Trean Insurance Group Annual Report 2017

Plain-text annual report

ON THE MOVE Annual Report 2017 A Tigers Realm Coal Annual Report 2017CONTENTS 01 Highlights 2017 02 Chairman’s Letter 04 Interim Chief Executive Officer’s Report 06 Resources and Additional Exploration Targets 08 Operations Review 16 Financial Report Coal Stockpile at Beringovsky Port. OUR COMPANY Tigers Realm Coal Limited Tigers Realm Coal Limited (Tigers Realm Coal, TIG, or the Company) is an ASX-listed company producing coking and thermal coals from its operation in Russia. TIG’s aim is to continue growing to become a significant producer of coking coal supplying the seaborne market. The Company is focused on the exploration, development and operation of its high-quality coking coal deposits and mines on the east coast of Russia and is committed to creating long term sustainable benefits for the communities and region in which it operates. The Company’s two coking coal projects, Amaam and Amaam North in the Chukotka Autonomous Okrug (District) of far eastern Russia are both within 35km of port access and close to targeted North Asian steel markets. ABN 50 146 732 561 B In 2017, the Company completed its first full year of operations at Phase 1 of Project F, Amaam North, exporting coal to customers in Japan, Taiwan and China. Project F Phase 1 is a low operating and capital cost starter project that will produce up to 600,000tpa of thermal and coking coal when full capacity is reached. This lays the foundation for development of Project F Phase 2, planned to be a 1Mtpa operation producing predominantly semi-hard coking coal. Ultimately, the Company believes Project F has the potential to achieve production up to 2Mtpa. The Company’s corporate office is located in Melbourne with the majority of its key management personnel based in Moscow and on site in Chukotka. Tigers Realm Coal Annual Report 2017HIGHLIGHTS 2017 + Achieving a TRIFR (Total Reportable Injury Frequency Rate) of 6.3 per million hours during the year ended 31 December 2017 and a TRIFR of 4.5 since operations commenced in July 2016. + The completion of capital projects that included: > Construction of a year-round coal haulage road. > Establishment of initial open pit operations and required environmental controls. > Site and port infrastructure upgrades to accommodation, offices, workshops and stockpiles. > Construction and commissioning of the port’s customs checkpoint. > Procurement of equipment to support our 2018 plans. + Mining of 249kt of coal of which 227kt was delivered to our port. + Sale and transshipment of 165kt of coal. Coking coal was sold to customers in Japan and China and thermal coal was sold to customers in Chukotka, Taiwan and China. + Closing the Company’s first debt financing transaction in December, a working capital facility for up to RUB 600 million (A$13.3 million) from Sberbank, one of Russia’s leading commercial banks. + Increasing TIG’s ownership of Amaam North to 100% (with the acquisition of 20% of the project from TIG’s joint venture partners) and restructuring existing Amaam North royalty arrangements including capping royalty payments at US$25 million over a maximum of 20 years and amending royalty rates down to a sliding scale of between 1.5% to 3% of FOB coal sales income. + Obtaining a mining and extraction licence over the Nadezhny licence area at the Amaam Project. + Actively undertaking positive community and government relations initiatives including presentations by the Company at the Far East Economic Forum in Vladivostok, including presenting the Company’s progress to the President of the Russian Federation. OUR VALUES Four core values underpin everything we do: + Respect – treating our people, communities and stakeholders with respect and understanding. + Care – for our people and the environment. An overriding commitment to ensuring our people finish work each day without suffering injury or harm. Minimising our impact on the environment. + Integrity – being honest and open in the way we communicate and work. Doing what we say we will do. + Delivery – empowering our people to excel. Consistently delivering on our plans and goals. 01 Tigers Realm Coal Annual Report 2017 CHAIRMAN’S LETTER Looking forward, 2018 will be a year where the Company consolidates the initial achievements of the last year with plans to grow our operating footprint. Dear Shareholders, 2017 saw a significant step for the Company in the delivery of our strategic development plan for the Amaam coal basins, with our target to fast track the low capital cost Project F on the Amaam North Licence whilst continuing to investigate options for the longer term development of the large Amaam deposit and new loading port in the Arinay lagoon. This strategy of incremental growth evolved in response to the uncertainty of international coal markets and investment sentiment on the development of new green-field coal projects, together with the influence of the Russian sanctions and access to capital markets arising from this. In recent times we have observed evidence of the steadily improving sentiment towards investment into the Russian Far East mining sector, underpinned by consumer recognition that raw materials for power, industrial and steel sector growth in Asia will be sourced increasingly from Russia. Phase 1 of Project F has seen the opening of the first open-cut mine, construction of the pit-to-port road together with associated infrastructure plus commencement of the barge loading operation to facilitate the loading of ships. TIG has achieved this initial objective at our Amaam North property, both safely, for which I am particularly pleased, and with a tremendous focus by management on operating cost and capital controls, despite having to deal with the inevitable challenges faced by all start-up operations. The successful achievement of these initial objectives has allowed us to deliver our coal production to several targeted consumers in the seaborne market space, enhancing our credibility and support for the further development of both coal basins. Looking forward, 2018 will be a year where the Company consolidates the initial achievements of the last year. We plan to significantly increase our coal production and sales as we enhance our infrastructure and the capabilities of our staff. Perhaps most critically, we believe we will turn the strong support that we are receiving from our targeted international customer base into formal strategic alliances that will underpin the further investment required to take us into the second phase of our strategic growth plan at Project F. Phase 2 will enable extraction of the whole of the Project F coal resource formation with wash plant beneficiation to improve the value-in-use rating of our coking coal product and accordingly the optimisation of our revenue potential from this area. I would like to thank the management and staff on our team as well as my Board colleagues for their commitment to the Company during the past year. We have, during 2017, expanded our operational team at site and introduced new management who bring both the expertise and authority essential to operate in remote locations. I also thank our governmental, community and economic stakeholders in Russia who continue to show their strong support for us as well as our coal customers who worked together with us to deliver our initial coal cargoes. Perhaps most importantly, I wish to thank you, our shareholders, for being consistently supportive as we build ourselves towards our goal of being a profitable coal supplier into the global market. Craig Wiggill Chairman 02 Tigers Realm Coal Annual Report 2017Crushing coal at Beringovsky Port. On behalf of the Board, I would like to thank our team for their commitment to the Company during the past year, and our shareholders, who have been consistently supportive as we work towards our goal of being a profitable and meaningful coal supplier into the global market. 03 Tigers Realm Coal Annual Report 2017INTERIM CHIEF EXECUTIVE OFFICER’S REPORT Our coal’s qualities were accepted by the market and we look forward to continuing good supply relationships with our 2017 customers and supplying new customers in 2018 and beyond. I am glad to report on TIG’s performance in 2017, a year during which the Company faced and overcame numerous challenges associated with developing our new Project F mining operations. In doing so, we clearly demonstrated our assets’ fundamental strengths and advantages – mining at a low stripping ratio, efficient transport of our coal along our now year-round road, and transhipment operations from our wholly owned Beringovsky Port. Our coal’s qualities were accepted by the market and we look forward to continuing good supply relationships with our 2017 customers and supplying new customers in 2018 and beyond. Pleasingly, the recovery in coal prices that commenced in the second half of 2016 continued through 2017 and into the first quarter of 2018. Going forward, the cash flows generated by the project and continued good performance are expected to form a foundation for sourcing the funding required to achieve our strategy of developing Project F in phases up to 2Mtpa. An important step in acquiring future project funding was achieved in December 2017, signing our first debt facility, a working capital loan of up to RUB 600 million (A$13.3 million) with Sberbank, Russia’s largest bank. We see this partnership as potentially playing a critical role to realising our future expansion plans. There has been significant growth in our employee numbers on site in Chukotka. Our management team has focused on bedding down processes and practices aimed at ensuring our business operates effectively and all staff are as motivated, well trained and operating as safely as is possible. The relative isolation of our site, along with climactic and natural conditions provide many personal challenges for those living and working on site. On behalf of the Company I extend a well earned thanks to our operational, management and corporate teams. We continue to engage and support the local community on a range of issues. Local and indigenous community representatives from Alkatvaam, Beringovsky and Anadyr visit our operations throughout the year and are informed about our operations and future plans. The Company is an important local employer and provides business and support for local enterprises. We look to further increase local employment and training, continuing our cooperative relationship with the local communities with whom we live, work and operate. The Company continues to proactively maintain its good relations with the Russian federal and regional governments. I was very pleased to present on the Company’s positive progress and initiatives provided by the government at the Far East Economic Forum in Vladivostok and as part of a select group, our Chairman presented the Company’s planned developments to the President of the Russian Federation. While the Company fell short on some of its aggressive internal targets and had one LTI (Lost Time Injury), the Company successfully achieved its strategic objectives for 2017. In its first year of mining operations TIG achieved a TRIFR (Total Reportable Injury Frequency Rate) of 6.3 per million hours, cumulative TRIFR since the commencement of operations in July 2016 being 4.5. There were a number of other notable achievements during the year. Capital projects were completed during four months of the year (May/June and October/November) and included the construction of a year-round coal haulage road, mine site infrastructure and port upgrades and the commissioning of a new customs checkpoint at our Beringovsky Port. Production and logistics activities were undertaken for the eight months of the year excluding the four months used for completion of capital projects, achieving 249kt of coal mined and 227kt delivered to our port. The Company sold 5kt of thermal coal to the domestic Russian market and exported 160kt of coal. Our coking coal was sold to customers in Japan and China and thermal coal sold to customers in Chukotka, Taiwan and China. We increased our ownership of Amaam North in July 2017 to 100% (with the acquisition of 20% of the project from TIG’s joint venture partners), restructuring existing Amaam North royalty arrangements as a result of which royalty payments were capped at US$25 million over a maximum of 20 years and royalty rates were reduced to a sliding scale of between 1.5% to 3%. Furthermore, the Company worked with state regulatory bodies to obtain a mining and extraction licence over the Nadezhny licence area at the Amaam Project. 04 Tigers Realm Coal Annual Report 2017We are working to significantly grow the Company and Project F in 2018 with the focus on: • strategically reviewing the development plans and advancing of the realisation of the Amaam Project. • improving safety performance; • increasing coal production and sales; • optimising short and medium-term mine plans and reducing costs; • funding our Project F expansions; • growing our market and meeting the expectations of our domestic and export customers; • maximising the positive benefits to our local communities and minimising our impact on the environment; • ensuring compliance with all licence and other regulatory obligations; and I would like to thank the Board for their constructive approach to working with our team, our staff for their dedication and our shareholders and stakeholders for their continued support. We look forward to keeping you informed of our progress in 2018. Peter Balka Interim Chief Executive Officer Coal haulage from mine to port. The Company is an important local employer and provides business and support for local enterprises. We look to further increase local employment and training, continuing our cooperative relationship with the local communities with whom we live, work and operate. 05 Tigers Realm Coal Annual Report 2017RESOURCES AND ADDITIONAL EXPLORATION TARGETS Coal Resources for Amaam North – Project F (100% Basis) Resource Category Measured C – coking Indicated B – coking InferredA – coking IndicatedB – thermal InferredA – thermal Total (Mt) Tonnage (Mt) 110.4 Relative Density 1.44 Note: Coal qualities on an air dried basis. Open Pit (Mt) 21.9 46.3 14.0 3.6 1.3 87.1 Underground (Mt) - 5.7 17.6 - - 23.3 Ash (%) 16.9 Inherent Moisture (%) 1.16 Volatile Matter (%) 26.6 Fixed Carbon (%) 55.3 Gross Calorific Value (kcal/kg) 6,770 Total (Mt) 21.9 52.0 31.6 3.6 1.3 110.4 Total Sulphur (%) 0.28 The Amaam North Project F Coal Resources are based on a Coal Resource Estimate prepared by SRK in December 2015 prior to the commencement of mining and depleted by 0.165 million tonnes of coal sales during 2017, the first year of production. Coal ReservesE for Amaam North – Project F (100% Basis) Coal Type Coking Thermal Total (Mt) Recoverable Reserves (Mt) Probable 7.8 4.1 11.9 Proved 9.3 - 9.3 Total 17.1 4.1 21.2 Marketable Reserves (Mt) Probable 5.8 4.1 9.9 Proved 6.0 - 6.0 Total 11.8 4.1 15.9 The Amaam North Project F Coal Reserves are based on a Coal Reserve Estimate prepared by MEC Mining in April 2016 prior to the commencement of mining and depleted by 0.165 million tonnes of coal sales during 2017, the first year of production. Coal Resources for Amaam (100% Basis) Resource Category Measured C – coking Indicated B – coking Inferred A – coking Total (Mt) Open Pit (Mt) 3 89 336 428 Underground (Mt) - 2 91 93 Tonnage (Mt) 521 Relative Density 1.62 Note: Coal qualities on an air dried basis. Ash (%) 33.6 Inherent Moisture (%) 1.69 Volatile Matter (%) 23.3 Fixed Carbon (%) 39.1 Gross Calorific Value (kcal/kg) 5114 Total (Mt) 3 91 427 521 Total Sulphur (%) 0.84 The Amaam Coal Resource Estimate was prepared by Resolve Coal in July 2015. Exploration TargetsD for Amaam and Amaam North (100% Basis) Amaam North (Mt) 90 to 370 Amaam (Mt) 25 to 40 Total (Mt) 115 to 410 06 Tigers Realm Coal Annual Report 2017Notes to Resources and Additional Exploration Targets The Company is not aware of any new information or data that materially affects the information included in this report and at the time of this report all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. Coal Resources and Coal Reserves are reported in 100% terms (unless otherwise stated). Coal Resources are reported inclusive of the Coal Resources that have been converted to Coal Reserves (i.e. Coal Resources are not additional to Coal Reserves). Competent Persons Statement – Amaam The information compiled in this announcement relating to exploration results, exploration targets or Coal Resources at Amaam is based on information provided by TIG and compiled by Neil Biggs, who is a member of the Australasian Institute of Mining and Metallurgy and who is employed by Resolve Coal Pty Ltd, and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Neil Biggs consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Competent Persons Statements – Amaam North The Amaam North Project F Coal Resources are based on a Coal Resource Estimate prepared by SRK in December 2015, undertaken prior to the commencement of mining and extensive grade control drilling in and adjacent to the current area of open pit working. SRK’s estimate has been reduced by 0.1 million tonnes Measured Resource (Coking) and 0.1 million tonnes Indicated Resource (Thermal) to reflect the 0.165 million tonnes of coal sales during 2017, the first year of production. The sales comprised a mix of thermal and coking coal to different customers. Since the preparation of the December 2015 Resource Estimate additional exploration drilling has also taken place. There are indications that a detailed examination of all data now available may lead to the interpretation of a modified geological structure, including steeper seam dips, across some parts of the resource area, particularly to the east and possibly the north of the current areas planned for working. SRK agrees that additional exploration drilling and an updated geological model and mining study, all planned for later in 2018, are required prior to a Resource update. The information presented in this report relating to Coal Resources is based on information compiled and modelled by Anna Fardell, Consultant (Resource Geology) of SRK Consulting (Kazakhstan) Ltd, who is a Fellow of the Geological Society of London; and reviewed by Keith Philpott, Corporate Consultant (Coal Geology) of SRK Consulting (UK) Ltd, who is a Fellow and Chartered Geologist of the Geological Society of London. Keith has worked as a geologist and manager in the coal industry for over 40 years and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Keith Philpott consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. The information in this report relating to the Project F Reserve Estimate is based on information compiled by Maria Joyce, a consultant to Tigers Realm Coal Ltd. and a Competent Person who is a Chartered Engineer of the Australasian Institute of Mining and Metallurgy. Maria Joyce is the head of the Technical Services division and full-time employee of MEC Mining Pty Ltd. Maria Joyce has sufficient experience that is relevant to the style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Maria Joyce consents to the inclusion in the report of the matters based on her information in the form and context in which it appears. Note A – Inferred Resources According to the commentary accompanying the JORC Code an ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade (or quality) continuity. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to an Ore Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. Note B – Indicated Resources According to the commentary accompanying the JORC Code an ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or quality) continuity between points of observation where data and samples are gathered. An Indicated Resource may be converted to a Probable Ore Reserve. Note C – Measured Resources According to the commentary accompanying the JORC Code a ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to confirm geological and grade (or quality) continuity between points of observation where data and samples are gathered. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proved Ore Reserve or under certain circumstances to a Probable Ore Reserve. Note D – Exploration Target According to the commentary accompanying the JORC Code an Exploration Target is a statement or estimate of the exploration potential of a mineral deposit in a defined geological setting where the statement or estimate, quoted as a range of tonnes and a range of grade (or quality), relates to mineralisation for which there has been insufficient exploration to estimate a Mineral Resource. Any such information relating to an Exploration Target must be expressed so that it cannot be misrepresented or misconstrued as an estimate of a Mineral Resource or Ore Reserve. The terms Resource or Reserve must not be used in this context. Note E – Reserves According to the commentary accompanying the JORC Code a ‘Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. Coal mined from Project F. 07 Tigers Realm Coal Annual Report 2017OPERATIONS REVIEW Overview of TIG’s Coking Coal Projects Tigers Realm Coal Ltd’s (ASX: TIG) strategy remains unchanged. Its objective is to become a significant supplier of up to 10Mtpa of coking coal to the seaborne market via the progressive development of the Amaam Coal Project. Amaam North, comprising an Exploration Licence No. AND 01203 TP (Levoberezhniy ‘Left Bank’ Licence) and an Exploration and Extraction (Mining) Licence, No. AND 15813 TE (Fandyushkinsky Field – ‘Project F’), has progressed significantly from the initial Resource announcement in July 2013 to its first year of production and sales in 2017. The Amaam Coking Coal Field comprises two well-located, large coking coal projects in the Far East of the Russian Federation: • Amaam North: a large coal basin where Project F is currently in production and in the process of expansion with the objective to generate earnings to support the development of the entire Amaam Coking Coal Field; and • Amaam: a large-scale coking coal project, with estimated production capacity of up to 6.5Mtpa of production from dedicated new infrastructure. The Amaam and Amaam North licences cover an area of 709km2 and are located in the Chukotka Autonomous Okrug (District), approximately 230km south of the regional capital of Anadyr, and some 40km to the south east of Beringovsky township and the wholly owned port. Amaam is a key asset of the Company, with the potential to be a major long-life project. The Company’s Pre-feasibility Study defined an operation potentially producing up to 6.5Mtpa of high-quality coking coal from a combination of open pit and underground mining over an estimated 20-year mine life, based on Exploration Licence No. AND 01277 TP (Zapadniy Subsoil Licence), formerly Licence No. AND 13867 TP and two Exploration and Extraction (Mining) Licences, Licence No. AND 01278 TE, replacing Licence No. AND 01225 TE and Licence No. AND 01288 TE. Amaam involves the construction of a coal handling and preparation plant (‘CHPP’) and associated infrastructure, a coal terminal with loading facilities on the nearby Arinay Lagoon and an all-weather 25km rail line or road to connect them. Mining waste in the pit during winter. 08 Tigers Realm Coal Annual Report 2017South Yakutsk Basin ~ 25km to port Amaam Project British Columbia Kuzbass Basin 2,000 – 5,000km railroads to ports North Asian Market 8 days shipping 1,100 km railroads to ports 1,100km railroads to ports and 14 days shipping 115 – 250km railroads to ports and 13 days shipping Bowen Basin KEY Major coking coal basins Railroad directions Sea directions TIG projects TIG’s strategy is achievable through the managed development of the Amaam Coal Project via three stages: Stage 1 Development of Project F to a 1Mtpa semi-hard coking coal operations shipped through the TIG-owned Beringovsky Port, split into 2 phases: • Phase 1: up to 0.6Mtpa utilising existing infrastructure and mining fleet; • Phase 2: up to in excess of 1Mtpa with construction of CHPP, and infrastructure, port and mining fleet upgrades. Stage 2 Production increases from Project F and Amaam North up to 2Mtpa. Stage 3 Development of Amaam to full capacity and the establishment of a transportation corridor from Amaam North to a year-round port at Arinay Lagoon. Amaam Coal Basin. 09 Tigers Realm Coal Annual Report 2017OPERATIONS REVIEW continued Operations Update Health, Safety, Environment and Community Relations 2017 A key objective of 2017 was the establishment of health and safety practices and systems appropriate for the operating environment in which the Company is mining, hauling and shipping coal. The conditions in winter and summer are very different and climate-specific safety systems are required. During 2017 there was one LTI, a knee injury sustained when a worker stepped down from a vehicle during maintenance. The Company achieved a TFIFR (Total Reportable Injury Frequency Rate per million hours) of 6.3 for the year ended 31 December 2017 and 4.5 since the commencement of Project F operations in July 2016. The Company is committed to continuously improving its safety systems and performance via the development of a site safety culture that puts controls in place for all potential hazards. During the year the Company developed and implemented HSE inductions for all new employees, commenced ongoing training and awareness programs, continued the implementation of the Take 5 – STOP hazard analysis system, reaffirmed through training and inspections programs our firm policy to ensure an alcohol-free work environment and completed an aviation audit of ChukotAvia, the commercial operator of plane and helicopter services in Chukotka, with SGS. A key area of safety focus was coal haulage, with climatic conditions throughout the year bringing different risks and accordingly mitigation practices. In 2017 there were a number of vehicle-related incidents, occurring both during road construction and coal haulage activities. During the year the Company implemented driver training programs. An integral component of the road construction and upgrade program was enhancing road signage and the improvement of other traffic management controls and aspects of road safety conditions. The road infrastructure has had continuous maintenance and daily road and vehicle inspections were and continue to be undertaken. In 2018, safe road and infrastructure usage, including coal haulage from pit to port, will again be a focus for site management and the operating crews. A mine rescue team has been established comprising a combination of external specialists and our own staff, their participation after the necessary training and certification of their new skills. First aid training is now embedded in our operational team, along with a safety passport system for all staff. Every employee’s safety passport sets out the key safety standards for the site as they relate in general and to the staff member in question. The passports are continuously used and are updated when any safety breaches occur. This allows simple and effective monitoring of all our employees’ individual safety performance. The Company commenced its programs to minimise the impact of our operations on the local environment. Our regulatory requirements are a baseline and we are working towards the implementation of best practices in a practical way appropriate for the current phase of the operations. The key focus during 2017, a year of both construction and operations, was water run-off management. Managing the impact on the environment and working proactively and cooperatively with our local communities are critical factors for the long term success of our operations. Our project is remote and our activities need to complement the requirements of our local communities and their future plans and aspirations. The Company continues to engage and support our local communities, providing progress reports on TIG’s operations and the actions being undertaken to manage the impact on the local environment and community. A Company priority is the maximisation of local employment and training opportunities whenever possible and has continued to provide support to local enterprises such as providing feed for local communities’ livestock in return for foodstuffs to be consumed in the camp. Project F TIG is very pleased to have successfully completed its first year of production and sales from the Project F operations. The Company’s first year performance is summarised below. ROM coal mined Coal to port Waste mined (bcm) ROM strip ratio (bcm:t) Thermal coal sold Coking coal sold Total coal sold ktonnes 249.4 227.0 942.9 3.8:1 122.4 42.2 164.6 Managing the impact on the environment and working proactively and cooperatively with our local communities are critical factors for the long term success of our operations. Our project is remote and our activities need to complement the requirements of our local communities and their future plans and aspirations. 10 Tigers Realm Coal Annual Report 2017Project F footprint and layout. TIG is very pleased to have successfully completed its first year of production and sales from the Project F operations. While the Company fell short on some of its aggressive internal targets and had one LTI (Lost Time Injury), the Company successfully achieved its strategic objectives to prove the mining, coal haulage and transshipment operations and gained acceptance of its coals by Asian customers. It was an intensive year for the site team, during which the focus was on capital projects for four months of the year (May/June and October/November) and on coal production and haulage to port for the other eight months. Our capital works program achieved the following during the year: • Completion of a year-round coal haulage road. • Establishment of initial open pit operations and required environmental controls. • Site infrastructure upgrades to accommodation, offices and workshop facilities. • Port upgrades including the expansion of stockpile areas, and construction and commissioning of the customs checkpoint. • Procurement of equipment to support the planned expansion of production and sales in 2018. • Production rates in the pit were positive and waste mining was in line with expectation, this despite equipment being deployed for road construction works for a period longer than originally anticipated and planned. Coal haulage from our pit to port was down by approximately 10% on expectations due to the reduced production/coal haulage period. 11 TIG maintained the momentum gained from the commencement of mining-related activities in December 2016 throughout 2017. The operation remains in the start-up/ ramp-up phase and there are a number of operational issues that are being constantly reviewed and improved by site management. During 2017, TIG improved its understanding of the coal resources in the (more complex) near surface/ oxidised zone that are the focus of operations in Phase 1. The minimisation of mining dilution and prediction of mined coal qualities, particularly for the unwashed low ash coking coal, requires rigorous control. TIG’s coal quality management procedures on start-up were not fully adequate, as a result of which during the September quarter some higher than forecast ash material was delivered to the port. The issue was addressed, the selective identification and separation of higher ash coal is now a priority for the operations team. As previously noted, coal haulage to port was approximately 10% lower than expected, this having a direct flow through effect to coal sales. The 165kt of coal TIG sold and transshipped through our port was accordingly lower than planned. In general, the port operated in line with expectations, transshipping 208kt of coal, inclusive of third party coal, into (typically) handymax-sized vessels. In addition to coal to port production levels being lower than expected, other influences on our lower than expected coal sales included adjustments to ship loading schedules to accommodate the higher ash product delivered to the port and to issues associated with the loading of the last vessel of the year. Weather conditions at season’s end were unfavourable and the final vessel was not well suited to our port’s open water conditions. However, the experience gained in loading this and the other five vessels loaded earlier during the 2017 shipping season will be incorporated into planning future port operations and performance. Tigers Realm Coal Annual Report 2017OPERATIONS REVIEW continued Government Relations The Federal and Chukotka Provincial Governments continued with their positive support of our projects and the economic development of the Far East of Russia in general. The Company’s projects reside within the Beringovsky Advanced Development Zone (ADZ), established by the Russian Government in order to promote the development of and investment in the Russian Far East. During production, the Company is benefiting from advantageous customs and employment regulations, in addition to exemptions and reductions in various taxes for the first 10 years of operations. TIG’s Russian Management Team has well established relationships with the Provincial Government and extensive experience in working within the regulatory environment and understanding the relevant approval processes. During 2017, the very positive result of this experience and cooperation was the establishment of the port customs checkpoint which both satisfied the Russian Government’s requirements and met the Company’s expectations on timing and costs of execution. The Company’s projects are well known at all levels of Government in Russia as a result of maintaining an appropriate and timely communications strategy including the use of mass media. During the Vladivostok Economic Forum in September, the Interim Chief Executive Officer made a number of presentations on the Company’s positive experiences working in Russia and our Chairman, Mr Craig Wiggill, presented to Mr Vladimir Putin, President of the Russian Federation and the Deputy Prime Minister and Presidential Envoy to the Far East Federal District, Mr Yury Trutnev. The forum was well attended by Russian and international representatives of government and industry, there being representation by a number of TIG’s existing and potential customers. TIG supports this forum as an important and high-profile event which allows the Company to engage with many of our key stakeholders. Exploration Licensing and Compliance Activities No exploration field activities were undertaken on TIG’s other exploration and mining licences during the year. Key activities during the year included the preparation of Russian regulatory reports that will be used for further conversion of parts of the Project F Resource area from an Exploration Licence to an Exploration and Extraction (Mining) Licence. A successful milestone was met in this process when the Company received a positive ruling from the State Expert Commission for the Company’s estimate of Project F coal reserves to the east of the existing Mining Licence. At Amaam, the Company obtained a mining and extraction (mining) licence over the Nadezhny area at the Amaam Project via the conversion of part of the larger Exploration Licence to a Mining Licence. The Company’s two Mining Licences provide long term tenure over the majority of Area 3 at Amaam, the area identified in the PFS as the start of potential mining operations. As at the end of 2017, the Company was fully in compliance with all licence obligations. Corporate Activities There were two key corporate highlights for the year. In July, the Company increased its ownership of Amaam North to 100% with the acquisition of 20% of the project from TIG’s joint venture partners. In parallel, existing Amaam North royalty arrangements were restructured, as a result of which royalty payments are now capped at US$25 million, royalties payable on FOB coal sales income over a maximum of 20 years and royalty rates reduced to a sliding scale of between 1.5% to 3%. In December 2017, the Company executed a working capital credit line of up to Russian Rubles 600 million (A$13.3 million) from the leading Russian commercial bank, Sberbank. The credit line has conditions and covenants typical for this type of facility and will support maintaining TIG’s liquidity prior to receiving our next receipts from sales in July 2018. The Company’s projects are well known at all levels of Government in Russia as a result of maintaining an appropriate and timely communications strategy. 12 Tigers Realm Coal Annual Report 2017Beringovsky Port in summer. In December 2017, the Company executed a working capital credit line of up to Russian Rubles 600 million (A$13.3 million) from the leading Russian commercial bank, Sberbank. 13 Tigers Realm Coal Annual Report 2017OPERATIONS REVIEW continued Amaam Overview With the Company’s primary focus on Project F, the work at Amaam was at a reduced level. The Company continued geological interpretation of the basin and completed reporting required for licence compliance. The Amaam licences cover 231km2, measure approximately 32km east-west and 9km north-south and are located 30km from the Bering Sea coast and a proposed deep water port site at Arinay Lagoon. TIG holds an 80% interest in the Amaam tenement. Since TIG commenced exploration activities in 2010, it has completed 48,000m of drilling (exploration and engineering), environmental and engineering baseline studies and a Pre-feasibility Study. TIG holds an 80% interest in the Amaam tenement. The Amaam Project is a multi-seam, moderate dipping deposit within a synclinal basin. Coal is in the Middle Chukchi formation, and is divided into four main areas by north-west trending faults. To date, exploration activities have identified that the highest tonnages of coal are within Areas 3 and 4. The Amaam coal is located close to the Arinay Lagoon, a year-round deep water port capable of receiving cape-sized vessels. Arinay is listed in enacted Federal Government legislation covering future Russian infrastructure projects. Amaam’s location is close to Asian markets, with shipping distance estimated to be approximately eight shipping days. Arinay Lagoon Port Terminal design. Project F camp and workshop. 14 Tigers Realm Coal Annual Report 2017Amaam geological plan. Amaam pre-feasibility study mine plan, CHPP, infrastructure and logistics corridor. Since TIG commenced exploration activities in 2010, it has completed 48,000m of drilling (exploration and engineering), environmental and engineering baseline studies and a Pre-feasibility Study. 15 Tigers Realm Coal Annual Report 2017FINANCIAL REPORT 17 Directors’ Report 39 Corporate Governance Statement 46 Consolidated Statement of Financial Position 47 Consolidated Statement of Comprehensive Income 48 Consolidated Statement of Changes in Equity 49 Consolidated Statement of Cash Flows 50 Notes to the Consolidated Financial Statements 95 Directors’ Declaration 96 Lead Auditor’s Independence Declaration Under Section 307C of the Corporations Act 2001 97 Independent Auditor’s Report to the Members of Tigers Realm Coal Limited 102 Shareholder Information 104 Corporate Directory Tigers Realm Coal Annual Report 2017 16 Tigers Realm Coal Limited Directors’ report For the year ended 31 December 2017 The Directors present their report together with the financial report of the Group, being Tigers Realm Coal Limited (the “Company” or “TIG”) and its subsidiaries, for the year ended 31 December 2017. 1. Directors, Alternate Director and Company Secretary The Directors of the Company at any time during or since the end of the financial year are: Name qualifications and independence status Mr Craig Wiggill Independent Chairman BSc Eng. Dr Bruce Gray Non-executive Director MB, BS, MS, PhD, FRACS Mr Owen Hegarty Independent Non-executive Director BEc(Hons), FAusIMM Experience, special responsibilities and other directorships Mr Wiggill was appointed Independent Chairman on 1 October 2015. Mr Wiggill has served as a Non-Executive Director of the Company since being appointed 20 November 2012. Mr Wiggill joined the Nominations and Remuneration Committee commencing 10 December 2015. Mr Wiggill has extensive experience in the global mining industry including over 25 years in the coal sector, the majority of his experience being within the Anglo American Plc group. Mr Wiggill is currently the Chairman (non-executive) at Buffalo Coal Corp (CVE: BUF) which has two operating coal mines in its portfolio. In addition, he is the Chairman (non-executive) of globalCOAL which is a company registered in London, the principal activities of which are the development of standardised contracts for the international coal market and the provision and management of screen based brokerage services for the trading of physical and financial coal contracts. His most recent executive role was as Chief Executive Officer (“CEO”) – Coal Americas at Anglo Coal, where he established and developed the Peace River operation in Canada and co-managed joint venture projects at Cerrejón and Guasare. He has also held leadership roles covering commercial, trading and marketing responsibilities, corporate strategy and business development for Anglo American. He holds no other directorships with ASX listed entities. Dr Gray was appointed as a Non-Executive Director of the Company on 1 October 2015. Prior to this, Dr Gray had been appointed as a Non-Executive Director of the Company on 25 October 2013 and resigned on 28 March 2014. Dr Gray has been a member of the Nomination and Remuneration Committee since 8 September 2016. Dr Gray established and operated a number of highly successful start-up businesses in the medical sector. He holds no other directorships with ASX listed entities. Mr Hegarty has more than 40 years’ experience in the mining industry. He had 24 years with the Rio Tinto Group, then founded and led Oxiana Ltd for 12 years. He is a founder of Tigers Realm Coal Ltd. He founded and is currently Executive Chairman of EMR Capital, a mining private equity firm. Until the end of 2016 he was Vice Chairman and Non-Executive Director of Fortescue Metals Group Ltd. Mr Hegarty has received a number of awards recognising his service to the mining industry and presently serves on a number of Government and industry advisory groups. Mr Hegarty was appointed a Director on 8 October 2010 and is Chairman of the Audit, Risk and Compliance Committee and of the Nomination and Remuneration Committee. He holds no other directorships with ASX listed entities. 