VITAL METALS LIMITED
ABN 32 112 032 596
ANNUAL REPORT
FOR THE YEAR ENDED
30 JUNE 2020
CORPORATE INFORMATION
DIRECTORS
Evan Cranston - Non-Executive Chairman
Geoff Atkins - Managing Director
Phillip Coulson- Non-Executive Director
James Henderson- Non-Executive Director
COMPANY SECRETARY
Ms Louisa Martino
BANKER
National Australia Bank Ltd
Level 14
100 St Georges Tce
Perth, WA, 6005
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco, WA, 6008
REGISTERED OFFICE AND PRICIPAL PLACE OF BUSINESS
Level 5, 56 Pitt Street
Sydney, NSW, 2000
Telephone:
Facsimile:
Website:
Email:
+61 2 8823 3100
+61 2 9525 8466
www.vitalmetals.com.au
vital@vitalmetals.com.au
STOCK EXCHANGE
The Company’s securities are quoted on the official list of the Australian Securities Exchange Limited
(ASX code: VML)
SHARE REGISTRY
Automic Registry Services
Suite 1a, Level 1
7 Ventnor Ave
West Perth, WA, 6005
Telephone: 1300 288 664
VITAL METALS LIMITED and its Controlled Entities
2020 Annual Report
CORPORATE INFORMATION
Chairman’s Letter
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
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-
-
-
-
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 to the Members
ASX Additional Information
4
5
29
30
32
33
35
36
71
72
76
VITAL METALS LIMITED and its Controlled Entities
2020 Annual Report
CHAIRMAN’S LETTER
Dear Fellow Shareholders,
As your recently appointed Chairman, it gives me great pleasure to present Vital Metals Limited’s 2020 Annual
Report.
The past year has seen a great change for the Company. Within a twelve-month period, Vital has achieved a
remarkable transformation. From a company looking for opportunities, Vital is now a rare earth development
company with world class projects and a management team the envy of rare earth companies around the
world.
Within these twelve months we have finalised the acquisition of the Nechalacho project and progressed its
development to the point where we have procured long lead time items and are preparing the site for the
commencement of operations. In an industry where normal development timelines are measured in years, to
achieve this within 12 months truly is a remarkable, especially when you consider that we, along with the rest
of the world have had to deal with a once in a life time pandemic which has impacted every facet of life. And
this is just the beginning. It is our job now to ensure that the momentum we have built over the past 12 months
is carried on over the next twelve months as we seek to enter production with further expansion to then follow.
Whilst it may be tempting to sit back and congratulate ourselves on the achievements of the past year it is
vitally important that we do not let the opportunity we have slip. In January 2020 Canada and the US finalised
a joint action plan on Critical Minerals. Central to this plan is developing a rare earth supply chain outside of
China. This highlights the importance of rare earth minerals through their use in electric vehicles, renewable
energy, defence and communications. With two World Class Rare Earth Projects, and the first new project to
enter production in North America, Vital is well positioned to be a vital element of this supply chain
With Nechalacho being a near term production project located in Canada with a JORC Resource of 94.7MT at
1.46% REO, this project has the potential to cornerstone the North American rare earth supply chain. Add in
the excellent infrastructure, simple, low cost processing via ore sorting and leaching and you are left with what
I believe is one of the best rare earth projects in the world which is on track for operations to commence in
2021 with site preparations works underway.
Complementing Nechalacho is the Wigu Hill project located in Tanzania. Like Nechalacho, Wigu Hill has
excellent infrastructure, with rail, power and water accessible within 10 kms of the project. The deposit
contains large, discrete bastnaesite crystals enabling simple processing, which is similar to Nechalacho. Vital
will target Wigu Hill as its second development project.
I would like to thank my fellow Board members and management as well as our in-country teams for their
ongoing efforts and positive outcomes during the past year.
Finally, thank you for your continuing support and we look forward to updating you on our progress during the
forthcoming year as we move forward in our quest to be the next rare earth producer with operations
commencing in 2021.
Yours sincerely
Evan Cranston
Chairman
VITAL METALS LIMITED and its Controlled Entities
Page 4
2020 Annual Report
DIRECTORS’ REPORT
The Board of Directors present 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 2020.
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
Mr Evan Cranston (appointed 22 October 2019 as Non-Executive Director and appointed Chairman 4 August 2020)
Non-Executive Chairman
Mr 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. Mr Cranston is a
former Non-Executive Director of New Century Resources Limited (ASX:NCZ) and Boss Resources Limited (ASX:BOE). He
is currently Executive Chairman of African Gold Ltd (ASX:A1G), Non-Executive Chairman of Carbine Resources Limited
(ASX:CRB) and Chairman and Director of TSX listed Benz Mining Corp (TSX-V:BZ).
Mr Geoff Atkins (appointed 22 October 2019)
Managing Director
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.
Mr Atkins is not a director on any other ASX listed Company.
Mr Phillip Coulson
Non-Executive Director
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.
Mr James Henderson (appointed 4 August 2020)
Non-Executive Director
Mr Henderson is currently Executive Chairman of Transocean Group Pty Ltd, a corporate advisory and private equity group
focused on the emerging company market. His expertise is in the area of corporate strategy and structuring, capital raising
and commercial negotiation.
Mr Henderson has led teams on a variety of transactions including mergers, acquisitions, dispositions, takeovers, and
capital raisings particularly in Australia, Canada, the USA and Africa and was a founding shareholder in Cheetah Resources
Pty Ltd.
Mr Henderson is also a Non-Executive Director of Compass Gold Corporation (TSX-V:CVB).
VITAL METALS LIMITED and its Controlled Entities
Page 5
2020 Annual Report
DIRECTORS’ REPORT
Mr Francis Harper (resigned 4 August 2020)
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 (ASX: TIE).
Mr Zane Lewis (resigned 4 August 2020)
Executive Director
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),
Flamingo AI Limited (ASX:FGO) and Fraser Range Metals Limited (ASX: FRN).
Mr Peter Cordin (resigned 25 September 2019)
Non-Executive Director
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 Aurora Minerals Limited and was formerly a director of MC Mining Limited
(ASX: MCM).
COMPANY SECRETARY
Ms Louisa Martino (appointed 1 July 2020)
Company Secretary
Lousia Martino has a Bachelor of Commerce from the University of Western Australia, is a member of the Institute of
Chartered Accountants Australia & New Zealand and a member of the Financial Services Institute of Australasia (FINSIA).
She provides a number of listed companies with company secretarial services and has worked within corporate finance,
assisting with company compliance and capital raisings. Ms Martino holds the position of Company Secretary for listed
companies PYX Resources Ltd, Cokal Ltd, Jadar Resources Ltd, and Oklo Resources Ltd.
Mr Sebastian Andre (resigned 30 June 2020)
Company Secretary
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.
VITAL METALS LIMITED and its Controlled Entities
Page 6
2020 Annual Report
DIRECTORS’ REPORT
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were mineral exploration in Burkina Faso, Tanzania, Germany and
Canada.
FINANCIAL POSITION
The Group’s net assets at 30 June 2020 were $15,743,525 (30 June 2019: $12,717,331).
The Directors consider that the Group is in a strong and stable financial position to continue and grow its existing activities.
REVIEW OF OPERATIONS
Vital Metals Limited (ASX:VML) is an explorer and developer focussing on rare earths, technology metals and gold projects.
The Company’s projects are located across a range of jurisdictions in Canada, Africa and Germany.
On 25 June 2019, the Company announced that it had entered into a binding terms sheet to acquire 100% of the issued
capital in Cheetah Resources Pty Ltd (ACN 625 460 513) (Cheetah), the owner of the Nechalacho and Wigu Hill projects.
The consideration payable to the vendors, proportionate to their interests in Cheetah, was satisfied by the issue of:
(i) 400,000,000 fully paid ordinary shares;
(ii) 400,000,000 Tranche 1 Performance Shares; and
(iii) 400,000,000 Tranche 2 Performance Shares,
The Tranche 1 Performance Shares will each convert to one Share on the Company entering into binding offtake for a
minimum of 1,000 kgs of contained REO in respect of the Nechalacho Project or Wigu Hill Project within 2 years of the
acquisition completion date.
The Tranche 2 Performance Shares will each convert to one Share on the Company commencing mining operations at the
Nechalacho Project or Wigu Hill Project within 3 years of the issue of the Tranche 1 Performance Shares.
Where the Tranche 2 Milestone is satisfied, the Tranche 1 Milestone will automatically be deemed to have been satisfied.
NECHALACHO RARE EARTHS PROJECT, CANADA
Vital Metals aims to be a rare earth oxides producer, targeting production from the Nechalacho rare earth project in
Canada in 2021.
During the year, the Company completed the acquisition of Cheetah Resources Pty Ltd (“Cheetah”). Cheetah owns 100%
of the mineral rights of the Nechalacho Project above the 150m elevation level, containing a mineral resource of high-
grade light rare earths, very close to surface with excellent potential for low cost extraction (Figure 1).
The Company is focused on initial areas of interest in the North T Zone and the high-grade Tardiff Zones, which lie within
the larger Upper Zone.
VITAL METALS LIMITED and its Controlled Entities
Page 7
2020 Annual Report
DIRECTORS’ REPORT
Figure 1: Nechalacho Deposit Layout
In December 2019, following a geological re-interpretation and creation of new geological wireframes, the Company
completed work necessary to re-estimate and update the resource located in the Upper Zone of the Nechalacho deposit
in accordance with the JORC 2012. The Upper Zone is estimated to contain combined measured, indicated and inferred
mineral resources of 94.7 million tonnes grading 1.46% REO including 0.29% Nd2O3 at a cutoff grade of 0.1% Nd2O3 above
the 150m elevation level.
Confidence
Category
Measured
Indicated
Inferred
Measured,
Indicated
and Inferred
ND2O3 cutoff grade
%
Tonnage
Mt
0.3
0.1
0.3
0.1
0.3
0.1
0.3
0.1
1.094
2.914
6.246
14.662
30.945
77.159
38.285
94.735
Table 1: Nechalacho Upper Zone Resource
REO
%
2.004
1.468
1.928
1.508
1.797
1.456
1.825
1.464
LREO
%
1.817
1.326
1.762
1.372
1.637
1.323
1.662
1.330
HREO
%
0.186
0.142
0.166
0.137
0.161
0.133
0.162
0.134
ND2O3
%
0.394
0.288
0.380
0.295
0.360
0.291
0.364
0.291
PR6O11
%
0.106
0.077
0.102
0.080
0.094
0.077
0.096
0.078
NdPr:TREO
%
25.0%
24.9%
25.0%
24.9%
25.3%
25.3%
25.2%
25.2%
Contained within the Upper Zone, the high-grade Tardiff Zone is estimated to contain combined measured, indicated and
inferred mineral JORC 2012 Resource of 3.19 MT @ 2.4% TREO using a cutoff grade of 0.3% Nd2O3.
Confidence
% Nd2O3 cutoff
Tonnage
TREO
LREO
HREO
ND2O3
PR6O11
NdPr:TREO
All 4 surface zones <50 m depth outlined by 2% TREO
Measured
Indicated
Inferred
Measured + Indicated + Inferred
(JORC)
0.3
0.3
0.3
0.3
Table 2: Nechalacho Tardiff Zone Resource
286,563
1,611,345
1,297,073
2.729
2.429
2.237
2.518
2.254
2.085
0.211
0.176
0.152
0.515
0.457
0.423
0.144
0.128
0.119
3,194,982
2.378
2.209
0.169
0.449
0.126
24.1%
24.1%
24.2%
24.2%
VITAL METALS LIMITED and its Controlled Entities
Page 8
2020 Annual Report
DIRECTORS’ REPORT
North T Zone
The North T Zone of the Nechalacho Rare Earth Project is a separate deposit located approximately 2km north of the
centre of the Upper Zone. The North T Zone contains two distinct zones of REE mineralisation, a bastnaesite subzone at
surface with an underlying xenotime subzone.
In December 2019, Vital prepared a new resource estimate for the bastnaesite and xenotime subzones complying with
JORC 2012 standards, based on new geological interpretations and a validated historic database. Although the historic
assays were validated by core duplicates and the drill coverage was considered adequate, due to a lack of QAQC records
for the historic assays, the resources were classed as indicated and inferred. The JORC 2012 mineral resource estimate of
the bastnaesite subzone of the North T-Zone comprised 60,305 tonnes at 1.600% Nd2O3 with a 0.3% Nd2O3 cutoff grade.
Historical drilling only assayed for Nd, Ce and Y.
In April 2020, the Company announced a significant increase in resource size and grade for North T. The JORC 2012 Mineral
Resource estimate of the North T Zone bastnaesite subzone comprises 105,000t @ 8.9% LREO using a cut-off grade of
0.3% Nd2O3.
Figure 2: Location of North T Zone with respect to Upper Zone
Bastnasite Sub-zone
Kilo Tonnes
LREO (%)
LA2O3 (%)
CEO2 (%)
PR6O11 (%)
ND2O3 (%)
Measured
Indicated
Inferred
Total
68
33
4
105
9.6
7.8
5.8
8.9
2.5
2.0
1.4
2.3
4.9
4.0
2.9
4.5
0.5
0.4
0.3
0.5
1.8
1.5
1.1
1.6
Table 3: Nechalacho North T Resource
The North T bastnaesite subzone is an elongated saucer shape with the outer edges of the mineralisation close to the
surface and the deepest part of the mineralisation in the centre of the Subzone. The deepest bastnaesite mineralisation
is approximately 45m below the surface.
VITAL METALS LIMITED and its Controlled Entities
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2020 Annual Report
DIRECTORS’ REPORT
Figure 3: North T Resource Model
This resource grade is consistent with samples Vital used to undertake ore-sorting testwork, as announced in December,
which achieved concentrate grades of 35%+ REO via conventional ore sorting technology without the use of chemicals or
water. The bastnaesite mineralisation has excellent metallurgical characteristics with 97% recoveries of the rare earths
into solution via sulphuric acid leach.
The cost of concentrating ore without the use of water and chemicals is substantially lower than a typical REO
concentration process requiring extensive crushing, chemicals and a capital intensive cracking and leaching plant with
associated tailings dam and storage facilities costs.
Development Strategy
Vital is progressing with its plan to bring its Nechalacho project into production in 2021. By commencing mining at the
small but very high-grade North T deposit, and upgrading the ore to a >35% REO concentrate, the Company anticipates it
will have a low cost but high value product for sale, with minimal upfront capital cost compared to other world class rare
earth projects.
