Vital Metals Limited
ABN 32 112 032 596
Annual Report
for the year ended 30 June 2019
Vital Metals Limited
Corporate Information
ABN 32 112 032 596
Directors
Francis Harper (Non-Executive Chairman)
Phillip Coulson (Executive Director)
Zane Lewis (Executive Director)
Company Secretary
Sebastian Andre
Registered Office
Suite 6, 205 Rokeby Road
SUBIACO WA 6008
Telephone: +61 8 9436 9644
Facsimile: +61 8 6166 0261
Principal Place of Business
Suite 6, 205 Rokeby Road
SUBIACO WA 6008
Telephone: +61 8 9436 9644
Facsimile: +61 8 6166 0261
Share Register
Automic Registry Services
Suite 1a, Level 1
7 Ventnor Ave
WEST PERTH WA 6005
Telephone: (08) 9324 2099
Facsimile: (08) 9321 2337
Auditors
BDO Audit (WA) Pty Ltd
38 Station Street
SUBIACO WA 6008
Bankers
National Australia Bank
Level 14 / 100 St Georges Tce
Perth WA 6005
Internet Address
www.vitalmetals.com.au
Stock Exchange Listing
Vital Metals Limited shares are listed on the Australian Securities Exchange (ASX code: VML).
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Vital Metals Limited
Contents
Directors' Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors' Declaration
Independent Auditor’s Report
ASX Additional Information
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Vital Metals Limited
Directors’ Report
Your Directors submit their report on the Consolidated Entity (referred to hereafter as the Group) consisting of Vital Metals Limited and
the entities it controlled at the end of, or during, the year ended 30 June 2019.
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. Where
applicable, all current and former directorships held in listed public companies over the last three years have been detailed below. Directors
were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Phillip Coulson, Executive Director (appointed 7 January 2019)
Mr Coulson has over 18 years of corporate advisory experience, having held senior advisory positions at Mantagu Stockbrokers and
Patersons Securities Limited. He has promoted and advised numerous companies in the identification and acquisition of technology and
resource projects.
Mr Coulson is not a director on any other ASX listed Company.
Zane Lewis, Executive Director (appointed 6 February 2019)
Mr Lewis has over 20 years’ experience and leadership of smallcap multinational companies. His hands-on skillset includes corporate
advisory, non executive director and Company Secretary roles at several ASX Listed and unlisted companies as well as extensive
international experience managing a group of Software and Tech companies in USA, Europe, Hong Kong, China and Australia.
Mr Lewis is a director of Lion Energy Limited (ASX:LIO), Kingsland Global Ltd (ASX:KLO), Tap Oil Limited (ASX: TAP) and Fraser
Range Metals Limited (ASX: FRN).
Peter Cordin, Non-Executive Director (resigned 25 September 2019)
Mr Cordin is a civil engineer with over 40 years’ experience in the evaluation and operation of resource projects within Australia and
overseas. He is the former Executive Chairman of Dragon Mining Limited which operated gold mines in Sweden and Finland. He has
direct experience in the management of diamond and gold operations and has been involved in the development of resource projects in
Kazakhstan and New Caledonia.
Mr Cordin is also a non-executive director of MC Mining Limited and Aurora Minerals Limited.
Francis Harper, Non-Executive Chairman
Mr Harper has extensive experience in West African mining, having served as Chairman and as a major shareholder of West African
Resources Limited between 2009 and 2015.He is also a founding director of Blackwood Capital, which has raised over $1 billion for
smaller companies over the last 15 years.
Mr Harper is also non-executive Chairman of Tietto Minerals Limited.
Mark Strizek, Managing Director (resigned 24 January 2019)
Mr Strizek holds a Bachelor of Science from Macquarie University and is a qualified geologist with over 16 years’ experience in the mining
industry. He is a Member of the Australasian Institute of Mining and Metallurgy. He has worked in open pit operations and exploration in
Western Australia and Queensland. He has also worked with Hellman & Schofield Pty Ltd as a consulting geologist, developing resource
models in commodities such as gold, iron ore, nickel and manganese. Prior to joining the Group, he worked with the Mineralogy group of
companies where he was involved in project development of iron ore, coal and petroleum resources in both Australia and Papua New
Guinea.
Andrew Simpson, Non-Executive Director (resigned 16 November 2018)
Mr Simpson holds a Graduate Diploma in Business and Administration (majoring in Marketing and Finance) from Curtin University and
is currently the Managing Director and Principal of Resource and Technology Marketing Services Pty Ltd (RTM) in Perth.
He formed RTM in 1999 to specialise in strategic and business planning, resource project assessment and marketing. RTM is recognised
as one of Australia’s leading market research consultants to the international mining industry.
Mr Simpson is non-executive Chairman of Swick Mining Services Ltd and Symbol Mining Ltd. He is the former non-executive Chairman
of Territory Resources Ltd and India Resources Ltd. Mr Simpson is a Member of the Australian Institute of Company Directors.
David Macoboy, Non-Executive Director (Resigned 2 July 2018)
Mr Macoboy holds a Bachelor of Economics and a Bachelor of Commerce from the University of WA. David was a Fellow of the Australian
Institute of Company Directors and a Certified Practicing Accountant. He is a former Chairman of Ammtec Limited, AVZ Minerals Limited
and Territory Resources Ltd and has served on numerous other boards. He has not held any directorships of other listed companies in the
past three years.
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Vital Metals Limited
Directors' Report continued
COMPANY SECRETARY
Sebastian Andre, (appointed 23 March 2019)
Sebastian Andre is a Chartered Company Secretary with 8 years of experience as a senior adviser at the ASX. Sebastian is a company
secretary of a number of listed entities and provides significant insight into compliance frameworks. Mr. Andre advises the boards and
executives of ASX listed entities on a range of matter aimed at minimising compliance risk and maximising corporate efficiency. He holds
a Bachelor of Commerce in Accounting and is a member of the Governance Institute of Australia.
Matthew Foy, BComm, ACIS, MAICD (appointed 17 November 2017, resigned 23 March 2019)
Matthew was previously a senior adviser at the ASX facilitating the compliance of listed companies. Matthew possesses core competencies
in publicly listed and unlisted company secretarial and governance disciplines. His expertise is in corporate, commercial and securities law
with an emphasis on capital raisings and mergers and acquisitions. He contributes general corporate and legal skills along with a strong
knowledge of the ASX requirements.
Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of Vital Metals Limited were:
Francis Harper
Phillip Coulson
Zane Lewis
Ordinary Shares
Options over
Ordinary Shares
Performance
rights
18,234,725
162,100,000
-
28,750,000
-
-
-
28,750,000
28,750,000
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were mineral exploration in Niger and in Burkina Faso, West Africa.
Diuring the year, the Group disposed of its Watershed Tungsten Project in North Queensland.
DIVIDENDS
No dividends were paid or declared during the financial year. No recommendation for payment of dividends has been made.
OPERATING AND FINANCIAL REVIEW
The consolidated profit of the Group after providing for income tax amounted to $3,225,692 (2018: loss of $3,253,430).
OPERATIONS REVIEW
Vital Metals Limited (ASX:VML) is an explorer and developer holding a portfolio of gold, technology metals and base metals. Our projects
are located across a range of jurisdictions in West Africa and Germany.
Exploration
Bouli Gold Project, Niger
During the Period, Vital Metals announced that it had withdrawn from an earn-in agreement with private Turkish company Summa over the
Bouli Gold project in Niger, West Africa. The Board conducted a review considering various factors relating to the project including the
geographical situation in Niger. The Company has no further expenditure requirements under the agreement.
Aue Cobalt Project, Germany
The Aue Project is located in the western Erzgebirge area of the German state of Saxony. The permit, comprising an area of 78 sq km is
located in the heart of one of Europe’s most famous mining regions surrounded by several world class mineral fields. Historical mining and
intensive exploration work carried out between from the 1940s and 1980s showed high prospectively of the Aue permit area for cobalt,
tungsten, tin, uranium and silver mineralisation.
During the period the Company received sample essays (returning 1.3% Ni, 0.8% Co, 0.3% Bi) from the Q2 2018 soil geochemistry program
and commenced a second sampling program. Soil sample assays received identified strong geochemical anomalies for bismuth (up to0.29%)
associated with Bi-Co-Ni mineralisation near Waschleithe and Bockau in historic mining areas.
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Directors' Report continued
Vital Metals Limited
Nahouri Gold Project, Burkina Faso
Vital Metals has suspended all exploration activity in Burkina Faso. The Company notes ongoing security concerns in the country and the
State of Emergency declared by the Burkina Faso government for several northern provinces, which is in place until January 2020.
During the June quarter, the Company has taken steps to minimise expenditure in Burkina Faso, including the terminating rental on the
exploration camp and associated infrastructure, consolidating exploration assets and samples back to the Company’s admin office in
Ouagadougou and reducing exploration staff headcount.
The Company's Burkina Faso tenements remain in good standing. The Company has received approaches from mining companies in relation
to Burkina Faso tenements and intends to progress those approaches while the Company monitors the security environment in Burkina Faso.
Vital will provide shareholders with an update by way of ASX announcement should the situation in Burkina Faso improve and a decision
to resume exploration be taken.
CORPORATE
Sale of subsidiary – North Queensland Tungsten Pty Ltd
During the period Vital finalised the sale of its Watershed Tungsten Project north of Cairns in far North Queensland to Tungsten Mining NL
(ASX: TGN) for $15 million cash consideration, less completion adjustments.
Vital used a portion of the sale funds to repay $1.4 million to Macquarie, following which the Company is debt free.
Unmarketable Parcel Share Sale Facility
The sale of VML shares under the Company’s share sale facility (Facility), as announced on 12 March 2019, was completed at a sale price
of $0.008 per share. A total of 1,304 shareholders collectively holding 35,285,288 fully paid ordinary VML shares participated in the Facility.
As a result of the successful conclusion of the Facility, the Company’s shareholder base has been reduced by 1,044 individual shareholders.
This reduction will in turn reduce the Company’s administrative costs, including printing and mailing costs and share registry expenses.
Acquisition of Cheetah Resources
As announced June 25, 2019 Vital has entered into a binding term sheet to acquire (the “Acquisition”) Cheetah Resources Pty Ltd
(“Cheetah”), a private Australian registered company focused on identifying, acquiring and bringing to production rare earths projects.
The Both Companies have completed the due diligence process. Finalisation of the acquisition awaits shareholder approval at the Annual
General Meeting (16 October 2019).
Overview of Cheetah
Cheetah was the creation of Geoff Atkins (former Corporate Planning Manager at Lynas Corporation) who after 5 years of reviewing and
assessing Rare Earth Oxide (REO) projects globally with his ex-colleagues at Lynas, developed a project criteria and strategy to develop
rare earth projects. Cheetah has subsequently assembled a pipeline of projects with significant REO resources and potential.
Rationale for Acquisition
Global rare earth demand has become inextricably linked to the advance in technology, as they are heavily used in wind turbines, electric
engines, strategic military systems, and oil fracking.
Cheetah’s philosophy is to simplify the development process by mining and producing a high purity mixed REO product, thereby avoiding
the very high capex requirements associated with rare earth separation facilities, whilst shortening the time to production. Cheetah’s plans
are to target customers who will be existing, or prospective, rare earth companies in need of feedstock, without deleterious waste products.
