30 June 2016 details of Listed and Unlisted Options are as follows:
Details
Number
Exercise price
Expiry date
Unlisted options
Listed options
Listed options
Unlisted options
Total
58,000
23,393,614
7,500,000
8,000,000
38,951,614
(e) Capital management
$4.30
$0.30
$0.30
$0.30
31 May 2017
13 October 2017
20 June 2018
20 June 2019
The Group’s objectives when managing capital is to safeguard the ability to continue as a going concern, so that
it can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its
capital structure in response to changes in these risks and in the market. There have been no changes in the
strategy adopted by management to control the capital of the Group since the prior year.
Movements in options
Balance at the beginning of the financial year
Options lapsed
Options exercised
Options issued pre-consolidation
Pre-consolidated total
Consolidation 100:1*
Options issued post-consolidation
2016
Number
2015
Number
97,500,135
(91,700,135)
(53,875)
2,340,387,178
2,346,133,303
23,461,614
15,500,000
97,500,135
-
-
-
-
-
-
Balance at the end of the financial year
38,961,614
97,500,135
* Differences due to rounding post-consolidation
28
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 14: REMUNERATION OF DIRECTORS AND EXECUTIVES
(a) Relevant interests in ordinary shares and options at 30 June 2016:
SHARES
Ordinary shares
Balance
30 June 2015
Net change
Net change of
associated
entities
Balance
30 June 2016
Directors
D Sutton
C Straw
J Naughton
D Flinn
N Featherby
A McClure
K Perrett
P Langworthy
2,779,114
2,393,532
25,000,000
3,120,876
-
-
-
-
(521,000)
(1,316,700)
-
-
-
8,687,500
600,000
-
(2,157,432)
(1,052,896)
24,750,000
(2,764,832)
-
9,187,500
400,000
500,000
115,792
23,935
250,000
356,044
-
17,875,000
1,000,000
500,000
(b) Relevant interests in options at 30 June 2016:
OPTIONS
Employee
options
Directors
D Sutton
C Straw
J Naughton
D Flinn (i)
N Featherby
A McClure
P Langworthy (ii)
K Perrett (ii)
Balance
30 June
2015
Granted as
remuneration
Options
lapsed/written
off
Net change
other
Balance
30 June 2016
20,000
25,825
-
5,000
-
-
-
-
-
-
-
-
-
-
-
-
(20,000)
(25,825)
-
(5,000)
-
-
-
-
62,418
-
-
1,000,000
500,000
-
-
-
62,418
-
-
1,000,000
500,000
Specified executives
T Franklin
-
Condition of options: listed with an exercise price of $0.30 and expiry date of 13th October 2017.
Conditions of options: unlisted with an exercise price of $0.30 and expiry date of 20th June 2019.
-
-
-
-
(i)
(ii)
29
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 15: RELATED PARTY TRANSACTIONS
Related parties of the Group throughout the 2016 financial year fall into the following categories:
Trading transactions
During the year, the Group entered into the following trading transactions with related parties. The amounts below
relating to trading transactions are including GST where applicable:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Centric Minerals Management Pty Ltd (CMM), an entity associated with Charles Straw and Richard
Holstein was paid $106,631 to provide management, administrative services (including provision of
office space and facilities) and geological consulting services to the Group, as of balance date, the
Group owed $36,800 to CMM.
Roschelle Ltd (RL), an entity controlled by Mr Nathan Featherby, was paid $49,000 from the Group and
the Group issued 100 million fully paid ordinary shares in the Group at an issue price of $0.001 to RL,
in relation to providing advisory and financing services to the Group, and as of balance date the Group
owed nil to RL.
Enrizen Capital Pty Ltd, (EC) an entity associated with Trent Franklin, was paid or is payable $65,972
in relation to capital raising services to the Group, and as of balance date, the Group owed $150,000
dollars to EC.
Enrizen Pty Ltd, (EPL) an entity associated with Trent Franklin, was paid $948 in relation to insurance
services to the Group, and as of balance date, the Group owed $990 to EPL.
Enrizen Lawyers Pty Ltd, (EL) an entity associated with Trent Franklin, was paid $825 in relation to legal
services provided to the Group, and as of balance date, the Group owed nil to EL.
Ochre Group Holdings Limited (OGH), an entity associated with Nathan Featherby, was paid $838,428
and is payable a further $550,000 in relation to strategic advice provided to the Group during the period.
Broad Investments Limited Ltd (BRO), an entity controlled by Vaz Hovanessian was paid or is payable
$259,375 from the Group for provision of office space and facilities, and as of the balance date, the
Group owed nil to BRO.
(viii)
Fern Street Partners Pty Limited (FSP), an entity controlled by Mr Vaz Hovanessian, was paid
$47,857 from the Group, in relation to capital raising services provided to the Group under normal
terms and conditions unless otherwise stated, and as of balance date the Group owed nil to FSP.
(ix)
(x)
Mancora Capital Pty Ltd (MC), an entity controlled by Mr Nathan Featherby, was paid $43,923 in
relation to corporate advisory services to the Group, and as of balance date the Group owed $72,243
to MC.
Raxigi Pty Ltd (RPL), an entity controlled by Mr Vaz Hovanessian, was paid $67,986 in relation to
accounting and company secretary services to the Group, and as of balance date the Group owed Nil
to RPL.
Other related party transactions: Equity interests in related parties
(i)
The Group holds 250,000 fully paid ordinary shares in Precious Metals Investments Ltd (PMZ), an entity
involved in exploration for precious metals. Former directors of the Group, David Sutton, Douglas Flinn,
Kevin Lynn and Charles Straw are directors of PMZ. These shares have been fully impaired in the
current year.