Vital has progressed toward the development of the Nechalacho rare earths project by signing multiple development and
supply contracts. In January 2020, Vital’s 100% subsidiary Cheetah Resources and Det’on Cho Nahanni Construction Ltd
signed a Memorandum of Understanding (MOU) with Nahanni Construction which has been selected as the preferred
Mining Services Contractor.Det’on Cho Nahanni Construction Ltd. is 51% or more owned by Det’on Cho Corporation which
is owned by the Yellowknife’s Dene First Nation.
Following the excellent ore sorting testwork results which produced a high grade (+35%) concentrate, Vital purchased a
COM Tertiary XRT 1220/B ore sorting equipment from TOMRA Sorting Inc. This is the same machine which was used in
testwork at SRC to produce the high-grade product as announced in December.
The sorter was delivered to Vancouver in August 2020, where it is stored until it is installed on site in March 2021.
VITAL METALS LIMITED and its Controlled Entities
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2020 Annual Report
DIRECTORS’ REPORT
Figure 4: Tomra Ore Sorter
The ore sorting testwork highlighted that Nechalacho is one of the few, and the first REO project, to successfully use ore
sorting to produce a high-grade +35% REO concentrate without the use of reagents and water. This will substantially
reduce the cost and the lead time to bring Nechalacho project into production.
In May 2020, Vital announced it had received amendments to Land Use Permit MV2014D0001 and Water License
MV2014L2-0001, issued by MacKenzie Valley Land and Water Board (MVLWB). Receipt of these permits will enable the
development and operation of a mining and concentration operation at Nechalacho’s North T Zone. These amendments
will enable Vital to proceed in the development of the first commercial rare earth project in Canada.
The Company and subsidiary Cheetah Resources thanked Yellowknife Dene First Nation (YKDFN), North Slave Metis
Alliance (NSMA), Deninu K’ue First Nation (DKFN), City of Yellowknife and Town of Hay River for Letters of Support
received during the approval process.
The previously cleared North T Zone will contain the open-cast surface operation, stockpiles, plant and equipment storage
area.
As planning progresses, Vital will need to submit more detailed plans to the MVLWB for approval as required. Borrow
sites for materials such as sand or clay minerals may be required, and Quarry Permits will be obtained for these sources.
Vital will use the existing and permitted 40-person exploration camp at Thor Lake for the Project.
Key milestones to achieving commencement of production at Nechalacho in 2021 are as follows:
-
-
Site establishment and preparation works:
October 2020 and January to March 2021
Finalisation of a mining contract:
September 2020 to January 2021
- Mobilisation of mining fleet to site:
- Mining operation:
February 2021
April to October 2021
-
-
-
Sorting operations commencing:
May/June to October 2021
Rare earth extraction facility construction commencing:
February 2021
Rare earth extraction facility operations commencing:
August 2021.
Following the successful completion of ore sorting testwork on ore from the North T deposit in 2019, Vital engaged
Halyard Inc to undertake detailed engineering and fabrication for the Ore Sorting Plant at Nechalacho. The Ore Sorting
Plant at Nechalacho centres around the Tomra COM Tertiary XRT 1200/B Sensor Based Sorter which is mounted inside a
40ft shipping container and located on a sub-structure. In addition to the ore sorter, the Ore Sorting Plant includes:
VITAL METALS LIMITED and its Controlled Entities
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2020 Annual Report
DIRECTORS’ REPORT
-
-
-
A feed system comprising of an ore feed hopper, ore feeder and ore feed conveyor;
Two sets of discharge stacker conveyors – one set for ore sorter eject and one set for ore sorter non-eject; and
Air compressor and diesel power generator.
The plant capital cost has been calculated at $3.7 million including 10% contingency.
Item
1
2
3
4
5
6
Description
Ore Sorter
AUD$ 000
1,395
Materials Handling Equipment
Generator and Air Compressor Package
Installation
Commissioning
Mobile Equipment
Subtotal
Contingency (10%)
Total
863
590
215
107
215
3,385
338
3,723
Table 4 Ore Sorting Capital Cost
Operating costs shall be incurred on a seasonal basis i.e. 1,530 operating hours per year, with sorter throughput to be
maximised during the available timeframe to reduce per tonne costs.
The Company signed a binding term sheet with SRC (Saskatchewan Research Council) subsequent to year end, to
negotiate definitive agreements for construction of a rare earth extraction plant. The Capital Cost Estimate for the Rare
Earth Extraction Plant set out in the term sheet is summarised below.
Item
Equipment Costs
Description
CAD$ 000
AUD$ 000
1
2
3
4
Other
5
6
Total
Crushing
Leaching
REO Precipitation and Finishing
Water & Waste Treatment
Miscellaneous Design, Fabrication and
Installation
EPCM
$365
$1,222
$610
$650
$1,700
$516
$5,063
$379
$1,268
$633
$675
$1,765
$535
$5,255
CAD:AUD 1.038
Table 5: Capital cost estimate for Rare Earth Extraction Plant
Vital appointed Orelogy Consulting Pty Ltd (Orelogy) during the year to define a pit design which met the conditions of
Vital’s Amended Land Use Permit and Water Licence whilst maximizing the contained rare earths. Specifically, the LUP
and WL provided approval for 600,000t of material to be extracted from the pit, as highlighted in Table 5, based on the
design assumptions (refer ASX Announcement 16 July 2020). The assumptions were based on geotechnical guidelines
considering:
- Geological domains
- Geological logging of core including structure and RQD values
-
-
Structural mapping of the decline
The shallow nature of the open pit (i.e. 35m deep) and
VITAL METALS LIMITED and its Controlled Entities
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2020 Annual Report
DIRECTORS’ REPORT
-
The lack of groundwater in recent drill holes.
Item
Ore
Waste Overburden
Waste Pegmatite
Waste Total
All Materials
Unit
T
REO %
t
t
t
t
Resource
Inventory
74,124
10.8
84,946
420,300
505,245
579,370
Stripping Ratio
waste/ore
6.8
REO
t
8,028
Table 6: North T Mine Plan Resource Inventory
The pit design detail is sufficient to enable completion of operational and management plans, environmental plans and
Run of Mine (ROM) design and further development of the mining and crushing services contract, to be finalised in
accordance with the defined project development milestones. This contract will extract all materials and crush all ore
materials within a single campaign (May 2021 – October 2021) and therefore is classified as near-term production, with
all production not extending past the current year and forthcoming year.
Site establishment works are on schedule with the mobilisation of mining equipment and the ore sorter scheduled to
occur in February/March 2021. In preparation of this activity, the Company’s site team will undertake site preparation
works this northern summer. Key work programs will include:
-
-
Site clearing for the proposed pit design, ROM and reject stockpiles;
Site preparation for the ore sorter and materials handling equipment; and
- Delivery and placement of the ore sorter base and sub-structure.
Vital is continuing negotiations with several prospective off-take customers, specifically relating to:
-
-
-
-
Product specification;
Start-up feedstock requirements;
Ramp-up profile; and
Long-term feedstock requirements.
Vital has targeted its first off-take agreement to be finalised in the December 2020 quarter.
Vital’s negotiations are well advanced for a rare earth Extraction Facility Build Own Operate Transfer contract within North
America. Plant design, including start-up production volumes and ramp-up profile will be finalised pending the outcome
of off-take negotiations. The term sheet was signed in September 2020.
Vital was encouraged by recent statements made by the US-Canada Critical Minerals Working Group about the United
States and Canada forging ahead on Critical Mineral co-operation. Vital continues to liaise closely with the Canadian
Government.
In addition, Vital’s subsidiary Cheetah Resources Ltd (Cheetah) was selected for the Government of Canada’s Accelerated
Growth Services Program (AGS). AGS helps growth-oriented Canadian businesses expand by assisting with access to
critical government services they need to grow, such as financing, exporting, innovation, and business advice.
Drilling
Vital received outstanding results from a 2019 drilling and re-assaying program at its North T resource. Vital completed
drilling and resampling of historical drill core to define the limits of the Bastnaesite Subzone. The 2019 program was
successful in redefining the zone through the extension of LREO mineralisation to the limits of the Bastnaesite Subzone
VITAL METALS LIMITED and its Controlled Entities
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2020 Annual Report
DIRECTORS’ REPORT
and resulted in a resource model suitable for mining studies. The combination of the new drilling and the resampling of
historical drill core has defined the limits of the North T Zone bastnaesite mineralisation on a nominal 10m by 10m drill
pattern.
The drilling and resampling program achieved some of this highest-grade drill results seen in North America. Significant
results included:
-
-
-
-
2.4m at 38.4% total rare earth oxides (TREO) from 13m,
5.1m at 22.9% TREO from 12m,
5.4m at 19.0% TREO from 2m and
2.4m at 29.6% TREO.
Process Testwork and Ore Sorting
Ore sorting was undertaken as the proposed technology to produce a bastnaesite concentrate from the North T ore body.
Ore sorting involves the separation of the bastnaesite mineralisation from the quartz gangue using XRay Transmission
(XRT) technology. This sensor was deemed suitable due to the significant differences in atomic density between
bastnaesite and quartz.
TOMRA Sorting Mining (TOMRA) engineers conducted a Performance Test at Saskatchewan Research Council (SRC) on
three sets of samples to determine whether TOMRA products are capable of sorting bastnaesite from quartz. The material
was pre-screened into the size fractions: 8-20mm, 20-30mm and 30-60mm. Oversize was crushed further, while the
undersized fraction was retained for gravity testwork.
In all tests, the material was fed through a single time with no cleaning or scavenging carrying out on product or reject.
Since the ore sorting equipment has a large capacity compared to the throughput for plant requirements, an installed ore
sorter will be flexible and used in a number of different modes to produce a high-grade bastnaesite product to be
transported for downstream processing.
Spiral testwork and shaking table testwork was undertaken on the fine material. Shaking table testwork proved that an
upgrade of over four times to 40% REO product at an REO recovery of 80% could be achieved, producing product and
rejects.
The successful testwork demonstrated potential to produce a high grade REO product from ore from the North T Zone at
Nechalacho.
Leaching Testwork
Vital successfully completed leaching testwork on high-grade concentrate from the North T deposit. The purpose of this
testwork was to confirm the amenability of leaching rare earths contained within concentrate produced by ore sorting
via recognised process flowsheets for the treatment of bastnaesite.
High-grade bastnaesite samples (~50% REO) were selected from the North T Zone. The North T zone is the same zone
from which samples were used to undertake ore sorting and gravity beneficiation testwork. Testwork was conducted on
a 90% ‘Bastnaesite’:10% Quartz to simulate a leach feed anticipated by the product from the ore sorter. Leach feed was
thus approximately 45% REO, 20% SiO2 and 10% CaO.
Leaching processes using Hydrochloric acid and Sulphuric acid were tested to find the most suitable and optimal process
route. High neodymium leach recoveries (where neodymium is indicative of overall rare earth) up to 97% in sulphuric acid
media and up to 93% in hydrochloric acid media were achieved. The testwork highlighted potential to selectively extract
cerium depending on customer requirements.
Testwork conducted by both SGS Lakefield and SRC demonstrated that North T Zone concentrate, similar to that produced
during beneficiation testwork, is amenable to leaching via either hydrochloric acid or sulfuric acid with REO recoveries of
up to 97%. These results provided Vital with confidence to proceed in establishing a near-term operation at Nechalacho,
focusing on North T.
VITAL METALS LIMITED and its Controlled Entities
Page 14
2020 Annual Report
DIRECTORS’ REPORT
WIGU HILL PROJECT, TANZANIA
In 2019, Cheetah signed a project development and option agreement with Montero Mining & Exploration Ltd
(“Montero”), a TSXV-listed entity, to acquire all 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
six months following the issuance of a mining licence.
Cheetah also has 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.
On 19 December 2019, the Mining Commission of Tanzania announced the mechanism for the granting of the mining
licence would be via a public invitation to tender. It is noted that the introduction of this tender did not affect Cheetah or
the agreement with Montero, as the funding of the work program and final payment of C$1,100,000 are contingent on
Montero being granted a mining licence over the area previously held under a retention licence by a subsidiary of
Montero.
During the second half of the year, the Company continued discussions with the Tanzanian Government regarding the
issuance of a Mining Licence (ML) for the Wigu Hill rare earth project.
NAHOURI GOLD PROJECT, BURKINA FASO
During the year, Vital Metals suspended all exploration activity in Burkina Faso due to ongoing security concerns in the
country and the State of Emergency declared by the Burkina Faso government for several northern provinces.
Vital will update shareholders when there is a change in these circumstances, allowing and a decision to resume
exploration can be made.
AUE COBALT PROJECT, GERMANY
During the period, there was no exploration activities on the Aue project, which comprises an area of 78km2 located in
the western Erzgebirge area of the German state of Saxony, one of Europe’s most famous mining regions surrounded by
several world class mineral fields. Historical mining and intensive exploration work carried out between the 1940s and
1980s and showed high prospectivity of the Aue permit area for cobalt, tungsten, tin, uranium and silver mineralisation.
RARE EARTHS MARKET OUTLOOK
As with many things, 2020 has seen a large degree of uncertainty in the rare earth market with softening in the price of
critical metals Neodymium and Praseodymium.
VITAL METALS LIMITED and its Controlled Entities
Page 15
2020 Annual Report
DIRECTORS’ REPORT
This reduction in prices was largely driven by the shutdown of plant, refineries and other production facilities which saw
a dramatic reduction in the volume of rare earths traded over the firt half of 2020. However, with economies starting to
open up again we have seen the prices of rare earths rebound accordingly. With economies and markets continuing to
re-open through the remainder of 2020 and into 2021 we expect demand for rare earths to continue to recover and grow.
Further, with a move to electric vehicles increasing and governments mandating a reduction in the sale of vehicles with
internal combustion engines, the medium and long term forecast for electric vehicles, and hence rare earths, is for a
prolonged period of growth.
This growth in demand will result in the need for increased production of critical minerals and rare earths in particular.
ANNUAL MINERAL RESOURCES STATEMENT
The Company’s Mineral Resources Statement has been complied and is reported in accordance with the Australasian
Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC 2012 edition) and Chapter 5 of
the ASX Listing Rules.
Vital’s governance arrangements and internal controls for reporting its Mineral Resources Estimate includes reporting on
an annual basis and in compliance with the 2012 Edition of JORC and the ASX Listing Rules. The Competent Person is
suitably qualified and experienced as defined in the 2012 Edition of JORC.
