ANNUAL REPORT 2015 RESOURCES LIMITED CORPORATE DIRECTORY BOARD OF DIRECTORS The Hon. Cheryl Edwardes Non-executive Chairman Mike Young Managing Director Julian Tapp Executive Director David Cornell Non-executive Director Aaron Hood Non-executive Director Shane McBride Company Secretary REGISTERED AND PRINCIPAL OFFICE Ground Floor 10 Richardson Street West Perth WA 6005 Telephone: Email: Website: +61 8 9389 2700 info@vimyresources.com.au www.vimyresources.com.au AUDITORS Grant Thornton Audit Pty Ltd Level 1 10 Kings Park Road West Perth WA 6005 SHARE REGISTRY Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Telephone: Fax: +61 8 9315 2333 +61 8 9315 2233 TRANSACTIONAL BANKERS ANZ Banking Group Limited 1275 Hay Street West Perth WA 6005 AUSTRALIAN SECURITIES EXCHANGE Shares in Vimy Resources Limited are quoted on the Australian Securities Exchange. ASX code: VMY 2 Vimy Resources Limited Annual Report 2015 TABLE OF CONTENTS CHAIRMAN’S LETTER CEO’S REVIEW OF ACTIVITIES OUTLOOK FOR 2016 OPERATIONS REPORT MINERAL RESOURCE STATEMENT TENEMENT DETAILS FINANCIAL STATEMENTS ADDITIONAL INFORMATION CORPORATE GOVERNANCE STATEMENT 04 06 10 12 16 21 23 80 83 1 Vimy Resources Limited Annual Report 2015 MINING A CLEANER TOMORROW WORLD NUCLEAR POWER REACTORS EXISTING, UNDER CONSTRUCTION AND PLANNED SOURCE: WORLD NUCLEAR ORGANISATION 77 OPERATING: UNDER CONSTRUCTION: 37 PLANNED: PROPOSED: 61 14 25 43 PROPOSED: 48 OPERATIING: 2 VIMY IS POSITIONED TO CAPITALISE ON THIS UNPRECEDENTED DEMAND 2 Vimy Resources Limited Annual Report 2015 MINING A CLEANER TOMORROW Western Australia’s Emerging Uranium Development Company Darwin Jabiluka Ranger Uranium Deposits City/Regional Centre Westmoreland Valhalla Kintyre Lake Way Project MULGA ROCK PROJECT Brisbane Kalgoorlie Olympic Dam Four Mile Sydney Adelaide Melbourne Hobart Yeelirrie Perth THE MULGA ROCK PROJECT HOSTS AUSTRALIA’S THIRD LARGEST UNDEVELOPED URANIUM DEPOSIT Vimy Resources Limited Annual Report 2015 3 CHAIRMAN’S LETTER Dear shareholders, I would like to take a step back and recap why we are so actively developing the Mulga Rock Project, and why we are excited about the future. Uranium’s suitability as a cheap and clean source of baseload power is a key factor in driving the increased take-up of nuclear power to meet growing energy needs. Regardless of world economic cycles, energy is always necessary and demand is always growing. Uranium reduces the world’s reliance on fossil fuels for base load electricity and is widely recognised as a low emission energy source. In 2015 there are 436 nuclear power plants in 30 countries accounting for 11% of the world’s electricity. This reduces two years of the world’s carbon emissions at today’s level. Since the March 2011 accident at Fukushima caused by an earthquake and tsunami, member states of the International Atomic Energy Agency (IAEA) have adopted a safety-first approach through a new nuclear safety action plan. Further a recent report from the IAEA confirmed that no one died from radiation following the Fukushima accident. Confidence is being restored and nuclear power will continue to grow in the coming decades. Also nuclear science and technology is being used in many exciting ways to improve people’s lives, especially in developing countries. In the health sector, nuclear techniques are now being used for diagnosing, treating and managing cancer, cardiovascular and other non-communicable diseases, while in agriculture they are being used to improve crop and plant varieties, to control animal and plant pests, for flood control and to identify safe water sources. Nuclear science is also used to monitor air quality, and even to protect cultural heritage by using gamma radiation to eradicate insects destroying a church in Romania. There are many other nuclear tools for a wide range of applications. Much of this work is being funded by the IAEA. Responsibility, and ensuring a positive social and environmental impact, is one of our core values. During the year we rebranded our Company to reflect this and outlined our vision “Mining a Cleaner Tomorrow.” In production, the Mulga Rock Project will produce enough uranium to fuel seven typical reactors and offset 50Mt of carbon dioxide emissions. This is equivalent to around 9% of Australia’s emissions. IN PRODUCTION, THE MULGA ROCK PROJECT WILL PRODUCE ENOUGH URANIUM TO FUEL SEVEN TYPICAL REACTORS AND OFFSET 50MT OF CARBON DIOXIDE EMISSIONS. THIS IS EQUIVALENT TO AROUND 9% OF AUSTRALIA’S EMISSIONS. 4 Vimy Resources Limited Annual Report 2015 » Pickering Power Station, Ontario, Canada The outlook for uranium demand is very positive, and is driven mainly by China. As its population expands, it will need to double its current electricity generation. China has stated a target of obtaining 20% of its primary energy from non-fossil sources by 2030. While renewables, including hydro-electric, wind and solar will be part of this, nuclear power is critical to meeting these energy goals. China is planning to increase its number of nuclear reactors from the 26 currently operating to 150 by 2030. It currently has 25 reactors under construction. Uranium prices have been relatively stable for the past year and a historically high number of reactors are under construction around the world. At present there are 67 units under construction in 15 countries. This, combined with projects being postponed and cancelled, has resulted in a market that is slowly developing a squeeze which will push uranium prices far higher. Our recent Scoping Study indicated that the Mulga Rock Project is economic at current long-term contract uranium prices. With this positive outlook for uranium demand, we are very optimistic about the future. This financial year we welcomed both Forrest Family Investments and Resource Capital Fund VI on to our share register as substantial shareholders, both of which provided significant cash injections into the Company. I would like to thank both of them, not only for the funds which have allowed our technical team to advance the project to where it is today, but also for their continued support. I would also like to thank our other substantial shareholders - Macquarie Bank, Acorn Capital and Mike Fewster - who continue to support us and maintain their shareholding in the Company. Finally, as Chairman, I would like to recognise our other core asset, our people. Mike and his team have worked tirelessly to progress the development of the Mulga Rock Project. It is their skill, dedication and commitment that has us where we are today. We have a great deposit, and a great opportunity, but it is our people that will turn the Mulga Rock Project into reality. On behalf of our Board, I would like to thank each and every one of the Vimy team. Again, I look forward to continuing to work with the Vimy team and stakeholders and to communicating the achievements and progress in the coming twelve months. The Hon. Cheryl Edwardes CHAIRMAN WE HAVE A GREAT DEPOSIT, AND A GREAT OPPORTUNITY, BUT IT IS OUR PEOPLE THAT WILL TURN THE MULGA ROCK PROJECT INTO REALITY. 5 Vimy Resources Limited Annual Report 2015 CEO’S REVIEW OF ACTIVITIES The 2014-2015 year has been a very challenging one for the resources sector, but I am pleased to report that despite the market malaise, Vimy continues to make substantial progress in developing the Mulga Rock Project into a world-class uranium mine. As I reviewed our various reports and announcements from the last twelve months, I was struck by how much has been achieved by our fantastic team in such a short time. Since this time last year, we have seen major improvements to the economics of the Mulga Rock Project: we increased our Mineral Resource estimate by 21% (please refer to the updated Resources table on page 15), we’ve improved on our geological understanding and controls on mineralisation, and very importantly, we have emphatically answered the metallurgical questions that have dogged this Project for so long. In short, we have made significant progress in moving the Mulga Rock Project towards actual uranium production. In July 2014, we completed a financing transaction which brought Andrew Forrest’s family investment group onto our share register. This transaction was also significant in that it allowed us to retire some $24m in debt. The new equity provided the opportunity to bolster our technical team and carry out significant technical works on the Mulga Rock Project. Following this event, we decided a fresh start was needed and so we rebranded the Company with a new name, and a 7:1 consolidation of the shares and in doing so breathed new life into the Company. In May 2015, another important strategic investor, Resource Capital Fund VI, joined our register through a $30 million funding package which is expected to fund us a long way towards project financing. 6 IN SHORT, WE HAVE MADE SIGNIFICANT PROGRESS IN MOVING THE MULGA ROCK PROJECT TOWARDS ACTUAL URANIUM PRODUCTION. Vimy Resources Limited Annual Report 2015 PEOPLE ARE OUR GREATEST ASSET As our Chairman said in her letter to you, our single greatest asset is our people and I join with her in thanking our team for their tireless efforts in making this year so successful. The essence of Vimy Resources is inspired by the character displayed by the Canadians who successfully won the battle of Vimy Ridge during the Great War. These characteristics are: unity, cooperation, ingenuity, preparation, planning, flexibility and of course courage. From what I’ve seen in the past twelve months, our whole team shares these characteristics. SCOPING STUDY SUPPORTS PROJECT ECONOMICS The Scoping Study, completed in May 2015, indicated that the Project is robust even at current long-term uranium prices. The Study supports our view that Mulga Rock is one of the best undeveloped uranium projects in Australia, confirming a mine life of 16 years with an estimated total production of 47.0Mlbs (21,325 tonnes) U3O8, with 70% of the uranium mining inventory for the first seven years coming from Indicated Resources. Importantly, the Scoping Study highlighted the simplicity of the geology, mining and metallurgical process. The results of the study will be incorporated into a Pre-feasibility Study (PFS) which we are expecting to release to the market in the December 2015 quarter. A silver lining in the current difficult conditions in the resources market is the downward trend in capital costs. This is a significant advantage for project developers such as Vimy. BENEFICIATION BREAKTHROUGH TO BOOST RECOVERIES AND DECREASE COSTS The metallurgy has always been the biggest question people have had about the Mulga Rock Project but we have dispelled all of the old myths and shown clearly that the metallurgy is very straightforward and does not represent a technical risk to the Project. There was a significant metallurgical breakthrough in 2015 with the application of simple gravity separation techniques to beneficiate the ore. This results in significant volume reduction and uranium grade enrichment of the ore before it is presented to the main processing plant. The result is a smaller plant, reduced reagent use and reduced tailings volumes. Other test work has confirmed that a majority of the uranium mineralisation is simple uraninite (UO2) and is amenable to simple acid leach at low pH and slightly elevated temperature. There is no need for pressure acid leach. The Vimy team continues to look for improvements and cost savings with mining costs being a future area of focus. Investigations into the use of a dozer trap mining method, pit floor conveying or continuous excavators may result in significant savings in removing overburden. 7 Vimy Resources Limited Annual Report 2015 MISSION VIMY AIMS TO BECOME A RELIABLE AND RESPECTED URANIUM PRODUCER. IT WILL ACT IN THE BEST INTEREST OF ITS STAKEHOLDERS THROUGH: » caring for our people » » » » embracing a safe work culture operational excellence and innovation continuous and sustainable company growth focussed and inclusive leadership DRILLING PROGRAM DRIVES RESOURCE UPGRADE AND IMPROVES OUR UNDERSTANDING OF THE GEOLOGY In April 2015, we announced a significant Resource upgrade for the Project which was the result of an extensive in-fill drilling program comprising a total of 144 air core and 37 diamond core holes in the Ambassador Mineral Resource which, along with the Princess Resource, forms the Mulga Rock East Deposit. This infill drill program reaffirmed our understanding and positive view of the nature and continuity of the Ambassador mineralisation with 32 drill holes out of 181 returning intercepts above 1,000 ppm (0.10%) U3O8. During the March 2015 quarter, we also completed an air core drilling exploration program to test potential extensions to the northern portion of the Emperor Mineral Resource, which forms the Mulga Rock West Deposit with Shogun. In September 2015, we announced a revision to the cut-off grade used to report the Mineral Resource for the Project resulting in a Resource Estimate of 65.6 Mt at 520 ppm U3O8 for 75.0 Mlb (34,030 tonnes) contained U3O8. This was due to positive impacts of the recent metallurgical test work and mining options on the Project as a whole, as referred to on page 7. Overall, the global contained uranium at Mulga Rock Project increased by 21% since the start of the financial year, from 62.2 Mlb U3O8 to 75.0 Mlb U3O8. Please refer to the updated Resources table on page 15. FINANCING - IT CAN STILL HAPPEN EVEN IN THIS MARKET As mentioned earlier, Vimy secured a $30m funding package from RCF VI through a combination of equity, royalty payment, and debt. This is significant on a number of fronts; firstly, it provides funding for Vimy during the important feasibility study phases of the Mulga Rock Project, through to the project financing stage. Secondly, it introduces another significant strategic investor to the Company, one that specialises in the resources sector and has considerable project development experience. And finally, as a specialist resources investor, RCF VI conducted detailed due diligence on the Mulga Rock Project and on Vimy, and has chosen to become a significant stakeholder. This is a strong endorsement of the Project and of Vimy’s team. 8 Vimy Resources Limited Annual Report 2015 SAFETY – WE ALL OWN IT Employee safety will always be a priority, regardless of whether we are in the early stages of development or in full production. We emphasise the fact that safety starts with the individual and so we encourage a culture of safety and have appropriate policies and procedures in place to promote this. I am pleased to disclose that we had another year of no lost time injuries reported. ENVIRONMENT – “MINING A CLEANER TOMORROW” Our Vision Statement is “Mining a Cleaner Tomorrow.” The obvious meaning of this derives from the huge benefit nuclear power provides in abating CO2 emissions from base load power generation. In fact, Vimy will produce enough uranium to power almost 7 GWe of nuclear power capacity resulting in a decrease in global emissions of 50 Mt CO2 per year; that is almost 9% of Australia’s entire CO2 emissions. But secondly, we will be open pit mining, and therefore impacting the local environment. But our aim is to be as low impact as technology and innovation allows. We aim to use innovative ‘real-time’ rehabilitation; backfilling the pits as we go, and we also plan to use in-pit tailings disposal so that our eventual footprint is as small as possible – thus mining cleaner. CONCLUSION AND OUTLOOK I strongly believe that the best way to add value for our shareholders is to bring the Mulga Rock Project to production as soon as we can and Vimy is very well positioned to do this. Despite the current state of the overall resources sector, uranium is different and looms as a significant energy-commodity in the near future. We have an excellent uranium project, and it just keeps getting better as our understanding of the geology, mining and metallurgy improves. We are on track as we progress towards development, and have funding secured to see the development phase through to project financing. Our philosophy can be captured in a surfing metaphor: we would rather be in the water, on our surfboard, in the take-off zone, waiting for the swell, rather than sitting on the beach waxing our board. And so despite the flat uranium market, the Board’s very strong view is that the Company should progress the Mulga Rock Project through the Definitive Feasibility Study (DFS) and approvals during 2016. Looking forward, we will remain focussed and continue to make significant progress in all of the areas I have discussed. I look forward to sharing this progress with you in future announcements. Mike Young MANAGING DIRECTOR AND CEO 9 Vimy Resources Limited Annual Report 2015 OUTLOOK FOR 2016 THE COMPANY HAS A BUSY FY16 AHEAD AS IT PROGRESSES THE MULGA ROCK PROJECT. There are several significant activities being conducted that will continue in the 2016 year. stakeholder engagement » » Resource definition drilling » mine design and ore reserves » geotechnical studies » metallurgical test work » » secondary mining approvals Public Environmental Review (PER) STAKEHOLDER ENGAGEMENT The PFS will allow the Company to present detailed and robust mining and processing plans to the public and investment community for the first time. This will allow the Company to continue stakeholder engagement with the local community of Kalgoorlie, as well as those communities along our road transport route to the Port of Adelaide in South Australia. RESOURCE DEFINITION DRILLING Currently, only half of the Mulga Rock East deposit, comprising Ambassador and Princess, is at Indicated status. As part of the DFS, a significant drilling program, covering Ambassador West, Shogun and a small part of the large Emperor deposit, will be completed in January 2016. Following on from this, updated Resource estimates will be done with the expectation that much more Inferred material will be upgraded to Indicated. MINE DESIGN AND ORE RESERVES An outcome of the PFS will be the publication of our maiden ore reserves during the year at Mulga Rock East. Following the Resource definition drilling and updated Resource estimates in early 2016, it is expected that we will update and increase the ore reserves at Ambassador and publish maiden ore reserves for Shogun later in the year. GEOTECHNICAL STUDIES In October 2015, the Company received Approval to Commence Mining Operations at Mulga Rock – albeit for two small test pits. But it is a significant step as the approvals are true mining approvals and the exercise was completed quickly. As well, our team gained valuable experience in the approvals process for the main mining proposal application in late 2016. The approval will allow us to excavate two test pits at Ambassador. The trenches will be approximately 300m by 100m and will allow us to assess the characteristics of the overburden and the ore zone. We will also excavate approximately 20t of ore sample for downstream metallurgical work. The pits will be excavated during November and December of 2015. 10 Vimy Resources Limited Annual Report 2015 METALLURGICAL TEST WORK During FY2016, we will test the proposed flow sheet with a pilot scale plant. The sample from the test pits will be used to test: » » » » » » beneficiation leach circuit resin-in-pulp circuit uranium elution (recovery) uranium concentrate precipitation base metal recovery. PUBLIC ENVIRONMENTAL REVIEW During 2016, the Company will continue the PER assessment process and barring any unforeseen hurdles, expects to receive ministerial state and federal approval in mid-2016. SECONDARY MINING APPROVALS While these will not be submitted until towards the end of CY16, the Company will begin the approvals process this year. 2015 2016 2017 2018 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 MULGA ROCK PROJECT PROVISIONAL TIMETABLE Activity PER Approval Works Approval Resource Drilling and Ore Reserves Definite Feasibility Study Investment Decision Engineering and Procurement Civils and Site Infrastructure Plant Fabrication - Offsite Plant Fabrication - Onsite Princess Pre-Strip Princess Ore Mining Commissioning Handover and First U3O8 This report contains “forward-looking statements“ which are only subjective predictions and are subject to inherent risks and uncertainties which could cause outcomes to differ materially from those expressed, implied or projected in such forward-looking statements. No representation or warranty, express or implied, is made by Vimy that the material contained in this report is accurate, reliable, relevant or complete, or will be achieved or prove to be correct. Vimy Resources Limited Annual Report 2015 11 OPERATIONS REPORT The Mulga Rock Project (MRP) is a large, world-class uranium resource located 240km east-northeast of Kalgoorlie in Western Australia. The Project, Australia’s third largest undeveloped uranium project, comprises four deposits: Ambassador and Princess, which form the Mulga Rock East Deposit, and Emperor and Shogun, which form the Mulga Rock West Deposit. The Project shares road access with the Tropicana Gold Mine. The Project is 100% owned and operated by Vimy. As the Project is located in the Great Victoria Desert, and there are no competing land uses to the proposed mining operation. SCOPING STUDY In May 2015, the results of a Scoping Study on the Mulga Rock Project were released to the ASX. The Study, undertaken by Amec Foster Wheeler Australia Pty Ltd and Coffey Mining, included an economic evaluation of the Project. The results of the Study reaffirm the Company’s confidence in the Project as it indicated that the Project is economic at current long-term contract uranium prices. The key economic highlights from the Study indicated: » » » » » C1 cost in years 1 to 7 of US$25/lb U3O8 including by-product credits C1 cost for LoM of US$29/lb U3O8 including by-product credits Average annual EBITDA of $161 million at US$75/lb U3O8 price Robust pre-tax NPV10 of $764M with a 39% IRR and a 2.6 year payback (inclusive of 5% WA Royalty) Breakeven price US$46/lb U3O8 including capital payback (@10% discount rate) The Study indicated a Life of Mine (LoM) of 16 years with an estimated total production of 47.0Mlbs (21,325 tonnes) U3O8. It also highlighted the Project’s low cost mining process, outlining a simple, shallow open-pit, strip mining operation, to a maximum depth of only 74 metres (typically less than 60 metres). The strip mining method proposed in the Study is similar to that used in the mining of coal and mineral sands; which results in a reduced environmental footprint at any given time and significant savings in rehabilitation costs. The Scoping Study also established that the process plant will use a low-cost acid leaching and a resin- in-pulp process. The Study was based on a total Resource estimate of 59.7Mt at 550ppm U3O8 for a contained 72.7Mlbs (32,985 tonnes) U3O8. 