30
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 16: PARENT ENTITY INFORMATION
Statement of profit or loss and other comprehensive income
Parent
Profit (loss ) after income tax
Total comprehensive income/(loss)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Retained profits
Total equity
2016
$
(5,478,483)
(5,478,483)
2015
$
(1,270,382)
(1,270,382)
Parent
2016
$
2015
$
42,871,675
105,865
48,824,976
5,445,989
6,251,458
6,251,458
711,366
711,366
63,502,087
19,884,707
(20,628,567)
(15,150,084)
42,873,520
4,734,623
NOTE 17: CONSOLIDATED ENTITIES
The Group operates in the exploration industry in Australia only. The Group has the following wholly owned
subsidiaries whose transactions have been consolidated into the Group accounts:
Silver Investment Holdings Australia Limited
Bowdens Silver Pty Limited
NOTE 18: RECONCILIATION OF OPERATING
(LOSS)/PROFIT AFTER INCOME TAX TO NET
CASH FLOWS FROM OPERATING ACTIVITIES
Operating (loss)/profit from
Impairment of exploration asset
Depreciation
Finance costs on convertible note
Write-off/loss of investment
Movements in working capital:
Increase/(decrease) in receivables and prepayments
Increase/(decrease) in payables and provision
(5,478,483)
-
8,949
-
147,702
(5,321,832)
(1,262,496)
-
10,645
16,000
237,684
(998,167)
2,534,105
(333,602)
4,801
207,399
Net cash outflows from operating activities
(3,121,329)
(785,967)
31
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTE 19: FINANCIAL INSTRUMENT DISCLOSURES
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate
risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise adverse affects on the financial performance of the
Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods
include sensitivity analysis in the case of interest rates and other price risks and aging analysis for credit risk.
Risk management is carried out by the company secretary under policies approved by the Board of Silver Mines.
The company secretary identifies and evaluates the risks in close cooperation with the Group’s management and
Board.
(a) Market risk
(i) Foreign exchange risk
The Group does not have any significant exposure to foreign exchange risk.
(ii) Price risk
The Group in the current year did not have any significant exposure to investment or commodity price risk. The
Group will have exposure to silver price risk if and when mining operations begin. Directors have not made any
determination at this stage as to whether they will consider commodity price hedge arrangements.
(iii) Cash flow and fair value interest rate risk
The Group has exposure to interest rate risk which is the risk that a financial instrument’s value will fluctuate as
a result of changes in market interest rates and the effective weighted average interest rates on those financial
assets and the financial liabilities.
The Group policy is to ensure that the best interest rate is received for the short-term deposits. The Group uses
a number of banking institutions, with a mixture of fixed and variable interest rates. Interest rates are reviewed
prior to deposits maturing and re-invested at the best rate.
32
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 19: FINANCIAL INSTRUMENT DISCLOSURES (continued)
The interest rate risk is detailed in the table below:
Weighted
average
effective
interest
rate
Floating
interest
rate
%
$
Fixed interest rate
maturing
Within 1
year
$
Over 1
year
$
Non-interest
bearing
Total
$
$
2016
FINANCIAL ASSETS
Cash assets
Performance guarantee bonds
Other financial assets
3.1
FINANCIAL LIABILITIES
Payables (current)
Borrowings (current)
Payables (non-current)
NET FINANCIAL
ASSETS/(LIABILITIES)
-
-
-
-
-
-
-
-
-
-
- 11,557,239 11,557,239
- 100,000
50,000
150,000
2,472,002
2,472,002
-
-
- 100,000 14,179,241 14,179,241
-
-
-
-
-
-
-
-
(7,453,035) (7,453,035)
-
-
(7,453,035) (7,453,035)
-
-
- 100,000
6,626,206
6,726,206
Weighted
average
effective
interest
rate
Floating
interest
rate
%
$
Fixed interest rate
maturing
Within 1
year
$
Over 1
year
$
Non-
interest
bearing
Total
$
$
2015
FINANCIAL ASSETS
Cash assets
Performance guarantee bonds
Other financial assets
3.4
FINANCIAL LIABILITIES
Payables (current)
Borrowings (current)
Payables (non-current)
NET FINANCIAL ASSETS
-
-
-
-
-
-
-
-
-
100,000
-
100,000
-
-
-
-
-
-
-
-
-
-
418
60,000
106,622
167,040
418
160,000
106,622
267,040
(422,066)
(289,300)
-
(711,366)
(422,066)
(289,300)
-
(711,366)
100,000
-
(544,326)
(444,326)
33
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 19: FINANCIAL INSTRUMENT DISCLOSURES (continued)
(b) Reconciliation of net financial assets per statement of financial position:
Net financial assets per above
Inventory (current)
Plant & equipment
Land & buildings
Deferred exploration & development
2016
$
2015
$
6,726,206
117,550
180,896
7,805,381
28,043,486
(444,326)
-
8,949
-
5,170,000
Net assets per statement of financial position
42,873,519
4,734,623
(c) Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security in respect of
recognised financial assets, is the carrying amount as disclosed in the statements of financial position and notes
to the financial statements.
(d)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through adequate
amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity
risk by continuously monitoring forecast and actual cash flows matching maturity profiles of financial assets and
liabilities. Surplus funds are generally only invested in instruments that are tradable in highly liquid markets.
