SILVER MINES LIMITED and its controlled entities
2017 Annual Report
CONTENTS
CORPORATE DIRECTORY ............................................................................................................................................. 3
INFORMATION ON BOARD ........................................................................................................................................... 15
AUDITOR'S INDEPENDENCE DECLARATION ............................................................................................................ 20
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ......................... 22
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ......................................................................................... 23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ......................................................................................... 24
CONSOLIDATED STATEMENT OF CASH FLOWS ...................................................................................................... 25
NOTES TO THE FINANCIAL STATEMENTS ................................................................................................................ 26
DIRECTORS’ DECLARATION ........................................................................................................................................ 43
INDEPENDENT AUDITOR’S REVIEW REPORT ........................................................................................................... 44
ADDITIONAL SECURITIES EXCHANGE INFORMATION ............................................................................................ 48
CORPORATE GOVERNANCE STATEMENT ................................................................................................................ 50
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Auditors
Crowe Horwath Sydney
Level 15
1 O’Connell Street
Sydney NSW 2000
Tel: +61 2 9262 2155
Fax: +61 2 9262 2190
CORPORATE DIRECTORY
Directors
Keith Perrett – Non-Executive Chairman
Anthony McClure – Managing Director
Peter Langworthy – Non-Executive Director
Jonathan Battershill – 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 11
225 George Street
Sydney NSW 2000
Tel : +61 2 9290 9600
Fax : +61 2 9279 0664
Email: enquiries@boardroomlimited.com.au
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
REVIEW OF OPERATIONS
Following the purchase of the Bowdens Silver Project and the associated corporate and business restructuring at the
end of the 2016 Financial Year, Silver Mines Limited’s (“Silver Mines” or “the Company”) focus throughout the 2017
Financial Year has involved advancing the Definitive Feasibility Study and Environmental Impact Statement along with
substantial exploration works. The Company and its wholly owned subsidiaries (together, “the Group”) also maintain
the Webbs, Conrad and Tuena Projects.
PROJECTS
During the year, the Group controlled the following projects, all of which are located in New South Wales, Australia:
Bowdens Silver Project (silver/polymetallic);
Webbs Project (silver/polymetallic);
Conrad Project (silver/polymetallic); and
Tuena Project (gold/silver).
Figure 1. Group Project Locations.
Bowdens Silver Project
Introduction
The Bowdens Silver Project (“Bowdens Silver”) is located in central New South Wales, approximately 26 kilometres
east of Mudgee. (See Figure 2). The project area comprises 1,654 km2 (408,000 acres) of titles covering approximately
80 kilometres of strike in the highly mineralised Rylstone Volcanics.
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Figure 2. Bowdens Silver tenement holdings in the Mudgee district.
Description
Bowdens Silver is the largest undeveloped silver deposit in Australia with substantial mineral resources.
The Group holds 100% of Exploration Licence EL5920 which contains the Bowdens Silver Deposit. The Group also
holds exploration licences EL6354, EL8159, EL8160, EL8168, EL8268, EL8403, EL8405 and EL8480. In addition, the
Group holds an 80% interest and manages a Joint Venture over Exploration Licence EL7391 with Thomson Resources
Limited.
The tenement group is situated on the eastern margin of the Lachlan Orocline where it is in contact with the younger,
unconformable overlying Permian aged units. These units comprise the highly mineralised early Permian Rylstone
Volcanics and the on-lapping later Permian, sedimentary units of the Shoalhaven Group within the Sydney Basin. The
Rylstone Volcanics unconformably overlie the Orodvician Coomber Formation and Silurian Dungaree 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.
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Figure 3. Bowdens Silver Geological Plan.
Drilling and Exploration Programs
During the 2017 Financial Year the Group conducted a substantial drilling program which focused on:
Increasing silver resources within and in the immediate vicinity of the current resource area;
Converting silver resources to higher levels of confidence as part of the Definitive Feasibility Study;
Further drilling advanced exploration targets where substantial silver mineralisation has been discovered
but not yet fully evaluated; and
Testing exploration targets proximal to the current resource beneath surface geochemical and geophysical
anomalies.
During the 2017 Financial Year the Group also conducted the following exploration activities:
A regional airborne geophysical survey covering the entire tenement area, identifying future exploration
targets;
Surface geochemical surveys along structural trend both north and south of the Bowdens Silver Resource
area identifying several anomalous zones for future exploration programs and drilling;
Ground-based Induced Polarisation (IP) surveys covering the Bowdens Silver Resource area and zones
immediately surrounding in all directions; and
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Further exploring the potential for high-grade mineralisation including zones containing gold and silver at
depth below the resource area.
A substantial amount of drilling has been completed within the Bowdens Silver Project including:
Previous
Silver Mines
Total
Diamond Drilling
14,910
11,683
26,593
Reverse
Circulation
Drilling
53,750
10,848
64,598
Total
68,660
22,531
91,191
Planned Upcoming Exploration Activities
Planning is underway to commence significant Bowdens Silver Project extensional and regional exploration
programs including:
Drill testing of geophysical IP targets beneath the Bowdens Silver Resource; and
Drill testing of high-grade silver extensions downplunge to the northwest of the Bowdens Silver Resource.
Geophysical surveys including IP surveys across the tenement package including at the Bara/Mt Laut and
Coomber Prospects;
Potential ground-based electromagnetic and gravity surveys over prospective areas;
Surface geochemical sampling on prospective target areas; and
Potential drill testing of regional target areas.
Mineral Resources
Subsequent to the financial year, the Group provided an update on Mineral Resources for the Bowdens Silver Project.
The Bowdens Mineral Resource Estimate has been completed by H&S Consultants using Multiple Indicator Kriging
and the reporting is compliant with the 2012 JORC Code and Guidelines. Please refer to Tables 1 and 2, and the
accompanying notes for further details.
Table 1 – Bowdens Silver Deposit Mineral Resource Estimate
as at September 2017
Category
Tonnes
(Mt)
Silver Eq.
(g/t)
Silver
(g/t)
Zinc
(%)
Measured
Indicated
Inferred
Total
76
29
23
128
72
59
60
67
45
31
31
40
0.37
0.38
0.40
0.38
Lead
(% )
0.25
0.25
0.28
0.26
Million
Ounces
Silver
111
Million
Ounces
Silver Eq.
175
29
23
163
55
45
275
Notes:
1. Bowdens’ silver equivalent: Ag Eq (g/t) = Ag (g/t) + 33.48*Pb (%) + 49.61*Zn (%) calculated from prices of US$20/oz silver, US$1.50/lb zinc,
US$1.00/lb lead and metallurgical recoveries of 85% silver, 82% zinc and 83% lead estimated from test work commissioned by Silver Mines
Limited.
2. Bowdens Silver Mineral Resource Estimate is reported to a 30g/t Ag Eq cut-off and extends from surface and is trimmed to 300 metres RL
3.
which is approximately 320 metres below surface representing a potential volume for open-pit optimisation models.
In the Group’s opinion, the silver, zinc and lead included in the metal equivalent calculations have a reasonable potential to be recovered and
sold.
4. Variability of summation may occur due to rounding.
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Table 2 – Bowdens Silver Deposit Mineral Resource Estimate by Cut Off Grade
as at September 2017
Cut off g/t Ag Eq.
Tonnes
(Mt)
Silver Eq.
(g/t)
Silver
(g/t)
Zinc
(%)
Lead
(%)
0
10
20
30
40
50
60
70
80
90
100
120
397.2
261.7
185.2
127.9
89.2
63.6
46.1
33.7
25.1
19.2
15.1
9.6
30.7
43.7
54.6
66.8
79.7
92.8
106.3
120.8
135.5
149.9
163.7
192.3
17.6
25.2
31.7
39.6
48.6
58.4
69.1
80.9
93.4
105.6
117.5
141.4
0.18
0.26
0.32
0.38
0.43
0.47
0.51
0.54
0.57
0.59
0.62
0.67
0.12
0.17
0.21
0.26
0.29
0.33
0.36
0.39
0.42
0.45
0.47
0.53
Million
Ounces
Silver
225
212
189
163
139
119
102
87
75
65
57
44
Million
Ounces
Silver Eq.
