SML CORPORATION LIMITED
(RENAMED SYNERTEC CORPORATION LIMITED 15 AUGUST, 2017)
ARBN 161 803 032
Annual Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE, 2017
CORPORATE DIRECTORY
Directors
Corporate Secretary and principal
registered office in Bermuda
Registered office in Australia
Registered agent office in Australia
Share registry
Auditor
Banker
Leeanne Bond (Non-Executive Chairperson), appointed 8 August 2017
Michael Carroll (Managing Director and CEO), appointed 8 August 2017
Kiat Poh (Non-Executive Director)
Kim Chuan Freddie Heng (Non- Executive Director)
Andrew Metcalfe, appointed 8 August 2017
Clarendon House 2 Church Street
Hamilton HM11
Bermuda.
Level 1, 57 Stewart Street
Richmond, Victoria 3121, Australia
Telephone: +(61 3) 9274 3000
Email: info@synertec.com.au
shareholder@synertec.com.au
Andrew Metcalfe
Level 2, 470 Collins Street
Melbourne, Victoria 3000, Australia.
Telephone: +(61 3) 9867 7199
Facsimile: +(61 3) 9867 8587
Email: andrew@accosec.com
Boardroom Pty Limited
Grosvenor Place
Level 12, 225 George Street
Sydney, New South Wales 2000, Australia
Telephone: 1300 737 760 (within Australia)
+(61 2) 9290 9600 (outside Australia)
Facsimile: +(61 2) 9290 9655
Grant Thornton Audit Pty Ltd
The Rialto, Level 30, 525 Collins Street
Melbourne, Victoria 3000, Australia
Westpac Banking Corporation
409 St Kilda Road
Melbourne, Victoria 3004, Australia
Stock exchange listing
Synertec Corporation Limited shares are listed on the Australian Securities
Exchange
ASX Code: SOP (fully paid ordinary shares)
SOPOA (quoted options, A$0.053, expiring 7 August 2020)
Website address
www.synertec.com.au
CONTENTS
CORPORATE DIRECTORY
STATEMENT FROM THE CHAIR
CORPORATE EVENTS
STATUTORY ACCOUNTS FOR THE YEAR ENDED 31 JULY 2017
DIRECTORS’ REPORT
FINANCIAL REPORT
DIRECTORS’ DECLARATION
INDEPENDENT AUDITORS’ REPORT
SHAREHOLDER INFORMATION AS AT 30 SEPTEMBER 2017
2
PAGE
2
3
5
6
7
16
41
42
46
STATEMENT FROM THE CHAIR
Message from the previous Chairman, Mr Kiat Poh (resigned as Chairperson, on 8 August 2017)
The financial year ending 30 June 2017 has been a momentous one for the Company. On 10 March 2017, the
Company announced that it had entered into an agreement to acquire the entire issued shares of Synertec Pty Ltd
(the “Acquisition”).
The Acquisition was the culmination in the efforts of the Company since the downturn in the resource sector in
Australia, that commenced some three years ago, to chart a new course for the Company and the group. At that
time, the board made a strategic decision to conserve the cash resources of the Company and took active steps
to seek alternative investments outside of the mineral resource space. During that journey, several options were
explored and declined. In one particular instance, binding heads of agreement were entered into but the
transaction was eventually terminated because the Vendors were unable to fulfil an important condition
precedent. Our efforts continued until Synertec Pty Ltd was introduced to the Company and we were able to
conclude a definitive agreement in March 2017.
The Company acquired Synertec Pty Ltd for a total consideration of $10m, half payable in cash and the other half
in shares in the Company at an issue price of 4.667 cents per share, for a total of 107,142,857 new shares in the
Company.
The Acquisition was completed on 8 August 2017 and with effect from 15 August 2017, the Company name was
changed from SML Corporation Limited to Synertec Corporation Limited (“Synertec”).
The existing shareholders (i.e. those people registered in the Company’s register at 5pm on 26 June 2017, the
Record Date) were issued with bonus options on the basis of one bonus option for every five shares held. Each
option is valid for three years from issue and exercisable at 5.3 cents. When exercised it will entitle the option
holder to receive a new fully paid ordinary share in the Company.
Additionally, the existing shareholders were issued Redemption Notes that entitled them to the net proceeds (after
deducting all direct costs, expenses, fees, and the like) of the divestment of the mining tenement at Glen-Wills
Sunnyside together with certain land, plant and equipment (the “Divestment”). The Redemption Notes were issued
to the existing shareholders on a pro-rata basis, comprising one Redemption Note for every share held as of the
Record Date. The net proceeds to be distributed for each Redemption Note will be determined at the end of the
sale process.
I am happy to report that the Divestment was successfully concluded with ABA Resources Pty Ltd at a gross sale
amount of $3.5m on 22 September 2017 and the cash has been received. It is envisaged that the entire sale
process will be completed in the first quarter of calendar 2018 upon the conclusion of all obligations under that
sale and purchase agreement.
The Company has moved into a new era, transforming from mineral resource exploration to specialized
engineering expertise and solutions. A new, dedicated team has come on board, together with our new
Chairperson, Ms Leeanne Bond. It gives me great pleasure to invite Leeanne to present her message to you in this
exciting new age for Synertec and the group.
3
STATEMENT FROM THE CHAIR - CONTINUED
Message from the Chair, Ms Leeanne Bond (appointed 8 August 2017)
Firstly I would like to acknowledge the excellent work of Mr Poh Kiat as Chairperson of the Company. He and the former
board have done an exceptional job in steering the acquisition of Synertec Pty Ltd and the Company is now well placed as
we embark on our new direction.
The new Board has been working hard since the acquisition completed and I am pleased with the energy and commitment
of all involved.
The Board is getting on with its task of creating value for the shareholders by unlocking value within the incredibly talented
and committed technical team. For example:
• The Company announced on 20 September 2017 the establishment of a Perth office. This allows the Company
to better serve significant oil and gas operations within Western Australia including Gorgon LNG, Wheatstone
LNG and the North West Shelf. We are already starting to generate income as a result of this initiative and we are
optimistic of realising significant opportunities into the future.
• With regards to our export aspirations the company announced on 1 September 2017 it had secured its first
overseas contracts with the North Caspian Operating Company N.V. Kazakhstan. In addition, we have several
other export opportunities that we believe we are well placed to secure in other major Oil and Gas regions.
In looking forward, I note that the Company has a strong Balance Sheet, has a considerable “pipeline” of opportunities and
has an exceptionally talented and committed team of engineers and technicians.
I am excited to be part of this journey and I am very confident that Synertec Corporation Limited will continue to grow and
deliver benefits to all stakeholders.
4
CORPORATE EVENTS
During the year under review and up to the date of this report, the following changes occurred within our Company:
• on 5 June 2017, our shareholders approved the change in the nature and scale of activities of our Company;
• on 20 June 2017, our Company completed the consolidation of capital on the basis of every four (4) shares into
three (3) shares;
• a successful share offer of 18,750,000 fully paid ordinary shares at $0.04 per share raising $750,000 in cash;
• on 8 August 2017, our Company successfully acquired 100% of the voting shares of Synertec Pty Ltd (Synertec),
resulting in the issue of 107,142,857 fully paid shares and a cash payment of $5 million to the former shareholders
of Synertec;
• an issue of 16,175,970 bonus options (“SOPOA”) to eligible existing shareholders with a 5.3 cents exercise price
and expiring on 7 August 2020;
• an issue of 80,879,849 Redemption Notes to eligible existing shareholders;
• an issue of 13,928,571 fully paid ordinary shares to our Company’s adviser;
• on 8 August 2017, our Company also revamped the composition of our board:
o Ms. Leeanne Bond was appointed a Director and Chair of the Board;
o Mr. Michael Carroll was appointed a Managing Director and CEO of the Company;
o Mr. Furang Li and Mr Shaw Pao Sze resigned as Directors of the Company;
o Mr. Kiat Poh and Mr Freddie Heng remained as Directors of the Company.
• on 11 August 2017, our Company was successful re-listed on the Australian Stock Exchange;
• on 15 August 2017, our Company changed its name to Synertec Corporation Limited; and
• on 22 September 2017, our Company completed the divestment of our 100% voting interest in Australian Gold
Mines Pty Limited, which in turn owns Mt Wills Gold Mines Pty Limited, the holder of all the mining assets, for
$3,500,000. With the completion of the divestment, our Company is no longer involved in any exploration
related activities. Net proceeds from the sale will be distributed to our redemption note holders upon the
conclusion of all obligations and the computation to arrive at the net proceeds.
ABOUT SYNERTEC
Synertec is a multi-disciplined engineering consulting firm, delivering specialist engineering and compliance services across
complex and highly regulated oil and gas, biotechnology, food and dairy, industrial automation, mining, petrochemical and
fine chemicals, pharmaceuticals and water industries.
Based in Melbourne, Synertec is an established business with over two decades of history in Australia’s specialist engineering
consulting industry. Synertec’s senior management have many years experience in the multi-disciplined and the specialist
engineering consulting industry to implement the development strategies and growth plans of the business.
Synertec’s ongoing growth strategy involves targeting industry segments in Australia and internationally that have:
• A requirement for complex engineering services;
• Large companies with complex manufacturing or production facilities
• Signficiant revenue opportunities in Australia, and in which the Australian market experience is equally applicable
internationally’;
• High barriers to entry; and
• Participants who seek long-term relationsips with engineering firms
In addition, the Directors believe that there is a strong opportunity to leverage the Gorgon and Wheatstone sales of the LNG
Custody Transfer Technology to market into the significant and expanding LNG sector worldwide.
