VRX SILICA LIMITED
ABN 59 142 014 873
ANNUAL REPORT
30 JUNE 2020
CORPORATE DIRECTORY
DIRECTORS
Paul Boyatzis (Chairman)
Bruce Maluish (Managing Director)
Peter Pawlowitsch (Non-executive Director)
SECRETARY
John Geary
REGISTERED AND PRINCIPAL OFFICE
Level 1, 6 Thelma Street
West Perth WA 6005
Telephone: (08) 9226 3780
Facsimile: (08) 9226 3764
Website: www.vrxsilica.com.au
SHARE REGISTRY
Computershare Investor Services Pty Ltd
Level 11, 172 St George's Terrace
Perth WA 6000
Telephone: (08) 9323 2000
Facsimile: (08) 9323 2033
AUDITORS
RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade
Perth WA 6000
AUSTRALIAN SECURITIES EXCHANGE
VRX Silica Limited shares (VRX) are listed on the
Australian Securities Exchange.
VRX Silica Limited
1
LETTER FROM THE BOARD OF DIRECTORS TO SHAREHOLDERS
Dear Shareholders
This year VRX Silica Limited achieved significant milestones in the Company’s progression to becoming a
global supplier of high-grade silica sand, whilst always being guided by the levels of social and
environmental responsibility expected of a responsible corporate citizen.
Management was very early in proactively engaging with the Native Title Claimants of the Arrowsmith and
Muchea silica sand project areas. Our negotiations in good faith aimed to reach a set of shared long-term
objectives for all parties, and a range of measures designed to achieve those objectives over the terms of
all agreements.
The Company was pleased to announce in January 2020 these negotiations with the Whadjuk People
Native Title Claimants and their representative body had resulted in the parties entering into a Native Title
Mining Project Agreement for the Muchea Silica Sand Project.
Subsequent to the end of the financial year the Company received confirmation that the Working Group for
the Southern Yamatji People, Native Title claimants over the Arrowsmith North and Arrowsmith Central
Silica Sand Projects project areas, had approved the terms of its proposed Mining Project Agreement
covering the areas.
On the ground the Company has undertaken sufficient drilling to assume geological and metallurgical
continuity of the sand deposits, released substantial resource upgrades and robust Bankable Feasibility
Studies (BFS) for Arrowsmith North and Central as well as our Muchea Project.
Continued and extensive metallurgical test work commissioned by VRX Silica during the year has allowed
for the creation of a catalogue of silica sand products that can be produced from each of the Silica Sand
Projects. This test-work indicates likely qualities for the manufacture of glass, ceramics and foundry sand
products considered appropriate for eventual economic extraction from the Arrowsmith projects which has
favourable logistics with a rail line to the Geraldton Port and Muchea which has a nearby rail link to the bulk
terminal at Kwinana.
VRX Silica has developed a unique mining and rehabilitation methodology specific to the environment at
our Silica Sand Projects which will enable a successful restoration of mined areas by keeping the top half
metre of topsoil intact and relocated to previously mined areas.
The COVID-19 virus has intruded into all facets of our daily lives and business this year and looks to
continue doing so for the near future. Despite this we continue to engage with our potential offtake
customers by video meetings.
We expect to maintain the momentum and to this end, on behalf of the Board, I would like to thank all staff
and contractors for their valuable contribution during the year. I would also like to thank our shareholders
for their support.
Bruce Maluish
Director
For and on behalf of the Board
VRX Silica Limited
2
COMPANY REVIEW
REVIEW OF OPERATIONS
Highlights of the activities conducted by VRX Silica Ltd during the financial year ending 30 June 2020 were:
• Arrowsmith North Mineral Resource Estimate Upgrade followed by Arrowsmith North BFS and
Maiden Ore Reserve
• Arrowsmith Central Mineral Resource Estimate Upgrade followed by Arrowsmith Central BFS and
Maiden Ore Reserve
• Executed a Strategic Alliance with China Southern Glass
• Muchea BFS and Maiden Ore Reserve
• Entered into a Native Title Mining Project Agreement for the Muchea Silica Sand Project with the
Whadjuk People Native Title Claim Applicants
The announcements for mineral resource estimate upgrades at the Arrowsmith North and Arrowsmith Central
Silica Sand Projects were followed by a Bankable Feasibility Study (BFS) and Maiden Ore Reserve
announcements for each of the projects and later in the period by a BFS and maiden Probable Ore Reserve
at the Muchea Silica Sand Project.
ARROWSMITH NORTH PROJECT
Arrowsmith North Mineral Resource Estimate Upgrade
The Arrowsmith North Silica Sand Project (Arrowsmith North) is located 270km north of Perth, WA (see
Figure 1). The maiden Mineral Resource Estimate (MRE)1 previously reported for Arrowsmith North was
based on a shallow hand auger drilling2 program.
This was followed by an aircore drill program completed during March 2019 and the receipt of the analytical
results from this program enabled the Company to upgrade the MRE on 9 July 2019 to 771 Mt @ 98.0%
3
SiO2
. This is comprised of an Indicated Resource estimate of 248 Mt @ 97.7% SiO2 and an Inferred
Resource estimate of 523 Mt @ 98.2% SiO2 which was an overall increase of 398% on the maiden MRE
(see Table 1 and Table 2 below). All Mineral Resources are reported in accordance with the 2012 edition
JORC Code4.
The MRE included an unpredicted 313 million tonnes of high-grade white sand at 98.7% SiO2. The resulting
model defined two different sand types, “Yellow” and “White” sand (Table 1 and Table 2) which differ with
respect to their chemistry and particle size distribution.
The Indicated Resource is predominately within the Mining Lease application area which is within the 100%
VRX Silica owned and granted tenements E70/5109 and E70/5027. The majority was subsequently
converted to Probable Ore Reserves (see below) and supports the Company’s continued assessment of
Arrowsmith North being an extremely long-life mining project with world-class potential. No more drilling is
required prior to the Company commencing mining operations.
1ASX announcement of 2 October 2018, “Arrowsmith North Maiden Mineral Resource.”
2ASX announcement of 13 March 2019, “Drilling at Muchea and Arrowsmith Silica Sand Projects.”
3ASX announcement of 9 July 2019, “Arrowsmith North Mineral Resource Estimate Upgrade.”