Nechalacho Rare Earths Project
As at 30 June, the Nechalacho Rare Earths Project has a Mineral Resources Estimate as defined in Table 1 below.
The annual Mineral Resources Estimate in respect of the Nechalacho Rare Earths Project is based on, and fairly represents,
information and supporting documentation prepared by a competent person. The Mineral Resource Estimate as a whole
has, as to the form and content in which it appears in the Annual Report, been approved by Mr Brendan Shand. Mr Shand
is a Competent Person and a member of the Australasian Institute of Mining and Metallurgy and an employee of the
Company. Mr Shand has sufficient experience that is relevant to the style of mineralisation and type of deposit under
consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the
‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Shand consents to the
inclusion in the report of the matters based on his information in the form and context in which it appears.
Resources
MTonnes
TREO(%)
HREO/TREO
%NdPr/TREO
Measured
Indicated
Inferred
Total/average
2020
0.287
1.611
1.297
3.196
2019
2020
2019
-
-
-
-
2.729%
2.429%
3,378%
2.378%
-
-
-
-
2020
7.7%
7.2%
6.8%
7.1%
2019
-
-
-
2020
24.1%
24.1%
24.2%
24.2%
2019
-
-
-
-
VITAL METALS LIMITED and its Controlled Entities
Page 16
2020 Annual Report
DIRECTORS’ REPORT
Table 7: Nechalacho Rare Earths Project, Canada Mineral Resource Estimates– refer ASX release 13 December 2019 and
15 April 2020
Wigu Hill Project – Foreign Estimate
The Company has reported a high grade NI43-101 resource of 3.3Mt at 2.6% REO in respect of its Wigu Hill Project,
Tanzania (refer ASX announcement 25 June 2019) as follows:
Zone
Twiga – NE
Twiga – SW
Tembo – NW
Tembo - SE
Total Inferred Resource
Tonnes
(millions)
1.6
0.5
0.9
0.2
3.3
LREO5 (%)
La2O3 (%)
CeO2 (%)
Pr6O11 (%)
Nd2O3 (%)
Sm2O3 (%)
2.6
3.6
2.2
2.2
2.6
0.98
1.33
0.78
0.69
0.96
1.26
1.71
1.09
1.1
1.27
0.1
0.13
0.09
0.1
0.1
0.23
0.3
0.23
0.27
0.24
0.01
0.02
0.02
0.01
0.02
Table 8: Wigu Hill Project, Tanzania Foreign Estimate (Cut-off of 1% LREO5)– refer ASX release 25 June 2019
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 the foreign estimate will be able to be reported as a mineral resource in accordance with the JORC
Code. The Company has previously disclosed the foreign estimate 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 estimate that materially impacts on the
reliability of the estimate or the Company’s ability to verify the foreign estimate 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.
The Company has not progressed evaluation of the previously reported foreign estimate. The Company will perform a
revision of the historical drilling information, to further ensure the integrity of the data, followed by another estimation
of the resource, with updated classification based on the level of information available. In addition, Vital intends to
conduct further drilling, bulk sampling, geotechnical and hydrological testing.
TENEMENT SCHEDULE
The Group’s tenement schedule is as follows:
Location
Canada
Burkina Faso
Germany
Tanzania
Tenement
Beneficial Interest
Nechalacho*
Nahouri
Kampala
Zeko
Aue
Wigu Hill**
100%
100%
100%
100%
100%
90%
* Vital owns 100% of the mineral rights of the Nechalacho Project above the 150 m elevation level
** Vital has signed a project development and option agreement to acquire Wigu Hill. The Company has the right to
acquire the licence upon the issuance of the licence by the Tanzanian Government
Compliance Statement
This Annual Report contains information extracted from ASX Market announcements reported in accordance with the 2012
edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (“2012 JORC
Code”). These announcements are 13 December 2020, 15 April 2020 and 19 February 2020. Vital Metals Limited confirms
that it is not aware of any new information or data that materially effects the information included in the original ASX
market announcement and, in the case of estimates of Mineral Resources, that all material assumptions and technical
VITAL METALS LIMITED and its Controlled Entities
Page 17
2020 Annual Report
DIRECTORS’ REPORT
parameters underpinning the estimates in the original market announcements continue to apply and have not materially
changed.
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.
CORPORATE
Board and Management Changes
Upon completion of the acquisition of Cheetah, Mr Geoff Atkins and Mr Evan Cranston were appointed to the Board of
the Company as Managing Director and Non-Executive Director, respectively.
In April 2020, Mr Tony Hadley was appointed as Chief Operating Officer of the Company. Mr Hadley is regarded as one of
the world’s leading experts in rare earth processing outside of China. Tony Hadley has extensive experience in operations,
technical development, project design and management, engineering and commissioning.
In conjunction with these appointments and as planned, Executive Director Mr Zane Lewis and Executive Director
Mr Phillip Coulson both stepped into Non-Executive Director roles with the Company.
Subsequent to the end of the Financial Year, in August 2020, the Company announced further board changes as it prepares
to progress to rare earth oxide production in 2021. Mr James Henderson was appointed as a Non-Executive Director. He
is the founder and Chairman of Transocean Group, which was established in 1987. He has more than 35 years’ experience
in providing financial advisory services in Australia and overseas.
Upon the appointment of Mr Henderson, Mr Francis Harper and Mr Zane Lewis retired as Directors of the Company.
With the retirement of Mr Harper, Mr Evan Cranston was appointed Non-Executive Chairman of Vital.
Mr Sebastian Andre resigned as Company Secretary, effective 30 June 2020. Vital appointed Ms Louisa Martino as
Company Secretary and Chief Financial Officer, effective 1 July 2020.
COVID-19
As with other companies, COVID-19 has caused some disruption to the Company’s activities, however development
activities continued with the Company remaining focused on bringing the Nechalacho Rare Earth Project into operation
in the shortest possible timeframe. The Company has a focus on the welfare of its employees and has implemented
measures to ensure their well-being including; health screening and temperature monitoring, change in rosters, spatial
distancing protocols, as well as a change in flow of staff to and from local communities.
As at 30 June 2020, the Company and its staff and contractors have been minimally impacted by the Covid-19 pandemic
and continue to operate its programs within Canada as planned.
FINANCIAL RESULTS
The Group recorded an operating loss for the year of $4,578,593 (2019: profit of $3,225,692). The 2020 result is consistent
with the nature and operations of the Group.
VITAL METALS LIMITED and its Controlled Entities
Page 18
2020 Annual Report
DIRECTORS’ REPORT
SIGNIFICANT CHANGES IN 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.
EVENTS SUBSEQUENT TO REPORTING DATE
Other than as set out below, there have been no significant events after the reporting date:
•
In August 2020, Mr James Henderson was appointed as a Non-Executive Director and Mr Francis Harper and Mr Zane
Lewis retired as Directors of the Company.
• On 24 August 2020, 12,500,000 options with an exercise price of $0.01 were exercised. There have been no other
changes to securities on issue since 30 June 2020.
• On 22 September 2020 the Company announced the signing of a binding term sheet with SRC (Saskatchewan Research
Council) to negotiate definitive agreements for construction of a rare earth extraction plant.
• On 26 September 2020 the Company announced that it had successfully received firm commitments to raise A$8.0
million (before costs) in new equity via a fully committed share placement to institutional, sophisticated and
professional investors at an issue price of $0.02 per share (400 million shares in total).
On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain
of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus
spreads globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the
WHO classified the COVID-19 outbreak as a pandemic.
The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain
as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of operations during
FY2021.
Management is actively monitoring the global situation and its impact on the Group's financial condition, liquidity,
operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global
responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of
operations, financial condition, or liquidity for the 2021 financial year.
DIVIDENDS
No dividends were paid or declared during the financial year. No recommendation for payment of dividends has been
made.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
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.
The impact of COVID-19 on the Company going forward, including its financial condition cannot be reasonably estimated
at this stage and will be reflected in the Group’s 2021 interim and annual financial statements.
ENVIRONMENTAL REGULATION
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.
VITAL METALS LIMITED and its Controlled Entities
Page 19
2020 Annual Report
DIRECTORS’ REPORT
INSURANCE OF DIRECTORS AND OFFICERS
The Company has entered into an agreement to indemnify all directors and officers 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, Company Secretary and Officers of the Company. 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 GROUP
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.
DIRECTORS’ INTERESTS IN SECURITIES OF THE GROUP
As at the date of this report, the interests of the directors in the shares, options and other performance securities of
Vital Metals Limited were:
DIRECTOR
Evan Cranston
Geoff Atkins
Phillip Coulson
James Henderson
ORDINARY
SHARES
16,528,998
31,149,849
167,100,000
79,432,114
OPTIONS
180,000,000
90,000,000
NIL
60,000,000
PERFORMANCE
RIGHTS
PERFORMANCE
SHARES
NIL
NIL
28,750,000
NIL
NIL
62,299,698
NIL
158,864,228
SHARES UNDER OPTION
At the date of this report the Group had on issue 2,155,111,289 ordinary shares, 57,500,000 Performance Rights,
800,000,000 Performance Shares and 459,666,667 options over ordinary shares.
VITAL METALS LIMITED and its Controlled Entities
Page 20
2020 Annual Report
DIRECTORS’ REPORT
Unissued ordinary shares of the Company under option at the date of this report are as follows:
DATE OPTIONS GRANTED
EXPIRY DATE
EXERCISE PRICE
NUMBER UNDER OPTION
12 May 2017
12 May 2017
24 Nov 2017
19 July 2018
3 Sept 2018
22 October 2019
22 October 2019
22 October 2019
31 January 2020
31 January 2020
31 January 2020
30 Apr 2021
30 Apr 2021
17 Nov 2021
19 July 2022
19 July 2022
22 October 2024
22 October 2024
22 October 2024
31 January 2025
31 January 2025
31 January 2025
$0.02
$0.023
$0.01
$0.015
$0.015
$0.02
$0.025
$0.03
$0.02
$0.025
$0.03
TOTAL
50,000,000
27,000,000
12,500,000
30,000,000
2,666,667
90,000,000
90,000,000
90,000,000
22,500,000
22,500,000
22,500,000
459,666,667
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.
DIRECTORS’ MEETINGS
The table below sets out the number of Directors’ meetings held during the period and the number of meetings attended
by each as a Director.
Director
Evan Cranston
Geoff Atkins
Phillip Coulson
Francis Harper
Zane Lewis
Peter Cordin
Number of Meetings held
while in office
6
6
8
8
8
1
Meetings attended
5
6
8
8
8
1
CORPORATE GOVERNANCE STATEMENT
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 is available on the Company’s website at:
https://www.vitalmetals.com.au/corporate/corporate-governance/
VITAL METALS LIMITED and its Controlled Entities
Page 21
2020 Annual Report
DIRECTORS’ REPORT
AUDITED REMUNERATION REPORT
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 2020 were:
Name
Francis Harper (resigned 4 August 2020)
Philip Coulson
Evan Cranston (appointed 22 October 2019)
Peter Cordin (resigned 25 September 2019)
Geoff Atkins (appointed 22 October 2019)
Zane Lewis (resigned 4 August 2020)
Anthony Hadley
Position for the year ended 30 June
2020
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director
Executive Director
Chief Operating Officer
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.
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.
Share–based compensation
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 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.
VITAL METALS LIMITED and its Controlled Entities
Page 22
2020 Annual Report
DIRECTORS’ REPORT
Employment Contracts of Directors and Executives
As at 30 June 2020, all Directors and all executives, have formal contracts with the Company.
The terms during the past year and as at the date of this report are set out as follows:
Name
Position
Francis Harper
Philip Coulson
Evan Cranston (appointed 22 October 2019)
Peter Cordin (resigned 25 September 2019)
Geoff Atkins (appointed 22 October 2019)
Zane Lewis
Anthony Hadley
1 Includes expense for options issued on appointment
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director
Executive Director
Chief Operating Officer
Annual Remuneration
FY 2020
40,000
90,000
1,564,2241
13,333
1,063,8061
120,000
102,200
Phillip Coulson
Phillip Coulson was appointed an Executive Director 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). During the year Mr Coulson moved to a Non-Executive director role.
Zane Lewis
Zane Lewis was appointed an Executive Director 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.
Geoff Atkins (effective 22 October 2019)
The Managing Director, Geoff Atkins is under a consulting agreement that commenced on 1 October 2019. The terms
of the contract include:
•
•
Annual consulting fee of $270,000; and
An incentive component comprising 90,000,000 options in 3 equal tranches to purchase fully paid ordinary
shares in the Company with the following key terms:
o Options were approved by shareholders at General Meeting held 16 October 2019;
o Exercise Prices Tranche 1-$0.02, Tranche 2-$0.025, Tranche 3-$0.03
o Expiry date of 5 years from date of issue
The duration of the consultancy agreement is for a minimum of 3 years. Mr Atkins may resign from his position and thus
terminate the consultancy by giving 3 months’ written notice. The Company may terminate the consultancy
agreement by providing 3 months’ written notice or providing payment in lieu of the notice period (based on the
consulting fee).
The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where
termination with cause occurs, the Managing Director is only entitled to that portion of remuneration (consultancy
fee) and only up to the date of termination.
Anthony Hadley (effective 2 March 2020)
The Chief Operating Officer, Tony Hadley is an employee of the Company under an executive agreement signed on 7
February 2020. Under the terms of the contract:
•
•
A salary package of $280,000 per annum plus statutory superannuation; and
An incentive component comprising 3 tranches of 6,000,000 options each to purchase fully paid ordinary
shares in the company with the following key terms:
o Options at the discretion of the directors and to be approved by shareholders;
o Exercise Price of Tranche 1-$0.02, Tranche 2-$0.025, Tranche 3-$0.03
VITAL METALS LIMITED and its Controlled Entities
Page 23
2020 Annual Report
DIRECTORS’ REPORT
o Expiry date of 31 January 2025
o Options to vest as follows:
§
§
§
Tranche 1 -6,000,000 options vest 1 year from date of issue
Tranche 2 -6,000,000 options vest 2 years from date of issue
Tranche 3 -6,000,000 options vest 3 years from date of issue.
The duration of the consultancy agreement will continue until the agreement is validly terminated in accordance with
its terms. Mr Hadley may resign from his position and thus terminate the agreement by giving 3 months’ written
notice.
The Company may terminate the agreement by providing 3 months’ written notice or providing payment in lieu of the
notice period (based on the fixed component of Mr Hadley’s remuneration including any accrued statutory leave
liabilities).
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.
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.
Remuneration of Key Management Personnel
Details of the remuneration provided to the Key Management Personnel of the Group are set out in the following
tables.