For further information please refer to www.synertec.com.au
5
Statutory Accounts of SML Corporation Limited
For Financial Year ended 30 June 2017
The following pages contain the statutory accounts of SML Corporation Ltd for the year ended 30
June 2017 that were announced on the ASX on 31 July 2017.
The Company’s name was changed on 15 August 2017 to Synertec Corporation Limited following
the completion of the acquisition of Synertec Pty Ltd by SML Corporation Ltd on 8 August 2017.
As the acquisition was completed after the year-end date, the statutory accounts contain financial
information of SML Corporation Ltd and the group only, without the inclusion of any financial
information of Synertec Pty Ltd.
The statutory accounts of Synertec Pty Ltd were completed and announced on the ASX on 28
September 2017. Shareholders are invited to download the accounts from the ASX website (code
“SOP”).
6
7
Directors Report
30 June 2017
The directors present their report, together with the financial statements, on the consolidated entity
(referred to hereafter as the 'consolidated entity') consisting of SML Corporation Limited (referred to
hereafter as the 'Company' or 'parent entity') and the entities it controlled for the year ended 30 June
2017.
1.0 Principal activities
The principal activity of the consolidated entity during the financial year was mineral exploration in
Australia. There were no significant changes in the nature of the consolidated entity's principal activity
during the year. The consolidated entity holds mining tenements in the East Gippsland region of Victoria
encompassing the historic Glen Wills and Sunnyside gold projects.
2.0 Directors
The following persons were directors of SML Corporation Limited during the financial year and up to the
date of this report:
Kiat Poh
Kim Chuan Freddie Heng
Shaw Pao Sze
Furang Li
2.1 Information on directors
Kiat Poh, Non-Executive Director.
Mr. Poh holds Certified Diploma in Accounting and Finance from ACCA, UK, Diploma in Management
Studies from the Singapore Institute of Management, and a Diploma in Civil Engineering from the
Singapore Polytechnic.
He has over 30 years’ experience at senior management level in the construction, real estate
development, manufacturing industries and financial markets. Over the years, he also held senior
positions in corporate finance and mezzanine capital investment companies in Malaysia specialising in
investments as well as mergers and acquisitions.
From 1998 to 2005, he was Managing Director of a Singapore Exchange listed company.
Since 2005, Mr. Poh has been managing a Singapore based investment advisory company that focuses
on participating in strategic stakes in listed companies.
Since May 2008, he has been a non-executive director of Centrex Metals Limited, a company listed on
ASX.
Kim Chuan Freddie Heng, Non-Executive Director.
Mr. Heng is a Chartered Accountant, BSc (Economics) from the London School of Economics. He
worked with an international accounting firm in London and Singapore.
From 1992 to 2000, he was an Executive Director (Finance) in a Singapore Exchange listed company.
During that period, he oversaw the structuring of four oil pipeline and storage depot projects in
Indonesia. He also oversaw the successful issue of floating rate notes to financial institutions in East
Asia to fund the first of those projects.
Since 2000, Mr. Heng has pursued his own interests in investments, primarily in listed companies. Mr.
Heng is currently a director of Noel Gifts International Limited, a company listed on the Singapore
Exchange and TMC Life Sciences Berhad, a company listed on the Kuala Lumpur Stock Exchange.
15
7
Directors Report
30 June 2017
Shaw Pao Sze, Non-Executive Director
Captain Sze is a Master Mariner FG (Commonwealth of Australia) having spent over 30 years of his
career in the Neptune Orient Lines ('NOL') group of companies, holding the position of Managing
Director of some of the group companies at various times. His expertise covers a spectrum of activities
such as corporate planning for NOL headquarters, conventional and containerized shipping in areas of
ownership and operation, shipping agency, cargo handling and haulage, port operations and
development and heavy lifting.
Captain Sze is currently a non-executive Director of Zicom Group Limited, a company listed on the
Australia Securities Exchange. He has no interest in shares or options of the Company.
Furang Li, Non-Executive Director
Mr. Li holds a master degree majoring in geosciences engineering and he is a member of Australasian
Institute of Mining and Metallurgy. He presently holds the position of the vice-chief engineer of
Northwest Mining and Geology Group Co., the general manager of Northwest Nonferrous International
Investment Company Ltd and director of Northwest Nonferrous Australia Mining Pty Limited.
Since 1989, Mr. Li has worked on exploration of gold, silver, copper, lead-zinc, nickel, manganese, and
iron. He has vast experience in presiding over the investigation and management of large-scale
international geological exploration and mining projects.
Mr. Li has no other current directorships and has no former directorships during the last three (3) years.
He has no interest in shares or options of the Company.
Note:
“Other current directorships” quoted above are current directorships for listed entities only and excludes directorships
in all other types of entities, unless otherwise stated.
”Former directorships (in the last 3 years)” quoted above are directorships held in the last 3 years for listed entities
only and excludes directorships in all other types of entities, unless otherwise stated.
2.2 Directors’ Interest in shares
Director
Kiat Poh
Kim Chuan Freddie Heng
Shaw Pao Sze
Furang Li
2.3 Meetings of directors
Interest in Ordinary Shares
2,423,417
2,176,433
-
-
The number of meetings of the Company's Board of Directors held during the financial year ended 30
June 2017 and up to the report date, and the number of meetings attended by each director were:
Board Meetings
Audit and Risk
Management
Committee Meetings
Remuneration and
Nomination
Committee
Meetings
Held
Attended
Held
Attended
Held Attended
Kiat Poh
Kim Chuan Freddie Heng
Shaw Pao Sze
Furang Li
4
4
4
4
4
4
4
4
2
2
2
-
2
2
2
-
-
2
2
2
-
2
2
2
8
16
Directors Report
30 June 2017
The Audit and Risk Management Committee and Remuneration and Nomination Committee comprise of
the following independent non-executive directors:
Audit and Risk Management Committee:
! Kim Chuan Freddie Heng as Chairman;
! Kiat Poh as member; and
! Shaw Pao Sze as member.
Remuneration and Nomination Committee:
! Shaw Pao Sze as Chairman;
! Kim Chuan Freddie Heng as member; and
! Furang Li as member.
3.0 Remuneration Report
The Remuneration Report outlines the directors’ and executive officers’ remuneration arrangements for
the Company and consolidated entity. Only key management personnel are included in the
Remuneration Report. For the purposes of this Report, key management personnel of the consolidated
entity are defined as those persons having authority and responsibility for planning, directing and
controlling the major activities of the consolidated entity, directly or indirectly, including any director
(whether executive or otherwise) of the Company.
For the purposes of this report, the term “executive” encompasses persons associated with the
Company and consolidated entity who take responsibility for day-to-day decisions affecting the
corporate and exploration activities of the consolidated entity. The Company has no executive directors.
Principles used to determine the nature and amount of remuneration.
The remuneration report is set out under the following main headings:
A
B
C
D
Details of remuneration.
Service agreements.
Share-based compensation.
A. Principles used to determine the nature and amount of remuneration.
The performance of the Company and consolidated entity depends upon the quality of its directors and
executive officers. To prosper, the consolidated entity must attract, motivate and retain highly skilled
personnel. To this end, the consolidated entity:
●
●
●
works to attract the appropriate staff by providing a competitive remuneration structure and a
recommends
productive working environment.
reviews and
resource policies, performance
management and procedures for the Company and consolidated entity, including directors of
the Company.
ensures that all compliance, governance, accounting, legal approvals and disclosure
requirements associated with the Company's and consolidated entity's employment
practices are satisfied.
remuneration, human
is responsible
The Remuneration and Nomination Committee
for determining and reviewing
compensation arrangements for the directors and the executive officers. The Remuneration and
Nomination Committee assesses the appropriateness of the nature and amount of emoluments of such
officers on a periodic basis by reference to relevant market conditions with the overall objective of
ensuring maximum stakeholder benefit from the retention of experienced and high quality directors and
executive officers. Such officers are given the opportunity to receive their base emolument in a variety
of forms including cash and superannuation salary sacrifice. The directors' emoluments are comparable
to similar sized companies in the resources industry.
17
9
Directors Report
30 June 2017
Compensation linked to performance.
At the date of this report, there is no formal link between the Company’s and consolidated entity's
performance and the directors’ emoluments as the Company’s and consolidated entity's exploration
operations represent no guarantee of the Company’s and consolidated entity's future value.
Remuneration structure.
In accordance with corporate governance principles and recommendations, the Company substantially
complies with the guidelines for non-executive directors’ remuneration.
Non-executive directors’ remuneration.
On appointment, non-executive directors were advised of their directors’ duties and responsibilities and
the remuneration and fee to be paid to directors in carrying out their duties.
The Company and consolidated entity aims to reward its non-executive directors with a level of
remuneration commensurate with their position and responsibilities within the consolidated entity so as
to reward non-executive directors for meeting or exceeding targets set by reference to appropriate
benchmarks; align the interests of non-executive directors with those of shareholders'; and ensure that
remuneration is competitive by market standards.
It is the consolidated entity's policy that service agreements must be entered into with its non-executive
directors, as detailed in section C below.
Fixed remuneration – objective
Fixed remuneration is reviewed at the end of each contract term by the Remuneration and Nomination
Committee. The process consists of a review of the Company, consolidated entity and individual
performance, relevant comparative remuneration externally and internally and, where appropriate,
external advice on policies and practices.