Thor Lake Rare Earth Project
Cheetah has entered into a binding terms sheet with Avalon Advance Materials Inc (“Avalon”) a TSX listed entity, to acquire near surface
resources of the Thor Lake Rare Earth Project at the Nechalacho property on Thor Lake, near Yellowknife, NWT, Canada for total
consideration of C$5,000,000 (~A$5.4million) (“Avalon Agreement”).
Under the Avalon Agreement, Cheetah acquires the mineral rights to all mineralisation between surface and a depth of 150m above sea level
(the “Upper Zone”). This includes near surface, high grade resources in the T-Zones (including North T and South T) and Upper Lake Zones
(includes North Tardiff and South Tardiff) as defined in Avalon’s 2013 feasability study.
The Thor Lake Rare Earth Project is located at Thor Lake in the Mackenzie Mining District of the Northwest Territories, approximately
100km southeast of the city of Yellowknife. The district is blessed with substantial infrastructure including roads and railways, direct barge
access and anticipated, low cost hydro power in the near future.
The Thor Lake Rare Earth Project hosts within the Upper Zone, a NI 43-101 compliant Indicated Resource of 47.21Mt grading at 1.52%
REO and Inferred Resource of 102Mt grading at 1.38% for a combined Mineral Resource estimate of 149.30Mt grading at 1.42% REO. For
further information, investors should refer to the Company announcement dated 25 June 2019 titled “Vital to Transform into Rare Earth
Oxide Developer”.
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Directors' Report continued
Vital Metals Limited
Investors should note that the Mineral Resource estimate for the Thor Lake Project Upper Zone is a foreign estimate and is not reported in
accordance with the JORC Code. A competent person has not done sufficient work to classify this foreign estimate as a mineral resource in
accordance with the JORC Code and it is uncertain that following further exploration or evaluation work that this foreign estimate will be
able to be reported as a mineral resource in accordance with the JORC Code.
Figure 1: Location of the Thor Lake Project
Avalon will retain ownership of the resources in the Basal Zone that was the subject of its 2013 Feasibility Study in which Avalon spent
over CAD$100m defining and obtaining permitting.
Mineralisation in the North T Zone contains a number of different mineralised regions containing high grade rare earths, beryllium, niobium
and lithium. Uniquely, amongst rare earth deposits, the North T Zone contains separate light and heavy rare earth regions. The Company’s
plans are to target this zone as the starting point of possible future operations.
The Upper Lake Zone also hosts underexplored, high-grade mineralisation at surface.
Potential Near-term Production
The Thor Lake Project has potential for a start-up operation exploiting high-grade, easily accessible near surface mineralisation initially from
the North T-Zone rather than focusing on the larger Upper Lake Zone. The Company plans to move quickly and assess options to utilise a
simple, mechanical sorting to produce a high-grade concentrate without the use of chemicals or water.
The focus on producing a concentrate for sale to existing refiners removes the massive capital costs and multi-year construction times
typically associated with building a REO refinery and is in line with the Company’s objectives to establish low-cost operations with a short
development time.
Wigu Hill Project
Cheetah has signed a project development and option agreement with Montero Mining & Exploration Ltd (“Montero”) a TSXV listed entity,
to acquire all of the Intellectual Property (“IP”) rights of Wigu Hill (BVI) Ltd, a subsidiary company that owns these rights to develop the
Wigu Hill Project located near Kisaki in Tanzania. Cheetah will purchase the rare earths IP rights held by Montero for C$100,000 and fund
a C$500,000 work program within 6 months following the issuance of a mining licence.
Cheetah will also have an option to acquire Montero’s remaining interests in Wigu Hill (BVI) Limited for a total consideration of
C$1,100,000 (“Montero Agreement”). Application for a Mining and Prospecting Licence over the area of the previous Retention Licence
has been made by a local Tanzanian company, owned by Tanzanians.
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Directors' Report continued
Vital Metals Limited
Figure 2: Location of the Wigu Hill Project
The Wigu Hill rare earth project covers an area of approximately 142km2 and is located approximately 200 km south-west of Dar es Salam
and 68 km of Morogoro, the nearest major regional centre (i.e. straight-line distances).
The project is a light rare earth element deposit and consists of a large carbonite complex with bastnaesite mineralisation.
Montero released an initial NI 43-101 Inferred resource estimate of 3.3Mt at 2.6% LREO5 including 510,000t @ 4.4% LREO5 on 2 of 10
possible drill targets. For further information, investors should refer to the Company announcement dated 25 June 2019 titled “Vital to
Transform into Rare Earth Oxide Developer”.
Investors should note that the Mineral Resource estimate for the Wigu Hill Rare Earth Project is a foreign estimate and is not reported in
accordance with the JORC Code. A competent person has not done sufficient work to classify this foreign estimate as a mineral resource in
accordance with the JORC Code and it is uncertain that following further exploration or evaluation work that this foreign estimate will be
able to be reported as a mineral resource in accordance with the JORC Code.
Proposed Board and Management Changes
Following the completion of the Acquisition, Vital intends to appoint to the board Mr Geoff Atkins as Managing Director and Mr Evan
Cranston as a Non-Executive Director.
Geoff Atkins
Mr Atkins is a Civil Engineer with over 20 years of project and corporate development experience across commercial, industrial, mining
and infrastructure sectors with responsibility for driving projects from concept, through feasibility and development to operational assets.
Evan Cranston
Evan Cranston is an experienced mining executive with a background in corporate and mining law. He is the principal of corporate advisory
and administration firm Konkera Corporate and has extensive experience in the areas of equity capital markets, corporate finance, structuring,
asset acquisition, corporate governance and external stakeholder relations. He holds both a Bachelor of Commerce and Bachelor of Laws
from the University of Western Australia.
Key Terms of the Acquisition:
Consideration:
Vital has agreed to acquire 100% of the issued capital of Cheetah for the consideration outlined below. The consideration is subject to
shareholder approval and is comprised of the following:
•
issue of 400,000,000 fully paid ordinary shares (“Ordinary Shares”) on completion;
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Vital Metals Limited
Directors' Report continued
•
issue performance shares comprised of the following:
(i)
(ii)
400,000,000 Tranche 1 Performance Shares which will convert into Ordinary Shares in the Company on
entering into binding offtake for a minimum of 1,000 kgs of contained REO in respect of the Thor Lake
Project or Wigu Hill Project within 2 years of the Acquisition completion date; and
400,000,000 Tranche 2 Performance Shares which will convert into Ordinary Shares in the Company on
commencement of mining operations at the Thor Lake Project or Wigu Hill Project.
(together, the “Performance Shares”)
Vital will separately seek confirmation from ASX with respect to the Performance Share terms.
Cash on hand
As at June 30, 2019 the Company held $12,708,796 in cash and cash equivalents.
Operating Results for the Year
Summarised operating results are as follows:
Consolidated entity revenues and profit before income tax expense
Shareholder Returns
Basic earnings per share (cents)
2019
Revenues
$
Results
$
4,364
3,225,692
2019
0.18
2018
(0.21)
Risk Management
The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with
the risks and opportunities identified by the board. The Company believes that it is crucial for all board members to be a part of this process,
and as such the board has not established a separate risk management committee.
The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified
by the Board. These include the following:
• Board approval of a strategic plan, which encompasses strategy statements designed to meet stake-holders needs and manage business
risk.
Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets.
•
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as disclosed in this Annual Report no significant changes in the state of affairs of the Group occurred during the financial year.
SIGNIFICANT EVENTS AFTER THE REPORTING DATE
There have been no significant events after the reporting date.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Group intends to continue its exploration and development activities on its existing projects and to acquire further suitable projects for
exploration as opportunities arise.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is subject to significant environmental regulation in respect to its exploration activities.
The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance
with all environmental legislation. The directors of the Group are not aware of any breach of environmental legislation for the year under
review.
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Directors' Report continued
Vital Metals Limited
REMUNERATION REPORT (Audited)
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. The
directors and key management personnel for the year ended 30 June 2019 were:
Phillip Coulson – Executive Director
Zane Lewis – Executive Director
Francis Harper – Non-Executive Chairman
Peter Cordin – Non-Executive Director (resigned 25 September 2019)
Mark Strizek – Managing Director (resigned 24 January 2019)
David Macoboy – Non-Executive Chairman (resigned 2 July 2018)
Andrew Simpson – Non-Executive Director (resigned 16 November 2018)
Principles used to determine the nature and amount of remuneration
Remuneration Policy
Remuneration of Directors and Executives is referred to as compensation throughout this report. Key management personnel including
directors of the Company and other executives have authority and responsibility for planning, directing and controlling the activities of the
Group. Compensation levels for directors and Key Management Personnel of the Group are competitively set to attract and retain
appropriately qualified and experienced directors and executives.
The Board is responsible for compensation policies and practices. The Board, where appropriate, seeks independent advice on remuneration
policies and practices, including the compensation packages and terms of employment. No such advice was sought in the current year.
The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic
objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account a number
of factors, including length of service and the particular experience of the individual concerned.
(i) Fixed Compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes any FBT charges related to
employee benefits including motor vehicles), as well as employer contributions to superannuation funds. Compensation levels are reviewed
annually by the Board where applicable.
(ii) Share based remuneration
Share options are granted to key employees as the Directors believe that this is the most appropriate method of aligning performance to the
interests of shareholders. The share options are issued under the Vital Metals Ltd Share Option Plan and the Directors feel that it
appropriately links the long term incentives of key employees to the interest of shareholders. The ability to exercise the options is
conditional on continued service for a period as determined by the Board upon each issuance of options. The Group does not have a policy
that prohibits those that are granted share-based payments as part of their remuneration from entering into other arrangements that limit
their exposure to losses that would result from share price decreases.
(iii) Service contracts/agreements
Phillip Coulson (effective 1 March 2019)
Phillip Coulson was appointed an Executive Director effective 1 March 2019 under a Consultancy Agreement. Under the Consultancy
Agreement, the remuneration for Mr Coulson’s role as an Executive is $120,000 per annum (in addition to his existing remuneration). The
term of the Consultancy Agreement is for an unlimited term which is capable of termination by giving no less than 3 months written notice
(any termination in lieu of notice would a termination payout of 3 months fees). Under the Consultancy Agreement, Mr Coulson is entitled
to performance rights described further below.
Zane Lewis (effective 1 March 2019)
Zane Lewis was appointed an Executive Director effective 1 March 2019 under a Consultancy Agreement. Under the Consultancy
Agreement, the remuneration for Mr Lewis’ role as an Executive is $120,000 per annum (in addition to his existing remuneration). The
term of the Consultancy Agreement is for an unlimited term which is capable of termination by giving no less than 3 months written notice
(any termination in lieu of notice would a termination payout of 3 months fees). Under the Consultancy Agreement, Mr Lewis is entitled
to performance rights described further below.
Mark Strizek (resigned 24 January 2019)
Mark Strizek was appointed on 1 July 2011 as Chief Executive Officer of the Group on a service contract. This contact was for an initial
term of three months as CEO after which term Mr Strizek was invited to join the Board as Managing Director (effective 7 October 2011)
for an unlimited term which is capable of termination on 6 months’ notice. Upon termination Mr Strizek is entitled to payment of his
notice period. By agreement, Mr Strizek’s salary was adjusted to $200,000 plus superannuation effective 1 April 2017.