12 Vimy Resources Limited Annual Report 2015 PRE-FEASIBILITY STUDY Results from the Scoping Study are being incorporated into a Pre-feasibility Study (PFS) due to be completed during the December quarter 2015. In addition, the benefits of beneficiation discussed earlier are being incorporated into the PFS, along with other optimisations identified since completion of the Scoping Study. DRILLING PROGRAMS Several drill programs were carried out during the year. An infill drilling program completed on the Ambassador deposit early in 2015 reaffirmed the Company’s understanding and positive view of the nature and the continuity of the Ambassador mineralisation. The program consisted of 144 air core and 37 diamond core drill holes for a total of 11,277 metres. In addition to providing information to improve bulk densities, results from the drilling program were used for the upgrade of the Mineral Resource Estimate for the Ambassador Resource which was announced to the ASX on 20 April 2015. That significant upgrade reflected primarily updated correction factors for the radiometric disequilibrium present within the ore zones, derived from improved diamond drilling datasets. Groundwater drilling was also completed in the March quarter with three large diameter, mud rotary water bores programmed to test the nature and suitability of the aquifers for extraction and groundwater re-injection. Two of those holes were drilled in the proposed re-injection borefield area 10 km south of the Ambassador deposit while the other was in the proposed extraction borefield area approximately 30 km to the northeast of the proposed processing plant. All three holes showed excellent transmissivities and high flow rates in the aquifers tested during pumping. At the time of preparing this report, additional infill drilling programs are being undertaken at Ambassador, Shogun and Emperor. 13 Vimy Resources Limited Annual Report 2015 ORE BENEFICIATION During the year, Vimy announced a project-changing beneficiation breakthrough following commercial-scale pilot test work. The results of the test work indicated that the uranium mineralisation at the Mulga Rock Project can be beneficiated to produce a highly concentrated plant feed. The beneficiation test work indicated that the uranium mineralisation is primarily associated with lighter carbonaceous and clay minerals mixed with non-mineralised medium to coarse sands. These sands are easily removed from the run of mine ore using a simple gravity separation process and, most importantly, with only a minimal loss of uranium. The test work indicated that, after beneficiation, the volume of upgraded ore to be processed will be significantly reduced after mass rejection of 65-72% of the run of mine ore, resulting in uranium grades which are 2.7 to 3.4 times greater than the original grades. It is expected that this ore beneficiation will have a substantial positive effect on the economics of the Mulga Rock Project. Significantly, the process plant is expected to be approximately half the size originally proposed for the Project, therefore decreasing the process plant capital and operating costs. A smaller process plant will reduce power costs, reagent consumption and borefield water requirements. Wear rates on processing plant equipment will be reduced as the abrasive sand component will have been removed from the plant feed. Higher uranium resin loading capabilities will be achieved during the resin-in-pulp process, resulting in lower resin inventory, lower first fill costs and potentially fewer impurities in the final yellowcake product. And finally, the mass of process tailings will be approximately half the amount originally envisaged for the Project. MINERAL RESOURCES In September 2015, the Company announced an updated Mineral Resource using a reduced cut-off grade. Estimated operating costs have decreased since the estimation of previous Mineral Resources, thereby necessitating a reduction in the cut-off grade used in Mineral Resource estimation. The previous cut-off grade of 200ppm U3O8 was reduced to 150ppm U3O8. This change resulted in the total Resource for the Project being increased to 65.6Mt at 520ppm U3O8 for a contained 75.0Mlbs (34,030 tonnes) U3O8 using the 150ppm U3O8 cut-off grade. The table on the next page shows the resulting Resource. There were consequential changes to the Base Metal Resource (please refer to the ASX release of 17 September 2015). 14 Vimy Resources Limited Annual Report 2015 MULGA ROCK PROJECT TOTAL RESOURCE – 14 SEPTEMBER 2015 Deposit / Resource Classification Cut-off Grade (ppm U3O8)5 Tonnes (Mt)4 U3O8 (ppm)5 U3O8 (Mlb) Mulga Rock East Princess1 Princess1 Ambassador3 Ambassador3 Sub-Total Mulga Rock West Emperor2 Shogun2 Sub-Total Total Resource Indicated Inferred Indicated Inferred Inferred Inferred 150 150 150 150 150 150 1.3 2.5 13.2 16.1 33.1 28.4 4.1 32.5 65.6 690 380 750 460 580 450 550 460 520 1.9 2.1 21.7 16.3 42.0 28.1 4.9 33.0 75.0 1. The Princess Resource estimate at a cut-off grade of 200ppm U3O8 was reviewed by Coffey Mining and announced to the ASX on 18 December 2014. 2. The Emperor and Shogun Resource estimates at a cut-off grade of 200ppm U3O8 were prepared by Coffey Mining and initially disclosed to the ASX on 13 January 2009 under the JORC Code 2004. They have subsequently been reviewed by Coffey Mining and re-released to the ASX on 18 December 2014 in accordance to the JORC Code 2012. 3. The Ambassador Resource estimate at a cut-off grade of 200ppm U3O8 was reviewed by Coffey Mining and announced to the ASX on 20 April 2015. 4. T = metric dry tonnes; appropriate rounding has been applied and rounding errors may occur. 5. Using cut combined U3O8 composites (combined chemical and radiometric grades). The Resource Estimate referred to above was announced to the market by the Company on 17 September 2015. The Company is not aware of any new information, or data, that affects the information in that announcement and that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. ENVIRONMENTAL Environmental approvals and permitting for the Project have continued to make good progress and are now well advanced. On 26 February 2015, the Environmental Protection Authority (EPA) approved Vimy’s Environmental Scoping Document (ESD). Vimy completed the outstanding work needed to fulfil the ‘Required Work’ set out in the ESD and submitted an initial draft in June 2015 and a revised draft in August 2015 which was accepted by the EPA. Following feedback from the Office of the EPA (OEPA) and other Decision Making Authorities (DMAs) the final version of the Public Environmental Review (PER) is being prepared for public release later this year. Vimy also hosted a site visit for representatives from the OEPA in October 2015. Overall the feedback has been positive, with DMAs recognising the benefits of Vimy’s proposal to: » » Undertake strip mining with simultaneous backfill into the mining voids and progressive rehabilitation; Dispose of most tailings into in-pit facilities where the tailing will be permanently isolated from any sensitive environmental receptors; and » Manage surplus dewatering from the mine by reinjection back into the same aquifer downstream. Vimy has also pioneered the use of innovative camera trapping techniques in an attempt to capture the presence of rare fauna that can be difficult to capture using conventional pitfall and other physical traps. The cameras are proving far more efficient and effective than conventional techniques as well as being far less disruptive and potentially damaging to intended targets. Vimy is continuing to consult with both Commonwealth and State authorities and is moving to wider stakeholder consultation as the project definition firms up and the potential impacts become better quantified. Vimy Resources Limited Annual Report 2015 15 MINERAL RESOURCE STATEMENT AT 30 JUNE 2015 MULGA ROCK PROJECT Overview » The MRP global uranium mineral estimate increased by 17% between 1 July 2014 and 30 June 2015, from 62.2 to 72.7Mlbs (from 57.3Mt at 500ppm U3O8 to 59.7Mt at 550ppm U3O8). » » This change was the result of significant increases in the Mineral Resources at Princess and Ambassador, by 60% and 33% respectively. Both Resources form the Mulga Rock East Deposit. As at 30 June 2015, the Princess Mineral Resource stood at 3.8Mt at 480ppm U3O8, with 47% in an Indicated category and the Ambassador Mineral Resource stood at 28.1Mt at 610ppm U3O8, with 58% classified as Indicated (see Table 1). Please note that on 17 September 2015 the Mineral Resource Statement for the Mulga Rock Project was subsequently upgraded and now stands at 65.6Mt @ 520ppm for 75Mlbs U3O8(please refer to the table on page 15). » Maiden Base Metal Resource estimates were reported, coincident with the uranium Mineral Resource. 16 Vimy Resources Limited Annual Report 2015 Uranium Resource Estimate TABLE 1: MULGA ROCK PROJECT TOTAL RESOURCE 30 JUNE 2015 compared to 30 JUNE 2014 Combined Mineral Resource categories of Indicated and Inferred. Deposit / Resource Mulga Rock East Princess Ambassador Sub-Total Mulga Rock West Emperor Shogun Sub-Total Total Resource Tonnes (Mt)3 2015 U3O8 (ppm)5 U3O8 (Mlb) Tonnes (Mt) 3.8 28.1 31.9 24.1 3.7 27.8 59.7 490 600 590 500 590 510 550 4.0 37.5 41.5 26.4 4.8 31.2 72.7 1.9 27.6 29.5 24.1 3.7 27.8 57.3 2014 U3O8 (ppm)5 600 470 480 500 590 510 500 U3O8 (Mlb) 2.5 28.4 30.9 26.4 4.8 31.2 62.2 TABLE 2: MULGA ROCK PROJECT TOTAL RESOURCE 30 JUNE 2015 Deposit / Resource Classification Cut-off Grade (ppm U3O8)5 Tonnes (Mt)4 U3O8 (ppm)5 U3O8 (Mlb) Mulga Rock East Princess1 Princess1 Ambassador Ambassador Sub-Total Mulga Rock West Emperor2 Shogun2 Sub-Total Total Resource Indicated Inferred Indicated Inferred Inferred Inferred 200 200 200 200 200 200 1.3 2.5 13.0 15.1 31.9 24.1 3.7 27.8 59.7 690 380 750 480 590 500 590 510 550 1.9 2.1 21.6 15.9 41.5 26.4 4.8 31.2 72.7 1 The Princess Resource estimate at a cut-off grade of 200ppm U3O8 was reviewed by Coffey Mining and announced to the ASX on 18 December 2014. 2. The Emperor and Shogun Resource estimates at a cut-off grade of 200ppm U3O8 were prepared by Coffey Mining and initially disclosed to the ASX on 13 January 2009 under the JORC Code 2004. They have subsequently been reviewed by Coffey Mining and re-released to the ASX on 18 December 2014 in accordance to the JORC Code 2012. 3 The Ambassador Resource estimate at a cut-off grade of 200ppm U3O8 was reviewed by Coffey Mining and announced to the ASX on 20 April 2015. 4. T = metric dry tonnes; appropriate rounding has been applied and rounding errors may occur. 5. Using cut combined U3O8 composites (combined chemical and radiometric grades). 17 Vimy Resources Limited Annual Report 2015 Resource Estimate updates by Deposit » The 33% increase in the Ambassador Mineral Resource, was primarily driven by a 30% increase in the average grade, as a result of an adjustment to the correction factor used to account for the secular radiometric disequilibrium. » » 58% of the Ambassador Mineral Resource is now classified as Indicated, totalling 13.0Mt at 750ppm U3O8 for 21.6Mlbs U3O8. The Mineral Resources revisions were generally the result of additional drilling reported to the ASX on 4 March 2015. AMBASSADOR DEPOSIT – CHANGE IN U3O8 MINERAL RESOURCE BETWEEN 1 JULY 2014 AND 30 JUNE 2015 45 40 35 30 25 20 15 10 5 0 » » » Base Fall Rise 2010 Geology Bulk Density Grade 2015 The 60% Mineral Resource increase at Princess was driven primarily via adjustments to the secular radiometric disequilibrium corrections factors applied and to a lesser degree to minor changes in bulk density and geological models used. The Indicated portion of the Princess Mineral Resource (for a total 47% of the Princess mineral resource, or 1.3Mt at 690ppm U3O8) is associated with the thicker, high grade western zone, which was the focus of diamond and twin aircore drilling in 2014. No material changes were made to the Mulga Rock West deposit Mineral Resource estimate (which comprises the Emperor and Shogun Resources, originally prepared and disclosed to the ASX on 13 January 2009 under the JORC Code 2004). Those Resource estimates were reviewed by Coffey Mining and re-released to the ASX on 18 December 2014 in accordance with the JORC Code 2012 but no material changes were made. 18 Vimy Resources Limited Annual Report 2015 » » The Mulga Rock East uranium deposit (Princess and Ambassador) also contains a base metal (“BM”) resource. Base metal mineralisation is associated with uranium but also occurs outside the boundaries of the uranium Resource. Base metals will be recovered as part of the processing of the uranium ore. However, since the economic extraction of BM independently of uranium is unlikely at this time, the BM Resource estimate reported in Table 3 represents only the BM mineralisation found inside the boundaries of the uranium Resource. The Princess and Ambassador BM Resources reported at the 200ppm U3O8 cut-off grade are provided in Table 3. Previous explorers did not assay for BM during previous drilling at the Mulga Rock West deposit (Emperor and Shogun), and therefore no BM Resource estimation can be determined for those deposits at this stage. Future drilling at Mulga Rock West will address this. TABLE 3: BASE METAL RESOURCE - MULGA ROCK EAST Tonnes Cu (ppm)1 Zn (ppm)1 Ni (ppm)1 Co (ppm)1 Deposit / Resource (Mt) Mulga Rock East – tonnes and grade Princess - Indicated Princess - Inferred Ambassador - Indicated Ambassador - Inferred Total 1.3 2.5 13.0 15.1 31.9 Deposit / Resource Classification Mulga Rock East – contained metal Princess Princess Ambassador Ambassador Total Indicated Inferred Indicated Inferred 750 270 340 170 270 Cu (kt) 0.9 0.7 4.4 2.6 8.6 1280 500 1350 320 790 Zn (kt) 1.6 1.3 17.5 4.8 25.2 440 250 600 300 420 Ni (kt) 0.6 0.6 7.8 4.6 13.6 210 140 250 160 200 Co (kt) 0.3 0.4 3.3 2.4 6.4 1 The base metal Resource is contained wholly within the uranium Resource. It is reported using the same cut-off grade of 200ppm U3O8 with no additional base metal grade cut-offs applied. Please note that post year end a further update to the Mineral Resource statement was released to the market. Please refer to page 15 for the updated Resource table. There were consequential changes to the Base Metal Resource (please refer to the ASX announcement of 17 September 2015 for further details). Vimy Resources Limited Annual Report 2015 19 RESOURCE ESTIMATES - OTHER MATERIAL INFORMATION SUMMARY Geology and Geological interpretation » Geological modelling: Updates to the Mulga Rock East geological model resulted in limited changes to block model volumes overall, with locally significant changes between domains, based on infill drilling programs at Ambassador East and Princess. » » Cretaceous-hosted mineralisation was identified and paleochannel boundaries and stratigraphy are now better defined. A lithological indicator was used for modelling density, based on a pro rata of lithologies logged. Sampling and sub-sampling » There are no material changes to report regarding sampling and sub-sampling techniques but recovery of loose material in sands during diamond drilling was improved through the use of core-tubes, oversized reamers and finger lifters. Sample analysis method » The correction methodology for secular radiometric disequilibrium was updated, shifting from a fixed factor for grades above 200ppm eU3O8 to a polynomial based correction for grades above 100ppm eU3O8. Analysis of wet bulk density based on quality dual spaced density wireline logging, supported by measurements on core. Dry bulk density derived from moisture values inferred from wet and dry weight measurements. » Drilling techniques » There were no material changes to the drilling techniques involved but a significant number of diamond holes and aircore twins used to analyse sampling bias associated with the latter. » Short-scale grade variability test work was also carried out on 8 inch diamond holes drilled for metallurgical bulk sampling purposes. Estimation methodology » An accumulation or grade x thickness estimation method was used for the domains 100 and 200 at Ambassador and conventional ordinary kriging of U3O8 distribution for domains 300 and 400. Resource classification » Resource classification criteria were amended to reflect the revised understanding of longitudinal continuity of the various domains, and to account for the two resource estimation methods used. Cut-off grade » There were no changes to cut-off grades applied other than in domains 300 and 400 at Ambassador where the cut-off grade was revised from 100ppm to 200 ppm U3O8 to provide consistency across the deposits. » Base metal grades reported were not cut but constrained to the uranium mineral resource domains. Mining and metallurgical methods and parameters and other modifying factors considered to date » There were no material changes to report, assuming mining via conventional open mining methods. CORPORATE GOVERNANCE – RESERVES AND RESOURCES CALCULATION Due to the nature, stage and size of the Company’s existing operations, the Board believes there would be no efficiencies gained in establishing a separate mineral reserves and resources committee responsible for reviewing and monitoring the Company’s processes for calculating mineral reserves and resources and for ensuring that the appropriate internal controls are applied to such calculations. However, the Company ensures that any mineral reserve and resource calculations are prepared by competent geologists and are reviewed independently and verified (including estimation methodology, sampling, analytical and test data). The Company will report any future mineral reserves and resource estimates in accordance with the 2012 JORC Code. COMPETENT PERSON’S STATEMENT The information in this report that relates to the Exploration Results for the Mulga Rock Resource Estimate U3O8 and base metals, Resource Database, Geology and Bulk Densities are based on information compiled by Xavier Moreau, who is a Member of the Australian Institute of Geoscientists. Mr Moreau is a full time employee of Vimy Resources Limited. Mr Moreau has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the JORC ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Moreau 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 that relates to the Mulga Rock Mineral Resource estimates U3O8 and base metals is based on information compiled or reviewed under the supervision of AMC Consultants as consultants to the Company and reviewed by Ingvar Kirchner, an employee of AMC Consultants. Mr Kirchner consents to the inclusion, form and context of the relevant information herein as derived from the original resource reports. Mr Kirchner has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the JORC ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. 20 Vimy Resources Limited Annual Report 2015 20 Vimy Resources Limited Annual Report 2015 TENEMENT DETAILS Project Mulga Rock Project Tenement M39/1080 M39/1081 E39/876 E39/877 E39/1148 E39/1149 E39/1150 E39/1551 P39/4877 P39/4878 P39/4879 P39/4880 P39/4881 P39/4882 L39/193 L39/219 Ownership 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Vimy Resources Limited Annual Report 2015 21 ANNUAL FINANCIAL STATEMENTS CONTENTS DIRECTORS’ REPORT 24 AUDITOR’S INDEPENDENCE DECLARATION 41 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT ADDITIONAL INFORMATION CORPORATE GOVERNANCE STATEMENT 42 43 44 45 46 76 77 80 83 This financial report covers Vimy Resources Limited as a Group consisting of Vimy Resources Limited and its subsidiaries. The financial report covers the year ended 30 June 2015 and is presented in Australian dollars. Vimy Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Ground Floor, 10 Richardson Street West Perth, Western Australia, 6005 The financial report was authorised for issue by the directors on 23 September 2015. The Company has the power to amend and reissue the financial report. Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the Company. Public releases are available at asx.com.au by entering the Company’s ASX code ‘VMY’. Additional information on the Company is available on its website vimyresources.com.au. 23 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Your directors present their report on Vimy Resources Limited consolidated entity (‘Group’) for the financial year ended 30 June 2015. DIRECTORS The names and details of directors who held office during the year ended 30 June 2015 and up to the date of this report (unless otherwise stated), are: The Hon. Cheryl Edwardes LLM, B.Juris, BA Independent Chairman Appointed 26 May 2014 A lawyer by training, Mrs Edwardes is a former Minister in the Western Australian Legislative Assembly with extensive experience and knowledge of WA’s legal and regulatory framework relating to mining projects, environmental, native title, and heritage and land access. Mrs Edwardes is currently Chairman of Atlas Iron Limited and assists the clients of FTI Consulting with a range of complex statutory approvals required for resources and infrastructure projects. She was the Executive General Manager for External Affairs for Hancock Prospecting and Special Counsel at Minter Ellison in Perth where she practised in government relations, climate change and environmental regulation and compliance. During her political career, Mrs Edwardes held positions including WA Attorney General, Minister for the Environment and Minister for Labour Relations. She also has broad experience and networks within China’s business community. Listed company directorships in the last three years: Atlas Iron Limited May 2015 to present Michael (Mike) Young BSc (Hon), MAIG, MAICD Managing Director and Chief Executive Officer Appointed 17 April 2013 Mr Young was the first CEO and MD of BC Iron Limited and played an integral role in taking that company to its current position as a significant iron ore producer. Mr Young successfully steered BC Iron through first stage exploration, definition of resources, feasibility study, the negotiation of development agreements with Fortescue Metals Group and ultimately the profitable production of iron ore. Mr Young is a geologist and a graduate of Queens University, Canada with a Bachelor of Science (Honours) degree in Geological Sciences. His experience includes base metals, iron ore, uranium and gold, with a strong focus on mine-camp exploration, resource definition, and mine development. Mr Young was a founding director of uranium developer Bannerman Resources Limited and is the non-executive Chairman and founder of Cassini Resources Limited. Listed company directorships in the last three years: BC Iron Limited October 2006 to November 2014, Cassini Resources Limited January 2012 to present, Waratah Resources Limited 2011 to 2012, Ascot Resources Limited June 2015 to present Julian Tapp BA, MSc Executive Director Appointed 18 March 2013 Mr Tapp brings a wealth of experience in regulatory approvals. In his previous role as Head of Government Relations for Fortescue Metals Group, Mr Tapp was instrumental in overseeing and expediting the approvals process for Fortescue’s world-class Pilbara iron ore project from conception through to operation. Mr Tapp trained as an economist before holding a number of high-level roles in companies around the globe, including as Director of New Business Development for the Middle East for BAeSystems. He is also currently a non-executive director with the Pilbara Port Authority. Listed company directorships in the last three years: Nil VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 24 24 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 David Cornell B.Comm, CA Independent Non-executive Director Mr Cornell is a director of Element Capital Pty Ltd and has significant experience providing strategic and corporate advice to listed companies, with a strong focus on transaction services. Mr Cornell has assisted several companies, including Vimy Resources Limited, through the listing process and has raised over a quarter of a billion dollars through debt, equity and hybrid structures for leading resource companies including Atlas Iron and CopperCo. Mr Cornell is a Chartered Accountant, gaining his experience with the international accounting firms Arthur Andersen and Ernst & Young where he specialised in providing corporate and professional services to both Western Australian junior explorers and international mining companies. Listed company directorships in the last three years: Nil Aaron Hood B.Comm, B.Eng, MBA Non-executive Director Appointed 26 May 2015 Mr Hood is the Chief Investment Officer of Minderoo, encompassing the philanthropic and private business holdings of Andrew and Nicola Forrest. Prior to joining Minderoo, Mr Hood spent ten years in Sydney and Perth as executive director of a private equity firm with investments in mining services, oil and gas, manufacturing and retail. He is currently a director of the Scotch College Foundation (WA) and UWA Business School Ambassadorial Council and Chairman of Harvey Beef. Mr Hood is a representative of the shareholder, Forrest Family Investments Pty Ltd (Peepingee Trust). Listed company directorships in the last three years: Impact Minerals Limited from May 2015 Felicity Gooding B.Comm, CA Non-executive Director Appointed 17 July 2014, Resigned 26 May 2015 Ms Gooding is the Chief Financial Officer of Minderoo, encompassing the philanthropic and private business holdings of Andrew and Nicola Forrest. Ms Gooding is a Chartered Accountant with over fifteen years’ experience specialising in due diligence, mergers and acquisitions and equity and debt financing across various sectors in Washington DC, Singapore and London. Ms Gooding has held senior positions at PricewaterhouseCoopers, Diageo Plc and Fortescue Metals Group Ltd where she was instrumental in the raising of over $5bn expansion financing. Prior to joining Minderoo, Ms Gooding was an executive at potash development company Sirius Minerals Plc. Ms Gooding is a representative of the shareholder, Forrest Family Investments Pty Ltd (Peepingee Trust). Listed company directorships in the last three years: Nil VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 25 25 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Shane McBride BBus., FCPA, FGIA, FCSA, MAICD Chief Financial Officer and Company Secretary Mr McBride has thirty five years of commercial management experience, with twenty-eight years’ experience in senior management roles in the resources industry. His experience has been gained in listed Australian public companies in the disciplines of corporate management, management and financial accounting, project development and mine site operations, corporate finance and company secretarial functions. Mr McBride has been a senior executive of the Company since July 2009. He was the managing director of an Australian copper producer listed on the ASX and has substantial experience as a public company director. Mr McBride has a Bachelor of Business degree, is a Fellow of CPA Australia, Fellow of Governance Institute of Australia and the Institute of Chartered Secretaries and Administrators, and is a Member of the Australian Institute of Directors. Listed company directorships in the last three years: Nil PRINCIPAL ACTIVITIES The principal activities of the Group during the year ended 30 June 2015 were exploration and development of its tenement package and progression of development studies on the Mulga Rock Project. There has been no significant change to the nature of the Group’s activities during the year. RESULTS OF OPERATIONS The consolidated operating loss after tax for the year ended 30 June 2015 attributable to members of the Group was $10,725,302 (30 June 2014: operating loss after tax $8,298,813). DIVIDENDS No dividends were paid in the current year (2014: $Nil). The directors do not recommend the payment of a dividend. OPERATING AND FINANCIAL REVIEW Operations Vimy Resources Limited (‘Vimy’) is a junior uranium exploration company, with its primary asset being the Mulga Rock Project located 240 kilometres northeast of the regional city of Kalgoorlie-Boulder in Western Australia. During the year, the Company continued to develop the Project by completing a Scoping Study on the Mulga Rock Project. A Pre-feasibility Study is currently underway and a Definitive Feasibility Study is expected to start in October 2015. As a junior explorer, the Company is in the high-risk, high-reward sector of the Australian mining industry. Juniors are the critical front-end of the mining industry with the highest risk and as such the Company’s business model is specific to this sector. The Company currently has sixteen tenements, two of which are mining leases and fourteen are exploration licences. The mining leases currently include all of the area that the Company anticipates will be incorporated into the Mulga Rock Project. The Company’s tenement holdings are currently limited to the Mulga Rock Project. Operating Loss The operating loss for the year increased by 30% for the financial year to $10,725,302 (2014: $8,298,813), principally due to the following factors: • • • Increased exploration and evaluation expenditure by $5,834,462, spent on the Mulga Rock Project development studies. Increased interest revenue by $122,580 due to the higher cash balances on hand after capital raisings during the year. Debt forgiven including interest and finance charges related to the conversion of convertible notes in July 2014 of $1,467,367. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 26 26 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Financial Position Net assets / (liabilities) improved by $30,383,524 during the financial year to $5,745,119 (2014: Net liability ($24,638,405)). This is substantially due to the Company’s convertible note holders converting the liability into shares, thereby eliminating $24,667,153 in debt; and the Company completing an equity capital raising of $17,000,000 during the year. The Group has an accounting policy to expense all exploration activities and therefore, such expenditure does not add to its net assets, even though it may add value to the Group’s tenements. Cash balances at 30 June 2015 totalled $6,445,757. Going Concern The Group’s ability to continue as a going concern and to expand its exploration and development activities depends on its ability to obtain financing through equity, debt or hybrid financing, joint ventures, production off-take arrangements or other means. On 20 May 2015, the Company announced a conditional $30 million funding facility with mining-focused private equity fund, Resource Capital Fund VI L.P. (‘RCF VI’), whereby RCF VI agreed to subscribe $5 million in equity through a share placement and conditionally offered to provide an additional $25 million of funding in the form of a royalty and bridging loan subject to customary conditions precedent Subsequently on 17 August 2015, the Company announced a legally binding agreement with RCF VI for the provision of the final $25 million of the $30 million funding package announced on 20 May 2015. The funding package comprises a $15 million unsecured bridging loan and a $10 million payment in return for a 1.15% royalty. On 3 September 2015, the Company received a payment of $10 million from RCF VI in consideration of the 1.15% royalty on future production from the Mulga Rock Project. Therefore, it is the view of the directors that the Group will have adequate resources to continue to operate for at least the next twelve months. For these reasons, they have continued to adopt the going concern basis in preparing the financial report. Business Strategies and Prospects for future financial years The Company is a junior exploration company and as such does not receive any revenue, other than interest on cash balances. The Company’s business strategy is therefore centred on the requirement for the Group to remain a sustainable entity while ensuring the shareholders’ expectations of potential resource discoveries and progression of its Mulga Rock Project are met. Administration and Organisation The Group’s strategy is to develop the Mulga Rock Project and to ultimately become a mining company producing uranium. At the same time the Group is continually looking for exploration opportunities to add to its exploration upside. Consequently, whilst the Board continually reviews its employment costs, the Group retains personnel that can add value through exploration and at the same time personnel that can manage the development of the Mulga Rock Project. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 27 27 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the year the following significant events occurred: • • • • On 17 July 2014, the Group finalised a $36.8 million equity injection whereby the Company completed an equity capital raising of $12 million in cash, $23.3 million of secured debt was converted to equity and the convertible note holders forgave $1.5 million in fees, thereby eliminating all secured debt. On 4 December 2014, the Company changed its name from Energy and Minerals Australia Limited (ASX: EMA) to Vimy Resources Limited (ASX: VMY). On 8 December 2014, the Company re-organised its capital structure by consolidating every 7 shares to 1 share. The consolidation reduced the number of ordinary shares on issue from 1,450,967,418 to 207,280,416 and options from 535,075,000 to 77,582,151. On 20 May 2015, the Company announced a conditional $30 million funding facility with mining-focused private equity fund, Resource Capital Fund VI L.P. (‘RCF VI’), whereby RCF VI agreed to subscribe $5 million in equity through a share placement and conditionally offered to provide an additional $25 million of funding in the form of a royalty and bridging loan subject to customary conditions precedent. MATTERS SUBSEQUENT TO THE END OF THE YEAR Since 30 June 2015 the following has occurred: • • On 17 August 2015, the Company announced a legally binding agreement with RCF Capital VI L.P. for the provision of the final $25 million of the $30 million funding package announced on 20 May 2015. The funding package comprises a $15 million unsecured bridging loan and a $10 million payment in return for a 1.15% royalty on the future production from the Mulga Rock Project. On 3 September 2015, the Company received a payment of $10 million from RCF VI in consideration of the 1.15% royalty. LIKELY DEVELOPMENTS The Group’s strategy is to develop the Mulga Rock Project and to ultimately become a uranium producer. At the same time the Group is continually looking for exploration opportunities to add to its exploration upside. New assets will be evaluated on a case by case basis. The Group’s objectives are to complete the feasibility studies to progress the development of the Mulga Rock Project and continue exploration activities on its tenement portfolio. MEETINGS OF DIRECTORS The meetings of the Company’s Board of Directors held during the year ended 30 June 2015, and the number of meetings attended by each director were: Directors during the year ended 30 June 2015 C. Edwardes M. Young J. Tapp D. Cornell F. Gooding A. Hood Full meetings of directors Remuneration Committee Audit Committee A 22 21 22 21 15 1 B 22 21 22 21 17 1 A 1 * * 1 1 - B 1 * * 1 1 - A 1 1 1 1 1 - B 1 1 1 1 1 - A = Number of meetings attended in person or electronic means. B = Number of meetings held during the time that the director held office and for which they were entitled to participate. * = Not a member of the relevant committee. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 28 28 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 DIRECTORS’ INTERESTS IN SHARES AND OPTIONS Particulars of directors’ interests and of persons connected with them in shares of the Group as at the reporting date are as follows: Director C. Edwardes M. Young J. Tapp D. Cornell F. Gooding (a) A. Hood (a) Number of shares Number of options 857,142 3,571,427 3,571,427 - - - - 2,142,856 2,142,856 - - - (a) Ms Gooding and Mr Hood represent the Forrest Family Investments Pty Ltd. (Peepingee Trust) which currently holds 57,142,857 ordinary shares and 57,142,857 options over ordinary shares in the Company. SHARE OPTIONS Options over ordinary shares of the Group as at the reporting date are as follows: Date granted Expiry date 17 December 2014 16 December 2019 17 July 2014 17 March 2014 17 March 2014 14 June 2013 30 June 2016 16 December 2018 16 December 2018 14 June 2018 7 February 2012 31 January 2017 Fair value per option at grant date Exercise price Number of options $0.31 $0.42 $0.35 $0.35 $0.098 $0.392 $0.80 $0.35 $1.54 $0.70 $0.35 $1.26 1,428,570 57,142,857 8,714,281 8,714,283 2,857,142 153,568 No option holder has any right under the options to participate in any other share issue of the Group or of any other controlled entity. No options were exercised during the year ended 30 June 2015. ENVIRONMENTAL REGULATIONS AND PERFORMANCE The Group has conducted exploration and development activities on mineral tenements. The right to conduct these activities is granted subject to environmental conditions and requirements. The Group aims to ensure a high standard of environmental care is achieved, and as a minimum, to comply with relevant environmental regulations. There have been no known material breaches of any of the environmental conditions. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 29 29 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 REMUNERATION REPORT (AUDITED) The Directors of the Group present the Remuneration Report of non-executive directors, executive directors and other key management personnel, prepared in accordance with the Corporation Act 2001 and the Corporation Regulations 2001. The Remuneration Report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration B. Details of remuneration C. Service agreements D. Share-based compensation E. Additional information A. Principles used to determine the nature and amount of remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. As an emerging development and exploration company, remuneration levels are established based on industry standards rather than company performance. These remuneration levels are set to attract qualified and experienced people to pursue the Group’s stated objectives. The Board takes advice on industry remuneration standards through consultation with external agents. The Board has established a remuneration charter, administered by the full Board, which provides oversight guidance on remuneration and incentive policies and practices and specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors. During the year the Board received advice from a consulting company, Ausrem Pty Ltd. The advice was considered by the remuneration committee and focused on the fixed, short and long term remuneration incentives of the Managing Director and Executive Director, Messrs M. Young and J. Tapp, and the Chairman, The Hon. Cheryl Edwardes and considered the issue of options and shares for their respective roles. The recommendation put forward to the committee supported the issue of options and shares on the condition that Vimy does not introduce any new short term incentive schemes. The Remuneration committee, which excludes Messrs Tapp and Young, is satisfied that this advice is given free from undue influence by members of the key management personnel of which the advice relates. Fees paid to Ausrem Pty Ltd totalled $11,062 during the year. Non-executive directors Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Board. The Chairman does not attend any discussions relating to determination of her own remuneration. Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum fee pool currently stands at $500,000 per annum. There are no retirement allowances for non-executive directors other than statutory superannuation contributions. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 30 30 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Executive pay The executive pay and reward framework has three components: (i) Base pay and benefits, including superannuation Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives’ discretion. Employees are offered a competitive base pay that comprises the fixed component of pay and rewards. External remuneration consultants provide analysis and advice to ensure base pay is set to reflect the market for a comparable role. Base pay for senior executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in any senior executives’ contracts. Superannuation contributions are made to employees’ chosen superannuation funds in accordance with regulatory requirements of each jurisdiction. (ii) Short-term performance incentives The Board is responsible for assessing short term incentives for key management personnel. Service agreements may establish short-term incentives against key performance indicators which are assessed by the Board. (iii) Long-term incentives Long-term incentives are provided to employees through the Vimy Employee Share Plan. See section D – Share-based compensation for further information. Company performance The Company is currently focused on exploration and development of its projects and is not expected to generate profits during this investment phase. Share price performance will be as a result of the success in progressing its projects, quality of the projects, management’s performance and external factors. Consequences of performance on shareholder wealth In considering the Group’s performance and benefits for shareholder wealth, the Board have regard to the following indices in respect of the current financial year and the previous four financial years: Item Loss per share (cents) Dividend (cents per share) 2015 (5.26) - 2014 * (13.72) - 2013 * (27.23) - 2012 * (13.02) - 2011 * (8.96) - Net Loss Share price ($) (10,725,302) (8,298,813) (15,337,969) (7,218,965) (4,979,842) 0.26 0.35 0.21 0.35 0.70 * The figures for these years have been retrospectively changed to factor in the consolidation of share capital of the Company on a basis that every 7 shares were consolidated into 1 share. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 31 31 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 B. Details of remuneration Amounts of remuneration The key management personnel of the Group are the directors and specified executives. Details of the remuneration of the key management personnel of the Group for the years ended 30 June 2015 and 2014 are set out in the following tables. Short-term benefits Post-employment benefits Cash salary and fees Cash bonus Super- annuation Termination benefits Share-based payments Value of options / shares Directors Non-executive C. Edwardes from 26 May 2014 D. Cornell F. Gooding (a) from 17 July 2014 resigned 26 May 2015 A. Hood (a) from 26 May 2015 Executive M. Young J. Tapp Total directors 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 90,000 8,876 40,000 40,000 34,149 - 4,200 - 422,012 254,843 315,503 325,000 905,864 628,719 - - - - - - - - - - - - - 8,550 821 3,800 3,700 - - - - 24,999 10,417 34,995 25,000 72,344 39,938 - - - - - - - - - - - - - - Total 176,050 9,697 43,800 43,700 34,149 - 4,200 - 77,500 - - - - - - - 123,709 - 123,709 - 324,918 - 570,720 265,260 474,207 350,000 1,303,126 668,657 (a) Payments for Mr Hood and Ms Gooding were made to the Forrest Family Investments Pty Ltd (Peepingee Trust) whom they represent on the Board. Ms Gooding commenced on 17 July 2014 and was replaced by Mr Hood from 26 May 2015. Key management personnel M. Fewster S. McBride CFO and Company Secretary 2015 2014 2015 2014 76,875 196,450 292,675 196,500 Total key management personnel 2015 2014 369,550 392,950 - - - - - - - - 34,923 18,176 34,923 18,176 - - - - - - - - 21,317 - 21,317 - 76,875 196,450 348,915 214,676 425,790 411,126 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 32 32 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Fixed remuneration At risk – short term incentives At risk – long term incentives 2015 2014 2015 2014 2015 2014 Directors Non-executive C. Edwardes D. Cornell F. Gooding A. Hood Executive M. Young J. Tapp Key management personnel M. Fewster S. McBride C. Service agreements 100% 100% - - 78% 74% 100% 94% 100% 100% - - 100% 100% 100% 100% - - - - - - - - - - - - - - - - - - - - 22% 26% - 6% - - - - - - - - Remuneration and other terms of employment for certain key management are formalised in service agreements. Employees are eligible for long term incentive benefits under the Vimy Employee Share Plan. Mr M. Young, Chief Executive Officer and Managing Director • • • Term of agreement – The executive service agreement has no fixed completion term. Termination – The Company may terminate Mr Young’s employment at any time with six months’ written notice or the payment of six months’ remuneration in lieu of notice. Mr Young must provide six months’ written notice to terminate the agreement. The service agreement may be terminated by the Company at any time, without notice to the executive as a result of misconduct, wilful neglect, material breaches of his duties, the executive being charged with a criminal offence which brings the Company into serious disrepute, the executive becoming insolvent or becoming ineligible to hold office as a director. Mr J. Tapp, Executive Director • • • Term of agreement – The executive service agreement has no fixed completion term. Termination – The Company may terminate Mr Tapp’s employment at any time with six months’ written notice or the payment of six months’ remuneration in lieu of notice. Mr Tapp must provide six months’ written notice to terminate the agreement. The service agreement may be terminated by the Company at any time, without notice to the executive as a result of misconduct, wilful neglect, material breaches of his duties, the executive being charged with a criminal offence which brings the Company into serious disrepute, the executive becoming insolvent or becoming ineligible to hold office as a director. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 33 33 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Mr S. McBride, Chief Financial Officer and Company Secretary • • • Term of agreement – The executive service agreement has no fixed completion term. Termination – The Company may terminate Mr McBride’s employment at any time with six months’ written notice or the payment of six months’ remuneration in lieu of notice. Mr McBride must provide six months’ written notice to terminate the agreement. The service agreement may be terminated by the Company at any time, without notice to the executive as a result of misconduct, wilful neglect, material breaches of his duties, the executive being charged with a criminal offence which brings the Company into serious disrepute, the executive becoming insolvent or becoming ineligible to hold office as a director. D. Share-based compensation During the year the Company granted options and issued shares under the Vimy Employee Share Plan (‘Plan’) to executives and key management personnel. The following shares were issued to directors and key management personnel for the period ended 30 June 2015: • • On 17 December 2014, the Company issued 714,285 ordinary shares each to Messrs Young and Tapp and 857,500 ordinary shares to The Hon. Cheryl Edwardes. These shares were purchased by the director or their associate and funded by a limited recourse loan provided by the Company. These are subject to a two year voluntary escrow period expiring on 16 December 2016. On 9 September 2014, the Company issued 457,142 ordinary shares to Mr McBride. These shares were purchased by an associate of Mr McBride and funded by a limited recourse loan provided by the Company. These shares were subject to a one year voluntary escrow period expiring on 9 September 2015. The terms of the Plan are detailed below under ‘Loans to Director and Key Management Personnel’. The following options were issued to directors and key management personnel for the period ended 30 June 2015: • On 17 December 2014, the Company granted 714,285 options each to Messrs Young and Tapp. They vest on 16 December 2016 and expire on 16 December 2019. Each option is exercisable at $0.80 per ordinary share. All options are options over ordinary shares of the Company, no option holder has any right under the options to participate in any other share issue of the Company or any other entity. No options have been exercised during the period ended 30 June 2015. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 34 34 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 E. Additional Information Shareholdings The number of ordinary shares in the Company held during the year by each director and key management personnel, including their personally related entities or associates, are set out below. Balance at the start of the period Granted as remuneration Other changes Balance at the end of the period 30 June 2015 Directors C. Edwardes M. Young J. Tapp D. Cornell A. Hood (a) F. Gooding (a) Key management personnel M. Fewster S. McBride - 2,857,142 2,857,142 - - - 5,714,284 857,142 714,285 714,285 - - - 2,285,712 - - - - - - - 857,142 3,571,427 3,571,427 - - - 7,999,996 36,597,577 211,871 - (3,216) 36,594,361 457,142 (211,871) 457,142 36,809,448 457,142 (215,087) 37,051,503 (a) Mr Hood and Ms Gooding are representatives of Forrest Family Investments Pty Ltd (Peepingee Trust) which holds 57,142,857 ordinary shares in the Company. Option holdings The number of options over ordinary shares in the Company held during the reporting period by each director and key management personnel, including their personally related entities, are set out below. Balance at the start of the period Granted as remuneration Exercised Other changes Balance at the end of the period Vested and exercisable at 30 June 2015 30 June 2015 Directors C. Edwardes M. Young J. Tapp D. Cornell A. Hood (a) F. Gooding (a) - 1,428,571 1,428,571 - - - - 714,285 714,285 - - - 2,857,142 1,428,570 Key management personnel M. Fewster S. McBride - 71,428 71,428 - - - - - - - - - - - - - - - - - - - - - 2,142,856 2,142,856 - - - - 1,428,571 1,428,571 - - - 4,285,712 2,857,142 - (21,428) (21,428) - 50,000 50,000 - 50,000 50,000 (a) Mr Hood and Ms Gooding are representatives of Forrest Family Investments Pty Ltd (Peepingee Trust) which holds 57,142,857 ordinary shares in the Company. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 35 35 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Loans to Directors and Key Management Personnel On 14 June 2013, shareholders approved an employee share scheme for the Company. As a result the Company adopted the employee share plan to be known as the Vimy Employee Share Plan (‘Plan’), pursuant to which employees (including directors) of the Company can be invited to subscribe for shares using financial assistance provided by the Company. The Plan provides a mechanism for the Company to invite employees (including the directors) to subscribe for shares in the Company and to apply for a loan from the Company to pay the subscription price for those shares (‘Plan Shares’). The Company takes security over the Plan Shares acquired under the Plan until the limited recourse loan provided for the subscription price for those shares has been repaid in full (‘Limited Recourse Loan’). A summary of the terms of issue and the Limited Recourse Loan(s) provided is shown below. Director (or associate) C. Edwardes M. Young M. Young J. Tapp J. Tapp Grant Date Number of shares acquired Amount of the loan Term of the loan 17/12/2014 17/12/2014 14/12/2013 17/12/2014 14/12/2013 857,142 714,285 1,428,571 714,285 1,428,571 $357,500 $298,000 $246,753 $298,000 $246,753 up to 5 years up to 5 years up to 5 years up to 5 years up to 5 years Key management personnel (or associate) S. McBride 9/9/2014 457,142 $221,440 up to 5 years Share based payment As non-interest bearing limited recourse loans were provided to purchase Plan Shares in the Company and these loans are secured against the same Plan Shares, AASB 2 (share based payments) applies. On this basis, the loan amount is not recognised in the financial statements. Loan terms The key terms of each Limited Recourse Loan provided under the Plan are as follows: (i) (ii) (iii) the Limited Recourse Loan may only be applied towards the subscription price for the shares issued under the Plan; the Limited Recourse Loan will be interest free, provided that if the Limited Recourse Loan is not repaid by the repayment date set by the Board, the Limited Recourse Loan will incur interest at 9% per annum after that date (which will accrue on a daily basis and compound annually on the then outstanding loan balance); by signing and returning an application for a Limited Recourse Loan, the participants of the Plan (each a Participant): ─ ─ acknowledges and agrees that the Plan Shares will not be transferred, encumbered, otherwise disposed of, or have a security interest granted over it, by or on behalf of the Participant until the Limited Recourse Loan is repaid in full to the Company; and authorises the Company (at its election) either to take such action in the Participant's name or direct that Participant take such action in relation to the Plan Shares as the Company considers appropriate which may include but is not limited to the Company undertaking buy-back of the Plan Shares or selling the Plan Shares; VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 36 36 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Loans to Directors and Key Management Personnel (continued) (iv) the Limited Recourse Loan becomes repayable on the earliest of: ─ ─ ─ the date which is five years after the grant date of the Limited Recourse Loan (‘Repayment Date’); one month after the Participant ceases for any reason to be employed by the Company; and (by the legal personal representative of the Participant) six months after the Participant ceases to be an employee of the Company due to their death; (v) (vi) notwithstanding paragraph (iv) above and subject to any voluntary escrow conditions entered into by the individual Participant, the Participant may repay all or part of the loan at any time before the Repayment Date; and the Limited Recourse Loan will be limited recourse such that on the repayment date the repayment obligation under the Limited Recourse Loan will be limited to the lesser of: ─ ─ the outstanding balance of the Limited Recourse Loan; and the market value of the Plan Shares on that date. In addition, where the Participant has elected for the Plan Shares to be provided to the Company in full satisfaction of the Limited Recourse Loan, the Company must accept the Plan Shares as full settlement of the repayment obligation under the Limited Recourse Loan. Rights attaching to Plan Shares The Plan Shares will rank equally with all other shares on issue in the capital of the Company. Holders of Plan Shares issued under the Plan will be entitled to exercise all voting rights attaching to the Shares in accordance with the Constitution. In addition, holders of Plan Shares issued under the Plan will be entitled to participate in dividends declared and paid by the Company in accordance with the Constitution. Sale of Plan Shares Where the Participant has been granted a Limited Recourse Loan to purchase the Plan Shares; and subject to voluntary escrow, those Plan Shares may only be sold by a Participant when the Limited Recourse Loan has been repaid proportionately to the number of Plan Shares to be sold. Otherwise any dealing by the Participant in the Plan Shares is prohibited without the prior written consent of the Company. If the Limited Recourse Loan becomes due and payable and the Participant has not repaid the amount of the Limited Recourse Loan in full within one month of the due date, then the Participant will forfeit their interest in the Plan Shares as full consideration for the repayment of the outstanding loan balance. The Company may either (at its election) take such action in the Participant's name or direct that Participant take such action in relation to the Plan Shares as the Company considers appropriate, which may include but is not limited to the Company undertaking buy-back of the Plan Shares or selling the Plan Shares. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 37 37 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Other transactions with director and key management personnel related entities Mr Fewster is a director of Eaglefield Holdings Pty Ltd. The Board previously agreed to reimburse legal costs incurred by Eaglefield Holdings Pty Ltd in relation to defending legal claims that were alleged by Yarri Mining Pty Ltd over EL39/876 and EL39/877. These actions were settled on 16 July 2013. There were no amounts unpaid at 30 June 2015 (30 June 2014: $102,784). Amounts recognised Legal fees Mr Cornell is a director of Element Capital Pty Ltd. Element has facilitated capital raisings for the Company for which it was paid commercial rates. There were no amounts unpaid at 30 June 2015 (30 June 2014: $108,000). Amounts recognised Capital raising fees Consolidated 2015 $ 2014 $ - - 152,785 137,136 End of audited remuneration report. 38 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 38 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 Auditor Grant Thornton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001. NON-AUDIT SERVICES During the period, the following fees were paid or payable for services provided by the auditor of the Parent entity, its related practices and non-related audit firms: Assurance services 1. Audit services Grant Thornton Audit Pty Ltd: Audit of financial reports and other audit work under the Corporations Act 2001 2. Non-audit services Advisory fees Total remuneration for assurance services Consolidated Year ended 30 June 2015 $ Year ended 30 June 2014 $ 32,629 34,648 1,600 34,229 - 34,648 Advisory services provided by the auditors was for general valuation advice in regard to the RCF VI funding facility. The Board is satisfied that the provision of this non-audit service did not compromise the auditor’s independence as required by the Corporations Act 2001. AUDITORS’ INDEMNITIES AND INSURANCE The Company does not indemnify its auditors for liability to another person’s or the Company that may arise out of the conduct of the Audit. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on the page following this Directors’ Report. OFFICERS’ INDEMNITIES AND INSURANCE The Company has agreed to indemnify former and current directors and officers of the Company against all liabilities to another person and the Company that may arise from their position as directors and officers of the Company and its controlled entities, except where the liability arises out of conduct involving a wilful breach of duty. The agreement stipulates that the Company will meet the full amount of such liabilities including costs and expenses. The Company agreed to pay a premium in respect of a contract insuring directors and officers of the Company. That contract of insurance prohibits the Company disclosing the nature of the liability insured against and the amount of the premium paid. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 39 39 Vimy Resources Limited Annual Report 2015 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015 Directors’ Report for the Year ended 30 June 2015 PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in or on behalf of the Company with leave of the court under section 237 of the Corporations Act 2001. This Directors’ Report, incorporating the Remuneration Report, is made in accordance with a resolution of the directors. Michael Young Chief Executive Officer and Managing Director Dated 23 September 2015 40 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 40 Vimy Resources Limited Annual Report 2015 AUDITOR’S INDEPENDENCE DECLARATION Auditor’s Independence Declaration To the Directors of Vimy Resources Limited Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Vimy Resources Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants P W Warr Partner - Audit & Assurance Perth, 23 September 2015 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. 41 Vimy Resources Limited Annual Report 2015 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2015 for the year ended 30 June 2015 Revenue Exploration expenditure Note 5 Consolidated 2015 $ 2014 $ 165,655 28,680 (9,033,668) (3,199,206) Corporate and administration expense (2,248,161) (2,274,688) Financing expense Debt forgiveness Employee share based expense Loss before income tax Income tax expense (122,379) (2,853,599) 15 6 1,467,367 (954,116) - - (10,725,302) (8,298,813) - - Loss attributable to members of the Company (10,725,302) (8,298,813) Other comprehensive income, net of tax - - Total comprehensive loss for the year (10,725,302) (8,298,813) Loss per share from continuing operations attributable to the members of the Company: Cents per share Cents per share Basic and Diluted loss per share 8 (5.26) (13.72) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 42 42 Vimy Resources Limited Annual Report 2015 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Statement of Financial Position as at 30 June 2015 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Prepayments Total Current Assets NON-CURRENT ASSETS Plant and equipment Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Loans and borrowings Total Current Liabilities NON-CURRENT LIABILITIES Provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS / (LIABILITIES) EQUITY Contributed equity Compound financial instrument Employee option plan reserve Employee share plan reserve Accumulated losses Consolidated Note 2015 $ 2014 $ 9 10 12 13 14 15 14 16 15 17 17 19 6,445,757 203,794 75,668 6,725,219 242,954 242,954 6,968,173 971,694 151,447 537,332 88,178 100,340 725,850 207,505 207,505 933,355 743,971 100,393 - 24,667,153 1,123,141 25,511,517 99,913 99,913 60,243 60,243 1,223,054 25,571,760 5,745,119 (24,638,405) 67,727,303 27,572,593 - 3,745,184 1,093,362 1,235,417 974,663 400,000 (64,310,963) (57,330,845) TOTAL EQUITY / (ACCUMULATED LOSSES) 5,745,119 (24,638,405) The above statement of financial position should be read in conjunction with the accompanying notes VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 43 43 Vimy Resources Limited Annual Report 2015 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Statement of Changes in Equity for the year ended 30 June 2015 Contributed equity $ Accumulated losses $ Option reserve $ Share reserve $ Compound financial instruments $ Total $ CONSOLIDATED Balance at 1 July 2013 27,725,770 (49,032,032) 974,663 400,000 3,745,184 (16,186,415) Share issue costs (153,177) - Loss attributable to members of the Company Other comprehensive income, net of tax - - (8,298,813) - - - - - - - - - - (153,177) (8,298,813) - Balance at 30 June 2014 27,572,593 (57,330,845) 974,663 400,000 3,745,184 (24,638,405) Balance at 1 July 2014 27,572,593 (57,330,845) 974,663 400,000 3,745,184 (24,638,405) Issue of ordinary shares net of issue costs Loss attributable to members of the Company Employee share based expense Conversion of compound financial instrument Other comprehensive income, net of tax 40,154,710 - (10,725,302) - - - - - - - - - 118,699 835,417 3,745,184 - - - - - Balance at 30 June 2015 67,727,303 (64,310,963) 1,093,362 1,235,417 - - - 40,154,710 (10,725,302) 954,116 (3,745,184) - - - - 5,745,119 The above statement of changes in equity should be read in conjunction with the accompanying notes VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 44 44 Vimy Resources Limited Annual Report 2015 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 Statement of Cash Flows For the year ended 30 June 2015 Cash Flows from Operating Activities Payments to other suppliers and employees Payments for exploration Interest received Other debtors Consolidated Note 2015 $ 2014 $ (2,143,470) (1,857,775) (8,790,801) (2,989,440) 139,875 24,095 21,526 10,470 Net cash used in Operating Activities 24 (10,770,301) (4,815,219) Cash Flows from Investing Activities Purchase of plant and equipment Net cash used in Investing Activities Cash Flows from Financing Activities (158,066) (158,066) Proceeds from issue of ordinary shares, net of issue costs 17,000,000 - - - Share issue costs Proceeds from loan drawdowns (163,208) (153,177) - 3,600,000 Net cash provided by Financing Activities 16,836,792 3,446,823 Net increase / (decrease) in cash and cash equivalents held 5,908,425 (1,368,396) Cash and cash equivalents at the beginning of the financial year 537,332 1,905,728 Cash and cash equivalents at the end of the financial year 9 6,445,757 537,332 The above statement of cash flows should be read in conjunction with the accompanying notes VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 45 45 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 TABLE OF CONTENTS Summary of significant accounting policies Financial risk management Critical accounting estimates and judgements Segment information Revenue Loss for the year Income tax benefit Earnings per share Cash and cash equivalents Trade and other receivables Financial assets Plant and equipment Trade and other payables Provisions Loans and borrowings Contributed equity Employee share and option reserves Share based payments Accumulated losses Expenditure commitments Director and key management personnel disclosures Loans and other transactions to directors and key management personnel Remuneration of auditors Reconciliation of loss after tax to net cash outflow from operating activities Contingent liabilities Parent entity information Events occurring after reporting date 47 53 57 58 58 59 59 60 61 61 61 62 63 63 64 65 66 67 68 69 69 70 72 73 74 74 75 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 46 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 46 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 REPORTING ENTITY Vimy Resources Limited (‘the Company’) is a company incorporated and domiciled in Australia. The address of the Company’s registered office and principal place of business is Ground Floor, 10 Richardson Street, West Perth, WA, 6005, Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2015 comprise the Company and its subsidiaries, together referred to as the (‘Group’). The Group is a for-profit entity and primarily involved in uranium project development and exploration. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. (a) Basis of preparation Statement of Compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (‘IFRS’) adopted by the International Accounting Standards Board (‘IASB’). Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and liabilities (including derivative instruments) at fair value. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency and are rounded to the nearest dollar. Where necessary prior year balances can be reallocated to compare with the current year. (b) Going Concern The Group’s ability to continue as a going concern and to expand its exploration and development activities depends on its ability to obtain financing through equity, debt or hybrid financing, joint ventures, production off- take arrangements or other means. On 20 May 2015, the Company announced a conditional $30 million funding facility with mining-focused private equity fund, Resource Capital Fund VI L.P. (‘RCF VI’), whereby RCF VI agreed to subscribe $5 million in equity through a share placement and conditionally offered to provide an additional $25 million of funding in the form of a royalty and bridging loan subject to customary conditions precedent Subsequently on 17 August 2015, the Company announced a legally binding agreement with RCF VI for the provision of the final $25 million of the $30 million funding package announced on 20 May 2015. The funding package comprises a $15 million unsecured bridging loan and a $10 million payment in return for a 1.15% royalty on future production from the Mulga Rock Project. On 3 September 2015, the Company received a payment of $10 million from RCF VI in consideration of the 1.15% royalty on future production from the Mulga Rock Project. Therefore, it is the view of the directors that the Group will have adequate resources to continue to operate for at least the next twelve months. For these reasons, they have continued to adopt the going concern basis in preparing the financial report. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 47 47 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Basis of consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2015. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. (d) New Accounting Standards for Application in Future Periods The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting period, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the Group but applicable in future reporting periods is set out below: • AASB 9 Financial Instruments AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. Effective date (annual reporting periods beginning on or after 1 January 2018). The entity has not yet assessed the full impact of AASB 9 as this standard does not apply mandatorily before 1 January 2018 and the IASB is yet to finalise the remaining phases of its project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 in Australia). • AASB 15 Revenue from Contracts with Customers The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under this approach entities will recognise transitional adjustments in retained earnings on the date of initial application (e.g. 1 July 2017), i.e. without restating the comparative period. They will only need to apply the new rules to contracts that are not completed as of the date of initial application. • AASB 2014-1 Amendments to Australian Accounting Standards (Part D: Consequential Amendments arising from AASB 14) Part D of AASB 2014-1 makes consequential amendments arising from the issuance of AASB 14. Effective date (annual reporting periods beginning on or after 1 January 2016). When these amendments become effective for the first time for the year ending 30 June 2017, they will not have any impact on the entity. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 48 48 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) • Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) The amendments to IAS 16 prohibit the use of a revenue-based depreciation method for property, plant and equipment. Additionally, the amendments provide guidance in the application of the diminishing balance method for property, plant and equipment. The amendments to IAS 38 present a rebuttable presumption that a revenue-based amortisation method for intangible assets is inappropriate. This rebuttable presumption can be overcome (i.e. a revenue-based amortisation method might be appropriate) only in two limited circumstances: • • the intangible asset is expressed as a measure of revenue, for example when the predominant limiting factor inherent in an intangible asset is the achievement of a revenue threshold (for instance, the right to operate a toll road could be based on a fixed total amount of revenue to be generated from cumulative tolls charged); or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. The Australian Accounting Standards Board (AASB) is expected to issue the equivalent Australian amendment shortly. Effective date (annual reporting periods beginning on or after 1 January 2016). When these amendments are first adopted for the year ending 30 June 2017, there will be no material impact on the transactions and balances recognised in the financial statements. The entity has not yet assessed the full impact of these amendments. (e) Impairment of non-financial assets At each reporting date, the entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. 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 which the estimates of future cash flows have not been adjusted. (f) Plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: Plant and equipment – 2 to 15 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. (g) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 49 49 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (h) Employee benefits Share-based payments - Options Prior to 14 June 2013, when the Group adopted a new employee share plan; share-based compensation benefits were provided to employees and directors via various share option plans. The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the options reserve relating to those options is transferred to share capital. The market value of shares issued to employees for no cash consideration under the share plans is recognised as an employee benefits expense with a corresponding increase in equity when the employees become entitled to the shares. Share-based payments - Shares On 14 June 2013, the Group adopted a new employee share plan the (Vimy Employee Share Plan), where eligible participants are granted shares in the Company funded by a limited recourse loan provided by the Company. The limited recourse loans are recorded within equity and not as a receivable or financial asset to be recovered by the Company. Share-based compensation benefits may be provided to employees and directors via Vimy Employee Share Plan. The fair value of the shares is the market volume weighted average closing price for the Shares over the 10 trading day period prior to issue, which is represented as an increase in equity. (i) Financial instruments (i) Compound financial instruments Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option of the holder at a fixed price determined at the inception of the loan (refer to Note 15 for details). The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. Interest related to the financial liability is recognised in the Statement of Profit or Loss and Other Comprehensive Income. On conversion, the financial liability is reclassified to equity and no gain or loss is recognised. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 50 50 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (ii) Non-derivative financial assets Loans and receivables Loans and 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. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise cash and cash equivalents and trade and other receivables. (iii) Non-derivative financial liabilities The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest rate method. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. Other financial liabilities comprise loans and borrowings and trade and other payables. (j) Income tax The income tax expense for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Vimy Resources Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidation group under the Tax Consolidation Regime. Each entity in the Group will continue to recognise its own current and deferred tax liabilities, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the Parent entity. The current tax liability of each Group entity will then subsequently be assumed by the Parent entity. The tax consolidated Group entered into a tax sharing agreement whereby each company in the Group contributes to the income tax payable in proportion to their contribution to profit before tax of the tax consolidated Group. (k) Exploration and evaluation expenditure Exploration, evaluation and acquisition costs are expensed in the year they are incurred. Development costs, when incurred, will be capitalised. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 51 51 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. (m) Short Term Employee benefits Short-term employee benefits are current liabilities included in employee benefits, measured at the undiscounted amount that the Group expects to pay as a result of the unused entitlement. Annual leave is included in ‘other long-term benefit’ and discounted when calculating the leave liability as the Group does not expect all annual leave for all employees to be used wholly within 12 months of the end of reporting period. Annual leave liability is still presented as current liability for presentation purposes under AASB 101 Presentation of Financial Statements. (n) Leases Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. (o) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. (p) Segments Identification and measurement of segments – AASB 8 requires the ‘management approach’ to the identification measurement and disclosure of operating segments. The ‘management approach’ requires that operating segments be identified on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker, for the purpose of allocating resources and assessing performance. This could also include the identification of operating segments which sell primarily or exclusively to other internal operating segments. Under AASB 8 segments were identified by business and geographical areas, and only segments deriving revenue from external sources were considered. There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss. (q) Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest revenue Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 52 52 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (r) New and revised standards that are effective for these financial statements A number of new and revised standards are effective for annual periods beginning on or after 1 July 2014. Information on these new standards is presented below. • • • • AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting Interpretation 21 Accounting for Levies AASB 2014-1 Amendments to Australian Accounting Standards The adoption of AASB 2013-3 had a small impact on the impairment disclosures and AASB 2014-1 has required additional disclosures in our segment note. Other than that, the adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. 2. FINANCIAL RISK MANAGEMENT The Group’s financial position is not complex. Its activities may expose it to a variety of financial risks in the future such as market risk (including fair value interest rate risk), credit risk, and liquidity risk. The Group’s overall financial risk management focuses on the unpredictability of the financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out under an approved framework covering a risk management policy and internal compliance and control by management. The Board identifies, evaluates and approves measures to address financial risks. The Group holds the following financial instruments: Financial assets Cash and cash equivalents Trade debtors and other receivables Prepayments Financial liabilities Trade and other payables Loans and borrowings Consolidated 2015 $ 6,445,757 203,794 75,668 6,725,219 2014 $ 537,332 88,178 100,340 725,850 971,694 - 743,971 24,667,153 971,694 25,411,124 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 53 53 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 2. FINANCIAL RISK MANAGEMENT (continued) (a) Market risk Cash flow and fair value interest rate risk The Group’s main interest rate risk arises from cash deposits. Deposits at variable rates expose the Group to cash flow interest rate risk. Deposits at fixed rates expose the Group to fair value interest rate risk. During 2015 and 2014, the Group’s deposits at variable rates were denominated in Australian dollars. As at the reporting date, the Group had the following variable rate deposits and there were no interest rate swap contracts outstanding: Short-term deposits Cash at bank 2015 2014 Weighted average interest rate Balance $ 4,045,000 2,400,757 Weighted average interest rate Balance $ 57,331 480,001 Net exposure to cash flow interest rate risk 1.46% 6,445,757 0.89% 537,332 The Group analyses its interest rate exposure on each occasion a deposit term expires. The Group aims to maximise interest returns from available funds and at the same time retain operating flexibility through adequate access to funds. During 2015 and 2014, if interest rates had been 10% higher or lower than the prevailing rates realised, with all other variables held constant, there would be an immaterial change in post-tax profit for the year. Equity would not have been impacted. (b) Credit risk The Group has no significant concentrations of credit risk. Cash transactions are limited to high credit quality financial institutions. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures on outstanding receivables and committed transactions. For banks and financial institutions, the Group will only hold deposits with A or better rated banks or financial institutions. All funds are currently banked with Westpac Banking Corporation and the Australian and New Zealand Banking Group Limited. Receivables are generally limited to Goods and Services Tax refunds from the Australian Taxation Office and minor on-chargeable expenses to third parties or employees. Events leading to other receivables are reviewed on a case by case basis and if there is no independent rating, management assesses the credit quality of the transaction party, taking into account its financial position, past experience and other factors. The Group has no derivative financial instruments. The Board has not authorised management to engage in derivative financial instruments. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised at the beginning of this note. All receivables at 30 June 2015 were received within two months. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group will aim at maintaining flexibility in funding by accessing appropriate committed credit lines available from different counterparties where appropriate and possible. Surplus funds when available are generally only invested in high credit quality financial institutions in highly liquid markets. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 54 54 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 2. FINANCIAL RISK MANAGEMENT (continued) Maturities of financial liabilities As at 30 June 2015, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: Current Non-current Within Six Months $ Six - Twelve Months $ One - Five Years $ Later than Five Years $ 30 June 2015 Loans and borrowings Trade and other payables Total - 971,694 971,694 - - - - - - - - - This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting periods as follows: 30 June 2014 Loans and borrowings Trade and other payables Total (d) Capital management 24,667,153 743,971 25,411,124 - - - - - - - - - The Group’s capital management objective is to ensure adequate funding is obtained to enable it to progress its exploration and project development activities, while retaining sufficient cash reserves to ensure the Group continues as a going concern. As a development and exploration company, funds for activities are generally sourced from equity markets, joint venture agreements, asset sales, or from borrowing facilities. The Group has utilised convertible notes and equity raisings to maintain adequate funding. The Board monitors cash resources against expenditure forecasts associated with the Company’s stated growth strategies and development plans to assess financial requirements. (e) Fair value estimation Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows: • • • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: unobservable inputs for the asset or liability VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 55 55 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 2. FINANCIAL RISK MANAGEMENT (continued) The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 30 June 2015 and 30 June 2014: 30 June 2015 Financial assets Cash and cash equivalents Trade debtors and other receivables Prepayments Total assets Financial liabilities Trade and other payables Loans and borrowings Total liabilities Net fair value 30 June 2014 Financial assets Cash and cash equivalents Trade debtors and other receivables Prepayments Total assets Financial liabilities Trade and other payables Loans and borrowings Total liabilities Net fair value Level 1 $ Level 2 $ Level 3 $ Total $ 6,445,757 203,794 75,668 6,725,219 (971,694) - (971,694) 5,753,525 Level 1 $ Level 2 $ 537,332 88,178 100,340 725,850 (743,971) - - - - - - - - - - - - - - (24,667,153) (743,971) (24,667,153) (18,121) (24,667,153) - - - - - - - - 6,445,757 203,794 75,668 6,725,219 (971,694) - (971,694) 5,753,525 Level 3 $ Total $ - - - - - - - - 537,332 88,178 100,340 725,850 (743,971) (24,667,153) (25,411,124) (24,685,274) There were no transfers between Level 1 and Level 2 in 2015 or 2014. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 56 56 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the consolidated financial statements in conformity with the IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. 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 estimates are revised and in any future periods affected. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following: (i) Income taxes The Group is subject to income taxes in Australia. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Sufficient tax losses exist to offset any deferred tax liabilities. The Group’s ability to access existing tax losses is dependent on it demonstrating achievement of either of two income tax defined tests, being the continuity of ownership test or the same business test. (ii) Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes formula. The accounting estimates and assumptions relating to equity-settled share- based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. (iii) Estimation of useful lives of assets The estimation of the useful lives of assets has been based on historical experience. In addition, the condition of material assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary. (iv) Impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. The directors considered the impairment of the investments in subsidiaries and loans receivable from subsidiaries based on their estimate of the fair value less costs to sell off the underlying mineral tenements. The inter-company loans have no interest or repayment terms and are effectively investments in controlled entities and are reflected at cost. In accordance with the Group’s accounting policies, inter-company loans are classified as part of the investment in controlled entities. Therefore, investments in subsidiaries fall under AASB 10 and are tested for impairment under AASB 136. AASB 136 prescribes the calculation of the recoverable amount of an asset at the higher of Value in Use or Fair Value less cost to sell. Due to a common control business combination in the previous year, assets acquired were recorded at their carrying values instead of fair value under the prescribed ‘predecessor accounting method’. The Group’s accounting policy is to expense all exploration expenditure in the year that it is incurred. Because of the matters above, the Board considers the fair value of the investments/loans receivable in subsidiaries to be directly associated with the value of the underlying minerals tenements. Based on these considerations, no impairment charge has been recognised by the Parent entity. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 57 57 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 4. SEGMENT INFORMATION The Group operates one business segment: Exploration and Evaluation. The activities undertaken by the Exploration segment include the exploration on tenements in Western Australia and development study activities on the Mulga Rock Project. This activity does not generate any sales revenue. The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision maker) in assessing performance and determining the allocation of resources. Result Segment contribution Carrying amount of segment assets Reconciliation to Consolidated Loss Segment contribution Corporate expenses Depreciation Employee share-based remuneration Financing expense Debt Forgiveness Financial income Exploration 2015 $ 2014 $ (9,109,671) (3,304,192) 213,666 198,632 (9,109,671) (2,119,790) (28,273) (954,116) (122,379) 1,467,367 141,560 (3,304,192) (2,148,919) (11,083) - (2,853,599) - 18,980 Loss from continuing operations (10,725,302) (8,298,813) Assets Segment assets Reconciliation to Group Assets Segment assets Corporate assets Group assets 5. REVENUE Interest received Other income 213,666 198,632 213,666 29,288 242,954 2015 $ 141,560 24,095 165,655 Consolidated 198,632 8,873 207,505 2014 $ 18,980 9,700 28,680 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 58 58 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 6. LOSS FOR THE YEAR The loss from ordinary activities before income tax has been determined after: (a) Expenses Depreciation Operating leases Auditor’s fees and provisions for audit of the financial report (b) Employee benefits expense Wages, salaries and directors' fees Employee share based expense Other employee benefits expense 7. INCOME TAX BENEFIT (a) Income tax recognised Consolidated 2015 $ 128,368 267,434 32,629 428,431 2,535,352 954,166 221,727 3,711,195 2014 $ 116,069 215,800 34,648 366,517 1,930,832 - 170,297 2,101,129 No income tax is payable by the Group as it recorded losses for income tax purposes for the year. (b) Numerical reconciliation between income tax benefit and the loss before income tax Loss before tax Income tax benefit at 30% (2014: 30%) Tax effect of: Consolidated 2015 $ 2014 $ (10,725,302) (3,217,591) (8,298,813) (2,489,944) ─ ─ ─ non-deductible expenses DTA on temporary differences not brought to account equity based remuneration - (36,187) - - 975,090 - DTA on tax losses not recognised 3,253,778 1,514,854 Income tax benefit attributable to loss from ordinary activities - - VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 59 59 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 7. INCOME TAX BENEFIT (continued) (c) Unrecognised deferred tax balances Tax losses carried forward Potential tax (benefit) at 30% Deferred tax liability ─ ─ ─ Property, plant and equipment Prepayments Accrued income Deferred tax asset ─ ─ ─ ─ ─ Exploration expenditure Borrowing costs Employee provisions S40-880 costs Other costs Amounts recognised in equity ─ ─ S40-880 costs Convertible notes Consolidated 2015 $ 2014 $ 52,433,043 15,729,913 42,839,766 12,851,930 - - (774) (56,312) - (269) 1,739,650 1,739,650 - 81,329 37,303 34,500 152,238 - - 53,125 28,225 6,046 66,277 - Net unrecognised deferred tax asset at 30% (17,774,159) (14,688,672) On 1 July 2007, Vimy Resources Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidation group under the Tax Consolidation Regime. Each entity in the Group will continue to recognise its own current and deferred tax liabilities, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the Parent entity. The current tax liability of each Group entity will then subsequently be assumed by the Parent entity. The tax consolidated group entered into a tax sharing agreement whereby each company in the Group contributes to the income tax payable in proportion to their contribution to profit before tax of the tax consolidated group. 