4 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
VRX Silica Limited
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COMPANY REVIEW
Figure 1: Arrowsmith North Project Location
The MRE allows for a Mining Reserve to be estimated following the completion of a positive feasibility study.
The mining depth in the Arrowsmith North Project area is limited to mining above the water table, which is 10
metres below the drilled depths and below the Resource. Additionally, the top half metre of topsoil has been
discounted in the MRE as it will be used for rehabilitation.
VRX Silica Limited
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COMPANY REVIEW
VRX Silica will undertake a further testwork program on the white sand, however metallurgical testwork
completed to-date confirms this updated silica sand resource is considered readily amenable to upgrading
by conventional washing and screening methods to produce a high-grade silica sand product with high mass
recoveries. The high-grade silica sand product specifications are expected to be suitable for industries such
as the glass making, foundry and ceramics industries.
Figure 2: Arrowsmith North Project schematic geology map showing MRE with separate drill type, Black dots =
aircore, Blue dots = auger
Figure 2 above shows the drill coverage over the tenements with the underlying sand types shown.
VRX Silica Limited
5
COMPANY REVIEW
Classification
Domain
Indicated
Inferred
Indicated +
Inferred
White Sand
Yellow Sand
All Sand
White Sand
Yellow Sand
All Sand
White Sand
Yellow Sand
All Sand
Million
Tonnes
33
215
248
280
243
523
313
458
771
SiO2%
Al2O3%
Fe2O3%
TiO2%
LOI%
98.7
97.5
97.7
98.7
97.7
98.2
98.7
97.6
98.0
0.50
1.10
1.00
0.50
1.00
0.80
0.54
1.08
0.86
0.20
0.40
0.40
0.10
0.40
0.30
0.15
0.40
0.30
0.20
0.20
0.20
0.20
0.20
0.20
0.18
0.17
0.17
0.20
0.50
0.50
0.20
0.50
0.40
0.24
0.52
0.41
*Note: Interpreted silica sand mineralisation is domained above a basal surface wireframe defined based on drill logging data.
The upper (Topsoil) layer within 0.5 m of surface is depleted from the modelled silica sand unit, being reserved for
rehabilitation purposes. All classified silica sand blocks in the model are reported. Differences may occur due to rounding.
Table 1: Arrowsmith North Silica Sand Mineral Resource Estimate as at July 2019
Classification
Domain
Indicated
Inferred
Indicated +
Inferred
White Sand
Yellow Sand
All Sand
White Sand
Yellow Sand
All Sand
White Sand
Yellow Sand
All Sand
Maiden
MRE (Mt)
Updated
MRE (Mt)
33
215
Difference
44
149
194
44
149
194
248
280
243
523
313
458
771
633%
163%
270%
708%
307%
398%
Table 2: Tonnage Comparison with Prior estimate
VRX Silica Limited
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COMPANY REVIEW
Arrowsmith North BFS and Maiden Ore Reserve
On 28 August 2019 VRX Silica announced details of its BFS and maiden Probable Ore Reserve at Arrowsmith
North5.
Financial Model
Based on capital and operating cost estimates a financial model was developed to evaluate the economics
of the Arrowsmith North project. Key outcomes from the BFS and summary financial model outputs are set
out below.
Post Tax, ungeared NPV10
Post Tax, ungeared NPV20
Post Tax, ungeared IRR
Payback period (yrs) (post tax) (ramp up rate)
Exchange Rate US$/A$
Life of Mine (yrs) (Scope of BFS)
Maiden Probable
Ore Reserve
$242,300,000
$99,800,000
79%
2.4
$0.70
25
EBIT
$1,144,000,000
Total Sales (initial 25 years) (no escalation)
$2,773,000,000
Cashflow after finance and tax
Capex (2 mtpa)
Capex contingency (inc)
Life of Mine C1 costs, FOB Geraldton (inc royalties)
Tonnes Processed (initial 25 years) (Mt)
Production Target (initial 25 years) (Mt)
Probable Ore Reserves @ 99.7% SiO2 (Mt)
Ore Reserve life (yrs)
JORC Resources (million tonnes)
$835,000,000
$28,260,000
20%
$30.18
53
47.7
204
102
771
Notes:
1. The Ore Reserve underpinning the above production target has been prepared by a Competent Person in
accordance with the requirements of the JORC Code.
2. The material assumptions for the BFS are set out below. All such material assumptions continue to apply
and have not materially changed.
3. All figures are presented in Australian dollars, unadjusted for inflation
5 ASX announcement of 28 August 2019, “Arrowsmith North BFS and Maiden Ore Reserve.”
VRX Silica Limited
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COMPANY REVIEW
Key Points and Assumptions
The BFS is based on only 25 years production from a considerable potential +100 year mine life. The project
will be a potentially new long-term industry for Western Australia with substantial economic benefits, including
long-term employment and royalties with a significant economic contribution to the local and Mid West region.
The Company has received great support for the project at meetings with the local Shires, Mid West
Development Commission, Mid West Chamber of Commerce & Industry and various local Members of State
and Federal Parliament.
The Company has engaged with the Department of Water and Environmental Regulation following
preliminary environmental studies to identify key issues pertaining to the project environmental approvals for
mining particularly the habitat for potential foraging by Red Tail and Carnaby’s black cockatoos.
VRX Silica has developed a mining and rehabilitation methodology specific to the environment at Arrowsmith
North which will enable a successful restoration of mined areas.
Key economic assumptions for the Arrowsmith North BFS are as follows:
Currency
Australian dollars
Project life
Sales contracts in Asia for silica sand are invariably based $US and a
A$0.70 exchange rate has been applied
25 years
Total probable Ore Reserve is well in-excess of this time period,
however the model is conservatively restricted to 25 years
Depreciation
15% rate on capital
Corporate tax rate
27% on taxable profit
Production
Steady state of production from Probable Ore Reserves over life of mine,
with the first 3 years at 1 million tonnes per year and thereafter at 2
million tonnes per year
The Company has currently expressions of interest and letters of intent
to purchase 1.5 million tonnes per year of Arrowsmith North products
and expects further interest once these products are made available to
the market
Shares on Issue
404,318,617
NPV estimation discount
rates
Capital cost
Operating costs
Sales revenue
Standard financial modelling conducted at both 10% and 20% discount
rates.