17 17 Tigers Realm Coal Annual Report 2017 4 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 1. Directors, Alternate Director and Company Secretary Name qualifications and independence status Mr Ralph Morgan Non-executive Director BA, MPhil Experience, special responsibilities and other directorships Mr Morgan was appointed Non-Executive Director on 1 April 2014. Mr Morgan is a partner at Baring Vostok Capital Partners Group Limited (“BVCP”) with responsibility for investment projects in the Russian Federation (“Russia”), the Commonwealth of Independent States (“CIS”) and Mongolia. Prior to BVCP he worked as Managing Director at Goldman Sachs in the Global Natural Resources Group from 2009-2012 and was responsible for the investment banking division’s advisory work with natural resource clients in Russia and the CIS. From 2004 to 2008 Mr Morgan was a Managing Director and COO at PJSC MMK Norilsk Nickel and prior to that role he was a partner with the Moscow office of McKinsey and Company for 9 years. Mr. Morgan is a Non-Executive Director of PJSC Magnitogorsk Iron & Steel Works and a Director of the U.S.-Russia Business Council. Mr Morgan holds a BA (Political Science, Yale University) and MPhil (Russian and East European Studies, Oxford University). Mr Morgan is a member of the Nomination and Remuneration Committee and the Audit, Risk and Compliance Committee. He holds no other directorships with ASX listed entities. Mr Tagir Sitdekov Non-executive Director MBA Mr Sitdekov was appointed a Non-Executive Director on 1 April 2014. Mr Sitdekov is currently a First Deputy General Director of Russia Direct Investment Fund (“RDIF”) and has been involved in the Russian private equity market for the last 10 years, recently as Managing Director at A-1, a direct investment arm of Alfa Group, Russia’s largest private conglomerate. Mr Sitdekov has participated in a number of landmark private equity transactions across a range of industries. From 2003 to 2005 he was CFO at power generating company OJSC Sochi TES (a subsidiary of RAO Unified Energy System of Russia) and prior to that role he was a Senior Consultant at Creditanstalt Investment Bank for 2 years. Mr Sitdekov holds an MBA (University of Chicago Booth School of Business, London). Mr Sitdekov is a member of the Audit, Risk and Compliance Committee. He holds no other directorships with ASX listed entities. The Directors have all been in office since the start of the financial year to the date of this report. Alternate Director Mr Nikolay Ishmetov Alternate Director MSc in Finance Company Secretary Mr David Forsyth Company Secretary FGIA, FCIS, FCPA Mr Ishmetov was appointed as an alternate director to Tagir Sitdekov on 1 July 2017 and attended 3 board meetings as an observer, not in his capacity as an alternate to Mr Sitdekov. Mr Ishmetov is currently a Senior Associate at RDIF and has been involved in the Russian private equity market for over 5 years. Mr Ishmetov has been serving for over 5 years as an alternate director on the Board of Directors of MD Medical Group, a leading healthcare operator in Russia. Prior to joining RDIF, Mr Ishmetov worked in the M&A department of Societe Generale, where he participated in a number of cross border M&A deals in various sectors. Mr Forsyth has over 40 years’ experience in engineering, project development and mining. His most recent position was with Oxiana Ltd, now OZ Minerals Limited, where he was Company Secretary and Manager Administration from 1996 to 2008. Mr Forsyth joined Tigers Realm Minerals Pty Ltd as Director and Company Secretary in 2009. Mr Forsyth was appointed Company Secretary on 8 October 2010. 18 5 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 1. Directors, Alternate Director and Company Secretary Name qualifications and independence status Mr Ralph Morgan Non-executive Director BA, MPhil Experience, special responsibilities and other directorships Mr Morgan was appointed Non-Executive Director on 1 April 2014. Mr Morgan is a partner at Baring Vostok Capital Partners Group Limited (“BVCP”) with responsibility for investment projects in the Russian Federation (“Russia”), the Commonwealth of Independent States (“CIS”) and Mongolia. Prior to BVCP he worked as Managing Director at Goldman Sachs in the Global Natural Resources Group from 2009-2012 and was responsible for the investment banking division’s advisory work with natural resource clients in Russia and the CIS. From 2004 to 2008 Mr Morgan was a Managing Director and COO at PJSC MMK Norilsk Nickel and prior to that role he was a partner with the Moscow office of McKinsey and Company for 9 years. Mr. Morgan is a Non-Executive Director of PJSC Magnitogorsk Iron & Steel Works and a Director of the U.S.-Russia Business Council. Mr Morgan holds a BA (Political Science, Yale University) and MPhil (Russian and East European Studies, Oxford University). Mr Morgan is a member of the Nomination and Remuneration Committee and the Audit, Risk and Compliance Committee. He holds no other directorships with ASX listed entities. Mr Tagir Sitdekov Non-executive Director MBA Mr Sitdekov was appointed a Non-Executive Director on 1 April 2014. Mr Sitdekov is currently a First Deputy General Director of Russia Direct Investment Fund (“RDIF”) and has been involved in the Russian private equity market for the last 10 years, recently as Managing Director at A-1, a direct investment arm of Alfa Group, Russia’s largest private conglomerate. Mr Sitdekov has participated in a number of landmark private equity transactions across a range of industries. From 2003 to 2005 he was CFO at power generating company OJSC Sochi TES (a subsidiary of RAO Unified Energy System of Russia) and prior to that role he was a Senior Consultant at Creditanstalt Investment Bank for 2 years. Mr Sitdekov holds an MBA (University of Chicago Booth School of Business, London). Mr Sitdekov is a member of the Audit, Risk and Compliance Committee. He holds no other directorships with ASX listed entities. Alternate Director Mr Nikolay Ishmetov Alternate Director MSc in Finance Company Secretary Mr David Forsyth Company Secretary FGIA, FCIS, FCPA Mr Ishmetov was appointed as an alternate director to Tagir Sitdekov on 1 July 2017 and attended 3 board meetings as an observer, not in his capacity as an alternate to Mr Sitdekov. Mr Ishmetov is currently a Senior Associate at RDIF and has been involved in the Russian private equity market for over 5 years. Mr Ishmetov has been serving for over 5 years as an alternate director on the Board of Directors of MD Medical Group, a leading healthcare operator in Russia. Prior to joining RDIF, Mr Ishmetov worked in the M&A department of Societe Generale, where he participated in a number of cross border M&A deals in various sectors. Mr Forsyth has over 40 years’ experience in engineering, project development and mining. His most recent position was with Oxiana Ltd, now OZ Minerals Limited, where he was Company Secretary and Manager Administration from 1996 to 2008. Mr Forsyth joined Tigers Realm Minerals Pty Ltd as Director and Company Secretary in 2009. Mr Forsyth was appointed Company Secretary on 8 October 2010. Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 2. Directors’ meetings The number of Directors' meetings (including meeting of committees of Directors) and number of meetings attended by each of the Directors of the Company during the financial year are: Attendance at meetings Directors’ meetings Meetings of committees of Directors Nomination and Remuneration Audit, Risk & Compliance A 7 7 7 7 7 3 B 7 5 7 7 7 3 A 3 3 3 3 - - B 3 3 3 3 - - A 6 - 6 6 6 - B 6 - 6 6 6 - Mr Craig Wiggill Dr Bruce Gray Mr Owen Hegarty Mr Ralph Morgan Mr Tagir Sitdekov Mr Nikolay Ishmetov* A = Number of meetings held B = Number of meetings attended * The number of meetings attended by the Alternate Director in his capacity as a standing invitee. Mr Ishmetov is not obliged to attend. The Directors have all been in office since the start of the financial year to the date of this report. 3. Principal activities The principal activities of the Group are the identification, exploration, development, mining and sale of coal from deposits in the Far East of the Russian Federation. 4. Operating and financial review Business Strategies and Group Objectives The Group’s objectives encompass the development of the Amaam Coking Coal Field, comprising its two, well-located, large coking coal projects in the Far East of Russia: • • Amaam North: a low-cost starter project providing a fast track to production and earnings, utilising existing infrastructure and supporting development of the entire Amaam Coking Coal Field; and Amaam: a large-scale coking coal project, with estimated production capacity of up to 6.5Mtpa of production from dedicated new infrastructure. Amaam North Amaam North, and specifically the Fandyushkinsky Field Licence AND 15813 TE area (“Project F”), a part of Amaam North, has progressed significantly from the initial Resource announcement in July 2013 and the Preliminary Feasibility Report for Project F completed in September 2013. A Project F Feasibility Study was completed in November 2014 and a Project F Feasibility Study Update, doubling mine life and reserves, was completed in April 2016. Subsequently, a non-renounceable rights issuance was successfully completed during 2016, the primary use of proceeds being the development of Phase One of Project F. Commercial mining commenced in January 2017 after completing the necessary initial construction works in the second half of 2016. During the year ended 31 December 2017, the Company achieved a production level of 249.4 thousand tonnes, of which 227.2 thousand tonnes were delivered to our Beringovsky Port and Coal Terminal, and coal sales for the year totalled 164.6 thousand tonnes. The Project F Feasibility Study forecasts a potential increase in coal sales in Phase One to 500 thousand tonnes in 2018 and 600 thousand tonnes in 2019. Management is currently forecasting, based on 2017 results and the present capacity of the operations, 2018 coal production in the range of 500 to 560 thousand tonnes with a stripping ratio of 2.5:1 and coal sales between 420 and 480 thousand tonnes. 5 19 6 Tigers Realm Coal Annual Report 201720 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedDirectors’ report (continued)For the year ended 31 December 201774.Operating and financialreviewBusiness Strategies and Group Objectives(continued)Project F Phase Two is planned to increase coal sales to over1milliontonnesper annumviathe upgrade of mine site infrastructure, the Beringovsky Port and Coal Terminal and the construction ofacoal handling and preparation plant(“CHPP”).The Group has, during the year ended 31 December 2017, commenced the assessment of alternative funding solutionsfor the further capital investment required for Project F Phase Two.Amaam Amaam is a core asset of the Group, being a potentially long-life project with capacity for up to 6.5Mtpa of high quality coking coal product from a combination of open pit and underground mining over an estimated 20-year life of mine. It involves the construction ofaCHPPand associated infrastructure, a year-round coal terminal with loading facilities on the nearby Arinay Lagoon and a 25km rail line or road to connect them. A Preliminary Feasibility Study was released in April 2013 and since then the Group has completedfurther drilling and exploration activities, updated the resource estimate and obtained two long-term(20 year)Extraction and Exploration Licences over parts of the deposit,and extended the Exploration Licence. The Company plansto commence an update ofthe Amaam development model to assessthe most efficient means by which to develop this significant coal resource. Further details on the current status of the Group’s licences are disclosed below in Significant Business Risks: Licenses, Permits and Titles.Amaam Coking Coal Field–World Location MapTigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 4. Operating and financial review (continued) Operating Performance Key Operating Indicators for the year ended 31 December 2017 (“2017”): 2017 Operating Indicators (thousand tonnes unless otherwise stated) Coal mined Overburden removed Stripping ratio Coal stocks at 31 December 2017 Coal sales Thermal coal sales Semi soft coking coal sales Employees as at 31 December 2017 *Full time equivalent staff 2017 Indicators Revenue from coal sales Cost of coal mined and sold Gross Margin on coal sold EBITDA* Net loss before tax Average coal sales price Average cost of coal mined per tonne Average cost of port handling and stevedoring costs per tonne sold Total free on board (“FOB”) cost of coal sold Results for 2017 249.4 942.9 bcm 3.8:1 84.8 164.6 122.4 42.2 178* Results for 2017 (A$ ‘000s unless otherwise stated) 15,926 (13,039) 2,887 (5,696) (6,987) A$96.75 (US$79.21) A$38.76 (US$30.09) A$22.89 (US$17.72) A$61.65 (US$47.81) *Earnings before interest tax, depreciation and amortisation is calculated as the loss before net finance costs and income tax expense, adjusted for depreciation of property, plant and equipment. During the year ended 31 December 2017, the Group realised 164.6 thousand tonnes of coal in its first coal shipping season and A$15.926 million in total revenue from the sale and shipment of coal. The Group incurred cash outflows from operations for the year ended 31 December 2017 of A$7.007 million (A$9.195 million for the year ended 31 December 2016). Cash outflows from investing activities for the year ended 31 December 2017 totalled A$6.923 million (A$2.274 million for the year ended 31 December 2016). The Group’s net loss for the year ended 31 December 2017 was A$7.107 million (for the year ended 31 December 2016: net loss of A$12.744 million). The improvement in operational performance was driven by the commencement of coal production and sales, the gross margin on the sale of coal products contributing A$2.887 million during the year ended 31 December 2017. The average margin per tonne of coal sold during the year ended 31 December 2017 was A$35.10 (US$31.40), the weighted average FOB sales price per tonne (“FOB/t”) being A$96.75 (US$79.21). The primary factors influencing the FOB/t sales price during the year ended 31 December 2017 include but are not limited to: ◊ ◊ ◊ General coal market conditions; Qualities of the coal product sold during the year ended 31 December 2017; and The Company’s entry into the seaborne coal markets and initial customer awareness and satisfaction in respect of coal supplied. 21 8 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedDirectors’ report (continued)For the year ended 31 December 201774.Operating and financialreviewBusiness Strategies and Group Objectives(continued)Project F Phase Two is planned to increase coal sales to over1milliontonnesper annumviathe upgrade of mine site infrastructure, the Beringovsky Port and Coal Terminal and the construction ofacoal handling and preparation plant(“CHPP”).The Group has, during the year ended 31 December 2017, commenced the assessment of alternative funding solutionsfor the further capital investment required for Project F Phase Two.Amaam Amaam is a core asset of the Group, being a potentially long-life project with capacity for up to 6.5Mtpa of high quality coking coal product from a combination of open pit and underground mining over an estimated 20-year life of mine. It involves the construction ofaCHPPand associated infrastructure, a year-round coal terminal with loading facilities on the nearby Arinay Lagoon and a 25km rail line or road to connect them. A Preliminary Feasibility Study was released in April 2013 and since then the Group has completedfurther drilling and exploration activities, updated the resource estimate and obtained two long-term(20 year)Extraction and Exploration Licences over parts of the deposit,and extended the Exploration Licence. The Company plansto commence an update ofthe Amaam development model to assessthe most efficient means by which to develop this significant coal resource. Further details on the current status of the Group’s licences are disclosed below in Significant Business Risks: Licenses, Permits and Titles.Amaam Coking Coal Field–World Location MapTigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 4. Operating and financial review (continued) Operating Performance During the year ended 31 December 2017, operational highlights were: • • Commencement of commercial mining in January 2017; Ongoing staff training on health and safety and operational practices; • • • • • • • Coal production of 249.4 thousand tonnes, of which 164.6 tonnes were sold and 84.8 thousand tonnes remain on hand at 31 December 2017, 62.6 thousand tonnes of coal are located at our port stockpiles, available for sale in 2018 and 22.2 thousand tonnes are located at the mine and requires washing, crushing and sizing prior to sale; • Waste overburden of 942.9 thousand bcm was removed, resulting in an average stripping ratio of 3.8:1; • Production capacity was increased through a combination of acquiring additional mobile fleet size and continuous improvement of processes and practices in respect of the mining, logistics and coal stockpiling processes; Completion of the coal haulage road upgrade works to enable year-round operation; Commissioning of the temporary customs checkpoint at the Beringovsky Port; On 3 July 2017, TIG signed a number of agreements with its joint venture partners - one in relation to the Amaam North Project, the other in relation to the Amaam Project, as a result of which the Heads of Agreement ("HOA") dated 29 June 2016 was implemented. The completion took place on 6 July 2017 and in addition to the simplification of corporate governance processes in respect of the Amaam project, the following key changes took place in respect of the Amaam North project: o o TIG acquired the remaining 20% non-controlling interest as a result of which Amaam North became a wholly owned project of the Group, The existing royalty structure was redefined as a result of which the royalties payable to TIG’s partners are reduced from a maximum of 5% of coal sales revenue as follows: ◊ For annual coal sales in excess of 100 thousand tonnes per year, annual payments are 1.5% of gross sales revenues for the first five years, 2.25% of gross sales revenues for the three subsequent years, and 3% of gross sales revenues thereafter; ◊ ◊ ◊ Under certain circumstances, TIG may elect to pay up to 50% of the amount due for any year in TIG shares, as determined by the volume weighted average price (VWAP) for the preceding six-month period from date of settlement; Total royalty payments are capped at US$25 million and are accrued and payable for a period of no more than 20 years from the date of execution of the aforementioned documents; and Irrespective of the amount paid, annual payments will cease after 2037. Receipt of the Exploration and Extraction (Mining) Licence AND 01288 TE in the Nadezhny Licence area of the Amaam Project; Operation of Beringovsky Port and Coal Terminal; and Completion on 22 December 2017 of the Russian Rouble (“RUB”) 600 million (A$13.308 million) working capital loan facility with Sberbank, a leading Russian commercial bank, required to be settled no later than 21 December 2018, first drawdown prior to 31 December 2017. Refer to Note 20 to the consolidated financial statements for further details. 22 9 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 4. Operating and financial review (continued) Operating Performance During the year ended 31 December 2017, operational highlights were: Commencement of commercial mining in January 2017; Ongoing staff training on health and safety and operational practices; • • • • • • • • • • Coal production of 249.4 thousand tonnes, of which 164.6 tonnes were sold and 84.8 thousand tonnes remain on hand at 31 December 2017, 62.6 thousand tonnes of coal are located at our port stockpiles, available for sale in 2018 and 22.2 thousand tonnes are located at the mine and requires washing, crushing and sizing prior to sale; • Waste overburden of 942.9 thousand bcm was removed, resulting in an average stripping ratio of 3.8:1; Production capacity was increased through a combination of acquiring additional mobile fleet size and continuous improvement of processes and practices in respect of the mining, logistics and coal stockpiling processes; Completion of the coal haulage road upgrade works to enable year-round operation; Commissioning of the temporary customs checkpoint at the Beringovsky Port; On 3 July 2017, TIG signed a number of agreements with its joint venture partners - one in relation to the Amaam North Project, the other in relation to the Amaam Project, as a result of which the Heads of Agreement ("HOA") dated 29 June 2016 was implemented. The completion took place on 6 July 2017 and in addition to the simplification of corporate governance processes in respect of the Amaam project, the following key changes took place in respect of the Amaam North project: o o wholly owned project of the Group, TIG acquired the remaining 20% non-controlling interest as a result of which Amaam North became a The existing royalty structure was redefined as a result of which the royalties payable to TIG’s partners are reduced from a maximum of 5% of coal sales revenue as follows: For annual coal sales in excess of 100 thousand tonnes per year, annual payments are 1.5% of gross sales revenues for the first five years, 2.25% of gross sales revenues for the three subsequent years, and 3% of gross sales revenues thereafter; Under certain circumstances, TIG may elect to pay up to 50% of the amount due for any year in TIG shares, as determined by the volume weighted average price (VWAP) for the preceding six-month period from date of settlement; Total royalty payments are capped at US$25 million and are accrued and payable for a period of no more than 20 years from the date of execution of the aforementioned documents; and Irrespective of the amount paid, annual payments will cease after 2037. Receipt of the Exploration and Extraction (Mining) Licence AND 01288 TE in the Nadezhny Licence area of the Amaam Project; Operation of Beringovsky Port and Coal Terminal; and Completion on 22 December 2017 of the Russian Rouble (“RUB”) 600 million (A$13.308 million) working capital loan facility with Sberbank, a leading Russian commercial bank, required to be settled no later than 21 December 2018, first drawdown prior to 31 December 2017. Refer to Note 20 to the consolidated financial statements for further details. ◊ ◊ ◊ ◊ Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 4. Operating and financial review (continued) Financial Position Cash balances The Group’s cash balance decreased by $15.098 million over the year to A$2.011 million at 31 December 2017 (year ended 31 December 2016: Increase of A$10.035 million to A$17.109 million). This decrease arose primarily from outflows from operating activities combined with the investment in the Company’s mining and logistics infrastructure to further enhance our operating capacity totalling A$6.020 million (31 December 2016: A$2.274 million). As of 31 December 2017, the Company has A$11.964 million in unused, available credit lines (A$ nil as at 31 December 2016). Inventory on hand The lower of cost and net realisable value of the Group’s inventories on hand at 31 December 2017 is A$4.929 million (31 December 2016: A$0.965 million), including A$2.386 million of coal stocks, A$0.462 million in fuel and oils and A$2.081 million of other consumables. Management performs a regular review of the recoverability of inventories, including coal stocks, to assess the Company’s ability to recover the cost of coal inventories on hand. Accordingly, a provision of A$0.850 million was recognised for the recoverability of coal stocks at 31 December 2017, primarily in respect of 22.2 thousand tonnes of coal stock maintained at the Company’s interim coal stockpile, which require washing, crushing and sizing prior to commercial realisation. Non-current assets The Company performs at a minimum twice annually a review for the existence of conditions indicating either the necessity to perform an impairment review or to consider the necessity to reverse previously recognised write-downs, as a result of which management have concluded that in 2017 neither further asset write-downs nor reversal of prior period write-downs recorded as a result of impairment testing performed in prior periods will be recognised. Refer to Note 9 to the consolidated financial statements for further details. Finance Leases During the year ended 31 December 2017, a number of finance lease arrangements were entered into, as a result of which 5 new Scania haulage trucks and 4 Liebherr vehicles were acquired. Advances of A$0.473 million were paid in respect of these leases and their outstanding balances at 31 December 2017 were A$1.660 million. The CAT finance lease executed in 2014 was fully settled and legal ownership over the leased equipment transferred to the Company in October 2017. Lapse of Options On 14 July and 14 February 2017, TIG announced that 1,857,000 and 82,000 options, respectively, lapsed or were forfeited and had been removed from the Company’s option register. Options Granted In October 2017, 37,074,000 options were granted as follows: • • 12,605,000 options were granted with an exercise price of A$0.08, vesting period of 24 months and an expiry period of five years from grant date; 24,469,000 options were granted with an exercise price of A$0.08, vesting period of 36 months and an expiry period of five years from grant date. 9 23 10 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 4. Operating and financial review (continued) Significant Business Risks TIG’s annual budget and related activities are subject to a range of assumptions and expectations all of which contain a level of uncertainty. TIG adopted a risk management framework in order to identify, analyse, treat and monitor the risks applicable to the Group. The risks are reviewed at least twice a year by the Audit, Risk and Compliance Committee and, following each review, are formally reported and discussed by the Board. Risks are analysed and reported using risk registers. Detailed below are risk areas identified as at the date of the Directors’ Report which may affect TIG’s future operating and financial performance and the approach to managing them. Country Risk TIG’s projects are located in Russia. Investing in Russia involves greater risk than investing in some other markets. Operating in this jurisdiction may expose TIG to a range of significant country specific risks including general economic, regulatory, legal, social and political conditions. These and other country specific risks may affect TIG’s ability wholly or in part to operate its business in the Russian Federation. Uncertainty in the Estimation of Mineral Resources Estimating the quantity and quality of Mineral Resources is an inherently uncertain process and the Mineral Resources stated, as well as any Mineral Resources or Reserves TIG states in the future, are and will be estimates, and may not prove to be an accurate indication of the quantity or quality of coal that TIG has identified or that it will be able to extract. Project Assessment and Development Risk A Feasibility Study on the Project F section of the Amaam North licence was completed in November 2014 and consequently updated in April 2016 (“ANFSU”). The Company has commenced commercial operations in the year ended 31 December 2017. However, the long-term mine development principles outlined in the ANSFU will be subject to significant macroeconomic and company specific risks, whose mitigation of which is essential to the ANSFU’s realisation. TIG is at the preliminary stage of determining the economic and technical viability of the Amaam project. To date, TIG has completed a Feasibility Study (AFS). There is a risk that the more detailed studies in relation to the Amaam project may disprove assumptions or conclusions reached in the AFS, may reveal additional challenges or complexities and may indicate initial cost estimates are incorrect. TIG must also proceed through a number of steps before making a final investment decision with respect to the project, conduct definitive feasibility studies, convert Resources to Reserves, obtain government approvals and permits and obtain adequate and appropriate financing. If TIG decides to proceed to production, the process of developing and constructing the Amaam project will be subject to many uncertainties, including the timing and cost of construction, the receipt of required government permits and the availability of financing for the projects. There is a risk that unexpected challenges or delays will arise, or that coal quality and quantity results will differ from the estimates on which TIG’s cost estimates are based, increasing the costs of production and/or resulting in lower sales. Operational Risks The projects may be subject to operational, technical or other difficulties, including those arising as a result of unforeseen events outside the control of the Company, any or all of which may negatively impact the amount of coal produced, delay coal deliveries or increase the estimated cost of production, which may have an adverse impact on the Company’s business and financial condition. These risks include: • • • General Economic Risks: TIG’s ability to obtain funding for the projects, financial performance and ability to execute its business strategy will be impacted by a variety of global economic, political, social, stock market and business conditions. Deterioration or an extended period of adversity in any of these conditions could have an adverse impact on TIG’s financial position and/or financial performance. Coal Market and Demand: TIG intends to earn future profits from the production and sale of coal and a decline in prices or lower demand for coal than expected by TIG may adversely impact the feasibility of the Company’s development and mine plans, and the economic viability of the projects. There is commodity price risk, with the Company, when valuing its projects, having adopted a long-term sales prices in accordance with average external forecasts, validated against long- term market expectations. Exchange Rate Variations: Significant changes in the Australian / US Dollar, US Dollar / Russian Rouble and the Australian Dollar / Russian Rouble exchange rates will have a significant impact on TIG’s ability to fund the capital expenditure required to construct these projects. 24 11 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 4. Operating and financial review (continued) Significant Business Risks TIG’s annual budget and related activities are subject to a range of assumptions and expectations all of which contain a level of uncertainty. TIG adopted a risk management framework in order to identify, analyse, treat and monitor the risks applicable to the Group. The risks are reviewed at least twice a year by the Audit, Risk and Compliance Committee and, following each review, are formally reported and discussed by the Board. Risks are analysed and reported using risk registers. Detailed below are risk areas identified as at the date of the Directors’ Report which may affect TIG’s future operating and financial performance and the approach to managing them. Country Risk the Russian Federation. Uncertainty in the Estimation of Mineral Resources TIG’s projects are located in Russia. Investing in Russia involves greater risk than investing in some other markets. Operating in this jurisdiction may expose TIG to a range of significant country specific risks including general economic, regulatory, legal, social and political conditions. These and other country specific risks may affect TIG’s ability wholly or in part to operate its business in Estimating the quantity and quality of Mineral Resources is an inherently uncertain process and the Mineral Resources stated, as well as any Mineral Resources or Reserves TIG states in the future, are and will be estimates, and may not prove to be an accurate indication of the quantity or quality of coal that TIG has identified or that it will be able to extract. Project Assessment and Development Risk A Feasibility Study on the Project F section of the Amaam North licence was completed in November 2014 and consequently updated in April 2016 (“ANFSU”). The Company has commenced commercial operations in the year ended 31 December 2017. However, the long-term mine development principles outlined in the ANSFU will be subject to significant macroeconomic and company specific risks, whose mitigation of which is essential to the ANSFU’s realisation. TIG is at the preliminary stage of determining the economic and technical viability of the Amaam project. To date, TIG has completed a Feasibility Study (AFS). There is a risk that the more detailed studies in relation to the Amaam project may disprove assumptions or conclusions reached in the AFS, may reveal additional challenges or complexities and may indicate initial cost estimates are incorrect. TIG must also proceed through a number of steps before making a final investment decision with respect to the project, conduct definitive feasibility studies, convert Resources to Reserves, obtain government approvals and permits and obtain adequate and appropriate financing. If TIG decides to proceed to production, the process of developing and constructing the Amaam project will be subject to many uncertainties, including the timing and cost of construction, the receipt of required government permits and the availability of financing for the projects. There is a risk that unexpected challenges or delays will arise, or that coal quality and quantity results will differ from the estimates on which TIG’s cost estimates are based, increasing the costs of production and/or resulting in lower sales. Operational Risks These risks include: The projects may be subject to operational, technical or other difficulties, including those arising as a result of unforeseen events outside the control of the Company, any or all of which may negatively impact the amount of coal produced, delay coal deliveries or increase the estimated cost of production, which may have an adverse impact on the Company’s business and financial condition. • • • General Economic Risks: TIG’s ability to obtain funding for the projects, financial performance and ability to execute its business strategy will be impacted by a variety of global economic, political, social, stock market and business conditions. Deterioration or an extended period of adversity in any of these conditions could have an adverse impact on TIG’s financial position and/or financial performance. Coal Market and Demand: TIG intends to earn future profits from the production and sale of coal and a decline in prices or lower demand for coal than expected by TIG may adversely impact the feasibility of the Company’s development and mine plans, and the economic viability of the projects. There is commodity price risk, with the Company, when valuing its projects, having adopted a long-term sales prices in accordance with average external forecasts, validated against long- term market expectations. Exchange Rate Variations: Significant changes in the Australian / US Dollar, US Dollar / Russian Rouble and the Australian Dollar / Russian Rouble exchange rates will have a significant impact on TIG’s ability to fund the capital expenditure required to construct these projects. Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 4. Operating and financial review (continued) Operational Risks (continued) • Product Quality: For Project F Amaam North, the coal quality test work conducted has confirmed over the project’s life the main product as a semi-hard coking coal with very low sulphur and low phosphorus levels. TIG has also conducted initial coal quality analysis on a number of drill cores recovered from Amaam. In the absence of extended coke test work, no guarantee can be given as to the quality of coking coal that could ultimately be produced at Amaam. If the quality of the Amaam coking coal is lower than currently anticipated, TIG’s prospects, value, project and financial condition may be materially adversely affected. Capital Management The nature of the Company’s Project F mining operations is such that coal production continues throughout the winter season, costs being incurred during this period, whilst sales are only able to be realised during the Beringovsky Port shipping season, which historically commences in June and can go through to November. The Company therefore is required to ensure that its liquidity levels are managed during the period between the Russian winter production period and the commencement of the shipping season, after consideration of the capital investments necessary to achieve the project’s development levels. Management have obtained short-term working capital financing in the amount of up to RUB 600 million (A$13.308 million), to be drawn down no later than 31 August 2018 and to be settled by no later than 21 December 2018, to address any such shortfalls. Project F’s expansion, as outlined in the ANFSU, will require further investment so as to upgrade the Beringovsky Port and Coal Terminal and construct a CHPP, management having commenced preliminary discussions during the year ended 31 December 2017 with potential financial partners. TIG’s Amaam project is at the pre-development stage and will require additional drilling, evaluation and feasibility study work prior to a development decision. Should TIG proceed to develop the Amaam project upon completion of further definitive studies, significant capital expenditure will be required. Licenses, Permits and Titles TIG requires certain licenses, permits and approvals to develop the Amaam North and Amaam projects. There are three main approvals required to commence the construction and operation of a mining project in Russia. These are a) an Exploration and Extraction Licence (Mining Licence); b) a Construction Permit; and c) a Commissioning Permit. Due to the current stage of the Amaam project, the majority of the required licences, permits and approvals to construct and operate have not yet been applied for. For Project F Amaam North, the Mining Licence was granted in December 2014 and work has been completed in obtaining all relevant Construction and Commissioning Permits. In addition to these mining related approvals, other approvals are required for the development of Project F. These are for the CHPP, road development from the Project F mine site to Beringovsky Port and Coal Terminal and for the capital upgrades to be completed at the Beringovsky Port and Coal Terminal. There are also a number of conditions and regulatory requirements that TIG must satisfy with respect to its tenements to maintain its interests in those tenements in good standing, including meeting specified drilling and reporting commitments. There is a risk that TIG may fail to obtain or be delayed in obtaining the licences, permits and approval, or meet the conditions required to maintain its interests in the tenements. In the event that TIG fails to obtain, or delays in obtaining such licenses, permits and approvals occur, and there arises a failure to meet tenement licence commitments, such events may adversely affect TIG’s ability to proceed with the projects as currently planned. Licence Update During the year ended 31 December 2017, TIG was issued licence No. AND 01278, replacing existing Licence No. 01225 AND, in accordance with which the right to mine expires in 2033. TIG was also granted a second Extraction and Exploration (Mining) Licence (Licence No. AND 01288 TE), expiring in 2037, over Area 3 of the Amaam deposit (“Nadezhny Licence”), being the central area of the Amaam deposit. The licence area covered by the aforementioned licences is approximately 40kms south of the Project F licence area. 5. Significant changes in the state of affairs In the opinion of the Directors, except as disclosed in the review of operations, there were no further significant changes in the Group’s state of affairs during the financial period ended 31 December 2017 not otherwise reflected in accompanying consolidated financial statements. 