(iv) Non-Executive directors
Total compensation for all Non-Executive Directors, last voted upon by shareholders at the 2007 AGM, is not to exceed $400,000 per
annum.
The remuneration policy for non-executive directors remains unchanged.
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Directors' Report continued
Vital Metals Limited
Company performance, shareholder wealth and directors’ and executives’ remuneration
No relationship exists between shareholder wealth, director and executive remuneration and Company performance due to the infant stage
of the Company’s operations.
The table below shows the gross revenue, losses and earnings per share for the last five years for the listed entity.
2016
2018
2015
2017
2019
Net profit/(loss)
Share price at year end (cents)
Earnings/(loss) per share (cents)
$
3,225,692
1.2
0.18
$
(3,253,430)
1.0
(0.21)
$
(4,961,426)
1.1
(0.82)
$
(1,156,042)
1.1
(0.31)
$
(6,939,729)
3.0
(2.4)
Use of remuneration consultants
The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2019.
Details of remuneration
Details of the remuneration of the directors and the key management personnel of the Group are set out in the following table.
The key management personnel of the Group are the directors and company secretary. Given the size and nature of operations of the
Group, there are no other employees who are required to have their remuneration disclosed in accordance with the Corporations Act 2001.
Key management personnel of the Group
Short-Term
Employment Termination
Post
Share-based
Payments
Salary
& Fees
$
Superannuation Termination
$
$
Options(1)
$
Share-based
Payments
Performance
rights(2)
$
Total
$
Directors
Phillip Coulson (Executive Director) (appointed 7 January 2019)
-
-
60,000
-
2019
2018
Zane Lewis (Executive Director) (appointed 6 February 2019)
2019
2018
56,665
-
David Macoboy (Non-Executive) (resigned 2 July 2018)
2019
2018
295
65,800
-
-
28
6,251
Mark Strizek (Managing Director) (resigned 24 January 2019)
-
-
-
-
-
-
-
-
-
-
-
2019
2018
116,667
200,000
11,083
19,000
175,916
-
10,978
61,351(1)
Andrew Simpson (Non-Executive) (resigned 16 November 2018)
2019
2018
16,667
40,000
-
-
Peter Cordin (Non-Executive) (resigned 25 September 2019)
2019
2018
Francis Harper (Non- Executive)
2019
2018
36,530
36,530
40,000
46,667
3,470
3,470
-
-
Other key management personnel
Ian Hobson (Company Secretary) (resigned 17 November 2017)
-
-
-
29,300
2019
2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
203,625
-
203,625
-
-
-
-
-
-
-
-
-
-
-
-
-
Total key management personnel compensation
2019
2018
326,824
547,059
14,581
40,478
175,916
-
10,978
61,351
407,250
-
263,625
-
260,290
-
323
72,051
314,644
280,351
16,667
40,000
40,000
40,000
40,000
46,667
-
29,300
935,549
648,888
(1) The fair value of the options is calculated at the date of grant using a Black Scholes option valuation model, or share price up-and-in barrier
model and allocated to each reporting period evenly over the period from the grant date to vesting date. The value disclosed is the portion of the
fair value of the options recognised in this reporting period.
(2) Shareholders approved the issue of 28,750,000 performance rights to both Mr Coulson and Mr Lewis at the general meeting held on 1 May 2019.
The terms of the performance rights are noted below.
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Directors' Report continued
Vital Metals Limited
There were no options or performance rights granted to key management personnel as compensation during the reporting period, other
than those set out below.
Options and Performance Rights granted as compensation
Options and performance rights are issued at no cost to Directors and Executives as part of their remuneration. The options and performance
rights are not issued based on performance criteria, but are issued to increase goal congruence between Executives, Directors and
Shareholders. The performance rights over ordinary shares of the Company were granted to or vesting with key management personnel
during the year (there were no options issued to key management personnel during the year):
Granted
& Vested
Number Vesting Date
Grant Date
Expiry
Date
Volatility
Exercise
Multiple
Fair Value
per right at
grant date
(cents)
Exercised
Number
% of
Remuneratio
n
1/5/2019
Phillip Coulson – Class A 1/5/2019 6,250,000
Phillip Coulson – Class B 1/5/2019 10,000,000 1/5/2019
Phillip Coulson – Class C 1/5/2019 12,500,000 1/5/2019
1/5/2019 6,250,000
Zane Lewis – Class A
1/5/2019
1/5/2019 10,000,000 1/5/2019
Zane Lewis – Class B
1/5/2019 12,500,000 1/5/2019
Zane Lewis – Class C
28/2/2023
28/2/2023
28/2/2023
28/2/2023
28/2/2023
28/2/2023
125%
125%
125%
125%
125%
125%
2.5
2.5
2.5
2.5
2.5
2.5
0.73
0.72
0.69
0.73
0.72
0.69
N/A
N/A
N/A
N/A
N/A
N/A
17.31%
27.12%
32.81%
17.53%
27.47%
33.23%
The performance milestones are as follows:
-
-
-
Class A: to vest on the date that the 10 day VWAP for the shares on the ASX is $0.012 or higher;
Class B: to vest on the date that the 10 day VWAP for the shares on the ASX is $0.015 or higher; and
Class C: to vest on the date that the 10 day VWAP for the shares on the ASX is $0.02 or higher.
Exercise of options granted as compensation
During the reporting period, there were no shares issued on the exercise of options previously granted as compensation, nor were there any
modifications to the terms of previously granted options.
Additional disclosures relating to key management personnel
Shareholding
The numbers of shares in the Company held during the financial year by each director of Vital Metals Ltd and other key management
personnel of the Group, including their personally related parties, are set out below.
2019
Received as
Balance at
start of the
year
Received during
the year on the
exercise of
options
Compensation Other changes
during the
year
Balance at
end of the
year
Directors of Vital Metals Limited
Ordinary shares
David Macoboy (resigned 2 July 2018)
Mark Strizek (resigned 24 January 2019)
Andrew Simpson (resigned 16 November 2018)
Peter Cordin
Francis Harper
Phillip Coulson (appointed 7 January 2019)
Zane Lewis (appointed 6 February 2019)
Notes:
1. Shareholding on date of resignation.
2. Shareholding as at date of appointment.
17,500,000
3,173,964
1,684,375
6,931,116
15,422,225
162,100,0002
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(17,500,000)1
(3,173,964)1
(1,684,375)1
2,812,500
2,812,500
-
-
-
9,743,616
18,234,725
- 162,100,000
-
-
11
Vital Metals Limited
Directors' Report continued
Option holding
The numbers of options over ordinary shares in the Company held during the financial year by each director of Vital
Metals Ltd and other key management personnel of the Group, including their personally related parties, are set out below:
2019
Balance at
start of the
year
Granted as
compensation Exercised
Expiry
Other
changes
Balance at
end of the
year
Vested and
exercisable
Directors of Vital Metals Limited
David Macoboy (resigned 2 July
2018)
Mark Strizek (resigned 24 January
2019)
Andrew Simpson (resigned 16
November 2018)
Peter Cordin
Francis Harper
Phillip Coulson (appointed 7
January 2019)
Zane Lewis (appointed 6 February
2019)
9,253,099
50,438,023
5,168,733
5,168,733
28,750,000
-
-
-
-
-
-
-
-
-
-
-
(9,253,099)
-
(6,506,198)2 (43,931,825)1,2
-
-
-
-
-
-
-
-
-
-
(2,168,733)3
-
(5,168,733)1
-
-
-
3,000,000
28,750,000
-
3,000,000
28,750,000
-
-
-
-
-
-
-
-
All vested options are exercisable at the end of the year.
1. Option holding on date of resignation
2. 14,465,913 options within this balance had a market condition attached where they would vest only if the share price hit 2 cents or
better for 10 consecutive days prior to 31 December 2018. This was not met, therefore these options will never vest.
3. Expiry of options exercisable at $0.027 each on or before 25 November 2018.
Loans to key management personnel
There were no loans to key management personnel during the year (2018: nil).
Other transactions with key management personnel
Mr Zane Lewis was appointed a director on 6 February 2019. For the period from February 2019 to balance date, Smallcap Corporate
Pty Ltd (an entity which Mr Lewis has a beneficial interest) provided company secretary and financial accounting services to the
Company. Total fees incurred to Smallcap Corporate Pty Ltd for the services up to 30 June 2019 was $18,995.
There were no other transactions with key management personnel during the year other than salaries and wages as disclosed in the
remuneration report.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
At the 2018 AGM, 88% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2018.
The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
End of audited Remuneration Report
DIRECTORS’ MEETINGS
During the year the Company held 4 meetings of directors. The attendance of directors at meetings of the board were:
David Macoboy
Mark Strizek
Andrew Simpson
Peter Cordin
Francis Harper
Phillip Coulson
Zane Lewis
Notes
Directors Meetings
B
A
-
2
2
4
4
2
2
-
2
2
4
4
2
2
A – Number of meetings attended.
B – Number of meetings held during the time the director held office during the year.
12
Number of options
231,182,434
32,666,667
(14,096,763)
(86,153,846)
163,598,492
Nil
163,598,492
Directors' Report continued
Vital Metals Limited
SHARES UNDER OPTION
At the date of this report there are 163,598,492 unissued ordinary shares in respect of which options are outstanding.
Balance at the beginning of the year
Movements of share options during the year:
Issued, exercisable at 1.5 cents, on or before 19 July 2022
Expired, exercisable at 2.7 cents, on or before 25 November 2018
Expired, exercisable at 1.625 cents, on or before 31 December 2018
Total number of options outstanding as at 30 June 2019
Movements of share options since 30 June 2019
Nil
Total number of options outstanding as date of this report
The balance is comprised of the following:
Date options issued
12 May 2017
12 May 2017
24 Nov 2017
24 Nov 2017
19 July 2018
3 Sept 2018
Expiry date
30 Apr 2021
30 Apr 2021
17 Nov 2021
24 Nov 2019
19 July 2022
19 July 2022
Exercise price (cents)
2
2.3
1.0
1.2
1.5
1.5
Number of options
50,000,000
27,000,000
25,000,000
28,931,825
30,000,000
2,666,667
Total number of options outstanding at the date of this report
No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of
any other body corporate.
163,598,492
INSURANCE OF DIRECTORS AND OFFICERS
The Company has entered into an agreement to indemnify all directors and the company secretary against any liability arising from a claim
brought by a third party against the Company. The agreement provides for the Company to pay all damages and costs which may be
awarded against the officer or director.
During the period the Company has paid an insurance premium in respect of a Directors’ and Officers’ Liability Insurance Contract. The
insurance premium relates to liabilities that may arise from an Officer’s position, with the exception of conduct involving a wilful breach
of duty or improper use of information or position to gain personal advantage.
The officers covered by the insurance policies are the Directors and the Company Secretary. The contract of insurance prohibits the
disclosure of the nature of the liabilities and the amount of premium.
LEGAL PROCEEDINGS
The company was not a party to any legal proceedings during the year.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
NON-AUDIT SERVICES
No non-audit services were provided by BDO, the Company’s auditor, during the financial year.
The Group has not provided any indemnity to the Auditors.
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 page 14.
Signed in accordance with a resolution of the directors.