The 20% rate is generally above standard reporting rates but
demonstrates that the Project is still financially robust at this higher rate
Based on estimates ±15% from engineering companies with extensive
experience in sand separation
A$30.18 C1 costs, including royalties
Based on first principles and current rates for equipment
US$35-53 per dry metric tonne dependent on product type, product
quality, contract terms and quantity
Revenue is constant based on current prices and ignores any projected
growth in prices
Maximum debt
Borrowing rates
Accounts receivable
Accounts payable
A$26 million
12%
30 days
30 days
VRX Silica Limited
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COMPANY REVIEW
Plant maintenance
5% of capital cost per year
Environmental bond
A$500,000
May be substituted by the WA Department of Mines, Industry Regulation
and Safety’s “Mining Rehabilitation Fund”
Capex contingency
20%
Recoveries
40%
N40 (Foundry ASF 40)
N20 (Foundry ASF 20)
24%
NF400 (Glass 400 ppm Fe2O3) 20%
Recoveries are based on CDE testwork at ±5%
Probable Ore Reserve
Table 3 below details the Probable Ore Reserve that will be produced from the mining of the Indicated Mineral
Resource and processing in a purpose built, wet sand processing plant.
The plant will produce four saleable products for different markets with a total Probable Ore Reserve of
223Mt, with 204Mt contained within the mining lease application MLA70/1389.
Chemical Composition
Classification
Product
Recovery
Probable
Arrowsmith-N20
24%
Arrowsmith-N40/
NF500
Local Market
60%
6%
Total Reserve
Global
Million
Tonnes
60
149
15
223
Within MLA70/
1389
Million Tonnes
54
136
14
204
SiO2
%
99.7
Al2O3
%
0.2
Fe2O3
%
0.05
TiO2
%
0.035
LOI
%
0.1
99.7
0.2
0.05
0.035
0.1
Particle Size
Product
Arrowsmith-N20
Arrowsmith-N40
Arrowsmith-NF500
Local Market
Sieve Opening (Mesh/μm Retained)
10 /
2mm
0.10%
-
-
-
20 /
850
3%
0%
-
-
30 /
600
87%
21%
40 /
425
8%
36%
0.50%
40%
-
-
50 /
300
1%
24%
42%
-
70 /
212
0.10%
13%
17%
100 /
150
-
5%
1%
140 /
106
-
1%
0%
200 /
75
-
0%
-
-
64%
22%
14%
AFS
No
21
36
38
-
Table 3: Arrowsmith North Silica Sand Probable Ore Reserve as at July 2019
VRX Silica Limited
9
COMPANY REVIEW
Metallurgical Factors
As a part of the upgraded MRE, CSA Global reviewed the metallurgical testwork to comply with Clause 49 of
the JORC Code. CSA Global has concluded that the available process testwork indicates likely product
qualities for glass, ceramics and foundry sand are considered appropriate for eventual economic extraction
from Arrowsmith North. Favourable logistics and the location of the project support the classification of
Arrowsmith North (in accordance with Clause 49) as an industrial mineral with an Inferred/Indicated Mineral
Resource
The extensive metallurgical testwork which has been completed by CDE Global at their facility in Cookstown,
Northern Ireland, and Nagrom in Kelmscott, Perth, allowed for the creation of a catalogue of silica sand
products that could be produced from Arrowsmith North6 (see Table 4).
A key challenge for industrial minerals projects is meeting market specifications. The silica sand market has
specifications for parameters such as purity (e.g. SiO2 content) in addition to tight specifications for trace
elements such as Fe, Ti, Al and Cr in the glass industry. The Company is confident that it can meet these
specifications from Arrowsmith North.
Chemical Composition (%)
Product
Industry SiO2 Al2O3
Fe2O3
TiO2
CaO
MgO
K2O
Arrowsmith-N20
Arrowsmith-N40
Arrowsmith-NF500
Foundry 99.7
Foundry 99.7
99.7
Glass
0.20
0.20
0.20
0.050
0.050
0.050
0.035
0.035
0.035
0.010
0.010
0.010
0.002
0.002
0.002
0.030
0.030
0.030
Particle Size
Product
Arrowsmith-N20
Arrowsmith-N40
Arrowsmith-
NF500
Sieve Opening (Mesh/μm Retained)
10 /
2mm
0.1%
30 /
600
87%
21%
40 /
425
8%
36%
20 /
850
3%
0%
50 /
300
1%
24%
70 /
212
0.1%
13%
100 /
150
140 /
106
200 /
75
5%
1%
0%
AFS
No
21
36
0.5% 40%
42%
17%
1%
0%
Table 4: Arrowsmith North saleable products from catalogue
Table 4 shows the recovered products which make up the Probable Ore Reserve. The mass balance of the
particle sizes was analysed allowing for the recoveries of these products in a wet processing plant to be
estimated.7 The recovery of each product is shown in Table 5.
Product
Arrowsmith-N20
Arrowsmith-N40 / NF500
Local Market
Industry
Foundry
Foundry / Glass
Fine sand
Total Recovery
Recovery
24%
60%
6%
90%
Table 5: Arrowsmith North Product Recovery
6ASX announcement of 26 February 2019, “Testwork Update and product Catalogues”.
7ASX announcement of 3 May 2019, “High Recovery from Silica Sand Process Plant Design”.
VRX Silica Limited
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COMPANY REVIEW
Material Modifying Factors – Mining Factors
The mining method chosen for Arrowsmith North is a rubber wheeled front-end loader, feeding into a 3 mm
trommel screen to remove oversize particles and organics. The undersize sand is slurried and pumped to a
sand processing plant located proximal to the Eneabba to Geraldton railway line. After processing, the silica
sand is loaded into railway trucks for bulk export from the Geraldton Port.
Mining of the dune sand will extract to the base of the Indicated Resource/Probable Ore Reserve. This level
is roughly the same as the freehold land boundary on the western side of the mining area and will leave a
slightly undulating surface. On the eastern side of the mining area the sand will slope upward as a 10%
gradient to the top of the adjacent dunes.
100% of the material in the Mining Lease application area is considered to be sand that can be beneficiated
to a saleable silica sand project. The top 500mm has been excluded from the MRE as it will be reserved for
rehabilitation purposes. As there is no waste material, the recovery factor is considered to be 100% and ore
loss therefore is considered to be 0%.