11 25 12 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 6. Events subsequent to reporting date On 16 February 2018, 1,161,000 options lapsed and were removed from the options register. Other than the aforementioned, there has not arisen in the interval between the end of the financial year and the date of this report, any transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 7. Dividends paid or recommended The Directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report. 8. Likely developments Mining activities will continue at the Amaam North Project, with production expected to be in the range of 500 to 560 thousand tonnes and sales between 420 and 480 thousand tonnes during 2018, production and sales are expected to increase up to 600 thousand tonnes by 2019. Ongoing enhancement of port, road and other mine infrastructure is expected during 2018 and Project F Phase Two funding alternatives will continue to be investigated further. The Group will progress exploration, appraisal and development of its Amaam project. 9. Environmental regulation The Group’s exploration, development and mining activity in Russia is subject to Federal and Regional Environmental regulation. The Group is committed to meeting or exceeding its regulatory requirements and has systems in place the ensure compliance with the relevant Environmental regulation. The Directors are not aware of any breach of these regulations during the period covered by this report. 10. Directors’ interests The relevant interest of each Director and Alternate Director in the shares or options over such instruments issued by the companies within the Group and other related bodies corporate, as notified by the directors to the ASX in accordance with S205G (1) of the Corporations Act 2001, at the date of this report is as follows: C Wiggill B Gray O Hegarty R Morgan 1 T Sitdekov N Ishmetov Tigers Realm Coal Limited Ordinary shares 1,200,000 378,001,865 30,412,029 - - - Options over ordinary shares 2,500,000 - 2,500,000 1,500,000 1,500,000 - 1. R Morgan transferred the entitlement of 1,000,000 options to B.V. Mining Holding Limited during 2014. 11. Share Options Options granted to directors and executives of the Company The option plan offers individuals the opportunity to acquire fully paid ordinary shares in the Company. Share options granted under the plan carry no dividend or voting rights. When exercised, each option is convertible into one ordinary share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in all respects with previously issued fully paid ordinary shares. Option holders cannot participate in new issues of capital which may be offered to shareholders prior to exercise. During the year ended 31 December 2017, there were 37,074,000 options issued to executives and employees and 1,665,000 options lapsed and 274,000 forfeited, thus bringing the options issued over ordinary shares in the Company to 59,437,000 as at 31 December 2017. Unissued shares under options Unissued shares under options as of the date of this report are detailed in Note 24 to the consolidated financial statements. 26 13 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 6. Events subsequent to reporting date On 16 February 2018, 1,161,000 options lapsed and were removed from the options register. Other than the aforementioned, there has not arisen in the interval between the end of the financial year and the date of this report, any transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. The Directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the Mining activities will continue at the Amaam North Project, with production expected to be in the range of 500 to 560 thousand tonnes and sales between 420 and 480 thousand tonnes during 2018, production and sales are expected to increase up to 600 thousand tonnes by 2019. Ongoing enhancement of port, road and other mine infrastructure is expected during 2018 and Project F Phase Two funding alternatives will continue to be investigated further. The Group will progress exploration, appraisal and development of its 7. Dividends paid or recommended date of this report. 8. Likely developments Amaam project. 9. Environmental regulation this report. 10. Directors’ interests The Group’s exploration, development and mining activity in Russia is subject to Federal and Regional Environmental regulation. The Group is committed to meeting or exceeding its regulatory requirements and has systems in place the ensure compliance with the relevant Environmental regulation. The Directors are not aware of any breach of these regulations during the period covered by The relevant interest of each Director and Alternate Director in the shares or options over such instruments issued by the companies within the Group and other related bodies corporate, as notified by the directors to the ASX in accordance with S205G (1) of the Corporations Act 2001, at the date of this report is as follows: C Wiggill B Gray O Hegarty R Morgan 1 T Sitdekov N Ishmetov Tigers Realm Coal Limited Ordinary shares Options over ordinary shares 1,200,000 378,001,865 30,412,029 - - - 2,500,000 2,500,000 1,500,000 1,500,000 - - Options granted to directors and executives of the Company The option plan offers individuals the opportunity to acquire fully paid ordinary shares in the Company. Share options granted under the plan carry no dividend or voting rights. When exercised, each option is convertible into one ordinary share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in all respects with previously issued fully paid ordinary shares. Option holders cannot participate in new issues of capital which may be offered to shareholders prior to exercise. During the year ended 31 December 2017, there were 37,074,000 options issued to executives and employees and 1,665,000 options lapsed and 274,000 forfeited, thus bringing the options issued over ordinary shares in the Company to 59,437,000 as at 31 December 2017. Unissued shares under options Unissued shares under options as of the date of this report are detailed in Note 24 to the consolidated financial statements. Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. Remuneration report – audited This remuneration report, which forms part of the directors’ report, sets out the remuneration information for Tigers Realm Coal Limited’s non-executive directors and other key management personnel (“KMP”) for the financial year ended 31 December 2017. (a) Details of key management personnel Name Position Commencement Date Directors Craig Wiggill Bruce Gray Owen Hegarty Ralph Morgan Tagir Sitdekov Nikolay Ishmetov Senior Executives Peter Balka Chairman, Director (Non-executive) 20 November 2012 Director (Non-executive) Director (Non-executive) Director (Non-executive) Director (Non-executive) Alternate Director for Mr Sitdekov 1 October 2015 8 October 2010 1 April 2014 1 April 2014 1 July 2017 Interim Chief Executive Officer 1 January 2011 Denis Kurochkin Scott Southwood Anatoly Nikolaev Sergey Efanov David Forsyth Chief Financial Officer General Manager Marketing General Manager Operations, Project F General Manager Operations, Project F Company Secretary 21 July 2014 13 October 2013 7 November 2016 15 November 2017 8 October 2010 (b) Changes to key management personnel Directors Mr Nikolay Ishmetov commenced his tenure as an alternate for Mr Sitdekov on 1 July 2017. There were no changes to the Directors during 2017. Executives 1. R Morgan transferred the entitlement of 1,000,000 options to B.V. Mining Holding Limited during 2014. 11. Share Options There were no other changes during 2017. On 31 August 2017, Anatoly Nikolaev’s employment ceased and on 15 November 2017 Sergey Efanov was appointed General Manager, Operations Project F. (c) Principles used to determine the nature and amount of remuneration KMP have authority and responsibility for planning, directing and controlling the Group’s activities and include the Company’s Directors and Senior executives. The Board is committed to clear and transparent disclosure of the Company’s remuneration arrangements. The Company’s remuneration policy is designed to ensure that it enables the Company to attract and retain valued employees and motivate senior executives to pursue the long-term growth and success of the Company, demonstrate a clear relationship between performance and remuneration and have regard for prevailing market conditions. 13 27 14 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (d) Remuneration report – audited (continued) Consequence of performance on shareholder wealth The Directors are committed to developing and maintaining a remuneration policy and practices that are targeted at the achievement of corporate values and goals and the maximisation of shareholder value. When determining compensation for KMP, the Remuneration and Nomination Committee and the Board have regard to financial funding, resource development, project advancement and development, and other objectives, based on goals set by the Remuneration and Nomination Committee and the Board throughout the year. In addition, the Board has regard to the following financial indices in respect of the financial year and previous four financial years. Net (loss) attributable to equity holders of the parent (A$ million) 2017 2016 2015 2014 2013 $(6.213) $(10.511) $(86.170) $(29.629) $(22.080) Closing share price (A$) $0.057 $0.073 $0.03 $0.12 $0.165 (e) Remuneration policy and structure for senior executives The objective of the Group’s executive remuneration policy is to ensure reward for performance is market competitive and appropriate for the results delivered. The structure aligns executive reward with achievement of strategic objectives and the creation of wealth for shareholders and conforms to market practice for delivery of reward. The structure provides a mix of fixed and variable remuneration and for the variable, or “at-risk”, remuneration a blend of short-term and long-term incentives. As executives gain seniority within the Group, the balance of this mix shifts to a higher proportion of “at-risk” rewards. The Company’s remuneration policy and structure for its senior executives comprises three main components: • • • Fixed Remuneration, which is the total base salary and includes employer superannuation contributions. The fixed remuneration reflects the job level, role, responsibilities, knowledge, experience and accountabilities of the individual executive and is set at a level which is competitive, aligned with the business needs and based on current market conditions in the mining industry and countries in which the Company does business. Compensation levels are reviewed each year by the Nomination and Remuneration Committee to take into account cost-of- living changes, any change in the scope of the role performed by the senior executive and any changes required to meet the principles of the remuneration policy. The review process considers individual and overall performance of the Group. Short-Term Incentive (“STI”), which is at-risk remuneration. This is an annual incentive award based on the achievement of pre-determined Company and individual objectives. These short-term incentives are available to executives and other eligible participants and are at the discretion of the Board. The STI is an at-risk bonus provided in the form of cash, which is payable subsequent to Board ratification of recommendations made by the Remuneration and Nomination Committee each year. Long-Term Incentive (“LTI”) Program is at-risk remuneration. Under the LTI Program employees, at the discretion of the Board, are offered options over ordinary shares in the Company under the Company’s Option Plan. For KMP other than the Interim CEO and General Manager Marketing, the target remuneration mix in the current year is 50% fixed, and 50% at risk (15% STI and 35% LTI). For the Interim CEO, the LTI element of remuneration was determined at the time of initial appointment, reflected in his employment agreement. The General Manager Marketing is engaged on a contract basis, being eligible to participate in both the Company’s STI and LTI programmes in accordance with the terms of the Company’s remuneration policy. 28 15 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (d) Remuneration report – audited (continued) Consequence of performance on shareholder wealth The Directors are committed to developing and maintaining a remuneration policy and practices that are targeted at the achievement of corporate values and goals and the maximisation of shareholder value. When determining compensation for KMP, the Remuneration and Nomination Committee and the Board have regard to financial funding, resource development, project advancement and development, and other objectives, based on goals set by the Remuneration and Nomination Committee and the Board throughout the year. In addition, the Board has regard to the following financial indices in respect of the financial year and previous four financial years. 2017 2016 2015 2014 2013 Net (loss) attributable to equity holders of $(6.213) $(10.511) $(86.170) $(29.629) $(22.080) the parent (A$ million) Closing share price (A$) $0.057 $0.073 $0.03 $0.12 $0.165 (e) Remuneration policy and structure for senior executives The objective of the Group’s executive remuneration policy is to ensure reward for performance is market competitive and appropriate for the results delivered. The structure aligns executive reward with achievement of strategic objectives and the creation of wealth for shareholders and conforms to market practice for delivery of reward. The structure provides a mix of fixed and variable remuneration and for the variable, or “at-risk”, remuneration a blend of short-term and long-term incentives. As executives gain seniority within the Group, the balance of this mix shifts to a higher proportion of “at-risk” rewards. The Company’s remuneration policy and structure for its senior executives comprises three main components: Fixed Remuneration, which is the total base salary and includes employer superannuation contributions. The fixed remuneration reflects the job level, role, responsibilities, knowledge, experience and accountabilities of the individual executive and is set at a level which is competitive, aligned with the business needs and based on current market conditions in the mining industry and countries in which the Company does business. Compensation levels are reviewed each year by the Nomination and Remuneration Committee to take into account cost-of- living changes, any change in the scope of the role performed by the senior executive and any changes required to meet the principles of the remuneration policy. The review process considers individual and overall performance of the Group. Short-Term Incentive (“STI”), which is at-risk remuneration. This is an annual incentive award based on the achievement of pre-determined Company and individual objectives. These short-term incentives are available to executives and other eligible participants and are at the discretion of the Board. The STI is an at-risk bonus provided in the form of cash, which is payable subsequent to Board ratification of recommendations made by the Remuneration and Nomination Committee each year. Long-Term Incentive (“LTI”) Program is at-risk remuneration. Under the LTI Program employees, at the discretion of the Board, are offered options over ordinary shares in the Company under the Company’s Option Plan. For KMP other than the Interim CEO and General Manager Marketing, the target remuneration mix in the current year is 50% fixed, and 50% at risk (15% STI and 35% LTI). For the Interim CEO, the LTI element of remuneration was determined at the time of initial appointment, reflected in his employment agreement. The General Manager Marketing is engaged on a contract basis, being eligible to participate in both the Company’s STI and LTI programmes in accordance with the terms of the Company’s remuneration • • • policy. Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (e) Remuneration report – audited (continued) Remuneration policy and structure for senior executives (continued) For the STI element of remuneration, a performance framework has been developed for KMP and other senior executives under the STI programme. Key Performance Indicators (“KPIs”) are developed for each individual, which are reassessed regularly to ensure they remain current and applicable as the Group’s operations develop. Individual performance against these KPIs is assessed annually by the individual’s manager or the Interim Chief Executive Officer and is subject to Board discretion. The performance framework develops individual KPIs in the following proportions: • • 30% Group related KPIs, (these are specific to Health, Safety & Environmental, Project, and Corporate objectives); and 70% Individual KPIs tailored to the role and objectives of each senior executive. For the LTI element of remuneration, any options granted under the Company’s Option Plan, are approved by the Board in advance. Further details of the Option Plan are included in Note 25 to the consolidated financial statements. The Company may make initial grants of options to certain senior executives as part of their individual employment contracts. It is a vesting condition that the holder of options remains an employee or director at the time of vesting. Other than the provisions relating to vesting of LTI grants in certain circumstances and a benefit accruing to the Interim CEO upon termination of his employment, employment contracts contain no termination benefits other than payments in lieu of notice and redundancy payments. The notice periods and redundancy payments vary for the individuals and depending upon the period of service. The remuneration and other terms of employment for key management personnel are formalised in their employment contracts and services contracts. (f) Employment contracts The Group has entered into employment arrangements with each senior executive, other than the General Manager Marketing, who is engaged on an external contractor basis, which are open-ended contracts with no expiry date. These contracts are capable of termination on three months’ notice. The Group retains the right to terminate a contract immediately by making a payment equal to three months’ pay in lieu of notice. No notice is required for termination due to serious misconduct. The senior executives are also entitled to receive on termination of employment their statutory and contractual entitlements of accrued annual and long service leave, together with any superannuation benefits. The employment contracts provide for the payment of performance-related cash bonuses under the STI programme and participation, where eligible, in the Company Option Plan under the LTI Program. The maximum cash bonus payable under the STI programme is up to 45% of total remuneration for senior executives, and up to 75% of base salary for the CEO. The employment contract outlines the components of compensation but does not prescribe how compensation levels are modified year to year. The Nomination and Remuneration Committee reviews and makes any recommendations to the Board annually on compensation levels, assessing the necessity or otherwise of any changes required so as to meet the principles of the Group’s compensation policy. (g) Remuneration of Executive and Non-Executive Directors On appointment to the Board, Non-executive Directors enter into service agreements with the Company in the form of a Letter of Appointment. The letter summarises the Board Policies and terms, including compensation, relevant to the office of Director. The employment contracts with Directors have no fixed term. Non-executive Director remuneration is reviewed annually by the Board. Non-executive Directors receive a fixed base fee for being a Director and may receive additional fees for either chairing or being a member of a Board committee, working on special committees, and / or serving on special committees and / or special boards. Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which has been established at A$1,500,000. In addition to this fixed base fee all resident non-executive Directors receive 9.50 per cent in superannuation contributions. No retirement or other long-term benefits are provided to any Director other than superannuation. Non-Executive Directors can claim reimbursement of out-of-pocket expenses incurred on behalf of the Company. During the year ended 31 December 2017, the base fee for Directors was $30,000 per annum. The Chairman is entitled to A$100,000 per annum and a per diem of the AUD equivalent of British Pounds Sterling (“GBP”) 1,000 is payable whilst travelling in respect of the Group’s business. In addition to the base fee, A$20,000 per annum is also payable to the Director who performs the duties of Chairman of the Audit, Risk and Compliance Committee. With the exception of the independent Chairman, all directors waived their director fee entitlements for the year ended 31 December 2017. 15 29 16 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (h) Remuneration report – audited (continued) Details of the remuneration of the Group’s key management personnel Details of the nature and amount of each major element of remuneration of each Director of the Company, and the key management personnel (as defined in AASB 124 Related Party Disclosures) are set out in the following tables. Short – term Post-employment Share - based payments Cash Salary and fees A$ Non- Monetary Benefits (1) A$ STI cash bonus (2) A$ Super- annuation A$ Termin- ation benefits A$ LTI (3) A$ Total Remun- eration A$ Proportion of remun- eration comprising options % Name 2017 Non-executive Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov Sub total 135,395 - - - - 135,395 - - - - - - - - - - - - 19,000 - - - - 19,000 Other key management personnel P Balka 414,126 62,307 D Kurochkin S Southwood D Forsyth S Efanov (5) A Nikolaev (4) 379,734 162,902 101,500 34,686 179,877 - - - - - 87,778 53,084 21,129 8,478 8,765 - Sub total 1,272,825 62,307 179,234 Total key management - - - - - - - - - - - - - - - - - - 19,117 19,117 3,878 158,273 - 3,878 3,878 3,878 - 3,878 3,878 3,878 15,512 169,907 21,672 21,047 12,650 7,995 8,709 - 585,883 453,865 196,681 117,973 52,160 198,994 72,073 1,605,556 2.45% 0.00% 100% 100% 100% 3.70% 4.64% 6.43% 6.78% 16.70% 0.00% personnel 1. 2. 3. 1,408,220 62,307 179,234 19,000 19,117 87,585 1,775,463 Includes the value of fringe benefits and other allowances. In respect of 2017. In accordance with the requirements of Accounting Standards, remuneration includes a proportion of the fair value of equity compensation granted or outstanding during the year (i.e. options granted under the LTI programme that remained unvested as at 31 December 2017). The fair value of equity instruments is determined at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not necessarily related to or indicative of the benefit (if any) that senior executives may ultimately realise should the equity instruments vest. The fair value of the options at the date of their grant has been determined in accordance with AASB 2 Share-based Payments. All options granted under the LTI programme are equity settled. 4. 5. Ceased as General Manager Project F on 31 August 2017. Commenced as General Manager Project F on 15 November 2017. During the year ended 31 December 2017, other than the remuneration detailed above, key management personnel were neither entitled to nor did they receive loans or other benefits. 30 17 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (h) Remuneration report – audited (continued) Details of the remuneration of the Group’s key management personnel Details of the nature and amount of each major element of remuneration of each Director of the Company, and the key management personnel (as defined in AASB 124 Related Party Disclosures) are set out in the following tables. Short – term Post-employment payments Share - based Cash Salary and fees A$ Non- Monetary Benefits (1) A$ STI cash bonus (2) A$ Super- Termin- ation annuation benefits LTI (3) A$ A$ A$ Total Remun- eration A$ Proportion of remun- eration comprising options % Name 2017 C Wiggill B Gray O Hegarty R Morgan T Sitdekov Sub total personnel P Balka D Kurochkin S Southwood D Forsyth S Efanov (5) A Nikolaev (4) Non-executive Directors 135,395 19,000 3,878 158,273 Other key management 19,000 15,512 169,907 - - - - 135,395 414,126 379,734 162,902 101,500 34,686 179,877 - - - - - - - - - - - - - - - - - - 87,778 53,084 21,129 8,478 8,765 62,307 - - - - - - - - - - - 19,117 19,117 - - - - - - - - - - - - 3,878 3,878 3,878 21,672 21,047 12,650 7,995 8,709 - - 3,878 3,878 3,878 585,883 453,865 196,681 117,973 52,160 198,994 2.45% 0.00% 100% 100% 100% 3.70% 4.64% 6.43% 6.78% 16.70% 0.00% Sub total 1,272,825 62,307 179,234 72,073 1,605,556 Total key management personnel 1,408,220 62,307 179,234 19,000 19,117 87,585 1,775,463 Includes the value of fringe benefits and other allowances. In respect of 2017. In accordance with the requirements of Accounting Standards, remuneration includes a proportion of the fair value of equity compensation granted or outstanding during the year (i.e. options granted under the LTI programme that remained unvested as at 31 December 2017). The fair value of equity instruments is determined at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not necessarily related to or indicative of the benefit (if any) that senior executives may ultimately realise should the equity instruments vest. The fair value of the options at the date of their grant has been determined in accordance with AASB 2 Share-based Payments. All options granted under the LTI programme are equity settled. Ceased as General Manager Project F on 31 August 2017. Commenced as General Manager Project F on 15 November 2017. 1. 2. 3. 4. 5. During the year ended 31 December 2017, other than the remuneration detailed above, key management personnel were neither entitled to nor did they receive loans or other benefits. Remuneration report – audited (continued) Details of the remuneration of the Group’s key management personnel Short – term Cash Salary and fees A$ Non- Monetary Benefits (1) A$ STI cash bonus (2) A$ Post employ- ment Share - based payments Super- annuation A$ Termin- ation benefits A$ LTI (3) A$ Total Remun- eration A$ 12. (h) 2016 Name 2016 Non-executive Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov Sub total 132,089 7,500 12,500 - - 152,089 - - - - - - - - - - - - - 713 1,188 - - 1,901 - - - - - - 18,095 150,184 - 18,095 8,774 8,774 8,213 31,783 8,774 8,774 53,738 207,728 Other key management personnel P Balka 411,071 D Kurochkin S Southwood D Forsyth A Nikolaev 413,429 170,000 126,000 38,404 51,214 101,293 1,272 - - - 59,666 19,426 15,263 - Sub total 1,158,904 52,486 195,648 Total key management - - - - - - 140,826 - - - - 53,537 44,948 33,711 19,800 - 757,941 519,315 223,137 161,063 38,404 140,826 151,996 1,699,860 Proportion of remun- eration comprising options % 12.05% 0.00% 56.93% 100.00% 100.00% 7.06% 8.66% 15.11% 12.29% 0.00% personnel 1,310,993 52,486 195,648 1,901 140,826 205,734 1,907,588 1. 2. 3. Includes the value of fringe benefits and other allowances In respect of 2016. In accordance with the requirements of Accounting Standards, remuneration includes a proportion of the fair value of equity compensation granted or outstanding during the year (i.e. options granted under the LTI programme that remained unvested as at 31 December 2016). The fair value of equity instruments is determined at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not necessarily related to or indicative of the benefit (if any) that senior executives may ultimately realise should the equity instruments vest. The fair value of the options at the date of their grant has been determined in accordance with AASB 2 Share-based Payments. All options granted under the LTI programme are equity settled. 17 31 18 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (i) Remuneration report – audited (continued) Analysis of performance related elements of remuneration The following table shows the relative proportions of remuneration packages of the Executive Directors and KMP during the year ended 31 December 2017, that are linked to performance and those that are fixed. The STI and LTI components of each of the Senior Executive’s remuneration are contingent upon the achievement of the performance criteria. Name 2017 Other key management personnel Peter Balka, Interim CEO Denis Kurochkin, CFO Scott Southwood, General Manager Marketing David Forsyth, Company Secretary Sergey Efanov, General Manager Project F (4) Anatoly Nikolaev, General Manager Project F (3) 2016 Other key management personnel Peter Balka, Interim CEO Denis Kurochkin, CFO Scott Southwood, General Manager Marketing David Forsyth, Company Secretary Anatoly Nikolaev, General Manager Project F Fixed Annual Remuneration (including superannuation contributions) % At Risk - STI as percentage of Total Remuneration 2 % At Risk - LTI as percentage of Total Remuneration 1 % At Risk - Total as percentage of Total Remuneration % 81.32 83.66 82.83 86.04 66.50 100.00 79.58 79.86 76.19 78.23 100.00 14.98 11.70 10.74 7.18 16.80 0.00 13.36 11.49 8.71 9.48 0.00 3.70 4.64 6.43 6.78 16.70 0.00 7.06 8.66 15.11 12.29 0.00 18.68 16.34 17.17 13.96 33.50 0.00 20.42 20.15 23.82 21.77 0.00 1 2 3 4 Since the LTI is provided exclusively by way of options, the percentages disclosed also reflect the value of remuneration consisting of options, based on the value of options expensed during the year. Bonuses in respect of 2017 results were approved by the Board of Directors on 6 February 2018. Ceased as General Manager Project F on 31 August 2017. Commenced as General Manager Project F on 15 November 2017. The Options Scheme prohibits executives from entering into arrangements to protect the value of unvested LTI Plan awards. The prohibition includes entering into contracts to hedge their exposure to options awarded as part of their remuneration package. 32 19 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (i) Remuneration report – audited (continued) Analysis of performance related elements of remuneration The following table shows the relative proportions of remuneration packages of the Executive Directors and KMP during the year ended 31 December 2017, that are linked to performance and those that are fixed. The STI and LTI components of each of the Senior Executive’s remuneration are contingent upon the achievement of the performance criteria. Name 2017 Other key management personnel Peter Balka, Interim CEO Denis Kurochkin, CFO Scott Southwood, General Manager Marketing David Forsyth, Company Secretary Sergey Efanov, General Manager Project F (4) Anatoly Nikolaev, General Manager Project F (3) 2016 Other key management personnel Peter Balka, Interim CEO Denis Kurochkin, CFO Scott Southwood, General Manager Marketing David Forsyth, Company Secretary Anatoly Nikolaev, General Manager Project F Fixed Annual Remuneration (including superannuation contributions) % At Risk - STI as percentage of Total Remuneration 2 % At Risk - LTI as percentage At Risk - Total of Total as percentage Remuneration of Total 1 % Remuneration % 81.32 83.66 82.83 86.04 66.50 100.00 79.58 79.86 76.19 78.23 100.00 14.98 11.70 10.74 7.18 16.80 0.00 13.36 11.49 8.71 9.48 0.00 3.70 4.64 6.43 6.78 16.70 0.00 7.06 8.66 15.11 12.29 0.00 18.68 16.34 17.17 13.96 33.50 0.00 20.42 20.15 23.82 21.77 0.00 Since the LTI is provided exclusively by way of options, the percentages disclosed also reflect the value of remuneration consisting of 1 2 3 4 options, based on the value of options expensed during the year. Bonuses in respect of 2017 results were approved by the Board of Directors on 6 February 2018. Ceased as General Manager Project F on 31 August 2017. Commenced as General Manager Project F on 15 November 2017. The Options Scheme prohibits executives from entering into arrangements to protect the value of unvested LTI Plan awards. The prohibition includes entering into contracts to hedge their exposure to options awarded as part of their remuneration package. Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (j) Remuneration report – audited (continued) Analysis of bonuses included in remuneration During and in respect of the years ended 31 December 2017 and 2016, there were A$179,234 and A$195,648, respectively, in short- term incentive (STI) cash bonuses awarded as remuneration to key management personnel of the Company. (k) Share Options granted as remuneration During the year ended 31 December 2017, 37,074,000 options over ordinary shares in the Company were granted, of which 15,672,000 were granted to key management personnel (Year ended 31 December 2016: Nil). Further details of the Option Plan are included in Note 25 to the consolidated financial statements. During the reporting period, 2,000,000 options over ordinary shares in the Company vested as follows: Number of options vested during year Fair value of option at grant date A$ Exercise price per option A$ Vesting date start Grant date Vesting date finish Expiry date Option vesting performance hurdle A$ 2017 Directors C Wiggill O Hegarty R Morgan T Sitdekov 500,000 500,000 500,000 500,000 11/06/2015 11/06/2015 11/06/2015 11/06/2015 0.035 0.035 0.035 0.035 0.23 0.23 0.23 0.23 11/06/2015 11/06/2017 11/06/2020 11/06/2015 11/06/2017 11/06/2020 11/06/2015 11/06/2017 11/06/2020 11/06/2015 11/06/2017 11/06/2020 0.000 0.000 0.000 0.000 During the year ended 31 December 2016, 7,015,500 options over ordinary shares in the Company vested as follows: Number of options vested during year Grant date Fair value of option at grant date A$ Exercise price per option A$ Vesting date start Vesting date finish Expiry date Option vesting performance hurdle A$ 2016 Directors C Wiggill O Hegarty Executives P Balka P Balka D Kurochkin S Southwood D Forsyth D Forsyth 1,000,000 1,000,000 11/06/2015 11/06/2015 0.021 0.021 1,291,000 1,051,500 1,000,000 750,000 541,000 382,000 19/12/2014 17/04/2015 17/04/2015 17/04/2015 19/12/2014 17/04/2015 0.036 0.049 0.049 0.049 0.036 0.049 0.50 0.50 0.17 0.23 0.23 0.23 0.17 0.23 11/06/2015 11/06/2016 11/06/2020 11/06/2015 11/06/2016 11/06/2020 0.000 0.000 19/12/2014 28/02/2016 28/02/2016 17/04/2015 17/04/2016 17/04/2020 17/04/2015 17/04/2016 17/04/2020 17/04/2015 17/04/2016 17/04/2020 19/12/2014 28/02/2016 28/02/2016 17/04/2015 17/04/2016 17/04/2020 0.000 0.000 0.000 0.000 0.000 0.000 19 33 20 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (k) Remuneration report – audited (continued) Share Options granted as remuneration (continued) Details of options granted to key management personnel during the year ended 31 December 2017 (Year ended 31 December 2016: Nil) are as follows: Number of options granted during year Fair value of option at grant date A$ Exercise price per option A$ Vesting date start Grant date Vesting date finish Expiry date Option vesting performance hurdle A$ 2017 Executives P Balka P Balka D Kurochkin D Kurochkin D Forsyth D Forsyth S Efanov S Efanov 1,736,000 3,371,000 1,713,000 3,325,000 648,000 1,258,000 1,231,000 2,390,000 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 0.031 0.030 0.031 0.030 0.031 0.030 0.031 0.030 0.08 0.13 0.08 0.13 0.08 0.13 0.08 0.13 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 34 21 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (k) Remuneration report – audited (continued) Share Options granted as remuneration (continued) Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (l) Remuneration report – audited (continued) Analysis of Movement in Share Options Details of options granted to key management personnel during the year ended 31 December 2017 (Year ended 31 December 2016: Nil) are as follows: The movement during the reporting period in the number of options over ordinary shares of Tigers Realm Coal Limited shares held directly, indirectly, or beneficially by the key management personnel and their related entities are set out below. Number of options granted during year Grant date A$ Fair value of option at grant date Exercise price per option A$ Vesting date start Vesting date Expiry finish date hurdle A$ Option vesting performance 2017 Executives P Balka P Balka D Kurochkin D Kurochkin D Forsyth D Forsyth S Efanov S Efanov 1,736,000 3,371,000 1,713,000 3,325,000 648,000 1,258,000 1,231,000 2,390,000 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 18/10/2017 0.031 0.030 0.031 0.030 0.031 0.030 0.031 0.030 0.08 0.13 0.08 0.13 0.08 0.13 0.08 0.13 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 18/10/2017 18/10/2019 18/10/2022 18/10/2017 18/10/2020 18/10/2022 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Held at 1 January Granted as remun- eration Exerci -sed during year Forfeited/ Lapsed during year Vested at 31 December Held at 31 December Total Exercisable Not exer- cisable Name 2017 Directors C Wiggill B Gray O Hegarty R Morgan 1 T Sitdekov 2,500,000 - 3,500,000 1,500,000 1,500,000 - - - - - 2,500,000 2,500,000 2,500,000 - - - (1,000,000) 2,500,000 - - 1,500,000 1,500,000 - 2,500,000 1,500,000 1,500,000 Other key management personnel P Balka D Forsyth D Kurochkin S Southwood A Nikolaev S Efanov 5,965,000 2,092,000 2,000,000 1,500,000 - - 5,107,000 1,906,000 5,038,000 2,475,000 - 3,621,000 (562,000) 10,510,000 5,403,000 (103,000) 3,895,000 1,989,000 - - - - 7,038,000 2,000,000 3,975,000 1,500,000 - 3,621,000 - - - 2,500,000 1,500,000 1,500,000 5,403,000 1,989,000 2,000,000 1,500,000 - - - - - - - - - - - - - - - - - - - - - - - 1. R Morgan transferred the entitlement of 1,000,000 options to B.V. Mining Holding Limited during 2014. Granted as remun- eration Exerci sed during year Held at 1 January Forfeited during year Held at 31 December Vested at 31 December Total Exercisable Not exer- cisable Name 2016 Directors C Wiggill B Gray O Hegarty R Morgan 1 T Sitdekov 2,500,000 - 3,500,000 1,500,000 1,500,000 Other key management personnel P Balka D Forsyth D Kurochkin S Southwood A Nikolaev 5,965,000 2,092,000 2,000,000 1,500,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,500,000 - 3,500,000 1,500,000 1,500,000 5,965,000 2,092,000 2,000,000 1,500,000 - 2,000,000 2,000,000 - 3,000,000 1,000,000 1,000,000 - 3,000,000 1,000,000 1,000,000 3,862,000 1,710,000 1,000,000 750,000 3,862,000 1,710,000 1,000,000 750,000 - - - - - - - - - - - 1. R Morgan transferred the entitlement of 1,000,000 options to B.V. Mining Holding Limited during 2014. 21 35 22 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (m) Remuneration report – audited (continued) Analysis of Movement in Share Options, by value The movement during the reporting period, by value, of options over ordinary shares in the Company held by each key management person. Value of options granted during year A$ Value of options exercised in year A$ Value of options lapsed in year A$ Remuneration consisting of options for the year % 2017 Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov - - - - - - Other Key Management Personnel P Balka D Forsyth D Kurochkin S Southwood A Nikolaev S Efanov 154,946 57,828 152,853 75,092 - 109,861 2016 Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov Other Key Management Personnel P Balka D Forsyth D Kurochkin S Southwood A Nikolaev - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (127,000) - - - (89,920) (16,480) - - - - - - - - - - - - 2.4 100.0 100.0 100.0 100.0 100.0 18.6 16.3 17.1 13.9 0.0 33.5 12.5 0.0 56.9 100.0 100.0 9.1 12.3 8.7 15.1 0.0 For details on the valuation of options, including models and assumptions used, refer to Note 24. 36 23 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Remuneration report – audited (continued) Analysis of Movement in Share Options, by value 12. (m) person. 