The Group at trading date had deposits which mature within three months and cash at bank. Due to the cash
available to the Group there is no use of any credit facilities at balance date.
(e) Net fair values
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or
for disclosure purposes. The net fair values of the financial assets and financial liabilities approximate their
carrying values.
No financial assets and financial liabilities are readily traded on organised markets.
The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in
the statements of financial position and in the notes to the financial statements.
(f)
Sensitivity analysis
The Group has not performed a sensitivity analysis on price risk and its impact on current year results and equity
which could result from a change in this risk as the likely impact is insignificant given the minimal revenue
generated from gold sales during the year.
34
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 20: EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
Weighted average number of shares used as the
denominator
Weighted average number of ordinary shares and
potential ordinary shares used as the denominator in
calculating basic and diluted earnings per share and
alternative diluted earnings per share
Reconciliation of earnings used in calculating basic
and diluted earnings per share
2016
Cents
(12.22)
(12.15)
2015
Cents
(0.18)
(0.18)
Number
Number
45,085,499
692,922,714
$
$
Earnings used in calculating basic and diluted earnings
per share
(5,478,483)
(1,262,496)
NOTE 21: BASIS OF ACQUISITION – SIHA AND BOWDENS SILVER PTY LTD
Summary of Terms of Acquisition
The Group purchased 100% of the issued shares in Silver Investment Holdings Limited (SIHA) from the
shareholders of SIHA based on the following consideration to the shareholders of SIHA:
1) Payment of AUD$200,000 in cash;
2) A loan of AUD$1,800,000 as Tranche 1 Loan to SIHA for payment to KCN as partial consideration for Bowdens
Silver Project which upon completion shall become an intercompany loan between the Group and SIHA;
3) A loan AUD$18,000,000 as Tranche 2 Loan to SIHA for payment to KCN as final consideration for Bowdens
Silver Project which upon completion shall become an intercompany loan between the Group and SIHA;
4) The issuance of 40,000,000 in ordinary shares in Silver Mines Limited at fair value at acquisition date;
5) The provision of a 1% Gross Revenue Royalty interest over the 85% interest held by the Group (via SIHA) in
the Bowdens Silver Project and all other tenements at the time of the purchase that are 100% owned by the
Group;
6) Tranche 1 Deferred Consideration of 20,000,000 ordinary shares in Silver Mines Limited subject to the
submission of the Environmental Impact Statement for the Bowdens Silver Project to the New South Wales
Government Department of Planning & Environment;
7) Tranche 2 Deferred Consideration of 20,000,000 ordinary shares in Silver Mines Limited subject to a mining
lease being granted under the Mining Act by the New South Wales Government Department of Industry,
Resources and Energy in relation to a tenement.
On 3rd March 2016, Silver Mines Limited announced it had entered into a Sale and Purchase Agreement (“the
Agreement”) whereby it would acquire 85% of the Bowdens Silver Project from Kingsgate Consolidated Limited
(“Kingsgate Consolidated”) for a total cash consideration of AUD$20 million. Under the Agreement, Silver Mines
Limited and Kingsgate Consolidated would operate the project on an unincorporated joint venture basis. The
purchase of Bowdens Silver was completed on 29th June 2016 through the payment of AUD$18 million, with
AUD$2 million having been previously paid by way of a deposit.
35
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
Also on 29th June 2016, Silver Mines Limited advised that it had entered into a Deed of Variation with Kingsgate
Consolidated whereby the acquisition price for the purchase of 100% of Bowdens Silver was varied to AUD$25
million with the balance of AUD$5 million to be paid by 30th September 2016 or such other date as may be agreed.
Name of acquiree:
Silver Investment Holdings Australia
Limited
Bowdens Silver Pty Ltd
Acquisition date
% of voting equity interest
acquired
8/06/2016
29/06/2016
100%
100%
Primary reasons for the business combination:
The restructuring plan was in line with the Group’s stated objective to consolidate quality silver deposits to form
Australia’s pre-eminent silver company.
Consideration transferred
Identifiable assets acquired
Property plant and equipment
Deferred exploration
Inventories
Receivables
Cash and cash equivalents
Trade and other payables
$
7,986,276
22,298,486
117,550
113,489
1,844,076
(46,577)
NOTE 22: EVENTS SUBSEQUENT TO REPORTING DATE
During the interval between the end of the 2016 financial year and the date of this report, the Group has executed
a farm-in agreement with Thomson Resources Limited relating to Exploration Licence 7391 in central west New
South Wales, Under the farm-in agreement, Silver Mines Limited commits to spend an initial $300,000 to earn
80% of the tenement and drill a minimum of 1,000 metres over a three year period.
On 30th September 2016, Silver Mines Limited advised that it had entered a Deed of Variation with Kingsgate
Consolidated where by the final payment to Kingsgate Consolidated of AUD$5 million for the purchase of
Bowdens Silver is amended as follows;
a non-refundable payment of AUD$1 million on 30th September 2016, with the residual amount to be paid
on or prior to 30th December 2016;
the remaining AUD$4 million (plus interest of 10% per annum calculated from 30th September 2016 to
the date payment is made) of the post completion amount is payable to Kingsgate Consolidated; and
should Silver Mines Limited not pay the final balance of AUD$4 million by 30th December 2016, the parties
will form an unincorporated joint venture as originally contemplated under the original agreement.
Other than the above, the Group has not entered any transaction or event of a material and unusual nature likely,
in the opinion of the directors of the Group, to affect significantly the operations of the Group, the results of those
operations, or the state of affairs of the Group in future financial years.