392
368
325
275
229
190
158
131
109
93
80
59
Note: For the previous Mineral Resource Estimates for Bowdens Silver, see page 12.
The updated resource is the result of additional drilling conducted in 2013 by Kingsgate Consolidated (13 drill holes
for 2,440 metres) and most recently by the Group (127 drill holes for 22,531 metres) over the past 12 months. This
additional information includes 86 reverse circulation drill holes for 10,848 metres and 54 diamond core holes for
14,123 metres.
The updated Mineral Resource Estimate compares to the previous estimate (October 2012) of 88 million tonnes @
64g/t Ag Eq for 182Moz silver equivalent. The September 2017 update is a 45% increase in tonnes, a 4% increase in
silver equivalent grade, a 22% increase in silver ounces and a 51% increase in silver equivalent ounces. In addition,
the Measured and Indicated component of the total resource has increased from 59% to 82% (refer Table 3). The
majority of the increase is the result of resource extensions at depth beneath the northern portion of the deposit and
more notably beneath the Bundarra Lens to the northwest. Additional resource extensions also occur down plunge to
the northwest.
Reported at a 30 g/t silver equivalent cut-off, the Bowdens Silver Mineral Resource extends from surface and is
trimmed to approximately 320 metres below surface. It is the opinion of the Group and its resource consultants that
this represents a potential volume for open-pit optimisation models. Table 2 and Figure 1 demonstrate that the
Bowdens Silver Deposit contains significant higher-grade portions within the resource estimate.
The Bowdens Silver Deposit remains open plunging to the northwest while at depth beneath the “Bundarra” lens
(northwest quadrant of the resource). The resource remains open both along strike and down dip to the west.
The updated Mineral Resource Estimate will be used as the basis to establish an initial Ore Reserve for the Bowdens
Silver Project, due for completion in late 2017. Pit optimisation and mine scheduling studies will be completed over the
coming months to determine initial project economics. The initial Ore Reserve Estimates will focus on the higher cut-
off grade portions of the Mineral Resource and will facilitate completion of the final elements for the currently
progressing Definitive Feasibility Study which is due for completion in early 2018.
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Figure 4. Bowdens Silver Mineral Resource Block Model.
Figure 5. Cross-sections A (10450mN) and B (10525mN) through the northern portion of the Bowdens Silver Deposit.
Definitive 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. During the 2017 Financial Year, the
Group continued works on the Bowdens Silver Definitive Feasibility Study with primary consultants GR Engineering,
AMC and ATC Williams. Works during the year included:
Geology, drilling and mineral resources;
Mine planning and scheduling;
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Metallurgical testing;
Flowsheet development;
Process and plant design;
Infrastructure;
Environmental management;
Water and tailings management; and
Capital and operating cost assessment.
It is the Group’s priority to finalise its Definitive Feasibility Study and Environmental Impact Statement which are
targeted for completion in the first quarter of calendar 2018.
Government Commitment and Community Engagement
Throughout the 2017 Financial Year, the Group continued an expansive program of consultation with State and Local
Governments along with interested stakeholders and community and interest groups.
The Group’s community consultation processes examine the potential impacts and benefits of exploration and
development across the Bowdens Silver Project and focus on the current proposed mine development area and the
surrounding areas in which the Group is commencing or proposing to commence exploration programs.
A new Community Consultative Committee will be established, as part of the requirements of the Department of
Planning and Environment.
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 and lies within the New England Orogen, which extends from north-eastern New
South Wales into eastern Queensland.
The dominant geological feature in the wider region is the Mole Granite which is associated with extensive
mineralisation with over 2,000 separate mineral occurrences. At Webbs, mineralisation is hosted in sediments and
consists of polymetallic vein lode zones in a narrow two kilometre long north trending zone which is marked by
scattered historic workings. The veins contain high grades of silver along with lead, zinc and copper sulphide
mineralisation.
The Webbs Silver Project has some of the highest grades of any undeveloped silver project in Australia. The previous
mineral resource estimate was completed under the JORC 2004 code and although it has been reviewed by Silver
Mines and is understood to be a reasonable estimate of the mineral system, it has not been updated to the JORC
2012 code. During the 2017 financial year, Silver Mines continued to review the Webbs Silver Project to assess
exploration and other options for this project.
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
with an additional body of near-surface greisen style disseminated and veinlet sulphide mineralisation, 20 metres to
40 metres wide. Mineralisation consists of high grades of silver along with lead, zinc, tin and copper sulphides and tin
oxide (cassiterite). Outside the main line of historic workings, there are more than 20 other historic shafts and diggings
that have not yet been adequately tested and as a result, Silver Mines believes that the project has considerable
potential to expand beyond the current known mineralised zone.
The previous mineral resource estimate was completed by Malachite Resources Limited under the JORC 2004 code
and although it has been reviewed by Silver Mines and is understood to be a reasonable representation of the
mineral system, it has not yet been updated to the JORC 2012 code. During the 2017 financial year, the Group
completed its acquisition of the Conrad Project from Malachite Resources Limited and the tenements were
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
transferred to Silver Mines. During the year, the Group commenced a review of the Conrad Project and began
considering exploration and other options for the Conrad Project.
The mineral resource estimates for Webbs and Conrads were reviewed during the year. There have been no further
drilling or changes to the geological model for both projects and as a result the resource estimates have not
changed.
For historical mineral resource estimates for the Webbs & Conrad Projects, see pages 12 & 13.
Tuena Project
During the 2017 Financial Year, the Group was granted EL8526, being the Tuena Project tenement which is located
to the south of Orange, New South Wales. The area is targeted for precious metals.
Tenement Information as at 30th June 2017
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
EL 8480
ELA 5405
EL 8526
EL 5674
EPL1050
EL 5977
ML 6040
ML 6041
ML 5992
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Bowdens Silver
Tuena
Webbs
Conrad
Conrad
Conrad
Conrad
Conrad
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
NSW
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
application
100%
100%
100%
100%
100%
100%
100%
1. Under Joint Venture with Thomson Resources Limited. Silver Mines Limited earning 80%.
CORPORATE
Appointment of Director
On 16th June 2017, Mr Jonathan Battershill was appointed to the Board of Silver Mines Limited as a Non-Executive
Director. Mr Battershill, whose qualifications are further outlined in the remuneration report, brings to the Group a
substantial array of experience in the mining, business development and financial industries both in Australia and
internationally.
Placement
In December 2016, Silver Mines successfully completed a placement to sophisticated investors raising A$5 million
(net of costs) at $0.165 per share. This financing was utilised to make the final payment to Kingsgate Consolidated for
the acquisition of the remaining 15% ownership of the Bowdens Silver Project.
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Share Purchase Plan
In March 2017, Silver Mines conducted a Share Purchase Plan to existing shareholders, allowing them to purchase
packages of shares valued at A$5,000, A$10,000 or A$15,000 at $0.165 per share. This Share Purchase Plan raised
A$3 million (before costs). The funds raised under the Share Purchase Plan were allocated towards continued works
at Bowdens Silver and for general working capital.
Minimum Shareholding Buy-Back
During the Financial Year, Silver Mines also conducted a minimum shareholding buy-back, for shareholders with
parcels of shares valued at less than A$500. Under the buy-back, a total of 582,611 shares, held by 1,205
the Company.
shareholders were bought back at $0.185 per share, and were cancelled by
RESULTS AND DIVIDENDS
The loss of the Group for the financial year after providing for income tax amounted to $2,278,907 compared to a loss
of $5,478,483 for the previous year.