Fixed remuneration - structure
Non-executive directors receive their fixed (primary) remuneration in form of cash payments to their
nominated accounts.
Variable remuneration - short-term incentive
At the date of this report, there was no short-term incentive program for directors.
10
18
Directors Report
30 June 2017
B. Details of remuneration
Amounts of remuneration
Details of the remuneration of the directors are set out in the following tables.
2017
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Termi-
nation
benefits
Total
Name
Non-Executive Directors:
Kiat Poh
K.C. Freddie Heng
Shaw Pao Sze
Furang Li
Total
Salary/
fees
$
Bonus
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
$
$
30,000
30,000
32,850
-
92,850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,000
30,000
32,850
-
92,850
2016
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Termi-
nation
benefits
Total
Name
Non-Executive Directors:
Kiat Poh
K.C. Freddie Heng
Shaw Pao Sze
Furang Li
Total
Salary/
fees
$
Bonus
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
$
$
30,000
30,000
32,850
-
92,850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,000
30,000
32,850
-
92,850
All remuneration is fixed.
C. Service agreements
Remuneration and other terms of employment for directors are formalised in their respective service
agreements. The service agreements may be terminated by either party by giving 1 month notice to the
other.
D. Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation
during the year ended 30 June 2017.
Options
There were no options issued to directors and other key management personnel as part of compensation
that were outstanding as at 30 June 2017.
19
11
Directors Report
30 June 2017
There were no options granted to or exercised by directors and other key management personnel as part
of compensation during the year ended 30 June 2017.
E. Shareholding holding
Shareholding
The number of shares in the parent entity 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:
2017
Ordinary shares
Kiat Poh *
Kim Chuan Freddie Heng*
Balance at the
start of the
year
Received as
part of
remuneration Additions
Disposals/
other
Balance at the
end of the year
3,231,335
2,901,910
6,133,245
-
-
-
-
-
-
(807,918)
(725.477)
(1,533,395)
2,423,417
2,176,433
4,599,850
* Other – represents the consolidation in the ratio of four (4) into three (3) shares that occurred during
the year.
2016
Ordinary shares
Kiat Poh
Kim Chuan Freddie Heng
Balance at
the start of
the year
3,231,335
2,901,910
6,133,245
Received as
part of
remuneration Additions
Disposals/
other
Balance at the
end of the
year
-
-
-
-
-
-
-
-
-
3,231,335
2,901,910
6,133,245
4.0 Shares under option
At the date of this report, there are no unissued shares under option.
5.0 Dividends
There were no dividends paid or declared during the current or previous financial year.
6.0 Review of operations
The loss for the consolidated entity after providing for income tax amounted to $9,568,692 (30 June
2016: $7,600,130). During the financial year, the Board received an independent external valuation of its
exploration and tenement assets which provided a value of $6,520,000 resulting in a write down of
$8,120,275. The impaired value remains an estimate and as such the Board will continue to assess and
make adjustment as the situation progresses. The Company has ceased further works and expenditure
on its tenement following the proposed acquisition described in the paragraphs below.
Acquisition of 100% shareholding in Synertec Pty Ltd
In an announcement released by the Company on 10 March 2017 (the “Announcement”), it disclosed
that it had on 9 March 2017 entered into a share purchase agreement pursuant to which the Company
agreed, subject to the satisfaction of certain conditions precedent, including, compliance by the
Company with Listing Rule 11.1 and Chapters 1 and 2 of the Listing Rules, to acquire 100% of the
issued shares of Synertec Pty Ltd (‘Synertec”) for a total consideration of $10.0 million (the
12
20
Directors Report
30 June 2017
“Acquisition”).
6.0 Review of operations (continued)
The principal terms of the Acquisition are as follows.
The consideration is to be satisfied by the payment of $5.0m in cash and the other $5m by the issue of
107,142,857 new fully paid ordinary shares in the Company at an issue price of 4.667 cents per share
post consolidation on the basis of every four fully paid ordinary shares being consolidated into three
fully paid ordinary shares (the “Consideration Shares”). The Company was required to consolidate its
capital in order to re-comply with Chapters 1 and 2 of the ASX Listing Rules.
Upon completion of the Acquisition but before the issue of the Consideration Shares, the Company will
issue to the existing shareholders, at no issue price, new bonus options to subscribe for new shares in
the Company on the basis of one bonus option for every five shares held. Each option will be
exercisable at 5.3 cents and will have an exercisable period of three years from the date of issue.
Following the successful completion of the Acquisition, the Company will seek to divest the Glen Wills –
Sunnyside mining tenement (the “GWS Tenement”) and the plant and equipment. If that divestment
does not occur within six months of the said completion, the GWS Tenement will be relinquished. If the
divestment is successful, the net sale proceeds will be distributed to the existing shareholders of the
Company on a pro rata basis. Pursuant to this distribution, the shareholders will be issued with
redemption notes that will entitle each shareholder to the net proceeds of the divestment on a pro rata
basis to his shareholding in the Company (“Redemption Notes”).
Synertec is an Australian multi-disciplined engineering consulting firm, delivering specialist engineering
and compliance services across complex and highly regulated oil and gas, biotechnological, food and
dairy, hospitals, industrial automation, mining, petrochemical and fine chemicals, pharmaceutical and
water industries.
The Company will change its name to Synertec Corporation Limited upon completion of the Acquisition.
On 5 June 2017, a Special General Meeting (“SGM”) was convened for the shareholders to consider
and approve a number of resolutions pursuant to the Acquisition. All the resolutions were duly passed
at the SGM.
Following the approval by shareholders of the Acquisition at the SGM, the shares of the Company were
suspended from quotation on the ASX and will remain suspended until the Company re-complies with
chapters 1 and 2 of the Listing Rules.
On 9 June 2017, in compliance with a requirement by the ASX in connection with the Acquisition, the
Company effected a consolidation of the shares on the basis of three shares for every four held. The
record date for the purposes of this consolidation was 13 June 2017 and the consolidated shares were
issued on 20 June 2017.
On 23 June 2017, the Company lodged its prospectus with ASIC for an offer of 18,500,000 shares in
the Company at $0.04 per shares, raising $750,000 before costs (the “Offer”). The purpose of the offer
is to re- comply with chapters 1 and 2 of the ASX Listing Rules. The funds raised will be used to defray
the costs of the Acquisition and as additional working capital.
7.0 Significant changes in the state of affairs
There were no other significant changes in the state of affairs of the consolidated entity during the
financial year with the exception of the items identified in the review of operations noted above.
21
13
Directors Report
30 June 2017
8.0 Matters subsequent to the end of the financial year
Since 30 June 2017, the Offer was launched and has been managed by Phillip Capital Limited. The
Offer was successfully completed on 20 July 2017.
Subject to the completion of the Acquisition, the existing shareholders of the Company will be issued
with bonus options, at nil consideration, on the basis of one option for every five shares held. The
options will be valid for three years from the date of issue and each option will entitle the holder to
subscribe for one share in the Company at an exercise price of $0.053.
Subject to the completion of the Acquisition, the Company will proceed with the divestment of the GWS
Tenement. Further, the Redemption Notes will be issued to the shareholders.
On 17 July 2017, the Company received the decision from the ASX to re-admit the Company to its
official list and to quote the Company’s securities, subject to the satisfaction of certain conditions
precedent including, inter alia, the completion of the Offer, the issue of the bonus options, the issue of
the Redemption Notes and completion of the share purchase agreement.
With the Offer now completed, the Company is currently working towards satisfying the remaining
conditions precedent to re-admit the Company to the ASX official list and to quote the Company’s
securities.
Except for the items above, no matters or circumstances have arisen since 30 June 2017 that could
significantly affect the Company or its operations.
9.0 Likely developments and expected results of operations
Information on likely developments in the operations of the company and the expected results of
operations have not been included in this report because the directors believe it would be likely to result
in unreasonable prejudice to the Company.
10.0 Environmental regulation
The consolidated entity is required to carry out its activities in accordance with Commonwealth and
State laws and regulations in the regions in which it undertakes its exploration activities.
The consolidated entity is not aware of any matter which requires disclosure with respect to any
significant environmental regulation in respect of its activities, other than complying with Department of
Economic Development, Jobs, Transport and Resources (DEDJTR) to make a provision for
rehabilitation of areas affected by the consolidated entity’s exploration program. At the reporting date, a
provision of $65,000 (2016: $65,000) had been recorded in the financial statements to meet any future
rehabilitation expenses that may arise.
The consolidated entity, as part of its operations, maintains strict adherence to environmental
rehabilitation and protection of flora and fauna in its areas of interest.
11.0 Indemnity and insurance
11.1 Indemnity and insurance of officers
The Company has indemnified the directors and executive officers of the Company for costs incurred, in
their capacity as a director or executive officer, for which they may be held personally liable, except
where there is a lack of good faith.
14
22
Directors Report
30 June 2017
11.1 Indemnity and insurance of officers (continued)
The Company has a director and officer liability insurance policy for its directors and executive officers.
The policy insures each of the directors and executive officers against liabilities for costs and expenses
incurred by them in defending any legal proceedings arising out of their conduct while acting in the
capacity of director or executive officer of the Company. The insurance policy has a liability limit of $5
million on any one claim and in the aggregate. The nature of the liabilities covered is official
investigation, inquiries and proceedings, occupational health & safety, mitigation costs and civil awards.