36
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 23: COMPANY DETAILS
The registered office and principal place of business of the Group is:
Silver Mines Limited
Level 11
52 Phillip Street,
Sydney NSW 2000
Australia
Tel: +61 2 8316 3997
Fax: +61 2 8316 3999
37
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
DIRECTORS’ DECLARATION
The directors declare that:
1
2
the financial statements and notes, as set out on pages 16 to 37 are in accordance with the Corporations Act
2001 and:
(a)
(b)
comply with Accounting Standards and the Corporations Regulations 2001; and
give a true and fair view of the financial position as at 30th June 2016 and of the performance for the
year ended on that date of the Group and economic entity;
the managing director and company secretary, who perform the functions of Chief Executive Oficer and Chief
Financial Officer respectively, have each declared that:
(a)
(b)
(c)
the financial records of the Group for the financial year have been properly maintained in accordance
with section 286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with the Accounting Standards; and
the financial statements and notes for the financial year give a true and fair view;
3
in the directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as
and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Keith Perrett
Chairman
30th September 2016
Anthony McClure
Managing Director
38
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
39
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
40
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
CORPORATE DIRECTORY
Auditors
Moyes Yong & Co
Level 7
Norwich House
6 O’Connell Street
Sydney NSW 2000
Tel: +61 2 8256 1100
Fax: +61 2 8256 1111
Company’s Solicitor
Marque Lawyers Pty Ltd
Level 4
343 George Street
Sydney NSW 2000
Tel: +61 2 8216 3000
Fax: +61 2 8216 3001
Directors
Keith Perrett – Non-Executive Chairman
Anthony McClure – Managing Director
Peter Langworthy – Non-Executive Director
Company Secretary
Trent Franklin
Australian Company Number
107 452 942
Registered Office
Silver Mines Limited
Level 11
52 Phillip Street
Sydney NSW 2000
Australia
Tel: +61 2 8316 3997
Fax: +61 2 8316 3999
E-mail: info@silvermines.com.au
Website: www.silvermines.com.au
Share Registry
Boardroom Pty Limited
Level 7
207 Kent Street
Sydney NSW 2000
Tel : +61 2 9290 9600
Fax : +61 2 9279 0664
Email: enquiries@boardroomlimited.com.au
41
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Additional securities exchange information as at 28th September 2016
At 28th September 2016 issued capital was 340,475,643 fully paid ordinary shares held by 3,794 holders.
Subject to the Listing Rules, Silver Mines Limited’s constitution and any special rights or restrictions attached to a
share, at a meeting of shareholders:
(a) on a show of hands, each shareholder present (in person, by proxy, attorney or representative) has one vote; and
(b) on a poll, each shareholder present (in person, by proxy, attorney or representative) has:
i one vote for each fully paid share they hold; and
ii a fraction of a vote for each partly paid share they hold. The fraction must be equivalent to the proportion
which the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited).
Amounts paid in advance of a call are ignored.
J P Morgan Nominees Australia Limited
20 Largest Holders of Ordinary Shares and their Holdings at 28th September 2016
56,156,792
1 National Nominees Limited
13,612,323
2 Citicorp Nominees Pty Limited
10,960,452
3
10,700,263
4 BNP Paribas Noms Pty Ltd
5 Morgan Stanley Australia Securities (Nominee) Pty Limited 10,433,761
6 Mr Anthony McClure
7 UBS Nominees Pty Ltd
8 Perth Select Seafoods Pty Ltd
9 HSBC Custody Nominees (Australia) Limited
10 HSBC Custody Nominees (Australia) Limited-Gsco Eca
11 Gascoyne Holdings Pty Ltd
12 Coolhand Nominees Pty Limited
13 Ms Georgina King
14 Palmer Bookmaking Pty Limited
15 Gurravembi Investments Pty Ltd
16 Citicorp Nominees Pty Limited
17 Laguna Bay Capital Pty Ltd
18 Farouk and Associates FZE
19 HSBC Custody Nominees (Australia) Limited - A/C 2
20 Ochre Group Holdings Limited
8,687,500
8,211,834
7,533,334
7,053,604
7,004,785
7,000,000
6,666,667
5,712,500
5,175,000
5,000,000
4,482,692
4,046,543
3,600,000
3,284,474
2,525,000
Total of Securities
Distribution of Holders and Holdings at 28th September 2016
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Totals
Holders
1,281
688
434
1,086
283
3,769
Total Units
344,584
2,218,659
3,660,488
42,059,505
292,192,407
340,475,643
187,847,524
340,475,643
%
0.101
0.652
1.075
12.353
85.819
100.000
16.49%
4.00%
3.22%
3.14%
3.06%
2.55%
2.41%
2.21%
2.07%
2.06%
2.06%
1.96%
1.68%
1.52%
1.47%
1.32%
1.19%
1.06%
0.97%
0.74%
55.18%
42
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Substantial shareholders at 29th September 2016
Silver Mines Limited has the following substantial shareholders:
Holder
BlackRock Group (BlackRock Inc and its subsidiaries)
Paradice Investment Management Ltd
Anthony John McClure
Shares
Percentage
41,800,000
20,000,000
17,875,000
12.27%
5.87%
5.25%
List of Tenements
The Group holds the following licenses:
Tenement Information as at 30th June 2016:
Tenement
Project Name
Location
Silver Mines
Ownership
EL 5920
EL 6354
EL 8159
EL 8160
EL 8168
EL 8268
EL 73911
EL 8403
EL 8405
ELA 5235
ELA 5257
EL 5674
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Tuena
Webbs
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
Tenements acquired since 30th June 2016
Tenement
Project Name
Location
EPL1050
EL 5977
ML 6040
ML 6041
ML 5992
Conrad
Conrad
Conrad
Conrad
Conrad
NSW
NSW
NSW
NSW
NSW
1. Under Joint Venture with Thomson Resources Limited
Status
Current
Renewal pending
Renewal pending
Renewal pending
Renewal pending
Current
Current
Current
Current
100%
100%
100%
100%
100%
100%
0%
100%
100%
Application
Application
Application
Application
100%
Current
Silver Mines
Ownership
100%
100%
100%
100%
100%
Status
Current
Renewal pending
Current
Current
Current
43
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
CORPORATE GOVERNANCE STATEMENT
This Corporate Governance Statement of Silver Mines Limited (the ‘Group’) has been prepared in accordance with
the 3rd Edition of the Australian Securities Exchange’s (‘ASX’) Corporate Governance Principles and
Recommendations of the ASX Corporate Governance Council (‘ASX Principles and Recommendations’). The
Group is required to disclose the extent to which it has followed the recommendations during the financial year,
including reasons where the Group has not followed a recommendation and any related alternative governance
practice adopted.