2017 Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov P Balka D Forsyth D Kurochkin S Southwood A Nikolaev S Efanov 2016 Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov P Balka D Forsyth D Kurochkin S Southwood A Nikolaev Other Key Management Personnel Other Key Management Personnel 154,946 57,828 152,853 75,092 109,861 - - - - - - - - - - - - - - - - - Value of options granted during year Value of options exercised in year A$ A$ Value of options lapsed in year A$ Remuneration consisting of options for the year % - - - - - - - - - - - - - - - - - - - - (127,000) (89,920) (16,480) - - - - - - - - - - - - - - - - - 2.4 100.0 100.0 100.0 100.0 100.0 18.6 16.3 17.1 13.9 0.0 33.5 12.5 0.0 56.9 100.0 100.0 9.1 12.3 8.7 15.1 0.0 For details on the valuation of options, including models and assumptions used, refer to Note 24. The movement during the reporting period, by value, of options over ordinary shares in the Company held by each key management Option vesting profiles over the Company’s ordinary shares granted as remuneration to each KMP and executive are detailed below: Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 12. (n) Remuneration report – audited (continued) Analysis of options over equity instruments granted as compensation Directors C Wiggill O Hegarty R Morgan 1 T Sitdekov Executives P Balka D Forsyth D Kurochkin S Southwood S Efanov Options granted Number Grant date Vested in year Forfeited/ Lapsed in year Vesting date start Vesting date finish 1,000,000 1,000,000 500,000 1,000,000 1,000,000 1,000,000 500,000 1,000,000 500,000 1,000,000 500,000 718,000 562,000 1,291,000 1,291,000 422,222 1,051,500 1,051,500 1,736,000 3,371,000 103,000 143,000 541,000 541,000 197,778 382,000 382,000 648,000 1,258,000 194,815 1,000,000 1,000,000 1,713,000 3,325,000 750,000 750,000 842,000 1,633,000 1,231,000 2,390,000 03/05/13 11/06/15 11/06/15 28/03/12 03/05/13 11/06/15 11/06/15 04/06/14 11/06/15 04/06/14 11/06/15 15/02/13 22/02/12 19/12/14 19/12/14 17/04/15 17/04/15 17/04/15 18/10/17 18/10/17 22/02/12 15/02/13 19/12/14 19/12/14 17/04/15 17/04/15 17/04/15 18/10/17 18/10/17 17/04/15 17/04/15 17/04/15 18/10/17 18/10/17 17/04/15 17/04/15 18/10/17 18/10/17 18/10/17 18/10/17 - - 500,000 - - - 500,000 - 500,000 - 500,000 - - - - - - 1,051,500 - - - - - - - - 382,000 - - - - 1,000,000 - - - 750,000 - - - - - - - (1,000,000) - - - - - - - - (562,000) - - - - - - - (103,000) - - - - - - - - - - - - - - - - - - - 03/05/13 11/06/15 11/06/15 28/03/12 03/05/13 11/06/15 11/06/15 04/06/14 11/06/15 04/06/14 11/06/15 15/02/13 22/02/12 19/12/14 19/12/14 17/04/15 17/04/15 17/04/15 18/10/17 18/10/17 22/02/12 15/02/13 19/12/14 19/12/14 17/04/15 17/04/15 17/04/15 18/10/17 18/10/17 17/04/15 17/04/15 17/04/15 18/10/17 18/10/17 17/04/15 17/04/15 18/10/17 18/10/17 18/10/17 18/10/17 03/05/14 11/06/16 11/06/17 28/03/14 03/05/15 11/06/16 11/06/17 04/06/15 11/06/17 04/06/15 11/06/17 15/02/15 22/02/14 19/12/15 28/02/16 17/04/15 17/05/16 17/04/17 18/10/19 18/10/20 22/02/14 15/02/15 19/12/15 28/02/16 17/05/15 17/04/16 17/04/17 18/10/19 18/10/20 17/05/15 17/04/16 17/04/17 18/10/19 18/10/20 17/04/16 17/04/17 18/10/19 18/10/20 18/10/19 18/10/20 1. R Morgan transferred the entitlement of 1,000,000 options to B.V. Mining Holding Limited during 2014. 13. Indemnification and insurance of Officers The Company provides insurance to cover legal liability and expenses for the Directors and Executive Officers of the Company. The Directors and Officers Liability Insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope the indemnity and that may be brought against the Officers in their capacity as Officers. Disclosure of the nature of the liability cover and the amount of the premium is subject to a confidentiality clause under the insurance policy. The Company has not provided any insurance or indemnity for the auditor of the Company. 23 37 24 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 14. Rounding and ASIC relief The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the Directors’ Report have been presented in Australian dollars and rounded to the nearest thousand dollars, unless otherwise indicated. 15. Audit and non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company are important. Details of the amounts paid or payable to Deloitte, the Group’s auditor, for audit and non-audit services provided during the year are outlined in Note 36 to the consolidated financial statements. The Board of Directors has considered the position and, in accordance with the advice received from the Audit, Risk and Compliance Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in Note 36, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved by the Board to ensure they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 ‘Code of Ethics for Professional Accountants’. 16. Proceedings on behalf of the Company No person has applied for leave of any Court to bring proceedings on behalf of the Company or 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 any part of those proceedings. Auditor’s Independence Declaration 17. The auditor’s independence declaration is included on page 96 and forms part of the Directors’ report for the year ended 31 December 2017. This report is made in accordance with a resolution of the Directors Dated at Melbourne this 27th day of February 2018. Signed in accordance with a resolution of the Directors: __________________________________ Owen Hegarty Director 38 25 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 14. Rounding and ASIC relief The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the Directors’ Report have been presented in Australian dollars and rounded to the nearest thousand dollars, unless otherwise indicated. 15. Audit and non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company are important. Details of the amounts paid or payable to Deloitte, the Group’s auditor, for audit and non-audit services provided during the year are outlined in Note 36 to the consolidated financial statements. The Board of Directors has considered the position and, in accordance with the advice received from the Audit, Risk and Compliance Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in Note 36, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved by the Board to ensure they do not impact the integrity and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 ‘Code of objectivity of the auditor; and Ethics for Professional Accountants’. 16. Proceedings on behalf of the Company No person has applied for leave of any Court to bring proceedings on behalf of the Company or 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 any part of those proceedings. 31 December 2017. 17. Auditor’s Independence Declaration The auditor’s independence declaration is included on page 96 and forms part of the Directors’ report for the year ended This report is made in accordance with a resolution of the Directors Dated at Melbourne this 27th day of February 2018. Signed in accordance with a resolution of the Directors: __________________________________ Owen Hegarty Director Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate governance statement The Board of Directors are responsible for the Company’s corporate governance. The Board guides and monitors the business affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. The Company has adopted systems of control and accountability as the basis for administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the highest standards of corporate governance commensurate with the Company’s needs. To the extent that they are appropriate and applicable the Company has adopted the Principles of Good Corporate Governance Recommendations (“Recommendations”) as published by the ASX Corporate Governance Council. As the Company’s activities develop in size, nature and scope, the Board will consider on an ongoing basis its corporate governance structures and whether they are sufficient given the Company’s size and nature of operations. This Corporate Governance Statement is current as at 27 February 2018 and has been approved by the Board. A description of the Group’s corporate governance practices are set out below. Where changes have occurred during the 2017 year the dates of these changes are shown. These corporate governance practices have been in place since the Company was listed on the ASX on 29 August 2011. Copies of the corporate governance documents mentioned in this statement are available on the Company’s website. Principle 1: Lay solid foundations for management and oversight Role of the Board The Board’s primary role is the protection and enhancement of long-term shareholder value. To fulfil this role, the Board is responsible for the overall corporate governance of the Group. The Board exercises its powers and performs its obligations in accordance with the provisions of the Company’s constitution and the Corporations Act 2001. The Board is responsible for: • charting the direction, policies, strategies and financial objectives of the Company and ensuring appropriate resources are available; • • • • • monitoring the implementation of these policies and strategies and the achievement of financial objectives; monitoring compliance with control and accountability systems, regulatory requirements and ethical standards; ensuring the preparation of accurate financial reports and statements; reporting to shareholders and the investment community on the performance and state of the Company; and reviewing on a regular and continuing basis: o o executive succession planning; and executive development activities. Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the Board to the CEO and senior executives as set out in the Group’s Delegation Policy, which is available on the Company’s website. These delegations of authority are reviewed on a regular basis. Board committees The Board had established three committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the Nomination and Remuneration Committee and the Audit, Risk and Compliance Committee. The Development and Finance Committee’s tenure ceased in September 2016 after fulfilling its intended purpose of reviewing and establishing Company strategy and guiding the successful completion of the Entitlement Offer. The necessity for and structures and memberships of the respective committees are reviewed regularly. Each committee has its own written charter setting out its role and responsibilities, composition, structure, and meeting requirements. These charters are subject to regular review and are available on the Company website. All matters determined by committees are submitted to the full Board as recommendations for Board decisions. Minutes of committee meetings are tabled at subsequent board meetings. Additional requirements for specific reporting by the committees to the Board are addressed in the charter of the individual committee. Management Performance Evaluation The Board, in conjunction with the Nomination and Remuneration Committee, is responsible for approving the performance objectives and measures for the CEO and other senior executives and providing input into the evaluation of performance against them. Performance evaluations of senior executives and management were completed for the 2017 financial year. The Company awarded bonuses to senior executives in respect of the 2017 financial year in February 2018. Refer to Section 12 of the Directors’ Report for details. 25 39 26 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 2: Structure of the Board Composition of the Board The names of the Company’s Directors in office at the date of this report, specifying which are independent, are set out in the Directors’ report. At the date of this report, the Board consists of four Non-Executive Directors and one Non-Executive Chairman. The composition of the Board is determined in accordance with the following principles outlined in the Board Charter: • a minimum of three Directors; • • the intention that as the Group develops the majority of Directors will be independent; and the requirement for the Board is to undertake an annual performance evaluation and consider the appropriate mix of skills required by the Board to maximise its effectiveness and its contribution to the Group. The Board considers the mix of skills and diversity of Board members when assessing the composition of the Board. At the date of this report the Board does not meet the Good Corporate Governance Recommendations in that the majority of Directors should be independent. Currently two of the five Directors are independent, Craig Wiggill and Owen Hegarty. On 6 February 2018, the Board reviewed the independence of Owen Hegarty and approved a change in his status to that of independent rather than non-independent. Given the developmental nature of the Company and the experience of the Directors, the Board considers the composition of the Board to be appropriate at this time. In due course, consideration will be given to increasing the number of independent Directors on the Board. Board Skills The Nomination and Remuneration Committee is responsible for developing and implementing processes to identify and assess necessary and desirable competencies and characteristics for Board members. The Board considers that collectively the Directors have the necessary skills, knowledge and experience to direct the Company as outlined in the following Skills Matrix. Experience and Competencies Professional Qualifications Coal Industry Experience Engineering Strategy, leadership and risk management Finance/Economics Commercial, trading and marketing Financial analysis and capital markets experience Corporate Governance and regulatory Project development and construction Stakeholder communication and engagement Safety, environment and social responsibility Director Independence The Board has adopted specific principles in relation to Directors’ independence. These state that when determining independence, a Director must be non-executive and the Board should consider whether the Director: • is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company; • • • • is or has been employed in an executive capacity by the Company of any other Group member, within three years before commencing to serve on the Board; within the last three years has been a principal of a material professional advisor or a material consultant to the Company or any other Group member, or an employee materially associated with the service provided; is a material supplier or customer of the Company or any other Group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; and has a material contractual relationship with the Company or other Group member other than a Director of the Company. Family ties and cross-directorships may be relevant in considering interests and relationships which may compromise independence and should be disclosed by Directors to the Board. 40 27 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 2: Structure of the Board Composition of the Board The names of the Company’s Directors in office at the date of this report, specifying which are independent, are set out in the Directors’ report. At the date of this report, the Board consists of four Non-Executive Directors and one Non-Executive Chairman. The composition of the Board is determined in accordance with the following principles outlined in the Board Charter: a minimum of three Directors; the intention that as the Group develops the majority of Directors will be independent; and the requirement for the Board is to undertake an annual performance evaluation and consider the appropriate mix of skills required by the Board to maximise its effectiveness and its contribution to the Group. The Board considers the mix of skills and diversity of Board members when assessing the composition of the Board. At the date of this report the Board does not meet the Good Corporate Governance Recommendations in that the majority of Directors should be independent. Currently two of the five Directors are independent, Craig Wiggill and Owen Hegarty. On 6 February 2018, the Board reviewed the independence of Owen Hegarty and approved a change in his status to that of independent Given the developmental nature of the Company and the experience of the Directors, the Board considers the composition of the Board to be appropriate at this time. In due course, consideration will be given to increasing the number of independent Directors rather than non-independent. on the Board. Board Skills necessary and desirable competencies and characteristics for Board members. The Board considers that collectively the Directors have the necessary skills, knowledge and experience to direct the Company as outlined in the following Skills Matrix. Experience and Competencies Professional Qualifications Coal Industry Experience Engineering Strategy, leadership and risk management Finance/Economics Commercial, trading and marketing Financial analysis and capital markets experience Corporate Governance and regulatory Project development and construction Stakeholder communication and engagement Safety, environment and social responsibility Director Independence The Board has adopted specific principles in relation to Directors’ independence. These state that when determining independence, a Director must be non-executive and the Board should consider whether the Director: is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company; commencing to serve on the Board; is or has been employed in an executive capacity by the Company of any other Group member, within three years before within the last three years has been a principal of a material professional advisor or a material consultant to the Company or any other Group member, or an employee materially associated with the service provided; is a material supplier or customer of the Company or any other Group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; and has a material contractual relationship with the Company or other Group member other than a Director of the Company. Family ties and cross-directorships may be relevant in considering interests and relationships which may compromise independence and should be disclosed by Directors to the Board. • • • • • • • • Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) The Board regularly reviews the independence of each Director in light of interests disclosed and will disclose any change to the ASX, as required by the ASX Listing Rules. Independent Professional Advice All Directors may obtain independent professional advice, at the Company’s cost, in carrying out their duties and responsibilities. Prior approval from the Chairman or the Board is required before seeking independent professional advice. Chairman The Board elects one of its Non-Executive Directors to be the Chairman. The Chairman is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with the Company’s senior executives. The Recommendations note that the Chairman should be an independent Director. The current Chairman, Mr Craig Wiggill satisfies the independence recommendation. The role of the Chairman is separate from that of the Interim CEO. The Interim CEO is responsible for implementing Group strategies and policies. Orientation Program The orientation program provided to new Directors and senior executives enables them to actively participate in Board decision making as soon as possible. It ensures that they have a full understanding of the Group’s financial position, strategies operations, culture, values and risk management policies. Directors have the opportunity to visit the Group’s business operations and meet with management to gain a better understanding of the Group’s operations. The Group also supports Directors to undertake continuing education relevant to the discharge of their obligations as Directors of the Group. The Nomination and Remuneration Committee is responsible for developing and implementing processes to identify and assess Nomination and Remuneration Committee The Nomination and Remuneration Committee consists of three Non-Executive Directors and the Chairman, who is independent. The Committee has a documented charter, approved by the Board which is available on the Company’s website. Details of the qualifications of members of the Nomination and Remuneration Committee and their attendance at meetings of the Committee are set out in the Directors’ Report. The Chairman of the Committee is Mr Owen Hegarty. The Nomination and Remuneration Committee operates in accordance with its charter, and the main responsibilities of the nomination activities of the Committee are to: • review and make recommendations to the Board relating to the remuneration of the Directors and the CEO; • • • • • • assess the necessary and desirable competencies of Board members; review Board succession planning; make recommendations to the Board regarding the appointment and re-election of Directors and the CEO; oversee succession planning, selection and appointment practices for management and employees of the Group; develop a process for the evaluation of the performance of the Board, its committees and Directors; and consider strategies to address Board diversity and the Company’s performance in respect of the Company’s Diversity Policy. The Committee is also responsible for considering and articulating the time needed to fulfil the role of Chairman and Non-Executive Directors. A performance evaluation of the Board, its committees and the Directors was completed for 2017. The outcomes of the evaluation were discussed and considered by all the Directors and specific performance goals were agreed upon for the coming year. 27 41 28 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 3: Promote ethical and responsible decision making Code of Conduct The Company has developed a Code of Conduct which has been endorsed by the Board and applies to all Directors, employees and contractors. The Code of Conduct is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour, professionalism and business ethics necessary to maintain confidence in the Group’s integrity. In summary, the Code of Conduct requires that all Group personnel at all times act with utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Group policies. Whistleblowers’ Policy The Company’s Whistleblowers’ Policy encourages employees and contractors to report concerns in relation to illegal, unethical or improper conduct without fear of reprisal if it is reported in good faith. The Company commits to absolute confidentiality and fairness in all matters raised. Securities Trading Directors and employees are allowed to purchase and sell shares in the Group provided they comply with the provisions of the Group’s Securities Trading Policy. The trading policy prohibits Directors and employees and their associates from trading in Group securities when they are in possession of price sensitive information which is not publicly available or during “blackout” periods. Directors and restricted employees must seek prior written approval before undertaking any trading in Company securities. The Directors and employees must also advise the Company Secretary if they intend to enter into, or have entered into, a margin lending or other security arrangement affecting Company securities. The Company Secretary will advise the ASX of any transactions conducted by Directors in relation to the Company securities. A register of interests is maintained which record security holdings in the Company by Directors and employees. Workplace Diversity The Board is committed to having an appropriate blend of diversity on the Board, and in the Group’s senior executive positions. The Group values diversity and recognises the benefits it can bring to the Group’s ability to achieve its goals. The Group has adopted a diversity policy which outlines the Group’s diversity objectives in relation to gender, age, cultural background and ethnicity. The Group has not established specific measurable gender and diversity objectives due to the start-up nature of its situation in the exploration and development of coking coal projects. However, the Group remains committed to recruiting the best candidates for roles at all levels within the Group at every operation. As at 31 December 2017, women comprised 17 % (31 December 2016: 15%) of employees throughout the Group. There are currently no female members of the Board. Copies of the Code of Conduct, Whistleblowers’ Policy, the Diversity Policy and the Securities Trading Policy are available on the Company’s website. Principle 4: Safeguard integrity in financial reporting Audit, Risk and Compliance Committee The Audit, Risk and Compliance Committee currently consists of three Non-Executive Directors and the Chairman, who is Independent. The Chairman of the Committee is a Non-Executive Director. The membership of the Committee does not fully meet the Good Corporate Governance Recommendations in that the Committee does not consist of a majority of independent Directors, with two of the four Directors being independent. Given the size of the Group and the Board, and straight forward structure of the Group, the Directors consider that the Audit, Risk and Compliance Committee is of sufficient size, independence and technical expertise to discharge its mandate effectively. All members of the Committee are financially literate and have an appropriate understanding of the mining industry. The Chairman, Mr Owen Hegarty has relevant qualifications with a Bachelor of Economics (Hons) and experience by virtue of being a director on other ASX listed companies. Mr Ralph Morgan has relevant qualifications, holding a BA (Political Science, Yale University) and MPhil (Russian and East European Studies, Oxford University) and relevant experience gained through being a member of the Audit Committee of PJSC Magnitorgorsk Iron & Steel Works and Board experience with PJSC MMK Norilsk Nickel. Mr Tagir Sitdekov has relevant qualifications with an MBA (University of Chicago Booth School of Business, London) and experience as a CFO at power generating company OJSC Sochi TES (a subsidiary of RAO Unified Energy System of Russia), and prior to that role he was a Senior Consultant at Creditanstalt Investment Bank for 2 years. 42 29 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 3: Promote ethical and responsible decision making Code of Conduct The Company has developed a Code of Conduct which has been endorsed by the Board and applies to all Directors, employees and contractors. The Code of Conduct is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour, professionalism and business ethics necessary to maintain confidence in the Group’s integrity. In summary, the Code of Conduct requires that all Group personnel at all times act with utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Group policies. The Company’s Whistleblowers’ Policy encourages employees and contractors to report concerns in relation to illegal, unethical or improper conduct without fear of reprisal if it is reported in good faith. The Company commits to absolute confidentiality and Whistleblowers’ Policy fairness in all matters raised. Securities Trading Directors and employees are allowed to purchase and sell shares in the Group provided they comply with the provisions of the Group’s Securities Trading Policy. The trading policy prohibits Directors and employees and their associates from trading in Group securities when they are in possession of price sensitive information which is not publicly available or during “blackout” periods. Directors and restricted employees must seek prior written approval before undertaking any trading in Company securities. The Directors and employees must also advise the Company Secretary if they intend to enter into, or have entered into, a margin lending or other security arrangement affecting Company securities. The Company Secretary will advise the ASX of any transactions conducted by Directors in relation to the Company securities. A register of interests is maintained which record security holdings in the Company by Directors and employees. Workplace Diversity The Board is committed to having an appropriate blend of diversity on the Board, and in the Group’s senior executive positions. The Group values diversity and recognises the benefits it can bring to the Group’s ability to achieve its goals. The Group has adopted a diversity policy which outlines the Group’s diversity objectives in relation to gender, age, cultural background and ethnicity. The Group has not established specific measurable gender and diversity objectives due to the start-up nature of its situation in the exploration and development of coking coal projects. However, the Group remains committed to recruiting the best candidates for roles at all levels within the Group at every operation. As at 31 December 2017, women comprised 17 % (31 December 2016: 15%) of employees throughout the Group. There are currently no female members of the Board. Copies of the Code of Conduct, Whistleblowers’ Policy, the Diversity Policy and the Securities Trading Policy are available on the Company’s website. Principle 4: Safeguard integrity in financial reporting Audit, Risk and Compliance Committee The Audit, Risk and Compliance Committee currently consists of three Non-Executive Directors and the Chairman, who is Independent. The Chairman of the Committee is a Non-Executive Director. The membership of the Committee does not fully meet the Good Corporate Governance Recommendations in that the Committee does not consist of a majority of independent Directors, with two of the four Directors being independent. Given the size of the Group and the Board, and straight forward structure of the Group, the Directors consider that the Audit, Risk and Compliance Committee is of sufficient size, independence and technical expertise to discharge its mandate effectively. All members of the Committee are financially literate and have an appropriate understanding of the mining industry. The Chairman, Mr Owen Hegarty has relevant qualifications with a Bachelor of Economics (Hons) and experience by virtue of being a director on other ASX listed companies. Mr Ralph Morgan has relevant qualifications, holding a BA (Political Science, Yale University) and MPhil (Russian and East European Studies, Oxford University) and relevant experience gained through being a member of the Audit Committee of PJSC Magnitorgorsk Iron & Steel Works and Board experience with PJSC MMK Norilsk Nickel. Mr Tagir Sitdekov has relevant qualifications with an MBA (University of Chicago Booth School of Business, London) and experience as a CFO at power generating company OJSC Sochi TES (a subsidiary of RAO Unified Energy System of Russia), and prior to that role he was a Senior Consultant at Creditanstalt Investment Bank for 2 years. Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 4: Safeguard integrity in financial reporting Audit, Risk and Compliance Committee The Audit, Risk and Compliance Committee has a documented charter approved by the Board. All members should be Non- Executive Directors, and the Chairman should be independent. Details of the qualifications of members of the Audit, Risk and Compliance Committee and their attendance at meetings of the Committee are set out in the Directors’ report. The Charter is available on the Company website and includes requirements for the Committee to consider the selection and appointment of the external auditor, and for the rotation of external audit engagement partners. The main responsibilities of the Committee are to: • review, assess and make recommendations to the Board on annual and half-year financial reports and all other financial information released to the market; • • • • • assist the Board in reviewing the effectiveness of the Group’s internal control environment covering; o o o effectiveness and efficiency of operations; reliability of financial reporting; and compliance with applicable laws and regulations. oversee the effective operation of the risk management framework; recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, the scope and quality of the audit and assess the performance of the auditor; consider the independence and competence of the external auditor on an ongoing basis; and review and approve the level of non-audit services provided by the external auditors and ensure that they do not adversely impact on auditor independence. In fulfilling its responsibilities, the Audit, Risk and Compliance Committee: • receives regular reports from management and the external auditor; • • • • meets with the external auditor at least twice a year without management being present, or more frequently if necessary; reviews the processes in place to support the CEO and CFO certification to the Board; reviews any significant disagreements between the auditors and management, irrespective of whether any have been resolved; and provides the external auditors with a clear line of direct communication at any point in time to either the Chair of the Audit, Risk and Compliance Committee or the Chairman of the Board. The Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party. CEO and CFO certification The Interim Chief Executive Officer and the Chief Financial Officer have declared in writing to the Board in accordance with Section 295 of the Corporations Act 2001 that the financial records of the Company for the financial year have been properly maintained, and that the Company’s financial reports for the financial year ended 31 December 2017 comply with accounting standards and present a true and fair view of the Company’s financial condition and operational results. The statement is required both annually and semi-annually. The Board has received and is satisfied with certification provided by the Interim CEO and CFO that the Group’s risk management and internal control systems are sound and operated effectively in all material aspects in relation to financial reporting risks for the financial year ended 31 December 2017. 29 43 30 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 4: Safeguard integrity in financial reporting External auditor The role of the external auditor is to provide an independent opinion that the financial reports are true and fair and comply with applicable accounting standards. The Company and the Committee policy is to appoint external auditors who clearly demonstrate quality and independence. Deloitte has provided an independence declaration to the Board for the financial year ended 31 December 2017. The Committee has considered the nature of the non–audit and assurance related services provided by the external auditor during the year and determined that services provided and the amount paid for those services are compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Committee has examined detailed material provided by the external auditor and by management and has satisfied itself that the standards of auditor independence and associated issues have been fully complied with. The roles of lead partner and audit review partner are rotated every five years. The external auditor will attend the annual general meeting and will be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. Principle 5: Make timely and balanced disclosure The Company has established written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Company’s securities. All information disclosed to the ASX is posted on the Company’s website as soon as it is disclosed to the ASX. The Company Secretary is responsible for communications with the ASX and compliance with the continuous disclosure requirements in the ASX Listing Rules. The Company also has in place a policy to monitor media sources. This role also oversees and coordinates information disclosure to shareholders, media and to the general public. The Company’s continuous disclosure policy is available on the Company’s website. Principle 6: Shareholder communications The Company places a high priority on communications with shareholders and aims to provide all shareholders with comprehensive, timely and equal access to balanced information about Group activities so that they can make informed investment decisions and provide undivided support to the Group. Principal communications to investors are through the provision of the annual report, financial statements, and market announcements. The Company website enables users to provide feedback and has an option for shareholders to register their email address for direct email updates on Group matters. The Company’s communications policy is available on the Company’s website. Principle 7: Recognise and manage risk The Board is responsible for satisfying itself that management has developed and implemented a sound system for risk management and internal control. The Board regards managing the risks that affect the Group’s businesses as a fundamental activity, as they influence the Group’s performance, reputation and success. Detailed work on the management of risk is delegated to the Audit, Risk and Compliance Committee and reviewed by the Board. The Committee recommends any actions it deems necessary to the Board for its consideration. The Committee is responsible for ensuring that there are adequate policies in relation to risk management, compliance and internal control systems. The Committee monitors the Company’s risk management by overseeing management’s actions in the evaluation, management, monitoring and reporting of material operational, corporate, compliance and strategic risks. The Board and the Committee receive regular reports from management on the effectiveness of the Group’s management of material business risks. The Company has adopted a Risk Management Policy which is available on the Company’s website. In relation to risk management the Committee regularly reviews the adequacy and effectiveness of the Company’s risk management framework including assessment of any material exposure to economic, environmental and social sustainability risks, how it manages or intends to manage and plans for managing each identified risk. It also reviews the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. 44 31 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 8: Remunerate fairly and responsibly The Nomination and Remuneration Committee operates in accordance with its charter which is available on the Company website. The Nomination and Remuneration Committee advises the Board on remuneration and incentive policies and practices generally and makes specific recommendations on remuneration packages and other terms of employment for executive Directors, other senior executives and Non-Executive Directors. The Nomination and Remuneration Committee is chaired by a Non-Executive Director and has four members, three being the recommended size. However, the Committee does not consist of a majority of independent Directors. Given the size of the Group and the Board, and the start-up nature and straightforward structure of the Group, the Directors consider the impact of this to be minimal, and the current structure to be sufficient. The structure of the remuneration of Non-Executive Directors is distinguished from that of executive Directors and senior executives, however, Board members are entitled to options as set out in this Annual Report having regard to the size of the Company’s management team and the minimal fees paid. The Nomination and Remuneration Committee also assumes responsibility for overseeing succession planning. Further information on Directors’ and executives’ remuneration, including principles used to determine remuneration, is set out in the Remuneration Report which forms a part of the Directors’ report. Details of the qualifications of members of the Nomination and Remuneration Committee and their attendance at meetings of the Committee are set out in the Directors’ report. Tigers Realm Coal Limited Directors’ report (continued) For the year ended 31 December 2017 Corporate Governance Statement (continued) Principle 4: Safeguard integrity in financial reporting External auditor applicable accounting standards. The role of the external auditor is to provide an independent opinion that the financial reports are true and fair and comply with The Company and the Committee policy is to appoint external auditors who clearly demonstrate quality and independence. Deloitte has provided an independence declaration to the Board for the financial year ended 31 December 2017. The Committee has considered the nature of the non–audit and assurance related services provided by the external auditor during the year and determined that services provided and the amount paid for those services are compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Committee has examined detailed material provided by the external auditor and by management and has satisfied itself that the standards of auditor independence and associated issues have been fully complied with. The roles of lead partner and audit review partner are rotated every five years. The external auditor will attend the annual general meeting and will be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. Principle 5: Make timely and balanced disclosure The Company has established written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Company’s securities. All information disclosed to the ASX is posted on the Company’s website as soon as it is disclosed to the ASX. The Company Secretary is responsible for communications with the ASX and compliance with the continuous disclosure requirements in the ASX Listing Rules. The Company also has in place a policy to monitor media sources. This role also oversees and coordinates information disclosure to shareholders, media and to the general public. The Company’s continuous disclosure policy is available on the Company’s website. Principle 6: Shareholder communications The Company places a high priority on communications with shareholders and aims to provide all shareholders with comprehensive, timely and equal access to balanced information about Group activities so that they can make informed investment decisions and provide undivided support to the Group. Principal communications to investors are through the provision of the annual report, financial statements, and market announcements. The Company website enables users to provide feedback and has an option for shareholders to register their email address for direct email updates on Group matters. The Company’s communications policy is available on the Company’s website. Principle 7: Recognise and manage risk The Board is responsible for satisfying itself that management has developed and implemented a sound system for risk management and internal control. The Board regards managing the risks that affect the Group’s businesses as a fundamental activity, as they influence the Group’s performance, reputation and success. Detailed work on the management of risk is delegated to the Audit, Risk and Compliance Committee and reviewed by the Board. The Committee recommends any actions it deems necessary to the Board for its consideration. The Committee is responsible for ensuring that there are adequate policies in relation to risk management, compliance and internal control systems. The Committee monitors the Company’s risk management by overseeing management’s actions in the evaluation, management, monitoring and reporting of material operational, corporate, compliance and strategic risks. The Board and the Committee receive regular reports from management on the effectiveness of the Group’s management of material business risks. The Company has adopted a Risk Management Policy which is available on the Company’s website. In relation to risk management the Committee regularly reviews the adequacy and effectiveness of the Company’s risk management framework including assessment of any material exposure to economic, environmental and social sustainability risks, how it manages or intends to manage and plans for managing each identified risk. It also reviews the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. 