Material Modifying Factors – Environmental Studies
Development location:
• South of the Yardongo Nature Reserve
• Approximately 10 km inland of the coast
• North of the Arrowsmith River (Registered Aboriginal Heritage Site)
• Outside of World Heritage Areas, National Heritage Places, Ramsar Wetlands, Conservation Reserves
or Commonwealth Marine Reserves
The Probable Ore Reserve is located within an area of deep sands, leached of nutrients. The vegetation is
coastal low scrub heath (known as Kwongan heath). There are relict dune structures which are represented
as low rolling hills.
Assessment process:
• Referral submission to the Federal Department of the Environment and Energy (DotEE);
• Submission of Section 38 referral to State Environmental Protection Authority (EPA)
• Seek an Accredited Environment Protection and Biodiversity Conservation Act 1999 (Cth) Assessment
under the State Environmental Protection Act 1986 (WA) via an Environmental Review Document with
public comment
• Undertake any further studies required
• Submission of Environmental Review Document
Mitigation strategies:
• Proposed Action lies within a large Development Envelope, allowing for the flexibility to target areas of
lower significance to matters of national environmental significance (MNES)
• Disturbance will be kept to a minimum, up to 35 ha per year and 14 ha at any one time
• Progressive rehabilitation using topsoil re-location to ensure topsoil and plants are translocated intact to
previously mined areas
• Conduct further surveys to identify MNES
• Use findings to steer the project and avoid MNES where possible
There are no mine tailings storage requirements, there are no waste dumps and processing requires no
chemicals.
VRX Silica Limited
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COMPANY REVIEW
Material Modifying Factors – Infrastructure
The project is located on unallocated crown land which is east of freehold land and bounded to the north by
a Nature Reserve and South by a proposed Nature Reserve. The west boundary of the project area is the
limit of tenure. The Brand Highway is proximal to the area and access is via the Mount Adams Road from the
north or Brand Highway to the south. The Eneabba/Geraldton rail line lies to the south west of the project
and will be used to transport the processed silica sand to the Geraldton Port for bulk export.
The project will require its own installed power and water infrastructure and labour will be sourced from the
nearest towns Dongara and Eneabba (approximately 30km from the mine site) and there will be no
accommodation installed at the mine site.
Costs
Operating Costs
Operating costs have been determined from first principles and are estimated to include all costs to mine,
process, transport and load product on to ships. They are estimated on 1 million tonnes per year throughput,
with expected unit cost savings if throughput is increased as anticipated to potentially 2 million tonnes per
year.
Royalties
The prevailing rate of royalty due to the State is used in the Company’s economic assessments. The State
Royalty rate is A$1.17 per dry metric tonne and reviewed every 5 years with the next review due in 2020.
There are no other royalties payable (including private) though a royalty may be negotiated with Native Title
claimants.
Revenue
Product Quality
Multiple products will be differentiated during processing subject to required particle size distribution by
screening. Recovery of products has been independently assessed by CDE Global, a world leading silica
sand testing laboratory.
Commodity Prices
Commodity prices for silica sand products have been determined by independent industry source Stratum
Resources. The industry standard is that sales contracts are in US dollars. The exchange rate to convert to
Australian dollars will be the prevailing rate at the time of payment.
Subject to final quality produced, the prices for the commodity will range from US$38 to US$58 per dry metric
tonne Free on Board (FOB). There will be no other treatment, smelting or refining charges. There are no
shipping cost estimates with all contracts to be based on FOB rates.
Revenue will be based on a negotiated per shipment basis per dry metric tonne FOB with payment by demand
on an accredited bank letter of credit.
Market Assessment
Industry leader Stratum Resources was commissioned by the Company to prepare an independent
assessment of the current market prices for proposed products. The assessment includes projections for
future demand and supply of silica sand and concludes there is a future tightening of supply of suitable
glassmaking silica sand with a commensurate future increase in price.
Sales volumes have been estimated as a result of received letters of intent and expressions of interest to
purchase products.
VRX Silica Limited
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COMPANY REVIEW
Economic Factors
The Company’s economic analysis has calculated a 10% and 20% discounted ungeared post tax net present
value (NPV). A 20% discounted NPV has also been calculated to demonstrate the strength of the economic
analysis.
The analysis is based on a 25-year production profile despite the Probable Ore Reserve far exceeding that
project life and has not considered any escalated future product prices nor any inflation to operating costs.
The analysis has used a US$/A$ exchange rate of US$0.70/A$1.00.
The analysis is most sensitive to the exchange rate and sales prices. The analysis indicates the financials of
the project are very robust and there is a high confidence that a viable long-term mining operation can be
justified. Capital requirements are based on independent estimates.
Social Factors
The Company made an application for a mining lease (M70/1389) on 21 December 2018. The application
lies within the Southern Yamatji Native Title claim boundaries (WC2017/002), which replaced a pre-
combination claim (WC2004/002) by the Amangu People. The Company has completed negotiations with
the claimant group regarding the mining lease application and the Company expects full execution of the
formal agreement for the grant of the mining lease is imminent. The project is wholly on unallocated crown
land and there is little negative impact on local communities.
Project Funding
The financial model summarised in the BFS sets out the project metrics and provides a basis for the potential
capital structure of the Company for the development of the project. Total capital expenditure at Arrowsmith
North (for a 2 million tonnes per annum processing plant) is estimated at approximately A$28 million (the
BFS details capital cost estimates).
The Company anticipates that the source of funding the capital investment at Arrowsmith North will be any
one, or a combination of, equity, debt and pre-paid offtake from the project. Whilst no final decision has been
made in that regard, the financial model assumes a maximum A$26 million in debt.
The Company has received a number of enquiries and expressions of interest from debt financiers for the
project. The financial model provides for debt capacity and is designed to meet the expectations of any
providers of potential debt funding for their due diligence and other internal requirements.
In addition, VRX Silica has also received enquiries and expressions of interest from organisations across
Asia for silica sand products from the project and holds signed letters of intent for substantial tonnages. A
number of these organisations have expressed interest in becoming a funding partner of the Company for
development of a mine by way of pre-paid offtake arrangements. The balance of the Company’s capital
requirements will be funded from equity capital.