Francis Harper
Chairman
Perth, 27 September 2019
13
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF VITAL METALS LIMITED
As lead auditor of Vital Metals Limited for the year ended 30 June 2019, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Vital Metals Limited and the entities it controlled during the period.
Jarrad Prue
Director
BDO Audit (WA) Pty Ltd
Perth, 27 September 2019
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
Vital Metals Limited
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
YEAR ENDED 30 JUNE 2019
Notes
Consolidated
REVENUE
Sundry income
Total income
EXPENDITURE
Exploration and evaluation expenditure
Administration expenses
Provision for impairment
Total expenses
RESULTS FROM OPERATING ACTIVITIES
Finance income
Finance expense
Net finance income / (expense)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX
INCOME TAX BENEFIT / (EXPENSE)
2019
$
4,364
4,364
849,677
1,350,132
1,700,000
3,899,809
2018
$
4,745
4,745
2,173,604
935,141
-
3,108,745
(3,895,445)
(3,104,000)
220,535
(35,911)
184,624
13,721
(184,323)
(170,602)
(3,710,821)
(3,274,602)
-
-
5
4
6
NET LOSS FOR THE YEAR FROM CONTINUING OPERATIONS ATTRIBUTABLE
TO OWNERS OF VITAL METALS LTD
(3,710,821)
(3,268,605)
PROFIT FROM DISCONTINUED OPERATIONS NET OF TAX
20
6,936,513
21,173
PROFIT / (LOSS) FOR THE YEAR
3,225,692
(3,253,430)
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified subsequently to profit or loss:
Disposal of reserves from discontinued operations
Exchange differences on translation of foreign operations
Other comprehensive income/(loss) for the year, net of tax
(449,286)
(4,503)
(453,789)
-
74,870
74,870
TOTAL COMPREHENSIVE PROFIT / (LOSS) FOR THE YEAR ATTRIBUTABLE TO
OWNERS OF VITAL METALS LTD
2,771,903
(3,178,560)
Basic and diluted loss per share for loss attributable to the ordinary equity
holders of the Company (cents per share)
24
0.18
(0.21)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the Notes to the Consolidated
Financial Statements.
15
Consolidated Statement of Financial Position
Vital Metals Limited
AT 30 JUNE 2019
Notes
Consolidated
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Assets held for sale
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Exploration and evaluation expenditure
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Borrowings
Liabilities held for sale
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed Equity
Reserves
Accumulated losses
TOTAL EQUITY
7
9
8
10
11
9
13
2019
$
12,708,796
135,252
-
12,844,048
-
-
-
2018
$
3,219,228
166,281
8,484,271
11,869,780
19,660
-
19,660
12,844,048
11,889,440
126,717
-
-
-
126,717
558,075
37,039
1,367,126
400,000
2,362,240
126,717
2,362,240
12,717,331
9,527,200
52,845,649
2,397,190
(42,525,508)
12,717,331
52,845,649
2,666,193
(45,984,642)
9,527,200
The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Statements.
16
Consolidated Statement of Changes in Equity
Vital Metals Limited
YEAR ENDED 30 JUNE 2019
Consolidated
Notes
Contributed
Equity
$
Share-Based
Payment
Reserve
$
Convertible
Note
Reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total
$
BALANCE AT 1 JULY 2017
47,810,512
1,506,681
233,442
388,367
(42,731,212)
7,207,790
Profit / (loss) for the year
OTHER COMPREHENSIVE INCOME/(LOSS)
Exchange differences on translation of
foreign operations
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS
Issue of Shares
Share issue transaction costs
Options issued during the year
-
-
-
-
-
-
13
13
25
5,787,709
(752,572)
-
-
-
462,832
-
-
-
-
-
-
-
(3,253,430)
(3,253,430)
74,871
-
74,871
74,871
(3,253,430)
(3,178,559)
-
-
-
-
-
-
5,787,709
(752,572)
462,832
BALANCE AT 30 JUNE 2018
52,845,649
1,969,513
233,442
463,238
(45,984,642)
9,527,200
Profit / (loss) for the year
Transferred to Accumulated Losses
OTHER COMPREHENSIVE INCOME/(LOSS)
Disposal of reserves from discontinued
operations
Exchange differences on translation of
foreign operations
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS
Share based payments
25
-
-
-
-
-
-
-
-
-
-
-
418,228
BALANCE AT 30 JUNE 2019
52,845,649
2,387,741
-
(233,442)
-
-
3,225,692
3,225,692
233,442
-
-
-
(449,286)
(4,503)
-
-
(449,286)
(4,503)
(233,442)
(453,789)
3,459,134
2,771,903
-
-
-
-
418,228
9,449
(42,525,508)
12,717,331
The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements.
17
Consolidated Statement of Cash Flows
Vital Metals Limited
YEAR ENDED 30 JUNE 2019
Notes
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Payments for exploration and evaluation costs
Payments to suppliers and employees
Interest received
NET CASH (OUTFLOW) FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of asset
Costs in relation to sale of asset
Loan to Cheetah Resources Pty Ltd
Payments for exploration expenditure
NET CASH INFLOW / (OUTFLOW) FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid
Repayment of loan
Proceeds from issue of shares
Payment of capital raising costs
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
24
7
2019
$
(1,142,140)
(834,626)
190,871
(1,785,895)
14,739,071
(397,071)
(1,700,000)
-
12,642,000
(57,687)
(1,345,350)
36,500
-
(1,366,537)
9,489,568
3,219,228
-
12,708,796
2018
$
(3,365,123)
(811,829)
13,592
(4,163,360)
-
-
-
(680,421)
(680,421)
-
-
5,787,609
(373,049)
5,414,560
571,779
2,674,830
(27,381)
3,219,228
The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements.
18
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting
of Vital Metals Limited and its subsidiaries. The financial statements are presented in Australian dollars. Vital Metals Limited is a company
limited by shares, domiciled and incorporated in Australia. The financial statements were authorised for issue by the directors on 27
September 2019. The Directors have the power to amend and reissue the financial statements.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board and the Corporations Act 2001. Vital Metals Limited is a for-profit entity for the
purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the Vital Metals Limited Group also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New accounting standards and interpretations
New, revised or amended Accounting Standards and Interpretations adopted by the Group
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board (“AASB”) that are mandatory for the current reporting period. The adoption of these Accounting Standards and
Interpretations did not have any significant impact on the financial performance or position of the Group during the financial year.
The adoption of these Accounting Standards and Interpretations are described below:
AASB 9: Financial Instruments:
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) for annual periods beginning on or after
1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment;
and hedge accounting.
The Group has applied AASB 9 retrospectively, with the initial application date of 1 July 2018. The Group has elected to restate
comparative information.
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-
financial items. The changes in accounting policies resulting from the adoption of AASB 9 did not have a material impact on the Group’s
financial statements.
As of 30 June 2018 and 30 June 2019, the Group’s financial instruments consist of cash and cash equivalents, trade and other receivables,
trade and other payables, and borrowings.
of
Class
instrument
financial
presented in the statement of financial
position
Original measurement category under
AASB 139
New measurement category under
AASB 9
Cash and cash equivalents
Trade and other receivables
Loans and receivables
Loans and receivables
Financial assets at amortised cost
Financial assets at amortised cost
Trade and other payables
Financial liability at amortised cost
Financial liability at amortised cost
The change in classification has not resulted in any re-measurement adjustments at 1 July 2018.
Refer to the relevant accounting policy disclosures for further details.
Impairment of financial assets
In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit loss model to be applied as opposed to an
incurred credit loss model under AASB 139. The expected credit loss model requires the Group to account for expected credit losses and
changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial asset.
In particular, AASB 9 requires the Group to measure the loss allowance at an amount equal to lifetime expected credit loss (“ECL”) if the
credit risk on the instrument has increased significantly since initial recognition. On the other hand, if the credit risk on the financial
instrument has not increased significantly since initial recognition, the Group is required to measure the loss allowance for that financial
instrument at an amount equal to the ECL within the next 12 months.
There is no impact on the cash flows of the Group from the application of AASB 9.
19
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AASB 15: Revenue from Contracts with Customers:
The Group has adopted AASB 15 with a date of initial application of 1 July 2018. Based on the Directors’ assessment there was no impact
on the Group’s existing revenue recognition policy arising from the adoption.
The Group has applied the AASB 15 cumulative effective method (ie by recognising the cumulative effect of initially applying AASB 15
as an adjustment to the opening balance of equity at 1 July 2018). Therefore, the comparative information has not been restated and
continues to be reported under AASB 118: Revenue.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Standards issued but not yet effective
A number of new standards, amendment of standards and interpretations have recently been issued but are not yet effective and have not
been adopted by the Group as at the financial reporting date.
The Group has reviewed these standards and interpretations, and with the exception of the items listed below for which the final impact is
yet to be determined, none of the new or amended standards will significantly affect the Group’s accounting policies, financial position or
performance.
Reference
and title
AASB 16
Leases
Summary
This Standard introduces a single lessee accounting
model and requires a lessee to recognise assets and
liabilities for all leases with a term of more than 12
months, unless the underlying asset is of low value. A
lessee is required to recognise a right-of-use asset
representing its right to use the underlying leased asset
and a lease liability representing its obligation to make
lease payments. The Group is currently not party to any
material lease agreements, therefore the initial adoption
of this standard is not expected to have a material impact
on the Group’s financial statements.
Application date
of standard *
Application date
for Group *
1 January 2019
1 July 2019
* Designates the beginning of the applicable annual reporting period
(iii) Early adoption of standards
The Group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2018.
(iv) 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, which have been measured at fair value.
(b) Going Concern
The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity
and the realisation of assets and the settlement of liabilities in the normal course of business.
(c) Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Vital Metals Limited (“Company” or
“parent entity”) as at 30 June 2019 and the results of all subsidiaries for the year then ended. Vital Metals Ltd and its subsidiaries together
are referred to in these financial statements as the Group or the consolidated entity.
Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group controls an entity when it is
exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that
control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
20
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(d) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the full Board of Directors.
The Group has identified two reportable segments being exploration activities undertaken in Australia and Burkina Faso. These segments
include the activities associated with the determination and assessment of the existence of commercially economic reserves, from the
Group’s mineral assets in these geographic locations.
Segment performance is evaluated based on the operating profit or loss or cash flows and is measured in accordance with the Group’s
accounting policies.
(e) Foreign currency translation
(i) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Vital Metals Limited's functional and presentation
(e) Foreign currency translation
(i) Functional and presentation currency (continued)
currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates
of monetary assets and liabilities, denominated in foreign currencies, are recognised in profit or loss.
(iii) Foreign operations
The assets and liabilities of foreign operations are translated to the functional currency as exchange rates at the reporting date. The income
and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions.
Foreign currency difference are recognised in other comprehensive income, and presented in the foreign currency translation reserve in
equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other
comprehensive income. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor
likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net
investment in a foreign operation and are recognised in other comprehensive income, and are presented in the translation reserve in equity.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.
(f) Finance income
Finance income comprises interest income earned on funds invested in bank accounts and call deposits. Interest is recognised on an accruals
basis in the statement of profit or loss and other comprehensive income, using the effective interest method.
(g) Income tax
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused
tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period
in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
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.
21
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Tax consolidation
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated Group with effect from 3 October 2005
and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Vital Metals Limited.