The table below shows the gross revenue, losses and earnings per share for the last five years for the listed entity.
2016
2017
2018
2019
2020
Net profit/(loss)
Share price at year end (cents)
Earnings/(loss) per share (cents)
Use of remuneration consultants
$
(4,578,593)
1.0
(0.23)
$
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)
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 Chief Operating Officer. 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.
VITAL METALS LIMITED and its Controlled Entities
Page 24
2020 Annual Report
DIRECTORS’ REPORT
Key Management Personnel Remuneration
Short term
Salary and
Fees$
Short Term
Bonus3
$
Post-
employment
Superannuation
$
Termination
Termination
$
Share-based
payments
Options1
$
Share-Based
Payments
Performance
Rights2
$
Total
$
Performance
related
%
-
-
-
-
-
-
-
41,613
100,000
202,500
90,000
60,000
120,000
56,665
Directors of Vital Metals Limited
Evan Cranston (Non-Executive Director) (appointed 22 October 2019)
2020
-
Geoff Atkins (Managing Director) (appointed 22 October 2019)
2020
-
Phillip Coulson (Non-Executive Director) (appointed 7 January 2019)
2020
2019
Zane Lewis (Executive Director) (appointed 6 February 2019)
2020
-
-
2019
David Macoboy (Non-Executive Director) (resigned 2 July 2018)
-
2020
2019
28
Mark Strizek (Managing Director) (resigned 24 January 2019)
2020
2019
Andrew Simpson (Non-Executive Director) (resigned 16 November 2018)
2020
2019
Peter Cordin (Non-Executive Director) (resigned 25 September 2019)
2020
2019
Francis Harper (Non- Executive Director)
2020
2019
25,000
116,667
12,177
36,530
40,000
40,000
-
16,667
-
11,083
1,157
3,470
-
295
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other key management personnel
Anthony Hadley (COO) (appointed 2 March 2020)
2020
93,333
Total key management personnel compensation
624,622
2020
326,824
2019
100,000
-
-
8,867
10,023
14,581
-
175,916
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,522,611
761,306
-
-
1,564,224
1,063,806
-
-
-
-
-
-
-
10,978
-
-
-
-
-
-
-
-
203,625
-
203,625
-
-
-
-
-
-
-
-
-
-
-
90,000
263,625
120,000
260,290
-
323
25,000
314,644
-
16,667
13,333
40,000
40,000
40,000
102,200
97.33
71.56
-
78.24
-
78.23
-
-
-
3.49
-
-
-
-
-
-
-
-
175,916
2,283,917
10,978
-
407,250
3,018,563
935,549
75.66
1.17
(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 fair value of the options
recognised in this reporting period. The options vested fully 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.
(3) Mr Geoff Atkins was paid a bonus of $100,00 following the successful completion of the acquisition of Cheetah Resources Pty Ltd by the company.
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):
VITAL METALS LIMITED and its Controlled Entities
Page 25
2020 Annual Report
DIRECTORS’ REPORT
Grant Date
Exercise Price
Number
Granted
Number
Vested
Expiry Date Volatility
Fair Value per
security at
grant date
(cents)
Exercise
Multiple
Exercised
Number
Performance Rights
Phillip Coulson – Class A
Phillip Coulson – Class B
Phillip Coulson – Class C
Zane Lewis – Class A
Zane Lewis – Class B
Zane Lewis – Class C
Options
Geoff Atkins
Geoff Atkins
Geoff Atkins
Evan Cranston
Evan Cranston
Evan Cranston
1/5/2019
1/5/2019
1/5/2019
1/5/2019
1/5/2019
1/5/2019
N/A
N/A
N/A
N/A
N/A
N/A
6,250,000
10,000,000
12,500,000
6,250,000
10,000,000
12,500,000
6,250,000
10,000,000
-
6,250,000
10,000,000
-
28/2/2023
28/2/2023
28/2/2023
28/2/2023
28/2/2023
28/2/2023
22/10/2019
22/10/2019
22/10/2019
22/10/2019
22/10/2019
22/10/2019
$0.02
$0.025
$0.03
$0.02
$0.025
$0.03
30,000,000
30,000,000
30,000,000
60,000,000
60,000,000
60,000,000
30,000,000
30,000,000
30,000,000
60,000,000
60,000,000
60,000,000
22/10/2024
22/10/2024
22/10/2024
22/10/2024
22/10/2024
22/10/2024
2.5
2.5
2.5
2.5
2.5
2.5
3.5
3.5
125%
125%
125%
125%
125%
125%
100%
100%
100%
100%
100%
100%
0.73
0.72
0.69
0.73
0.72
0.69
0.89
0.85
0.81
0.89
0.85
0.81
-
-
N/A
-
-
N/A
-
-
-
-
-
-
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.
2020
Directors of Vital Metals Limited
Ordinary shares
Peter Cordin (resigned 25 September 2019)
Francis Harper
Phillip Coulson 3
Zane Lewis 3
Geoff Atkins (appointed 22 October 2019) 4
Evan Cranston (appointed 22 October 2019) 3,4
Performance Shares – Tranche A1
Geoff Atkins (appointed 22 October 2019)
Performance Shares – Tranche B2
Geoff Atkins (appointed 22 October 2019)
Balance at
start of the
year
Received during the
year on the exercise
of options
Received as
Compensation
Other changes
during the year
Balance at end
of the year
9,743,616
18,234,725
162,100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,743,6162
18,234,725
5,000,000
167,100,000
8,000,000
8,000,000
31,149,849
31,149,849
16,528,998
16,528,998
31,149,849
31,149,849
31,149,849
31,149,849
VITAL METALS LIMITED and its Controlled Entities
Page 26
2020 Annual Report
DIRECTORS’ REPORT
2020 (cont’d)
Other key management personnel
Anthony Hadley
Balance at
start of the
year
Received during the
year on the exercise
of options
Received as
Compensation
Other changes
during the year
Balance at end
of the year
-
-
-
-
-
Notes:
1.
2.
Tranche 1 Performance Shares will each convert to one Share on the Company entering into binding offtake for a minimum of 1,000 kgs of
contained REO in respect of the Nechalacho Project or Wigu Hill Project within 2 years of the acquisition completion date.
The Tranche 2 Performance Shares will each convert to one Share on the Company commencing mining operations at the Nechalacho
Project or Wigu Hill Project within 3 years of the issue of the Tranche 1 Performance Shares. Where the Tranche 2 Milestone is satisfied, the
Tranche 1 Milestone will automatically be deemed to have been satisfied.
3. On market purchase of shares
4.
Includes acquisition consideration shares.
Option and Performance Rights holding
The numbers of performance rights and 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:
2020
Directors of Vital Metals Limited
Options
Peter Cordin (resigned 25 September
2019)
Francis Harper
Geoff Atkins (appointed 22 October
2019)
Evan Cranston (appointed 22 October
2019)
Performance Rights
Phillip Coulson1
Zane Lewis1
Balance at
start of the
year
Granted as
compensation
Exercised
Expiry
Other changes
Balance at end
of the year
Vested and
exercisable
3,000,000
28,750,000
-
-
-
-
90,000,000
180,000,000
28,750,750
28,750,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
3,000,000
28,750,000
28,750,000
90,000,000
90,000,000
180,000,000
180,000,000
28,750,000
16,250,000
28,750,000
16,250,000
Other key management personnel
Anthony Hadley
Note 1: performance milestones are as follows:
-
-
-
-
-
-
-
-
-
Class A: (6,250,000 performance rights) to vest on the date that the 10 day VWAP for the shares on the ASX is $0.012 or higher;
Class B: (10,000,000 performance rights) to vest on the date that the 10 day VWAP for the shares on the ASX is $0.015 or higher; and
Class C: (12,500,000 performance rights) to vest on the date that the 10 day VWAP for the shares on the ASX is $0.02 or higher.
Loans to key management personnel
There were no loans to key management personnel during the year (2019: nil).
VITAL METALS LIMITED and its Controlled Entities
Page 27
2020 Annual Report
DIRECTORS’ REPORT
Other transactions with key management personnel
Mr Zane Lewis was appointed a director on 6 February 2019. For the financial year, 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 2020 was $219,750
(2019:$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.
Engagement of remuneration consultants
During the financial year, the Company did not engage any remuneration consultants to review the Key Management
Personnel remuneration for the year ended 30 June 2020.
Securities Trading Policy
The Company’s security trading policy provides guidance on acceptable transactions in dealing in the Company’s
various securities, including shares, debt notes and options. The Company’s security trading policy defines dealing in
company securities to include:
(a) Subscribing for, purchasing or selling Company Securities or entering into an agreement to do any of
those things;
(b) Advising, procuring or encouraging another person (including a family member, friend, associate,
colleague, family company or family trust) to trade in Company Securities; and
(c) Entering into agreements or transactions which operate to limit the economic risk of a person’s holdings
in Company Securities.
The securities trading policy details acceptable and unacceptable times for trading in Company Securities including
detailing potential civil and criminal penalties for misuse of “inside information”. The Directors must not deal in
Company Securities without providing written notification to the Chairman. The Chairman must not deal in Company
Securities without the prior approval of the Chief Executive Officer. The Directors are responsible for disclosure to the
market of all transactions or contracts involving the Company’s shares.
Voting and comments made at the Company's 2019 Annual General Meeting ('AGM')
At the 2019 AGM, 93.7% of the votes received supported the adoption of the remuneration report for the year ended
30 June 2019. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
End of Audited Remuneration Report.
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 29.
This report has been made in accordance with a resolution of the Board of Directors pursuant to s.298 (2) of the
Corporations Act 2001.
Signed in accordance with a resolution of the directors
Evan Cranston
Chairman
Sydney: 30 September 2020
VITAL METALS LIMITED and its Controlled Entities
Page 28
2020 Annual Report
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 NEIL SMITH TO THE DIRECTORS OF VITAL METALS LIMITED
As lead auditor of Vital Metals Limited for the year ended 30 June 2020, 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.
Neil Smith
Director
BDO Audit (WA) Pty Ltd
Perth, 30 September 2020
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.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Note
2020
$
2019
$
Continuing Operations
Sundry income
Exploration and evaluation expenditure
Administration expenses
Depreciation
Provision for impairment
Share based payments expense
Total Expenses
Loss from continuing operations
Finance income
Finance costs
Net finance income
Profit / (loss) before income tax
Income tax expense
1.2
41,413
(172,658)
(1,908,899)
(75,895)
-
(2,502,918)
(4,660,370)
(4,618,957)
44,736
(4,371)
40,364
8.1
1.1
1.1
1.3
4,364
-
(849,677)
(931,157)
(747)
(1,700,000)
(418,228)
(3,899,809)
(3,895,445)
220,535
(35,911)
184,624
(4,578,593)
-
(3,710,821)
-
Profit / (loss) after income tax
(4,578,593)
(3,710,821)
Profit from discontinued operations net of tax
-
6,936,513
Net profit / (loss) for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or
loss:
Disposal of reserves from discontinued operations
Foreign currency translation differences for foreign
operations
Other comprehensive income for the year,
net of income tax
Total comprehensive profit/(loss) for the year
(4,578,593)
3,225,692
-
(449,286)
301,869
(4,503)
301,869
(4,276,724)
(453,789)
2,771,903
VITAL METALS LIMITED and its Controlled Entities
Page 30
2020 Annual Report
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME (Cont.)
FOR THE YEAR ENDED 30 JUNE 2020
Note
2020
$
2019
$
Profit / (Loss) attributable to:
Owners of the Company
Total Comprehensive Profit/(Loss) attributable to:
Owners of the Company
Earnings/(Loss) per share and for loss attributable to the
ordinary equity holders of the company:
Diluted earnings/(loss) per share for loss attributable to
the ordinary equity holders of the company:
1.4
1.4
(4,578,593)
(4,578,593)
(4,276,724)
(4,276,724)
3,225,692
3,225,692
2,771,903
2,771,903
(0.23) cents
0.18 cents
(0.23) cents
0.18 cents
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes
VITAL METALS LIMITED and its Controlled Entities
Page 31
2020 Annual Report
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets
Note
2.1
2.2
2.3
2020
$
2019
$
1,756,773
391,116
56,000
12,708,796
135,252
-
TOTAL CURRENT ASSETS
2,203,889
12,844,048
NON-CURRENT ASSETS
Property, plant and equipment
Right of use asset
Exploration and evaluation expenditure
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Financial liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Financial liabilities
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
3.1
3.2
3.3
2.4
4.1
2.5
4.1
1,527,769
91,928
12,467,416
14,087,113
-
-
-
-
16,291,002
12,844,048
446,947
80,425
6,130
533,502
13,975
13,975
547,477
126,717
-
-
126,717
-
126,717
126,717
15,743,525
12,717,331
4.2
4.3
57,645,649
5,201,977
(47,104,101)
52,845,649
2,397,190
(42,525,508)
15,743,525
12,717,331
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
VITAL METALS LIMITED and its Controlled Entities
Page 32
2020 Annual Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Balance at 1 July 2019
Profit / (loss) Loss for year
Transferred to Accumulated Losses
Other comprehensive income
Exchange differences on translation of foreign operation
Total other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their capacity of owners
Contributions of equity, net of transaction costs
Share based payments
Share-based
Payment
Reserve
$
Contributed
Equity
$
52,845,649
-
-
2,387,741
-
-
-
-
-
-
-
4,800,000
-
-
2,502,918
Foreign Currency
Translation Reserve
$
Accumulated
Losses
$
Total
$
9,449
-
-
301,869
301,869
301,869
-
-
(42,525,508)
(4,578,593)
-
(4,578,593)
-
-
(4,578,593)
12,717,331
(4,578,593)
-
(4,578,593)
301,869
301,869
(4,276,724)
-
-
4,800,000
2,502,918
Balance at 30 June 2020
57,645,649
4,890,659
311,318
(47,104,101)
15,743,525
VITAL METALS LIMITED and its Controlled Entities
Page 33
2020 Annual Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Balance at 1 July 2018
Profit / (loss) Loss for year
Transferred to Accumulated Losses
Other comprehensive income
Disposal of reserves from discontinued operations
Exchange differences on translation of foreign operation
Total other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their capacity of owners
Contributions of equity, net of transaction costs
Share based payments
Contributed
Equity
$
52,845,649
-
-
-
-
-
-
-
-
Share-based
Payment
Reserve
$
Convertible
Note Reserve
$
Foreign Currency
Translation
Reserve
$
1,969,513
-
-
-
-
-
-
418,228
463,238
-
-
(449,286)
(4,503)
(453,789)
(453,789)
-
-
233,442
-
(233,442)
-
-
(233,442)
-
-
-
Accumulated
Losses
$
(45,984,642)
3,225,692
233,442
-
-
-
3,459,134
-
-
Total
$
9,527,200
3,225,692
-
(449,286)
(4,503)
(453,789)
2,771,903
-
418,228
Balance at 30 June 2019
52,845,649
2,387,741
9,449
(42,525,508)
12,717,331
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
VITAL METALS LIMITED and its Controlled Entities
Page 34
2020 Annual Report
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
CASH FLOW FROM OPERATING ACTIVITIES
Payments for exploration and evaluation costs
Payments to suppliers and employees
Government incentive received
Interest received
Interest paid
Note
2020
$
(172,658)
(1,902,708)
41,413
44,736
(4,371)
2019
$
(1,142,140)
(834,626)
-
190,871
-
Net cash outflow in operating activities
2.1
(1,993,588)
(1,785,895)
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposal of asset
Payments relating to sale of asset
Loan to Cheetah Resources Pty Ltd prior to acquisition
Payments for exploration expenditure
Payments for property, plant and equipment
Cash acquired on acquisition of Cheetah Resources Pty Ltd
Payments to acquire exploration and evaluation asset
Payments for rent bond
Payments for security deposit on permits
-
-
(3,953,428)
(2,490,098)
(1,510,976)
93,859
(899,483)
(43,700)
(95,680)
14,739,071
(397,071)
(1,700,000)
-
-
-
-
-
-
Net cash inflow/(outflow) in investing activities
(8,899,506)
12,642,000
CASH FLOW FROM FINANCING ACTIVITIES
Interest paid
Repayment of loan
Proceeds from share issues (net of share issue costs)
Repayment of lease liability
Net cash used in financing activities
-
-
-
(55,008)
(55,008)
(57,687)
(1,345,350)
36,500
-
(1,366,537)
Net increase/(decrease) in cash held
(10,948,102)
9,489,568
Cash at beginning of the year
12,708,796
3,219,228
Foreign exchange variances on cash
(3,921)
-
Cash at end of the year
2.1
1,756,773
12,708,796
The above Consolidated Statement of Cash Flows should be read in conjunction with the
accompanying notes.