Both this Corporate Governance Statement and the ASX Appendix 4G have been lodged with the ASX. This
statement has been approved by the Group’s Board of Directors (‘Board’) and is current as at 30th September 2016.
The following governance related documents can be found on the Group’s website at
http://www.silverminesltd.com.au/about/corporate-governance.aspx, under the section marked ‘About Us’, ‘Corporate
Governance’.
Charters:
Board
Audit Committee
Nomination Committee
Remuneration Committee
Policies and Procedures:
Code of Conduct
Continuous Disclosure
Selection and Appointment of New Directors
Trading in Company Securities
Assessing the Independence of Directors
Independent Professional Advice
Selection, Appointment and Rotation of External Auditor
Performance Evaluation of the Board, Board Committees, Individual Directors and Key Executives
Compliance Strategy (summary)
Shareholder Communication Strategy
Risk Management Policy
The ASX Principles and Recommendations and the Group’s response as to how and whether it follows those
recommendations are set out below.
Principle 1: Lay solid foundations for management and oversight
Recommendation 1.1 - A listed entity should disclose:
(a) the respective roles and responsibilities of its board and management; and
(b) those matters expressly reserved to the board and those delegated to management.
The Group has established the functions reserved to the Board, and those delegated to senior executives and has set
out these functions in its Board Charter, which is disclosed on the Group website.
The Board is collectively responsible for promoting the success of the Group through its key functions of overseeing
the management of the Group, providing overall corporate governance of the Group, monitoring the financial
performance of the Group, engaging appropriate management commensurate with the Group’s structure and
objectives, involvement in the development of corporate strategy and performance objectives, involvement in the
development of corporate strategy and performance objectives, and reviewing, ratifying and monitoring systems of risk
management and internal control, codes of conduct and legal compliance.
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Senior executives are responsible for supporting the managing firector and assisting the managing director in
implementing the running of the general operations and financial business of the Group in accordance with the
delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the
Group’s materiality thresholds at first instance to the managing director, or, if the matter concerns the managing
director, directly to the chairman or the lead independent director, as appropriate.
Recommendation 1.2 - A listed entity should:
(a) undertake appropriate checks before appointing a person, or putting forward to security holders a
candidate for election, as a director; and
(b) provide security holders with all material information in its possession relevant to a decision on
whether or not to elect or re-elect a director.
Before appointing a director, or putting forward to shareholders a director for appointment, the Group undertakes
comprehensive reference checks that cover elements such as the person’s character, experience, employment history
and qualifications. Directors are required to declare each year that they have not been disqualified from holding the
office of director by the Australian Securities and Investments Commission (‘ASIC’).
An election of directors is held each year. A director that has been appointed during the year must stand for election at
the next Annual General Meeting (‘AGM’). Retiring directors are not automatically re-appointed.
The Group has provided in the Director’s Report (in the Annual Report) information about each candidate standing for
election or re-election as a director that the Board considers necessary for shareholders to make a fully informed
decision. Such information includes the person’s biography, which includes experience and qualifications, details of
other directorships, and any material information which may affect the person’s ability to act independently on matters
before the Board, and whether the Board supports the appointment or re-election.
Recommendation 1.3 - A listed entity should have a written agreement with each director and senior
executive setting out the terms of their appointment
The terms of the appointment of a non-executive director are set out in writing and cover matters such as the term of
appointment, required committee work, notice requirements and other special duties and remuneration entitlements.
Executive directors and senior executives are issued with service contracts which detail the above matters as well as
the circumstances in which their service may be terminated (with or without notice) and any entitlements upon
termination.
Recommendation 1.4 - The company secretary of a listed entity should be accountable directly to the Board,
through the chair, on all matters to do with the proper functioning of the Board.
The company secretary reports directly to the Board through the chairman and is accessible to all directors. The
company secretary’s role, in respect of matters relating to the proper functioning of the Board, includes:
(a) advising the Board and its committees on governance matters;
(b) monitoring compliance of the Board and associated committees with policies and procedures;
(c) coordinating all Board business;
(d) retaining independent professional advisors;
(e) ensuring that the business at Board and committee meetings is accurately minuted; and
(f) assisting with the induction and development of directors.