The Group incurred exploration and development expenditure of $9,085,266 during the year (2016: $26,873,486). The
total net assets of the Group stands at $52,190,340 (2016: $46,873,519) of which investment in exploration
expenditure accounts for $41,128,752 (2016: $32,043,486).
The Group is a mining exploration company, and as such does not earn income from the sale of product. No dividends
have been declared or paid during the year.
ENVIRONMENTAL REGULATIONS
The Group’s operations are subject to various environmental controls under State regulations. The directors are not
aware of any material breaches during the financial year.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS DURING THE FINANCIAL YEAR AND AFTER THE END
OF THE REPORTING PERIOD
The Group has not had any significant changes in the state of the affairs of the Group during the year. Since year end,
the Group has not had any significant events that have affected, or may significantly affect, the Group operations, the
results of the Group or the Group’s state of affairs in future financial years.
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
The directors believe, on reasonable grounds, that it would unreasonably prejudice the interests of the Group if any
further information on likely developments, future prospects and business strategies in the operations of the Group
and the expected results of these operations, were included in this report.
PREVIOUS AND HISTORICAL MINERAL RESOURCES ESTIMATES
The mineral resource estimates for the Conrads Silver Deposit and the Webbs Silver Deposit were completed under
JORC code 2004 and have not been updated to JORC code 2012 and hence are classed as ‘historical estimates’ and
not reported in accordance with the JORC Code. A competent person has not done sufficient work to classify the
historical estimates of mineral resources in accordance with the JORC code. It is uncertain that following evaluation
and/or further exploration work that the historical estimates will be able to be reported as a mineral resource in
accordance with the JORC code 2012.
The Conrads Silver Deposit Resource Estimate was first presented by Malachite Resources NL 16 th December 2008
based on work by Hellman and Schofield Pty Ltd and disclosed under the JORC code 2004. Since the mineral resource
estimate was last calculated there has been no further material drill results from the project and as a result the historical
resource estimate has not been updated. It is the intention to continue to review the historical estimates and, in time,
update these estimates to be compliant with JORC code 2012. This will be conducted prior to any economic studies,
when these historical estimates will be updated accordingly.
The Webbs Silver Deposit Resource Estimate was presented by Silver Mines Limited on 27th February 2012 based on
work compiled by GeoRes Pty Ltd and disclosed under the JORC code 2004. Since the mineral resource estimate
was last calculated there has been no further material drill results from the project and as a result the historical resource
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
estimate has not been updated. It is the intention to continue to review the historical estimates and, in time, update
these estimates to be compliant with JORC code 2012. This will be conducted prior to any economic studies, when
these historical estimates will be updated accordingly.
Previous Bowdens Silver Mineral Resource Estimate
Bowdens Silver Deposit Mineral Resource Comparison October 2012 compared with
September 2017 Estimates
Category
Tonnes
(Mt)
Silver
Eq. (g/t)
Silver
(g/t)
Zinc
(%)
Lead
(%)
Measured 2012
23.6
74.5
56.6
0.41
0.31
Millio
n
Ounc
es
Silver
43
Million
Ounces
Silver Eq.
57
Measured 2017
75.7
72.0
45.5
0.37
0.25
111
175
Indicated 2012
28.4
63.6
48.0
0.36
0.27
44
Indicated 2017
Inferred 2012
29
36
58.8
31.4
0.38
0.25
29
58.0
41.0
0.4
0.30
47
Inferred 2017
23.2
59.9
30.6
0.4
0.28
23
58
55
68
45
Total 2012
88
64.4
47.4
0.39
0.29
134
182
Total 2017
127.9
66.8
39.6
0.38
0.26
163
275
Notes:
1. The October 2012 estimate was based on metal prices of US$26.33/oz silver, US$0.94/lb zinc and US$0.98/lb lead with net smelter
return metallurgical recoveries of 72% silver, 66% zinc and 75% lead, giving a formula of Ag Eq (g/t) = Ag (g/t) + 27.5*Pb (%) + 22.8*Zn (%).
2. The 2017 silver equivalent is based on Ag Eq (g/t) = Ag (g/t) + 33.48*Pb (%) + 49.61*Zn (%) calculated from prices of US$20/oz silver,
US$1.50/lb zinc and US$1.00/lb lead and metallurgical recoveries of 85% silver, 82% zinc and 83% lead estimated from test-work
commissioned by Silver Mines Limited.
3. Bowdens Silver Mineral Resource Estimate is reported to a 30g/t Ag Eq cut off and extends from surface and is trimmed to 300mRL which is
4.
approximately 320m below surface representing a potential volume for open-pit optimisation models.
In the Group’s opinion, the silver, lead and zinc included in the metal equivalent calculations have a reasonable potential to be recovered and
sold.
5. Variability of summation may occur due to rounding.
Historical Webb’s Mineral Resource Estimate
Webb’s Mineral Resource Estimate February 20121
Resource
Category
Measured
Indicated
Inferred
Total
Tonnes
(Million)
0.194
Silver
(g/t)
364
Copper
(%)
0.29
0.775
0.522
1.49
245
201
245
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)
470
341
302
345
Ag Eq
(Moz)
2.9
8.5
5.1
16.5
[1] 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.
[2] 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.
[3] 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.
In the Group’s opinion, the silver, lead, copper and zinc included in the metal equivalent calculations have a reasonable potential to be recovered.
[4]
[5] For clarification on the reporting of these results, see page 12.
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SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Historical Conrad Mineral Resource Estimate
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
Lead
(%)
1.69
Zinc
(%)
0.68
0.19
0.20
1.21
0.48
1.33
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.
[4] For clarification on the reporting of these results, see page 12..
COMPETENT PERSONS STATEMENT
Bowdens Silver Resource Estimation
The information in this report that relates to mineral resources for the current Bowdens Silver Resource Estimate is
based on work compiled by Mr Arnold van der Heyden who is a Director of H & S Consultants Pty Ltd. Mr van der
Heyden is a member and Chartered Professional (Geology) of the Australian Institute of Mining and Metallurgy and
has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration, and to
the activity being undertaken, 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 van der Heyden
consents to the inclusion in this report of the matters based on the information in the form and context in which it
appears.
Bowdens Silver Exploration and Drill Results
The information in this report that relates to the Bowdens Silver drill hole intercepts and exploration in the Bowdens
Silver area is based on information compiled by Scott Munro an employee of Bowdens Silver and a member of
Australian Institute of Geoscientists (AIG) and Darren Holden the principal of GeoSpy Pty Ltd and a member of the
Australasian Institute of Mining and Metallurgy (MAusIMM) respectively. Mr Munro and Mr Holden have 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 Munro and Mr Holden consent
to the inclusion in this report of the matters based on this information in the form and context in which it appears.
Webbs Silver Project and Conrad Silver Project
Technical information in this report that relates to exploration at the Webbs Silver Project and Conrads Silver Project
is based on information reviewed by Mr Darren Holden, advisor to the Group and principal of GeoSpy Pty Ltd. 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.
14
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
INFORMATION ON BOARD
DIRECTORS
The Directors of Silver Mines Limited during the financial year and until the date of this report are:
Keith Perrett
Anthony McClure
Peter Langworthy
Jonathan Battershill
Nathan Featherby
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director - Appointed 16th June 2017
Non-Executive Director - Resigned 26th August 2016
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 a Director in June 2016 and was appointed the Non-Executive Chairman
in August 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
company 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.