VITAL METALS LIMITED and its Controlled Entities
Page 35
2020 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
ABOUT THIS REPORT
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, which is also the parent entity’s functional currency. 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 30 September 2020. The Directors have the power to amend and reissue the financial statements.
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:
Application date
of standard *
1 January 2019
Application date
for Group *
1 July 2019
Reference
and title
AASB 16
Leases
Summary
This Standard introduces a single lessee accounting model and requires a lessee to
recognize 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 recognize 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. The adoption of AASB 16 is set out in Note 4.1
* 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 2019.
(iv) New and amended standards not yet adopted by the Group
Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June
2019 reporting period. The directors have not early adopted any of these new amended standards and interpretations.
The directors are in the process of assessing the impact of the applications of the standard and its amendment to the
extent relevant to the financial statement of the Group.
(v) 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.
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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 2020 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.
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.
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.
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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.
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.
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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).
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.
Employee benefits
(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 8.1.
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.
Key estimates and judgements
Impact of Coronavirus (COVID-19) pandemic.
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the company based on known information. Other than as addressed in specific notes, there does not currently appear
to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or
conditions which may impact the company unfavourably as at the reporting date or subsequently as a result of the
Coronavirus (COVID-19) pandemic.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
CONTENTS OF THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGE
41
41
41
42
45
46
47
47
48
48
49
49
49
51
51
54
54
56
58
58
59
59
63
63
64
64
64
65
66
67
68
69
69
70
1. FINANCIAL PERFORMANCE
1.1. FINANCE INCOME
1.2. INCOME AND EXPENSES
1.3. INCOME TAX
1.4. LOSS PER SHARE
1.5. SEGMENT INFORMATION
2. WORKING CAPITAL PROVISIONS
2.1. CASH AND CASH EQUIVALENTS
2.2. TRADE AND OTHER RECEIVABLES
2.3. TRADE AND OTHER PAYABLES
2.4. PROVISIONS
INVESTED CAPITAL
3.1. PROPERTY, PLANT AND EQUIPMENT
3.2. RIGHT OF USE ASSET
3.3. EXPLORATION AND EVALUATION
3.
4. CAPITAL STRUCTURE AND FINANCING ACTIVITIES
4.1. FINANCIAL LIABILITIES
4.2. CONTRIBUTED EQUITY
4.3. RESERVES
4.4. DIVIDENDS
5. RISK
5.1. FINANCIAL RISK MANAGEMENT
6. GROUP STRUCTURE
6.1. SUBSIDIARIES
7. UNRECOGNISED ITEMS
7.1. COMMITMENTS
7.2. CONTINGENCIES
7.3. EVENTS OCCURRING AFTER THE REPORTING PERIOD
8. OTHER INFORMATION
8.1. SHARE-BASED PAYMENTS
8.2. RELATED PARTY TRANSACTIONS
8.3. PARENT ENTITY FINANCIAL INFORMATION
8.4. REMUNERATION OF AUDITIORS
8.5. OTHER ACCOUNTING POLICIES
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. FINANCIAL PERFORMANCE
1.1. FINANCE INCOME
Interest revenue
Interest Expense
Net finance income / (expense)
2020
$
44,736
(4,371)
40,364
2019
$
220,535
(35,911)
184,624
Accounting Policy
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.
1.2. INCOME AND EXPENSES
The following significant Income and expense
items not separately highlighted in the Statement
of Profit or Loss and Other Comprehensive Income
are relevant in explaining the financial
performance:
Income:
Government incentives
Sundry Income
Personnel expenses
Wages and salaries
Annual leave
Superannuation
Termination
Total personnel expenses
2020
$
2019
$
41,413
-
1,096,639
6,130
28,466
-
1,131,525
-
4,364
312,346
-
19,176
175,916
507,438
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1.3. 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 before taxation
Prima facie tax benefit at the Australian tax rate of
30% (2019: 30%)
Add tax effect of:
Non-deductible items
Burkina Faso operations not brought to
account
Less effect of:
Capital raising costs
Tax losses not brought to account
Income tax expense
2020
$
2019
$
-
-
-
-
-
-
-
-
-
-
(4,578,593)
(3,710,821)
(1,373,578)
(1,113,246)
750,875
9,187
(41,871)
655,386
-
635,907
132,393
-
344,946
-
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1.3 INCOME TAX (CONT)
(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
Other prepayments/capital expenditure
Non-recognition of deferred tax assets
2020
$
2019
$
-
-
663,317
(663,317)
-
8,571,535
(663,317)
1,839
59,903
(7,969,960)
-
1,138
9,629
-
(10,767)
-
8,223,618
(10,767)
17,912
109,566
(8,340,329)
-
(c) Tax losses
At 30 June 2020, the Consolidated Entity has $28,571,785 (2019: $27,412,059) 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.
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%)
2020
$
8,571,535
2019
$
8,223,618
(d) Tax consolidation legislation
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
(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%.
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1.3 INCOME TAX (CONT)
Key estimates and judgements
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.
Accounting policy
Current tax
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 tax
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.
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 for the year
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.
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1.4. LOSS PER SHARE
Basic earnings/(loss) per share – cents per share
Diluted earnings/(loss) per share – cents per share
The following reflects the loss and share data used
in the calculations of basic loss per share and diluted
loss per share:
Net profit/(loss)
Weighted average number of shares outstanding:
Weighted average number of ordinary shares used
in calculating basic earnings per share:
Weighted average number of ordinary shares used
in calculating diluted earnings per share:
2020
(0.23)
(0.23)
2019
0.18
0.18
(4,578,593)
3,225,692
2,019,871,563
1,742,611,288
2,019,871,563
1,742,611,288
Classification of securities
Diluted earnings per share is calculated after classifying all options on issue and all ownership based
remuneration scheme shares remaining uncovered at 30 June 2020 that are dilutive as potential ordinary
shares. As at 30 June 2020, the company has on issue a total of 382,166,667 options over unissued capital,
57,500,000 Performance Rights and 800,000,000 Performance Share and of these Nil (2019: 25,000,000) are
considered dilutive.
Conversions, calls, subscriptions or issues after 30 June 2020
On 24 August 2020, 12,500,000 options with an exercise price of $0.01 were exercised. There have been no
other changes to securities on issue since 30 June 2020.
Accounting Policy
Earnings per share
Basic earnings per share is determined by dividing the profit from ordinary activities after related income
tax expense and after preference dividends by the weighted average number of ordinary shares outstanding
during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
45
Segment income
Profit from
discontinued
operation
Interest revenue
Total revenue
Segment profit /
(loss)
Profit/(Loss) from
discontinued
operations
Net profit/(loss)
before tax
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1.5. SEGMENT INFORMATION
The consolidated entity has three reportable segments being mineral exploration and prospecting for
minerals in Australia, Canada and Burkina Faso.
The following is an analysis of the Group’s revenue and results by reportable segment:
Australia
Canada
Burkina Faso
Consolidated Total
2020
$
2019
$
2020
$
2019
$
2020
$
2019
$
2020
$
2019
$
41,413
4,364
-
44,736
86,149
6,936,513
220,535
7,161,412
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41,413
4,364
-
44,736
6,936,513
220,535
86,149
7,161,412
(3,459,701)
(3,269,511)
(1,088,269)
-
(30,623)
(441,310) (4,578,593) (3,710,821)
-
6,936,513
-
(3,459,701)
3,667,002
(1,088,269)
Segment assets
1,704,737
12,844,047
14,550,716
Segment liabilities
350,100
126,717
240,315
-
-
-
-
-
-
-
6,936,513
(30,623)
(441,310) (4,578,593) 3,225,692
35,549
- 16,291,002 12,844,047
(42,938)
12,150
547,477
126,717
Accounting Policy
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 three reportable segments being activities undertaken in Australia, Burkina Faso and Canada.
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.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2. WORKING CAPITAL PROVISIONS
2.1. CASH AND CASH EQUIVALENTS
Note
2020
$
2019
$
Cash at bank
Short-term deposits
Cash and cash equivalents as shown in the statement of
financial position and the statement of cash flows
1,756,773
-
708,796
12,000,000
1,756,773
12,708,796
Reconciliation of Profit/(Loss) after Income Tax to net cash
flows from operating activities:
Profit/(Loss) after income tax
Non-cash flows from continuing operations:
Depreciation
Write-off property, plant and equipment
Provision for impairment
Share based payments
Other Adjustments
(Profit) on sale of non-current assets
Changes in assets and liabilities:
(Increase) / decrease in receivables
Increase / (decrease) in payables
Increase / (decrease) in Provisions
Net cash (used in) operating activities
(4,578,593)
3,225,692
75,895
-
-
2,502,917
-
19,660
1,700,000
418,228
-
(6,936,513)
(57,590)
57,653
6,130
(1,993,588)
31,030
(206,953)
(37,039)
(1,785,895)
Accounting Policy
For the purpose of the statement of cash flows, cash includes cash on hand and in banks and at call deposits
with banks or financial institutions.
Non-Cash Investing and Financing Activities
During the year, the Group acquired Cheetah Resources Pty Ltd by the issue of Ordinary Shares and
Performance Shares in the Company. This includes the initial recognition of the Right to Use Asset as set out in
Note 4.1. Full details of the acquisition of Cheetah Resources Pty Ltd are set out in Note 3.3. There were no
other non-cash investing or financing activities during the year (2019: Nil).
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2.2. TRADE AND OTHER RECEIVABLES
Current
Trade debtors
Other debtors
GST Receivable
Prepayments
Security deposit
Note
2020
$
17,187
19,503
199,303
15,743
139,380
391,116
5.1
2019
$
-
119,543
-
14,944
765
135,252
Accounting Policy
Trade and other receivable assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost. Interest income from these
financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign
exchange gains and losses. Impairment losses are presented as separate line items in the statement of profit or
loss.
The Group assesses on a forward looking basis the expected credit losses associated with its financial assets
carried at amortised cost. The impairment methodology applied depends on whether there has been a significant
increase in credit risk. For trade receivables and other receivable, the Group applies the simplified approach
permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the
receivables.
2.3. FINANCIAL ASSETS
Current
Shares in listed companies held for resale at cost
Less provision for diminution
2020
$
108,520
(52,520)
56,000
2019
$
-
-
-
Shares in listed companies held for resale are recorded at market value.
Accounting Policy
The Group classifies equity investments that are held for trading as financial assets at fair value through profit or
loss (FVPL). For assets measured at fair value, gains and losses are recorded in the profit or loss.
2.4. TRADE AND OTHER PAYABLES
Current
Trade creditors
Accrued expenses
Other payables
2020
$
275,938
117,644
53,365
446,947
2019
$
126,717
-
-
126,717
Carrying value is considered to approximate fair value. Refer to note 5.1 for the Group’s interest rate and liquidity
risk
Accounting Policy
Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to
make future payments resulting from the purchase of goods and services.
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2.5. PROVISIONS
Provision for Annual Leave
2020
$
6,130
6,130
2019
$
-
-
Accounting Policy
Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled
wholly within 12 months after the end of the period in which the employees render the related service. Examples
of such benefits include wages and salaries, annual leave, non-monetary benefits and accumulating sick leave.
Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the
liabilities are settled.
3.
INVESTED CAPITAL
3.1. PROPERTY, PLANT AND EQUIPMENT
Software:
At cost
Accumulated depreciation
Plant and equipment:
At cost
Accumulated Depreciation
Motor vehicles
At cost
Accumulated depreciation
Capital Works in Progress
At cost
Total property, plant & equipment – written down value
2020
$
2019
$
78,482
(20,929)
57,553
32,496
(4,814)
27,682
37,089
(2,003)
35,086
1,407,448
1,527,769
-
-
-
-
-
-
-
-
-
-
-
Capital Works in Progress represents capital items (ultimately plant and equipment) that has been ordered and
partly paid for at the Reporting Date, but where the asset has not been received and is still being constructed at
the Reporting Date.
The remaining expenditure commitment relating to the Capital Works in Progress is disclosed in Note 7.1.