31 45 32 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Consolidated statement of financial position As at 31 December 2017 Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Investments in restricted financial instruments Other assets Total current assets Non-current assets Property, plant and equipment Total non-current assets Total assets Current Liabilities Trade and other payables Lease liability Bank loans payable Royalty liability Employee benefits Total current liabilities Non-current liabilities Trade and other payables Lease liability Employee benefits Royalty liability Provision for site restoration costs Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves (Accumulated losses) Total equity attributable to equity holders of the Company Non-controlling interest Total equity Note 31 December 2017 A$’000 31 December 2016 A$’000 12 14 17 15 18 19 22 20 23 21 19 22 21 23 24 2,011 2,898 4,929 1,453 861 85 12,237 15,600 15,600 27,837 3,767 739 1,357 86 1,137 7,086 140 1,757 - 5,292 64 7,253 14,339 13,498 173,747 22,693 (163,944) 32,496 (18,998) 13,498 17,109 1,390 965 566 - 728 20,758 7,498 7,498 28,256 651 2,011 - 216 433 3,311 - 828 141 3,465 - 4,434 7,745 20,511 173,747 35,729 (157,731) 51,745 (31,234) 20,511 The notes on pages 50 to 94 are an integral part of these consolidated financial statements. 46 33 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Consolidated statement of financial position As at 31 December 2017 Tigers Realm Coal Limited Consolidated statement of comprehensive income For the year ended 31 December 2017 Note 31 December 31 December 2017 A$’000 2016 A$’000 Note 31 December 2017 A$’000 31 December 2016 A$’000 Investments in restricted financial instruments Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Other assets Total current assets Non-current assets Property, plant and equipment Total non-current assets Total assets Current Liabilities Trade and other payables Lease liability Bank loans payable Royalty liability Employee benefits Total current liabilities Non-current liabilities Trade and other payables Lease liability Employee benefits Royalty liability Provision for site restoration costs Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves (Accumulated losses) Non-controlling interest Total equity Total equity attributable to equity holders of the Company 12 14 17 15 18 19 22 20 23 21 19 22 21 23 24 The notes on pages 50 to 94 are an integral part of these consolidated financial statements. 2,011 2,898 4,929 1,453 861 85 12,237 15,600 15,600 27,837 3,767 739 1,357 86 1,137 7,086 140 1,757 - 5,292 64 7,253 14,339 13,498 173,747 22,693 (163,944) 32,496 (18,998) 13,498 17,109 1,390 965 566 - 728 20,758 7,498 7,498 28,256 651 2,011 - 216 433 3,311 - - 828 141 3,465 4,434 7,745 20,511 173,747 35,729 (157,731) 51,745 (31,234) 20,511 33 Revenue from coal sales Mining and related costs of coal sold Transshipment and other port costs Gross margin on coal sold Other income Administrative and other operating expenses Share based payments Exploration and evaluation expenses Stripping costs expensed Change in provisions for current assets Loss resulting from change in royalty agreement liability Results from operating activities Net foreign exchange (loss) / gain Finance income Finance costs Net finance (costs) / income Loss before income tax Income tax expense Net Loss Other comprehensive income Items that may subsequently be reclassified to the profit or loss Foreign currency translation differences for foreign operations Total comprehensive loss for the period Net Loss is attributable to: Owners of the Company Non-controlling interest Net Loss for the period Total comprehensive loss attributable to: Owners of the Company Non-controlling interest Total comprehensive loss for the period Loss per share (cents per share) basic loss per share (cents) diluted loss per share (cents) 7 7 8 25 17 23 10 11 11 The notes on pages 50 to 94 are an integral part of these consolidated financial statements. 15,926 (9,271) (3,768) 2,887 68 (5,766) (126) (65) - (812) (2,126) (5,940) (670) 5 (382) (1,047) - - - - 95 (4,136) (248) (4,174) (174) (504) (3,681) (12,822) 656 10 (350) 316 (6,987) (12,506) (120) (7,107) (238) (12,744) (32) (7,139) (6,213) (894) (7,107) (7,102) (37) (7,139) (0.35) (0.35) 1,464 (11,280) (10,511) (2,233) (12,744) (7,296) (3,984) (11,280) (0.86) (0.86) 47 34 Tigers Realm Coal Annual Report 20170 0 0 ’ $ A l a t o T g n i l l o r t n o c - n o N 0 0 0 ’ $ A t s e r e t n I 0 0 0 ’ $ A 0 0 0 ’ $ A 0 0 0 ’ $ A l a t o T e v r e s e R r e h t O e v r e s e R e v r e s e r 0 0 0 ’ $ A ) s e s s o L 0 0 0 ’ $ A n g i e r o F y c n e r r u C d e s a b e r a h S n o i t a l s n a r T s t n e m y a p d e t a l u m u c c A ( e r a h S l a t i p a C 0 0 0 ’ $ A e t o N y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o C 7 1 0 2 r e b m e c e D 1 3 d e d n e r a e y e h t r o F d e t i m L i l a o C m l a e R s r e g i T 1 8 9 , 8 ) 0 5 2 , 7 2 ( 1 3 2 , 6 3 2 8 5 , 8 1 5 5 3 , 6 ) 3 6 9 , 6 4 1 ( 5 8 1 , 1 5 1 6 1 0 2 y r a u n a J 1 t a s a e c n a l a B 4 6 4 , 1 ) 4 4 7 , 2 1 ( ) 0 8 2 , 1 1 ( - 8 4 2 ) 4 3 7 ( 6 9 2 , 3 2 1 1 5 , 0 2 ) 2 3 ( ) 7 0 1 , 7 ( ) 9 3 1 , 7 ( - 6 2 1 - - - - ) 3 3 2 , 2 ( ) 1 5 7 , 1 ( ) 4 8 9 , 3 ( ) 1 1 5 , 0 1 ( 5 1 2 , 3 ) 6 9 2 , 7 ( - 8 4 2 ) 4 3 7 ( 6 9 2 , 3 2 - - - - - - - 2 7 0 , 7 - 5 1 2 , 3 5 1 2 , 3 - - - 7 5 2 - - - - - - 8 4 2 ) 1 1 5 , 0 1 ( - ) 1 1 5 , 0 1 ( - - ) 7 5 2 ( - - - - ) 4 3 7 ( 6 9 2 , 3 2 ) 4 9 8 ( 7 5 8 ) 7 3 ( - 3 7 2 , 2 1 ) 9 8 8 ( ) 3 1 2 , 6 ( ) 2 0 1 , 7 ( 6 2 1 ) 3 7 2 , 2 1 ( - - - ) 3 7 2 , 2 1 ( - ) 9 8 8 ( ) 9 8 8 ( - - - - - - 6 2 1 - - - ) 3 1 2 , 6 ( ) 3 1 2 , 6 ( - - - - - ) 4 3 2 , 1 3 ( 5 4 7 , 1 5 2 8 5 , 8 1 4 4 5 , 0 1 3 0 6 , 6 ) 1 3 7 , 7 5 1 ( 7 4 7 , 3 7 1 4 2 5 2 5 3 5 2 d o i r e p e h t r o f ) s s o l ( e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O ) s s o l ( t e N s e r a h s y r a n i d r o f o e u s s I y t i u q e g n i s i a r f o s t s o C y t i u q e n i s e g n a h c r e h t O s t n e m y a p d e s a b e r a h S 48 d o i r e p e h t r o f ) s s o l ( e v i s n e h e r p m o c l a t o T s s o l e v i s n e h e r p m o c r e h t O ) s s o l ( t e N s t s e r e t n i g n i l l o r t n o c - n o n f o n o i t i s i u q c A s t n e m y a p d e s a b e r a h S 7 1 0 2 y r a u n a J 1 t a e c n a l a B 5 3 8 9 4 , 3 1 ) 8 9 9 , 8 1 ( 6 9 4 , 2 3 9 0 3 , 6 5 5 6 , 9 9 2 7 , 6 ) 4 4 9 , 3 6 1 ( 7 4 7 , 3 7 1 7 1 0 2 r e b m e c e D 1 3 t a e c n a l a B . s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a e r a 4 9 o t 0 5 s e g a p n o s e t o n e h T Tigers Realm Coal Annual Report 2017 Tigers Realm Coal Limited Consolidated statement of cash flows For the year ended 31 December 2017 Cash flows from operating activities Cash receipts from customers Interest income received Cash paid to suppliers and employees Exploration and evaluation expenditure Interest and financing costs paid Income taxes paid Net cash used in operating activities Cash flows from investing activities Acquisition of property, plant and equipment Acquisition of restricted financial instruments Proceeds from the disposal of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Repayment of finance lease liabilities Proceeds from borrowings Security deposit Proceeds from issue of shares Share issue costs Net cash (used in) received from financing activities Net movement in cash and cash equivalents Cash and cash equivalents at beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the period Note 31 December 2017 A$’000 31 December 2016 A$’000 13,983 8 (20,465) (65) (429) (39) (7,007) (6,020) (948) 45 (6,923) (2,655) 1,365 658 - - (632) (14,562) 17,109 (536) 2,011 96 10 (4,632) (4,234) (316) (119) (9,195) (2,274) - - (2,274) (2,479) - 600 23,062 (500) 20,683 9,214 7,074 821 17,109 13 12 Non-cash investing activities: Finance leases On 31 March 2017, the Group executed a finance lease arrangement to acquire 5 Scania trucks, as amended 8 June 2017. The value of the trucks acquired under these finance lease arrangements was Russian Rubles (“RUB”) (“RUB 49.354 million (A$1.061 million). On 16 June 2017, the Group executed 4 finance lease arrangements with Liebherr to acquire 3 excavators and a bulldozer (“Liebherr fleet”). The value of the Liebherr fleet acquired under these finance lease arrangements was RUB 58.168 million (A$1.251 million). On 19 July 2016, the Group executed two finance lease arrangements to acquire 8 Scania trucks. The value of the trucks acquired under these finance lease arrangements was RUB 81.165 million (A$1.837 million). Non-cash financing activities: Underwriting fees During the year ended 31 December 2017 there were no non-cash financing activities (31 December 2016, A$0.234 million in underwriting fees were offset against the proceeds from rights issue). The notes on pages 50 to 94 are an integral part of these consolidated financial statements. 49 36 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 1. Reporting entity Tigers Realm Coal Limited (the “Company” or “TIG”) is a company domiciled in Australia. During the year ended 31 December 2017, the Company’s registered office changed to 151 Wellington Parade South, Melbourne Victoria, 3002 from Level 7, 333 Collins St, Melbourne, Victoria, 3000. The consolidated financial statements of the Company as at and for the year ended 31 December 2017 comprise the Company and its subsidiaries (together referred to as the “Group”). The Group is a for-profit entity and primarily is involved in coal exploration and evaluation, mining and sales activities. 2. (a) Basis of preparation Statement of compliance These consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of Directors on 27th February 2018. (b) Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are carried at fair value and share based payment expenses which are recognised at fair value. Historical cost is based on the fair values of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. Further details on how the Group estimates fair values of an asset or a liability are included in Note 5. The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the financial statements have been presented in Australian dollars and rounded to the nearest thousand dollars, unless otherwise indicated. (c) Significant accounting judgements, estimates and assumptions The application of the Group’s accounting policies, which are described in Note 3, requires management to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Information about assumptions that have the most significant effect on the amounts recognised in the financial statements and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial period are described in the following notes: • • • Going concern basis of accounting Carrying value of non-current assets Royalty liability Note 3 – Note 9 – Note 23 – (d) Comparative information Comparative figures have been reclassified to conform to changes in presentation in the current financial year as follows: Consolidated statement of comprehensive income for the year ended 31 December 2016 Administrative and other operating expenses Change in provision for current assets Results from operating activities 31 December 2016 As previously reported A$’000 (4,640) - (12,822) Effect of change in classification A$’000 31 December 2016 As reclassified A$’000 504 (504) - (4,136) (504) (12,822) 50 37 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 1. Reporting entity Tigers Realm Coal Limited (the “Company” or “TIG”) is a company domiciled in Australia. During the year ended 31 December 2017, the Company’s registered office changed to 151 Wellington Parade South, Melbourne Victoria, 3002 from Level 7, 333 Collins St, Melbourne, Victoria, 3000. The consolidated financial statements of the Company as at and for the year ended 31 December 2017 comprise the Company and its subsidiaries (together referred to as the “Group”). The Group is a for-profit entity and primarily is involved in coal exploration and evaluation, mining and sales activities. 2. (a) Basis of preparation Statement of compliance These consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of Directors on 27th February 2018. (b) Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are carried at fair value and share based payment expenses which are recognised at fair value. Historical cost is based on the fair values of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. Further details on how the Group estimates fair values of an asset or a liability are included in Note 5. The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the financial statements have been presented in Australian dollars and rounded to the nearest thousand dollars, unless otherwise indicated. (c) Significant accounting judgements, estimates and assumptions The application of the Group’s accounting policies, which are described in Note 3, requires management to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Information about assumptions that have the most significant effect on the amounts recognised in the financial statements and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial period are described in the following notes: • • • Note 3 – Note 9 – Going concern basis of accounting Carrying value of non-current assets Note 23 – Royalty liability (d) Comparative information Comparative figures have been reclassified to conform to changes in presentation in the current financial year as follows: Consolidated statement of comprehensive income for the year ended 31 December 2016 Administrative and other operating expenses Change in provision for current assets Results from operating activities 31 December 2016 31 December As previously Effect of change 2016 reported A$’000 in classification As reclassified A$’000 A$’000 (4,640) - (12,822) 504 (504) - (4,136) (504) (12,822) Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 3. Significant accounting policies The accounting policies set out below and in the related notes, have been applied consistently to all periods presented in these consolidated financial statements and consistently throughout the Group. (a) Going concern basis of accounting The consolidated financial statements have been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. For the year ended 31 December 2017, the Group had a net loss of A$7.107 million (31 December 2016: loss A$12.744 million) and net cash outflows from operating activities of A$7.007 million (31 December 2016: A$9.195 million). As at 31 December 2017, the Group had cash and cash equivalents of A$2.011 million (31 December 2016: A$17.109 million) and net current assets of A$5.151 million (31 December 2016: A$17.447 million) and an unused available credit line of A$11.96 million (31 December 2016 $nil). Based on the Group’s forecast cash flows, the Group will have a surplus of liquidity throughout the 12 months to 31 December 2018. This forecast, however, is primarily dependent, amongst other matters, upon the successful implementation of the production and sales assumptions, including but not limited to the following contained therein: • Actual coal quality being consistent with that indicative quality identified in testing performed to date and incorporated into the sales budget and commensurately actual coal prices achieved are at levels, or in excess of, those prices utilised in management forecasting; Actual mining and production levels being achieved and implemented within the expected cost levels, structure and timing; Coal shipments being realised within the forecast scheduling parameters, which are subject to a number of factors including but not limited to transhipment efficiency and weather conditions; Compliance with ongoing drilling obligations in accordance with the terms of the Amaam and Amaam North licences; Macroeconomic factors including the commodity (specifically coal) prices, exchange rates and the financial markets; and Compliance with those terms and conditions of the Sberbank loan referred to in Note 20, including but not limited to the conditions precedent to drawing down that level of financing required to maintain adequate liquidity and compliance with the relevant loan covenants. • • • • • After making enquiries, and considering the uncertainties described above, the Directors are of the view that the continued application of the going concern basis of accounting is appropriate due to the following factors: • The quality of coal required to realise the volume of production and sales contemplated in the Group’s forecasts is sufficiently verified for its reasonableness by coal testing and mining activities conducted to date. This, in conjunction with recent and forecast current thermal and coking coal prices, provides management with a reasonable basis to conclude that income from sales of coal will meet those expectations reflected in cash flow forecasts; Commercial mining operations commenced in January 2017. With the exception of a materially adverse unforeseen event transpiring, there have been no initial indicators in the coal production process to date which would suggest coal qualities and volumes and the cost of production being materially greater than those assumptions utilised in the cash flow forecasts through 31 December 2018; Licence Compliance obligations for both the Amaam and Amaam North tenements were restructured in accordance with the Licence Actualisation process, as a result of which there are no material drilling obligations in the year to 31 December 2018. Those minimal remaining obligations in the year to 31 December 2018 are either expected to be achieved with minimal cost and risk of non-compliance with licence terms and conditions. There is, therefore, a reasonable expectation that the Group will be able to successfully be compliant with licence drilling obligations, as reflected in the 2018 forecast; Coal shipments have been forecast after consideration of actual 2017 port operating performance during the shipping season and those climactic and other conditions which would be reasonably expected to occur and influence the Group’s shipping capabilities. The occurrence of materially adverse conditions in excess of reasonable conditions may influence the Group’s ability to meet the expected shipping schedules; The Group retains the right to develop Phase 2 and beyond of Project F only upon the existence of those internal and macroeconomic conditions, including but not limited to favourable coking coal price outlook, which would allow the Group to raise that additional funding required to finance the capital investment and operational requirements of the implementation of Phase 2 of Project F by making such a development commercially viable; and There are no indicators that the Group will not be able to utilise the Sberbank loan as and when required, be able to service the loan in accordance with the loan terms and remain compliant with the loan’s covenant through to the loan’s settlement. • • • • • Accordingly, the Directors have determined that it is appropriate for the Group to continue to adopt the going concern basis in preparing this financial report, and no adjustments have been made to the carrying value and classification of assets and the amount and classification of liabilities that may be required if the Group does not continue as a going concern. 37 51 38 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 3. (b) (i) Significant accounting policies (continued) Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests (NCI) in a subsidiary are allocated to the non-controlling interests even if doing so reduces the non-controlling interests below zero. All intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. (ii) Business combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. The Group measures goodwill at the acquisition date as: • • • • the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the profit or loss. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the Group’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured, settlement being accounted for in equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. Subsequent to acquisition date, transactions with non-controlling interests that do not result in a loss of control are accounted for as transactions with equity owners of the Group. Any difference between the amount of the adjustment to the non-controlling interest and any consideration paid or received is recognised as a separate reserve within equity. The assets, liabilities and contingent liabilities recognised at the acquisition date are recognised at fair value. In determining fair value, the consolidated entity has utilised valuation methodologies including discounted cash flow analysis. The assumptions made in performing this valuation include assumptions as to discount rates, foreign exchange rates, commodity prices, the timing of development, capital costs, and future operating costs. Any significant change in key assumptions may cause the acquisition accounting to be revised including recognition of goodwill or a discount on acquisition. Additionally, the determination of the acquirer and the acquisition date also require significant judgement to be made by the Group. 52 39 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 Significant accounting policies (continued) 3. (b) (i) Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests (NCI) in a subsidiary are allocated to the non-controlling interests even if doing so reduces the non-controlling interests below zero. All intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. (ii) Business combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. The Group measures goodwill at the acquisition date as: • • • • the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the profit or loss. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the Group’s incremental borrowing rate, being the rate at which a similar Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured, settlement being accounted for in equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. Subsequent to acquisition date, transactions with non-controlling interests that do not result in a loss of control are accounted for as transactions with equity owners of the Group. Any difference between the amount of the adjustment to the non-controlling interest and any consideration paid or received is recognised as a separate reserve within equity. The assets, liabilities and contingent liabilities recognised at the acquisition date are recognised at fair value. In determining fair value, the consolidated entity has utilised valuation methodologies including discounted cash flow analysis. The assumptions made in performing this valuation include assumptions as to discount rates, foreign exchange rates, commodity prices, the timing of development, capital costs, and future operating costs. Any significant change in key assumptions may cause the acquisition accounting to be revised including recognition of goodwill or a discount on acquisition. Additionally, the determination of the acquirer and the acquisition date also require significant judgement to be made by the Group. Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 3. Significant accounting policies (continued) (iii) Non-controlling interests For each business combination, the Group elects to measure any NCI in the acquiree either: • • at fair value; or at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners and are recorded in an equity reserve called “Other Reserve”. Adjustments to non-controlling interests are based on a proportionate amount of net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss. (iv) Loss of control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost (c) (i) Foreign currency Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. Each entity in the Group determines its own functional currency and the items included in the financial statements of each entity are measured using that functional currency. (ii) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on the retranslation are recognised in profit or loss. borrowing could be obtained from an independent financier under comparable terms and conditions. (iii) Foreign operations For the purpose of presenting these consolidated financial statements, the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportional share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant portion of the cumulative amount is reattributed to non-controlling interests. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and are presented in the translation reserve in equity. 39 53 40 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 3. (d) (i) Significant accounting policies (continued) Financial instruments Non-derivative financial assets The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in transactions in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset, the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has the following non-derivative financial assets: • • Trade and other receivables. Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Refer to Note 14 for details of trade and other receivables and Note 15 for Investments in restricted financial instruments Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less from the acquisition date that are subject to insignificant risk of changes in their fair value and are used by the Group in the management of its short-term commitments. (ii) Non-derivative financial liabilities The Group initially recognises non-derivative financial liabilities on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired. The Group has the following non-derivative financial liabilities: • • Trade and other payables Liabilities are recognised for amounts to be paid in the future for goods and services provided to the Group prior to the end of the reporting period and are stated at amortised cost. The amounts are unsecured and are usually paid within 30 days of recognition. Finance leases Finance leases to be paid in accordance with payment schedule based on the contractual agreements. (e) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. 54 41 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 Significant accounting policies (continued) 3. (d) (i) Financial instruments Non-derivative financial assets The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in transactions in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset, the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has the following non-derivative financial assets: Trade and other receivables. Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Refer to Note 14 for details of trade and other receivables and Note 15 for Investments in restricted financial instruments Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less from the acquisition date that are subject to insignificant risk of changes in their fair value and are used by the Group in the management of its short-term commitments. (ii) Non-derivative financial liabilities The Group initially recognises non-derivative financial liabilities on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired. The Group has the following non-derivative financial liabilities: Liabilities are recognised for amounts to be paid in the future for goods and services provided to the Group prior to the end of the reporting period and are stated at amortised cost. The amounts are unsecured and are usually paid within 30 days of • • • • Finance leases to be paid in accordance with payment schedule based on the contractual agreements. Trade and other payables recognition. Finance leases (e) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 3. (f) (i) Significant accounting policies (continued) Intangible assets Mineral Rights Acquired mineral rights comprise identifiable exploration and evaluation assets including mineral reserves acquired as part of a business combination and are recognised at fair value at the date of acquisition. The mineral rights will be reclassified as mine property and development from commencement of development and amortised when commercial production commences on a unit of production basis over the estimated economic reserve of the mine. The mineral rights are subject to impairment testing in accordance with the Group’s policy for exploration, evaluation and development assets. In the year ended 31 December 2015 all mineral rights were written-down. Details of the policy on assessing the carrying value of non-current assets are disclosed in Note 9. (ii) Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition refer Note 3(b)(ii) (business combinations). Goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised, however its carrying value is assessed annually against its recoverable amount, as explained below in Note 3(g) Impairment. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. In the year ended 31 December 2015 all goodwill was written-down. Details of the policy on assessing the carrying value of non-current assets are disclosed in Note 9. (iii) Other intangible assets Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. (iv) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. (v) Amortisation Except for goodwill and mineral rights, intangible assets are amortised on a straight-line basis in profit or loss over the estimated useful lives, from the date they are available for use. The estimated useful lives for the current and comparative years for computer software is three to five years. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (g) Impairment of non-derivative financial assets (including receivables) A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be measured reliably. All impairment losses are recognised in profit or loss. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss. 41 55 42 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 3. (h) Significant accounting policies (continued) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The probability of an outflow of economic benefits is one of the key criteria in determining the recognition and measurement of legal and constructive obligations: • If the likelihood of an outflow of economic resources is remote, neither disclosure of a contingency nor the recognition of a provision is made; If the likelihood of an outflow of economic resources is possible, a contingent liability is disclosed in the financial statements, unless the acquisition method of accounting for business combinations in Note 3(b)(ii) are applied and a liability equivalent to the fair value of the future outflows of economic benefits is able to be determined; or If the likelihood of an outflow of economic resources is probable, a provision is recognised. • • Provisions are determined by assessing the present value of the expected future outflow of economic benefits. The discounting of the expected (probable) future cash flows reflects the current market assessments of the time value of money and the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance charge. (i) Leases Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of financial position. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. (j) Exploration and evaluation costs Exploration and evaluation expenditure comprises costs directly attributable to: • • • • • Research and analysing exploration data; Conducting geological studies, exploratory drilling and sampling; Examining and testing extraction and treatment methods; Compiling pre-feasibility and definitive feasibility studies; and Exploration and evaluation costs, including the costs of acquiring licences. Exploration and evaluation expenditure is charged against profit and loss as incurred, except for expenditure incurred after a decision to proceed to development is made, in which case the expenditure is capitalised as an asset. (k) Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services and similar value added taxes (VAT in Russia and GST in Australia), except where the amount of VAT/GST incurred is not recoverable from the taxation authority. In these circumstances, the VAT/GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of VAT/GST included. The net amount of VAT/GST recoverable from, or payable to, the relevant tax authorities is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The VAT/GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the relevant tax authorities are classified as operating cash flows. (l) Other significant accounting policies Significant accounting policies that summarise the measurement and recognition basis used and which are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. 56 43 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 Significant accounting policies (continued) 3. (h) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The probability of an outflow of economic benefits is one of the key criteria in determining the recognition and measurement of legal and constructive obligations: • • • If the likelihood of an outflow of economic resources is remote, neither disclosure of a contingency nor the recognition of a provision is made; If the likelihood of an outflow of economic resources is possible, a contingent liability is disclosed in the financial statements, unless the acquisition method of accounting for business combinations in Note 3(b)(ii) are applied and a liability equivalent to the fair value of the future outflows of economic benefits is able to be determined; or If the likelihood of an outflow of economic resources is probable, a provision is recognised. Provisions are determined by assessing the present value of the expected future outflow of economic benefits. The discounting of the expected (probable) future cash flows reflects the current market assessments of the time value of money and the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance charge. (i) Leases position. Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of financial Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. (j) Exploration and evaluation costs Exploration and evaluation expenditure comprises costs directly attributable to: Research and analysing exploration data; Conducting geological studies, exploratory drilling and sampling; Examining and testing extraction and treatment methods; Compiling pre-feasibility and definitive feasibility studies; and Exploration and evaluation costs, including the costs of acquiring licences. • • • • • Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 4. (a) Application of new and revised accounting standards New and amended standards adopted The Group has adopted the following new and revised standards and interpretations issued by AASB that a relevant to their operations and effective for the current year Date issued Standard/Interpretation February 2016 AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses March 2016 AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 Effective for annual reporting periods beginning on or after 1 January 2017 1 January 2017 February 2017 AASB 2017-2 Amendments to Australian Accounting Standards – Further Annual Improvements 2014–2016 Cycle 1 January 2017 The Group has applied the amendments to AASB 107 for the first time in the current year. The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non-cash changes. The Group’s liabilities arising from financing activities consist of lease liability (Note 22) and bank loan payable (Note 20). A reconciliation between the opening and closing balances of these items is provided in Notes 20 and 22, respectively. Consistent with the transition provisions of the amendments, the Group has not disclosed comparative information for the prior period. Apart from the additional disclosure in Notes 20 and 22, the application of above amendments has had no impact on the Group's consolidated financial statements. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective for the year ended 31 December 2017 (b) Standard and interpretations in issue not yet adopted Exploration and evaluation expenditure is charged against profit and loss as incurred, except for expenditure incurred after a decision to proceed to development is made, in which case the expenditure is capitalised as an asset. A number of new standards, amendments to standards and interpretations are issued but not yet effective for annual periods beginning after 1 January 2017 and have not been applied in preparing these consolidated financial statements. (k) Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services and similar value added taxes (VAT in Russia and GST in Australia), except where the amount of VAT/GST incurred is not recoverable from the taxation authority. In these circumstances, Standard/Interpretation the VAT/GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of VAT/GST included. The net amount of VAT/GST recoverable from, or payable to, the relevant tax authorities is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The VAT/GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the relevant tax authorities are classified as operating cash flows. AASB 9 Financial Instruments, AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), AASB 2014-1 Amendments to Australian Accounting Standards [Part E – Financial Instruments], AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) Effective for annual reporting periods beginning on or after Applies on a modified retrospective basis to annual periods beginning on or after 1 January 2018 (l) Other significant accounting policies Significant accounting policies that summarise the measurement and recognition basis used and which are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. AASB 15 Revenue from Contracts with Customers, AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15, AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15, and AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to AASB 15 Applicable to annual reporting periods beginning on or after 1 January 2018 AASB 16 Leases Applicable to annual reporting periods beginning on or after 1 January 2019 43 57 44 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 4. (b) Application of new and revised accounting standards (continued) Standard and interpretations in issue not yet adopted (continued) AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of Share-based Payment Transactions Applicable to annual reporting periods beginning on or after 1 January 2018 AASB 2016-6 Amendments to Australian Accounting Standards – Applying AASB 9 Financial Instruments with AASB 4 Insurance Contracts, AASB 2017-3 Amendments to Australian Accounting Standards – Clarifications to AASB 4 Applicable to annual reporting periods beginning on or after 1 January 2018 AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvements 2014-2016 Cycle and Other Amendments AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income Tax Treatments AASB 17 Insurance Contacts AASB 2017-5 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates and Joint Ventures Applicable to annual reporting periods beginning on or after 1 January 2018 Applicable to annual reporting periods beginning on or after 1 January 2019 Applicable to annual reporting periods beginning on or after 1 January 2019 Applicable to annual reporting periods beginning on or after 1 January 2018 Applicable to annual reporting periods beginning on or after 1 January 2019 Applicable to annual reporting periods beginning on or after 1 January 2019 As at 31 December 2017, the Group has non-cancellable operating lease commitments of A$0.682 million, as disclosed in Note 27. A preliminary assessment indicates that these arrangements will meet the definition of a lease under AASB 16, and hence the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application of AASB 16. The new requirement to recognise a right-of-use asset and a related lease liability is not expected to have significant impact on the amounts recognised in the financial report. The application of AASB 15 will not have a significant impact on the financial position and/or financial performance of the Group, apart from providing more extensive disclosures on the Group’s revenue transactions. The directors of the Company do not anticipate that the application of other amendments will have a material impact on the Group's consolidated financial statements. 