Whilst the envisaged project development requires a low capital intensity relative to a greenfields hard rock
mining project, and any one of, or a combination of equity, debt and pre-paid offtake is planned, VRX Silica
has not as yet secured the required capital. The positive financial metrics of the BFS and feedback from
potential funding partners provides encouragement as to the likelihood of meeting optimum project and
corporate capital requirements.
VRX Silica Limited
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COMPANY REVIEW
ARROWSMITH CENTRAL PROJECT
Arrowsmith Central Mineral Resource Estimate Upgrade
The Arrowsmith Central Silica Sand Project (Arrowsmith Central) is located 270km north of Perth, WA (see
Figure 3).
Figure 3: Arrowsmith Central Project Location
The air core drill program conducted at Arrowsmith North during March 2019 (see above) also included
Arrowsmith Central.
VRX Silica Limited
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COMPANY REVIEW
The previously reported maiden MRE for Arrowsmith Central8 was based on shallow hand auger drilling9 and
the receipt of the air core analytical results enabled the MRE to be upgraded to an Indicated Mineral Resource
of 28.2 Mt @ 96.6% SiO2 in addition to an Inferred Mineral Resource of 48.3 Mt @ 96.9% SiO2 for a total MRE
of 76.5 Mt @ 96.8% SiO2. This was announced to ASX in August 2019. 10 All Mineral Resources are reported
in accordance with the JORC Code (see Table 6 and Table 7).
The Indicated MRE is predominately within the Mining Lease application area for Arrowsmith Central and the
Company expects that the majority of the Indicated Mineral Resource will convert to Probable Reserves and
a long-life mining project. The estimation of an Indicated Mineral Resource will allow for an Ore Reserve to
be estimated once a feasibility study is completed.
This Arrowsmith Central MRE complements Arrowsmith North and adds not only to VRX Silica’s total inventory
but will also produce alternative products for the glassmaking and foundry industries in Asia.
Classification
Indicated
Inferred
Indicated + Inferred
Million
Tonnes
28.2
48.3
76.5
SiO2%
Al2O3%
Fe2O3%
TiO2%
LOI%
96.6
96.9
96.8
1.7
1.5
1.5
0.4
0.4
0.4
0.2
0.2
0.2
0.7
0.7
0.7
* Note: Interpreted silica sand layer is domained above a basal surface wireframe defined based on
the drill sampling depths. A depletion zone, consisting of the upper 0.5 m, is reserved for rehabilitation
purposes and is not estimated or reported. Differences may occur due to rounding
Table 6: Arrowsmith Central Silica Sand Mineral Resource Estimate as at July 2019
Classification
Indicated
Inferred
Indicated + Inferred
Maiden
MRE (Mt)
28.0
28.0
Updated
MRE (Mt)
28.2
48.3
76.5
Difference
173%
273%
Table 7: Tonnage Comparison with Prior estimate
The MRE is wholly within granted tenement E70/4987 which is 100% owned by the Company. This MRE
update is based on the results of the most recent drilling, with the initial hand auger drilling being used to
assist in the model estimation. The modelled extents are further limited to within the VRX Silica nominated
Arrowsmith Central target area and based on the geologically logged drill data and with reference to the
publicly available soil mapping data (see Figure 5).
8ASX announcement of 13 December 2019, “Arrowsmith Central Maiden Mineral Resource.”
9ASX announcement of 13 March 2019, “Drilling at Muchea and Arrowsmith Silica Sand Projects.”
10ASX announcement of 15 August 2019, “Arrowsmith Central Mineral Resource Estimate Upgrade.”
VRX Silica Limited
15
COMPANY REVIEW
Based on the soil mapping data the entire Arrowsmith Central target area is underlain by a single mixed silica
sand material unit, which consists of dominant pale deep sands with interspersed yellow sands. The MRE
has been estimated to the bottom of the potentially mineable sand layer with the top half metre of topsoil
having been discounted in the MRE as it will be used for rehabilitation. Figure 4 below is a representative
section through the MRE showing the modelled layer and Figure 5 shows the drill coverage over the
tenements with the underlying sand types shown.
Figure 4: Representative schematic section A – B (See Figure 5), Looking north; 10 times Vertical exaggeration.
Metallurgical testwork completed to-date confirms this updated silica sand model is considered readily
amenable to upgrading by conventional washing and screening methods to produce a high-grade silica sand
product with high mass recoveries. The high-grade silica sand product specifications are expected to be
suitable for the glass making, foundry and ceramics industries.
Figure 5: Simplified geology of the Arrowsmith Central Area. Figure 4 section line A – B shown. Tenements as in
Figure 1. Auger and AC drill collar locations shown as blue and red points respectively.
VRX Silica Limited
16
COMPANY REVIEW
Arrowsmith Central BFS and Maiden Ore Reserve
VRX Silica announced details of the BFS and maiden Probable Ore Reserve for Arrowsmith Central on 17
September 201911.
The Probable Ore Reserve for Arrowsmith Central totals 18.9Mt @ 99.6% SiO2 as reported in accordance with
the JORC Code, with 18.7Mt @ 99.6% SiO2 contained within the area of the Company’s Mining Lease
application (M70/1392) for Arrowsmith Central. Arrowsmith Central is a smaller Resource than Arrowsmith
North but still has the potential to be a very long-life project with additional drilling of the Inferred Resource
expected to be sufficient to realise the production target.
It will produce alternative products to Arrowsmith North and will add to VRX Silica’s available catalogue of
products to be produced.
Financial model
Based on capital and operating cost estimates a financial model was developed to evaluate the economics
of the Arrowsmith Central project. Key outcomes from the BFS and summary financial model outputs are set
out below.