Mr Jonathan Battershill, Non-Executive Director
Mr Battershill graduated with a Bachelor of Engineering (Geology) degree (Hons) from the Camborne School of Mines,
United Kingdom in 1995. His career spans over 20 years in mining, business development and finance both in Australia
and internationally. His industry experience includes senior operational and business development roles with WMC
Resources Limited as well as significant stockbroking experience at Hartleys, Citigroup and UBS both in Sydney and
London. Mr Battershill was consistently voted one of the leading mining analysts in Australia between 2009 and 2015
by institutional investors.
Mr Battershill is also a director of TSX listed company Black Dragon Gold Corp. Until recently, Mr Battershill was the
Global Mining Strategist (Executive Director) with the UBS investment bank in London and is currently the Principal of
JJB Advisory Limited, a private advisory and consulting firm based in the UK.
Mr Battershill was appointed as a Non-Executive Director of Silver Mines in June 2017.
15
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
COMPANY SECRETARY
Mr Trent Franklin, Company Secretary
Mr Franklin holds qualifications in finance, risk management, 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 Enrizen Financial Group, a financial services, accounting and legal firm. He is also a director of listed
company Gateway Mining Limited, and Company Secretary of listed companies Ochre Group Holdings Limited and
ATC Alloys Limited and has previously served as a director of Mandalong Resources Limited, the Australian Olympic
Committee Inc and the Australian Olympic Foundation.
Meetings of Directors
During the financial year, 4 meetings of directors were held:
Meetings eligible to attend
4
4
4
0
0
Meetings attended
4
4
4
0
0
A McClure
K Perrett
P Langworthy
J Battershill
N Featherby (resigned)
REMUNERATION REPORT
Remuneration policy
The remuneration policy of the Group 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.
16
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
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.
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 arrangement with the Group in which he receives total remuneration of
$450,000 per annum (inclusive of superannuation) 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 non-executive director fees 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 acts as Company Secretary to the
Group on behalf of Enrizen Accounting Pty Ltd.
Mr Nathan Featherby The service agreement with Plage Mala Limited provided for the engagement of Nathan
Featherby as a non-executive director of the Group for a monthly fee of $5,000. The agreement between Mr
Featherby and the Group was terminated upon Mr Featherby’s resignation on 26 th August 2016.
Voting and comments made at the Group’s 2016 Annual General Meeting (AGM).
At the 2016 AGM, 97.72% of the votes received supported the adoption of the remuneration report for the year ended
30 June 2016. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
Details of remuneration:
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-based
payments
Total
Cash
salary
and
fees
$
Cash
bonus
Non-
monetary
Super-
annuation
Long
service
leave
Equity-
settled
shares
Equity-
settled
options
$
$
$
$
$
$
$
80,000
60,000
-
-
-
-
-
-
-
-
-
-
-
-
80,000
60,000
2017
Non-Executive
Directors:
K Perrett
(Chairman)
P Langworthy
17
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
-
9,965
J Battershill
N Featherby
(Resigned)
Executive
Directors:
A McClure
410,959
Other Key
Management
Personnel:
T Franklin*
85,000
645,924
-
-
-
-
-
-
-
-
-
-
-
-
39,041
-
39,041
-
-
-
-
-
-
-
-
-
-
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-based
payments
-
-
-
9,965
- 450,000
-
85,000
- 684,965
Total
Cash
salary
and
fees
Cash
bonus
Non-
monetary
Super-
annuation
Long
service
leave
Equity-
settled
shares
Equity-
settled
options
2016
$
$
$
$
$
$
$
$
Non-Executive
Directors:
K Perrett
(Chairman)
P Langworthy
J Battershill
N Featherby
(Resigned)
Executive
Directors:
A McClure
Other Key
Management
Personnel:
-
-
-
248,750
-
T Franklin**
51,000
299,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 248,750
-
-
-
51,000
- 299,750
* Fees payable to Mr Franklin are paid to Enrizen Accounting Pty Ltd and encompass Company Secretarial as well
as accounting services to the Group.
** Mr Franklin was appointed as Company Secretary in February 2016.
See Note 14 of the Notes to the Financial Statements regarding related party transactions.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
18
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Ordinary shares
Balance
30 June 2016
Net change due to
directors'
resignations
Net change of
associated
entities
Balance
30 June 2017
Directors
D Sutton (resigned)
C Straw (resigned)
J Naughton (resigned)
D Flinn (resigned)
A McClure
K Perrett
P Langworthy
J Battershill
N Featherby (resigned)
Specified executives
T Franklin
Employee options
Directors
D Flinn (i) (resigned)
P Langworthy (i)
K Perrett (i)
Specified executives
T Franklin
115,792
23,935
250,000
356,044
17,875,000
1,000,000
500,000
-
-
-
(115,792)
(23,935)
(250,000)
(356,044)
-
-
-
-
-
-
-
-
-
-
17,875,000
1,000,000
500,000
-
-
-
-
-
-
-
1,000,000
1,000,000
Balance
30 June 2016
Net change due to
directors'
resignations
Options
lapsed/writt
en off
Net
change
other
Balance
30 June
2017
62,418
1,000,000
500,000
-
(62,418)
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
500,000
-
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
(i) Conditions of options: unlisted with an exercise price of $0.30 and expiry date of 20th June 2019.
CORPORATE GOVERNANCE
The Company’s Corporate Governance Statement, is attached to this report and located on the Company’s website.
The Company has mostly complied with the applicable principles of corporate governance, and if it has not, it has
explained why that is so.
Proceedings on behalf of the Group
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings
to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those
proceedings. The Group was not a party to any such proceedings during the year.
19
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Non-audit services
There were no non-audit services performed by the external auditor during the financial year.
Directors and officers indemnification
The Group has paid a premium to insure the directors and officers of the Group. The insurance agreement limits
disclosure of premium details. The insurance premiums relate to:
• Costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and
whatever their outcome; and
• Other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or
improper use of information or position to gain a personal advantage.
AUDITORS INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is
enclosed and forms part of this annual report.
Events subsequent to reporting date
No matter or circumstance has arisen since the reporting date that has significantly affected, or may significantly affect,
the consolidated entity’s operations, the results of those operations or the consolidated entity’s state of affairs in future
financial years.
This report is made in accordance with a resolution of the Directors.
Keith Perrett
Chairman
29th September 2017
Anthony McClure
Managing Director
20
Crowe Horwath Sydney
ABN 97 895 683 573
Member Crowe Horwath International
Audit and Assurance Services
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
29 September 2017
The Board of Directors
Silver Mines Limited
Level 11, 52 Phillip Street
Sydney NSW 2000
Dear Board Members
Silver Mines Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Silver Mines Limited.
As lead audit partner for the audit of the financial report of Silver Mines Limited for the financial year
ended 30 June 2017, I declare that to the best of my knowledge and belief, that there have been no
contraventions of:
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(i)
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
CROWE HORWATH SYDNEY
LEAH RUSSELL
Senior Partner
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of
financial services licensees.
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEAR ENDED 30 JUNE 2017
Revenue
Cost of sales
Gross Profit from continuing operations
Other income
Share registry and exchange fees
Auditors
Marketing
Office expenses
IT and communication
Depreciation
Accountancy
Professional and technical advisors
Employee benefits expenses
Travel and accommodation
Impairment of exploration assets
Impairment of investments
Loss on investment
Option expense
Other expenses
Loss from continuing operations before interest and
income tax
Interest income
Finance costs
2017
$
55,643
(27,008)
28,635
5,603
(171,614)
(77,000)
(98,268)
(67,637)
(15,838)
(250,848)
(85,000)
(616,258)
(641,595)
(157,814)
-
-
-
-
(93,209)
2016
$
-
-
-
-
(157,661)
(27,300)
(247,239)
(311,730)
(14,224)
(8,949)
(218,962)
(3,419,758)
-
(449,690)
(45,106)
(50,000)
(97,702)
(18,182)
(164,851)
(2,240,842)
(5,231,354)
65,816
(103,880)
12,962
(260,091)
Loss from continuing operations before income tax
(2,278,907)
(5,478,483)
Income tax
-
-
Loss from continuing operations after income tax
(2,278,907)
(5,478,483)
Comprehensive income
-
-
Total comprehensive income (loss) (attributable to
owners of the company)
(2,278,907)
(5,478,483)
Earnings per share
Basic & diluted earnings per share
(0.63)
(12.2)
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial
statements.