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
3.1 PROPERTY PLANT AND EQUIPMENT CONT
Movements in carrying amounts
2020
Opening net book value
Additions
Depreciation Expense
Balance at 30 June 2020
2019
Opening net book value
Additions
Depreciation Expense
Balance at 30 June 2019
Software
$
-
78,482
(20,929)
57,553
Plant and
Equipment Motor Vehicles
$
-
32,496
(4,814)
27,682
$
-
37,089
(2,003)
35,086
Capital Works
in Progress
$
-
1,407,448
-
1,407,448
Total
$
-
1,555,514
(27,746)
1,527,769
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Key estimates and judgements (PPE)
The estimations of useful lives, residual values and depreciation methods require management judgements and
are regularly reviewed. If they need to be modified, the depreciation expense is accounted for prospectively from
the date of the assessment until the end of the revised useful life (for both the current and future years).
Accounting Policy
Each class of property, including software, plant and equipment and motor vehicles is carried at cost less, where
applicable, any accumulated depreciation and impairment. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Capital Works in Progress are measured at cost until the capital works are completed and underlying equipment
is delivered and installed for use. At the Reporting Date, management will consider there is any circumstance that
has arisen that would require any adjustment to the carrying value of the capital works in progress.
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.
Depreciation
Depreciation is provided on a straight line basis on all property, plant and equipment. This is done over the useful
lives of the asset to the Company commencing from the time the asset is held ready for use.
The depreciation periods used for each class of depreciable assets are:
Class of fixed asset
Software
Plant and equipment
Motor vehicles
Depreciation period
2-3 years
2-3 years
3 years
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
3.2. RIGHT OF USE ASSET
Properties
Opening balance
Acquisitions during the year
Depreciation Expense
Closing net book amount
2020
$
91,928
-
144,460
(52,532)
91,928
2019
$
-
-
-
-
-
The Group leases office space as part of its operations. The term of the lease is 24 months at the date of entering
the agreement with 14 months remaining as at the Reporting Date. Further information is set out in Note 4.1.
3.3 EXPLORATION AND EVALUATION
Costs carried forward in respect of areas of interest in the
exploration and evaluation phases:
Opening net book amount
Acquisition of Cheetah Resources (refer below)
Exploration expenditure
Exploration expenditure – expensed
Exchange rate difference
Closing net book amount
The closing balances relate to the following areas of interest:
Nechalacho Project, Canada
Wigu Hill Project, Tanzania
2020
$
2019
$
-
9,573,102
3,209,872
(172,658)
(142,900)
12,467,416
12,467,415
-
12,467,415
-
-
849,677
(849,677)
-
-
-
-
-
Acquisition of Cheetah Resources
On the 16 October 2019, shareholders approved the acquisition of Cheetah Resources Pty Ltd, which holds the
Nechalacho Project. Exploration and evaluation expenditure in relation to areas of interest in Canada are
capitalised.
The acquisition of Cheetah Resources Pty Ltd occurred on 16 October 2019, which was the day of approval. The
acquisition has been treated as an asset acquisition via the issue of equity under AASB 2 Share Based Payments
(“AASB 2”). The below outlines the consideration and identifiable assets and liabilities acquired at the date of
acquisition:
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
3.3 EXPLORATION AND EVALUATION (CONT)
Consideration:
400,000,000 Ordinary Shares
400,000,000 Tranche A Performance Shares¹
400,000,000 Tranche B Performance Shares²
Total Consideration
Assets and Liabilities acquired:
Cash
Trade and other receivables
Financial asset
Exploration Asset
Property, plant and equipment
Creditors
Loan
Other Liabilities
Closing Balance
$
4,800,000
-
-
4,800,000
93,859
81,529
55,995
9,573,102
6,517
(173,913)
(3,937,606)
(899,483)
4,800,000
¹ - The fair value of the Tranche A performance shares issued is $4,800,000. The probability of conditions being
met was assessed 0% at the date of acquisition.
² - The fair value of the Tranche B performance shares issued is $4,800,000. The probability of conditions being
met was assessed 0% at the date of acquisition.
In line with the Group’s accounting policy the performance shares issued as consideration for the asset
acquisition will not be remeasured at each reporting period.
Included in the consideration paid to the vendors are fully paid ordinary shares and performance shares issued
to an entity related to the Managing Director, Mr. Geoff Atkins:
- 31,149,849 Fully Paid Ordinary Shares;
- 31,149,849 Tranche A Performance Shares; and
- 31,149,849 Tranche B Performance Shares
Key estimates and judgements
Asset acquisition
The Group has determined that the acquisition of Cheetah Resources is deemed to be an asset acquisition not a
business combination. In assessing the requirements of AASB 3 Business Combinations, the Group has
determined that the assets acquired do not constitute a business. The assess acquired consists of mineral
exploration tenements. When an asset acquisition does not constitute a business combination, the assets and
liabilities are assigned a carrying amount based on their relative fair values in the purchase transaction and no
deferred tax will arise in relation to the acquired asset as the initial recognition exemption for deferred tax under
AASB 112 applies. No goodwill will arise on the acquisition and transaction costs of the acquisition.
The Group also assessed the probability of the conditions being met for the conversion of the Tranche A and
Tranche B Performance shares as 0% at the date of acquisition.
Exploration and evaluation expenditure
The recoverability of the carrying amount of the exploration and evaluation assets is dependent on the successful
development and commercial exploitation, or alternatively, sale of the respective area of interest.
The Group reviews the carrying value of exploration and evaluation expenditure on a regular basis to determine
whether economic quantities of reserves have been found or whether further exploration and evaluation work
is underway or planned to support continued carry forward of capitalised costs. This assessment requires
judgement as to the status of the individual projects and their estimated recoverable amount.
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
3.3 EXPLORATION AND EVALUATION (CONT)
Accounting Policy
Asset acquisition
When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a
carrying amount based on their relative fair values in an asset purchase transaction and no deferred tax will arise
in relation to the acquired assets and assumed liabilities as the initial recognition exemption for deferred tax
under AASB 112 applies. No goodwill will arise on the acquisition and transaction costs of the acquisition will be
included in the capitalised cost of the asset. Assets acquired during the period were evaluation assets.
Exploration and evaluation expenditure
Exploration and evaluation expenditures in relation to separate areas of interest are capitalised in the year in
which they are incurred and are carried at cost less accumulated impairment losses where the following
conditions are satisfied:
i)
ii)
rights to tenure of the area of interest are current; and
at least one of the following conditions is also met:
a)
the exploration and evaluation expenditures are expected to be recouped through successful
development and exploration of the area of interest, or alternatively by its sale; or
b) exploration and evaluation activities in the area of interest have not at the 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.
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.
Government grants received in relation to exploration and evaluation expenditure are recorded as a deduction
in the carrying value of the asset
Capitalised exploration costs are reviewed each reporting date to test whether an indication of impairment
exists. If any such indication exists, the recoverable amount of the capitalised exploration costs is estimated to
determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the
carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the
extent that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset in previous years.
Where a decision is made to proceed with development, accumulated expenditure is tested for impairment
and transferred to capitalised development and then amortised over the life of the reserve associated with the
area of interest once mining operations have commenced.
Development expenditure is recognised at cost less any impairment of losses. Where commercial production
in an area of interest has commenced, the associated costs are amortised over the life of reserves associated
with the area of interest. Changes in factors such as estimates of proved and probable reserves that affect unit
of production calculations are dealt with on a prospective basis.
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
4. CAPITAL STRUCTURE AND FINANCING ACTIVITIES
4.1. FINANCIAL LIABILITIES
CURRENT
Lease liabilities
Bank facility at amortised cost
NON CURRENT
Lease liabilities
2020
$
80,425
-
80,425
13,975
13,975
2019
$
-
126,717
126,717
-
-
The Group leases office space as part of its operations. The term of the lease is 24 months at the date of entering the
agreement (with 14 months remaining as at 30 June 2020). Lease liabilities were measured at the present value of
the remaining lease payments, discounted using the lessee’s incremental borrowing rate of 4.91%.
During the 2019 financial 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.
Accounting Policy Note
Leases
For the year ended 30 June 2020
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
•
•
leases of low value assets; and
leases with a term of 12 months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term,
with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this
is not readily determinable, in which case the group’s incremental borrowing rate on commencement of the lease is
used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index
or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they
relate.
On initial recognition, the carrying value of the lease liability also includes:
•
•
•
amounts expected to be payable under any residual value guarantee;
the exercise price of any purchase option granted in favour of the group if it is reasonable certain to assess
that option; and
any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of
termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives
received, and increased for:
•
•
•
lease payments made at or before commencement of the lease;
initial direct costs incurred; and
the amount of any provision recognised where the group is required to dismantle, remove or restore the
leased asset.
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
4.1 FINANCIAL LIABILITIES (CONT)
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to
be shorter than the lease term.
When the group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of
a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect
the payments to make over the revised term, which are discounted using a revised discount rate (being the interest
rate implicit in the lease for the remainder of the lease term or, if that cannot be readily determined, the Group’s
incremental borrowing rate at the re-assessment date). An equivalent adjustment is made to the carrying value of
the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
The carrying value of lease liabilities is also revised when the variable element of future lease payments dependent
on a rate or index is revised or there is a revision to the estimate of amounts payable under a residual value guarantee.
In both cases an unchanged discount rate is used. In both cases an equivalent adjustment is made to the carrying
value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease
term.
When the group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature
of the modification:
•
•
•
if the renegotiation results in one or more additional assets being leased for an amount commensurate
with the standalone price for the additional rights-of-use obtained, the modification is accounted for as a
separate lease in accordance with the above policy
in all other cases where the renegotiated increases the scope of the lease (whether that is an extension to
the lease term, or one or more additional assets being leased), the lease liability is remeasured using the
discount rate applicable on the modification date, with the right-of-use asset being adjusted by the same
amount.
if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease
liability and right-of-use asset are reduced by the same proportion to reflect the partial of full termination
of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to
ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term,
with the modified lease payments discounted at the rate applicable on the modification date. The right-of-
use asset is adjusted by the same amount.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as
an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are
items such as IT-equipment and small items of office furniture.
For the year ended 30 June 2019
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged
on a straight-line basis over the length of the lease.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the
lease term.
Adoption of new and amended Leases accounting standards
AASB 16 Leases replaces AASB 117 Leases and Interpretation 4 Determining whether an Arrangement contains a
Lease.
In accordance with the transitional provisions of AASB 16, the Group has elected to adopt AASB 16 using the modified
retrospective approach, where the lease liability is measured at the present value of future lease payments on the
initial date of application, being 1 July 2019. In determining the present value, the discount rate is determined by
reference to the group’s incremental borrowing rate on the date of initial application of the standard (1 July 2019).
On transition to AASB 16 the Group has measured its right of use assets at the amount of the lease liability, adjusted
for any lease prepayments or accruals recognised under the old leasing standard, AASB 117.
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
4.1 FINANCIAL LIABILITIES (CONT)
In applying the modified retrospective approach, the Group has taken advantage of the following practical expedients:
•
A single discount rate has been applied to portfolios of leases with reasonably similar characteristics.
•
Leases with a remaining term of 12 months or less from the date of application have been accounted for as short-
term leases (i.e. not recognised on balance sheet) even though the initial term of the leases from lease
commencement date may have been more than 12 months.
There were no lease liability arrangements as at 30 June 2019 and therefore no measurement at the present value of
future lease payments on the initial date of application, being 1 July 2019 was conducted.
4.2. CONTRIBUTED EQUITY
(a) Issued and paid up capital
Fully paid ordinary shares
2020
$
2019
$
57,645,649
52,845,649
2020
Number of
shares
2019
Number of
shares
2020
$
2019
$
(b) Movements in shares on issue
Beginning of the year
Issued during the year:
Issued during the year (i)
Transaction costs on issue
End of the year
1,742,611,288 1,742,611,288
52,845,649
52,845,649
400,000,000
-
2,142,611,289 1,742,611,288
-
-
2,142,611,289 1,742,611,288
4,800,000
57,645,649
-
57,645,649
-
52,845,649
-
52,845,649
(i)
Issue of shares on 22 October 2019 relating to the acquisition of Cheetah Resources Pty Ltd. Refer Note
3.3. These shares were issued at a price of $0.012 per share.
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
4.2 CONTRIBUTED EQUITY (CONT)
(c) Movements in options on issue
Beginning of the financial year
Issued during the year:
- Exercisable at 1.5 cents and expiring 19 July 2022
- Exercisable at 2 cents and expiring 22 October 2024*
- Exercisable at 2.5 cents and expiring 22 October 2024*
- Exercisable at 3 cents and expiring 22 October 2024*
- Exercisable at 2 cents and expiring 31 January 2025
- Exercisable at 2.5 cents and expiring 31 January 2025
- Exercisable at 3 cents and expiring 31 January 2025
Expired/cancelled during the year:
- Exercisable at 2.7 cents on or before 25 November 2018
- Exercisable at 1.625 cents on or before 31 December 2018
- Exercisable at 1.2 cents and expiring 24 November 2019
End of the financial year
Number of options
2020
2019
163,598,492
231,182,434
-
90,000,000
90,000,000
90,000,000
22,500,000
22,500,000
22,500,000
32,666,667
-
-
-
-
-
-
-
-
(28,931,825)
472,166,667
(14,096,763)
(86,153,846)
-
163,598,492
* Of the total 270,000,000 options issued during the period, 90,000,000 were issued to Director Geoff Atkins and
180,000,000 were issued to Mr Evan Cranston.
(d) Terms and condition of contributed equity
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.
(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 2020 is shown below:
Current assets
Current liabilities
Working capital
2020
$
2,203,889
(533,502)
1,670,387
2019
$
12,844,047
(126,717)
12,717,330
Accounting Policy
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 acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, e.g. as the result of a share buyback, those instruments are
deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and
the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly
in equity.
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
4.3. RESERVES
Share based payment reserve
Opening balance
Movement for the year
Closing balance
Foreign Currency Translation Reserve
Opening balance
Movement for the year
Closing balance
Total Reserves
(i) Share based payment reserve
2020
$
2,387,741
2,502,918
4,890,659
9,449
301,869
311,318
5,201,977
2019
$
1,969,513
418,228
2,387,741
463,238
(453,789)
9,449
2,397,190
The share-based payments reserve is used to recognise the fair value of options issued. Refer to note 8.1 for details.
(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 below. The reserve is recognised in profit or loss when the net investment is
disposed of.
Accounting Policy
(i) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Vital Metals Limited's functional
and presentation.
(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.
4.4. DIVIDENDS
No dividends were paid during the financial year. No recommendation for payment of dividends has been
made.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
5. RISK
5.1 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) 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.