58 45 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 4. (b) Application of new and revised accounting standards (continued) Standard and interpretations in issue not yet adopted (continued) Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 5. Determination of fair values A number of the Group’s accounting policies and disclosures require the determination of fair value for financial assets and liabilities. AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of Applicable to annual Share-based Payment Transactions AASB 2016-6 Amendments to Australian Accounting Standards – Applying AASB 9 Financial Applicable to annual Instruments with AASB 4 Insurance Contracts, AASB 2017-3 Amendments to Australian Accounting reporting periods Standards – Clarifications to AASB 4 AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Applicable to annual Annual Improvements 2014-2016 Cycle and Other Amendments AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income Tax Applicable to annual Treatments AASB 17 Insurance Contacts AASB 2017-5 Amendments to Australian Accounting Standards – Effective Date of Amendments to Applicable to annual AASB 10 and AASB 128 and Editorial Corrections AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates Applicable to annual and Joint Ventures reporting periods beginning on or after 1 January 2018 beginning on or after 1 January 2018 reporting periods beginning on or after 1 January 2018 reporting periods beginning on or after 1 January 2019 Applicable to annual reporting periods beginning on or after 1 January 2019 reporting periods beginning on or after 1 January 2018 Applicable to annual reporting periods beginning on or after 1 January 2019 reporting periods beginning on or after 1 January 2019 As at 31 December 2017, the Group has non-cancellable operating lease commitments of A$0.682 million, as disclosed in Note 27. A preliminary assessment indicates that these arrangements will meet the definition of a lease under AASB 16, and hence the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application of AASB 16. The new requirement to recognise a right-of-use asset and a related lease liability is not expected to have significant impact on the amounts recognised in the financial report. The application of AASB 15 will not have a significant impact on the financial position and/or financial performance of the Group, apart from providing more extensive disclosures on the Group’s revenue transactions. The directors of the Company do not anticipate that the application of other amendments will have a material impact on the Group's consolidated financial statements. When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on inputs used in valuation techniques as follows. • • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). • If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred. (a) Non-derivative financial assets and liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Short-term receivables with no stated interest rate are measured at the original invoice amount if the effect of discounting is immaterial. Fair value is determined at initial recognition and, for disclosure purposes, at each annual reporting date. Further information about the assumptions made in measuring fair values is included in Note 26. 45 59 46 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 6. Segment reporting The Group has two reportable segments, as described below, which are its main mineral exploration and development projects. The Group has identified these segments based on the internal reports used and reviewed by the Group’s Interim Chief Executive Officer (the chief operating decision maker), in assessing performance and determining the allocation of resources. The accounting policies used by the Group in reporting segments internally are the same as those contained in Note 3. The Group’s reportable segments are outlined below. Amaam North Project Amaam Project Other The Amaam North Project is located in the Bering Basin in Chukotka province, Russia and consists of the Amaam North tenement. The Amaam North Project also includes transport and infrastructure assets associated with the Beringovsky Port and Coal Terminal acquired by the Company in June 2014. This Project currently is solely comprised of Project F Phase One, which has moved from exploration & evaluation to the mining and production phase. Project F is a component of the larger Amaam North tenement, where there is significant potential additional exploration and evaluation works to be undertaken. The Amaam Project is located in the Bering Basin in Chukotka province, Russia and consists of the Amaam tenement. This project has been and although activity is limited to compliance work, remains in the exploration and evaluation phase. Consists of corporate and office expenses primarily incurred at the Group’s Melbourne and Moscow offices. This is not a reportable segment. Management monitors the expenditure outlays in relation to each segment for the purposes of cost control and making decisions about resource allocation. The Group’s administration and financing functions are managed on a group basis and are included in the “Other”, which is not a reportable segment. 31 December 2017 Total income from coal sales Interest and other income Cost of coal sold Change in provisions for current assets Depreciation and amortisation Loss resulting from change in royalty agreement liability Finance costs Other segment expenses Net foreign exchange gain / (loss) Segment result Segment assets Segment liabilities 31 December 2016 Total segment revenue (interest and other income) Inventory losses Depreciation and amortisation Loss resulting from change in royalty agreement liability Other segment expense Net foreign exchange gain / (loss) Segment result Segment assets Segment liabilities Amaam North Project A$’000 Amaam Project A$’000 Total Reportable Segments A$’000 Other A$’000 Total A$’000 - - - - - - - (174) - (174) 35 (3) 15 - - - (604) (41) (630) 133 (28) 15,926 68 (13,039) (812) (279) (2,126) (382) (4,376) 77 (4,943) 26,238 (14,052) 80 (504) (284) (3,681) (7,782) 220 (11,951) 13,403 (7,603) 60 15,926 68 (13,039) (812) (279) (2,126) (382) (4,550) 77 (5,117) 26,273 - 5 - - - - - (1,128) (747) (1,870) 15,926 73 (13,039) (812) (279) (2,126) (382) (5,678) (670) (6,987) 1,564 27,837 (14,055) (284) (14,339) 95 (504) (284) (3,681) (8,386) 189 (12,581) 13,536 (7,631) 10 - - - (412) 477 75 14,720 (114) 105 (504) (284) (3,681) (8,798) 656 (12,506) 28,256 (7,745) 47 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 6. Segment reporting The Group has two reportable segments, as described below, which are its main mineral exploration and development projects. The Group has identified these segments based on the internal reports used and reviewed by the Group’s Interim Chief Executive Officer (the chief operating decision maker), in assessing performance and determining the allocation of resources. The accounting policies used by the Group in reporting segments internally are the same as those contained in Note 3. The Group’s reportable segments are outlined below. Amaam North Project The Amaam North Project is located in the Bering Basin in Chukotka province, Russia and consists of the Amaam North tenement. The Amaam North Project also includes transport and infrastructure assets associated with the Beringovsky Port and Coal Terminal acquired by the Company in June 2014. This Project currently is solely comprised of Project F Phase One, which has moved from exploration & evaluation to the mining and production phase. Project F is a component of the larger Amaam North tenement, where there is significant potential additional exploration and evaluation works to be undertaken. The Amaam Project is located in the Bering Basin in Chukotka province, Russia and consists of the Amaam tenement. This project has been and although activity is limited to compliance work, remains in the exploration and evaluation phase. Consists of corporate and office expenses primarily incurred at the Group’s Melbourne and Moscow offices. This is not a reportable segment. Management monitors the expenditure outlays in relation to each segment for the purposes of cost control and making decisions about resource allocation. The Group’s administration and financing functions are managed on a group basis and are included in the “Other”, which is not a reportable segment. Amaam North Project A$’000 Amaam Project A$’000 Total Reportable Segments A$’000 Other A$’000 Total A$’000 Amaam Project Other 31 December 2017 Total income from coal sales Interest and other income Cost of coal sold Change in provisions for current assets Depreciation and amortisation Loss resulting from change in royalty agreement liability Finance costs Other segment expenses Net foreign exchange gain / (loss) Segment result Segment assets Segment liabilities 31 December 2016 Total segment revenue (interest and other income) Inventory losses Depreciation and amortisation Loss resulting from change in royalty agreement liability Other segment expense Net foreign exchange gain / (loss) Segment result Segment assets Segment liabilities 15,926 68 (13,039) (812) (279) (2,126) (382) (4,376) 77 (4,943) 26,238 (14,052) 80 (504) (284) (3,681) (7,782) 220 (11,951) 13,403 (7,603) - - - - - - - - (174) (174) 35 (3) 15 - - - (604) (41) (630) 133 (28) 15,926 68 (13,039) (812) (279) (2,126) (382) (4,550) 77 (5,117) 26,273 95 (504) (284) (3,681) (8,386) 189 (12,581) 13,536 (7,631) 1,564 27,837 (14,055) (284) (14,339) - 5 - - - - - (1,128) (747) (1,870) 10 - - - (412) 477 75 14,720 (114) 15,926 73 (13,039) (812) (279) (2,126) (382) (5,678) (670) (6,987) 105 (504) (284) (3,681) (8,798) 656 (12,506) 28,256 (7,745) 47 61 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 2017486.Segment reporting(continued) Geographical informationThe Group manages its business on a worldwide basis but primarily holds non-current assets in onegeographic segment,beingRussia.20172016RevenuesNon-currentassetsRevenues(interestand other income)Non-currentassetsA$’000A$’000A$’000A$’000Asia15,578---Russia41615,600957,498Total15,99415,600957,4987.Revenue31 December201731 December2016A$’000A$’000Revenuefrom thermal coal sales9,820-Revenuefrom semisoft coal sales4,290-Revenue from shipment of coal1,816Total revenuefrom coal sales15,926-Otherincome6895Total revenue15,99495Recognition and measurement: RevenueRevenue from the sale of coal is recognised when all the following conditions have been satisfied:(a) the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;(b) the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the coal sold;(c) the amount of revenue can be measured reliably;(d) it is probable that the economic benefits associated with the transaction will flow to the Company; and(e) the costs incurred or to be incurred in respect of the transaction can be measured reliably.Revenue is measured at the fair value of the consideration received or receivable, reflecting contractually defined terms of payment and excluding taxes, levies or duties collected on behalf of the government/ other statutory bodies.Coal products are sold in accordance with internationally recognised shipping terms (INCO), primarily on eitherfree on board (“FOB”), Beringovsky Port or cost and freight (“CFR”) terms. Where sales are made on the FOB basis, the risks and rewards of ownership pass to the customer after the time the goods have been delivered on board the vessel. Sales made in accordance with CFR terms differ to FOB as the Company is obliged to pay for the cost of shipping and other costs necessary to bring the product to the destination port. However, in CFR sales contracts the risk of loss of or damage to the goods, as well as anyadditional costs due to events occurring after the time the goods have been delivered on board the vessel is transferred from the Company to the customer when the goods pass the ship's rail in the port of shipment, Beringovsky.Preliminary volume and quality of coal shipped are independently measured upon loading the vessel at the Beringovsky Port. Coal sales contracts include terms in accordance with which the sales price is defined with reference to the initial coal quality parameters, as adjusted for the results of coal quality tests performed upon delivery of the product to the destination port. If coal does not meet minimum standards, the shipment may be either rejected or an adjustment made up or down to the initial contract price. Accordingly, the Company recognises revenue on coal sales at the earlier of then loaded on to the vessel or when the coal quality tests at the destination port affirm both the mass and quality characteristics, dependent upon the specific terms of each sales agreement.Revenue from theshipment of coal is recognised at the point of delivery on shore at the destination port.Advances received from the customers are reported as customer’s deposits unless the above conditions are satisfied.Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 8. Administrative and other operating expenses Wages, salaries and other personnel costs Contractors and consultants’ fees Legal fees and compliance costs Depreciation expense Repairs and maintenance Port operating expenses Accounting and audit fees Office accommodation costs Transportation and freight costs Travel IT and communication costs Insurance Other 9. Carrying value of non-current assets Amaam North Project CGU 31 December 2017 A$’000 31 December 2016 A$’000 (2,242) (1,124) (907) (279) - (18) (244) (166) (2) (191) (97) (100) (396) (5,766) (1,306) (599) (434) (16) (406) (322) (216) (121) (144) (115) (104) (86) (267) (4,136) During the year ended 31 December 2017, with the operational development of Phase One of Project F, the carrying value of non- current assets of Amaam North Project CGU, net of accumulated depreciation, increased by A$8.102 million to A$15.600 million (as of 31 December 2016 A$7.498 million) (refer to Note 18 for details). As at 31 December 2017, the Group concluded that due to: • • • • Commencement of Phase One of the Project F Feasibility Study Update’s principles during 2017; The profits generated from the coal sales realised during 2017; the absence of significant adverse changes in mid and long-term coal price forecasts; and the completion of the asset procurement and infrastructure development activities in 2017 sufficient to advance expected production and sales volumes in 2018, there is no necessity to recognise further impairment losses for the Amaam North Project CGU and accordingly estimated the recoverable amount through the value in use of Amaam North Project CGU non-current assets and accordingly the assets are measured at their carrying value. Management also believe that at this early stage of Amaam North’s development, until both production and sales levels and related financial performance assumptions currently included in deriving the Amaam North CGU’s positive recoverable amount, are verified by sufficient observable indications of the ability to achieve these assumptions on an ongoing basis, there is no necessity for the reversal of impairment losses recognised in prior periods. Methodology The Group assessed the recoverable amount of Amaam North Project CGU primarily through determining its value-in-use. The Group estimates the value-in-use of the Amaam North Project CGU using a discounted cash flow model for the life of the project. The projected cash flows are for a period in excess of five years and represent management’s estimate of the life of mine. The calculation of value-in-use is sensitive to a number of assumptions: • • • • Short, mid and long-term commodity prices; Discount rate; Operating expenditure and capital cost; and Foreign exchange rates. 62 49 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 8. Administrative and other operating expenses Wages, salaries and other personnel costs Contractors and consultants’ fees Legal fees and compliance costs Depreciation expense Repairs and maintenance Port operating expenses Accounting and audit fees Office accommodation costs Transportation and freight costs IT and communication costs Travel Insurance Other 9. Carrying value of non-current assets Amaam North Project CGU 31 December 31 December 2017 A$’000 2016 A$’000 (2,242) (1,124) (907) (279) - (18) (244) (166) (2) (191) (97) (100) (396) (1,306) (599) (434) (16) (406) (322) (216) (121) (144) (115) (104) (86) (267) (5,766) (4,136) During the year ended 31 December 2017, with the operational development of Phase One of Project F, the carrying value of non- current assets of Amaam North Project CGU, net of accumulated depreciation, increased by A$8.102 million to A$15.600 million (as of 31 December 2016 A$7.498 million) (refer to Note 18 for details). As at 31 December 2017, the Group concluded that due to: Commencement of Phase One of the Project F Feasibility Study Update’s principles during 2017; The profits generated from the coal sales realised during 2017; the absence of significant adverse changes in mid and long-term coal price forecasts; and the completion of the asset procurement and infrastructure development activities in 2017 sufficient to advance expected production and sales volumes in 2018, there is no necessity to recognise further impairment losses for the Amaam North Project CGU and accordingly estimated the recoverable amount through the value in use of Amaam North Project CGU non-current assets and accordingly the assets are measured at their carrying value. Management also believe that at this early stage of Amaam North’s development, until both production and sales levels and related financial performance assumptions currently included in deriving the Amaam North CGU’s positive recoverable amount, are verified by sufficient observable indications of the ability to achieve these assumptions on an ongoing basis, there is no necessity for the reversal of impairment losses recognised in prior periods. Methodology The Group assessed the recoverable amount of Amaam North Project CGU primarily through determining its value-in-use. The Group estimates the value-in-use of the Amaam North Project CGU using a discounted cash flow model for the life of the project. The projected cash flows are for a period in excess of five years and represent management’s estimate of the life of mine. The calculation of value-in-use is sensitive to a number of assumptions: Short, mid and long-term commodity prices; Discount rate; Operating expenditure and capital cost; and Foreign exchange rates. • • • • • • • • 49 63 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 2017509.Carrying value of non-current assets (continued)Short, midand long-term commodity prices:The Group considered information available from industry analysts and commentators in relation to commodityprice forecasts. It continued to use a leading industry specialist’s forecast real prices across the anticipated mine life as its preferred source of data when analysing price forecasts due to the level of detail they supply for their 20-year forecast prices. It also considered the short-term forecasts of other market commentators to ensure a degree of consistency with the commodity price forecasts adopted. As at 31 December 2017, the range of the coking and thermal coal price forecasts adopted by the Group over the estimated mine life for Amaam North Project is US$98to US$111and US$55 to US$84 per ton, respectively.Discount rate:In calculating the value-in-use, areal pre-tax discount rate of 11.62% forthe Amaam North Project CGU was applied to the pre-tax cash flows expressed in real terms. These discount rates were derived from the Group’s pre-tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to the particular CGU and to determine the pre-tax rate. The WACC takes into account returns on both debt and equity. Operating expenditure and capital costs: The Group engaged a number of external consultants to assist with the cost estimates, as part of the process of completing the Amaam North Project BFS. The reasonableness of the information providedis assessed internallybefore making informed decisions on estimates.Foreign exchange rates: Foreign exchange rates (USD: RUB) are estimated with reference to existing conditions and external market forecasts,updated at least annually. Amaam Project CGUDuring the year ended 31 December 2017, there were minimal activities undertaken at the Amaam Project CGU, there being no additions to the carrying value of non-current assets, their carrying value remaining at $Nil as at31 December 2017.As the development of the Amaam Project is not expected in the foreseeable future, as at 31 December 2017, the Group concluded that there are no indications that asset write-downs recognised in prior periods for Amaam Project CGUrequire reversal.Recognition and measurement: Non-current assets The carrying amounts of the Group’s non-financial assets excluding goodwill are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill the recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest groups of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying value of any goodwill allocated to the cash generating units and then to reduce the carrying amount of the other assets in the cash generating unit (group of units) on a pro rata basis.An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in priorperiods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,net of depreciation or amortisation, if no impairment loss had been recognised.64 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175110.Income tax expense A reconciliation between tax expense and accounting profit multiplied by Australia’s domestic tax rate for the years ended 31December 2017and 2016is set out below:31 December201731 December2016A$’000A$’000Loss before tax from continuing operations(6,987)(12,506)Income tax (credit) using the domestic corporation tax rate of 30%(2,096)(3,752)Changes in income tax expense due to:Effect of tax rates in foreign jurisdictions1,0331,439Non-deductible expenses-royalty liability258460Tax deductible expenses not recognised for accounting purposes(317)(348)Assessable imputed interest income8057Non-deductible expenses-other106131Adjustments to prior periods’ assessable income44184Current period tax losses for which no deferred tax asset was recognised1,0022,067Total income tax expense on pre-tax net profit12023831 December201731 December2016A$’000A$’000Current tax expense120238Deferred tax (credit) --Total income tax expense 120238Unrecognised deferred tax assets31 December2017A$’00031 December2016A$’000Netdeferred tax assets not recognised in respect of tax losses23,84526,665Recognition and measurement: Income taxes Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity, or in comprehensive income.Current taxCurrent tax is the expected tax payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.65 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175110.Income tax expense A reconciliation between tax expense and accounting profit multiplied by Australia’s domestic tax rate for the years ended 31December 2017and 2016is set out below:31 December201731 December2016A$’000A$’000Loss before tax from continuing operations(6,987)(12,506)Income tax (credit) using the domestic corporation tax rate of 30%(2,096)(3,752)Changes in income tax expense due to:Effect of tax rates in foreign jurisdictions1,0331,439Non-deductible expenses-royalty liability258460Tax deductible expenses not recognised for accounting purposes(317)(348)Assessable imputed interest income8057Non-deductible expenses-other106131Adjustments to prior periods’ assessable income44184Current period tax losses for which no deferred tax asset was recognised1,0022,067Total income tax expense on pre-tax net profit12023831 December201731 December2016A$’000A$’000Current tax expense120238Deferred tax (credit) --Total income tax expense 120238Unrecognised deferred tax assets31 December2017A$’00031 December2016A$’000Netdeferred tax assets not recognised in respect of tax losses23,84526,665Recognition and measurement: Income taxes Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity, or in comprehensive income.Current taxCurrent tax is the expected tax payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175210.Income tax expense (continued)Recognition and measurement: Income taxes (continued) Deferred taxDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit willbe realised. Tax exposureIn determining the amount of current and deferred tax,the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.Tax consolidationThe Company and its wholly-owned Australian resident entity are part of a tax consolidated group. As a consequence, all members of the tax consolidated group are taxed as a single entity. The head entity within the tax consolidated group is Tigers RealmCoal Limited. The tax losses incurred in Australia do not expire under current tax legislation. In overseas jurisdictions, tax losses can be carried forward for varying periods. As at 31 December 2016 and 2015, no deferred tax assets have been recognised for carried forwardtax losses as it is not probable that future taxable profit will be available against which the Group can utilise the benefits.Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 11. (Loss) per share (Loss) per share Basic (loss) per share – cents Diluted (loss) per share – cents (a) Basic (loss) per share 31 December 2017 Cents 31 December 2016 cents a b (0.35) (0.35) (0.86) (0.86) The calculation of basic loss per share (EPS) at 31 December 2017 was based on the loss attributable to ordinary equity holders of the Company of A$6.213 million (At 31 December 2016: loss of A$10.511 million) and a weighted average number of ordinary shares outstanding during the period ended 31 December 2017 of 1,791,669,870 (for the year ended 31 December 2016: 1,222,438,179). (b) Diluted (loss) per share The calculation of diluted loss per share at 31 December 2017 is the same as basic loss per share. The Company had issued 59,437,000 options over ordinary shares, which have been excluded from the calculation of diluted earnings per share because they are anti-dilutive for the reporting period. 12. Cash and cash equivalents Bank balances Cash and cash equivalents 31 December 2017 A$’000 31 December 2016 A$’000 2,011 2,011 17,109 17,109 All cash and cash equivalents are available for use by the Group. 13. Reconciliation of loss for the year to net cash flows from operating activities Cash flows from operating activities Loss for the period Foreign exchange loss Share based payments Net change in royalty agreement liability Depreciation expense Change in provisions for current assets Income tax expense Movements in working capital Change in trade and other receivables Change in inventory Change in other assets Change in prepayments Change in employee provisions Change in trade and other payables Net cash used in operating activities 31 December 2017 A$’000 31 December 2016 A$’000 25 23 10 (7,107) 15 126 1,996 279 812 81 (3,798) (1,541) (4,010) (80) (998) 369 3,051 (7,007) (12,744) 192 248 3,681 16 - 238 (8,369) (579) (677) 90 (16) 420 (64) (9,195) 53 66 Tigers Realm Coal Annual Report 2017The calculation of basic loss per share (EPS) at 31 December 2017 was based on the loss attributable to ordinary equity holders of the Company of A$6.213 million (At 31 December 2016: loss of A$10.511 million) and a weighted average number of ordinary shares outstanding during the period ended 31 December 2017 of 1,791,669,870 (for the year ended 31 The calculation of diluted loss per share at 31 December 2017 is the same as basic loss per share. The Company had issued 59,437,000 options over ordinary shares, which have been excluded from the calculation of diluted earnings per share because they are anti-dilutive for the reporting period. Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 11. (Loss) per share (Loss) per share Basic (loss) per share – cents Diluted (loss) per share – cents (a) Basic (loss) per share December 2016: 1,222,438,179). (b) Diluted (loss) per share 12. Cash and cash equivalents Bank balances Cash and cash equivalents Cash flows from operating activities Loss for the period Foreign exchange loss Share based payments Net change in royalty agreement liability Depreciation expense Change in provisions for current assets Income tax expense Movements in working capital Change in trade and other receivables Change in inventory Change in other assets Change in prepayments Change in employee provisions Change in trade and other payables Net cash used in operating activities All cash and cash equivalents are available for use by the Group. 13. Reconciliation of loss for the year to net cash flows from operating activities 31 December 31 December 2017 Cents (0.35) (0.35) 2016 cents (0.86) (0.86) a b 31 December 31 December 2017 A$’000 2016 A$’000 2,011 2,011 17,109 17,109 31 December 31 December 2017 A$’000 2016 A$’000 25 23 10 (7,107) 15 126 1,996 279 812 81 (3,798) (1,541) (4,010) (80) (998) 369 3,051 (7,007) (12,744) 192 248 3,681 16 - 238 (8,369) (579) (677) 90 (16) 420 (64) (9,195) 53 Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 14. Trade and other receivables Trade and other receivables VAT and GST receivable 15. Investment in restricted financial instruments Alfa Bank promissory notes 31 December 2017 A$’000 31 December 2016 A$’000 1,184 1,714 2,898 174 1,216 1,390 31 December 2017 A$’000 31 December 2016 A$’000 861 861 - - On 21 December 2017, the Group acquired 12 promissory notes issued by Alfa Bank, a leading Russian commercial bank, as a condition precedent to the completion of the Sberbank loan. These promissory notes are at call after their maturity on 31 January 2018 and accrue interest at the rate of 5.9% per annum. The promissory notes’ fair value approximates their nominal value and accordingly are measured at their fair value. The promissory notes are pledged as collateral to the Sberbank loan and are therefore effectively not redeemable until such time as all amounts due to Sberbank have been settled. For further details of the Sberbank loan, refer to Note 20. 16. Other assets Security deposit Other assets 31 December 2017 A$’000 31 December 2016 A$’000 - 85 85 722 6 728 In 2014, the Group issued a bank guarantee in favour of CAT as part of the arrangement to acquire a small fleet of mobile equipment, the carrying value was US$0.523 million or A$0.722 million at 31 December 2016, having decreased from an initial amount of US$1.607 million upon inception. The obligation was fully settled in September 2017 and the guarantee deposit refunded. 67 54 Tigers Realm Coal Annual Report 201768 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175517.Inventories31 December201731 December2016A$’000A$’000Coal inventories:net of provision of A$0.850million for recognition of inventories at the lower of cost and their net realisable value (At 31 December 2016: nil)2,386-Fuel:net of provisions of A$nil(At 31 December 2016A$0.087 million)462388Other consumables:net of provisionsof A$0.098million (At 31 December 2016A$0.417 million)2,0815774,929965Management performs a regular review of the recoverability of inventories, including coal stocks, to assess the Company’s ability to recover the cost of inventories on hand. Accordingly, a provision of A$0.850 million was recognised for the recoverability of coal stocks at 31 December 2017, primarily in respect of 22.2 thousand tonnes of coal stock maintained at the Company’s interimcoal stockpile, which require washing, crushing and sizing prior to commercial realisation.Recognition and measurement: Inventories Inventories are valued at the lower of cost and net realisable value and upon initial recognition on the weighted average costbasis. The cost of raw materials and consumable stores is the purchase price. The cost of partly-processed and saleable products is generally the cost of production, including:•labour costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore; •the depreciation of mining properties and leases and of property, plant and equipment used in the extraction and processing ofore; and•production overheads.Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.Inventories are periodically assessed for the existence of slow moving and obsolete stocks and adjustments to the recoverable amount recognised as necessary.6 5 9 0 9 , 2 1 7 1 , 4 - 1 2 0 , 1 - 1 0 1 , 8 5 3 1 , 0 1 ) 1 4 2 ( 5 9 9 , 7 1 - ) 8 6 ( ) 5 3 5 ( 0 3 ) 3 0 6 ( ) 2 2 8 , 1 ( ) 5 9 3 , 2 ( 0 0 6 , 5 1 8 9 4 , 7 - - - - - - - 2 4 2 4 - - - - - ) 3 ( ) 3 ( 9 3 - - 9 0 9 , 2 0 9 7 0 6 3 , 2 7 1 9 5 0 , 6 5 1 5 , 3 ) 1 5 1 ( 0 4 4 , 9 - ) 7 6 ( ) 4 1 5 ( 3 2 ) 1 8 5 ( ) 3 5 2 , 1 ( ) 1 1 8 , 1 ( 9 2 6 , 7 8 7 4 , 5 - - 8 1 1 9 6 5 , 1 - 7 8 6 , 1 ) 4 7 ( 5 9 1 , 4 8 0 8 , 5 - ) 1 ( ) 1 2 ( 7 ) 2 2 ( ) 8 1 5 ( ) 3 3 5 ( 5 7 2 , 5 5 6 6 , 1 - - - - - - 8 2 5 ) 6 ( 2 2 5 - - - - - ) 8 4 ( ) 8 4 ( - 4 7 4 - 3 1 1 1 7 1 , 4 ) 9 2 9 , 3 ( 5 5 3 6 7 0 , 0 1 ) 8 3 2 , 8 ( ) 0 1 ( 3 8 1 , 2 - - - - - - - 3 8 1 , 2 5 5 3 0 0 0 ’ $ A 0 0 0 ’ $ A 0 0 0 ’ $ A s 0 0 0 ’ $ A l a t o T s g n i t t i F & s e r u t x i F t n e m p i u q E & t n a l P e r u t c u r t s a r f n i e n i M & d n a L s g n i d l i u B 0 0 0 ’ $ A n i s t e s s A n o i t c u r t s n o c 0 0 0 ’ $ A s e t a r e g n a h c x e n i t n e m e v o m f o t c e f f E s e t a r e g n a h c x e n i t n e m e v o m f o t c e f f E 7 1 0 2 r e b m e c e D 1 3 t a s A s e t a r e g n a h c x e n i t n e m e v o m f o t c e f f E d o i r e p e h t r o f e g r a h c n o i t a i c e r p e D t n e m r i a p m i d n a n o i t a i c e r p e D 6 1 0 2 y r a u n a J 1 t a s A s e t a r e g n a h c x e n i t n e m e v o m f o t c e f f E d o i r e p e h t r o f e g r a h c n o i t a i c e r p e D 7 1 0 2 r e b m e c e D 1 3 t a s A 7 1 0 2 y r a u n a J 1 t a s A 7 1 0 2 y r a u n a J 1 t a s A s n o i t i d d A s r e f s n a r T 6 1 0 2 y r a u n a J 1 t a s A t s o C s n o i t i d d A s r e f s n a r T 7 1 0 2 r e b m e c e D 1 3 t A : e u l a v k o o b t e N 6 1 0 2 r e b m e c e D 1 3 t A 69 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c e h t o t s e t o N 7 1 0 2 r e b m e c e D 1 3 d e d n e r a e y e h t r o F t n e m p i u q e d n a t n a l p , y t r e p o r P . 8 1 d e t i m L i l a o C m l a e R s r e g i T Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175517.Inventories31 December201731 December2016A$’000A$’000Coal inventories:net of provision of A$0.850million for recognition of inventories at the lower of cost and their net realisable value (At 31 December 2016: nil)2,386-Fuel:net of provisions of A$nil(At 31 December 2016A$0.087 million)462388Other consumables:net of provisionsof A$0.098million (At 31 December 2016A$0.417 million)2,0815774,929965Management performs a regular review of the recoverability of inventories, including coal stocks, to assess the Company’s ability to recover the cost of inventories on hand. Accordingly, a provision of A$0.850 million was recognised for the recoverability of coal stocks at 31 December 2017, primarily in respect of 22.2 thousand tonnes of coal stock maintained at the Company’s interimcoal stockpile, which require washing, crushing and sizing prior to commercial realisation.Recognition and measurement: Inventories Inventories are valued at the lower of cost and net realisable value and upon initial recognition on the weighted average costbasis. The cost of raw materials and consumable stores is the purchase price. The cost of partly-processed and saleable products is generally the cost of production, including:•labour costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore; •the depreciation of mining properties and leases and of property, plant and equipment used in the extraction and processing ofore; and•production overheads.Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.Inventories are periodically assessed for the existence of slow moving and obsolete stocks and adjustments to the recoverable amount recognised as necessary. 70 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175718.Property, plant and equipment(continued)Recognition and measurement: Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and cumulative impairment losses. Cost includes expenditure that is directly attributable to the acquisition or construction of an asset. Once an undeveloped mining project has been determined as commercially viable and approval to mine has been given, expenditureother than that on land, buildings, fixtures and fittings, plant and equipment and capital work in progress iscapitalised under “Mine Infrastructure”. Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fullydetermined. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if itis probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.Depreciation Property, plant and equipment is depreciated over the lesser of its useful life or over the remaining life of the mine where there is no reasonable alternative use for the asset. The useful lives and residual values for material assets and categories of assets are reviewed annually and changes are reflected prospectively. Depreciation commences when an asset is available and ready for its intended use. The major categories of property, plant and equipment are depreciated on a straight-line basis, except for mining assets, which are depreciated on a units of production basis.Straight-line basis Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the related mine are depreciated on a straight-line basis. The estimated useful lives are as follows:•Buildings10–20 years•Plant & equipment3–10 years•Fixtures & fittings3–10 yearsUnits of production basisFor mining assets, consumption of the economic benefits of the asset is linked to production. These assets are depreciated onthe lesser of the respective assets’ useful lives and the life of the ore body in respect of which the assets are being used. Where the useful life of the assets is greater than the life of the ore body for which they are being utilised, depreciation is determined on a units of production basis. In applying the units of production method, depreciation is normally calculated based on production in the period as a percentage of total expected production in current and future periods based on ore reserves and other mineral resources.71 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175718.Property, plant and equipment(continued)Recognition and measurement: Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and cumulative impairment losses. Cost includes expenditure that is directly attributable to the acquisition or construction of an asset. Once an undeveloped mining project has been determined as commercially viable and approval to mine has been given, expenditureother than that on land, buildings, fixtures and fittings, plant and equipment and capital work in progress iscapitalised under “Mine Infrastructure”. Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fullydetermined. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if itis probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.Depreciation Property, plant and equipment is depreciated over the lesser of its useful life or over the remaining life of the mine where there is no reasonable alternative use for the asset. The useful lives and residual values for material assets and categories of assets are reviewed annually and changes are reflected prospectively. Depreciation commences when an asset is available and ready for its intended use. The major categories of property, plant and equipment are depreciated on a straight-line basis, except for mining assets, which are depreciated on a units of production basis.Straight-line basis Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the related mine are depreciated on a straight-line basis. The estimated useful lives are as follows:•Buildings10–20 years•Plant & equipment3–10 years•Fixtures & fittings3–10 yearsUnits of production basisFor mining assets, consumption of the economic benefits of the asset is linked to production. These assets are depreciated onthe lesser of the respective assets’ useful lives and the life of the ore body in respect of which the assets are being used. Where the useful life of the assets is greater than the life of the ore body for which they are being utilised, depreciation is determined on a units of production basis. In applying the units of production method, depreciation is normally calculated based on production in the period as a percentage of total expected production in current and future periods based on ore reserves and other mineral resources.Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175818.Property, plant and equipment(continued)19.Trade & other payables31 December201731 December2016A$’000A$’000Trade payables and accrued expenses3,796536Taxes payable1111493,907685Current3,767685Non-current140-Total3,907685Recognition and measurement: Property, plant and equipment Stripping CostsIn open pit mining operations, overburden and other waste materials must be removed to access ore from which minerals can be extracted economically. The process of removing overburden and waste materials is referred to as stripping. Stripping costs during the development of a mine (or pit), before production commences, are generally expensed as incurred except when capitalised aspart of the cost of construction of the mine (or pit) and subsequently amortised over the life of the mine (or pit) on a units of production basis only where the below criteria are all met:•it must be probable that there will be an economic benefit in a future accounting period because the stripping activity has improved access to the orebody; •it must be possible to identify the “component” of the orebody for which access has been improved; and•it must be possible to reliably measure the costs that relate to the stripping activity.Production phase stripping can give rise to two benefits: the extraction of ore in the current period and improved access to ore which will be extracted in future periods. When the cost of stripping which has a future benefit is not distinguishable from the cost of producing current inventories, the stripping cost is allocated to each of these activities based on a relevant production measure using a life-of-component strip ratio. The ratio divides the tonnage of waste mined for the component for the period either by the quantity of ore mined for the component or by the quantity of minerals contained in the ore mined for the component. Stripping costs for the component are deferred to the extent that the current period ratio exceeds the life of component ratio. 72 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175920.Bank loans payable31 December201731 December2016A$’000A$’000Bank loans payable1,357-1,357-On 22 December 2017, the Group entered into a non-revolving credit line which must be settled by no later than 21 December 2018, in accordance with which it could borrow up to RUB600 million(A$13.308 million). As of 31 December 2017, RUB 61.157 million(A$1.357 million) has been drawn down.The interest on outstanding balances accrues at 9.9% per annum and a fee for unused facilities accrues at 0.5% per annum.The loan is to be secured by a pledge over moveable tangible assets with a carrying value as at 31 December 2017 of A$2.479million. The registration of the pledge over the moveable assets is a condition precedent which must be and was completed by 31January 2018. Furthermore, the outstanding balance is secured by cross guarantees provided by the Company’s Russian subsidiaries and the subordination of intragroup loans.An arrangement fee of RUB 3 million was paid to activate the loan and is amortised over the period during which the loan is available for drawdown, through 31 August 2018. As an integral component of the agreement, the Group is required to guarantee payments under the loan by acquiring a promissory note which is also pledged as collateral to the bank. The Group acquired Alfa Bank promissory notes to the value of RUB 38.8 million (A$0.861 million) to this end, the details of which are disclosed in Note 15.The loan has a number of covenants which are generally expected in such transactions, which the company is required to comply with untilthe settlement of all outstanding amounts.21.Employee Benefits31 December201731 December2016A$’000A$’000Provision for annual leave242131Provision for salary and related costs payable43444Provision for other employment benefits162141Provision for bonuses2992581,137574Current1,137433Non-current-141Recognition and measurement: Loans payable and financing costs Loans payable are recorded at their fair value after consideration of their terms and conditions. Any fees and commissions associated with the execution of loans payable are amortised over the term in respect to which they relate. These fees include, but are not limited to, arrangement fees and fees on unused and available credit lines. Interest on unpaid balance are accrued asincurred. 73 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20175920.Bank loans payable31 December201731 December2016A$’000A$’000Bank loans payable1,357-1,357-On 22 December 2017, the Group entered into a non-revolving credit line which must be settled by no later than 21 December 2018, in accordance with which it could borrow up to RUB600 million(A$13.308 million). As of 31 December 2017, RUB 61.157 million(A$1.357 million) has been drawn down.The interest on outstanding balances accrues at 9.9% per annum and a fee for unused facilities accrues at 0.5% per annum.The loan is to be secured by a pledge over moveable tangible assets with a carrying value as at 31 December 2017 of A$2.479million. The registration of the pledge over the moveable assets is a condition precedent which must be and was completed by 31January 2018. Furthermore, the outstanding balance is secured by cross guarantees provided by the Company’s Russian subsidiaries and the subordination of intragroup loans.An arrangement fee of RUB 3 million was paid to activate the loan and is amortised over the period during which the loan is available for drawdown, through 31 August 2018. As an integral component of the agreement, the Group is required to guarantee payments under the loan by acquiring a promissory note which is also pledged as collateral to the bank. The Group acquired Alfa Bank promissory notes to the value of RUB 38.8 million (A$0.861 million) to this end, the details of which are disclosed in Note 15.The loan has a number of covenants which are generally expected in such transactions, which the company is required to comply with untilthe settlement of all outstanding amounts.21.Employee Benefits31 December201731 December2016A$’000A$’000Provision for annual leave242131Provision for salary and related costs payable43444Provision for other employment benefits162141Provision for bonuses2992581,137574Current1,137433Non-current-141Recognition and measurement: Loans payable and financing costs Loans payable are recorded at their fair value after consideration of their terms and conditions. Any fees and commissions associated with the execution of loans payable are amortised over the term in respect to which they relate. These fees include, but are not limited to, arrangement fees and fees on unused and available credit lines. Interest on unpaid balance are accrued asincurred. Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20176021.Employee Benefits(continued)22.Lease Liability31 December201731 December2016A$’000A$’000Lease expenditure contracted and provided for:Payable not later than one year1,1262,304Payable later than one year, not later than five years2,1131,0523,2393,356Future finance charges(743)(517)Total lease liabilities2,4962,839Current7392,011Non-current1,7578282,4962,839Movement in finance lease liabilities are as follows31 December201731 December2016A$’000A$’000Opening balance offinance leaseliability 2,8393,674New finance lease agreements entered during the year2,3161,837Finance lease payments(2,655)(2,479)Net effect of movement in exchange rates(4)(193)Total finance leaseliability recognised at end of year2,4962,839The terms andconditions of the finance leasesare as follows:31 December 2017CurrencyEffectiveinterest rateYear of maturityValue at inceptionCarrying amountScania finance lease liabilitiesRUB18.74-20.24%2020-2023RUB128,758RUB 68,750Liebherr finance lease liabilitiesRUB13.10-14.50%2021RUB 55,684RUB 43,494Recognition and measurement: Employee benefits Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within twelve months of the reporting date represent obligations resulting from employee’s services provided to reporting dateand are calculated at undiscounted amounts based on remuneration wage and salary rates that the Company expects to pay as at the reporting date, including related on-costs, such as workers’ compensation insurance and payroll tax.A liability is recognised for the amount expected to be paid under short-term incentive bonus plans if the Group has a present legal or constructive obligation to pay this amount resulting from past service provided by the employee, and the obligation canbe estimated reliably.74 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20176122.Lease Liability(continued)CAT finance leaseIn 2014, the Group entered into a finance lease with CATto acquire a small fleet of mobile equipment.The obligation was fully settled in September 2017 and the guarantee deposit refunded. Scania finance leasesIn August 2016, the Group entered into two finance lease agreements with Scania to acquire eight haulage trucks. The value ofthe coal haulage trucks recognised in property, plant and equipment was RUB 81.165 million (A$1.837 million). The value of the finance lease, after advance payment of RUB 28.407 million, was RUB 52.757 million (A$1.194 million) upon inception and RUB 37.588 million (A$0.836million)at 31 December 2017and RUB 51.283 million (A$1.151 million)at 31 December 2016. On 31 March 2017, the Group executed a finance lease agreementto acquire fiveadditional Scania haulage trucks. The costof the coal haulage trucks recognised in property, plant and equipment was RUB 49.354million (A$1.096million). The valueof the finance lease, afteranadvance payment of RUB 13.364 million(A$0.302million), was RUB 34.229million (A$0.776million) upon inception and RUB 31.162 million (A$0.691million)at 31 December 2017.Liebherr finance leasesIn June 2017, the Group executed fourfinance lease agreements with Liebherr to acquire 3 excavators and a bulldozer (“Liebherr fleet”). The costof the Liebherr fleet recognised in property, plant and equipment wasRUB 58.168million (A$1.251million).The value of the finance lease, after an advance payment of RUB 7.686 million(A$0.171 million), was RUB 47.998million (A$1.067million) upon inception and RUB 43.494million (A$0.969million) at 31 December 2017.Recognition and measurement: Finance leases Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fairvalue and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.These finance lease commitments relate to the acquisition of mobile fleet used in the early development stage and subsequently in mining activities at Project F Amaam Northand is based on the cost of the assets.Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fairvalue and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.Finance lease related interest and other charges are recognised in the statement of comprehensive income.Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 23. Royalty Liability Opening balance of royalty agreement liability Change in royalty agreement liability due to change in estimates Payments made during the year Effect of movement in exchange rates Total royalty agreement liability at year end Current Non-current 31 December 2017 A$’000 31 December 2016 A$’000 3,681 2,126 (130) (299) 5,378 86 5,292 5,378 - 3,681 - - 3,681 216 3,465 3,681 The Group entered into a number of royalty agreements as part of obtaining interests in the Amaam North and Amaam Projects. These royalty agreements are dependent upon the performance of a number of conditions precedent, the realisation of which may result in royalty payments of up to 3% and 5% of the FOB coal sales revenues generated by the Amaam North and Amaam projects, respectively. In July 2017, the Amaam North royalty rates were amended, as a result of which they were reduced to between 1.5 and 3%, with a cap placed on total royalty payments of US$25 million. For further details on the amendments, refer to Note 35. Amaam North Royalty Liability Following the raising of funds and commencement of Project F, Phase One, the Group concluded it is probable that an outflow of resources embodying economic benefits will be required to settle royalty obligations and accordingly a provision was required for the obligations under existing royalty agreements. While the amount of provision recognised represents the best estimate of the expenditure required to settle the obligations under existing royalty agreements, this estimate is based on estimates of possible outcomes and financial effect, which were determined by the application of management’s judgement on a number of key assumptions used in determining the amount of provision, including: • the discount rate used; • • • the probability of revenue cash flows from successful implementation of Project F Phase One and commencement of Phase Two; the likelihood of achieving forecast coal sales prices; and the forecast for Australian Dollar to US Dollar exchange rate. Amaam Royalty Liability No liability was recognised at 31 December 2017 (31 December 2016 Nil) in relation to Amaam Project royalty arrangements with Bering and Siberian Tigers due to the impact of coal price forecasts on the ability to realise the project on a commercially viable basis. 75 62 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20176122.Lease Liability(continued)CAT finance leaseIn 2014, the Group entered into a finance lease with CATto acquire a small fleet of mobile equipment.The obligation was fully settled in September 2017 and the guarantee deposit refunded. Scania finance leasesIn August 2016, the Group entered into two finance lease agreements with Scania to acquire eight haulage trucks. The value ofthe coal haulage trucks recognised in property, plant and equipment was RUB 81.165 million (A$1.837 million). The value of the finance lease, after advance payment of RUB 28.407 million, was RUB 52.757 million (A$1.194 million) upon inception and RUB 37.588 million (A$0.836million)at 31 December 2017and RUB 51.283 million (A$1.151 million)at 31 December 2016. On 31 March 2017, the Group executed a finance lease agreementto acquire fiveadditional Scania haulage trucks. The costof the coal haulage trucks recognised in property, plant and equipment was RUB 49.354million (A$1.096million). The valueof the finance lease, afteranadvance payment of RUB 13.364 million(A$0.302million), was RUB 34.229million (A$0.776million) upon inception and RUB 31.162 million (A$0.691million)at 31 December 2017.Liebherr finance leasesIn June 2017, the Group executed fourfinance lease agreements with Liebherr to acquire 3 excavators and a bulldozer (“Liebherr fleet”). The costof the Liebherr fleet recognised in property, plant and equipment wasRUB 58.168million (A$1.251million).The value of the finance lease, after an advance payment of RUB 7.686 million(A$0.171 million), was RUB 47.998million (A$1.067million) upon inception and RUB 43.494million (A$0.969million) at 31 December 2017.Recognition and measurement: Finance leases Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fairvalue and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.These finance lease commitments relate to the acquisition of mobile fleet used in the early development stage and subsequently in mining activities at Project F Amaam Northand is based on the cost of the assets.Assets held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fairvalue and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.Finance lease related interest and other charges are recognised in the statement of comprehensive income.76 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20176323.Royalty Liability(continued)24.Share capital31 December31 December20172016A$’000A$’000Share Capital188,197188,197Costs of raising equity(14,450)(14,450)173,747173,747(i) Movements in shares on issue:No of sharesIssue price A$A$’000Opening balance at 1 January 2016895,834,935164,901Movements in 2016Issue of ordinary shares –fully underwritten entitlement offer895,834,9350.02623,296Opening balance at 1 January 20171,791,669,870188,197Closing share capital balance at 31 December 20171,791,669,870188,197Recognition and measurement: Royalty liabilities The Group, from time to time, enters into legal agreements with various parties as a result of which there will be future outflows of economic benefits, including obligations which arise from the execution and realisation of sales agreements (“Royalty Agreement”). In applying the recognition and measurement criteria outlined above in respect of provisions in Note 3(h) to royalty agreements, management perform an assessment of the probability of the outflow of economic benefits, which it has deemed to be influenced by the following factors and circumstances, when assessing the disclosure, recognition and measurement of Royalty Agreement obligations:•Existence of a licence which provides the legal capacity to mine and sell product which is the subject of Royalty Agreements;•The performance of a feasibility study or other similar project assessment which provides an indication of the economic benefits accruing to the Group from implementing a project or part thereof, incorporating the consideration of macroeconomic factors and project specific assumptions on income and expenditures;•General macroeconomic conditions (including but not limited to financial and commodity markets -specifically the market for coal);•Economic resources are in place which enable the realisation of a plan to extract and sell ore, as defined in a feasibility study (as amended and updated). Economic resources include both financial, human & other resources necessary to realise strategic plans; •Board approves the decision to commence thoseactivities necessary to develop and mine ore with the view of commencing commercial production; and•Actual operations confirm those assumptions upon which the decision made to commence mining operations were made (including the ability to realise any sales agreements executed).As noted above, where the likelihood of an outflow of economic benefits is deemed to be remote, no disclosures are made.Where possible, disclosure is made of a contingent liability and where probable a provision is recognised and measured.Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 24. Share capital (continued) The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. All shares rank equally with regard to the Company’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Issue of ordinary shares – year ended 31 December 2016 On 29 June 2016, the Company announced the launch of a 1 for 1 pro-rata non-renounceable entitlement offer of TIG ordinary shares (“New Shares”) at an offer price of A$0.026 per New Share (“Offer Price”) to raise up to A$23.3 million (“Entitlement Offer”), which was successfully completed in September 2016. On 3 August 2016, pursuant to the Entitlement Offer, 570,099,821 ordinary shares were issued and allotted to those shareholders who took up their entitlement in accordance with the terms of the Entitlement Offer and a further 44,900,743 unconditional underwriting shares were issued, being the Hanate Group’s portion of the Entitlement Offer shortfall for which no shareholder approval was required, the total shares issued and allotted being 615,000,564 ordinary shares. On 19 September 2016, the allotment of the remaining shares was approved at an extraordinary general shareholders’ meeting, as a result of which on 26 September 2016, the following shares were allotted: • • • 120,893,457 BVMHL underwriting shares and 23,501,472 BVMHL Entitlement Offer shares; 75,992,714 Hanate underwriting shares; and 93,396,204 RDIF underwriting shares. (i) Movements in options on issue: During the year ended 31 December 2017, 37,074,000 options were granted and 1,665,000 lapsed and 274,000 were forfeited, resulting in options on issue at 31 December 2017 of 59,437,000. 25. (a) Share based payments Recognised share based payment expense 31 December 2017 A$’000 31 December 2016 A$’000 Expense arising from equity settled share based payment transactions 126 248 (b) Description of share-based payment arrangements In 2010, the Company established the Staff Option Plan as part of the Group’s Long-Term Incentive Plan to assist in the attraction, motivation and retention of senior executives and employees and to encourage their personal commitment to the Company. The plan forms a necessary part of the competitive packages offered by the Company in-light of the markets in which it operates. The plan also creates an ownership mindset among participants and ensures business decisions and strategic planning has regard to the Company’s long-term performance and growth. There a number of different performance hurdles, exercise prices and vesting conditions dependent on the individual’s position held. It is a vesting condition that the holder of options remains an employee or director at the time of vesting. There have been no cancellations or modification to the Staff Option Plan since it was established in 2010. 77 64 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20176323.Royalty Liability(continued)24.Share capital31 December31 December20172016A$’000A$’000Share Capital188,197188,197Costs of raising equity(14,450)(14,450)173,747173,747(i) Movements in shares on issue:No of sharesIssue price A$A$’000Opening balance at 1 January 2016895,834,935164,901Movements in 2016Issue of ordinary shares –fully underwritten entitlement offer895,834,9350.02623,296Opening balance at 1 January 20171,791,669,870188,197Closing share capital balance at 31 December 20171,791,669,870188,197Recognition and measurement: Royalty liabilities The Group, from time to time, enters into legal agreements with various parties as a result of which there will be future outflows of economic benefits, including obligations which arise from the execution and realisation of sales agreements (“Royalty Agreement”). In applying the recognition and measurement criteria outlined above in respect of provisions in Note 3(h) to royalty agreements, management perform an assessment of the probability of the outflow of economic benefits, which it has deemed to be influenced by the following factors and circumstances, when assessing the disclosure, recognition and measurement of Royalty Agreement obligations:•Existence of a licence which provides the legal capacity to mine and sell product which is the subject of Royalty Agreements;•The performance of a feasibility study or other similar project assessment which provides an indication of the economic benefits accruing to the Group from implementing a project or part thereof, incorporating the consideration of macroeconomic factors and project specific assumptions on income and expenditures;•General macroeconomic conditions (including but not limited to financial and commodity markets -specifically the market for coal);•Economic resources are in place which enable the realisation of a plan to extract and sell ore, as defined in a feasibility study (as amended and updated). Economic resources include both financial, human & other resources necessary to realise strategic plans; •Board approves the decision to commence thoseactivities necessary to develop and mine ore with the view of commencing commercial production; and•Actual operations confirm those assumptions upon which the decision made to commence mining operations were made (including the ability to realise any sales agreements executed).As noted above, where the likelihood of an outflow of economic benefits is deemed to be remote, no disclosures are made.Where possible, disclosure is made of a contingent liability and where probable a provision is recognised and measured.Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 25. (b) Share based payments (continued) Description of share-based payment arrangements The Staff Option Plan offers individuals the opportunity to acquire options over fully paid ordinary shares in the Company. Share options granted under the plan carry no dividend or voting rights. When exercised, each option is convertible into one ordinary share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in all respects with previously issued fully paid ordinary shares. Option holders cannot participate in new issues of capital which may be offered to shareholders prior to exercise. A fair value of these options is assessed at the grant date using a Monte Carlo simulation model in accordance with AASB2 Share- based Payments. The options vest and expire at dates set out in the terms of the grant. The options cannot be transferred and are not quoted on the ASX. (c) Summary of options granted under the Option Plan The options outstanding at 31 December 2017 have an exercise price in the range of A$0.08 to A$0.60 (2016: A$0.17 to A$0.75). The weighted average remaining contractual life for options outstanding at 31 December 2017 is 3.63 years (31 December 2016: 3.52 years). There were 37,074,000 options granted during the year ended 31 December 2017 (year ended 31 December 2016: Nil) the fair value of options granted during the year ended 31 December 2017 was A$0.031. There are 22,363,000 vested and exercisable options at 31 December 2017 (31 December 2016: 19,123,500). There were no options exercised during the year ended 31 December 2017 (During the year ended 31 December 2016: Nil). Movements in outstanding options 2017 2016 Weighted Average Exercise Price A$ Number of Options Weighted Average Exercise Price A$ Balance at the beginning of the year Granted Forfeited/lapsed Exercised Balance at the end of the year Vested and exercisable at year end Number of Options 24,302,000 37,074,000 (1,939,000) - 59,437,000 22,363,000 0.318 0.113 0.587 0.242 0.238 Details of share options outstanding at 31 December 2017 are detailed below: 2017 Date of issue Number of Options 22 February 2012 28 March 2012 15 February 2013 15 February 2013 15 February 2013 22 March 2013 3 May 2013 3 May 2013 4 June 2014 19 December 2014 19 December 2014 17 April 2015 17 April 2015 11 June 2015 11 June 2015 18 October 2017 18 October 2017 Balance at the end of the year - - 150,000 150,000 861,000 200,000 1,000,000 1,000,000 2,000,000 2,544,000 2,544,000 3,957,000 3,957,000 2,000,000 2,000,000 24,469,000 12,605,000 59,437,000 78 Average Exercise Price A$ 0.500 0.750 0.260 0.260 0.340 0.340 0.500 0.600 0.500 0.230 0.170 0.230 0.170 0.500 0.230 0.080 0.130 31,406,000 - (7,104,000) - 24,302,000 19,123,500 0.300 0.000 0.239 0.000 0.318 0.309 2016 Number of Options Average Exercise Price 665,000 1,000,000 150,000 150,000 861,000 200,000 1,000,000 1,000,000 2,000,000 2,544,000 2,544,000 4,094,000 4,094,000 2,000,000 2,000,000 - - A$ 0.500 0.750 0.260 0.260 0.340 0.340 0.500 0.600 0.500 0.230 0.170 0.230 0.170 0.500 0.230 - - 0.318 65 0.242 24,302,000 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 25. (b) Share based payments (continued) Description of share-based payment arrangements The Staff Option Plan offers individuals the opportunity to acquire options over fully paid ordinary shares in the Company. Share options granted under the plan carry no dividend or voting rights. When exercised, each option is convertible into one ordinary share subject to satisfying vesting conditions and performance criteria. The shares when issued rank pari passu in all respects with previously issued fully paid ordinary shares. Option holders cannot participate in new issues of capital which may be offered to shareholders prior to exercise. not quoted on the ASX. A fair value of these options is assessed at the grant date using a Monte Carlo simulation model in accordance with AASB2 Share- based Payments. The options vest and expire at dates set out in the terms of the grant. The options cannot be transferred and are (c) Summary of options granted under the Option Plan The options outstanding at 31 December 2017 have an exercise price in the range of A$0.08 to A$0.60 (2016: A$0.17 to A$0.75). The weighted average remaining contractual life for options outstanding at 31 December 2017 is 3.63 years (31 December 2016: 3.52 years). There were 37,074,000 options granted during the year ended 31 December 2017 (year ended 31 December 2016: Nil) the fair value of options granted during the year ended 31 December 2017 was A$0.031. There are 22,363,000 vested and exercisable options at 31 December 2017 (31 December 2016: 19,123,500). There were no options exercised during the year ended 31 December 2017 (During the year ended 31 December 2016: Nil). Movements in outstanding options 2017 2016 Number of Weighted Average Number of Weighted Average Options Exercise Price Options Exercise Price Balance at the beginning of the year Granted Forfeited/lapsed Exercised Balance at the end of the year Vested and exercisable at year end 24,302,000 37,074,000 (1,939,000) - 59,437,000 22,363,000 Details of share options outstanding at 31 December 2017 are detailed below: Date of issue 2017 2016 Number of Options Average Exercise Price Number of Average Options Exercise Price A$ 0.318 0.113 0.587 0.242 0.238 A$ 0.500 0.750 0.260 0.260 0.340 0.340 0.500 0.600 0.500 0.230 0.170 0.230 0.170 0.500 0.230 0.080 0.130 0.242 - - 150,000 150,000 861,000 200,000 1,000,000 1,000,000 2,000,000 2,544,000 2,544,000 3,957,000 3,957,000 2,000,000 2,000,000 24,469,000 12,605,000 59,437,000 A$ 0.300 0.000 0.239 0.000 0.318 0.309 A$ 0.500 0.750 0.260 0.260 0.340 0.340 0.500 0.600 0.500 0.230 0.170 0.230 0.170 0.500 0.230 - - 31,406,000 (7,104,000) - - 24,302,000 19,123,500 665,000 1,000,000 150,000 150,000 861,000 200,000 1,000,000 1,000,000 2,000,000 2,544,000 2,544,000 4,094,000 4,094,000 2,000,000 2,000,000 - - 22 February 2012 28 March 2012 15 February 2013 15 February 2013 15 February 2013 22 March 2013 3 May 2013 3 May 2013 4 June 2014 19 December 2014 19 December 2014 17 April 2015 17 April 2015 11 June 2015 11 June 2015 18 October 2017 18 October 2017 Balance at the end of the year 24,302,000 0.318 Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 25. (c) Share based payments (continued) Summary of options granted under the Option Plan During the year to 31 December 2017, 37,074,000 options were issued, 1,665,000 options lapsed and 274,000 were forfeited and no options exercised, bringing the options issued over ordinary shares in the Company to 59,437,000 as at 31 December 2017. (d) Inputs for the measurement of grant date fair values The grant date fair values of the options granted through the Staff Option Plan utilised assumptions underlying the Black-Scholes methodology to produce a Monte Carlo simulation model which allows for incorporation of the performance hurdles that must be met before the share based payment vests to the holder. Expected volatility is estimated by considering historic average share price volatility for those options issued since February 2013. Prior to that date, due to the lack of sufficient share price history (TIG was listed on 29 August 2011) the share price volatility was based on the historical volatility of a group of comparable companies, based on their principal activities, for volatility estimation purposes. The expected dividend yield used in the valuation process has been nil. The early exercise provision has been measured using a sell multiple of two times the exercise price. The post-vesting withdrawal rate used in the valuation of the options is nil. The risk-free rate is derived from the yield on Australian Government Bonds of appropriate terms. The inputs used in the measurement of the fair values at the grant date of the options granted under the Staff Option Plan and outstanding at 31 December 2017 are outlined below: Option Grant Date Fair value at grant date (A$) Share price at grant date (A$) Exercise price Perfor- mance hurdle Perfor- mance period Expiry date Risk free interest rate 15 Feb 2013 15 Feb 2013 15 Feb 2013 22 Mar 2013 3 May 2013 3 May 2013 4 June 2014 19 Dec 2014 19 Dec 2014 17 Apr 2015 17 Apr 2015 11 Jun 2015 11 Jun 2015 18 Oct 2017 18 Oct 2017 $0.056 $0.079 $0.115 $0.100 $0.064 $0.065 $0.043 $0.030 $0.036 $0.049 $0.061 $0.021 $0.035 $0.031 $0.030 $0.220 $0.220 $0.220 $0.200 $0.170 $0.170 $0.140 $0.099 $0.099 $0.130 $0.130 $0.100 $0.100 $0.060 $0.060 $0.260 $0.260 $0.340 $0.340 $0.500 $0.600 $0.500 $0.230 $0.170 $0.230 $0.170 $0.500 $0.230 $0.080 $0.130 A A C C B C B B D B C B C B C E F F F E F E E G E F E F E F 15 Feb 2018 15 Feb 2018 15 Feb 2018 22 Mar 2018 3 May 2018 3 May 2018 4 June 2019 28 Feb 2019 28 Feb 2019 17 Apr 2020 17 Apr 2020 11 Jun 2020 11 Jun 2020 18 Jun 2022 18 Jun 2022 3.05% 3.05% 3.05% 3.17% 2.69% 2.69% 2.69% 2.32% 2.32% 1.84% 1.84% 2.09% 2.09% 2.32% 2.32% Note A. B. C. D. E. F. G. Performance hurdle: options vest if share price exceeds $0.50 Performance hurdle: options vest 12 months after grant date. Performance hurdle: options vest 24 months after grant date. Performance hurdle: options vest 437 days after grant date. Performance period: 12 months after grant date. Performance period: 24 months after grant date. Performance period: 437 days after grant date. 65 79 66 Tigers Realm Coal Annual Report 201780 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20176725.Share based payments(continued)26.Risk management and financialinstruments(a)Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Audit, Risk and Compliance Committee, which is responsible for developing and monitoring the Group’srisk management policies.The committee reports regularly to the Board.The Group has established a Risk Management Policy to provide a framework for the management of risk within the Group.The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.The Group has exposure to the following risks from its operations and use of financial instruments:•Credit risk•Liquidity risk•Market risk•Operational riskThis note presents information about the Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. (i)Credit riskCredit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.(ii)Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.(iii)Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices will affect the Group’s income or the value of its holdings of financial instruments.The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.For the Group currency risk arises from transactions in foreign currencies, predominantly US Dollars(USD), and Russian Roubles(RUB).For the Group interest rate risk arises from the exposure to Australian cash deposit rates relating to cash and cash equivalents. For the Group commodity price risk affects the valuation of the Royalty Agreement Liability, as the liability is determined starting with the value of the Amaam project, with its value determined using a DiscountedCash-Flow model. Recognition and measurement: Share based payments Equity-based compensation is recognised as an expense in respect of the services received.The fair value of options granted is recognised as an asset or expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees became unconditionally entitled tothe options. The fair value at grant date is independently determined using an option pricing model that takes into account the exercise price, the term of the options, the vesting and performance criteria, the impact of dilution, the non-tradable natureof the option, the share price at grant date and expected volatility of the underlying share, the expected dividend yield andthe risk-free interest rate for the term of the option.Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 26. Risk management and financial instruments (continued) (iv) Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes, personnel, technology and infrastructure and from external factors other than credit, liquidity and market risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations. The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness. The primary responsibility for the development and implementation of controls to address operational risk is assigned to the Group’s senior management. This responsibility is supported by the development of the Group Policies and Code of Conduct. (b) Capital management The Company and Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration, evaluation and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, or issue new shares. The Group’s focus historically has been to raise sufficient funds through equity to fund exploration and evaluation activities. In December 2017, the Group raised its first loan, a fixed interest rate working capital Russian Rouble denominated loan, detailed further in Note 20 and has a number of finance lease obligations detailed further in Note 22. The Board has not set a target for employee ownership of the Company’s ordinary shares. The Board has not yet set a debt to capital target for the Group. Russian Law provides that Russian subsidiaries in the Group need to maintain a level of net assets higher than their charter capital. Management closely monitor this requirement and act accordingly when required. Neither the Company nor remaining subsidiaries are subject to any externally imposed capital requirements. (c) Financial instruments The Group holds the following financial instruments: Financial assets Cash and cash equivalents Investments in restricted financial instruments Trade and other receivables Financial liabilities Trade and other payables Bank loans payable Finance leases 31 December 2017 A$’000 31 December 2016 A$’000 2,011 861 2,898 5,770 3,907 1,357 2,496 7,760 17,109 - 1,390 18,499 651 - 2,839 3,490 81 68 Tigers Realm Coal Annual Report 2017Tigers Realm Coal LimitedNotes to the consolidated financial statementsFor the year ended 31 December 20176725.Share based payments(continued)26.Risk management and financialinstruments(a)Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Audit, Risk and Compliance Committee, which is responsible for developing and monitoring the Group’srisk management policies.The committee reports regularly to the Board.The Group has established a Risk Management Policy to provide a framework for the management of risk within the Group.The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.The Group has exposure to the following risks from its operations and use of financial instruments:•Credit risk•Liquidity risk•Market risk•Operational riskThis note presents information about the Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. (i)Credit riskCredit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.(ii)Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.(iii)Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices will affect the Group’s income or the value of its holdings of financial instruments.The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.For the Group currency risk arises from transactions in foreign currencies, predominantly US Dollars(USD), and Russian Roubles(RUB).For the Group interest rate risk arises from the exposure to Australian cash deposit rates relating to cash and cash equivalents. For the Group commodity price risk affects the valuation of the Royalty Agreement Liability, as the liability is determined starting with the value of the Amaam project, with its value determined using a DiscountedCash-Flow model. Recognition and measurement: Share based payments Equity-based compensation is recognised as an expense in respect of the services received.The fair value of options granted is recognised as an asset or expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees became unconditionally entitled tothe options. The fair value at grant date is independently determined using an option pricing model that takes into account the exercise price, the term of the options, the vesting and performance criteria, the impact of dilution, the non-tradable natureof the option, the share price at grant date and expected volatility of the underlying share, the expected dividend yield andthe risk-free interest rate for the term of the option.Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 26. (d) Risk management and financial instruments (continued) Accounting classifications and fair values The following table shows the carrying amounts of financial assets and liabilities. 31 December 2017 Financial assets not measured at fair value Cash and cash equivalents Investment in restricted financial instruments Trade and other receivables Financial liabilities not measured at fair value Trade and other payables Bank loans payable Finance lease 31 December 2016 Financial assets not measured at fair value Cash and cash equivalents Trade and other receivables Financial liabilities not measured at fair value Trade and other payables Finance lease Loans & Receivables Carrying amount Other financial liabilities A$’000 Total 2,011 861 2,898 5,770 - - - - - - - - 3,907 1,357 2,496 7,760 2,011 861 2,931 5,803 3,907 1,357 2,496 7,760 Loans & Receivables Carrying amount Other financial liabilities A$’000 Total 17,109 1,390 18,499 - - - - - - 651 2,839 3,490 17,109 1,390 18,499 651 2,839 3,490 (e) Credit risk Exposure to credit risk Management monitors the exposure to credit risk on an ongoing basis. The maximum exposure to credit risk on financial assets which have been recognised on the balance sheet are generally the carrying amount, net of any provisions. Current receivables net of provision for doubtful receivables are not overdue or in default. The Group does not require collateral in respect of financial assets. The Group has treasury policies in place for deposit transactions to be conducted with financial institutions with a minimum credit rating. At the reporting date, cash is held with reputable financial institutions which all meet the Group’s minimum credit rating required by the approved treasury policy. Cash and cash equivalents Investment in restricted financial instruments Trade and other receivables 82 Carrying amount 2017 A$’000 2,011 861 2,898 5,770 2016 A$’000 17,109 - 1,390 18,499 69 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 26. (d) Risk management and financial instruments (continued) Accounting classifications and fair values The following table shows the carrying amounts of financial assets and liabilities. 