Post Tax, ungeared NPV10
Post Tax, ungeared NPV20
Post Tax, ungeared IRR
Payback period (yrs) (post tax) (ramp up rate)
Exchange Rate US$/A$
Life of Mine (yrs) (BFS Study)
EBIT
Total Sales (no escalation)
Cashflow after finance and tax
Capex (2 Mtpa)
Capex contingency (inc)
Life of Mine C1 costs, FOB Geraldton (inc Royalties)
Tonnes Processed (Mt) (BFS Study)
Production Target (Mt)
Probable Ore Reserves (Mt) (99.6% SiO2)
Ore Reserve life (yrs)
JORC Resources (Mt)
Maiden Probable Ore
Reserve Only
Maiden Probable Ore
Reserve and Inferred
Mineral Resource
$103,800,000
$47,800,000
$147,600,000
$56,100,000
60%
2.8
$0.70
13-14
60%
2.8
$0.70
25
$335,000,000
$737,000,000
$1,022,000,000
$2,167,000,000
$243,000,000
$25,880,000
$539,000,000
$25,880,000
20%
$28.21
24
19
19
9
77
20%
$27.67
51
39.6
19
9
77
11 ASX announcement of 17 September 2019, “Arrowsmith Central BFS and Maiden Ore Reserve.”
VRX Silica Limited
17
COMPANY REVIEW
Notes:
1. There is a low level of geological confidence associated with inferred mineral resources and there is no certainty
that further exploration work will result in the determination of indicated mineral resources or that the production
target itself will be realised.
2. The Probable Ore Reserve and the Inferred Mineral Resource underpinning the above production targets have
been prepared by a Competent Person in accordance with the requirements of the JORC Code.
3. The material assumptions for the BFS are set out below. All such material assumptions continue to apply and have
not materially changed from the date of release of the BFS.
4. All figures are presented in Australian dollars, unadjusted for inflation.
5. The first column shows outputs from the Probable Ore Reserve only and the second column showing outputs from
the aggregated Probable Ore Reserve and the Inferred Mineral Resource.
Key Points and Assumptions
The key points and assumptions for Arrowsmith Central are the same as for Arrowsmith North (see above)
except where noted below.
The BFS is based on only 25 years production from a long-term +35 year mine life.
The maiden Probable Ore Reserve of 18.7 Mt @ 99.6% SiO2 contained within the area of the Company’s
Mining Lease application area supports a 13-14 year project. This is estimated from the Indicated Mineral
Resource only and constitutes approximately 48% of the estimated total production target (in terms of
processed tonnes of silica sand) over the 25 year mine life for the project BFS. The Company intends to
mine solely from Probable Ore Reserves in the initial 13-14 years of the project. The balance is from the
Inferred Mineral Resource in the proposed mining area which is 29.4 Mt @ 96.2% SiO2, which the Company
intends to mine from year 14 onwards.
Key economic assumptions for the Arrowsmith Central BFS are as follows:
Currency
Australian dollars
Sales contracts in Asia for silica sand are invariably based $US and a A$0.70
exchange rate has been applied
Project life
25 years
Total Probable Ore Reserve alone supports a 13-14 year project. Mining will
occur solely from the Probable Ore Reserve during the first 13-14 years.
There is a reasonable expectation that with further close spaced drilling the
existing Inferred Mineral Resource would convert to Indicated Mineral Resource
and subsequently Probable Ore Reserve. This will increase the mine life to well
in excess of this time period, however the model is conservatively restricted to
25 years.
Depreciation
15% rate on capital
Corporate tax rate
27% on taxable profit
Production
Steady state of production from Probable Ore Reserves over life of mine, with
the first 5 years at 1 million tonnes per year and thereafter at 2 million tonnes
per year
Currently the Company has expressions of interest and letters of intent to
purchase 1 million tonnes per year of Arrowsmith Central products and expects
further interest once these products are available to the market
Shares on Issue
404,318,617
VRX Silica Limited
18
COMPANY REVIEW
NPV estimation
discount rates
Standard financial modelling conducted at both 10% and 20% discount rates.
The 20% rate is generally above standard reporting rates but demonstrates that
the Project is still financially robust at this higher rate
Capital cost
Based on estimates ±15% from engineering companies with extensive
experience in sand separation
Operating costs
A$27.67 C1 costs, including royalties
Based on first principles and current rates for equipment
Sales revenue
US$35-46 per dry metric tonne dependent on product type, product quality,
contract terms and quantity
Revenue is constant based on current prices and ignores any projected growth
in prices
Maximum debt
A$20 million
Borrowing rates
12%
Accounts receivable
30 days
Accounts payable
30 days
Plant maintenance
5% of capital cost per year
Environmental bond A$500,000
May be substituted by the WA Department of Mines, Industry Regulation and
Safety’s “Mining Rehabilitation Fund”
Capex contingency
20%
Recoveries
CF400 (Glass 400 ppm Fe2O3) 17%
34%
C20 (Foundry ASF 20)
17%
C50 (Foundry ASF 50)
TiO2 Concentrate 9%
Recoveries are based on CDE testwork at ±5%
The Company has undertaken sufficient drilling to assume geological and metallurgical continuity of the sand
deposit. There is negligible difference between the modelled sand in each category. In order to upgrade the
Inferred Mineral Resource, the Company anticipates that an additional 500 m of aircore drilling will be
required. The cost for drilling, assaying and associated studies is estimated (at current rates) to be in the
region of $100,000 and will need to be undertaken within the first 13 years of mining operations.
Given the simple nature of the silica sand deposit at the project and the associated geological and
metallurgical confidence, the Company expects that this additional drilling will be sufficient to realise the
production target.
Notwithstanding the above, there is a low level of geological confidence associated with inferred mineral
resources and there is no certainty that further exploration work will result in the determination of indicated
mineral resources or that the production target itself will be realised.
VRX Silica Limited
19
COMPANY REVIEW
Probable Ore Reserve
VRX Silica has completed the necessary work to convert the Indicated Mineral Resource to Probable Ore
Reserve.
The Probable Ore Reserve for Arrowsmith Central totals 18.9 Mt @ 99.6% SiO2 as reported in accordance
with the JORC Code with 18.7 Mt @ 99.6% SiO2 contained within the area of the Company’s Mining Lease
application (MLA70/1392).
Classification
Indicated
Inferred
Indicated + Inferred
Million
Tonnes
28.2
48.3
76.5
SiO2%
Al2O3%
Fe2O3%
TiO2%
LOI%
96.6
96.9
96.8
1.7
1.5
1.5
0.4
0.4
0.4
0.2
0.2
0.2
0.7
0.7
0.7
* Note: Interpreted silica sand mineralisation is domained above a basal surface wireframe defined based
on drill sampling depths. A depletion zone, consisting of the upper 0.5 m, is reserved for rehabilitation
purposes and is not estimated or reported. Differences may occur due to rounding.