Financial instruments other than receivables that potentially subject the Group to concentrations of credit risk
consist principally of cash deposits. The Group places its cash deposits with high credit quality financial institutions,
being in Australia one of the major Australian (big four) banks. Cash holdings in other countries are not significant.
The Group’s cash deposits are all on call or in term deposits and attract a rate of interest at normal short-term
money market rates.
The Group’s exposure to credit risk is low and limited to cash and cash equivalents and other receivables. All cash
and cash equivalents $1,756,773 as at 30 June 2020 (2019: $12,708,796) are held with financial institutions that
have a AAA credit rating (Standard & Poor’s).
The maximum exposures to credit risk are the amounts as shown in the Statement of Financial Position.
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. These provisions are considered representative across all
customers of the Group based on recent sales experience, historical collection rates and forward-looking
information that is available.
Trade and other receivables
Trade Debtors
Security and other deposits
Other
Cash at bank and short-term bank deposits
AAA rating
2020
$
17,187
139,380
234,549
391,116
2019
$
-
765
134,487
135,252
1,756,773
12,708,796
(b) Cash flow interest rate risk
The Group’s exposure to the risks of changes in market interest rates, foreign exchange 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 Canadian Dollar in respect of its operations
in Canada and CFA Franc in relation to its activities in Burkina Faso. The group maintains minimal working capital
in Canada and 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.
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
5.1 FINANCIAL RISK MANAGEMENT (CONT)
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:
Weighted
Average
Effective
Interest
Rate
2020
%
Fixed Interest Rate
Maturing
Variable
Interest Rate
2020
$
Within
1 Period
2020
$
1-5
Periods
2020
$
Non-Interest
Bearing
2020
$
Total
2020
$
0.25
1,593,380
-
-
1,593,380
-
-
-
-
-
-
-
-
-
-
-
-
163,393
1,756,773
391,116
554,509
391,116
2,147,889
446,947
446,947
446,947
446,947
Weighted
Average
Effective
Interest
Rate
2019
%
Fixed Interest Rate
Maturing
Variable
Interest Rate
2019
$
Within
1 Period
2019
$
1-5
Periods
2019
$
Non-Interest
Bearing
2019
$
Total
2019
$
1.92%
12,708,796
-
12,708,796
-
-
-
12,708,796
-
-
-
-
-
-
-
-
-
-
-
12,708,796
135,521
135,521
135,521
12,844,317
126,717
126,717
8,804
12,717,600
2020
Financial assets:
Cash at bank
Trade and other
receivables
Total financial assets
Financial liabilities:
Trade and other
payables
Total financial
liabilities
2019
Financial assets:
Cash at bank
Trade and other
receivables
Total financial assets
Financial liabilities:
Trade and other
payables
Total financial
liabilities
At 30 June 2020, 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 $44,738 higher/lower
(2019: -/+ 25 basis points, $5,514 higher/lower) as a result of lower/higher interest income from cash and cash
equivalents.
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
5.1 FINANCIAL RISK MANAGEMENT (CONT)
Sensitivity Analysis
At the reporting date, the variable interest profile of the Group’s interest bearing financial instruments were:
Financial assets
0.25% (2019- 0.25%) increase
0.25% (2019- 0.25%) decrease
2020
$
1,593,380
2019
$
12,708,796
2020
$
44,738
44,738
2019
$
5,514
5,514
(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.
Group:
at 30 June 2020
Less than 6
months
$
6 – 12
months
$
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Total
contractual
cash flows
$
Carrying
amount
(assets)
/liabilities
Trade and other
payables
446,947
-
Financial liabilities
-
80,425
-
-
-
-
-
-
446,947
446,947
80,425
80,425
$
Group:
at 30 June 2019
Less than 6
months
$
6 – 12
months
$
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Total
contractual
cash flows
$
Carrying
amount
(assets)
/liabilities
Trade and other
payables
126,717
-
-
-
-
126,717
126,717
$
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
5.1 FINANCIAL RISK MANAGEMENT (CONT)
(d) Foreign Exchange Risk
A risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency other than the consolidated entity’s functional currency.
The Group operates internationally, with its major assets being held in Burkina Faso and Canada, and is exposed
to foreign exchange risk arising from currency exposures to the Euro, FCFA (fixed to the Euro), and Canadian
Dollar. Historically, given the level of expenditure and available funding, the Group considered its exposure to
foreign exchange risk was manageable and hedging policies were not adopted. The Company, through the
Managing Director and the Chief Financial Officer regularly monitor movements in the foreign currencies that
the Company is exposed to. If appropriate, and from time to time, the Company may enter into forward foreign
exchange contract to minimise its exposure to foreign exchange risks. The Company also has foreign currency
denominated accounts that are utilised to manage this risk. The Company did not enter into any new forward
foreign exchange contracts during the year.
The Board considers policies relating to foreign currency exposure from time to time and, based on available
funding, proposed exploration programs and foreign currency exposures, may or may not decide to enter in
further forward foreign exchange contracts. The Board will continue to review its position in respect of foreign
exchange risk management and will adopt suitable policies as required.
The carrying value of foreign currency denominate monetary assets and liabilities as at the reporting date are as
follows:
CAD
Euro/CFA
Assets
2020
2019
110,459
15,620
-
-
Liabilities
2020
2019
586,815
16,593
-
-
Foreign Currency Sensitivity Analysis
The Group is mainly exposed to CAD and CFA. The following table details the Group’s sensitivity to a 10% increase
and decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate that
represents management’s assessment of the reasonably possible change in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their
translation at the year end for a 10% change in foreign currency rates. A positive number below indicates an
increase in profit where the Australian dollar strengthens 10% against the relevant currency. For a 10%
weakening of the Australian dollar against the relevant currency, there would be a comparable impact on the
profit, and the balances below would be negative.
Financial Assets
+10% Appreciation
-10% Depreciation
Financial Liabilities*
+10% Appreciation
-10% Depreciation
CAD Dollars
2020
AUD
(10,369)
10,369
1,562
(1,562)
2019
AUD
2020
AUD
CFA
2019
AUD
-
-
-
-
(55,084)
55,084
1,659
(1,659)
-
-
-
-
* Note – the majority of the balance of financial liabilities relates to capitalised exploration expenditure.
Therefore, the variations in the balance as shown in the sensitivity analysis would not impact the profit or loss,
but rather the carrying value of the capitalised exploration expenditure.
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
5.1 FINANCIAL RISK MANAGEMENT (CONT)
Forward Foreign Exchange Contracts
As at 30 June 2020 there were no outstanding forward foreign exchange contracts (2019: Nil).
(e) Fair value of financial instruments
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.
6. GROUP STRUCTURE
6.1. SUBSIDIARIES
6.2. The consolidated financial statements include the financial statements of the ultimate parent entity Vital
Metals Limited and the subsidiaries listed in the following table:
Name of Entity
Cheetah Resources Pty Ltd
Cheetah Resources Corp.
Vital Metal Burkina Sarl
Country of
Incorporation
Australia
Canada
Burkina Faso
Equity Interest
2020
100%
100%
100%
2019
-
-
-
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
7. UNRECOGNISED ITEMS
7.1. COMMITMENTS
EXPENDITURE COMMITMENTS
(a) Capital expenditure commitments
- Within one year
- Later than one year but not later than five years
(b) Mineral tenement commitments (including under acquisition
agreements)
- Within one year
- Later than one year but not later than five years
2020
$
2019
$
689,939
-
-
-
689,939
-
-
-
-
-
7.2. CONTINGENCIES
There are two royalties in place relating to the Nechalacho Project:
1. A 3% net smelter return royalty.
a)
b)
the royalty holder has agreed to waive their right to the royalty for the first five (5) years
following commencement of commercial production at the Nechalacho Project; and
the royalty holder has also agreed to grant Cheetah an option to pay C$2,000,000 at any time
during the eight (8) year period following the acquisition of the Nechalacho Project to cancel
the royalty.
2. The Murphy Royalty which is a 2.5% net smelter return royalty held by a third party. Vital holds an
option to purchase the royalty for an inflation adjusted fixed amount estimated to currently be
C$1,500,000.
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
7.3. EVENTS OCCURING AFTER THE REPORTING PERIOD
Other than as set out below, there has not been any matter or circumstance that has arisen since the end of the
financial year, that has significantly affected or may significantly affect the operations of the Group, the results of
those operations, or the state of affairs of the Group in future financial years.
•
In August 2020, Mr James Henderson was appointed as a Non-Executive Director and Mr Francis Harper and
Mr Zane Lewis retired as Directors of the Company.
• On 24 August 2020, 12,500,000 options with an exercise price of $0.01 were exercised. There have been no
other changes to securities on issue since 30 June 2020.
• On 22 September 2020 the Company announced the signing of a binding term sheet with SRC (Saskatchewan
Research Council) to negotiate definitive agreements for construction of a rare earth extraction plant.
• On 26 September 2020 the Company announced that it had successfully received firm commitments to raise
A$8.0 million (before costs) in new equity via a fully committed share placement to institutional, sophisticated
and professional investors at an issue price of $0.02 per share (400 million shares in total)
On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a
new strain of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international
community as the virus spreads globally beyond its point of origin. Because of the rapid increase in exposure
globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic.
The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore
uncertain as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of
operations during FY2021.
Management is actively monitoring the global situation and its impact on the Group's financial condition, liquidity,
operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global
responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results
of operations, financial condition, or liquidity for the 2021 financial year.
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
8. OTHER INFORMATION
8.1. SHARE BASED PAYMENTS
(a) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
SHARE BASED PAYMENTS
Options issued to directors
Options issued to Employee/Consultant
Performance Rights
2020
$
2019
$
2,283,917
219,001
-
2,502,918
10,978
-
407,250
418,228
The fair value of options issued during the half year were calculated by using a black-scholes pricing model applying
the following inputs.
Grant dated
Number issued
Share price at grant date
Exercise price
Life of options (years)
Expected share price volatility
Weighted average risk free interest rate
Fair value per option
Grant dated
Number Issued
Share price at grant date
Exercise price
Life of options (years)
Vesting life (years)
Expected share price volatility
Weighted average risk free interest rate
Fair value per option
Directors
Directors
Directors
16/10/2019
90,000,000
$0.03
$0.020
5
100%
0.77%
$0.0089
16/10/2019
90,000,000
$0.03
$0.025
5
100%
0.77%
$0.0085
16/10/2019
90,000,000
$0.03
$0.030
5
100%
0.77%
$0.0081
Consultant
Consultant Consultant
21/11/2019
22,500,000
$0.13
$0.020
5
1
100%
0.84%
$0.0090
21/11/2019 21/11/2019
22,500,000 22,500,000
$0.13
$0.030
5
3
100%
0.84%
$0.0082
$0.13
$0.025
5
2
100%
0.84%
$0.0084
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.
For service provider options the value of the service received was unable to be measured reliably and therefore the
value was measured by reference to the fair value of the options issued.
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
8.1 SHARE BASED PAYMENTS (CONT)
(b) Options
Set out below are summaries of the options granted:
Consolidated
2020
2019
Weighted
average
exercise price
cents
1.70
-
-
-
-
-
1.70
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
58,598,492
337,500,000
-
-
(28,931,825)
-
367,166,667
Outstanding at the beginning of the year
Granted
Forfeited/cancelled
Exercised
Expired
Outstanding at year-end
Exercisable at year-end
The weighted average remaining contractual life of share options outstanding at the end of the financial year was 4.11 years
(2019: 1.18 years), and the exercise price ranges from 1.5 to 3.0 cents.
There were no share options exercised in 2020 or 2019.
The range of exercise prices for options outstanding at the end of the year is $0.01 to $0.03 (2019: $0.01 to $0.023).
(c) Performance shares
On 16 October 2019, the Company issued 800,000,000 performance shares which convert to one ordinary share upon
completion of the following milestones within:
•
•
400,000,000 Performance Shares (Tranche 1) with a fair value of $4,800,000 that will convert to one Share
on the Company entering into binding offtake for a minimum of 1,000 kgs of contained REO in respect of
the Nechalacho Project or Wigu Hill Project within 2 years of the Acquisition completion date; and
400,000,000 Performance Shares (Tranche 2) with a fair value of $4,800,000 that will each convert to one
Share on the Company commencing mining operations at the Nechalacho Project or Wigu Hill Project
within 3 years of the issue of the Tranche 1 performance shares.
The Company assessed the probability of conditions being met at 0% in relation to Tranche 1 and 0% in relation to
Tranche 2 as at the date of acquisition. The performance shares issued as part of the acquisition will not be remeasured
at each reporting period.
Accounting Policy
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange
for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the
amount of cash is determined by reference to the share price.
The costs of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award,
the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The
amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less
amounts already recognised in previous periods.
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
8.1 SHARE BASED PAYMENTS (CONT)
The costs of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with
non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the
employees to receive payment. No account is taken of any other vesting conditions.
Key estimates and judgements
The Group has an Incentive Option Scheme (“Scheme”) for executives and employees of the Group.
In accordance with the provisions of the Scheme, as approved by the shareholders at the August 2019 annual
general meeting, executives and employees may be granted options at the discretion of the directors.
Each share option converts into one ordinary share of VITAL METALS LIMITED on exercise. No amounts are paid or
are payable by the recipient on receipt of the option. The options carry neither rights of dividends nor voting rights.
Options may be exercised at any time from the date of vesting to the date of their expiry.
Options issued to directors are not issued under the Scheme but are subject to approval by shareholders.
8.2
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 6.1.
(c) KEY MANAGEMENT PERSONNEL DISCLOSURES
Directors and other key management personnel
The directors of Vital Metals Limited during the financial year were:
-
-
-
-
-
-
Evan Cranston (appointed 22 October 2019)
Geoff Atkins (appointed 22 October 2019)
Phillip Coulson
Francis Harper
Zane Lewis
Peter Cordin (resigned 25 September 2019)
Other key management personnel consisted of:
-
Anthony Hadley
Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Termination
Share-based payments
68
2020
$
724,622
10,023
-
2,283,917
3,018,563
$
2019
$
326,824
14,581
175,916
418,228
935,549
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
8.2
RELATED PARTY TRANSACTIONS (CONT)
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 2020 was $219,750 (2019: $18,995).
Other disclosures regarding key management personnel are made in the remuneration report on pages 9 to 12.
(d) LOANS TO RELATED PARTIES
Vital Metals Ltd has provided unsecured, interest free loans to each of its wholly owned subsidiaries totalling
$Nil at 30 June 2020 (2019: $30,464,241).