The controlled entities have been fully compensated for all deferred tax assets and liabilities transferred to Vital Metals Limited on the date
of forming a tax consolidated group. The entities have also entered into a tax sharing and compensation agreement where the wholly owned
entities reimburse Vital Metals Limited for any current income tax payable or receivable by Vital Metals Limited in respect of their
activities. The group has decided to use the “separate taxpayer within group” approach in accordance with UIG 1052 to account for the
current and deferred tax amounts amongst the entities within the consolidated group.
(h) Leases
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating
leases (note 18). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a
straight-line basis over the period of the lease.
(i) Impairment of assets
Assets, except for deferred tax assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an
impairment are reviewed for possible reversal of the impairment at each reporting date.
(j) Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to
the contractual provisions of the instrument.
Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the
instrument is classified "at fair value through profit or loss", in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Financial assets
Financial assets are subsequently measured at:
•
•
•
amortised cost;
fair value through other comprehensive income; or
fair value through profit or loss.
A financial asset that meets the following conditions is subsequently measured at amortised cost:
•
•
the financial asset is managed solely to collect contractual cash flows; and
the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding on specified dates.
A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income:
•
•
the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding on specified dates;
the business model for managing the financial assets comprises both contractual cash flows collection and the selling of the
financial asset.
By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other
comprehensive income are subsequently measured at fair value through profit or loss.
The initial designation of the financial instruments to measure at fair value through profit or loss is a one-time option on initial
classification and is irrevocable until the financial asset is derecognised.
22
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial liabilities
Financial liabilities are subsequently measured at:
•
•
amortised cost; or
fair value through profit or loss.
A financial liability is measured at fair value through profit and loss if the financial liability is:
•
•
•
a contingent consideration of an acquirer in a business combination to which AASB 3: Business Combinations applies;
held for trading; or
initially designated as at fair value through profit or loss.
All other financial liabilities are subsequently measured at amortised cost using the effective interest method.
Derecognition
Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial
position.
Derecognition of financial assets
A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in such a way
that all the risks and rewards of ownership are substantially transferred.
All of the following criteria need to be satisfied for derecognition of financial asset:
•
•
•
the right to receive cash flows from the asset has expired or been transferred;
all risk and rewards of ownership of the asset have been substantially transferred; and
the Group no longer controls the asset (ie the Group has no practical ability to make a unilateral decision to sell the asset to a
third party).
On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
On derecognition of a debt instrument classified as at fair value through other comprehensive income, the cumulative gain or loss
previously accumulated in the investment revaluation reserve is reclassified to profit or loss.
On derecognition of an investment in equity which was elected to be classified under fair value through other comprehensive income, the
cumulative gain or loss previously accumulated in the investment revaluation reserve is not reclassified to profit or loss, but is transferred
to retained earnings.
Derecognition of financial liabilities
A liability is derecognised when it is extinguished (ie when the obligation in the contract is discharged, cancelled or expires). An
exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a
financial liability is treated as an extinguishment of the existing liability and recognition of a new financial liability.
The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Impairment
The Group recognises a loss allowance for expected credit losses on financial assets that are measured at amortised cost or fair value
through other comprehensive income.
Loss allowance is not recognised for:
financial assets measured at fair value through profit or loss; or
equity instruments measured at fair value through other comprehensive income.
The Group uses the simplified approach to impairment, as applicable under AASB 9: Financial Instruments:
Simplified approach
The simplified approach does not require tracking of changes in credit risk at every reporting period, but instead requires the recognition
of lifetime expected credit loss at all times. This approach is applicable to:
•
•
trade receivables or contract assets that result from transactions within the scope of AASB 15: Revenue from Contracts with
Customers and which do not contain a significant financing component; and
lease receivables.
In measuring the expected credit loss, a provision matrix for trade receivables was used taking into consideration various data to get to an
expected credit loss (i.e diversity of customer base, appropriate groups of historical loss experience, etc).
23
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recognition of expected credit losses in financial statements
At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit
or loss and other comprehensive income.
The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset.
Assets measured at fair value through other comprehensive income are recognised at fair value, with changes in fair value recognised in
other comprehensive income. Amounts in relation to change in credit risk are transferred from other comprehensive income to profit or
loss at every reporting period.
For financial assets that are unrecognised (eg loan commitments yet to be drawn, financial guarantees), a provision for loss allowance is
created in the statement of financial position to recognise the loss allowance.
(k) Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation and impairment. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged
to the statement of profit or loss and other comprehensive income during the reporting period in which they are incurred.
Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their cost, net of their residual values,
over their estimated useful lives. The rate of depreciation for buildings is 10% and for plant and equipment and office equipment the rates
vary between 5% and 33.3% per annum.
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 (note
1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit
or loss and other comprehensive income.
(l) Exploration and evaluation expenditure
The Group applies the most appropriate accounting policy for exploration and evaluation expenditure incurred for each area of interest.
Exploration and evaluation expenditure for the Australian area of interest continue to be capitalised as follows:
Exploration for and evaluation of mineral resources is the search for mineral resources after the entity has obtained legal rights to explore
in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource.
Accordingly, exploration and evaluation expenditures are those expenditures incurred by the Company in connection with the exploration
for and evaluation of minerals resources before the technical feasibility and commercial viability of extracting mineral resources are
demonstrable.
Accounting for exploration and evaluation expenditures is assessed separately for each ‘area of interest’. An ‘area of interest’ is an
individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been
proved to contain such a deposit.
Expenditure incurred on activities that precede exploration and evaluation of mineral resources, including all expenditure incurred prior to
securing legal rights to explore an area, is expensed as incurred. For each area of interest the expenditure is recognised as an exploration
and evaluation asset where the following conditions are satisfied:
a) The rights to tenure of the area of interest are current; and
b) At least one of the following conditions is also met:
i. The expenditure is expected to be recouped through successful development and commercial exploitation of an area of interest, or
alternatively by its sale; and
ii. Exploration and evaluation activities in the area of interest have not, at reporting date, reached a stage which permits a reasonable
assessment of the existence or otherwise of ‘economically recoverable reserves’ and active and significant operations in, or in
relation to, the area of interest are continuing. Economically recoverable reserves are the estimated quantity of product in an area
of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable conditions.
Exploration and evaluation assets include:
• Acquisition of rights to explore;
• Topographical, geological, geochemical and geophysical studies;
• Exploratory drilling, trenching, and sampling; and
• Activities in relation to evaluating the technical feasibility and commercial viability of extracting the mineral resource.
24
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General and administrative costs are allocated to, and included in, the cost of exploration and evaluation assets only to the extent that those
costs can be related directly to the operational activities in the area of interest to which the exploration and evaluation assets relate. In all
other instances, these costs are expensed as incurred.
Government grants received in relation to exploration and evaluation expenditure are recorded as a deduction in the carrying value of the
asset.
Exploration and evaluation expenditure is not depreciated as it is not yet ready for use.
Impairment testing of exploration and evaluation expenditure
Exploration and evaluation expenditure is assessed for impairment if sufficient data exists to determine technical feasibility and commercial
viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
Exploration and evaluation expenditure is tested for impairment when any of the following facts and circumstances exist:
The term of exploration licence in the specific area of interest has expired during the reporting period or will expire in the near future, and
is not expected to be renewed;
• Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area are not budgeted nor planned;
• Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities
of mineral resources and the decision was made to discontinue such activities in the specified area; or
• Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
Where a potential impairment is indicated, an assessment is performed for each cash generating unit that is no larger than the area of
interest. The Group performs impairment testing in accordance with accounting policy note 1(i).
Accounting for exploration and evaluation expenditures is assessed separately for each ‘area of interest’. An ‘area of interest’ is an
individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been
proved to contain such a deposit.
Exploration and evaluation assets include:
• Acquisition of rights to explore;
• Topographical, geological, geochemical and geophysical studies;
• Exploratory drilling, trenching, and sampling; and
• Activities in relation to evaluating the technical feasibility and commercial viability of extracting the mineral resource.
(m) Employee benefits
(i) Annual leave and long service leave
Liabilities for annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in other
payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities
are settled.
(ii) Share-based payments
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (‘equity-settled transactions’) - refer to note 27.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted.
The fair value is determined by an internal valuation using an appropriate option pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting
date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which
the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Group, will ultimately vest. This
opinion is formed based on the best available information at reporting date. No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement
award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award.
(n) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific
25
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
to the liability.
Site Restoration
In accordance with the Group’s environmental policy and applicable legal requirements, a provision for site restoration is recognised in
respect of the estimated cost of rehabilitation, decommissioning and restoration of the area disturbed during exploration activities up to
reporting date, but not yet rehabilitated. Such activities include dismantling infrastructure, removal and treatment of waste material, and
land rehabilitation, including re-contouring, topsoiling and revegetation of the disturbed area.
The amount recognised as a liability represents the estimated future costs discounted to present value at a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a
finance cost in the income statement.
A corresponding asset is recognised in Property, Plant and Equipment only to the extent that it is probable that future economic benefits
associated with the rehabilitation, decommissioning and restoration expenditure will flow to the entity.
Costs arising from unforeseen circumstances, such as contamination from discharge of a toxic material, are recognised as a provision with
a corresponding expense recognised in the income statement when an obligation, which is probable and capable of reliable estimation,
arises.
At each reporting date the site restoration provision is re-measured to reflect any changes in discount rates and timing or amounts of the
costs to be incurred. Such changes in the estimated liability are accounted for prospectively from the date of the change and are added to,
or deducted from, the related asset where it is probable that future economic benefits will flow to the entity.
(o) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the
period of the borrowings using the effective interest method. Fees paid on the establishment of the loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down.
The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible
bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The
remainder of the proceeds is allocated to the conversion option and recognised in shareholders’ equity, net of tax effects.
Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and
the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or
finance costs.
(p) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of
the acquisition as part of the purchase consideration.
(q) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the company by the weighted average
number of ordinary shares outstanding during the financial year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income
tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(r) Goods and Services Tax (GST) and Value Added Tax (VAT)
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 of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the 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 respective taxation authorities, are presented as operating cash flows.
26
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(t) Critical accounting estimates and judgements
The preparation of these financial statements 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:
Share-based payment transactions
The fair value of employee share options/performance rights are measured using an appropriate binomial option valuation model.
Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted
average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the
instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based
on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in
determining fair value.
27
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
2.
FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and
liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group.
Risk management is carried out by the full Board of Directors as the Group believes that it is crucial for all board members to be involved
in this process. The Managing Director, with the assistance of senior management as required, has responsibility for identifying, assessing,
treating and monitoring risks and reporting to the board on risk management.
(a) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Consolidated Entity’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters, while optimising the return.
The Group is exposed to fluctuations in foreign exchange rates of the CFA Franc in relation to its activities in Burkina Faso. The group
maintains minimal working capital in Burkina Faso and only transfers cash funds as required, as such the Consolidated Statement of
Financial Position exposure at any point in time is not significant. Foreign exchange risk will also arise from future commercial transactions
and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign
operations.
The Group is also exposed to fluctuations in interest rates in relation to its cash deposits and commodity prices in relation to the carrying
value of its exploration and evaluation assets. The Group monitors all of the above-mentioned risks and takes action as required.
The Group’s exposure to interest rate risk, and the effective weighted average interest rate for each class of financial asset and financial
liability is set out below.