22
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
Notes
2017
$
2016
*Restated
$
Current assets
Cash and cash equivalent
Receivables
Inventory - livestock
Total current assets
Non-current assets
Financial assets
Deferred exploration and development
Intangible assets
Land and buildings
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Payables
Employee provisions
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserve
Accumulated losses
Total Equity
3
4
5
6
7
8
9
10
11
12
13
3,641,237
281,387
170,794
4,093,418
50,000
41,128,752
875,000
7,718,031
500,922
50,272,705
11,557,239
2,472,002
117,550
14,146,791
150,000
32,043,486
-
7,805,381
180,896
40,179,763
54,366,123
54,326,554
2,045,938
129,845
2,175,783
7,406,458
46,577
7,453,035
2,175,783
7,453,035
52,190,340
46,873,519
71,097,814
4,000,000
(22,907,474)
63,502,086
4,000,000
(20,628,567)
52,190,340
46,873,519
*Refer to note 1g for details regarding the restatement as a result of an amendment.
The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements.
23
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Ordinary
Shares
$
Notes
Share
capital
reserve
$
Accumulated
losses
$
Total
$
Balance at 1 July 2015
19,884,707
-
(15,150,084)
4,734,623
Transactions with owners, in their
capacity as owners
Placement of shares
Cost of funds raised
Total transactions with owners, in
their capacity as owners
Comprehensive income for period
Loss attributable to owners of the
company
Total comprehensive income for the
period
45,957,166
(2,339,787)
43,617,379
-
-
-
-
-
-
-
-
45,957,166
(2,339,787)
43,617,379
(5,478,483)
(5,478,483)
(5,478,483)
(5,478,483)
Balance at 30 June 2016
63,502,086
-
(20,628,567)
42,873,519
Balance at 1 July 2016
63,502,086
-
(20,628,567)
42,873,519
Restated
1(g)
-
4,000,000
-
4,000,000
Restated total equity at the
beginning of the financial year
Transactions with owners, in their
capacity as owners
Equity funds received, issue of shares
Shares buy-back
Costs of funds raised
Total transactions with owners, in
their capacity as owners
Comprehensive income for period
Loss attributable to owners of the
company
Total comprehensive income for the
period
63,502,086
4,000,000
(20,628,567)
46,873,519
8,316,936
(107,784)
(613,424)
7,595,728
-
-
-
-
-
-
-
-
-
-
8,316,936
(107,784)
(613,424)
7,595,728
(2,278,907)
(2,278,907)
(2,278,907)
(2,278,907)
Balance at 30 June 2017
13
71,097,814
4,000,000
(22,907,474)
52,190,341
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial
statements.
24
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Notes
2017
$
2016
$
Cash flows from operating activities
Receipts from customers ( inclusive GST)
Payments to suppliers & employees ( inclusive GST)
Interest received
Finance costs
59,449
(4,328,621)
65,816
(103,880)
-
(2,887,162)
12,962
(260,091)
Net cash outflows from operating activities
(4,306,236)
(3,134,291)
Cash flows from investing activities
Payment for purchase of inventory
Payments for deferred exploration
Payment to acquire intangible
Payment for property, plant and equipment
Proceeds from sale of property, plant and equipment
-
(11,819,660)
(875,000)
(487,079)
2,273
(117,550)
(16,482,017)
(102,298)
(7,986,277)
-
Net cash outflows from investing activities
(13,179,465)
(24,688,142)
Cash flows from financing activities
Proceeds from issues of shares
Payments for share buy-back
Payments for capital raising costs
Payment of borrowings
10,290,906
(107,784)
(613,424)
-
41,957,167
-
(2,339,787)
(288,126)
Net cash inflows from financing activities
9,569,699
39,329,254
Net (decrease)/increase in cash and cash equivalent
(7,916,003)
11,506,821
Cash and cash equivalent at the beginning of the financial year
11,557,239
50,418
Cash and cash equivalent at the end of the financial year
3
3,641,237
11,557,239
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial
statements.
25
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 will raise sufficient cash and liquid assets.
The Directors have prepared a forecast for the foreseeable future reflecting the abovementioned 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 30 June 2017 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.
26
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (continued)
d. New Accounting Standards and Interpretations not yet mandatory or early adopted.
The consolidated entity has adopted all of the new revised or amended Accounting Standards and Interpretations
issued by the Australia Accounting Standards Board (AASB) that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
e.
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 review 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.
f. Critical accounting estimates and significant judgments used in applying accounting policies
The critical estimates and judgments are consistent with those applied and disclosed in the June 2016 annual
report.
g. Restated interpretation in accounting for asset acquisition
In June 2016, the Company completed the acquisition of Silver Investment Holdings Australia Ltd (SIHA) and
Bowdens Silver Pty Ltd. As part of the consideration for the purchase of SIHA, 40,000,000 ordinary shares in the
capital of the Company are to be issued as a deferred consideration upon completion of project milestones. On
review of the accounting treatment, the Company determined that the recognition of the deferred consideration
should be amended by including $4,000,000 into non-current assets, along with corresponding increase in the
share capital reserve.
27
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 2: INCOME TAX
(a) Reconciliation of income tax expense to prima facie tax
payable
2017
$
2016
$
Operating loss before income tax
(2,278,907)
(5,478,483)
Prima facie income tax benefit/(expense) at 30% on operating
profit/(loss)
622,361
1,643,545
Add tax effect of:
Tax losses and temporary differences not recognised
Non temporary differences
(622,361)
-
(1,643,545)
-
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.
(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
24,284,330
21,600,029
Potential tax benefit at 27.5%
6,678,190
5,940,008
(d) Unrecognised temporary differences
Non deductible amounts as temporary differences
Accelerated deductions for book compared to tax
Total
-
-
6,678,190
-
-
5,940,008
Potential effect on future tax expense
6,678,190
5,940,008
The Group’s ability to recover unrecognised tax losses depends on the Group’s earnings as well as the Group meeting
the Same Business Test or the Continuity of Ownership Test.
NOTE 3: CASH AND CASH EQUIVALENTS
Current
2017
$
2016
$
Cash at bank and on hand
3,641,237
11,557,239
28
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 4: RECEIVABLES
Current
Outstanding deposit
Sundry debtors
2017
$
-
281,387
281,387
2016
$
1,973,972
498,030
2,472,002
Outstanding deposit relates to funds from June 2016 Placement received after 30 June 2016. Sundry debts
comprise of GST refundable amounting to $266,176 (2016: $498,030) and prepayment amounting to $15,211
(2016: Nil).
NOTE 5: INVENTORY - LIVESTOCK
Current
Livestock
NOTE 6: FINANCIAL ASSETS
Non-current
Performance guarantee bonds
NOTE 7: DEFERRED EXPLORATION AND DEVELOPMENT EXPENDITURE
Non-current
Exploration expenditures
Costs carried forward in respect of areas of interest in:
Exploration and evaluation phase
Opening balance
Expenditure in the period
Closing balance
2017
$
170,794
2016
$
117,550
2017
$
50,000
2016
$
150,000
2017
$
2016
$
32,043,486
9,085,266
41,128,752
5,170,000
26,873,486
32,043,486
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.