However, this does not include such liabilities that arise from conduct involving a wilful breach of duty by
directors or executive officers or the improper use by the directors or executive officers of their position
or of information to gain advantage for themselves or someone else or to cause detriment to the
Company. The policy is subject to a confidentiality clause which prohibits the disclosure of the premium.
11.2 Indemnity and insurance of auditor
The Company has not agreed to indemnify the auditor of the Company and any related entity against a
liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the
auditor of the Company or any related entity.
12.0 Proceedings on behalf of the Company
No person has applied to the Court for leave to bring proceedings on behalf of the Company, or to
intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on
behalf of the Company for all or part of those proceedings.
13.0 Officers of the Company who are former audit partners of auditor
There are no officers of the Company who are former audit partners of Grant Thornton Audit Pty Ltd.
14.0 Auditor
Grant Thornton Audit Pty Ltd continues in office.
This report is made in accordance with a resolution of directors.
On behalf of the directors,
Kiat Poh
Non-Executive Chairman
31 July 2017
Melbourne
23
15
FINANCIAL REPORT
For the year ended 30 June 2017
General information
The financial report covers SML Corporation Limited as a consolidated entity consisting of SML
Corporation Limited and the entities it controlled. The financial report is presented in Australian dollars,
which is the Company’s functional and presentation currency.
The financial report consists of the financial statements, notes to the financial statements and the
directors' declaration.
The Company is a listed public Company limited by shares, incorporated in Bermuda.
Its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
Its registered office in Australia is 9A/23-25 Bunney Road, Oakleigh South, VIC 3167, Australia.
A description of the nature of the consolidated entity's operations and its principal activities are included
in the directors' report, which is not part of the financial report.
The financial report was authorised for issue, in accordance with a resolution of directors, on 31 July
2017. The directors have the power to amend and reissue the financial report.
16
24
SML Corporation Limited
Consolidated Statement of Profit or Loss and other Comprehensive Income
For the year ended 30 June 2017
Revenue
Expenses
Operating expenses
Exploration expenditure written off
Impairment of property, plant and equipment
Loss before income tax expenses
Income tax expenses
Note
Consolidated
2017
$
2016
$
5
6
6
7
224,735
219,153
(993,402)
(8,120,275)
(679,750)
(632,148)
(7,189,546)
-
(9,568,692)
(7,602,541)
-
-
Loss after income tax expense for the year attributable
to the owners of SML Corporation Limited
17
(9,568,692)
(7,602,541)
Other comprehensive income for the year, net of tax
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
17
-
-
-
2,411
Total comprehensive loss for the year attributable to the
owners of SML Corporation Limited
(9,568,692)
(7,600,130)
Basic earnings per share
Diluted earnings per share
26
26
Cents
(11.83)
(11.83)
Cents
(9.40)
(9.40)
This statement should be read in conjunction with the notes to the financial statements.
25
17
SML Corporation Limited
Consolidated Statement of Financial Position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Assets held for sale
Trade and other receivables
Other
Total current assets
Non-current assets
Property, plant and equipment
Deferred exploration and evaluation expenditure
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Consolidated
Note
2017
$
2016
$
8
9
10
11
12
13
14
15
3,768,772
6,855,238
4,039
2,704
10,630,753
4,558,649
-
23,883
2,704
4,585,236
-
-
-
1,161,274
14,585,186
15,746,460
10,630,753
20,331,696
244,354
244,354
-
-
33,640
33,640
65,000
65,000
244,354
98,640
10,386,399
20,233,056
16
18
17
(169,914)
62,948,442
(52,392,129)
108,051
62,948,442
(42,823,437)
10,386,399
20,233,056
This statement should be read in conjunction with the notes to the financial statements.
18
26
SML Corporation Limited
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Consolidated
Balance at 1 July 2015
Other comprehensive income for the
year, net of tax
Loss after income tax expense for the
year
Contributed
equity
$
Reserve
$
Accumulated
losses
$
Total
Equity
$
108,051
62,948,442
(35,223,307)
27,833,186
-
-
-
2,411
2,411
-
(7,602,541)
(7,602,541)
Balance at 30 June 2016
108,051
62,948,442
(42,823,437)
20,233,056
Consolidated
Balance at 1 July 2016
Other comprehensive income for the
year, net of tax
Loss after income tax expense for the
year
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners:
Transactions costs in issuing shares
Contributed
equity
$
Reserve
$
Accumulated
losses
$
Total
Equity
$
108,051
62,948,442
(42,823,437)
20,233,056
-
-
108,051
-
-
62,948,442
-
-
(9,568,692)
(52,392,129)
(9,568,692)
10,664,364
(277,965)
-
-
(277,965)
Balance at 30 June 2017
(169,914)
62,948,442
(52,392,129)
10,386,399
This statement should be read in conjunction with the notes to the financial statements.
27
19
SML Corporation Limited
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
Cash flows related to operating activities
Payments to suppliers (inclusive of GST)
Interest received
Other revenue
Consolidated
Note
2017
$
2016
$
(681,558)
81,898
142,837
(492,187)
114,162
104,992
Net cash used in operating activities
27
(456,823)
(273,033)
Cash flows from investing activities
Payments for exploration and evaluation
13
(55,089)
(102,729)
Net cash used in investing activities
(55,089)
(102,729)
Cash flows from financing activities
Transactions costs on issue of shares
16
(277,965)
Net cash used in financing activities
(277,965)
-
-
Net decrease in cash and cash equivalents
(789,877)
(375,762)
Effects of exchange fluctuations on cash held
-
2,411
Cash and cash equivalents at the beginning of the financial year
4,558,649
4,932,000
Cash and cash equivalents at the end of the financial year
8
3,768,772
4,558,649
This statement should be read in conjunction with the notes to the financial statements.
20
28
Notes to the financial statements
30 June 2017
Note 1. Corporate Information
The consolidated financial statements of the Company for the year ended 30 June 2017 were
authorised for issue in accordance with a resolution of the directors on 31 July 2017. The Company is a
limited company incorporated and domiciled in Bermuda whose shares are publicly traded.
The principal activity of the consolidated entity during the financial year was mineral exploration in
Australia. There was no significant change in the nature of the consolidated entity’s principal activity
during the year. The consolidated entity holds mining tenements in the East Gippsland region of Victoria
encompassing the historic Glen Wills and Sunnyside gold projects.
Note 2. Significant accounting policies
Basis of preparation
These financial statements have been prepared under the historical cost convention, as modified by the
revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative
instruments) at fair value through profit or loss. The consolidated financial information is presented in
Australian dollars.
Statement of compliance
The consolidated financial statements are general purpose financial statements which have been
prepared in accordance with the International Financial Reporting Standards (“IFRS”).
Functional and presentational currency
The functional and presentational currency of the company is Australian dollars. The consolidated
financial statements are presented in Australian dollars, which in the opinion of the directors is the most
appropriate presentation currency as the operations are based in Australia.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the consolidated entity's
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements are disclosed in note 3.
The principal accounting policies adopted in the preparation of the financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
New Accounting Standards and Interpretations
None of the amendments to Standards or interpretations effective for the first time for periods beginning
on or after 1 July 2016 had a significant effect on the Group’s financial statements.
Going concern
The financial statements have been prepared on the going concern basis, which contemplates
continuity of normal business activities and the realisation of assets and settlement of liabilities in the
ordinary course of business. The consolidated entity is a mineral exploration entity and as such does not
currently generate operating revenue to support continued business activities. The consolidated entity is
therefore dependent on maintaining cash reserves.
The directors believe that they will be able to realise the consolidated entity’s assets and extinguish its
liabilities in the normal course of business and at the amounts stated in these financial statements.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of SML
Corporation Limited ('consolidated entity') as at 30 June 2017 and the results of all subsidiaries for the
year then ended. SML Corporation Limited and its subsidiaries together are referred to in these financial
statements as the 'consolidated entity'.
29
21
Notes to the financial statements
30 June 2017
Principles of consolidation (continued)
The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement
with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All
subsidiaries have a reporting date of 30 June. The effects of substantive potential voting rights are
considered when assessing whether control exists. Subsidiaries are fully consolidated from the date on
which control is transferred to the consolidated entity. They are de-consolidated from the date that
control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the
consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Refer to the
'business combinations' accounting policy for further details. A change in ownership interest, without the
loss of control, is accounted for as an equity transaction, where the difference between the
consideration transferred and the book value of the share of the non-controlling interest acquired is
recognised directly in equity attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including
goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation
differences recognised in equity. The consolidated entity recognises the fair value of the consideration
received and the fair value of any investment retained together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented
is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM').
The CODM is responsible for the allocation of resources to operating segments and assessing their
performance.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity
and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration
received or receivable.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method
of calculating the amortised cost of a financial asset and allocating the interest income over the relevant
period using the effective interest rate, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and unused tax losses and under and over provision
in prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to
apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted
or substantively enacted, except for:
•
When the deferred income tax asset or liability arises from the initial recognition of goodwill or
an asset or liability in a transaction that is not a business combination and that, at the time of the
transaction, affects neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with investments in subsidiaries,
associates or interests in joint ventures, and the timing of the reversal can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
•
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it
is probable that future taxable amounts will be available to utilise those temporary differences and
losses.