8.3
PARENT ENTITY FINANCIAL INFORMATION
The following information relates to the parent entity, Vital Metals Limited, as at 30 June 2020. The
information presented here has been prepared using accounting policies consistent with those presented in
this report.
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial performance
Profit/(loss) for the year
Other comprehensive income
Total comprehensive Profit/(loss)
2020
$
1,612,809
3,100,000
4,712,809
2019
$
12,760,645
-
12,760,645
13,916,794
-
13,916,794
114,567
-
114,567
57,645,649
4,890,659
(43,906,705)
18,629,603
52,845,649
2,397,189
(42,596,760)
12,646,078
(3,460,913)
-
(3,460,913)
4,647,323
(448,922)
4,199,401
Contingent liabilities and commitments
-
-
There are no parent company guarantees in place at the Reporting date.
8.4
REMUNERATION OF AUDITORS
Amounts received or due and receivable by BDO Audit (WA) Pty Ltd
-
-
Audit and review of financial statements
Other amounts received or due and receivable by BDO
Total remuneration
No non-audit services were performed during 2020 or 2019.
69
2020
$
46,214
-
46,214
2019
$
36,801
-
36,801
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
8.5
OTHER ACCOUNTING POLICIES
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where
the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the
GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the
statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising
from investing and financing activities which are recoverable from, or payable to, the ATO are classified as
operating cash flows.
70
DIRECTORS’ DECLARATION
VITAL METALS LIMITED AND ITS CONTROLLED ENTITIES
ABN 32 112 032 596
DIRECTORS’ DECLARATION
In the directors’ opinion:
1.
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 30 to 70 are in accordance with the Corporations Act 2001, including
(a) complying with Australian Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and,
(b) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its
performance for the financial year ended on that date;
2.
3.
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 2020, comply with Section 300A of the Corporations Act 2001; and
The Notes to the Consolidated Financial Statements confirm that the financial statements also comply with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
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.
Evan Cranston
Chairman
Sydney: 30 September 2020
71
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 2020, 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 2020 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 (including Independence Standards) (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 the acquisition of Cheetah Resources Pty Ltd
Key audit matter
How the matter was addressed in our audit
During the year, the Group acquired the Nechalacho
Our procedures included, but were not limited to:
Project through the acquisition of Cheetah Resources
Pty Ltd, as disclosed in Note 3.3.
This acquisition has been assessed as an asset
acquisition, rather than a business combination.
This was determined to be a key audit matter due to
the significant judgement applied in determining the
appropriate accounting treatment, including whether
the acquisition should be classed as an asset or
business acquisition and the significance of the
transaction to the financial statements.
·
·
·
·
·
·
Obtaining an understanding of the transaction,
including an assessment of whether the
transaction constituted an asset or business
acquisition;
Reviewing the sale and purchase agreement to
understand the key terms and conditions;
Assessing management’s determination of the fair
value of consideration paid and agreeing the
consideration to supporting documentation;
Assessing management’s determination of the fair
value of the share-based payments made,
considering the appropriateness of the valuation
used;
Agreeing the net assets acquired to support; and
Assessing the adequacy of the related disclosures
in Note 3.3 to the Financial Statements.
Carrying value of exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
At 30 June 2020 the carrying value of the capitalised
Our procedures included, but were not limited to:
exploration and evaluation asset was disclosed in
Note 3.3.
As the carrying value of the exploration and evaluation
asset represents a significant asset of the Group, we
considered it necessary to assess whether any facts or
circumstances exist to suggest that the carrying
amount of this asset may exceed its recoverable
amount.
·
·
Obtaining a schedule of the area of interest held
by the Group and assessing whether the rights to
tenure of the area of interest remained current at
balance date;
Verifying, on a sample basis, exploration and
evaluation expenditure capitalised during the year
for compliance with the recognition and
measurement criteria of AASB 6;
Key audit matter
How the matter was addressed in our audit
This was determined to be a key audit matter due to
·
Considering the status of the ongoing exploration
the significant judgement applied in determining the
programmes in the respective areas of interest by
treatment of exploration expenditure in accordance
holding discussions with management, and
with Australian Accounting Standard AASB 6 Exploration
reviewing the Company’s exploration budgets, ASX
for and Evaluation of Mineral Resources.
announcements and director’s minutes;
·
·
·
Considering whether any area of interest had
reached a stage where a reasonable assessment of
economically recoverable reserves existed;
Considering whether any facts or circumstances
existed to suggest impairment testing was
required; and
Assessing the adequacy of the related disclosures
in Note 3.3 to the Financial Statements.
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 2020, 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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 22 to 28 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Vital Metals Limited, for the year ended 30 June 2020,
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
Neil Smith
Director
Perth, 30 September 2020
ASX ADDITIONAL INFORMATION
As at 7 SEPTEMBER 2020
The Australian Securities Exchange Limited, in respect of listed public companies, requires the following information:
1. Shareholding
(a)
Distribution of shareholders as at 7 September 2020 - fully paid ordinary shares
Size of Holding
1-1,000 shares
1,001 - 5,000 shares
5,001 – 10,000 shares
10,000 – 100,000 shares
100,001 shares and over
Number of
Shareholders
43
19
17
585
1,300
Percentage of
Holders
2.2%
1.0%
0.9%
29.8%
66.1%
Number of Shares
4,964
59,679
136,205
41,463,917
2,113,446,524
Percentage
of Shares
0.0%
0.0%
0.0%
1.9%
98.1%
Total
1,964
100.0%
2,155,111,289
100.0%
(b)
Marketable Parcels
The number of shareholdings held in less than a marketable parcel is 1,115 holders with 925,827 shares as
at 7 September 2020. The required marketable parcel is $500 (4,348 shares).
(c)
Substantial Shareholders
As at 7 September 2020 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.
Substantial Shareholder
Number of Securities
Voting Power
TROICA ENTERPRISES PTY LTD
162,100,000
7.75%
(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, Performance Rights or Performance Shares on issue.
(e)
On-market Buy-Back
Currently there is no on-market buy-back of the Company’s securities.
76
ASX ADDITIONAL INFORMATION
As at 7 SEPTEMBER 2020
(f)
Top Twenty Shareholders of Vital Metals Limited – Ordinary Shares:
TROICA ENTERPRISES PTY LTD
MR GAVIN JEREMY DUNHILL
TRANSOCEAN PRIVATE INVESTMENTS PTY LTD
EQUIPMENT COMPANY OF AUSTRALIA PTY LIMITED
AUSDRILL INTERNATIONAL PTY LTD
BLU BONE PTY LTD
TISIA NOMINEES PTY LTD
KINGSLANE PTY LTD
OCEAN VIEW WA PTY LTD
CITICORP NOMINEES PTY LIMITED
KOBIA HOLDINGS PTY LTD
MR ALEXANDER MICHAEL WORT
ATKINS PROJECTS AND INFRASTRUCTURE PTY LTD
C G HEATH PTY LTD
MR RUSSELL GREGORY GARROD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HAMMERHEAD HOLDINGS PTY LTD
NEREENA PTY LTD
MR SIMON NAPOLI
SEAMIST ENTERPRISES PTY LTD
Fully Paid Ordinary
Shares
162,100,000
83,000,000
79,432,114
Percentage
of
Total
(%)
7.75%
3.85%
3.69%
78,158,174
68,000,000
55,043,580
45,733,489
41,932,489
41,000,000
38,066,888
35,043,580
35,000,000
31,149,849
25,000,000
24,000,000
22,255,736
22,000,000
20,147,473
20,000,000
19,468,655
3.63%
3.16%
2.55%
2.12%
1.95%
1.90%
1.77%
1.63%
1.62%
1.45%
1.16%
1.11%
1.03%
1.02%
0.93%
0.93%
0.90%
Totals: Top 20 Holders of ORDINARY Shares (TOTAL)
Total Remaining Holders Balance
951,532,027
1,203,579.262
44.15%
55.85%
Total All shareholders
2,155,111,289
100.0%
77
ASX ADDITIONAL INFORMATION
As at 7 SEPTEMBER 2020
2.
UNQUOTED EQUITY SECURITIES
The unquoted equity securities outstanding are as follows:
Number
Class
Holders with more than 20% interest in that
12,500,000
Class A Performance Rights
20,000,000
Class B Performance Rights
25,000,000
Class C Performance Rights
class
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
Ardentis Pty Ltd (15,000,000)
David Macoboy (6,000,000)
12,500,000
Unlisted options exercisable at 1.0 cents
expiring 17 November 2021
JSR Nominees Pty Ltd (6,250,000)
Francis Harper Pty Ltd (6,250,000)
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)
22,500,000
Unlisted options exercisable at 2.0 cents
expiring 31 January 2025
Mathew Edler (12,500,000)
Darren Sutton (7,500,000)
22,500,000
Unlisted options exercisable at 2.5 cents
expiring 31 January 2025
Mathew Edler (12,500,000)
Darren Sutton (7,500,000)
22,500,000
Unlisted options exercisable at 3.0 cents
expiring 31 January 2025
Mathew Edler (12,500,000)
Darren Sutton (7,500,000)
90,000,000
Unlisted options exercisable at 2.0 cents
expiring 22 October 2024
90,000,000
Unlisted options exercisable at 2.5 cents
expiring 22 October 2024
90,000,000
Unlisted options exercisable at 3.0 cents
expiring 22 October 2024
400,000,000
Performance Shares – Tranche A
Atkins Projects and Infrastructure Pty Ltd (Geoff
Atkins) (30,000,000)
Konkera Pty Ltd (Evan
Cranston) (60,000,000)
Atkins Projects and Infrastructure Pty Ltd (Geoff
Atkins) (30,000,000)
Konkera Pty Ltd (Evan
Cranston) (60,000,000)
Atkins Projects and Infrastructure Pty Ltd (Geoff
Atkins) (30,000,000)
Konkera Pty Ltd (Evan
Cranston) (60,000,000)
-
400,000,000
Performance Shares – Tranche B
-
78
ASX ADDITIONAL INFORMATION
As at 7 SEPTEMBER 2020
Distribution of holders of unquoted equity securities
Class A Performance
Rights
Class B Performance
Rights
Class C Performance
Rights
Unlisted options
($0.02 @ 30/04/2021)
Unlisted options
($0.023 @ 30/04/2021)
No. of
holder
s
-
-
-
-
2
2
1 – 1,000
1,001 –
5,000
5,001 –
10,000
10,001 –
100,000
100,001
and over
Total
No. of
securities
No. of
holders
No. of
securities
No. of
holder
No. of
securities
No. of
holder
No. of
securities
No. of
holders
No. of
securities
-
-
-
-
12,500,000
12,500,000
-
-
-
-
2
2
-
-
-
-
20,000,000
20,000,000
-
-
-
-
2
2
-
-
-
-
25,000,000
25,000,000
-
-
-
-
3
3
-
-
-
-
50,000,000
50,000,000
-
-
-
-
4
4
-
-
-
-
27,000,000
27,000,000
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
($0.01 @ 17/11/2021)
($0.015 @ 19/7/2022)
($0.02 @ 31/1/2025)
($0.025 @ 31/1/2025)
($0.03 @ 31/1/2025)
No. of
holder
s
No. of
securities
No. of
holders
No. of
securities
No. of
holder
No. of
securities
No. of
holder
s
No. of
securities
No. of
holders
No. of
securities
1 – 1,000
1,001 –
5,000
5,001 –
10,000
10,001 –
100,000
100,001 and
over
Total
-
-
-
-
2
2
-
-
-
-
12,500,000
12,500,000
-
-
-
-
6
6
-
-
-
-
32,666,667
32,666,667
-
-
-
-
3
3
-
-
-
-
22,500,000
22,500,000
-
-
-
-
3
3
-
-
-
-
22,500,000
22,500,000
-
-
-
-
3
3
-
-
-
-
22,500,000
22,500,000
Unlisted options
Unlisted options
Unlisted options
($0.02 @ 22/10/2024)
($0.025 @ 22/10/2024)
($0.03 @ 22/10/2024)
Performance Shares –
Tranche A
Performance Shares –
Tranche B
No. of
holders
No. of
securities
No. of
holders
No. of
securities
No. of
holder
No. of
securities
No. of
holders
No. of
securities
No. of
holders
No. of
securities
1 – 1,000
1,001 –
5,000
5,001 –
10,000
10,001 –
100,000
100,001 and
over
Total
-
-
-
-
2
2
-
-
-
-
90,000,000
90,000,000
-
-
-
-
2
2
-
-
-
-
90,000,000
90,000,000
-
-
-
-
2
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
90,000,000
90,000,000
22
22
400,000,000
400,000,000
22
22
400,000,000
400,000,000
79
ASX ADDITIONAL INFORMATION
As at 7 SEPTEMBER 2020
Details in respect of Performance Securities on Issue
Details of the Performance Rights on issue are as follows:
Number of Performance Rights
on Issue as at 30 June 2020
Summary of Terms of the
Performance Securities
Performance Securities vested
Performance Securities
converted during the year to 30
June 2020
Class A Performance Rights
12,500,000
Class B Performance Rights
20,000,000
Class C Performance Rights
25,000,000
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
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
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
12,500,000
20,000,000
-
-
-
-
Details of Performance Shares on issue are as follows:
Number of Performance Rights
on Issue as at 30 June 2020
Summary of Terms of the
Performance Securities
Performance Shares – Tranche A
400,000,000
Performance Shares – Tranche B
400,000,000
Convert into Shares upon the Company entering into a
binding offtake agreement or agreements with an unrelated
third party purchaser or purchasers with demonstrated
capacity to complete 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 Completion Date
Convert into Shares upon the
commencement of mining operations
(based on a mining plan approved by the
Company) in respect of the Thor Lake
Project or Wigu Hill Project, within 3
years of the issue of the Tranche A
Performance Shares.
-
-
-
-
Performance Securities vested
Performance Securities
converted during the year to 30
June 2020
3.
COMPANY SECRETARY
The name of the Company Secretary is Louisa Martino.
4.
REGISTERED OFFICE
Level 5, 56 Pitt Street
Sydney, NSW, AUSTRALIA, 2000
Telephone:
Facsimile:
Website:
+61 2 8823 3100
+61 2 9525 8466
www.vitalmetals.com.au
5.
REGISTERS OF SECURITIES
Automic Registry Services
Suite 1a, Level 1
7 Ventnor Ave
West Perth, WA, 6005
Telephone: 1300 288 664
6.
STOCK EXCHANGE LISTING
Australian Securities Exchange Limited
(ASX Code: VML)
7.
RESTRICTED SECURITIES
The Company has the following restricted securities: nil
80