29
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 7: DEFERRED EXPLORATION AND DEVELOPMENT EXPENDITURE (continued)
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.
NOTE 8: INTANGIBLE ASSETS
Non-current
Opening balance
Additions
Disposals
Closing balance
2017
$
2016
$
-
875,000
-
875,000
-
-
-
-
The Group has entered into a number of option agreements to purchase properties attaching to the tenements. As
consideration for these agreements, the Group has paid total option fees of $875,000. However, if the Group chooses
not to exercise with the option agreements, the rights to purchase the land will be forfeited and the amount will be
written off through the Profit and Loss statement.
NOTE 9: LAND AND BUILDINGS
Non-current
Properties at cost
Accumulated Depreciation
2017
$
8,140,619
(422,588)
7,718,031
2016
$
8,134,619
(329,238)
7,805,381
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Consolidated
$
$
$
Land
Buildings
Buildings
improvements
Total
$
Balance at 1 July 2015
Additions through business acquisitions
Depreciation expense
Balance at 30 June 2016 and 1 July 2016
Additions
Depreciation expense
-
7,181,532
-
7,181,532
-
-
-
237,836
-
237,836
-
(6,750)
-
386,013
-
-
7,805,381
-
386,013
6,000
(86,600)
7,805,381
6,000
(93,350)
Balance at 30 June 2017
7,181,532
231,086
305,413
7,718,031
30
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 9: LAND AND BUILDINGS (continued)
Land and buildings are shown at cost, less subsequent depreciation and impairment for buildings.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of buildings and building
improvements (excluding land) over their expected useful lives as follows:
Buildings
Building improvements
40 years
4-8 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
Items of land and buildings are derecognised upon disposal or when there is no future economic benefit to the
consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or
loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
NOTE 10: PROPERTY, PLANT AND EQUIPMENT
Plant and equipment - at cost
Less: accumulated depreciation
2017
$
661,541
(160,145)
500,922
2016
$
180,896
-
180,896
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Consolidated
Balance at 1 July 2015
Additions through business
acquisitions
Depreciation expense
Balance at 30 June 2016 and
1 July 2016
Additions
Disposals
Depreciation expense
Plant &
Mining
Equipment
$
Office &
Camp
Equipment
$
Motor
Vehicles
$
Other
Assets -
Farming
$
Computer
Equipment
Total
$
$
-
-
-
-
85,618
46,842
33,380
15,057
-
-
-
-
85,618
46,842
33,380
15,057
-
-
-
-
-
180,896
-
180,896
63,813
-
(61,638)
137,752
-
(58,756)
276,264
(475)
(34,501)
-
-
(4,058)
2,817
-
(1,193)
480,646
(475)
(160,145)
Balance at 30 June 2017
87,793
125,839
274,667
10,998
1,625
500,922
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
31
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 10: PROPERTY, PLANT AND EQUIPMENT (continued)
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and
equipment over their expected useful lives as follows:
Plant & Mining Equipment
Office & Camp Equipment
Motor Vehicles
Other Assets - Farming
Computer Equipment
4-20 years
3-8 years
6-8 years
5 years
2 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit
to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to
profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
NOTE 11: PAYABLES
Current
Trade creditors and accruals
Other creditors
2017
$
2,045,938
-
2,045,938
2016
$
2,406,458
5,000,000
7,406,458
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Other creditors as at 30th June 2016 amounted to $5,000,000 which was paid to Kingsgate Consolidated Limited for
the remaining 15% of the Bowdens Silver Project. A payment of $1,000,000 was paid on 30th September 2016, and
the remaining $4,000,000 of the purchase price was paid on 23rd December 2016.
NOTE 12: EMPLOYEE PROVISIONS
Current - employee provisions
2017
$
129,845
2016
$
46,577
Short-term employee benefits
Liabilities for wages and salaries, including annual leave to be settled wholly within 12 months of the reporting date are
measured at the amounts expected to be paid when the liabilities are settled.
32
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 13: CAPITAL AND RESERVES
(a) Movements in ordinary share capital
Date
Details
Number of
shares
Issue
price
1-Jul-15
15-Jul-15
1-Sep-15
19-Oct-15
19-Oct-15
2-Dec-15
5-Feb-16
5-Feb-16
5-Feb-16
9-Feb-16
29-Feb-16
7-Apr-16
10-Jun-16
21-Jun-16
21-Jun-16
30-Jun-16
30-Jun-16
31-Dec-16
31-Dec-16
30-Jun-17
30-Jun-17
30-Jun-17
30-Jun-17
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
Capital Raising costs
Issued capital
Capital Raising costs
Issued capital
Shares buy-back
Capital Raising costs
692,922,714
20,000
2,771,770,856
875
1,197,003,500
50,000,000
375,000,000
150,000,000
0.01
0.001
0.01
0.001
0.001
0.0015
0.001
77,056,191 0.001622
0.003
0.0015
0.0015
-
-
0.15
0.1
33,000
522,910,809
877,454,916
6,714,172,861
67,142,076
233,333,567
40,000,000
340,475,643
32,223,856
0.165
18,181,968
(582,611)
0.165
0.185
390,298,856
$
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
35,000,050
4,000,000
(2,339,787)
63,502,086
5,316,936
(463,424)
3,000,000
(107,784)
(150,000)
71,097,814
* 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.
(b) 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.
(c) Share options
At 30 June 2017 details of Listed and Unlisted Options are as follows:
Details
Listed options
Listed options
Unlisted options
Total
Number
Exercise
price
Expiry
date
23,393,614
10,705,000
8,000,000
42,098,614
$0.30
$0.30
$0.30
13-Oct-17
20-Jun-18
20-Jun-19
33
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 13: CAPITAL AND RESERVES (continued)
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
Options lapsed post-consolidation
Balance at the end of the financial year
* Differences are due to post-consolidated rounding.
(d) Reserves
2017
Number
2016
Number
38,951,614
-
-
-
-
-
3,205,000
(58,000)
42,098,614
97,500,135
(91,700,135)
(53,875)
2,340,387,178
2,346,133,303
23,451,614
15,500,000
-
38,951,614
In June 2016, the Company completed the acquisition of Silver Investment Holdings Australia Ltd (SIHA) and
Bowdens Silver Pty Ltd. As part of the consideration for the purchase of SIHA, 40,000,000 ordinary shares in the
capital of the Group are to be issued as a deferred consideration. On review of the accounting for the acquisition, the
Company discovered the recognition of the deferred consideration had been misinterpreted. This error has now been
amended by restating the deferred exploration and development expenditure and share capital reserve.
Consolidated
Balance at 1 July 2015
Deferred consideration as part of the consideration for the purchase of SIHA
Balance at 30 June 2016
Movement during the year
Balance at 30 June 2017
(e) Capital risk management
Equity
Reserve
$
-
4,000,000
4,000,000
-
4,000,000
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.
34
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 13: CAPITAL AND RESERVES (continued)
Minimum Shareholding Buy-Back
During the Financial Year, Silver Mines also conducted a minimum shareholding buy-back, for shareholders with parcels
of shares valued at less than A$500. Under the buy-back, a total of 582,611 shares, held by 1,205 shareholders were
bought back at $0.185 per share, and were cancelled by the Company.
NOTE 14: RELATED PARTY TRANSACTIONS
(a) Directors
The names and positions held of Group key personnel are:
Key Management Person
Keith Perrett
Anthony McClure
Peter Langworthy
Jonathan Battershill
Trent Franklin
Nathan Featherby
Position
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Company Secretary
Non-Executive Director (Resigned 26th August 2016)
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated
entity is set out below:
Short-term employee benefits
Post-employment benefits
(b) Trading transactions
2017
$
2016
$
705,924
39,041
299,750
-
744,965
299,750
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)
Ochre Group Holdings Limited (OGH), an entity associated with Nathan Featherby, received $632,500 (2016:
$838,428) in relation to strategic advice provided to the Group. As at balance date the Group owed $Nil (2016:
$550,000) to OGH.