Table 8: Arrowsmith Central Silica Sand Mineral Resource Estimate as at September 2019
Table 9 below details the Probable Ore Reserve that will be produced from the mining of the Indicated Mineral
Resource and processing in a purpose built, wet sand processing plant.
The plant will produce four saleable products for different markets with a total Probable Ore Reserve of
18.9 Million tonnes, with 18.7 Million tonnes contained within the mining lease application M70/1392.
Chemical Composition
Global
Classification
Product
Probable
Arrowsmith-CF400
Arrowsmith-C20
Arrowsmith-C50
TiO2 Concentrate
Recovery Million
Tonne
s
4.2
17%
Within
M70/1392
Million
Tonnes
4.1
34%
17%
9%
8.4
4.2
2.2
8.2
4.1
2.2
Total Reserve
18.9
18.7
SiO2
%
Al2O3
%
Fe2O
3%
TiO2
%
LOI
%
99.6
0.25
0.04
0.03
0.1
<1%
+2
%
Particle Size
Product
Arrowsmith-CF400
Sieve Opening (Mesh / μm Retained)
10 /
2mm
-
20 /
850
0%
30 /
600
0.5%
40 /
425
44%
50 /
300
70 /
212
38.9% 16.1%
100 /
150
0.5%
140 /
106
-
200 /
75
-
Arrowsmith-C20
6.2%
22.2% 30.4% 37.9%
2.9%
0.3%
0.1%
-
-
Arrowsmith-C50
-
-
0.3%
31.9% 27.5% 17.3%
13.7%
8.2%
1.1%
AFS
No
37
22
49
Table 9: Arrowsmith Central Silica Sand Probable Ore Reserve as at September 2019
VRX Silica Limited
20
COMPANY REVIEW
Metallurgical Factors
As a part of the upgraded MRE, CSA Global reviewed the metallurgical testwork to comply with Clause 49 of
the JORC Code. CSA Global has concluded that the available process testwork indicates likely product
qualities for glass, ceramics and foundry sand are considered appropriate for eventual economic extraction
from Arrowsmith Central. Favourable logistics and the location of the project support the classification of
Arrowsmith Central (in accordance with Clause 49) as an industrial mineral with an Inferred/Indicated Mineral
Resource.
The extensive metallurgical testwork which has been completed by CDE Global at their facility in Cookstown,
Northern Ireland, and Nagrom in Perth, allowed for the creation of a catalogue of silica sand products that
could be produced from Arrowsmith Central12 (see Table 10).
Chemical Composition (%)
Product
Industry SiO2 Al2O3 Fe2O3 TiO2 CaO MgO
K2O
Arrowsmith-CF400 Glass
99.6 0.25
0.040 0.030 0.005 0.001 0.050
Arrowsmith-C20
Foundry 99.6 0.25
0.040 0.030 0.005 0.001 0.050
Arrowsmith-C50
Foundry 99.6 0.25
0.040 0.030 0.005 0.001 0.050
Particle Size
Sieve Opening (Mesh / μm Retained)
Product
Arrowsmith-CF400
10 /
2mm
20 /
850
40 /
30 /
600
425
0.5% 44%
50 /
300
39%
70 /
212
16%
100 /
150
0.5%
140 /
106
200 /
75
AFS
No
Arrowsmith-C20
6%
22%
30%
38%
3%
0.3% 0.1% 0%
Arrowsmith-C50
0%
0.3% 32%
28%
17%
14%
8%
1%
22
49
Table 10: Arrowsmith Central saleable Products from Catalogue
In addition to these products the processing plant will produce a by-product from the spirals plant which
contains a concentration of titanium minerals such as rutile and ilmenite which can be sold at a nominal value
to a company with specialist equipment for separating mineral concentrate.
These products become the recovered products which make up the Probable Ore Reserve, Table 9. The
mass balance of the particle sizes was analysed allowing for the recoveries of these products in a wet
processing plant to be estimated.13 The recovery of each product is shown in Table 11.
Product
Industry
Recovery
Arrowsmith - C20
Foundry
Arrowsmith - C50/CF400
Foundry / Glass
TiO2 Concentrate
Mineral sands
Total Recovery
34%
34%
9%
77%
Table 11: Arrowsmith Central Product Recovery
12ASX announcement of 26 February 2019, “Testwork Update and product Catalogues”.
13ASX announcement of 3 May 2019, “High Recovery from Silica Sand Process Plant Design”.
VRX Silica Limited
21
COMPANY REVIEW
Material Modifying Factors – Environmental Studies
Development location:
• East of the Beekeepers Nature Reserve
• Approximately 20 km inland of the coast
• South of the Arrowsmith River (Registered Aboriginal Heritage Site)
• Outside of World Heritage Areas, National Heritage Places, Ramsar Wetlands, Conservation Reserves
or Commonwealth Marine Reserves
Revenue
Commodity Prices
Subject to final quality produced, the prices for the commodity will range from US$35 to US$46 per dry metric
tonne FOB. There are no shipping cost estimates with all contracts to be based on FOB rates.
Economic Factors
The analysis is based on a 25 year production profile with the Probable Ore Reserve supporting a 13-14 year
project. Mining will occur solely from the Probable Ore Reserve during that period. There is a reasonable
expectation that with further close spaced drilling the existing Inferred Resources would convert to Indicated
Resources and Probable Reserves well in excess of this time period, however the model is conservatively
restricted to 25 years. See above for further information.
Social Factors
The Company made an application for a mining lease (M70/1392) on 13 February 2019. The application lies
within the Southern Yamatji Native Title claim boundaries (WC2017/002), which replaced a pre-combination
claim (WC2004/002) by the Amangu People. The Company has completed negotiations with the claimant
group regarding the mining lease application and the Company expects full execution of the formal agreement
for the grant of the mining lease is imminent. The project is wholly on unallocated crown land and there is little
negative impact on local communities.
Project Funding
Mining from the area of the Probable Ore Reserve only supports a 13-14 year mine life. The Company intends
to mine solely from the Probable Ore Reserve during that period. The financial model shows that Arrowsmith
Central is a viable project with the Probable Ore Reserve only, and the Inferred Mineral Resource is not the
determining factor for its viability.