31 December 2017 Financial assets not measured at fair value Cash and cash equivalents Investment in restricted financial instruments Trade and other receivables Financial liabilities not measured at fair value Trade and other payables Bank loans payable Finance lease 31 December 2016 Financial assets not measured at fair value Cash and cash equivalents Trade and other receivables Financial liabilities not measured at fair value Trade and other payables Finance lease Carrying amount Loans & Other financial Receivables Total liabilities A$’000 2,011 861 2,898 5,770 17,109 1,390 18,499 - - - - - - - - - - - - - - 3,907 1,357 2,496 7,760 651 2,839 3,490 2,011 861 2,931 5,803 3,907 1,357 2,496 7,760 17,109 1,390 18,499 651 2,839 3,490 Carrying amount Loans & Other financial Receivables Total liabilities A$’000 (e) Credit risk Exposure to credit risk Management monitors the exposure to credit risk on an ongoing basis. The maximum exposure to credit risk on financial assets which have been recognised on the balance sheet are generally the carrying amount, net of any provisions. Current receivables net of provision for doubtful receivables are not overdue or in default. The Group does not require collateral in respect of financial assets. The Group has treasury policies in place for deposit transactions to be conducted with financial institutions with a minimum credit rating. At the reporting date, cash is held with reputable financial institutions which all meet the Group’s minimum credit rating required by the approved treasury policy. Cash and cash equivalents Investment in restricted financial instruments Trade and other receivables Carrying amount 2017 A$’000 2,011 861 2,898 5,770 2016 A$’000 17,109 - 1,390 18,499 69 Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 26. Risk management and financial instruments (continued) Geographical information The Group’s maximum exposure to credit risk for Trade and other receivables at the reporting date by geographical region was: Asia and the Russian Federation Australasia Counterparty information The Group’s maximum exposure to credit risk for Trade and other receivables at the reporting date by type of counterparty was: Coal customers Other Impairment losses The ageing of the Group’s Trade and other receivables at the reporting date was: Carrying amount 2017 A$’000 3,759 - 3,759 2017 A$’000 1,144 2,615 3,759 2016 A$’000 1,372 18 1,390 2016 A$’000 - 1,390 1,390 Gross 2017 A$’000 Impaired 2017 A$’000 Gross 2016 A$’000 Impaired 2016 A$’000 Not past due Past due 0-30 days Past due 31-120 days Past due 121 days to one year More than one year 3,759 - - - - 3,759 - - - - - - 1,390 - - - - 1,390 There was no provision for impairment at 31 December 2017 (At 31 December 2016: $Nil). 83 - - - - - - 70 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 26. (f) Risk management and financial instruments (continued) Liquidity risk Exposure to liquidity risk Management monitors the exposure to liquidity risk on an on-going basis. Prudent liquidity risk management implies maintaining sufficient cash reserves to meet the on-going operational requirements of the business. It is the Group’s policy to maintain sufficient funds in cash and cash equivalents. Furthermore, the Group monitors its cash requirements and raises appropriate funding as and when required to meet such planned expenditure. The following are the contractual maturities of financial liabilities. 31 December 2017 Non-derivative financial liabilities Trade and other payables Bank loan payable Finance Lease 31 December 2016 Non-derivative financial liabilities Trade and other payables Finance Lease Contractual cashflows Carrying amount A$’000 Total A$’000 6 months or less A$’000 6-12 months A$’000 1-2 years A$’000 2-5 years A$’000 More than 5 years A$’000 3,907 1,357 2,496 7,760 651 2,839 3,490 3,907 1,480 3,238 8,625 651 3,356 4,007 3,767 67 317 4,151 651 1,373 2,024 - 1,413 808 2,221 - 932 932 70 - 1,125 1,195 70 - 988 1,058 - 492 492 - 559 559 - - - - - - - It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. (g) (i) Market risk Currency risk Exposure to currency risk Management monitors the exposure to currency risk on an ongoing basis. The Group operates internationally and is exposed to foreign exchange risk arising from various currencies, primarily with respect to the US Dollar (“USD”) and the Russian Rouble (”RUB”). The Group’s exposure to foreign currency risk was as follows: Cash and cash equivalents Receivables Investment in restricted promissory notes Trade and other payables Bank loan payable Finance Lease Net exposure USD 2017 A$’000 RUB 2017 A$’000 USD 2016 A$’000 RUB 2016 A$’000 117 1,144 - (976) - - 285 1,789 1,754 861 (2,554) (1,357) (2,495) (2,002) 14,032 - - - - (1,673) 12,359 38 1,372 - (534) - (1,166) (290) 84 71 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 Risk management and financial instruments (continued) 26. (f) Liquidity risk Exposure to liquidity risk Management monitors the exposure to liquidity risk on an on-going basis. Prudent liquidity risk management implies maintaining sufficient cash reserves to meet the on-going operational requirements of the business. It is the Group’s policy to maintain sufficient funds in cash and cash equivalents. Furthermore, the Group monitors its cash requirements and raises appropriate funding as and when required to meet such planned expenditure. The following are the contractual maturities of financial liabilities. Contractual cashflows Carrying amount A$’000 Total A$’000 6 months or less A$’000 6-12 months A$’000 1-2 years 2-5 years A$’000 A$’000 More than 5 years A$’000 3,907 1,357 2,496 7,760 651 2,839 3,490 3,907 1,480 3,238 8,625 651 3,356 4,007 3,767 67 317 4,151 651 1,373 2,024 - 1,413 808 2,221 - 932 932 70 - 1,125 1,195 70 - 988 1,058 - 492 492 - 559 559 - - - - - - - It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different 31 December 2017 Non-derivative financial liabilities Trade and other payables Bank loan payable Finance Lease 31 December 2016 Non-derivative financial liabilities Trade and other payables Finance Lease amounts. Market risk Currency risk (g) (i) Exposure to currency risk (”RUB”). The Group’s exposure to foreign currency risk was as follows: Cash and cash equivalents Receivables Investment in restricted promissory notes Trade and other payables Bank loan payable Finance Lease Net exposure USD 2017 A$’000 RUB 2017 A$’000 USD 2016 A$’000 RUB 2016 A$’000 117 1,144 (976) - - - 285 1,789 1,754 861 (2,554) (1,357) (2,495) (2,002) 14,032 - - - - (1,673) 12,359 38 1,372 (534) - - (1,166) (290) Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 26. (g) (i) Risk management and financial instruments (continued) Market risk Currency risk Exchange rates used The following significant exchange rates were applied during the year relative to one Australian dollar: 2017 1.3049 0.0224 Average rate 2016 1.3383 0.0201 Reporting date spot rate 2017 1.2809 0.0222 2016 1.3876 0.0226 USD RUB Sensitivity analysis A weakening of the AUD, as indicated, against the USD and RUB at 31 December 2017 would have the impact in equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. Strengthening Weakening Equity A$’000 Profit or loss A$’000 Equity A$’000 Profit or loss A$’000 32 (222) 1,375 (34) 32 (222) 1,375 (34) (10) 170 (1,125) 28 (10) 170 (1,125) 28 31 December 2017 USD (10% movement) RUB (10% movement) 31 December 2016 USD (10% movement) RUB (10% movement) (ii) Market price risk Management monitors the exposure to commodity price risk on an on-going basis. The Group does not have any direct commodity price risk relating to its financial assets or liabilities. Management monitors the exposure to currency risk on an ongoing basis. The Group operates internationally and is exposed to foreign exchange risk arising from various currencies, primarily with respect to the US Dollar (“USD”) and the Russian Rouble (iii) Interest rate risk Exposure to interest rate risk Management monitors the exposure to interest rate risk on an ongoing basis. The Group’s exposure to interest rate risk relates primarily to its cash and cash deposits. At the reporting date the interest rate profile of the company’s and the Group’s interest bearing financial instruments was: Fixed rate instrument Financial assets Financial liabilities Variable rate instruments Cash and cash equivalents Financial liabilities Carrying amount 2017 A$’000 - 3,853 3,853 2,011 - 2,011 2016 A$’000 - 2,839 2,839 17,109 - 17,109 71 85 72 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 26. (iii) Risk management and financial instruments (continued) Interest rate risk (continued) Interest rates used The following significant interest rates have been applied. 2017 Australian cash deposit rate 2016 Australian cash deposit rate Sensitivity analysis Average rate % Reporting date spot rate % 1.50 1.73 1.50 1.50 An increase in interest rates, as indicated below, at balance dates would have increased equity and profit and loss by the amounts shown below. This analysis is based on interest rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular exchange rates, remain constant. A reduction in the interest rates would have had the equal but opposite effect to the amounts shown below, on the basis that all other variables remain constant. 31 December 2017 Australian cash deposit rate (100 basis points increase) 31 December 2016 Australian cash deposit rate (100 basis points increase) Group Equity A$’000 Profit or loss A$’000 3 6 3 6 27. Operating Leases Leases as lessee Non-cancellable operating lease rentals are payable in: 31 December 2017 A$’000 31 December 2016 A$’000 Less than one year Between one and five years More than five years Lease expense recognised in profit or loss Operating lease expense 50 139 493 682 162 162 95 31 7 133 50 50 The Group leases office space in Melbourne, Australia and Moscow, Russia in addition to land on site in Chukotka under operating leases. 86 73 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 Risk management and financial instruments (continued) 26. (iii) Interest rate risk (continued) Interest rates used The following significant interest rates have been applied. Australian cash deposit rate 2017 2016 Australian cash deposit rate Sensitivity analysis An increase in interest rates, as indicated below, at balance dates would have increased equity and profit and loss by the amounts shown below. This analysis is based on interest rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular exchange rates, remain constant. A reduction in the interest rates would have had the equal but opposite effect to the amounts shown below, on the basis that all other variables remain constant. Group Equity A$’000 Profit or loss A$’000 31 December 2017 Australian cash deposit rate (100 basis points increase) 31 December 2016 Australian cash deposit rate (100 basis points increase) 27. Operating Leases Leases as lessee Non-cancellable operating lease rentals are payable in: 31 December 31 December 2017 A$’000 2016 A$’000 Less than one year Between one and five years More than five years Lease expense recognised in profit or loss Operating lease expense The Group leases office space in Melbourne, Australia and Moscow, Russia in addition to land on site in Chukotka under operating leases. Average Reporting date rate % spot rate % 1.50 1.73 1.50 1.50 3 6 50 139 493 682 162 162 3 6 95 31 7 133 50 50 73 Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 28. Expenditure commitments Exploration expenditure commitments In order to maintain current rights of tenure to exploration tenements, the Group is required to perform minimum exploration work to meet its licence obligations. In the Russian Federation, this minimum exploration work is defined by the performance of a minimum number of drilling metres over the life of each exploration licence. These obligations are expected to be fulfilled in the normal course of operations. Mining interests may be relinquished or joint ventured to reduce this amount. The various country and state governments have the authority to defer, waive or amend the minimum expenditure requirements. As of and for the year ended 31 December 2017, the Group is in compliance with those exploration obligations defined in the respective licences. Port and other commitments Port commitments are comprised of port handling and stevedoring contract fees committed for future shipments handled by the Sea Port of Anadyr (Anadyrmorport) of A$11.167 million, of which A$5.496 million is expected to be settled in the 12 months subsequent to 31 December 2017 and A$5.671 million in the year ended 31 December 2019. Other commitments as at 31 December 2017 totalled A$1.159 million. 29. Contingencies Under the terms of the ASIC Class Order 98/1418, the Company has entered into an approved deed of cross guarantee of liabilities with the subsidiary identified in Note 34. 30. (a) Related parties’ disclosure Identity of related parties The Group has a related party relationship with its subsidiaries (refer Note 32), KMP, (refer Note 31) and Tigers Realm Minerals Pty Ltd (“TRM”). TRM was a related party as TRM was a substantial shareholder of the Company until the in-specie distribution of its shareholding in the Group to its shareholder in November 2016 and as the Group transacted with TRM in the reporting period. Pursuant to a services agreement dated 27 May 2011, TIG had a services agreement with TRM for the provision of services including the secondment of staff and the provision of office accommodation which was terminated in 2017. By means of being substantial shareholders, BV Mining Holding Limited, RDIF Investment Management LLC and HSBC Custody Nominees (Australia) Limited, holding shares beneficially for Bruce Gray, had related party relationships as a result of which during the year ended 31 December 2016, each earning an underwriting fee of A$93.6 thousand, A$46.8 thousand and A$93.6 thousand, respectively. There were no transactions with related parties during the year ended 31 December 2017. It is the Group’s policy that the where transactions are undertaken with related parties, they are done so on an arm’s length basis. (b) Other related party transactions In AUD Note Group TRM services provided Transactions value period ended 31 December 2017 A$ Receivable/ payable as at 31 December 2017 A$ Transactions value period ended 31 December 2016 A$ Receivable/ payable as at 31 December 2016 A$ - - (107,733) - 87 74 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 31. (a) Key Management Personnel Disclosures Compensation of key management personnel The key management personnel compensation included in “Administration expenses” (see Note 8) and “Share-based payments” (see Note 25) is as follows: Short-term employee benefits Post-employment benefits Termination benefits Share-based payments 2017 A$ 1,649,761 19,000 19,117 87,585 1,775,463 2016 A$ 1,561,028 - 140,826 205,734 1,907,588 (b) Key management personnel compensation disclosures Information regarding individual Directors’ and executives, compensation and some equity instrument disclosures as permitted by Corporation Regulation 2M.3.03 and 2M.6.04 is provided in the Remuneration Report in Section 12 of the Directors’ Report. Movements in shares (c) The movement in the number of Tigers Realm Coal Limited shares held directly, indirectly, or beneficially by the key management personnel and their related entities are set out below. Note Balance at 1 January Acquisitions Sales Other Changes Balance at 31 December 2017 Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov 1,200,000 378,001,865 30,191,006 - - Other key management personnel D Kurochkin S Southwood P Balka D Forsyth S Efanov A Nikolaev 617,390 136,700 3,481,080 19,267,673 - - - - 221,023 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,200,000 378,001,865 30,412,029 - - 617,390 136,700 3,481,080 19,267,673 - - 88 75 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 31. (a) Key Management Personnel Disclosures Compensation of key management personnel Short-term employee benefits Post-employment benefits Termination benefits Share-based payments The key management personnel compensation included in “Administration expenses” (see Note 8) and “Share-based payments” (see Note 25) is as follows: 2017 A$ 1,649,761 19,000 19,117 87,585 1,775,463 2016 A$ 1,561,028 - 140,826 205,734 1,907,588 (b) Key management personnel compensation disclosures Information regarding individual Directors’ and executives, compensation and some equity instrument disclosures as permitted by Corporation Regulation 2M.3.03 and 2M.6.04 is provided in the Remuneration Report in Section 12 of the Directors’ Report. (c) Movements in shares The movement in the number of Tigers Realm Coal Limited shares held directly, indirectly, or beneficially by the key management personnel and their related entities are set out below. 2017 Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov D Kurochkin S Southwood P Balka D Forsyth S Efanov A Nikolaev Other key management personnel 1,200,000 378,001,865 30,191,006 - - - - 617,390 136,700 3,481,080 19,267,673 221,023 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,200,000 378,001,865 30,412,029 617,390 136,700 3,481,080 19,267,673 - - - - Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 31. (c) Key Management Personnel Disclosures (continued) Movements in shares Note Balance at 1 January Acquisitions Sales Other Changes Balance at 31 December 2016 Directors C Wiggill B Gray O Hegarty R Morgan T Sitdekov 600,000 116,681,418 17,290,482 - - Other key management personnel D Kurochkin S Southwood P Balka D Forsyth A Nikolaev 308,695 136,700 1,242,593 9,611,807 - 600,000 261,320,447 12,900,524 - - 308,695 - 2,238,487 9,655,866 - - - - - - - - - - - - - - - - - - - - - 1,200,000 378,001,865 30,191,006 - - 617,390 136,700 3,481,080 19,267,673 - Note Balance at 1 January Acquisitions Sales Other Changes Balance at 31 December 32. Group entities Significant subsidiaries Parent entity Tigers Realm Coal Limited Subsidiaries TR Coal International Limited Tigers Realm Coal (Cyprus) Pty Ltd Greaterbay Larnaca Finance (Cyprus) Pty Ltd Eastshore Coal Holding Limited Telofina Holdings Ltd 2 Rosmiro Investments Limited Anadyrsky Investments Limited Northern Pacific Coal Company Beringpromugol LLC Beringtranscoal LLC Port Ugolny LLC Bering Ugol Investments LLC Tigers Realm Coal Spain, SL1 Tigers Coal Singapore No. 1 PTE Limited 1 1 2 Currently in liquidation. Founded in 2017 Country of Incorporation Ownership Interest 2016 2017 Australia Australia Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Russia Russia Russia Russia Russia Spain Singapore 100% 100% 100% 80% 100% 100% 100% 80% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% N/A 80% 100% 80% 80% 80% 80% 80% 100% 100% 75 89 76 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 33. Parent entity disclosures As at, and throughout the financial year ended 31 December 2017, the parent entity of the Group was Tigers Realm Coal Limited. Information relating to the parent entity follows: Results of parent entity Loss for the period Total comprehensive income Financial position of parent entity Current assets Total assets Current liabilities Total liabilities Net Assets Total equity of the parent entity comprising Share capital Reserves Accumulated deficit Total equity Contingent liabilities of the parent entity 31 December 2017 A$’000 31 December 2016 A$’000 (146) (146) 31,567 31,567 - - 31,567 173,747 6,729 (148,909) 31,567 (239) (239) 31,587 31,587 - - 31,587 173,747 6,603 (148,763) 31,587 The parent entity has contingent liabilities arising from its guarantees to each creditor of TR Coal International Limited under the Deed of Cross Guarantee as discussed in Note 34. Capital commitments of the parent entity There is no capital expenditure contracted for by the parent entity not recognised as liabilities. 90 77 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 33. Parent entity disclosures 34. Deed of cross guarantee As at, and throughout the financial year ended 31 December 2017, the parent entity of the Group was Tigers Realm Coal Limited. Information relating to the parent entity follows: 31 December 31 December 2017 A$’000 2016 A$’000 (146) (146) 31,567 31,567 - - 31,567 173,747 6,729 (148,909) 31,567 (239) (239) 31,587 31,587 - - 31,587 173,747 6,603 (148,763) 31,587 Results of parent entity Loss for the period Total comprehensive income Financial position of parent entity Current assets Total assets Current liabilities Total liabilities Net Assets Share capital Reserves Accumulated deficit Total equity Total equity of the parent entity comprising Contingent liabilities of the parent entity Deed of Cross Guarantee as discussed in Note 34. Capital commitments of the parent entity The parent entity has contingent liabilities arising from its guarantees to each creditor of TR Coal International Limited under the There is no capital expenditure contracted for by the parent entity not recognised as liabilities. Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiary listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and directors’ reports. It is a condition of a Class Order that the Company and the subsidiary enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of the subsidiary under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiary has also given similar guarantees in the event that the Company is wound up. The entities subject to the Deed of Cross Guarantee are: • • Tigers Realm Coal Limited; and TR Coal International Limited. The Deed of Cross Guarantee was established on 22 November 2012. A consolidated statement of comprehensive income and consolidated statement of financial position, comprising the Company and controlled entity which are a party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee for the year ended 31 December 2017 is set out below. Statement of comprehensive income and retained earnings Asset write-downs Exploration and evaluation expenses Share based payments Administrative expenses Results from operating activities Net foreign exchange (loss)/gain Finance income Net finance (expense)/income Loss before income tax Income tax (expense) Net Loss Other comprehensive income Foreign currency translation differences for foreign operations Income tax on other comprehensive income Total comprehensive loss for the period Accumulated deficit at beginning of year Accumulated deficit at end of year 31 December 2017 A$’000 31 December 2016 A$’000 - (126) (1,003) (1,129) (745) 5 (740) (1,869) - (1,869) - - (1,869) (180,953) (182,822) (53) (248) (1,101) (1,402) 464 10 474 (928) - (928) - - (928) (180,025) (180,953) 77 91 78 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 34. Deed of cross guarantee (continued) Current Assets Cash and cash equivalents Prepayments Total current assets Non-current assets Related party receivables Total non-current assets Total assets Current Liabilities Trade and other payables Total current liabilities Total liabilities Net assets Equity Share capital Reserves (Accumulated deficit) Total equity 31 December 2017 A$’000 31 December 2016 A$’000 148 68 216 19,607 19,607 19,823 74 74 74 14,598 75 14,673 17,746 17,746 32,419 114 114 114 19,749 32,305 173,747 28,824 (182,822) 173,747 39,511 (180,953) 19,749 32,305 92 79 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 34. Deed of cross guarantee (continued) Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 35. Non-controlling interest Completion of transaction with Partners Current Assets Cash and cash equivalents Prepayments Total current assets Non-current assets Related party receivables Total non-current assets Total assets Current Liabilities Trade and other payables Total current liabilities Total liabilities Net assets Equity Share capital Reserves (Accumulated deficit) Total equity 31 December 31 December 2017 A$’000 2016 A$’000 148 68 216 19,607 19,607 19,823 74 74 74 14,598 75 14,673 17,746 17,746 32,419 114 114 114 19,749 32,305 173,747 28,824 (182,822) 173,747 39,511 (180,953) 19,749 32,305 On 6 July 2017, the Group acquired the remaining 20% interest in the Amaam North project from its partners, terminated the shareholders agreement of January 2012 and in parallel restructured the related royalty arrangements, as a result of which the royalty obligations were capped at US$25 million, to be payable no later than 20 years from the date of the completion. The primary consequences of the completion in respect of the Amaam North Project are: • The Group acquired its partner’s 20% interest in the Amaam North project; and • The existing royalty structure was redefined as a result of which the royalties payable to the Group’s partner are reduced from a maximum of 5% of coal sales revenue, as follows: ◊ ◊ ◊ ◊ For annual coal sales in excess of 100,000 tonnes per year, annual payments are 1.5% of gross sales revenues for the first five years, 2.25% of gross sales revenues for the three subsequent years, and 3% of gross sales revenues thereafter; Under certain circumstances, TIG may elect to pay up to 50% of the amount due for any year in TIG shares; Total royalty payments are capped at US$25 million and are accrued and payable for a period of no more than 20 years from the date of executing the documentation to realise the HOA; and Irrespective of the amount paid, annual payments will cease after 2037. The abovementioned transaction also implemented amendments to the Amaam shareholders’ agreement (“SHA”) to simplify the processes governing the Amaam Project partners’ decision to develop and mine coal at the Amaam Project and corporate reporting and board processes, work program approval and other management processes. The effect of the aforementioned transaction was the reduction in the Group’s general reserves by A$12.273 million, being the carrying value of the non-controlling interest acquired at the date of closing. No change in the non-controlling interests in Eastshore and the Amaam project occurred during the year ended 31 December 2017. 79 93 80 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 36. Auditors’ Remuneration Details of the amounts paid to the auditor, Deloitte, and its related practices for audit and non-audit services provided during the year are set out below. Audit services: Audit and review of financial reports –Deloitte Australia Audit and review of financial reports - Deloitte Overseas Services other than statutory audit Other services Agreed-upon procedures in relation to rights issuance reports – Deloitte Australia Taxation compliance and advisory services – Deloitte Australia Taxation compliance services and advisory services – Deloitte Overseas Total Services Provided 37. Events after the reporting period 31 December 2017 A$ 31 December 2016 A$ 122,100 118,700 240,800 - 29,400 32,600 62,000 62,000 302,800 105,000 80,000 185,000 20,110 - - 20,110 20,110 205,110 On 16 February 2018, 1,161,000 options lapsed and were removed from the options register. Other than the aforementioned, there has not arisen in the interval between the end of the financial year and the date of this report, any transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 94 81 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Notes to the consolidated financial statements For the year ended 31 December 2017 36. Auditors’ Remuneration year are set out below. Audit services: Audit and review of financial reports –Deloitte Australia Audit and review of financial reports - Deloitte Overseas Services other than statutory audit Other services Deloitte Australia Overseas Agreed-upon procedures in relation to rights issuance reports – Taxation compliance and advisory services – Deloitte Australia Taxation compliance services and advisory services – Deloitte Total Services Provided 37. Events after the reporting period Tigers Realm Coal Limited Directors’ declaration For the year ended 31 December 2017 Details of the amounts paid to the auditor, Deloitte, and its related practices for audit and non-audit services provided during the 31 December 31 December 2017 A$ 2016 A$ 1. In the opinion of the Directors of Tigers Realm Coal Limited (‘the Company’): (a) the attached consolidated financial statements and notes that are set out on pages 46 to 94 are in accordance with the Corporations Act 2001, including: 122,100 118,700 240,800 - 29,400 32,600 62,000 62,000 302,800 105,000 80,000 185,000 20,110 - - 20,110 20,110 205,110 (i) giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. There are reasonable grounds to believe that the Company and the group entities identified in Note 32 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those group entities pursuant to ASIC Class Order 98/1418. The Directors have been given the declarations required by Section 259A of the Corporations Act 2001 from the chief executive officer and the chief financial officer for the financial year ended 31 December 2017. The Directors also draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. 2. 3. 4. On 16 February 2018, 1,161,000 options lapsed and were removed from the options register. Other than the aforementioned, there has not arisen in the interval between the end of the financial year and the date of this report, any transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Signed in accordance with a resolution of the Directors: Dated at Melbourne this 27th day of February 2018. ________________________________________________ Owen Hegarty Director 81 95 82 Tigers Realm Coal Annual Report 2017Deloitte Touche Tohmatsu ABN 74 490 121 060 Level 23, Riverside Centre 123 Eagle Street Brisbane, QLD, 4000 Australia Phone: +61 7 3308 7000 www.deloitte.com.au The Board of Directors Tigers Realm Coal Limited 151 Wellington Parade South East Melbourne VIC 3002 27 February 2018 Dear Board Members, Tigers Realm Coal Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Tigers Realm Coal Limited. As lead audit partner for the audit of the financial statements of Tigers Realm Coal Limited for the financial year ended 31 December 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely, DELOITTE TOUCHE TOHMATSU Colin Brown Partner Chartered Accountants Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. The entity named herein is a legally separate and independent entity. In providing this document, the author only acts in the named capacity and does not act in any other capacity. Nothing in this document, nor any related attachments or communications or services, have any capacity to bind any other entity under the ‘Deloitte’ network of member firms (including those operating in Australia). Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 83 96 Tigers Realm Coal Annual Report 2017 Deloitte Touce Tohmatsu ABN 74 490 121 060 Level 23, Riverside Centre 123 Eagle Street Brisbane, QLD, 4000 Australia Phone: +61 7 3308 7000 www.deloitte.com.au Independent Auditor’s Report to the Members of Tigers Realm Coal Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Tigers Realm Coal Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion those standards are We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. further described in We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. The entity named herein is a legally separate and independent entity. In providing this document, the author only acts in the named capacity and does not act in any other capacity. Nothing in this document, nor any related attachments or communications or services, have any capacity to bind any other entity under the ‘Deloitte’ network of member firms (including those operating in Australia). Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 84 97 Tigers Realm Coal Annual Report 2017 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 for 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 the scope of our audit responded to the Key Audit Matter Carrying value of property, plant and equipment Our procedures included, but were not limited to: The assessment of the carrying value of property, plant and equipment totalling $15.600 million as disclosed in Note 18 is a key audit matter. in determining As outlined in Note 9 the recoverable amount of property, plant and equipment is estimated using a value- in-use model. The value-in-use model requires the exercise of significant judgement the assumptions, the most significant of which include:     forecast sales quantities forecast long-term coal prices forecast capital expenditure forecast costs of production and distribution; and the discount rate.   evaluating management’s assessment whether an impairment indicator existed or whether an impairment loss in prior periods has recognised reversed;  obtaining an understanding of the management’s processes to assess the carrying value of the assets;  evaluating management’s methodologies and their documented basis for key assumptions utilised in the model;  assessing in conjunction with our valuation experts the reasonableness of key market assumptions including forecast long-term coal prices, foreign the exchange rate discount rate applied. This assessment took into consideration forecasts from third party financial institutions and market analysts; forecasts and forecast forecast  assessing and challenging the key sales for assumptions quantities, capital expenditure and forecast costs of production by comparing them to economic and industry forecasts and the Board approved forecasts; distribution and  performing an assessment of the historical accuracy of forecasting by the management; and  evaluating the adequacy of the disclosures. Estimation of the amount of royalty obligations in relation to Amaam and Amaam North Projects As disclosed in Note 23, the Group has entered into a number of royalty arrangements as part of obtaining interests in Amaam and Amaam North Our procedures included, but were not limited to:  assessing the Group’s methodology to estimate the amount of the obligation, challenging its appropriateness and obtaining an understanding of the key the processes associated with 85 98 Tigers Realm Coal Annual Report 2017 Projects. Management is required to make a number of judgements to estimate the amount of the obligation, including identifying appropriate an methodology, the probability and timing of expected future cash flows from the revenue derived from the sale of coal produced and the discount rate. As the estimate these judgments, there is a risk that changes in key assumptions can have a significant impact on the estimate and therefore reported results. Accordingly, it was identified as a key audit matter. sensitive to is preparation of models supporting the estimate;  agreeing the consistency of forecasted cash flows from the revenue derived from the sale of coal produced used in estimating the amount of royalty obligations with the forecasts used in the model prepared to determine the recoverable amount of the property, plant and equipment;  performing an assessment of the historical accuracy of forecasting by the management; and  evaluating the adequacy of the disclosures. Other Information The directors are responsible for the other information. The other information comprises the Directors’ Report, Corporate Governance Statement and Shareholder Information, which we obtained prior to the date of this auditor’s report, the other information also includes the following documents which will be included in the annual report (but does not include the financial report and our auditor’s report thereon): Highlights 2017, Chairman’s Letter, Interim Chief Executive Officer’s Report, Resources and Additional Exploration Targets and Operations Review. Our opinion on the financial report does not cover the other information and accordingly we do not and will 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 identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, 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. When we read the Highlights 2017, Chairman’s Letter, Interim Chief Executive Officer’s Report, Resources and Additional Exploration Targets and Operations Review, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either 86 99 Tigers Realm Coal Annual Report 2017 intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the 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 Group internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.  Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group 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 Group to cease to continue as a going concern.  Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 87 100 Tigers Realm Coal Annual Report 2017 We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in paragraph 12 of the directors’ report for the year ended 31 December 2017. In our opinion, the Remuneration Report of Tigers Realm Coal Limited, for the year ended 31 December 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Colin Brown Partner Chartered Accountants Brisbane, 27 February 2018 88 101 Tigers Realm Coal Annual Report 2017 Tigers Realm Coal Limited SHAREHOLDER INFORMATION 1. Top 20 Shareholders as at 16 February 2018 1 BV MINING HOLDING LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2 3 RDIF INVESTMENT MANAGEMENT LLC NAMARONG INVESTMENTS PTY LTD PINE RIDGE HOLDINGS PTY LTD 5 4 Number of shares % of Total 559,421,427 31.22% 353,272,489 19.72% 243,817,623 13.61% 100,952,582 5.63% 42,805,378 2.39% 6 SHIMMERING BRONZE PTY LIMITED 29,912,029 1.67% 7 ANTMAN HOLDINGS PTY LTD 21,428,272 1.20% FOREMOST MANAGEMENT SERVICES PTY LIMITED SENNEN TROVE PTY LTD AJM INVESTCO PTY LTD 8 9 10 18,868,970 1.05% 15,046,133 0.84% 13,509,823 0.75% 11 J P MORGAN NOMINEES AUSTRALIA LIMITED 13,305,013 0.74% 12 REGENT PACIFIC GROUP LTD 12,700,000 0.71% 13 ASIPAC GROUP PTY LTD 12,688,600 0.71% 14 CO-INVESTMENT PARTNERSHIP I LP 12,190,921 0.68% ROMADAK PTY LTD 15 10,417,046 0.58% 16 GP SECURITIES PTY LTD 9,316,393 17 INTEGRATED MINING SOLUTIONS PTY LTD 8,497,856 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 18 19 BNP PARIBAS NOMINEES PTY LTD 20 CITICORP NOMINEES PTY LIMITED 7,829,613 6,483,950 6,341,611 0.52% 0.47% 0.44% 0.36% 0.35% Total for Top 20 1,498,805,729 83.65% 102 89 Tigers Realm Coal Annual Report 2017 Tigers Realm Coal Limited Tigers Realm Coal Limited SHAREHOLDER INFORMATION 1. Top 20 Shareholders as at 16 February 2018 Number of shares % of Total 559,421,427 31.22% 353,272,489 19.72% 100,952,582 5.63% 1 BV MINING HOLDING LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) 2 LIMITED NAMARONG INVESTMENTS PTY LTD PINE RIDGE HOLDINGS PTY LTD 3 RDIF INVESTMENT MANAGEMENT LLC 243,817,623 13.61% 4 5 8 9 42,805,378 2.39% 6 SHIMMERING BRONZE PTY LIMITED 29,912,029 1.67% 7 ANTMAN HOLDINGS PTY LTD 21,428,272 1.20% FOREMOST MANAGEMENT SERVICES PTY LIMITED SENNEN TROVE PTY LTD AJM INVESTCO PTY LTD 18,868,970 1.05% 15,046,133 0.84% 10 13,509,823 0.75% 11 J P MORGAN NOMINEES AUSTRALIA LIMITED 13,305,013 0.74% 12 REGENT PACIFIC GROUP LTD 12,700,000 0.71% 13 ASIPAC GROUP PTY LTD 12,688,600 0.71% 14 CO-INVESTMENT PARTNERSHIP I LP 12,190,921 0.68% ROMADAK PTY LTD 15 10,417,046 0.58% 16 GP SECURITIES PTY LTD 9,316,393 17 INTEGRATED MINING SOLUTIONS PTY LTD 8,497,856 HSBC CUSTODY NOMINEES (AUSTRALIA) 18 LIMITED - A/C 2 19 BNP PARIBAS NOMINEES PTY LTD 20 CITICORP NOMINEES PTY LIMITED 7,829,613 6,483,950 6,341,611 Total for Top 20 1,498,805,729 83.65% 0.52% 0.47% 0.44% 0.36% 0.35% 89 SHAREHOLDER INFORMATION (CONTINUED) 2. Voting rights of ordinary shares On a show of hands one vote for each shareholder, and On a poll, one vote for each fully paid ordinary share. 3. Distribution of Shareholders and Shareholdings as at 16 February 2018 Holding and Distribution 1 to 1000 1001 to 5000 5001 to 10000 10001 to 100000 100001 and Over Total No. of Holders Securities % 37 45 59 403 362 906 6,059 177,783 514,474 18,720,699 1,772,260,302 1,791,669,870 .00 .01 .03 1.04 98.92 100.00 4. Tigers Realm Coal Substantial Shareholders as at 16 February 2018 Holder No. of Shares % of Total BV Mining Holding Limited Bruce N Gray Limited Liability Company Namarong Investments Pty Ltd 559,421,427 378,001,865 258,446,728 31.22% 21.10% 14.42% 100,952,582 5.63% 5. Shareholdings of less than a marketable parcel as at 16 February 2018 143 holding a total of 710,107 shares. 6. Unquoted Securities as at 16 February 2018 58,276,000 Unlisted options on issue. 103 90 Tigers Realm Coal Annual Report 2017 Tigers Realm Coal Limited Corporate Directory DIRECTORS Craig Wiggill (Chairman) Owen Hegarty Bruce Gray Ralph Morgan Tagir Sitdekov Nikolay Ishmetov (Alternate) COMPANY SECRETARY David Forsyth PRINCIPAL & REGISTERED OFFICE 151 Wellington Parade South, East Melbourne, Victoria, 3002 Tel: 03 8644 1300 Fax: 03 9650 7230 Email: ir@tigersrealmcoal.com AUDITORS Deloitte Touche Tohmatsu 123 Eagle Street Brisbane, Queensland 4000 BANKERS Commonwealth Bank of Australia Limited 727 Collins Street, Melbourne, Victoria 3008 104 2 Tigers Realm Coal Annual Report 2017Tigers Realm Coal Limited Corporate Directory DIRECTORS Craig Wiggill (Chairman) Owen Hegarty Bruce Gray Ralph Morgan Tagir Sitdekov Nikolay Ishmetov (Alternate) COMPANY SECRETARY David Forsyth PRINCIPAL & REGISTERED OFFICE 151 Wellington Parade South, East Melbourne, Victoria, 3002 Tel: 03 8644 1300 Fax: 03 9650 7230 Email: ir@tigersrealmcoal.com AUDITORS Deloitte Touche Tohmatsu 123 Eagle Street Brisbane, Queensland 4000 BANKERS Commonwealth Bank of Australia Limited 727 Collins Street, Melbourne, Victoria 3008 2 Tigers Real Coal Limited 151 Wellington Parade South East Melbourne Victoria 3002 T +61 3 8644 1300 F +61 3 9650 7230 tigersrealmcoal.com

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