2019
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Net financial assets/(liabilities)
2018
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Borrowings
Weighted
Average
Interest Rate
%
1.92
0.8
9.05
Variable
Interest Rate
$
Fixed Interest
Rate
$
Non-Interest
Bearing
$
Total
$
12,708,796
-
12,708,796
-
-
12,708,796
3,219,228
-
3,219,228
1,367,066
1,367,066
1,852,162
-
-
-
-
-
-
-
-
-
-
-
-
-
-
135,521
135,521
126,717
126,717
8,804
-
166,281
166,281
558,075
-
558,075
(391,794)
12,708,796
135,521
12,844,317
126,717
126,717
12,717,600
3,219,228
166,281
3,385,509
558,075
1,367,066
1,925,142
1,460,368
At 30 June 2019, if interest rates had changed by -/+ 25 basis points from the weighted average rate for the period with all other variables
held constant, post-tax loss for the Group would have been $5,514 higher/lower (2018: -/+ 25 basis points, $8,048 higher/lower) as a result
of lower/higher interest income from cash and cash equivalents.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations.
The Group’s exposure to credit risk is low and limited to cash and cash equivalents and other receivables. The majority of cash and cash
equivalents $12,708,796 at 30 June 2019 ($3,219,228 at 30 June 2018) are held with financial institutions that have a AA- credit rating
(Standard & Poor’s).
The maximum exposures to credit risk are the amounts as shown in the Statement of Financial Position.
28
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
FINANCIAL RISK MANAGEMENT (cont’d)
2.
(c) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable
securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being mineral
exploration, the Group has limited access to credit facilities, with the primary source of funding being equity raisings. The Board of
Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with a
view to initiating appropriate capital raisings as required.
The financial liabilities of the Group are confined to trade and other payables as disclosed in the statement of financial position. All trade
and other payables are due within 12 months of the reporting date. All other financial liabilities were fully repaid during the year.
The following are the contractual maturities of trade and other payables:
2019
Non-derivative financial liabilities
Trade and other payables
Borrowings
2018
Non-derivative financial liabilities
Trade and other payables
Borrowings
Carrying
Amount
$
Contractual
Cash Flow
$
6 Months or
Less
$
6 – 12 Months
$
1 – 2 Years
$
126,717
-
126,717
126,717
-
126,717
126,717
-
126,717
558,075
1,367,066
1,925,142
558,075
1,367,066
1,925,142
558,075
1,367,066
1,925,142
-
-
-
-
-
-
-
-
-
-
-
-
(d) Accounting classification of Fair Values
The carrying amounts of all financial assets and liabilities approximate their respective net fair values at reporting date.
Fair value estimation
Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further
information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Trade and other receivables
Fair value, which is determined for disclosure purposes, is estimated as the present value of future cash flows, discounted at the market
rate of interest at the reporting date.
Trade and other payables
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the reporting date.
Borrowings
Fair value, which is determined for disclosure purposes, at the time of for establishing the financial liability and based on the present value
of the remaining cash flows, discounted at the assessed weighted average cost of capital.
29
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
30 JUNE 2019
SEGMENT INFORMATION
3.
The consolidated entity has two reportable segments being mineral exploration and prospecting for minerals in Australia and Burkina Faso.
During the year, the entity disposed of its interests in its Australian exploration and processing segment. Further segment reporting
information is provided in Note 1(d).
Australia
Burkina Faso
2019
$
2018
$
2019
$
2018
$
Segment income
4,364
10,742
-
-
Reconciliation of segment income to total
revenue before tax:
Profit from discontinued operation
Interest revenue
Total revenue
Consolidated Total
2018
2019
$
$
10,742
4,364
6,936,513
220,535
7,161,412
-
13,721
24,463
Segment profit / (loss)
6,711,911
(1,681,044)
(441,310)
(463,286)
6,270,601
(2,130,609)
Reconciliation of segment profit to net
profit before tax:
Depreciation
Personnel expenses
Finance expense
Provision for impairment
Other corporate and administration
Net loss before tax
(747)
(507,438)
(35,911)
(1,700,000)
(800,813)
(3,225,692)
(4,144)
(457,445)
(184,323)
-
(476,908)
(3,253,430)
Segment operating assets
-
3,331,532
-
60,000
-
3,391,532
Reconciliation of segment operating assets
to total assets:
Cash and cash equivalents (head office)
Receivables (head office)
Property, plant & equipment (head office)
Total assets
12,708,796
135,251
-
12,844,047
3,177,288
148,303
6,848,221
13,565,343
Segment operating liabilties
-
-
12,150
1,684,454
12,150
1,684,454
Reconciliation of segment operating
liabilities to total liabilities:
Payables and provisions (head office)
Borrowings (head office)
Total liabilities
4.
NET FINANCIAL INCOME
Interest income
Interest expense
Net finance income/(expense)
114,567
-
126,717
986,563
1,367,126
4,038,143
Consolidated
2019
$
2018
$
220,535
13,721
(35,911)
(184,323)
184,624
(170,603)
30
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
EXPENSES
5.
The following significant expense items not separately highlighted in the
Statement of Profit or Loss and Other Comprehensive Income are
relevant in explaining the financial performance:
Share-based payments – consulting / director fees (refer also note 25)
Depreciation of non-current assets in administration expenses
Plant and equipment
Furniture and equipment
Total depreciation
Personnel expenses
Wages and salaries
Contributions to defined contribution superannuation funds
Termination
Total personnel expenses
Provision for recoverability
Loan to Cheetah Resources Pty Ltd*
Consolidated
2019
$
2018
$
418,228
83,309
26
721
747
312,346
19,176
175,916
507,438
1,700,000
2,919
1,225
4,144
417,401
40,044
-
457,445
-
*The Group has agreed to provide an unsecured loan facility to Cheetah Resources Pty Ltd of up to A $3,000,000 (subsequently
increased to A $4,500,000) at an annual interest rate of 12%. In the event shareholder approval for the acquisition of Cheetah Resources
Pty Ltd is not obtained or due diligence is not satisfactorily completed, the loan is due and payable on the date that is 12 months after the
shareholder meeting. The Group has decided to conservatively provide for the loan as at 30 June 2019 on the basis that it is the primary
source of funding for Cheetah Resources Pty Ltd.
6.
INCOME TAX
(a) The major components of income tax are:
Statement of Profit or Loss and Other Comprehensive Income
Current income tax
Current income tax benefit
Deferred income tax
Relating to origination and reversal of temporary differences
Unused tax losses not recognised as deferred tax asset
Tax rebate from R&D activities
Income tax benefit reported in the Statement of Profit or Loss and Other
Comprehensive Income
The aggregate amount of income tax attributable to the financial period differs
from the amount calculated on the operating loss. The differences are:
Accounting loss
Prima facie tax benefit at the Australian tax rate of 30% (2018: 30%)
Add tax effect of:
Non-deductible items
Sale of subsidiary
Burkina Faso operations not brought to account
Less tax effect of:
Capital raising costs
Utilisation of tax losses not brought to account
Tax losses not brought to account
Income tax benefit
31
-
-
-
-
-
(3,710,821)
(1,113,246)
635,907
-
132,393
-
-
344,946
-
-
-
-
-
-
(3,248,340)
(974,502)
35,065
4,444,696
150,594
(6,005)
(3,649,847)
-
-
Vital Metals Limited
Notes to the Consolidated Financial Statements continued
6.
INCOME TAX (CONTINUED)
(b) Deferred income tax
Statement of Financial Position
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Property, plant and equipment – depreciation
Accrued income
Exploration expenses
Set-off against tax assets
Deferred tax assets
Tax value of losses carried forward
Set-off of deferred tax liability
Accrued expenses
Provisions
Other prepayments/capital expenditure
Non-recognition of deferred tax assets
Consolidated
2019
$
2018
$
1,138
9,629
-
(10,767)
-
8,223,618
(10,767)
17,912
-
109,566
(8,340,329)
-
5,732
2,508,572
(2,514,304)
-
7,808,597
(2,514,304)
21,000
133,980
163,434
(5,612,707)
-
(c) Tax losses
At 30 June 2019, the Consolidated Entity has $27,412,059 (2018: $26,028,658) of taxable losses that are available for offset against future
taxable profits of the consolidated entity, subject to the loss recoupment requirements in the Income Tax Assessment Act 1997. During the
year ended 30 June 2018, the Consolidated Enity had taxable income of $8,100,530 which comprise mainly the capital gains from the sale
of a subsidiary company, NQT. Albeit the sale was completed in 2019 income year, the terms of the agreement were effective prior to 30
June 2018 for the purpose of Capital Gains Tax. Carried forward losses of $8,100,530 were applied against the taxable income on the basis
that the Consolidated Entity satisfied the loss recoupment requirements in the Income Tax Assessment Act 1997.
No deferred tax asset has been recognised in the Statement of Financial Position in respect of the amount of these losses, as it is not
presently probable future taxable profits will be available against which the Company can utilise the benefit.
Unrecognised deferred tax assets
Tax losses – revenue (at 30%)
8,223,618
7,808,597
(d) Tax consolidation legislation
Vital Metals Ltd and its controlled entities implemented the tax consolidations legislation as of 4 October 2005. The Australian Tax Office
was notified of this decision on lodgement of the 2006 income tax return.
Upon the completions of the sale of subsidiary, North Queensland Tungsten has exited the consolidated group as at 9 August 2018. Vital
Metals Ltd remains the head entity of the consolidated group for income tax purposes.
(e) Corporate Tax Rate
In 2018, the government enacted a change in the eligibility to access the lower income tax rate for small business entities of 27.5%. Vital
Metals Ltd does not satisfy these requirements and is therefore subject to the corporate tax rate of 30%.
7.
CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term deposits
Cash and cash equivalents as shown in the statement of financial position and
the statement of cash flows
Refer to note 2 for the Group’s exposure to interest rate risk and credit risk.
708,796
12,000,000
3,210,478
8,750
12,708,796
3,219,228
32
Vital Metals Limited
Notes to the Consolidated Financial Statements continued
8.
NON-CURRENT ASSETS – EXPLORATION & EVALUATION EXPENDITURE
Exploration and evaluation expenditure
Costs carried forward in respect of areas of interest in the exploration and
evaluation phases:
Opening net book amount
Exploration expenditure
Exploration expenditure – expensed
Transfer to Assets held for Sale (see note 9)
Closing net book amount
The closing balances relate to the following areas of interest:
Watershed Tungsten Project, Queensland
Nahouri Gold Project, Burkina Faso
Bouli Project, Niger
Aue Cobalt Project, Germany
Consolidated
2019
$
2018
$
-
849,677
(849,677)
-
-
7,588,322
4,261,072
(3,365,123)
(8,484,271)
-
9
-
-
-
-
-
-
-
-
-
-
7,588,322
-
-
-
6,294,658
2,279,716
7,588,322
8,574,374
The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial
exploitation or sale of the respective area of interest.
The Group undertakes at least on an annual basis a comprehensive review for indicators of impairment of these assets. There is significant
estimation in determining the inputs and assumptions used in determining the recoverable amounts. The key areas requiring estimation
and assumptions may include: recent drill results and reserves and resource estimates; fundamentals and economic factors such as
commodity prices; exchange rates and current and anticipated operating costs in the industry; and the Group's market capitalisation
compared to its net assets and independent valuations that may be available.