22
30
Notes to the financial statements
30 June 2017
Income tax (continued)
The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting
date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future
taxable profits will be available for the carrying amount to be recovered. Previously unrecognised
deferred tax assets are recognised to the extent that it is probable that there are future taxable profits
available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset
current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities;
and they relate to the same taxable authority on either the same taxable entity or different taxable
entity's which intend to settle simultaneously.
The consolidated entity has not implemented the tax consolidation legislation.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other
short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Non-current assets classified as held for sale
When the Group intends to sell a non-current asset or a group of assets (a disposal group), and if sale
within twelve (12) months is highly probable, the asset or disposal group is classified as ‘held for sale’
and presented separately in the statement of financial position.
Assets classified as ‘held for sale’ are measured at the lower of their carrying amounts immediately prior
to their classification as held for sale and their fair value less costs to sell. Once classified as ‘held for
sale’, the assets are not subject to depreciation or amortisation.
Trade and other receivables
Other receivables are recognised at amortised cost, less any provision for impairment. They are usually
settled within 30-90 days.
An allowance account (provision for impairment of receivables) is used when there is objective evidence
that the consolidated entity will not be able to collect all amounts due according to the original terms of
the receivables. The amount of the impairment loss is expensed to profit or loss. When a receivable for
which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it
is written off against the allowance account (bad debts written off). Subsequent recoveries of amounts
previously written off are credited to profit or loss.
Property, plant and equipment
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.
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 and equipment
Mining and exploration assets
3-10 years
20 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at
each reporting date.
The cost of discrete mine assets under construction is periodically transferred from deferred exploration
and evaluation expenditure and is re-classified as property, plant and equipment. Assets still under
construction are not depreciated.
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.
31
23
Notes to the financial statements
30 June 2017
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on
the use of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to ownership of leased assets, and operating leases,
under which the lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the present value of
minimum lease payments. Lease payments are allocated between the principal component of the lease
liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of
the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the
shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the
consolidated entity will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss
on a straight-line basis over the term of the lease.
Deferred exploration and evaluation expenditure assets
Exploration and evaluation expenditure in relation to separate areas of interest for which rights of tenure
are current is carried forward as an asset in the statement of financial position where it is expected that
the expenditure will be recovered through the successful development and exploitation of an area of
interest, or by its sale; or exploration activities are continuing in an area and activities have not reached
a stage which permits a reasonable estimate of the existence or otherwise of economically recoverable
reserves. Where a project or an area of interest has been abandoned, the expenditure incurred thereon
is written off in the year in which the decision is made.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more frequently if events or changes in circumstances
indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. The value-
in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax
discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not
have independent cash flows are grouped together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to
the end of financial year and which are unpaid. Due to their short-term nature they are measured at
amortised cost and not discounted. The amounts are unsecured and are usually paid within 45 days of
recognition.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs
are expensed in the period in which they are incurred.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation
as a result of a past event, it is probable the consolidated entity will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation. The amount recognised as a
provision is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time
value of money is material, provisions are discounted using a current pre-tax rate specific to the liability.
24
32
Notes to the financial statements
30 June 2017
Provisions (continued)
The increase in the provision resulting from the passage of time is recognised as a finance cost.
Provision for restoration and rehabilitation
A provision for restoration and rehabilitation is recognised when there is a present obligation as a result
of exploration and development activities undertaken, it is probable that an outflow of economic benefits
will be required to settle the obligation, and the amount of the provision can be measured reliably. The
estimated future obligations include the costs of removing facilities, abandoning sites and restoring the
affected areas. The provision for future restoration costs is calculated by the Department of Economic
Development, Jobs, Transport and Resources (DEDJTR) and is currently the best estimate of the
present value of the expenditure required to settle the restoration obligation at the reporting date. Future
restoration costs are reviewed annually and any changes in the estimate are reflected in the present
value of the restoration provision at reporting date; where the initial estimated cost is capitalised into the
cost of the related asset and amortised on the same basis as the related asset.
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of
whether equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred,
equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the
amount of any non-controlling interest in the acquiree. For each business combination, the non-
controlling interest in the acquiree is measured at either fair value or at the proportionate share of the
acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and
liabilities assumed for appropriate classification and designation in accordance with the contractual
terms, economic conditions, the consolidated entity's operating or accounting policies and other
pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its
previously held equity interest in the acquiree at the acquisition-date fair value and the difference
between the fair value and the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair
value. Subsequent changes in the fair value of contingent consideration classified as an asset or liability
is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any
non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair
value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is less than the fair value of the identifiable net assets
acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in
profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification
and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the
consideration transferred and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the
measurement period, based on new information obtained about the facts and circumstances that
existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from
the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair
value.
33
25
Notes to the financial statements
30 June 2017
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of SML
Corporation Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial year, adjusted for bonus elements
in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for
no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the tax authority is included in other receivables or
other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing
or financing activities which are recoverable from, or payable to the tax authority, are presented as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable
to, the tax authority.
Rounding of amounts
Amounts in this report have been rounded off to the nearest dollar.
Application of new and revised Accounting Standards
The adoption of all the new and revised Standards and Interpretations has not resulted in any changes
to the consolidated entity's accounting policies and has no effect on the amounts reported for the
current or prior periods. The new and revised Standards and Interpretations has not had a material
impact and not resulted in changes to the consolidated entity’s presentation of or disclosure in its
financial statements.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below
were in issue but not yet effective.
IFRS 9 ‘Financial Instruments’ (2014)
In July 2014, the IASB released IFRS 9 ‘Financial Instruments’ (2014), representing the completion of its
project to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. The new standard
introduces extensive changes to IAS 39’s guidance on the classification and measurement of financial
assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. IFRS 9
also provides new guidance on the application of hedge accounting.
The entity is yet to undertake a detailed assessment of the impact of IFRS 9. However, based on the
entity’s preliminary assessment, the Standard is not expected to have a material impact on the
transactions and balances recognised in the financial statements when it is first adopted for the year
ending 30 June 2019.
26
34
Notes to the financial statements
30 June 2017
Standards and Interpretations in issue not yet adopted (continued)
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11
‘Construction Contracts’, and several revenue-related Interpretations. The new standard establishes a
control-based revenue recognition model and provides additional guidance in many areas not covered
in detail under existing IFRSs, including how to account for arrangements with multiple performance
obligations, variable pricing, customer refund rights, supplier repurchase options, and other common
complexities.
The entity is yet to undertake a detailed assessment of the impact of IFRS 15. However, based on the
entity’s preliminary assessment, the Standard is not expected to have a material impact on the
transactions and balances recognised in the financial statements when it is first adopted for the year
ending 30 June 2019.
IFRS 16 ‘Leases’
IFRS 16 a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is treated
similarly to other non-financial assets and depreciated accordingly and the liability accrues interest. This
will typically produce a front-loaded expense profile (whereas operating leases under IAS 17 would
typically have had straight-line expenses) as an assumed linear depreciation of the right-of-use asset
and the decreasing interest on the liability will lead to an overall decrease of expense over the reporting
period.
The lease liability is initially measured at the present value of the lease payments payable over the
lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate
cannot be readily determined, the lessee shall use their incremental borrowing rate.
As with IFRS 16’s predecessor, IAS 17, lessors classify leases as operating or finance in nature. A
lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to
ownership of an underlying asset. Otherwise a lease is classified as an operating lease.
For finance leases a lessor recognises finance income over the lease term, based on a pattern
reflecting a constant periodic rate of return on the net investment. A lessor recognises operating lease
payments as income on a straight-line basis or, if more representative of the pattern in which benefit
from use of the underlying asset is diminished, another systematic basis.
The entity is yet to undertake a detailed assessment of the impact of IFRS 16. However, based on the
entity’s preliminary assessment, the Standard is not expected to have a material impact on the
transactions and balances recognised in the financial statements when it is first adopted for the year
ending 30 June 2020.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually
evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue
and expenses. Management bases its judgements, estimates and assumptions on historical experience
and on other various factors, including expectations of future event, management believes to be
reasonable under the circumstances. The resulting accounting judgements and estimates will seldom
equal the related actual results. The judgements, estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are discussed below.
Assets held for sale
As disclosed in Note 9 to the financials, the Deferred exploration and expenditure and Property, plant
and equipment and restoration reserves were re-classified to "Assets held for sale" for the reporting
year ended 30 June 2017. The Directors have assessed and then impaired the value of this non-current
assets to its estimated fair value for the year ended 30 June 2017. It is expected that these assets will
be sold in the next 12 months.
35
27
Notes to the financial statements
30 June 2017
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Provision for restoration and rehabilitation
As disclosed in Note 15 to the financials, the estimated future obligations include the costs of removing
facilities, abandoning sites and restoring the affected areas. The provision for future restoration costs is
calculated by the Department of Economic Development, Jobs, Transport and Resources (DEDJTR)
and is currently the best estimate of the present value of the expenditure required to settle the
restoration obligation at the reporting date. Future restoration costs are reviewed annually and any
changes in the estimate are reflected in the present value of the restoration provision at reporting date.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other
indefinite life intangible assets at each reporting date by evaluating conditions specific to the
consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger
exists, the recoverable amount of the asset is determined. This involves fair value less costs to sell or
value-in-use calculations, which incorporate a number of key estimates and assumptions.