Recommendation 1.5 - A listed entity should:
(a) have a diversity policy which includes requirements for the board or a relevant committee of the
board to set measurable objectives for achieving gender diversity and to assess annually both the
objectives and the entity’s progress in achieving them;
(b) disclose that policy or a summary of it; and
(c) disclose as at the end of each reporting period the measurable objectives for achieving gender
diversity set by the board or a relevant committee of the board in accordance with the entity’s
diversity policy and its progress towards achieving them, and either:
45
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
(i) the respective proportions of men and women on the board, in senior executive positions and
across the whole organisation (including how the entity has defined “senior executive” for
these purposes); or
(ii) if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s
most recent “Gender Equality Indicators”, as defined in and published under that Act.
The Board does not intend to set measurable objectives for achieving gender diversity. It is the Board’s policy that
gender discrimination has no position in the workplace and that men and women must be treated equally and without
any discrimination. It is the Board’s belief that employment should be on a merit-based system and that a diversity
policy may hinder this system due to the size of the organisation.
The respective proportion of women employees in the whole organisation, women in senior executive positions and
women on the Board as at the date of this statement are set out in the following table:
On the Board
In senior executive positions
Portion of women
0 out of 3 (0%)
0 out of 1 (0%)
Across the whole organisation
5 out of 20 (25%)
Recommendation 1.6 - A listed entity should:
(a) have and disclose a process for periodically evaluating the performance of the board, its committees
and individual directors; and
(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the
reporting period in accordance with that process.
The Chairman is responsible for evaluation of the Board and individual directors. The Board has not established any
independent committees.
The Chairman evaluates the performance of the Board and individual directors by way of ongoing review with
reference to the compositions of the Board and its suitability to carry out the Group’s objectives. The Chairman reports
back to the Board as to its performance at least annually.
During the 2015/2016 financial year an evaluation of the Board and the individual directors did not take place as the
Board is made up of recently appointed directors who were evaluated prior to being appointed. The Board intends to
carry out a performance evaluation during the coming period. The Group’s process for performance evaluation is
disclosed on the Group’s website.
Recommendation 1.7 - A listed entity should:
(a) have and disclose a process for periodically evaluating the performance of its senior executives; and
(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the
reporting period in accordance with that process.
The Chairman in consultation with the Board reviews the performance of the senior executives. The current size and
structure of the Group allows the managing director to conduct informal evaluation of the senior executives regularly.
Open and regular communication with senior executives allows the Chairman to ensure that senior executives meet
their responsibilities as outlined in their contracts with the Group, and to provide feedback and guidance, particularly
where any performance issues are evident. Annually, individual performance may be more formally assessed in
conjunction with a remuneration review.
During the 2015/ 2016 financial year, there was a change in senior executives, who were evaluated prior to being
appointed. The Board intends to carry out a performance evaluation of these executives during the coming period.
The Group’s Process for Performance Evaluation is disclosed on the Group’s website.
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Principle 2: Structure the board to add value
Recommendation 2.1 - The board of a listed entity should:
(a) have a nomination committee which:
(i).
(ii).
has at least three members, a majority of whom are independent directors; and
is chaired by an independent director,
(b) and disclose:
(i).
(ii).
(iii).
the charter of the committee;
the members of the committee; and
as at the end of each reporting period, the number of times the committee met throughout the
period and the individual attendances of the members at those meetings; or
(c) if it does not have a nomination committee, disclose that fact and the processes it employs to address
board succession issues and to ensure that the board has the appropriate balance of skills,
knowledge, experience, independence and diversity to enable it to discharge its duties and
responsibilities effectively.
The Board has not established a separate nomination committee. Given the current size and composition of the
Board, the Board believes that there would be no efficiencies gained by establishing a separate nomination
committee. Accordingly, the Board performs the role of the nomination committee.
Items that are usually required to be discussed by a nomination committee are marked as separate agenda items at
Board meetings when required. When the Board convenes as the nomination committee it carries out those functions
which are delegated to it by the Group’s Nomination Committee Charter, which is available on the Group’s website.
The Board deals with any conflicts of interest that may occur when convening as the nomination committee by
ensuring that the director with the conflicting interests is not party to the relevant discussions.
Recommendation 2.2 - A listed entity should have and disclose a board skills matrix setting out the mix of
skills and diversity that the board currently has or is looking to achieve in its membership.
The Board’s skills matrix which it is looking to achieve in its membership includes technical experience, public
company experience and financial experience. The Board considers that this composition is appropriate for the
effective execution of the Board’s responsibilities and the size and operations of the Group.
Recommendation 2.3 - A listed entity should disclose:
(a) the names of the directors considered by the Board to be independent directors;
(b) if a director has an interest, position, association or relationship of the type described in Box 2.3 but
the board is of the opinion that it does not compromise the independence of the director, the nature of
the interest, position, association or relationship in question and an explanation of why the board is of
that opinion; and
(c) the length of service of each director.
The Board considers that Peter Langworthy and Keith Perrett are independent directors. These directors are
independent as they are non-executive directors who are not members of management and who were free of any
business or other relationship that could materially interfere with or could be reasonably perceived to interfere with, the
independent exercise of their judgment.
When considering the independence of a director, the Board considers whether the director:
(a) is a substantial shareholder of the Group or an officer of, or otherwise;
(b) associated directly with, a substantial shareholder of the Group;
(c) is employed, or has previously been employed in an executive capacity by the Group or another group
member, and there has not been a period of at least three years between ceasing such employment and
serving on the Board;
(d) has within the last three years been a principal of a material professional adviser or a material consultant to
the Group or another group member, or an employee materially associated with the service provided;
(e) is a material supplier or customer of the Group or other group member, or an officer of or otherwise
associated directly or indirectly with a material supplier or customer; or
47
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
(f) has a material contractual relationship with the Group or another group member other than as a director.