8. EARNINGS PER SHARE Basic and diluted loss per share (cents per share) Consolidated 2015 Cents (5.26) 2014 Cents (13.72) Loss after tax used in the calculation of basic EPS (10,725,302) (8,298,813) Weighted average number of shares outstanding during the year used in calculations of loss per share 203,752,216 60,532,316 There are 79,010,701 potential ordinary shares that have not been included in the dilutive EPS calculation because they are anti-dilutive. 60 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 60 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 9. CASH AND CASH EQUIVALENTS Cash at bank and in hand Short-term deposits Consolidated 2015 $ 2,400,757 4,045,000 6,445,757 2014 $ 480,001 57,331 537,332 (a) The above figures are shown as cash and cash equivalents at the end of the financial period in the statement of cash flows. (b) Cash at bank and on hand includes interest-bearing amounts. The average rate applicable to the Group’s balance at 30 June 2015 was 1.46% (0.89% at 30 June 2014). (c) Included in short-term deposits are deposits for $45,000 ($57,331 at 30 June 2014) which are secured against bank guarantees for similar amounts in respect of environmental bonds. 10. TRADE AND OTHER RECEIVABLES Current Receivables Goods and services tax recoverable Consolidated 2015 $ 2014 $ 82,248 121,546 203,794 2,741 85,437 88,178 11. FINANCIAL ASSETS Controlled entities Parent entity: Vimy Resources Limited Subsidiaries of Vimy Resources Limited: Narnoo Mining Pty Ltd Camuco Pty Ltd Gunbarrel Energy and Minerals Australia Pty Ltd Country of incorporation Percentage owned 2015 2014 Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 61 61 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 12. PLANT AND EQUIPMENT Office equipment Cost Accumulated depreciation Total office equipment Exploration equipment Cost Accumulated depreciation Total exploration equipment Total office and exploration equipment Movements in the carrying amounts of each class of office and exploration equipment at the beginning and end of the current financial period is as set out below: Office equipment Balance at the beginning of year Additions Depreciation expense Carrying amount at the end of the year Exploration equipment Balance at the beginning of year Additions Depreciation expense Carrying amount at the end of the year Total carrying amount at the end of the year Consolidated 2015 $ 2014 $ 280,911 (251,623) 29,288 1,167,272 (953,606) 213,666 242,954 8,873 48,688 (28,273) 29,288 198,632 115,129 (100,095) 213,666 242,954 232,223 (223,350) 8,873 1,052,143 (853,511) 198,632 207,505 19,956 - (11,083) 8,873 303,618 - (104,986) 198,632 207,505 62 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 62 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 13. TRADE AND OTHER PAYABLES Current Trade payables and accruals 14. PROVISIONS Current Employee entitlement: Annual Leave Opening balance Employee entitlements provided for Employee entitlements used Closing balance The current provision relates to annual leave for employees of the Group. Based on past experience, the provision is expected to be used over the forthcoming twelve months. Non-Current Employee entitlement: Long Service Leave Opening balance Employee entitlements provided for Employee entitlements used Closing balance Consolidated 2015 $ 971,694 971,694 2014 $ 743,971 743,971 Consolidated 2015 $ 2014 $ 100,393 148,409 (97,355) 151,447 73,278 103,338 (76,223) 100,393 60,243 39,670 - 99,913 - 60,243 - 60,243 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 63 63 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 15. LOANS AND BORROWINGS (a) (b) Consolidated 2015 $ - - - 2014 $ 20,897,666 3,769,487 24,667,153 Convertible Notes Promissory Notes Total Loans and Borrowings (a) Convertible Notes: (i) (ii) (iii) (iv) (v) The Company issued two tranches of convertible notes. The 2011-Convertible Notes were drawn down on 14 October 2011 and the 2012-Convertible Notes were drawn down on 23 November 2012, collectively they are referred to as the Notes. Term of the Notes – Maturity was on 16 December 2015. Issue Price – The Notes have been issued to the noteholders at a subscription price of $0.95 for each convertible note. Vimy issued a total of 10,684,211 2011-Convertible Notes to the noteholders, which equates to a total subscription price of $10,150,000; and 4,336,842 2012- Convertible Notes to the noteholders, which equates to a total subscription price of $4,120,000. Interest on the Notes accrued at a rate of 10% per annum and is payable in arrears, 14 days after the conclusion of each interest period. Under certain circumstances the interest rate was to increase to 20% per annum. Any interest that remained unpaid for 14 days was to be capitalised unless the noteholders have previously advised the Company that interest cannot be capitalised for that period. Conversion Price of the Notes – The noteholders may elect to convert all (but not some) of the Notes into Vimy Shares. The Notes will convert into the number of Vimy Shares equal to the outstanding amount payable by Vimy under the Notes (sum of the face value ($1) plus capitalised amendment, waiver and establishment fees and any capitalised or accrued but un-capitalised interest) to that noteholder divided by the Conversion Price (initially set at 18 cents but subsequently reset to 7 cents on drawdown of the 2012-Convertible Notes) multiplied by the number of notes held by that noteholder. (vi) Security for the Notes – The facility was secured by a fixed and floating charge over the assets of Vimy Resources Limited and its subsidiaries and a mining mortgage secured the tenements that make up the Mulga Rock Project. (vii) The capitalised amendment, waiver and establishment fees which total $1,200,000 was waived on the earlier of the conversion of all the 2011 Convertible Notes and the 2012 Convertible Notes. On 17 July 2014, these Notes were converted into equity. The Company’s previous convertible note holders comprising Australian resource investment groups Acorn Capital Limited and its clients, Macquarie Bank Ltd and the Element Resources Fund, converted $23.3 million of debt to equity by subscribing for 613,741,209 ordinary fully paid shares at an issue price of $0.038 per share (pre-consolidation), in addition, the note holders have forgiven $1.2 million in fees plus interest thereon. These transactions resulted in the Company eliminating the convertible note facility. The Notes were considered a Compound Financial Instrument, that is, an instrument that has both a debt and equity component. A review of the convertible notes for accounting purposes has determined that the applicable market interest rate for these convertible notes was 30% pa. Consequently, the original drawn down amounts of $10,150,000 and $4,120,000 were split between debt and equity using that rate as a basis for the split. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 64 64 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 15. LOANS AND BORROWINGS (continued) (b) Promissory Notes (i) (ii) (iii) The Company issued four tranches of promissory notes. On each of 27 September 2013 and 27 November 2013 the Company issued promissory notes to the value of $300,000, on 20 December 2013 the Company issued promissory notes to the value of $350,000 and on 24 January 2014 the Company issued promissory notes to the value of $2,649,960; collectively (‘the Promissory Notes’). All of the Promissory Notes were issued to Acorn Capital Limited and its clients; and Macquarie Bank Limited (‘Promissory Noteholders’). The total principal amount of the loans provided pursuant to the Promissory Notes was $3,600,000. Interest on the Promissory Notes– accrued at a rate of 10% per annum and was payable on maturity. Security for the Promissory Notes – The facility is secured by the same charge as the convertible notes referred to in Note 15 (a). On 17 July 2014, the Promissory Notes were converted into equity along with the convertible notes explained in part (a) above. 16. CONTRIBUTED EQUITY 227,732,795 (2014: 423,726,209) fully paid ordinary shares Ordinary shares At 1 July 2014 (Pre consolidation) 17 July 2014 Share placement @ 3 cents (Pre consolidation) 17 July 2014 Conversion of convertible and promissory notes to equity (Pre consolidation) Consolidated Number $ 423,726,209 400,000,000 613,741,209 27,572,593 12,000,000 23,322,166 5 September 2014 Employee share plan issue (Pre consolidation) 8 December 2014 Consolidation of share capital (a) 13,500,000 (1,243,687,002) 17 December 2014 Employee share plan issue (Post consolidation) 21 May 2015 Share placement @ 30 cents (Post consolidation) 21 May 2015 Shares issued for fees on placement @ 30 cents (Post consolidation) 2,285,712 16,666,667 1,500,000 Share issue costs - - - 5,000,000 450,000 (617,456) Balance at 30 June 2015 (Post consolidation) 227,732,795 67,727,303 (a) On 8 December 2014, the Company restructured its capital by way of consolidation on a 7 to 1 basis of ordinary shares. Share fractions were rounded down to the nearest whole share resulting in 643 shares being eliminated. After consolidation, shares on issue decreased from 1,450,967,418 to 207,208,416. The shares have no par value. Fully paid ordinary shares Ordinary shares participate in dividends and the proceeds on winding up of the Parent entity in proportion to the number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 65 65 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 17. EMPLOYEE SHARE AND OPTION RESERVES Share Options Reserves Reserves Reserves comprise the following: Options reserve Balance as at start of financial year 1,428,570 options granted (a) Balance as at end of the financial year Consolidated 2015 $ 2014 $ 1,093,362 974,663 974,663 118,699 1,093,362 974,663 - 974,663 (a) On 17 December 2014, the Company granted 714,285 options each to Messrs Young and Tapp which vest two years after grant date being 16 December 2016 and expire on 16 December 2019. Each option is exercisable at $0.80 per ordinary share. The Black Scholes valuation expense will be proportionately allocated over the vesting period. Share Plan Reserves The share plan reserve records items recognised as expenses on the valuation of employee shares. Reserves Reserves comprise the following: Employee Share Plan Reserve Balance as at start of financial year 4,214,283 shares issued (a) Balance as at end of the financial year Consolidated 2015 $ 2014 $ 1,235,417 400,000 400,000 835,417 1,235,417 400,000 - 400,000 (a) On 9 September 2014, a total of 1,928,571 shares were issued to staff and have been funded by a non-interest bearing, limited recourse loan from the Company. These shares are subject to voluntary escrow period of one year expiring on 9 September 2015 and the Black Scholes valuation expense will be proportionately allocated over the escrow period. On 17 December 2014, a total of 2,285,712 ordinary shares were issued to Directors, Messrs Young and Tapp and The Hon. Cheryl Edwardes and have been funded by a non-interest bearing, limited recourse loan from the Company. These shares are subject to voluntary escrow period of two years expiring on 16 December 2016 and the Black Scholes valuation expense will be proportionately allocated over the escrow period. As non-interest bearing limited recourse loans were provided to purchase Plan shares in the Company and these loans are secured against the same Plan shares, AASB 2 (share based payments) applies. On this basis, the loan amount is not recognised in the financial statements and instead an amount is expensed as a share based payment. The employee share plan reserve records items recognised as expenses on the valuation of employee share issues. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 66 66 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 18. SHARE BASED PAYMENTS (a) Employee option plan The Company had an employee share option plan, which was also available to directors (the issue of securities to directors requires shareholder approval), called the Vimy Resources Limited Employee Share Option Plan (“Plan”). This Plan was replaced by the Vimy Employee Share Plan on 14 June 2013, however, some options remain outstanding under the prior employee option plan and some options were issued during the year to the directors outside of the previous Plan. Set out below is a summary of options granted to employees under the Vimy Resources Limited Employee Option Plan: Grant date Expiry date Number Balance at start of year Number Granted during year Number Exercised during year Number Cancelled during year Number Balance at end of year Number Exercisable at end of year Various Various 3,035,000 1,428,570 Weighted average exercise price 0.80 - - (24,285) 4,439,285 3,010,715 3.71 0.65 0.40 The Company issued 1,428,570 options to directors on 17 December 2014. The input variables used in the Black Scholes option pricing model are as follows: Grant date: Expiry date: Exercise price: Expected volatility: Expected life: Risk free interest rate (based on government bonds): Calculated share value at grant date: Total amount to be recognised as share based payment over the two year vesting period (b) Employee share plan 17 December 2014 16 December 2019 $0.80 115% 5 years 2.38% $0.311 $444,362 On 14 June 2013, the Company established an employee share plan, which is also available to directors (the issue of securities to directors requires shareholder approval). The plan is called the Vimy Employee Share Plan. A summary of the main terms and conditions of the Vimy Employee Share Plan can be found at Note 22. Set out below is a summary of shares granted to employees under the Plan: Issue date Number Balance at start of year Number Issued during year Number Cancelled during year Number Balance at end of year 14 June 2013 2,857,142 5 September 2014 17 December 2014 - - - 1,928,571 2,285,712 - - - 2,857,142 1,928,571 2,285,712 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 67 67 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 18. SHARE BASED PAYMENTS (continued) On 5 September 2014, the Company issued 1,928,571 shares to staff under its employee share plan. The input variables used in the Black Scholes option pricing model are as follows: Issue date: Expected volatility: Latest loan repayment date: Risk free interest rate (based on government bonds): Calculated share value at issue date: 5 September 2014 115% 5 years 2.99% $0.39 Total amount to be recognised as share based payments over a one year escrow period $768,958 Subsequently on 17 December 2014, the Company issued 2,285,712 shares to directors under its employee share plan. The input variables used in the Black Scholes option pricing model are as follows: Issue date: Expected volatility: Latest loan repayment date: Risk free interest rate (based on government bonds): Calculated share value at issue date: 17 December 2014 115% 5 years 2.38% $0.34 Total amount to be recognised as share based payments over a two year escrow period $776,601 Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: Employee share based expense 19. ACCUMULATED LOSSES Consolidated 2015 $ 954, 116 Consolidated 2015 $ 2014 $ - 2014 $ Accumulated losses at the beginning of the financial year (57,330,845) (49,032,032) Transfer of compound financial instrument to accumulated losses 3,745,184 - Net loss attributable to members of the Company (10,725,302) (8,298,813) Accumulated losses at the end of the financial year (64,310,963) (57,330,845) 68 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 68 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 20. EXPENDITURE COMMITMENTS (a) Operating lease commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements relating to office space Payable - minimum lease payments - not later than 12 months - between 12 months and 5 years Consolidated 2015 $ 2014 $ 74,000 - 74,000 230,067 74,000 304,067 A cash backed guarantee bond has been established for $45,000 in relation to these commitments. (b) Expenditure commitments contracted for: Exploration tenements In order to maintain current rights of tenure to exploration tenements, the Group is required to outlay rentals and to meet the minimum expenditure requirements. These obligations are not provided for in the financial statements and are payable: - not later than 12 months - between 12 months and 5 years 1,947,120 5,034,120 6,981,240 2,256,408 6,405,914 8,662,322 21. DIRECTOR AND KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Key management personnel The following additional persons had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the year: Name Position Employer S. McBride Chief Financial Officer and Company Secretary Vimy Resources Limited (b) Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments Consolidated 2015 $ 1,275,414 107,267 346,235 1,728,916 2014 $ 1,021,669 58,114 - 1,079,783 In accordance with AASB124 remuneration disclosures related to key management personnel are included in the Remuneration Report in the Directors’ Report. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 69 69 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 22. LOANS AND OTHER TRANSACTIONS TO DIRECTORS AND KEY MANAGEMENT PERSONNEL (a) Loans to Director and Key Management Personnel On 14 June 2013, shareholders approved a new employee share scheme for the Company. As a result the Company adopted the employee share plan to be known as the Vimy Employee Share Plan (‘Plan’), pursuant to which certain employees (including directors) of the Company can be invited to subscribe for shares using financial assistance provided by the Company. The Plan provides a mechanism for the Company to invite employees (including the directors) to subscribe for shares in the Company and to apply for a loan from the Company to pay the subscription price for those shares (‘Plan Shares’). The Company takes security over the Shares acquired under the Plan until the limited recourse loan provided for the subscription price for those shares is repaid in full (‘Limited Recourse Loan’). Subsequent to shareholder approval of the Plan and separate shareholder approval to issue shares to directors, a summary of the terms of issue and the Limited Recourse Loan provided is shown below. Grant Date Number of shares acquired Amount of the loan Term of the loan Director (or associate) C. Edwardes M. Young J. Tapp 17/12/2014 17/12/2014 14/12/2013 17/12/2014 14/12/2013 857,142 714,285 1,428,571 714,285 1,428,571 $357,500 $298,000 $246,753 $298,000 $246,753 up to 5 years up to 5 years up to 5 years up to 5 years up to 5 years Key management personnel (or associate) S. McBride 9/9/2014 457,142 $221,440 up to 5 years Share based payment As non-interest bearing limited recourse loans were provided to purchase Plan Shares in the Company and these loans are secured against the same Plan Shares, AASB 2 (share based payments) applies. On this basis, the loan amount is not recognised in the financial statements. Loan terms The key terms of each Limited Recourse Loan provided under the Plan are as follows: (i) (ii) the Limited Recourse Loan may only be applied towards the subscription price for the shares issued under the Plan; the Limited Recourse Loan will be interest free, provided that if the Limited Recourse Loan is not repaid by the repayment date set by the Board, the Limited Recourse Loan will incur interest at 9% per annum after that date (which will accrue on a daily basis and compound annually on the then outstanding loan balance); (iii) by signing and returning an application for a Limited Recourse Loan, the participants of the Plan (each a Participant): ─ ─ acknowledges and agrees that the Plan Shares will not be transferred, encumbered, otherwise disposed of, or have a security interest granted over it, by or on behalf of the Participant until the Limited Recourse Loan is repaid in full to the Company; and authorises the Company (at its election) either to take such action in the Participant's name or direct that Participant take such action in relation to the Plan Shares as the Company considers appropriate which may include but is not limited to the Company undertaking buy-back of the Plan Shares or selling the Plan Shares; VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 70 70 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 22. LOANS AND OTHER TRANSACTIONS TO DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued) (iv) the Limited Recourse Loan becomes repayable on the earliest of: ─ ─ ─ the date which is five years after the grant date of the Limited Recourse Loan (‘Repayment Date’); one month after the Participant ceases for any reason to be employed by the Company; and (by the legal personal representative of the Participant) six months after the Participant ceases to be an employee of the Company due to their death; (v) notwithstanding paragraph (iv) above and subject to any voluntary escrow conditions entered into by the individual participant, the Participant may repay all or part of the loan at any time before the Repayment Date; and (vi) the Limited Recourse Loan will be limited recourse such that on the repayment date the repayment obligation under the Limited Recourse Loan will be limited to the lesser of: ─ ─ the outstanding balance of the Limited Recourse Loan; and the market value of the Plan Shares on that date. In addition, where the Participant has elected for the Plan Shares to be provided to the Company in full satisfaction of the Limited Recourse Loan, the Company must accept the Plan Shares as full settlement of the repayment obligation under the Limited Recourse Loan. Rights attaching to Plan Shares The Plan Shares will rank equally with all other shares on issue in the capital of the Company. Holders of Plan Shares issued under the Plan will be entitled to exercise all voting rights attaching to the Shares in accordance with the Constitution. In addition, holders of Plan Shares issued under the Plan will be entitled to participate in dividends declared and paid by the Company in accordance with the Constitution. Sale of Plan Shares Where the Participant has been granted a Limited Recourse Loan to purchase the Plan Shares; and subject to voluntary escrow those Plan Shares may only be sold by a Participant when the Limited Recourse Loan has been repaid proportionately to the number of Plan Shares to be sold. Otherwise any dealing by the Participant in the Plan Shares is prohibited without the prior written consent of the Company. If the Limited Recourse Loan becomes due and payable and the Participant has not repaid the amount of the Limited Recourse Loan in full within one month of the due date, then the Participant will forfeit their interest in the Plan Shares as full consideration for the repayment of the outstanding loan balance. The Company may either (at its election) take such action in the Participant's name or direct that Participant take such action in relation to the Plan Shares as the Company considers appropriate, which may include but is not limited to the Company undertaking buy-back of the Plan Shares or selling the Plan Shares. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 71 71 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 22. LOANS AND OTHER TRANSACTIONS TO DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued) (b) Other transactions with director and key management personnel related entities Mr Fewster is a director of Eaglefield Holdings Pty Ltd. The Board previously agreed to reimburse legal costs incurred by Eaglefield Holdings Pty Ltd in relation to defending legal claims that were alleged by Yarri Mining Pty Ltd over EL39/876 and EL39/877. These actions were settled on 16 July 2013. There was $102,784 unpaid at 30 June 2015 (30 June 2014: $nil). Amounts recognised Legal fees Mr Cornell is a director of Element Capital Pty Ltd. Element has facilitated capital raisings for the Company for which it was paid commercial rates. There was $108,000 unpaid at 30 June 2015 (30 June 2014: $nil). Amounts recognised Capital raising fees 23. REMUNERATION OF AUDITORS Consolidated 2015 $ 2014 $ - - 152,785 137,136 Consolidated 2015 $ 2014 $ During the period the following fees were paid or payable for services provided by the auditor of the Parent entity, its related practices and non-related audit firms: Assurance services Audit services Grant Thornton Audit Pty Ltd: - audit and review of financial reports and other audit work under the Corporations Act 2001 32,629 34,648 Non audit services - Advisory fees Total remuneration for assurance services 1,600 34,229 - 34,648 72 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 72 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 24. RECONCILIATION OF LOSS AFTER TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Consolidated 2015 $ 2014 $ (a) Reconciliation of cash Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash at bank 6,445,757 537,332 Reconciliation of cash flow from operations with loss after income tax Loss after income tax Loss on the sale of asset Depreciation Share based payments expense Convertible note – net amortisation of legal costs Fees and interest forgiven on Convertible Notes Finance cost Changes in assets and liabilities: Decrease in trade and other receivables Decrease in prepayments Increase in trade and other payables Increase in employee benefits (10,725,302) (8,298,813) - 128,369 954,116 - (1,467,367) 112,379 - 116,069 - 125,199 - 2,853,599 (10,997,805) (5,203,946) (115,616) 24,672 227,723 90,725 (18,404) 173,226 146,547 87,358 Net cash outflow from operating activities (10,770,301) (4,815,219) (b) Non-cash financing and investing activities The following transactions occurred which affected assets and liabilities but which are not reflected in the statement of cash flows: Capitalisation of finance costs Debt forgiveness Employee share based expenses Payment of facility fee on RCF funding facility 112,379 (1,467,367) 954,116 450,000 2,853,599 - - - VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 73 73 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 25. CONTINGENT LIABILITIES Royalty Narnoo Mining Pty Ltd (‘Narnoo’), one of the Company's wholly owned subsidiaries, had agreed to pay a royalty of 1.5% on all the gross proceeds actually received by Narnoo from selling mineral products, other than scandium, extracted and recovered from a number of the tenements held by Narnoo. The royalty would have ceases on the earlier of the conversion of all the 2011 Convertible Notes and the 2012 Convertible Notes (2011 and 2012 Convertible Notes), the repayment of 2011 and 2012 Convertible Notes on the last business day before the maturity date for the notes and the payment by Narnoo of the cash consideration detailed below. If the Company repaid the 2011 and 2012 Convertible Notes early or a Noteholder gave a redemption notice upon the occurrence of a redemption event under the 2011 and 2012 Convertible Notes, then a Noteholder must give a surrender notice (if instructed by the Relevant Noteholders being Noteholders who have subscribed for 66% or more by value in aggregate of the Convertible Notes) under which the Noteholder will surrender all of its rights under the royalty arrangements. Narnoo would have been required to pay the Noteholders $12 million upon receiving the surrender notice from the Noteholders. On 17 July 2014, the 2011 and 2012 Convertible Notes were converted into equity. As part of those transactions the 1.5% Royalty agreement over the Narnoo Mining Pty Ltd tenements was terminated. Please refer to Note 15 for further details. 26. PARENT ENTITY INFORMATION Information relating to Vimy Resources Limited: Current assets Total assets Current liabilities Total liabilities Total net assets Issued capital Accumulated losses Compound financial instruments Employee share plan reserve Employee options plan reserve Total shareholders’ equity Profit / (Loss) of the parent entity Parent Entity 2015 $ 2014 $ 6,725,031 46,560,060 1,100,911 1,200,824 667,477 31,489,065 25,372,384 25,432,627 45,359,236 6,056,438 67,727,303 27,572,593 (24,696,846) (26,636,002) - 1,093,362 1,235,417 45,359,236 3,745,184 400,000 974,663 6,056,438 (1,806,028) (5,027,015) Total comprehensive loss of the parent entity (1,806,028) (5,027,015) VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 74 74 Vimy Resources Limited Annual Report 2015 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2015 Notes to the Financial Statements 30 June 2015 26. PARENT ENTITY INFORMATION (continued) Guarantees of the Parent: On 1 July 2007, Vimy Resources Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidation group under the Tax Consolidation Regime. Each entity in the Group will continue to recognise its own current and deferred tax liabilities, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the Parent entity. The current tax liability of each Group entity will then subsequently be assumed by the Parent entity. The tax consolidated group entered into a tax sharing agreement whereby each company in the Group contributes to the income tax payable in proportion to their contribution to profit before tax of the tax consolidated group. Commitments and contingent liabilities of the Parent Expenditure commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements relating to office space Payable - minimum lease payments - not later than 12 months - between 12 months and 5 years Parent Entity 2015 $ 2014 $ 74,000 - 74,000 26,567 - 26,567 27. EVENTS OCCURRING AFTER REPORTING DATE Since 30 June 2015 the following has occurred: • • On 17 August 2015, the Company announced a legally binding agreement with RCF Capital VI L.P. for the provision of the final $25 million of the $30 million funding package announced on 20 May 2015. The funding package comprises a $15 million unsecured bridging loan and a $10 million payment in return for a 1.15% royalty on future production from the Mulga Rock Project. On 3 September 2015, the Company received a payment of $10 million from RCF VI in consideration of the 1.15% royalty. VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 75 75 Vimy Resources Limited Annual Report 2015 DIRECTORS’ DECLARATION 30 JUNE 2015 Directors’ Declaration 30 June 2015 1. In the opinion of the directors of Vimy Resources Limited: (a) the consolidated financial statements and notes of Vimy Resources Limited are in accordance with the Corporations Act 2001, including i. ii. giving a true and fair view of its financial position as at 30 June 2015 and of its performance for the financial year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that Vimy Resources Limited will be able to pay its debts as and when they become due and payable; and 2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2015. 3. The consolidated financial statements comply with International Financial Reporting Standards. Signed in accordance with a resolution of the directors: Michael Young Chief Executive Officer and Managing Director Dated: 23 September 2015 VIMY RESOURCES LIMITED – Annual Financial Statements 2015 І Page 76 76 Vimy Resources Limited Annual Report 2015 INDEPENDENT AUDITOR’S REPORT Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 Independent Auditor’s Report To the Members of Vimy Resources Limited T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au Level 1 10 Kings Park Road West Perth WA 6005 Independent Auditor’s Report To the Members of Vimy Resources Limited Report on the financial report We have audited the accompanying financial report of Vimy Resources Limited (the Correspondence to: “Company”), which comprises the consolidated statement of financial position as at 30 June PO Box 570 West Perth WA 6872 2015, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for T +61 8 9480 2000 F +61 8 9322 7787 the year then ended, notes comprising a summary of significant accounting policies and E info.wa@au.gt.com other explanatory information and the directors’ declaration of the consolidated entity W www.grantthornton.com.au comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. Report on the financial report We have audited the accompanying financial report of Vimy Resources Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June Directors’ responsibility for the financial report 2015, the consolidated statement of profit or loss and other comprehensive income, The Directors of the Company are responsible for the preparation of the financial report consolidated statement of changes in equity and consolidated statement of cash flows for that gives a true and fair view in accordance with Australian Accounting Standards and the the year then ended, notes comprising a summary of significant accounting policies and Corporations Act 2001. The Directors’ responsibility also includes such internal control as other explanatory information and the directors’ declaration of the consolidated entity the Directors determine is necessary to enable the preparation of the financial report that comprising the Company and the entities it controlled at the year’s end or from time to time gives a true and fair view and is free from material misstatement, whether due to fraud or during the financial year. error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards. Directors’ responsibility 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 Auditor’s responsibility Corporations Act 2001. The Directors’ responsibility also includes such internal control as Our responsibility is to express an opinion on the financial report based on our audit. We the Directors determine is necessary to enable the preparation of the financial report that conducted our audit in accordance with Australian Auditing Standards. Those standards gives a true and fair view and is free from material misstatement, whether due to fraud or require us to comply with relevant ethical requirements relating to audit engagements and error. The Directors also state, in the notes to the financial report, in accordance with plan and perform the audit to obtain reasonable assurance whether the financial report is Accounting Standard AASB 101 Presentation of Financial Statements, the financial free from material misstatement. statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. 77 Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. Vimy Resources Limited Annual Report 2015 INDEPENDENT AUDITOR’S REPORT An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view 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 Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: a the financial report of Vimy Resources Limited is in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements. Report on the remuneration report We have audited the remuneration report included in pages 30 to 38 of the directors’ report for the year ended 30 June 2015. 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. 78 Vimy Resources Limited Annual Report 2015 INDEPENDENT AUDITOR’S REPORT Auditor’s opinion on the remuneration report In our opinion, the remuneration report of Vimy Resources Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001. GRANT THORNTON AUDIT PTY LTD Chartered Accountants P W Warr Partner - Audit & Assurance Perth, 23 September 2015 79 Vimy Resources Limited Annual Report 2015 ADDITIONAL INFORMATION AS AT 23 SEPTEMBER 2015 Additional Information as at 23 September 2015 Capital structure The capital structure of the Company at the date of this report was: Ordinary shares 227,732,795 Unlisted options 79,010,703 Distribution of listed ordinary fully paid shares Size of holding Number of shareholders Number of ordinary shares 1 1,001 5,001 10,001 - - - - 1,000 5,000 10,000 100,000 100,001 - and over 449 532 147 235 44 1,407 177,354 1,331,547 1,091,384 7,236,676 217,895,834 227,732,795 The number of shareholders holding less than a marketable parcel of ordinary shares was 513. Twenty largest shareholders of listed ordinary shares Name Ordinary shares held % of total 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Forrest Family Inv. Pty Ltd ATF Peepingee A/C Macquarie Bank Limited National Nominees Limited ATF Geiger Resource Fund Sumico WA Pty Ltd Merrill Lynch Australia Nominees Pty Ltd BNP Paribas Nominees Pty Ltd Michael E. Fewster and S. T. Fewster J. P. Morgan Nominees Australia Limited HSBC Custody Nominees Australia Limited Eaglefield Holdings Pty Ltd (Fewster Super Fund Account) Michael C. Young and J. T. Young Citicorp Nominees Pty Ltd Julian R. Tapp Greensilk Nominees Pty Ltd (Dunbar - Tapp Family Account) Cheryl Edwardes C.G., H.J. and M. Petricevic Christopher W. Davis HSBC Custody Nominees Australia Limited HSBC Custody Nominees Australia Limited Kenneth Joseph Hall 57,142,857 43,156,026 27,691,365 27,620,076 18,166,667 7,480,343 5,228,571 4,498,513 4,150,944 3,745,714 3,571,427 3,332,532 2,142,856 1,428,571 857,142 854,874 753,993 595,714 520,416 500,000 25.09% 18.95% 12.16% 12.13% 7.98% 3.28% 2.30% 1.98% 1.82% 1.64% 1.57% 1.46% 0.94% 0.63% 0.38% 0.38% 0.33% 0.26% 0.23% 0.22% 213,438,601 93.73% 80 Vimy Resources Limited Annual Report 2015 ADDITIONAL INFORMATION AS AT 23 SEPTEMBER 2015 Additional Information as at 23 September 2015 Voting rights of ordinary shares (ASX Code: VMY) At a general meeting, on a show of hands, every ordinary shareholder present in person or by proxy has one vote. On the taking of a poll, every ordinary shareholder present in person or by proxy, and whose shares are fully paid, has one vote for each of his or her shares. Distribution of all unlisted employee option plan holders: Size of holding Number of option holders Number of options 5,001 10,001 100,001 - - - 10,000 100,000 and over 3 5 2 10 21,426 132,142 4,285,712 4,439,280 Holders of 20% or more of the securities listed above: Michael C. Young and J. T. Young ATF the MJE Trust 2,142,856 options Julian R. Tapp 2,142,856 options Distribution of unlisted option holders (expiring on 16 December 2018, exercisable at $1.54 per share): Size of holding Number of option holders Number of options 100,001 - and over 6 6 8,714,281 8,714,281 Holders of 20% or more of the securities listed above: National Nominees Limited Macquarie Bank Limited 3,290,235 options 4,292,751 options Distribution of unlisted option holders (expiring on 16 December 2018, exercisable at 70 cents per share): Size of holding Number of option holders Number of options 100,001 - and over 6 6 8,714,283 8,714,283 Holders of 20% or more of the securities listed above: National Nominees Limited Macquarie Bank Limited 3,242,318 options 4,230,236 options Distribution of unlisted option holders (expiring on 30 June 2016, exercisable at 35 cents per share): Size of holding Number of option holders Number of options 100,001 - and over 1 1 57,142,857 57,142,857 Holders of 20% or more of the securities listed above: Forrest Family Inv. Pty Ltd ATF Peepingee A/C 57,142,857 options 81 Vimy Resources Limited Annual Report 2015 ADDITIONAL INFORMATION AS AT 23 SEPTEMBER 2015 Additional Information as at 23 September 2015 Unlisted options Until exercised, unlisted options confer no voting rights and no rights to subscribe for new securities in the Company. They do not entitle the holder to a dividend, or to participate in a winding up of the Company. The unlisted options are a separate class of security that may be converted into the Company’s shares on a one-for-one basis once they are exercised. Substantial shareholders (in accordance with notices provided to the Company) Name Ordinary shares held % of total 1 2 3 4 5 Forrest Family Inv. Pty Ltd Acorn Capital Limited Macquarie Bank Limited Michael Edward Fewster Resource Capital Fund VI LP On-market buy back 57,142,857 47,462,332 43,159,992 36,597,577 18,166,667 25.09% 20.84% 18.95% 16.07% 7.98% There is no current on-market buy back of the Company’s shares in place. Investor Relations Shareholders and investors seeking information on the Company should reference the Australian Securities Exchange website asx.com.au and search announcements under the Company’s ASX symbol VMY, reference the Company’s website at www.vimyresources.com.au or contact the Chief Executive Officer or Company Secretary at: Vimy Resources Limited Ground Floor 10 Richardson Street West Perth WA 6005 Telephone: +61 8 9389 2700 Facsimile: +61 8 9389 2722 Email: info@vimyresources.com.au Shareholder enquiries Enquiries relating to shareholding, tax file number and notification of change of address should be directed to: Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Telephone: +61 8 9315 2333 Facsimile: +61 8 9315 2233 82 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement STATEMENT Vimy Resources Limited (‘Company’) has adopted systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this statement. Commensurate with the spirit of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations Third Edition (“Principles and Recommendations”), the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. Where, after due consideration, the Company's corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice, in compliance with the "if not, why not" regime. This statement is current as at 30 September 2015. DISCLOSURE – PRINCIPLES AND RECOMMENDATIONS The Company reports below on how it has followed (or otherwise departed from) each of the Principles and Recommendations during the 2015 financial year (‘Reporting Period’). Principle 1 – Lay solid foundations for management and oversight A listed entity should establish and disclose the respective roles and responsibilities of board and management and how their performance is monitored and evaluated. Recommendation 1.1: A listed entity should disclose: (a) (b) the respective roles and responsibilities of board and management; and those matters expressly reserved to the board and those delegated to management. Disclosure: The Company has established functions reserved to the Board and has set out these functions in its Board Charter. The Board is collectively responsible for promoting the success of the Company through its key functions of overseeing the management of the Company, providing overall corporate governance of the Company, monitoring the financial performance of the Company, engaging appropriate management commensurate with the Company's structure and objectives, involvement in the development of corporate strategy and performance objectives and reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal compliance. The Company has established the functions delegated to senior executives and has set out these functions in its Board Charter. Senior executives are responsible for supporting the Chief Executive Officer/ Managing Director (‘CEO/MD’) and assisting the CEO/MD in implementing the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the Company's materiality thresholds at first instance to the CEO/MD or, if the matter concerns the CEO/MD, then directly to the Chair. Recommendation 1.2: A listed entity should: (a) (b) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 1 83 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Disclosure: When the Board determines that changes are required to the Board or indeed, if a director resigns from the Board, in determining candidates for the Board, the Nomination Committee (or equivalent) will follow a prescribed procedure whereby it considers the balance of independent directors on the Board as well as the skills and qualifications of potential candidates that will best enhance the Board's effectiveness. The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession planning. Directors are rotated on the basis of: “At each annual general meeting one-third of the directors for the time being, or, if their number is not a multiple of three, then the whole number nearest one-third, shall retire from office and based on that calculation the directors to retire at an annual general meeting are those who have been longest in office since their last election. A retiring director is eligible for re-election. Re-appointment of directors is not automatic.” The Company Policy and Procedure for the Selection and re/Appointment of Directors requires that shareholders shall be informed of the names of candidates submitted for election as directors at a general meeting of shareholders. In order to enable shareholders to make an informed decision regarding the election, the following information shall be supplied to shareholders: • • • • • biographical details (including competencies and qualifications and information sufficient to enable an assessment of the independence of the candidate); details of material business relationships between the candidate and the Company; and the candidate and directors of the Company; directorships held; the term of office currently served by any directors subject to re-election; and any other particulars required by law. Recommendation 1.3: A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. Disclosure: Remuneration and other terms of employment for certain key management personnel are formalised in service agreements which are disclosed in the remuneration report. Recommendation 1.4: The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. Disclosure: The Company Secretary fulfils other management responsibilities in addition to company secretarial duties. The formal reporting line of the Company Secretary is to the CEO/MD. For any matter relevant to the company secretarial duties or conduct of the Board, the Company Secretary has an indirect reporting line, and is accountable, to the Chair of the Board. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 2 84 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 1.5: A listed entity should: (a) (b) (c) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; disclose that policy or a summary of it; and disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them and either: o o the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under that Act. Notification of departure: The Company does not have a diversity policy. Explanation for departure: The Company has not established a diversity policy due to the relatively small size of the Company. The Board considers that at this stage no benefits would be gained by establishing a diversity policy. The Company is committed to ensuring a diverse mix of skills and talent exists amongst its directors, officers and employees to enhance the Company’s performance. The Board of five members currently comprises one woman; being the Chairman, The Hon. Cheryl Edwardes. The Company currently has nineteen employees, five are women. There are no women in senior executive roles. Recommendation 1.6: A listed entity should: (a) (b) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Disclosure: The assessment process currently used by the Board requires each director to complete a questionnaire relating to the role, composition, procedures, practices and behaviour of the Board and its members. Senior executives having most direct contact with the Board may also be invited to complete similar questionnaires. Responses to the questionnaires are confidential and provided direct to the Company Secretary with the results individually and in aggregate then communicated to the Chair of the Board. During the Reporting Period, a formal evaluation of the Board did not take place, although the Chair informally considered the composition of the Board. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 3 85 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 1.7: A listed entity should: (a) (b) have and disclose a process for periodically evaluating the performance of its senior executives; and disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Disclosure: The performance of all directors and senior executives is reviewed at least annually. The Board evaluates the performance of senior executives having regard to such things as: the responsibilities of the executive; performance against budget and goals that have been set; any communicated key performance indicators; and qualitative as well as quantitative measures. No senior executive is involved with their own evaluation, and the Board evaluates such parties without such parties being present. An evaluation of senior executives was undertaken during the year in accordance with this process. Principle 2 – Structure the Board to add value A listed entity should have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively. Recommendation 2.1: The board of a listed entity should: (a) have a nomination committee which: o o has at least three members, a majority of whom are independent directors; and is chaired by an independent director, and disclose: o o o the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. Disclosure: The Board has not established a Nomination Committee. Notification of departure: The full Board performs the function of a Nomination Committee. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 4 86 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Explanation for departure: A separate Nomination Committee has not been formed due to the relatively small size and structure of the Board. The Board considers that at this stage no efficiencies or other benefits would be gained by establishing a separate Nomination Committee. The Board discusses nomination-related matters on an ongoing basis, as required. When considering matters of nomination, the Board functions in accordance with its Nomination Committee Charter. Items that are usually required to be discussed by a Nomination Committee are marked as separate agenda items at Board meetings when required. The Board deals with any conflicts of interest that may occur when convening in the capacity of Nomination Committee by ensuring the director with conflicting interests is not party to the relevant discussions. Recommendation 2.2: A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. Disclosure: A profile of each director containing their skills, experience, expertise and term of office is set out in the Directors' Report. Recommendation 2.3: A listed entity should disclose: (a) (b) the names of the directors considered by the board to be independent directors; if a director has an interest, position, association or relationship of the type described in Box 2.3 of the Principles and Recommendations, but the board is of the opinion that it does not compromise the independence of the director; the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and (c) the length of service of each director. Disclosure: The independent directors of the Company during the reporting period were The Hon. Cheryl Edwardes and Mr David Cornell. These directors are independent as they are non-executive directors who are not members of management and who are free of any material business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgement. The director’s interest, position, association or relationship and length of service is set out in the Directors’ Report. Recommendation 2.4: A majority of the board of a listed entity should be independent directors. Notification of departure: The Company did not have a majority of independent directors. Explanation for departure: The Board considered that the composition of the Board was adequate for the Company’s current size and operations, and includes an appropriate mix of skills and expertise, relevant to the Company’s business. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 5 87 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 2.5: The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO/MD of the entity. Disclosure: The Hon. Cheryl Edwardes is the independent chair and Michael Young is the CEO/MD of the Company. Recommendation 2.6: A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively. Disclosure: The formal letter of appointment and induction pack provided to directors contains sufficient information to allow the new director to gain an understanding of: • • • • the rights, duties and responsibilities of directors; the role of Board Committees; the roles and responsibilities of the executive team; and the Company’s financial, strategic, and operational risk management position. New directors undertake an induction program which comprises: • • • an information pack which includes a copy of the Company’s constitution; Board and Committee charters; most recent annual report; most recent monthly group performance report; the Company’s strategic plan; organisational chart; deed of access, insurance and indemnity and details of the Company’s directors and officers’ insurance policy; and a copy of the register of the Company’s most significant risks; a program of meetings with members of the Company’s executive team; visits to the Company’s projects. Principle 3 – Act ethically and responsibly A listed entity should act ethically and responsibly. Recommendation 3.1: A listed entity should: (a) (b) have a code of conduct for its directors, senior executives and employees; and disclose that code or a summary of it. Disclosure: The Company has established a Code of Conduct as to the practices necessary to maintain confidence in the Company's integrity, practices necessary to take into account their legal obligations and the expectations of their stakeholders and responsibility and accountability of individuals for reporting and investigating reports of unethical practices. A copy of the Company’s Code of Conduct is made available on the Company’s website. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 6 88 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Principle 4 – Safeguard integrity in financial reporting Recommendation 4.1: The board of a listed entity should: (a) have an audit committee which: o o has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and is chaired by an independent director, who is not the chair of the board, and disclose: o o o the charter of the committee; the relevant qualifications and experience of the members of the committee; and in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. Disclosure: The Company has an Audit Committee. For the reporting period, Mr David Cornell was the independent chair of the Audit Committee. The Audit Committee Charter is disclosed on the Company’s website. The number of Audit Committee meetings held during the year and the qualifications of the directors are disclosed in the Directors’ Report. Recommendation 4.2: The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO/MD and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Disclosure: The CEO/MD and CFO provide a declaration that the consolidated financial statements and notes of Vimy Resources Limited are in accordance with the Corporations Act 2001, including: • • • • giving a true and fair view of its financial position as at 30 June 2015 and of its performance for the financial year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and there are reasonable grounds to believe that Vimy Resources Limited will be able to pay its debts as and when they become due and payable; and the directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the CEO/MD and CFO for the financial year ended 30 June 2015. The consolidated financial statements comply with International Financial Reporting Standards. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 7 89 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 4.3: A listed entity that has an Annual General Meeting (‘AGM’) should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Disclosure: The external auditor attends the Company's AGM. Shareholders may submit written questions to the auditor to be considered at the meeting in relation to the conduct of the audit and the preparation and content of the Independent Audit Report by providing the questions to the Company at least five business days before the day of the meeting. Shareholders are also given a reasonable opportunity at the meeting to ask the auditor questions relevant to the conduct of the audit, the Independent Audit Report, the accounting policies adopted by the Company and the independence of the auditor. Principle 5 – Make timely and balanced disclosure A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a material effect on the price or value of its securities. Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Disclosure: The Company has established written policies designed to ensure compliance with ASX Listing Rule disclosure and accountability at a senior executive level for that compliance. Principle 6 – Respect the rights of security holders A listed entity should respect the rights of its security holders by providing them with appropriate information and facilities to allow them to exercise those rights effectively. Recommendation 6.1: A listed entity should provide information about itself and its governance to investors via its website. Disclosure: The Company has a website “vimyresources.com.au” providing information about itself and its governance to investors. Recommendation 6.2: A listed entity should design and implement an investor relations program to facilitate effective two way communication with investors. Disclosure: The Company has designed a communications policy for promoting effective communication with investors and encouraging shareholder participation at general meetings. Please refer to the section above marked Website Disclosures. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 8 90 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 6.3: A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. Disclosure: Notices of meeting sent to the Company’s shareholders comply with the ASX Listing Rules. In relation to AGMs, shareholders are invited to submit questions before the meeting. The Chairman also encourages shareholders at the AGM to ask questions and make comments about the Company’s operations and the performance of the Board and senior management. New directors or directors seeking re-election are given the opportunity to address the AGM and to answer questions from shareholders. Recommendation 6.4: A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. Disclosure: Shareholders have the option of electing to receive all shareholder communications by email. The Company provides a printed copy of the annual report only to those shareholders who have specifically elected to receive a printed copy. The annual report is available on the Company website. All announcements made to the ASX are available to shareholders by email notification when a shareholder provides the Company with an email address and elects to be notified of all the Company’s ASX announcements. The Company share register is managed and maintained by Security Transfer Registrars Pty Ltd. Shareholders can access their shareholding details or make enquiries about their current shareholding electronically by quoting their Shareholder Reference Number (SRN) or Holder Identification Number (HIN), via the Security Transfer Registrars investor centre or by emailing registrar@securitytransfer.com.au. Principle 7 – Recognise and manage risk A listed entity should establish a sound risk management framework and periodically review the effectiveness of that framework. Recommendation 7.1: The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: o o has at least three members, a majority of whom are independent directors; and is chaired by an independent director, and disclose: o o o the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 9 91 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Notification of departure: The Board performs the function of the Risk Committee. Explanation for departure: The composition of the Board during the financial year did not allow for a Risk Committee to be structured in accordance with the recommendation. The Board assumes the role of the Risk Committee. The Board has adopted a Risk Management Policy, which sets out the Company's risk profile. Under the policy, the Board is responsible for approving the Company's policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control. Under the policy, the Board delegates day-to-day management of risk to the CEO/MD, who is responsible for identifying, assessing, monitoring and managing risks. The CEO/MD is also responsible for updating the Company's material business risks to reflect any material changes, with the approval of the Board. In fulfilling the duties of risk management, the CEO/MD has unrestricted access to Company employees, contractors and records. The CEO/MD may obtain independent expert advice on any matter believed appropriate, with the prior approval of the Board. The Audit Committee monitors and reviews the integrity of financial reporting and the Company's internal financial control systems and risk management systems. In addition, the following risk management measures have been adopted by the Board to manage the Company's material business risks: • • • the Board has established authority limits for management which, if exceeded, will require prior Board approval; the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Company's continuous disclosure obligations; and the Board has adopted a corporate governance manual which contains other policies to assist the Company to establish and maintain its governance practices. Recommendation 7.2: The board or a committee of the board should: • • review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and disclose, in relation to each reporting period, whether such a review has taken place. Disclosure: The Board has required management to design, implement and maintain risk management and internal control systems to manage the Company's material business risks. The Board also requires management to report to it confirming that those risks are being managed effectively. Further, the Board has received oral reports from management as to the effectiveness of the Company's management of its material business risks on an ongoing and regular basis for each reporting period. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 10 92 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 7.3: A listed entity should disclose: • • if it has an internal audit function, how the function is structured and what role it performs; or if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes Disclosure: The CEO/MD and the CFO have provided a declaration to the Board in accordance with section 295A of the Corporations Act 2001 and have assured the Board that such declaration, after considering the size of the group, its complexity, number of personnel and its financial resources, is founded on a sound system of risk management and internal control appropriate to the Company and that the system is operating effectively in all material respects in relation to financial reporting risks. Recommendation 7.4: A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. Disclosure: The Board monitors all material risks that the Company is exposed to and actively seeks to mitigate them, using resources reasonably available to control those risks. The activities of the Company are focused on developing the Mulga Rock Project into a producing uranium mine. Uranium mining has inherent risks which the Company, utilising its own professional employees and consultants and working in partnership with communities and authorities, actively seeks to mitigate against. The material risks which the Company is exposed include, but are not limited to, the following: • • • • • • • obtaining government approvals geological and environmental issues land access and community disputes the ability to raise additional capital commodity price and world economy recruiting and retaining qualified personnel inherent risks associated with production, storage and transport of uranium. The Board is responsible to oversee the risk management function and the CEO/MD is in charge of implementing an appropriate level of control to mitigate these risks within the Company. The Board reviews all major strategies and decisions and takes appropriate actions on a continuous basis. Principle 8 – Remunerate fairly and responsibly A listed entity should pay director remuneration sufficient to attract and retain high quality directors and design its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 11 93 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 8.1: The board of a listed entity should: (a) have a remuneration committee which: o o has at least three members, a majority of whom are independent directors; and is chaired by an independent director, and disclose: o o o the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. Notification of departure: The Company has a Remuneration Committee that comprises of two independent directors being Mr David Cornell, the Chair of the Committee, and The Hon. Cheryl Edwardes, and also Mr Aaron Hood, who is not an independent director. The Committee has adopted, and applies, its Remuneration Committee Charter which is made available on the Company’s website. The number of Remuneration Committee meetings held during the year is disclosed in the Directors’ Report. Recommendation 8.2: A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. Disclosure: Non-executive directors are remunerated at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive directors is not linked to individual performance. Pay and rewards for executive directors and senior executives consists of a base salary and performance incentives. Long term performance incentives may include securities granted at the discretion of the Board and subject to obtaining the relevant approvals. Executives are offered a competitive level of base pay at market rates and are reviewed annually to ensure market competitiveness. Details of remuneration, including the Company’s policy on remuneration, are contained in the Remuneration Report which forms part of the Directors’ Report. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 12 94 Vimy Resources Limited Annual Report 2015 CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement Recommendation 8.3: A listed entity which has an equity-based remuneration scheme should: • • have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and disclose that policy or a summary of it. Disclosure: On 14 June 2013, shareholders approved an employee share scheme for the Company (‘Plan’). The Plan provides a mechanism for the Company to invite employees (including the directors) to subscribe for shares in the Company and to apply for a loan from the Company to pay the subscription price for those shares (‘Plan Shares’). The Company takes security over the Plan Shares acquired under the Plan until the limited recourse loan provided for the subscription price for those shares is repaid in full. Further details of this scheme can be seen in the notes to the annual financial report. As far as the Company is aware, no director or employee uses hedging instruments to limit their exposure to risk on either shares or options in the Company. The Company’s Securities Trading Policy prohibits the use of such hedging instruments. VIMY RESOURCES LIMITED – Corporate Governance 2015 І Page 13 95 Vimy Resources Limited Annual Report 2015 Registered and principal office Ground Floor 10 Richardson Street West Perth WA 6005 Postal Address PO Box 23, West Perth WA 6872 Telephone: +61 8 9389 2700 Email: Website: info@vimyresources.com.au www.vimyresources.com.au 96 Vimy Resources Limited Annual Report 2015