Recoverability of deferred exploration and evaluation expenditure
The consolidated entity assesses the recoverability of the carrying value of deferred exploration and
evaluation expenditure at each reporting date, or at closer intervals should the need arise. The
assessment includes a review of the consolidated entity’s exploration and development plans for each
area of interest, the success or otherwise of activities undertaken in those areas in recent times, the
likely success of future planned exploration activities and/or any potential plans for divestment of those
areas. The carrying value of the deferred exploration and evaluation expenditure is then adjusted, if
necessary.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant
judgement is required in determining the provision for income tax. There are many transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination
is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the
consolidated entity’s current understanding of the tax law. Where the final tax outcome of these matters
is different from the carrying amounts, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
Note 4. Operating segments
Identification of reportable operating segments
The Company operated predominately as an explorer for base precious metals, with the emphasis on
gold, silver, zinc and lead mineralisation within Australia.
IFRS 8 requires operating segments to be identified on the basis of internal reports about the
components of the Group that are regularly reviewed by the chief operating decision maker in order to
allocate resources to the segment and to assess its performance. The board reviews the Company as a
whole in the business segment of mineral exploration within Australia.
Note 5. Revenue
Interest
Other revenue
28
2017
$
2016
$
81,898
142,837
114,162
104,991
224,735
219,153
36
Notes to the financial statements
30 June 2017
Note 6. Expenses
Analysis of expenses:
Depreciation
Plant and equipment
Mining and exploration assets
Total depreciation
Others
Directors remuneration
Write down of exploration assets
Impairment of property, plant and equipment
Note 7. Income tax expense
Numerical reconciliation of income tax expense to prima facie tax
payable
Total comprehensive loss before income tax expense
Tax at the Australian tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating
taxable income:
Non deductible expenses
Tax losses and temporary differences for deferred tax assets not
recognised
2017
$
2016
$
35,500
35,786
71,286
75,208
71,572
146,780
92,850
8,120,275
679,750
92,850
7,189,546
-
2017
$
2016
$
(9,568,692)
(7,600,130)
(2,870,608)
(2,280,039)
(268,995)
75,380
2,621,373
665,460
(518,230)
(1,539,199)
Deferred tax asset attributable to tax losses not bought to account
518,230
1,539,199
Income tax expense
-
-
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been
recognised
Potential tax benefit @ 30%
2017
$
2016
$
28,529,547
26,802,117
8,558,864
8,040,635
The above potential tax benefit for tax losses has not been recognised in the statement of financial
position. These tax losses can only be utilised in the future if the continuity of ownership test is passed,
or failing that, the same business test is passed.
At 30 June 2017, there is no recognised or unrecognised deferred income tax liability (2016: $nil) for
taxes that would be payable on the unremitted earnings of certain of the consolidated entity’s
subsidiaries, associates or joint ventures, as the consolidated entity has no liability for additional
taxation should such amounts be remitted.
At 30 June 2017, the consolidated entity had deferred tax liabilities on capitalised mineral exploration
expenditure of $1,956,000 (2016: $4,375,556) that has been set off against the deferred tax losses.
37
29
Notes to the financial statements
30 June 2017
Note 8. Cash and cash equivalents
Cash on hand
Cash at bank
Cash on deposit
2017
$
2016
$
-
3,663,436
105,336
4,000
535,384
4,019,265
3,768,772
4,558,649
An amount of $52,000 (2016: $62,000) is held on term deposit to support bank guarantees for an
amount of $52,000 (2016: $62,000) given to the Department of Economic Development, Jobs,
Transport and Resources (DEDJTR) to cover mining tenements granted to the consolidated entity and
as rehabilitation bonds on these mining tenements, and as such are not available for general use.
An amount of $53,336 (2016: $53,336) is held on term deposit to support bank guarantee for office
lease.
Note 9. Assets held for sale
Assets held for sale comprise:
Mineral exploration project, at fair value
Property, plant and equipment, at fair value
Provision for rehabilitation
2017
$
2016
$
6,520,000
400,238
(65,000)
6,855,238
-
-
-
-
The Board has treated the above assets as held for sale. The assets held for sale are carried at their
fair value less estimated costs to sell.
Note 10. Trade and other receivables
Other receivables
Note 11. Other
Deposits
2017
$
2016
$
4,039
23,883
2017
$
2016
$
2,704
2,704
30
38
Notes to the financial statements
30 June 2017
Note 12. Property, plant and equipment
Plant and equipment - at cost
Less: Accumulated depreciation
Mining and exploration assets - at cost
Less: Accumulated depreciation
Reconciliation of written down values
Balance at 30 June 2015
Additions
Disposals
Depreciation
Balance at 30 June 2016
Additions
Written off
Depreciation
Impairment
Transferred to assets held for sale
2017
$
2016
$
-
-
-
-
-
-
-
938,024
(731,991)
206,033
1,812,011
(856,770)
955,241
1,161,274
Plant and
equipment
$
Mining and
exploration
assets
$
Total
$
281,241
1,026,813
1,308,054
-
-
(75,208)
206,033
-
(10,000)
(35,500)
-
(160,533)
-
-
(71,572)
955,241
-
-
(35,786)
(679,750)
(239,705)
-
-
(146,780)
1,161,274
-
(10,000)
(71,286)
(679,750)
(400,238)
Balance at 30 June 2017
-
-
-
The Board of Directors has assessed impairment of property, plant and equipment at the reporting
period and recognised impairment loss of $679,750 on certain mining and exploration assets based on
an estimate of the asset’s recoverable amount.
39
31
Notes to the financial statements
30 June 2017
Note 13. Deferred exploration and evaluation expenditure
Mineral exploration projects - at cost
Reconciliations
Consolidated
Balance at 30 June 2015
Additions
Reversal of provision of rehabilitation
Exploration expenditure written off
Balance at 30 June 2016
Additions
Exploration expenditure written off (Note 6)
Transferred to assets held for sale
Balance at 30 June 2017
2017
$
-
2016
$
14,585,186
Exploration and Evaluation
$
21,692,003
102,729
(20,000)
(7,189,546)
14,585,186
55,089
(8,120,275)
(6,520,000)
-
The consolidated entity holds granted Mining Licence 4921 in the East Gippsland region of Victoria.
During the financial year, the Board received an independent external valuation of the MIN 4921 which
provided a value of $6,520,000. The value of MIN 4921 has been estimated by using the Net Present
Value of Future Cash Flows method. The impairment loss of $8,101,523 was recognised in the
Statement of Profit or Loss and Other Comprehensive Income to reduce the carrying amount of the
exploration and evaluation assets to the independent valuation. The impaired value remains an
estimate and further works and/or expenditure may be necessary. As such the Board will continue to
assess and make adjustment as the situation progresses.
A royalty will be payable by Mt. Wills Gold Mines Pty Ltd ('Mt Wills') of $2 per tonne of ore treated in the
production of gold and other precious metals, for ore sourced from tenements and/or applications held
by Mt Wills (MIN 4921). For the first 500,000 tonnes of ore treated, the royalty will be payable in equal
proportions to Mrs Karen Bidstrup as trustee for The Red Gum Court Trust and to Mr William Jay, after
which time the whole $2 per tonne royalty will be payable to Mrs Karen Bidstrup as trustee for The Red
Gum Court Trust.
Note 14. Trade and other payables
Trade payables
Other payables
2017
$
2016
$
131,389
112,965
244,354
1,084
32,556
33,640
32
40
Notes to the financial statements
30 June 2017
Note 15. Non-current liabilities – provisions
Provision for rehabilitation
Transferred to assets held for sale
2017
$
2016
$
65,000
(65,000)
-
65,000
-
65,000
The provision for rehabilitation is the net present value of the estimated cost of rehabilitating the Glen
Wills and Sunnyside project site in compliance with future regulations and practices at the end of
commercial production. The consolidated entity carries out regular rehabilitation as part of its on-going
exploration program.
Note 16. Equity – contributed
Ordinary shares - fully paid
80,879,849
107,839,799
(169,914)
108,051
2017
Shares
2016
Shares
2017
$
2016
$
Movements in ordinary share capital
Details
Balance
Share consolidation
Capital raising costs
Balance
Share buy-back
There is no current on-market share buy-back.
Date
No of shares
$
30 June 2016
20 June 2017
107,839,799
(26,959,950)
-
108,051
-
(277,965)
30 June 2017
80,879,849
(169,914)
Share consolidation
On 20 June 2017, the Company consolidated the shares on issue on the basis that every four (4)
shares be consolidated into three (3) shares.
Capital Raising Costs
As detailed in Review of Operations included in the directors report, subject to completion of the
Acquisition, the Company will allot and issue the consideration shares, offer shares, advisor shares,
bonus options and redemption notes. Any transactions costs associated with the issuing of shares are
deducted from contributed equity.
Share options
The Company has no quoted share options.
Capital risk management
The Board of directors ('Board') manage the consolidated entity’s capital to ensure the consolidated
entity continues as a going concern. The primary objectives of the Board are to actively explore and
develop the consolidated entity’s mining assets so that they can maximise returns for shareholders; to
minimise the cost of capital by maintaining the most efficient capital structure; and, to optimise the use
of the consolidated entity’s human and financial resources. None of the consolidated entity’s entities are
subject to externally imposed capital requirements. The exploration activities are being funded by
equity.
41
33
Notes to the financial statements
30 June 2017
Note 16. Equity – contributed (continued)
Capital risk management (continued)
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
debt. The capital risk management policy remains unchanged.