(ii) Mancora Capital Pty Ltd (Mancora), an entity controlled by Mr Nathan Featherby, received $72,243 (2016:
$43,923) in relation to corporate advisory services to the Group. As at balance date the Group owed $Nil (2016:
$72,243) to Mancora.
(iii) Enrizen Capital Pty Ltd, (EC) an entity associated with Trent Franklin, was issued 1 million fully paid ordinary
shares in the Company at an issue price of $0.15. EC received $300,000 (2016: $65,972) in relation to capital
raising and underwriting services to the Group. As at balance date the Group owed $Nil (2016: $150,000) to EC.
(iv) Enrizen Pty Ltd, (EPL) an entity associated with Trent Franklin, was paid $900 (2016: $948) in relation to
insurance services to the Group. As at balance date the Group owed $Nil (2016: $990) to EPL.
35
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 14: RELATED PARTY TRANSACTIONS (Continued)
(v)
Enrizen Lawyers Pty Ltd, (EL) an entity associated with Trent Franklin, was paid $44,151 (2016: $825) in relation
to legal services provided to the Group. As at balance date the Group owed nil to EL.
Enrizen Accounting Pty Ltd (EA), an entity associated with Trent Franklin, was paid $93,150 (2016: Nil) in relation
to company secretarial and accounting services provided to the Group. As at balance date the Group owed $350
(2016: Nil) to EA.
(c) Consolidated Entities
The Group operates in the exploration industry in Australia only. The Group has the following 100% wholly owned
subsidiaries whose transactions have been consolidated into the Group accounts:
Silver Investment Holdings Australia Pty Limited
Bowdens Silver Pty Limited
Conrad Resources Pty Ltd
Tuena Resources Pty Ltd
Webbs Resources Pty Ltd
established 8 August 2016
established 8 August 2016
established 8 August 2016
All the new subsidiaries were established during the year and were not acquired.
NOTE 15: PARENT ENTITY INFORMATION
Statement of profit or loss and other comprehensive income
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
Parent
2017
$
(1,707,497)
(1,707,497)
2016
$
(5,478,483)
(5,478,483)
Parent
2017
$
2016
$
2,965,729
52,929,749
201,001
201,001
21,071,675
49,124,977
6,251,458
6,251,458
75,097,814
(22,336,066)
52,728,748
63,502,087
(20,628,568)
42,873,519
36
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: RECONCILIATION OF OPERATING (LOSS)/PROFIT AFTER
INCOME TAX TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Operating (loss)/profit after income tax
Depreciation
Write-off/loss of investment
Movements in working capital:
Increase/(decrease) in receivables and prepayments
Increase/(decrease) in payables and provision
2017
$
(2,278,907)
250,848
-
(2,028,059)
2016
$
(5,478,483)
8,949
147,702
(5,321,832)
(1,550,504)
(727,673)
2,521,143
(333,602)
Net cash outflows from operating activities
(4,306,236)
(3,134,291)
NOTE 17: 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.
37
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 17: FINANCIAL INSTRUMENT DISCLOSURES (continued)
(iii) Cash flow and fair value interest rate risk (continued)
Weighted
average
effective
interest
rate
Floating
interest
rate
Fixed interest rate
maturing
Non-
interest
bearing
Total
%
$
Within 1
year
$
Over 1
year
$
$
$
2017
FINANCIAL ASSETS
Cash assets
Performance guarantee
bonds
Other financial assets
FINANCIAL LIABILITIES
Payables (current)
Borrowings (current)
Payables (non-current)
3,641,237
-
-
3,691,237
-
-
-
-
NET FINANCIAL
ASSETS/(LIABILITIES)
3,691,237
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,641,237
50,000
50,000
281,387
331,387
281,387
3,972,623
(2,045,938)
-
-
(2,045,938)
(2,045,938)
-
-
(2,045,938)
-
(1,714,552)
1,926,685
38
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 17: FINANCIAL INSTRUMENT DISCLOSURES (continued)
Weighted
average
effective
interest
rate
Floating
interest
rate
Fixed interest rate
maturing
Non-
interest
bearing
Total
Within
1 year
Over 1
year
%
$
$
$
$
$
2016
FINANCIAL ASSETS
Cash assets
Performance guarantee
bonds
Other financial assets
FINANCIAL LIABILITIES
Payables (current)
Borrowings (current)
Payables (non-current)
3.1
11,557,239
-
-
11,557,239
-
-
-
-
NET FINANCIAL
ASSETS/(LIABILITIES)
11,557,239
-
-
-
-
-
-
-
-
-
-
- 11,557,239
100,000
50,000
150,000
-
2,472,002
2,472,002
100,000
2,522,002 14,179,241
-
-
-
-
(7,406,458)
(7,406,458)
-
-
-
-
(7,406,458)
(7,406,458)
100,000 (4,884,456)
6,772,783
(b) Reconciliation of net financial assets per statement of financial position:
Net financial assets per above
Inventory (current)
Plant & equipment
Land & buildings
Intangible assets
Deferred exploration & development
Employees provision
2017
$
2016
$
1,926,685
170,794
500,922
7,718,031
875,000
41,128,752
(129,845)
6,772,783
117,550
180,896
7,805,381
-
32,043,486
(46,577)
Net assets per statement of financial position
52,190,339
46,873,519
39
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 17: FINANCIAL INSTRUMENT DISCLOSURES (continued)
(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.
40
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 18: 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
2017
Cents
2016
Cents
(0.63)
(0.63)
(12.22)
(12.22)
Number
Number
360,378,354
45,085,499
$
$
Reconciliation of earnings used in calculating basic and diluted earnings
per share
Earnings used in calculating basic and diluted earnings per share
(2,278,907)
(5,478,483)
NOTE 19: REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by Crowe Horwath Sydney,
the auditor of the company:
Audit services - Crowe Horwath Sydney (2016: Moyes Yong & Co)
Audit or review of the financial statements
53,000
51,300
2017
$
2016
$
Other services - Crowe Horwath Sydney
Preparation of the tax advice
10,975
-
63,975
51,300
41
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 20: COMMITMENTS
Capital commitments-option
Committed at the reporting date but not recognised as liabilities, payable:
Intangible assets
Lease commitments-operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
2017
$
2016
$
3,465,000
18,962
-
-
Tenement minimum spend for a year
4,395,000
649,000
Capital commitments include contracted amounts for options agreement for the right to purchase properties at the
execution date. However, if the company chooses not to execute the agreements, the rights will be forfeited and the
amount will be written off through the Profit and Loss statement.
Operating lease commitments include contracted amounts for motor vehicle operating leases expiring within one year.
To maintain the right to a tenement the Group is committed to a minimum spend on the tenement in a 12 month period
NOTE 21: EVENTS SUBSEQUENT TO REPORTING DATE
No matter or circumstance has arisen since the reporting date that has significantly affected or may significantly affect
the consolidated entity’s operations, the results of those operations or the consolidated entity’s state of affairs in future
financial years.
NOTE 22: 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
42
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
DIRECTORS’ DECLARATION
The directors declare that:
1
The financial statements and notes, as set out on pages 22 to 42 are in accordance with the Corporations Act 2001
and:
(a) comply with Accounting Standards and the Corporations Regulations 2001; and
(b) give a true and fair view of the financial position as at 30th June 2017 and of the performance for the year
ended on that date of the Group and economic entity.