33
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
9.
ASSETS/LIABILITIES HELD FOR SALE
Assets
Exploration capitalised
Liabilities
Site Restoration provision
Net assets held for sale
Consolidated
2019
$
-
-
-
-
-
2018
$
8,484,271
8,484,271
(400,000)
(400,000)
8,084,271
On 2 May 2018, the Company announced the signing of a binding term sheet to sell 100% interest of the Watershed Tungsten Project
(Watershed) to ASX-listed company Tungsten Mining NL (TGN). The agreed consideration for Watershed was for $14,739,704 cash.
The Watershed sale was completed on 10 August 2018.
10. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade creditors and accruals
Carrying value is considered to approximate fair value. Refer to note 2 for the
Group’s interest rate and liquidity risk.
11. NON-CURRENT LIABILITIES – BORROWINGS
Bank facility at amortised cost
Consolidated
2019
$
2018
$
126,717
558,075
-
1,367,126
During the year the Group fully settled the outstanding Macquarie Bank Loan facility subsequent to the disposal of the Watershed Tungsten
Project. Furthermore, an Amendment and Restated Royalty Deed for the Watershed Project has been executed, with Tungsten Mining NL
assuming the royalty obligation owing to Macquarie Bank.
34
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
12. NON-CURRENT LIABILITIES – PROVISIONS
Site Restoration Provision
Opening balance
Transfer to Held for Sale Assets/Liabilities
Closing balance
13. CONTRIBUTED EQUITY
(a) Share capital
9
-
-
-
400,000
(400,000)
-
2019
2018
Notes
Number of
shares
$
Number of
shares
$
Ordinary shares fully paid
13(b), 13(d) 1,742,611,288
52,845,649
1,742,611,288
52,845,649
Total contributed equity
1,742,611,288
52,845,649
1,742,611,288
52,845,649
(b) Movements in ordinary share capital
Beginning of the financial year
Issued during the year:
-
-
-
Less: transaction costs
End of the financial year
Placement 25 September 2017
Placement 5 April 2018
Placement 26 June 2018
1,742,611,288
52,845,649
1,055,751,226
47,810,512
-
-
-
1,742,611,288
-
-
-
-
52,845,649
263,937,807
329,922,257
92,999,998
1,742,611,288
1,981,409
2,969,300
837,000
(752,572)
52,845,649
(c) Movements in options on issue
Beginning of the financial year
Issued during the year:
− Exercisable at 1.2 cents and expiring 24 November 2019
− Exercisable at 1.0 cents and expiring 17 November 2021
− Exercisable at 1.5 cents and expiring 19 July 2022
Expired/cancelled during the year:
− Exercisable at 4.0 cents on or before 24 November 2017
− Exercisable at 2.7 cents on or before 25 November 2018
− Exercisable at 1.625 cents on or before 31 December 2018
End of the financial year
Number of options
2019
2018
231,182,434
186,937,742
-
-
32,666,667(1)
28,931,825
25,000,000
-
-
14,096,763
86,153,846
163,598,492
(9,687,133)
-
-
231,182,434
(1) These options were granted on 20 June 2018, but were issued on 19 July 2018.
(d) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number
of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is
entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have
a limited amount of authorised capital.
35
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
13.
CONTRIBUTED EQUITY (continued)
(e) Capital risk management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
developments of the business. The Board’s focus has been to raise sufficient funds through equity (via rights issues and placements) to
fund exploration and evaluation activities. There were no changes in the Group’s approach to capital management during the year. Neither
the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
Management also monitor capital through the assessment of adequate working capital. The working capital as at 30 June 2019 is shown
below:
Current assets
Current liabilities
Working capital
14. RESERVES
Consolidated
2019
$
12,844,047
(126,717)
12,717,330
2018
$
11,869,780
(2,362,240)
9,507,540
(i) Share based payment reserve
The share-based payments reserve is used to recognise the fair value of options issued. Refer to note 25 for details.
(ii) Convertible note reserve
The convertible note reserve is used to recognise the fair value of the equity component of the convertible loan facility as described in
Note 11.
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as
described in note 1(e). The reserve is recognised in profit or loss when the net investment is disposed of.
15. DIVIDENDS
No dividends were paid during the financial year. No recommendation for payment of dividends has been made.
16. KEY MANAGEMENT PERSONNEL DISCLOSURES
Consolidated
Key management personnel compensation
Short-term benefits
Post-employment benefits
Termination
Share-based payments
2019
$
326,824
14,581
175,916
418,228
935,549
2018
$
547,059
40,478
-
61,351
648,888
Other transactions:
Mr Zane Lewis was appointed a director on 6 February 2019. For the period from February 2019 to balance date, Smallcap Corporate Pty
Ltd (an entity which Mr Lewis has a beneficial interest) provided company secretary and financial accounting services to the Company.
Total fees incurred to Smallcap Corporate Pty Ltd for the services up to 30 June 2019 was $18,995.
Other disclosures regarding key management personnel are made in the remuneration report on pages 9 to 12.
36
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
17. REMUNERATION OF AUDITORS
Remuneration of the auditor of the parent entity for:
Audit and review of financial reports
No non-audit services were performed during 2019 or 2018.
18. COMMITMENTS
Consolidated
2019
$
2018
$
36,801
42,333
(a) Exploration commitments
Following the disposal of the Watershed Tungsten project, the Group currently has no exploration related minimum spend commitments
(2018: $265,000).
Consolidated
2019
$
2018
$
-
-
-
-
-
-
-
-
(b) Lease commitments: Group as lessee
Operating leases (non-cancellable):
Minimum lease payments
within one year
later than one year but not later than five years
Aggregate lease expenditure contracted for at reporting date but not
recognised as liabilities
19. RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent entity within the Group is Vital Metals Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 20.
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 16.
(d) Loans to related parties
Vital Metals Ltd has provided unsecured, interest free loans to each of its wholly owned subsidiaries totalling $30,464,241 at 30 June 2019
(2018: $29,981,397).
37
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
20. DISCONTINUED OPERATIONS
On 10 August 2018, the Company disposed of 100% of its interest in their subsidiary North Queensland Tungsten, including the Watershed
Tungsten Project in Queensland, to Tungsten Mining NL. The financial information relating to the discontinued operation for the period
to the date of disposal is set out below.
Revenue
Expenses
Other income
Profit/(Loss) before Income Tax
Income Tax (expense)/benefit
Results from Operating Activities after tax
Loss from Discontinued Operations
Cash flows from discontinued operations
Net cash used in Operating Activities
Net cash flows for the period
Profit on Sale of subsidiary assets
Consideration Received
Cash
Escrowed funds
Total disposal consideration
Carrying amount of net assets sold
Costs of disposal
Gain on sale of subsidiary before income tax and reclassification of foreign currency
translation reserve
Reclassification of foreign currency translation reserve
Income tax expense on gain
Gain on sale of subsidiary after reclassification of foreign currency translation reserve
21. SUBSIDIARIES
10 August 2018
$
30 June 2018
$
-
(23,709)
-
(23,709)
-
(23,709)
(23,709)
5,997
(3,357)
18,533
15,176
-
15,176
15,176
(14,624)
(14,624)
(680,421)
(680,421)
10-Aug
2018
$
13,739,705
1,000,000
14,739,705
(7,855,407)
(397,071)
6,487,227
449,286
-
6,936,513
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(c):
Name
Country of Incorporation
Equity Holding(1)
Class of Shares
North Queensland Tungsten Pty Ltd(2)
Ordinary
Vital Metals Burkina Sarl
Ordinary
(1) The proportion of ownership interest is equal to the proportion of voting power held.
(2) North Queensland Tungsten Pty Ltd was disposed on 10 August 2018 as described in Note 20.
Australia
Burkina Faso
2019
%
-
100
2018
%
100
100
38
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
22. CONTINGENCIES
No contingent liabilities exist as at the date of this report.
23. EVENTS OCCURRING AFTER THE REPORTING DATE
There have been no significant events after the reporting date.
24. STATEMENT OF CASH FLOWS
Reconciliation of net loss after income tax to net cash outflow from
operating activities
Net profit / (loss) for the year
Non-Cash Items
Write-off of property, plant and equipment
Share based payments
Provision for impairment
Other Adjustments
(Profit) on sale of non-current assets
Change in operating assets and liabilities, net of effects from purchase of
controlled entities
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
Net cash outflow from operating activities
Consolidated
2019
$
2018
$
3,225,692
(3,253,430)
19,660
418,228
1,700,000
4,144
83,309
-
(6,936,513)
-
31,030
(206,953)
(37,039)
(1,785,895)
(96,785)
(873,217)
-
(4,163,360)
There were no non cash investing during the year (2018: Nil). Non cash financing activities of nil (2018: $58,903).
39
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
25. LOSS PER SHARE
(a) Reconciliation of earnings used in calculating loss per share
Loss attributable to the owners of the Company used in calculating basic and
diluted loss per share
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share.
Consolidated
2019
$
2018
$
3,225,692
(3,253,430)
Number of shares
Number of shares
1,742,611,288
1,573,787,505
(c) Information on the classification of options
As at 30 June 2019, the there were 25,000,000 options that were dilutive. The dilutive earnings per share including these options is 1.85
cents.
26. SHARE-BASED PAYMENTS
(a) Broker options
The terms and conditions relating to the grants of the broker options are as follows, with all options to be settled by physical delivery of
shares:
Grant Date
12 May 2017
15 September 2017
20 March 2018
Expiry Date
30 April 2021
17 November 2021
19 July 2022
Exercise Price
$0.02
$0.01
$0.015
(1) 30,000,000 Broker options were granted on 20 June 2018, but issued 19 July 2019.
Number Outstanding at Year End
2019
50,000,000
25,000,000
30,000,000
105,000,000
2018
50,000,000
25,000,000
- (1)
75,000,000
The weighted average fair value of options granted during 2018 was 0.8 cents. The value of the options has been recognised as a capital
raising expense. There were no options granted during the year.
The value of services received was unable to be reliably measured and therefore, the price was calculated by using a Black Scholes model
applying the following inputs.
Valuation information
$0.015 Options, grant date 20 March 2018
Exercise price (cents)
Life of the option (years)
Expected share price volatility
Risk free interest rate
Share price grant date
1
4.08
120%
2.12%
1.1
40
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
26.
SHARE-BASED PAYMENTS (continued)
Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is indicative of future
trends, which may not eventuate.
The fair value and grant date of the options is based on historical exercise patterns, which may not eventuate in the future.
(b) Employee Share Option Plan
The Vital Metals Limited Share Option Plan was approved in April 2005.
The issue to each individual Employee, Key Employee or Director is controlled by virtue of the provisions of both the Share Plan and the
Australian Stock Exchange Limited Listing Rules. Under the Share Scheme the number of shares an eligible person will be entitled to
receive each year will be determined by the Board of Directors in their sole discretion.
Employees, key employees and Directors are entitled to take up ordinary shares at a cost determined by the Board with regard to the market
value of the shares when the Board resolves to offer the Option.