Family ties and cross-directorships may be relevant in considering interests and relationships which may affect
independence, and should be disclosed to the Board.
Details of the Board of directors, their appointment dated, length of service as independence status is as follows:
Director’s name
Appointment date
Anthony McClure
Keith Perrett
20th June 2016
20th June 2016
Length of service at 29
September(approx.)
3 months
3 months
Peter Langworthy
20th June 2016
3 months
Independence status
Executive
Independent
non-executive
Independent non-executive
Where it is determined that a non-executive director should no longer be considered independent, the Group shall
make an announcement to the market.
Recommendation 2.4 - A majority of the board of a listed entity should be independent directors.
As at 29th September 2016, two thirds of the Board is considered independent. The Board considers that the current
size and composition of the Board is appropriate for the execution of the Board’s responsibilities. To assist directors
with independent judgement, it is the Board’s policy (set out on the Group’s website) that if a director considers it
necessary to obtain independent professional advice to properly discharge the responsibility of their office as a
director then, provided the director first obtains approval from the chairman for incurring such expense, the Group will
pay the reasonable expenses with obtaining such advice.
Recommendation 2.5 - The chair of the board of a listed entity should be an independent director and, in
particular, should not be the same person as the CEO/ managing director of the entity.
Keith Perrett is the chairman of the Board and is considered an independent director.
Recommendation 2.6 - A listed entity should have a program for inducting new directors and provide
appropriate professional development opportunities for directors to develop and maintain the skills and
knowledge needed to perform their role as directors effectively.
The Board in its capacity as nomination committee has a responsibility to ensure all new directors are provided with
an induction into the Group and that directors have access to ongoing education relevant to their position in the
Group.
Principle 3: Act ethically and responsibly
Recommendation 3.1 - A listed entity should:
(a) have a code of conduct for its directors, senior executives and employees; and
(b) disclose that code or a summary of it.
The Group has established a Code of Conduct as to the practices necessary to maintain confidence in the Group’s
integrity, the practices necessary to take into account its legal obligations and the reasonable expectations of its
stakeholders and the responsibility and accountability of individuals for reporting and investigating reports of unethical
practices.
The Code of Conduct is available on the Group’s website.
Principle 4: Safeguard integrity in corporate reporting
Recommendation 4.1 - The board of a listed entity should:
48
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
(a) have an audit committee which:
(i) has at least three members, all of whom are non-executive directors and a majority of whom are
independent directors; and
(ii) is chaired by an independent director, who is not the chair of the board,
(b) and disclose:
(i) the charter of the committee;
(ii) the relevant qualifications and experience of the members of the committee; and
(iii) in relation to each reporting period, the number of times the committee met throughout the period
and the individual attendances of the members at those meetings; or
(c) if it does not have an audit committee, disclose that fact and the processes it employs that
independently verify and safeguard the integrity of its corporate reporting, including the processes for
the appointment and removal of the external auditor and the rotation of the audit engagement partner.
The Board has not established a separate audit committee and therefore it is not structured in compliance with
recommendation 4.1. Given the current size and composition of the Board, the Board believes there would be no
efficiencies gained by establishing a separate audit committee. The Board performs the role of audit committee. Items
required to be discussed by an audit committee are marked as separate agenda items at Board meetings as required.
When the Board convenes as the audit committee it carries out those functions which are delegated to it in the
Group’s Audit Committee Charter, which is available on the Group’s website.
The Board deals with any conflicts of interest that may occur when convening in the capacity of the audit committee
ensuring that the director with conflicting interests is not party to the relevant discussions.
The Group has adopted an Audit Committee Charter which describes the role, compositions, functions and
responsibilities of the audit committee.
The qualifications of the Board and company secretary are set out on the Group’s website.
Recommendation 4.2 - The board of a listed entity should, before it approves the entity’s financial statements
for a financial period, receive from its CEO/managing director and CFO/company secretary a declaration that,
in their opinion, the financial records of the entity have been properly maintained and that the financial
statements comply with the appropriate accounting standards and give a true and fair view of the financial
position and performance of the entity and that the opinion has been formed on the basis of a sound system
of risk management and internal control which is operating effectively.
For the financial year ending on 30th June 2016, the Board received a statement from its managing director and
company secretary, whom perform the functions of CEO and CFO respectively, declaring that in their opinion, the
financial records of the Group have been properly maintained and comply with the appropriate accounting standards.
Recommendation 4.3 - A listed entity that has an AGM should ensure that its external auditor attends its AGM
and is available to answer questions from security holders relevant to the audit.
The external auditor attends the Group’s AGM and is available to answer questions from security holders relevant to
the audit.
49
SILVER MINES LIMITED and its controlled entities
2016 Annual Report
Principle 5: Make timely and balanced disclosure
Recommendation 5.1 - A listed entity should:
(a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules;
and
(b) disclose that policy or a summary of it.
The Group has established written policies and procedures designed to ensure compliance with ASX Listing Rule
disclosure requirements and accountability at a senior executive level for that compliance.
A summary of the Group’s Policy on Continuous Disclosure and Compliance Procedure is disclosed on the Group’s
website.
Principle 6: Respect the rights of security holders
Recommendation 6.1 - A listed entity should provide information about itself and its governance to investors
via its website.
The Group maintains information in relation to governance documents, directors and senior executives, Board and
committee charters, annual reports, ASX announcements and contact details on the Group’s website.