2
The Managing Director and the Company Secretary, who perform the functions of Chief Executive Officer and Chief
Financial Officer respectively, have each declared that:
(a) the financial records of the Group for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with the Accounting Standards; and
(c) 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
29th September 2017
Anthony McClure
Managing Director
43
Silver Mines Limited
Independent Auditor’s Report to the Members of Silver Mines Limited
Crowe Horwath Sydney
ABN 97 895 683 573
Member Crowe Horwath International
Audit and Assurance Services
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Silver Mines Limited (the Company and its subsidiaries (the
Group)), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial
performance for the year then ended;
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the Financial Report, which indicates that the Group will require further
funding in the next twelve months from the date of this report to fund its planned exploration and
development projects and operating costs. These conditions, along with other matters as set forth in
Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability
to continue as a going concern. Our opinion is not modified in respect to this matter.
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of
financial services licensees.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key Audit Matter
How we addressed the Key Audit Matter
Deferred Exploration and Development Expenditure – Note 7 of the financial report
The Group has a significant exploration asset,
representing three active areas of interest,
Bowdens, Webbs and Conrad, in New South
Wales.
As outlined in Note 7 of the financial report, the
application of the Group’s accounting policy in
respect of capitalised (deferred) exploration and
development expenditure requires significant
judgement, as follows:
Relating the expenditure to an area of
interest; and
Determining the extent to which expenditure
is expected to be recouped through
successful development of the area.
Exploration assets are required to be tested for
impairment when facts and circumstances
suggest that the carrying amount of an
exploration and evaluation asset may exceed its
recoverable amount.
Examples of impairment indicators include:
The Group’s title to the tenement lapses;
The Group ceasing to explore, or is unable to
fund the minimum capital commitments to
maintain the tenement title; and
Reports indicating the asset will not be viable
because of the impact of changes in the
industry, geography of project, committed
expenditure and tenement expiry date.
Our procedures included, amongst others:
Reviewing the Group’s accounting policy
and concluding that it is consistent with the
requirements of AASB 6 Exploration and
Evaluation of Mineral Resources.
Evaluating the Group’s processes and
controls in regards the recognition and
deferral of exploration and development
expenditure.
Selecting a sample of exploration and
development expenditure and testing the
allocation of the expenditure to the project
reference and evaluating that the
capitalisation (deferral) of expenditure is in
accordance with the Group’s accounting
policy.
Obtaining the Resource Authority Public
Report to verify the Group’s ownership
interest of each of the tenements to which
the exploration and development
expenditure relates.
We challenged the directors’ assumptions that
support the evaluation of impairment indicators
by:
Reviewing the Group’s budgets and drilling
programs and assessing whether it covers
the committed expenditure before the
expiry date.
Ensuring that substantive exploration and
development expenditure is planned and
budgeted for each tenement.
Assessing the Group’s capacity to fund
future committed exploration expenditure.
Obtained the Resource Authority Public
Report to verify the Group’s ownership
interest for each of the tenements to which
the exploration expenditure relates
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2017, but does not
include the financial report and our auditor’s report thereon. The annual report is expected to be made
available to us after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards, International Financial
Reporting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view
and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This
description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 19 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of Silver Mines Limited, for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
CROWE HORWATH SYDNEY
LEAH RUSSELL
Senior Partner
Dated at Sydney this 29th day of September 2017
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
ADDITIONAL SECURITIES EXCHANGE INFORMATION AS AT 27 SEPTEMBER 2017
At 27 September 2017 the issued capital in the Company was comprised of:
390,298,856 fully paid ordinary shares held by 2,734 holders;
23,393,614 listed options held by 537 holders, with an exercise price of $0.30 and an expiry date of 13 October
2017 (SVLO);
10,705,000 listed options held by 72 holders, with an exercise price of $0.30 and an expiry date of 20 June 2018
(SVLOA); and
7,000,000 unlisted options held by 6 holders, with an exercise price of $0.30 and an expiry date of 20 June
2019.
Each fully paid ordinary share in the Company entitles the holder to one vote at a meeting of shareholders. Options do
not carry voting rights.
At 27 September 2017, the Company has 633 shareholders whose holdings are less than a marketable parcel of shares
(total value of A$500, assuming a share price of $0.098).
Substantial shareholders at 27 September 2017
Silver Mines Limited has the following substantial shareholders:
Holder
BlackRock Group (BlackRock Inc and its subsidiaries)
Paradice Investment Management Ltd
Shares
35,484,533
20,000,000
%
9.09
5.12
20 Largest Holders of Ordinary Shares and their holdings at 27 September 2017
1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2. NATIONAL NOMINEES LIMITED
3. CITICORP NOMINEES PTY LIMITED
4. UBS NOMINEES PTY LTD
5. J P MORGAN NOMINEES AUSTRALIA LIMITED
6. MR ANTHONY MCCLURE
7. GASCOYNE HOLDINGS PTY LTD
8. COOLHAND NOMINEES PTY LIMITED
9. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO
ECA
10. MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY
LIMITED
11. PERTH SELECT SEAFOODS PTY LTD
12. BNP PARIBAS NOMS PTY LTD
13. MS GEORGINA SUSAN KING
14. BT PORTFOLIO SERVICES LIMITED
15. NATIONAL NOMINEES LIMITED
16. PALMER BOOKMAKING PTY LIMITED
17. FAROUK AND ASSOCIATES FZE
18. VICTOR M LEWIS PTY LTD
19. SENECA SECURITIES PTY LTD
20. CITICORP NOMINEES PTY LIMITED
37,981,762
22,970,599
21,906,135
10,941,118
9,099,872
8,687,500
7,000,000
6,666,667
9.731%
5.885%
5.613%
2.803%
2.332%
2.226%
1.793%
1.708%
6,473,965
1.659%
6,192,981
6,000,000
5,986,969
5,712,500
5,000,000
4,671,667
4,346,157
3,600,000
3,500,000
3,478,918
3,306,788
1.587%
1.537%
1.534%
1.464%
1.281%
1.197%
1.114%
0.922%
0.897%
0.891%
0.847%
48
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
Distribution of holders and holdings at 27 September 2017
Fully paid ordinary shares:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
Holders
196
432
439
1,230
437
2,734
Total Units
50,235
1,626,978
3,587,687
49,392,657
335,641,299
390,298,856
%
0.013
0.417
0.919
12.655
85.996
100.000
49
SILVER MINES LIMITED and its controlled entities
2017 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 29th September 2017.
The following governance related documents can be found on the Group’s website at
http://www.silvermines.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. Senior executives are responsible for supporting the managing director
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.
50
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
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:
(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.
51
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
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
Proportion of women
0 out of 4 (0%)
3 out of 7 (43%)
Across the whole organisation
8 out of 30 (27%)
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.
During the 2016/2017 financial year an evaluation of the Board and the individual directors did not take place as the
Company conducted an in-depth evaluation of the current Board, prior to and upon its appointment at the end of the
previous financial year. 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 2016/ 2017 financial year, the Group conducted an evaluation of certain senior executives within the Group
who were employed throughout the period. Other senior executives will be evaluated in the coming period upon the
anniversary of their engagement with the Group.The Group’s Process for Performance Evaluation is disclosed on the
Group’s website.
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
52
SILVER MINES LIMITED and its controlled entities
2017 Annual Report
(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 of the
ASX Corporate Governance Principles, 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, Keith Perrett and Jonathan Battershill 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
(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.)
1 year 3 months
1 year 3 months
Independence status
Executive
Independent
Non-Executive
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2017 Annual Report
Peter Langworthy
20th June 2016
1 year 3 months
Jonathan Battershill
16th June 2017
3 months
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 30 June 2017, three quarters 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:
(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.
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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 2017, the Board received a statement from its Managing Director and
Company Secretary, who 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.
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).
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2017 Annual Report
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) 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 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).
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.
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2017 Annual Report
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.
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 2017 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.
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.
57