The terms and conditions relating to the grants of the share option plan are as follows, with all options to be settled by physical delivery of
shares:
Grant Date
25 November 2016
23 March 2017
17 November 2017
20 June 2018
Expiry Date
25 November 2018
30 April 2021
24 November 2019
19 July 2022
Exercise Price
$0.027
$0.023
$0.012
$0.015
Number Outstanding at Year End
2019
-
27,000,000
28,931,825(1)
2,666,667
58,598,492
2018
14,096,763
27,000,000
28,931,825(1)
- (2)
70,028,588
(2) Options issued to Mark Strizek split between Tranche A and Tranche B. The Tranche B options did not meet its vesting
conditions.
(3) 2,666,667 Advisor options were granted on 20 June 2018, but were issued on 3 September 2018.
Set out below are summaries of the employee options granted:
Outstanding at the beginning of the year
Granted
Forfeited/cancelled
Exercised
Expired
Outstanding at year-end
Exercisable at year-end
Consolidated
2019
2018
Weighted
average
exercise price
cents
1.93
-
-
-
2.70
1.70
1.70
Number of
options
70,028,588
-
-
-
(14,096,763)
58,598,492
58,598,492
Number of
options
50,783,896
28,931,825
-
-
(9,687,133)
70,028,588
70,028,588
Weighted
average
exercise price
cents
2.74
1.2
-
-
4
1.93
1.93
The weighted average remaining contractual life of share options outstanding at the end of the financial year was 1.18 years (2018: 1.17
years), and the exercise price ranges from 1.2 to 2.3 cents.
There were no share options exercised in 2019 or 2018.
41
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
26.
SHARE-BASED PAYMENTS (continued)
Valuation information
Advisor Options
Exercise price (cents)
Life of the option (years)
Fair value per option (cents)
Expected share price volatility
Risk free interest rate
Share price at grant date – 20 June 2018
1.5
4.08
0.57
120%
2.12%
1.1
(c) Performance rights
On 1 May 2019, it was approved by shareholders at the notice of meeting to issue to Mr Phillip Coulson and Mr Zane Lewis the following
performance rights:
Phillip Coulson
Zane Lewis
Total
Class A
Class B
Class C
6,250,000
10,000,000
12,500,000
6,250,000
10,000,000
12,500,000
12,500,000
20,000,000
25,000,000
Value per
instrument
$.0.0073
$0.0072
$0.0069
The milestones of each class of performance rights are noted below:
Class A: to vest on the date that the 10 day VWAP for the Shares on the ASX is $0.012 or higher on or before 28 February 2023.
Class B: to vest on the date that the 10 day VWAP for the Shares on the ASX is $0.015 or higher on or before 28 February 2023.
Class C: to vest on the date that the 10 day VWAP for the Shares on the ASX is $0.02 or higher on or before 28 February 2023.
The performance rights were valued using a hybrid ESO model, with the following material inputs:
Share price at grant date – 1 May 2019
Life of the performance right (years)
Expected share price volatility
Risk free interest rate
Exercise multiple
$0.0085
3.83 years
125%
1.31%
2.5
(d) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
Options issued to employees/directors
Performance rights issued to directors
Shares issued for capital raising (value based on options value)
Consolidated
2019
$
10,978
407,250
418,228
-
2018
$
83,309
-
83,309
379,523
42
Notes to the Consolidated Financial Statements continued
Vital Metals Limited
27. PARENT ENTITY INFORMATION
The following information relates to the parent entity, Vital Metals Limited, at 30 June 2019. The information presented here has been
prepared using accounting policies consistent with those presented in Note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Non-Current liabilities
Total liabilities
Contributed equity
Reserves
Accumulated losses
Total equity
Profit for the year
2019
$
12,760,645
-
12,760,645
114,567
-
114,567
52,845,649
2,397,189
(42,596,760)
12,646,078
2018
$
3,289,424
6,207,011
9,496,435
324,786
1,367,126
1,691,912
52,845,649
2,202,955
(47,244,083)
7,804,522
4,647,323
(4,442,622)
Total comprehensive loss for the year
4,199,401
(1,442,622)
The parent entity did not have any guarantees, contingent liabilities, or any contractual commitments for the acquisition of property, plant
and equipment, as at 30 June 2019 or 30 June 2018.
43
Directors’ Declaration
Vital Metals Limited
In the directors’ opinion:
(a)
the consolidated financial statements comprising the statement of profit or loss and other comprehensive income, statement of
financial position, statement of changes in equity, statement of cash flows and accompanying notes set out on pages 15 to 43 are
in accordance with the Corporations Act 2001, including:
(i)
complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance for the
financial year ended on that date;
(ii)
(b)
(c)
(d)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
the remuneration disclosures included in the Directors’ Report (as part of the audited Remuneration Report), for the year ended 30
June 2019, comply with Section 300A of the Corporations Act 2001; and
a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been
included in note 1(a) to the financial statements.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Francis Harper
Chairman
Perth, 27 September 2019
44
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Vital Metals Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Vital Metals Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2019, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
Accounting for share-based payments
Key audit matter
How the matter was addressed in our audit
During the year, the Group agreed to issue
Our procedures included, but were not limited to the
performance rights to key management personnel and
following:
employees, which have been accounted for as share-
based payments as disclosed in Note 25 to the financial
report.
Share-based payments are a complex accounting area
and due to the judgemental estimates used in
determining the fair value of the share-based payments
in accordance with AASB 2: Share-based Payments, we
consider management’s calculation of the share-based
payments expense to be a key audit matter.
·
·
·
·
·
Reviewing relevant supporting documentation to
obtain an understanding of the contractual
nature, terms and conditions of the share-based
payment arrangements;
Considering the appropriateness of the
methodology and date of valuation used by
management to assess the fair value of the
share-based payments;
Assessing the competency and objectivity of the
valuation expert used by management to
determine the fair value of the share-based
payments;
Assessing the reasonableness of the share-based
payment expense; and
Assessing the adequacy of the related disclosures
in Note 1(t) and 25 to the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2019, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 12 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Vital Metals Limited, for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Jarrad Prue
Director
Perth, 27 September 2019
Vital Metals Limited
ASX Additional Information
Additional information required by Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current as at 26 September 2019.
(a) Distribution of quoted equity securities
Analysis of numbers of quoted equity security holders by size of holding:
1
1,001
5,001
10,001
100,001
-
-
-
-
1,000
5,000
10,000
100,000
and over
The number of shareholders holding less than a marketable parcel of shares are:
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary shares are:
Ordinary shares
Number of holders Number of shares
39
18
16
505
1,206
1,784
160
4,983
55,045
127,929
37,832,995
1,704,590,337
1,742,611,289
2,956,641
Listed ordinary shares
1
2
TROICA ENTERPRISES PTY LTD
EQUIPMENT COMPANY OF AUSTRALIA PTY LIMITED
AUSDRILL INTERNATIONAL PTY LTD
3
4 MR GAVIN JEREMY DUNHILL
5 MR ALEXANDER MICHAEL WORT
6 MR MARK JOHN BAHEN & MRS MARGARET PATRICIA BAHEN
7 CITICORP NOMINEES PTY LIMITED
8 MR CAIGEN WANG
9 OCEAN VIEW WA PTY LTD
10 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
11 HAMMERHEAD HOLDINGS PTY LTD
12
JEUMONT PTY LTD
12 MR SIMON NAPOLI
12 BLU BONE PTY LTD
13 ARGONAUT EQUITY PARTNERS PTY LIMITED
14 NEREENA PTY LTD
15 BNP PARIBAS NOMS PTY LTD
16 MR RUSSELL GREGORY GARROD
16 ZERRIN INVESTMENTS PTY LTD
17 GECKO RESOURCES PTY LTD
18 MR FRANCIS ROBERT HARPER
19 MRS VANESSA ANN STEWART
19 FLUE HOLDINGS PTY LTD
20 HAROLD CRIPPS HOLDINGS PTY LTD
Total
Total issued capital - selected security class(es)
Number of shares
162,100,000
68,158,174
68,000,000
54,000,000
35,000,000
32,687,368
29,386,963
25,143,253
24,000,000
21,545,296
20,250,000
20,000,000
20,000,000
20,000,000
19,696,667
18,922,473
18,565,000
15,000,000
15,000,000
14,000,000
11,700,000
10,000,000
10,000,000
9,600,000
Percentage of
ordinary shares
9.30%
3.91%
3.90%
3.10%
2.01%
1.88%
1.69%
1.44%
1.38%
1.24%
1.16%
1.15%
1.15%
1.15%
1.13%
1.09%
1.07%
0.86%
0.86%
0.80%
0.67%
0.57%
0.57%
0.55%
742,755,194
1,742,611,289
42.62%
100.00%
48
Vital Metals Limited
(c) Substantial shareholders
As at 26 September 2019 there was one substantial shareholder who had notified the Company in accordance with section
671B of the Corporations Act 2001 as having a substantial interest of 5% or more in the Company’s voting securities.
1
TROICA ENTERPRISES PTY LTD
Listed ordinary shares
Number of shares
Percentage of
ordinary shares
162,100,000
9.30%
(d) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction. There are no voting rights attached to any
class of options that is on issue.
(e) On-market Buy-Back
Currently there is no on-market buy-back of the Company’s securities.
(f) Unquoted equity securities
The unquoted options outstanding are as follows:
Number
Class
Holders with more than 20% interest in that class
12,500,000
Class A Performance Rights
20,000,000
Class B Performance Rights
25,000,000
Class C Performance Rights
Phil Coulson (6,250,000)
Zane Lewis (6,250,000)
Phil Coulson (10,000,000)
Zane Lewis (10,000,000)
Phil Coulson (12,500,000)
Zane Lewis (12,500,000)
50,000,000
Unlisted options exercisable at 2.0 cents expiring
30 April 2021
Argonaut Investments Pty Ltd (25,000,000)
JSR Nominees Pty Ltd (12,500,000)
Francis Harper (12,500,000)
27,000,000
Unlisted options exercisable at 2.3 cents expiring
30 April 2021
Mark Strizek (15,000,000)
David Macoboy (6,000,000)
25,000,000
Unlisted options exercisable at 1.0 cents expiring
17 November 2021
Argonaut Investments Pty Ltd (12,500,000)
JSR Nominees Pty Ltd (6,250,000)
Francis Harper Pty Ltd (6,250,000)
28,931,825
Unlisted options exercisable at 1.2 cents expiring
14 November 2019
Susan Strizek (28,931,825)
32,666,667
Unlisted options exercisable at 1.5 cents expiring
19 July 2022
Argonaut Investments Pty Ltd (10,000,000)
Francis Harper (10,000,000)
Boston First Capital Pty Ltd (10,000,000)
(g) Corporate Governance
Pursuant to the ASX Listing Rules, the Company’s Corporate Governance Statement will be released in conjunction with this
report. The Company’s Corporate Governance Statement
the Company’s website at:
https://www.vitalmetals.com.au/corporate/corporate-governance/
is available on
(h) ASX Listing Rule 5.13 Information
The Company has previously disclosed the foreign estimates in compliance with ASX Listing Rule 5.12 in the announcement
dated 25 June 2019 titled “Vital to Transform into Rare Earth Oxide Developer” (“Announcement”). The Company is not in
possession of any new information or data relating the foreign estimates that materially impacts on the reliability of the
estimates or the Company’s ability to verify the foreign estimates in accordance with Appendix 5A (JORC Code). The
Company confirms that the supporting information provided in the Announcement continues to apply and has not materially
changed.
49