Note 17. Equity - accumulated losses
Accumulated losses at the beginning of the financial year
Other comprehensive income for the year
Loss after income tax expense for the year
(42,823,437)
-
(9,568,692)
(35,223,307)
2,411
(7,602,541)
Accumulated losses at the end of the financial year
(52,392,129)
(42,823,437)
2017
$
2016
$
Note 18. Reserve
2017
$
2016
$
Restructure of group with establishment of new parent entity
62,948,442
62,948,442
Note 19. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk, credit risk, liquidity
risk and fair value estimation. The consolidated entity's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the consolidated entity. The consolidated entity uses different methods to measure
different types of risk to which it is exposed. These methods include sensitivity analysis in the case of
interest rate, foreign exchange and other price risks and ageing analysis for credit risk.
The Board has overall responsibility for the establishment and oversight of the risk management
framework. Risk management policies are established to identify and analyse the risks faced by the
consolidated entity, to set appropriate risk limits and controls, and to monitor risks and adherence to
limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and in the consolidated entity’s activities. The Board monitors compliance with risk
management policies and procedures and reviews the adequacy of the risk management framework in
relation to the risks faced by the consolidated entity.
Market risk
Commodity price risk
Although the consolidated entity is not in commercial production, the primary risk to the consolidated
entity is the movement in the price of gold, base metals and the other target minerals, as measured in
Australian dollars. An inferred gold mineral resource has been identified at the consolidated entity's Glen
Wills and Sunnyside project on the mining tenements located in East Gippsland, Victoria.
The exploration potential for gold for part of the Glen Wills and Sunnyside project has also been
independently assessed. The carrying value of the consolidated entity's projects and the economic
viability of future developments are subject to the risk of movements in commodity prices and the effect
that those movements may have on the economics of developing mineral projects and the resulting
financial returns to be derived in future years.
34
42
Notes to the financial statements
30 June 2017
Note 19. Financial instruments (continued)
Market risk (continued)
Price risk
Although the consolidated entity is not in commercial production, the primary risk to the consolidated
entity is the movement in US dollar/Australian dollar foreign currency market price risk effecting the price
of gold.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or the cash flows associated with the
instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from fluctuations
in interest bearing financial assets or liabilities that the consolidated entity may have. The consolidated
entity’s exposure to market risk for changes in interest rates relate primarily to the income that it earns
from funds on deposit. The consolidated entity’s policy is to invest surplus funds with only recognised,
creditworthy third parties and to settle trade payables within the credit terms allowed by suppliers so as
not to incur interest on overdue balances.
As at the reporting date, the consolidated entity had the following variable rate balances:
Consolidated
Cash and cash equivalents
2017
Weighted
average
interest rate
%
Balance
$
2016
Weighted
average
interest rate
%
Balance
$
1.30
3,768,772
2.60
4,558,649
Net exposure to cashflow interest rate risk
3,776,772
4,558,649
An official increase/decrease in interest rates of one (2016: one) percentage point would have
favourable/adverse effect on profit before tax of $37,687 (2016: $45,586) per annum. The percentage
change is based on the expected volatility of interest rates using market data and analysts’ forecasts.
Credit risk
The consolidated entity is not in commercial production and therefore has no significant sales
transactions. With respect to the credit risk arising from the other financial assets of the consolidated
entity, which comprise cash and cash equivalents, the consolidated entity’s exposure to credit risk arises
from the possible default of a counterparty, with the maximum exposure being equal to the carrying
amount of these assets, less any recoveries which may be achieved in the event of a default by that
counterparty. The consolidated entity trades with only recognised, creditworthy third parties and
accordingly the consolidated entity's exposure to possible losses is not significant. Other than the cash
funds held in interest-bearing accounts with an Australian first class bank, there are no significant
concentrations of credit risk within the consolidated entity.
At 30 June 2017, none of the consolidated entity's receivables are past due or impaired (2016: nil).
Liquidity risk
The consolidated entity’s objective is to maintain a balance between continuity of funding and flexibility
through the use of new equity raisings and other finance facilities. At 30 June 2017, there were no bank
facilities in place. The liquidity of the consolidated entity is monitored via regular cash flow budgets which
highlight the need for capital raising when required.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial
instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables
include both interest and principal cash flows disclosed as remaining contractual maturities and therefore
these totals may differ from their carrying amount in the statement of financial position.
43
35
Notes to the financial statements
30 June 2017
Note 19. Financial instruments (continued)
2017
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Total non-derivatives
2016
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Total non-derivatives
Weighted
average
interest rate
%
1 year
or
less
$
Consolidated
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
$
$
$
Remaining
contractual
maturities
$
-
-
-
131,389
112,965
244,354
-
-
-
-
-
-
-
-
-
131,389
112,965
244,354
Weighted
average
interest rate
%
1 year
or less
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
$
$
$
$
Remaining
contractual
maturities
$
-
-
-
1,084
32,556
33,640
-
-
-
-
-
-
-
-
-
1,084
32,556
33,640
The cash flows in the maturity analysis above are not expected to occur significantly earlier than
disclosed.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying
amounts of trade receivables and trade payables are assumed to approximate their fair values due to
their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining
contractual maturities at the current market interest rate that is available for similar financial instruments.
Note 20. Key management personnel disclosures
Directors and key management personnel
The following persons were directors and key management personnel of SML Corporation Limited during
the financial year:
Kiat Poh
Kim Chuan Freddie Heng
Shaw Pao Sze
Furang Li
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
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
Related party transactions
Related party transactions are set out in note 23.
2017
$
2016
$
92,850
92,850
36
44
Notes to the financial statements
30 June 2017
Note 21. Contingent liabilities
As at 30 June 2017, contingent liabilities of the Company are as follows:
On 1 July 2016, the Company and Inaya Limited entered into an agreement pursuant to which Inaya
Limited agreed to provide assistance to the Company in managing and communicating any proposed
investment, merger and/or acquisition opportunities with its primary shareholders in the Peoples’ Republic
of China (“PRC”), Singapore and elsewhere outside Australia. For these services, and subject to
completion of the acquisition, the Company will issue 13,928,571 Shares to Inaya Limited in consideration
for Inaya Limited’s facilitation of the proposed acquisition.
On 4 January 2017, the Company and TFO Nominees Pty Ltd (“TFO”) entered into an agreement
pursuant to which TFO agreed to provide assistance to divest the Glen Wills- Sunnyside mining tenement
and the plant and equipment. If the divestment is successful, a management success fee of 1% on the
sales price will be payable to TFO.
Note 22. Commitments for expenditure
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities,
payable:
Within one year
One to five years
Exploration & evaluation expenditure payable
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
2017
$
2016
$
38,303
7,596
85,214
63,839
45,899
149,053
214,317
214,317
214,317
428,634
428,634
642,951
Operating lease commitments relate to the rent of the consolidated entity’s premises in St Kilda Road and
Oakleigh South. The current lease in St Kilda Road will expire on 30 April 2018 and the premises has
been subleased to a third party for the same terms except the sublease will expire on 31 March 2018.
The current lease in Oakleigh South will expire on 20 March 2018 however an option exists to extend the
lease by further three terms of one year.
In order to maintain in good standing, the mining and exploration tenements in which the consolidated
entity is involved, the consolidated entity will be required to meet the minimum conditions and expenditure
obligations of the tenements once they are granted; as well as any other obligations which may arise from
arrangements with participants over jointly held tenements. These expenditures are met on a regular
basis as part of the consolidated entity's on-going exploration program.
Note 23. Related party transactions
Parent entity
SML Corporation Limited is the ultimate parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 24.
45
37
Notes to the financial statements
30 June 2017
Note 23. Related party transactions (continued)
Key management personnel
Disclosures relating to key management personnel are set out in note 20 and the remuneration report in
the directors' report.
Transactions with related parties
The consolidated entity derived $31,620 (2016: $71,623) in occupancy related charges from the Director
related Company and major shareholder Northwest Nonferrous Australia Mining Pty Ltd. There is no
outstanding balance as at 30 June 2017 (2016: Nil).
Loans to/from related parties
There were no loans to or from related parties at the reporting date.
Note 24. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following
subsidiaries in accordance with the accounting policy described in note 1:
Name of subsidiary
Country of
incorporation and
principal place of
business
Principal activity
Equity holding
SML Resources Limited
Synergy Metals Pty Limited
Australian Gold Mines Pty
Limited
Mt. Wills Gold Mines Pty
Limited*
Mitta Omeo Metals Pty Ltd
British Virgin Island
Australia
Investment holding
Investment holding
Australia
Investment holding
Australia
Australia
Mineral exploration
Mineral exploration
*
Owned 100% by Australian Gold Mines Pty Limited
2017
100%
100%
100%
100%
100%
2016
100%
100%
100%
100%
100%
Australian Gold Mines Pty Limited and Mt Wills Gold Mines Pty Limited collectively hold interests in the
Glen Wills and Sunnyside gold project located in the East Gippsland region in Victoria, Australia.
Note 25. Events occurring after the reporting date
Since 30 June 2017, the Offer was launched and has been managed by Phillip Capital Limited. The Offer
was successfully completed on 20 July 2017.
Subject to the completion of the Acquisition, the existing shareholders of the Company will be issued with
bonus options, at nil consideration, on the basis of one option for every five shares held. The options will
be valid for three years from the date of issue and each option will entitle the holder to subscribe for one
share in the Company at an exercise price of $0.053.
Subject to the completion of the Acquisition, the Company will proceed with the divestment of the GWS
Tenement. Further, the Redemption Notes will be issued to the shareholders.