Recommendations 6.2 and 6.3
A listed entity should design and implement an investor relations program to facilitate effective two-way
communication with investors (6.2).
A listed entity should disclose the policies and processes it has in place to facilitate and encourage
participation at meetings of security holders (6.3).
The Group has designed a communications policy for promoting effective communication with shareholders and
encouraging shareholder participation at general meetings. The policy is disclosed on the Group’s website.
Recommendation 6.4 - A listed entity should give security holders the option to receive communications
from, and send communications to, the entity and its security registry electronically.
The Group’s website allows security holders to receive communications from and send communications to the entity
electronically. Investors may elect to receive email alerts from the Group.
Principle 7: Recognise and manage risk
Recommendations 7.1 and 7.2
The board of a listed entity should:
(a) have a committee or committees to oversee risk, each of which:
(i)
(ii)
has at least three members, a majority of whom are independent directors; and
is chaired by an independent director,
(b)
and disclose:
the charter of the committee;
the members of the committee; and
(i)
(ii)
(iii) as at the end of each reporting period, the number of times the committee met throughout the
period and the individual attendances of the members at those meetings; or
(c) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the
processes it employs for overseeing the entity’s risk management framework (7.1).
The board or a committee of the board should: (a) review the entity’s risk management framework at least
annually to satisfy itself that it continues to be sound; and (b) disclose, in relation to each reporting period,
whether such a review has taken place (7.2).
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
The Board does not have a specific risk management committee. The Board’s audit committee as referred to in
recommendation 4 above assists with monitoring and reviewing the Group’s risk management processes and
systems.
The Risk Management Policy, disclosed on the Group website, demonstrates the measures taken and policies
implemented to manage risks associated with the Group’s business.
The Board has recently received a report from management as to the effectiveness of the management of material
business risks.
Recommendation 7.3 - A listed entity should disclose:
(a) if it has an internal audit function, how the function is structured and what role it performs; or
(b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and
continually improving the effectiveness of its risk management and internal control processes.
Given the size and composition of the Group, the Board has not established an internal audit function, other than the
audit committee function which the Board serves as disclosed in recommendation 4 above and in the Audit Committee
Charter disclosed on the website. The Board may from time to time engage an external auditor to conduct additional
reviews of Group processes.
Recommendation 7.4 - A listed entity should disclose whether it has any material exposure to economic,
environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks.
The risk profile of the Group is as follows:
Market-related.
Financial reporting.
Operational.
Environmental.
Economic cycle/marketing.
Legal and compliance.
These risks are managed using the Risk Management Policy disclosed on the Group’s website. Under the policy, the
Board is responsible for updating the Group’s material business risks. In addition, the following risk management
measures have been adopted by the Board to manage the Group’s material business risks:
(a) the Board has established authority limits for management, which, if proposed to be exceeded, requires prior
Board approval;
(b) the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Group’s
continuous disclosure obligations; and
(c) the Board has adopted a corporate governance manual which contains other policies to assist the Group to
establish and maintain its governance practices.
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1 - The board of a listed entity should:
(a) have a remuneration committee which:
(i) has at least three members, a majority of whom are independent directors; and
(ii) is chaired by an independent director,
(b) and disclose:
(i) the charter of the committee;
(ii) the members of the committee; and
(iii) as at the end of each reporting period, the number of times the committee met throughout the
period and the individual attendances of the members at those meetings; or
(c) if it does not have a remuneration committee, disclose that fact and the processes it employs for
setting the level and composition of remuneration for directors and senior executives and ensuring
that such remuneration is appropriate and not excessive.
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SILVER MINES LIMITED and its controlled entities
2016 Annual Report
The Board has not established a separate remuneration committee and accordingly it is not structured in accordance
with recommendation 8.1. Given the current size and composition of the Board, the Board believes that there would
be no efficiencies gained by establishing a separate remuneration committee. Accordingly the Board performs the role
of the remuneration committee.
Items usually required of a remuneration committee are marked as separate agenda items at Board meetings when
required. When the Board convenes as the remuneration committee, it carries out those functions which are delegated
to it by the Remuneration Committee Charter which is disclosed on the Group’s website. The Board deals with any
conflicts of interest that may occur when convening in the capacity of the remuneration committee by ensuring that the
director with conflicting interests is not party to the relevant discussions.
The full Board in its capacity as remuneration committee did not meet during the 2016 financial year however,
remuneration related discussions were held by the Board from time to time as required.
Recommendation 8.2 - A listed entity should separately disclose its policies and practices regarding the
remuneration of non-executive directors and the remuneration of executive directors and other senior
executives.
Details of remuneration are set out in the remuneration report which forms part of the directors report (in the Annual
Report) and is set out in the Remuneration Charter on the Group’s website. The policy on remuneration clearly
distinguishes the structure of non-executive director’s remuneration from that of executive directors. Executive
directors are offered a competitive level of base pay at market rates and are reviewed annually to ensure market
competitiveness.
There are no termination or retirement benefits for non-executive directors (other than superannuation).
The Group’s Remuneration Committee Charter includes a statement of the Group’s policy on prohibiting transactions
in associated products which limits the risk of participating in unvested entitlements under any equity based
remuneration schemes.
Recommendation 8.3 - A listed entity which has an equity-based remuneration scheme should:
(a) have a policy on whether participants are permitted to enter into transactions (whether through the
use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and
(b) disclose that policy or a summary of it.
Not applicable. The Group does not have an equity-based remuneration scheme.
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