On 17 July 2017, the Company received the decision from the ASX to re-admit the Company to its official
list and to quote the Company’s securities, subject to the satisfaction of certain conditions precedent
including, inter alia, the completion of the Offer, the issue of the bonus options, the issue of the
Redemption Notes and completion of the share purchase agreement.
38
46
Notes to the financial statements
30 June 2017
Note 25. Events occurring after the reporting date (continued)
With the Offer now completed, the Company is currently working towards satisfying the remaining
conditions precedent to re-admit the Company to the ASX official list and to quote the Company’s
securities.
Except for the items above, no matters or circumstances have arisen since 30 June 2017 that could
significantly affect the Company or its operations.
Note 26. Earnings per share
Loss after income tax attributable to the owners of the Company
(9,568,692)
(7,600,130)
2017
$
2016
$
Weighted average number of ordinary shares used in calculating basic
earnings per share
80,879,849
80,879,849
Number
Number
Restated
Weighted average number of ordinary shares used in calculating
diluted earnings per share
Basic earnings per share
Diluted earnings per share
80,879,849
80,879,849
Cents
Cents
(11.83)
(11.83)
(9.40)
(9.40)
Prior period restatement
The weighted number of ordinary shares for 2016 has been restated for the effect of the share
consolidation (in the ratio of 4 into 3) completed in June 2017, in accordance with IAS 33 'Earnings per
share'.
Weighted average number of ordinary shares used in calculating basic
earnings per share (before restatement)
Adjustment required by IAS 33 ‘Earnings per share’
Weighted average number of ordinary shares used in calculating basic
earnings per share (after restatement)
Number
107,839,799
(26,959,950)
80,879,849
47
39
Notes to the financial statements
30 June 2017
Note 27. Cash flows information
2017
$
2016
$
Reconciliation of cash flows from operating activities with loss
after income tax expense:
Loss after income tax expense for the year
(9,568,692)
(7,600,130)
Cash flows excluded from loss attributable to operating activities:
Non-cash flows in loss:
Exploration expenditure written off
Impairment of property, plant and equipment
Write off of property, plant and equipment
Depreciation
Effects of exchange fluctuations on cash held
8,120,275
679,750
10,000
71,286
-
7,189,546
-
-
146,780
(2,411)
Changes in assets and liabilities:
(Increase)/decrease in trade, other receivables and other assets
Increase/(decrease) in trade and other payables
19,844
210,714
(2,036)
(4,782)
Net cash used in operating activities
(456,823)
(273,033)
40
48
Directors' declaration
In the directors' opinion:
●
●
●
the attached financial statements and notes thereto comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board as described
in note 2 to the financial statements;
the attached financial statements and notes thereto give a true and fair view of the consolidated
entity's financial position as at 30 June 2017 and of its performance for the financial year ended
on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
On behalf of the directors,
Kiat Poh
Non-Executive Chairman
31 July 2017
Melbourne
49
41
The Rialto, Level 30
525 Collins Street
Melbourne Victoria 3000
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
to the Members of SML Corporation Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of SML Corporation 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,
consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group gives a true and fair view of the
Group’s financial position as at 30 June 2017 and of its performance for the year ended on that
date in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with International Financial Reporting 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 ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of
the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
grantthornton.com.au
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory
services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia
Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide
partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL
does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and
are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’
may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities.
GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
42
50
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 our audit addressed the key audit
matter
Assets Held for Sale – valuation
Note 9
At 30 June 2017 the carrying value of Assets
Held for Sale was $6,855,238.
During the period SML has classified its
Exploration and Evaluation Assets and
associated plant and equipment as assets held
for sale in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued
Operations. Management made this
determination on the basis that SML has
entered into a share sale agreement to acquire
100% of the issued shares in another entity,
and appointed a third party to assist with the
divestment of its mining tenement and
associated plant and equipment. Management
engaged a specialist to assist with the
divestment process.
In accordance with IFRS 5, specific conditions
must be met in order to be classified as assets
held for sale.
This area is a key audit matter as significant
judgement is required in determining whether
the facts and circumstances suggest that the
assets be classified as held for sale.
Our procedures included, amongst others:
• Confirming that there is an intention to sell
and an active marketing campaign has
commenced for the sale of Exploration
and Evaluation Assets and associated
plant and equipment by agreeing to board
papers and market announcements;
• Assessing the completeness of the
carrying value of these assets by
considering whether all costs that should
be capitalised have been appropriately
captured in line with accounting
standards, to ensure they have been
appropriately recorded at fair value less
estimated selling costs in line with
accounting standards;
• Reading related agreements and holding
discussions with management’s specialist
to confirm the process of divestment of
Exploration and Evaluation assets and
associated plant and equipment;
• Assessing the valuations of Exploration
and Evaluation assets and associated
plant and equipment and reviewing for
mathematical accuracy;
• Assessing the competence, capabilities
and objectivity of management’s expert
used in performing the valuations;
• Engaging with internal valuation experts to
assess the reasonableness of
assumptions and inputs used in the
valuation; and
• Assessing the adequacy of the related
financial statement disclosures.
Information Other than the Financial Report and Auditor’s Report Thereon
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.
Our opinion on the financial report does not cover the other information and 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.
51
43
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard
Responsibilities of the Directors’ for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives
a true and fair view in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board 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 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 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 the financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Entity’s internal control.
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Entity’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Entity to cease to continue as a going concern.
44
52
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
A. C. Pitts
Partner - Audit & Assurance
Melbourne, 31 July 2017
53
45
SHAREHOLDER INFORMATION
Fully Paid Ordinary Shares
Analysis of holdings as at 30 September 2017
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
141
150
107
399
73
870
Total Units
44,270
392,465
821,858
17,134,365
202,308,319
220,701,277
%
0.020
0.178
0.372
7.764
91.666
100.000
The number of unmarketable parcel holders as at 30 September 2017 based upon a share price of
$.038 (3.8 cents), is 448 shareholders holding in aggregate 1,793,499 ordinary shares.
Top 20 Holdings as at 30 September 2017
Holder Name
NEW CONCEPT CORPORATION LIMITED
NORTHWEST NONFERROUS AUSTRALIA MINING PTY LTD
INAYA LIMITED
KIPBERG PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
MR SIK ERN WONG
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
MR GOO TONG ANG
MR EWE GHEE LIM & MISS CHARLENE YULING LIM
MR KIAT POH & MISS JU-LYNN POH
EST MR TREVOR NEIL HAY
MS LEE LUANG YEO
KENG CHUEN THAM
PMR INVESTMENTS PTY LIMITED
MR KAH HONG CHAN
MR DAVID KEITH EDWARDS & MRS ROBERTA MAY EDWARDS
JAALEW INVESTMENTS PTY LTD
MR LARRY SCHREIER
MRS ERICA MAY BINNIE
Number
Held
98,796,992
39,375,000
13,928,571
8,345,865
7,656,377
3,573,397
2,539,800
2,453,171
2,360,882
2,360,531
2,170,376
1,607,526
1,408,180
1,200,000
1,000,000
854,949
506,250
500,000
475,501
450,000
191,563,368
%
44.765%
17.841%
6.311%
3.782%
3.469%
1.619%
1.151%
1.112%
1.070%
1.070%
0.983%
0.728%
0.638%
0.544%
0.453%
0.387%
0.229%
0.227%
0.215%
0.204%
86.798%
Substantial Shareholders of the Company are set out below:
Number
Held
%
NEW CONCEPT CORPORATION LIMITED
NORTHWEST NONFERROUS AUSTRALIA MINING PTY LTD
INAYA LIMITED
98,796,992
39,375,000
13,928,571
44.765%
17.841%
6.311%
Voting rights attached to ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a
poll each share shall have one vote.
46
54
Shares Options
Analysis of holdings as at 30 September 2017
Listed Options $0.053 Expiring 7 August 2020
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
270
235
52
65
12
634
Total Units
89,016
579,394
351,589
1,833,315
13,322,656
16,175,970
Top 20 Holdings as at 30 September 2017
Holder Name
NORTHWEST NONFERROUS AUSTRALIA MINING PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
MR SIK ERN WONG
MS LEE LUANG YEO
MR GOO TONG ANG
MR EWE GHEE LIM & MISS CHARLENE YULING LIM
MR KIAT POH & MISS JU-LYNN POH
EST MR TREVOR NEIL HAY
KENG CHUEN THAM
MR KAH HONG CHAN
MR DAVID KEITH EDWARDS & MRS ROBERTA MAY EDWARDS
MRS LILIANA TEOFILOVA
MR KA FAI MARTIN WONG
SUBZERO COMMERCIAL REFRIGERATION PTY LTD
MISS LAY HONG GOH
MR GORDON BURDEKIN & MRS NOELLE BURDEKIN
MR CHEE KOK TEO
MR MELVIN BOON KHER POH
MR IVAN PRGOMET
Number
Held
7,875,000
1,531,278
714,680
507,960
481,636
472,176
472,106
434,075
321,505
240,000
170,990
101,250
85,778
84,618
79,780
75,000
66,808
60,628
60,522
56,250
13,892,040
%
0.550
3.582
2.174
11.334
82.361
100.000
%
48.683%
9.466%
4.418%
3.140%
2.977%
2.919%
2.919%
2.683%
1.988%
1.484%
1.057%
0.626%
0.530%
0.523%
0.493%
0.464%
0.413%
0.375%
0.374%
0.348%
85.881%
55
47
48