The Company has received a number of enquiries and expressions of interest from debt financiers for the
project. The financial model provides for debt capacity and is designed to meet the expectations of any
providers of potential debt funding for their due diligence and other internal requirements.
VRX Silica Limited
22
COMPANY REVIEW
MUCHEA PROJECT
Muchea BFS and Maiden Ore Reserve
On 18 October 2019 VRX Silica announced details of its BFS and maiden Probable Ore Reserve at Muchea.
This was the third BFS for the Company’s three advanced silica sand projects announced during 2019.
The Muchea Silica Sand Project is located 50km north of Perth and held in its wholly owned subsidiary Wisecat
Pty Ltd (Wisecat).
The Muchea Silica Sand Project (Muchea) is located 50km north of Perth (see Figure 6).
Figure 6: Muchea Project Location
VRX Silica Limited
23
COMPANY REVIEW
The Probable Ore Reserve for Muchea totals 18.7 Mt @ 99.9% SiO2 as reported in accordance with the JORC
Code, with 14.6Mt @ 99.9% SiO2 contained within the area of the Company’s Mining Lease application
(M70/1390) for Muchea.
This Reserve estimate is only a small portion of the silica sand Inferred Resource Estimate for the project but
produces a very high-grade product which is in high demand in specialist Asian markets. Muchea is a world
class high-grade silica sand project which can support a substantial export industry for WA providing benefits
to the State and the Muchea-Gingin district.
Muchea will produce alternative high-grade products to Arrowsmith and will add to our available catalogue of
products from our silica sand projects. The Company has already had significant interest in the Muchea
product which will command higher prices than products from the Company’s Arrowsmith North and Central
silica sand projects.
Financial Model
Based on the capital and operating cost estimates a financial model was developed for the purpose of
evaluating the economics of the Project. Key outcomes from the BFS and summary financial model outputs
are set out below, with the first column showing outputs from the aggregated Probable Ore Reserve and the
Inferred Mineral Resource, and the second column showing outputs from the Probable Ore Reserve only.
Muchea
(Inc. Inferred)
Muchea (Reserve
Only)
Post Tax, ungeared NPV10
Post Tax, ungeared NPV20
Post Tax, ungeared IRR
Payback period (yrs) (post tax) (ramp up rate)
Exchange Rate US$/A$
Life of Mine (yrs) (Scope of BFS Study)
$337,900,000
$180,500,000
$146,400,000
$104,600,000
96%
2.3
$0.70
25
96%
2.3
$0.70
15
Total Sales (initial 25 years) no escalation
$3,345,000,000
$1,011,000,000
EBIT
$1,540,000,000
$447,000,000
Cashflow after finance and tax
$1,123,000,000
$321,000,000
Shares on Issue
EPS after tax (per year)
Capex (2 mtpa)
Capex contingency (inc)
Life of Mine C1 costs, FOB Kwinana (inc royalties)
Tonnes Processed (initial 25 years) (Mt)
404,318,617
404,318,617
$0.11
$0.09
$32,820,000
$32,820,000
20%
$32.74
54
20%
$33.84
16
Production Target (Mt) (BFS Study)
(25 years) 48.3
(9-10 years) 14.6
Probable Ore Reserves @ 99.9% SiO2 (Mt)
Ore Reserve life (yrs)
JORC Resources (million tonnes)
18.7
9-10
208
18.7
9-10
208
VRX Silica Limited
24
COMPANY REVIEW
Notes:
1. There is a low level of geological confidence associated with inferred mineral resources and there is no
certainty that further exploration work will result in the determination of indicated mineral resources or that the
production target itself will be realised.
2. The Probable Ore Reserve and the Inferred Mineral Resource underpinning the above production targets have
been prepared by a Competent Person in accordance with the requirements of the JORC Code.
3. The material assumptions for the BFS are set out below. All such material assumptions continue to apply and
have not materially changed from the date of release of the BFS.
4. All figures are presented in Australian dollars, unadjusted for inflation.
Mining from the area of the Probable Ore Reserve only supports a 9-10 year mine life. The Company intends
to mine solely from the Probable Ore Reserve during that period. The financial model shows that Muchea is
a viable project with the Probable Ore Reserve only, and the Inferred Mineral Resource is not the determining
factor for its viability.
Key Points and Assumptions
The BFS is based on only 25 years production from a potentially long-term +100 year mine life.
The maiden Probable Ore Reserve of 14.6 Mt @ 99.9% SiO2 contained within the area of the Company’s
Mining Lease application and will support a 9-10 year project. This is estimated from the Indicated Mineral
Resource only and constitutes approximately 39% of the estimated total production target (in terms of
processed tonnes of silica sand) over the 25 year mine life. The Company intends to mine solely from
Probable Ore Reserves during the initial 9-10 years of the project.
The balance is from the Inferred Mineral Resource of 61.4 Mt @ 99.6% SiO2 in the proposed mining area
which the Company intends to mine from year 10 onwards. The Company has undertaken sufficient drilling
to assume geological and metallurgical continuity of the sand deposit. There is negligible difference between
the modelled sand in each category. In order to upgrade the Inferred Mineral Resource, the Company
anticipates that an additional 2,000m of aircore drilling will be required. The cost for drilling, assaying and
associated studies is estimated (at current rates) to be in the region of $200,000 and will need to be
undertaken within the first 9-10 years of mining operations. Given the simple nature of the silica sand deposit
at the project and the associated geological and metallurgical confidence, the Company expects that this
additional drilling will be sufficient to realise the production target. Notwithstanding this, there is a low level
of geological confidence associated with inferred mineral resources and there is no certainty that further
exploration work will result in the determination of indicated mineral resources or that the production target
itself will be realised.
The Company has been in discussions with both the Department of Premier and Cabinet and the Department
of Jobs, Tourism, Science and Industry to identify options for the Company to gain access to ground within
File Notation Area 12671 (FNA), which is for the proposed “Perth and Peel Green Growth Plan for 3.5 million”.
Whilst that ground sits outside the proposed development area for the project and the FNA does not affect
the modelled 25 years of production at Muchea detailed in the BFS, the Company is seeking access to this
ground to extend the project’s mine life to well beyond 25 years, and potentially over 100 years. Further
details of the FNA are set out in the BFS.
The Company has met with various local Members of State and Federal Parliament with great support for the
project. The project will be a potentially new long-term industry for Western Australia and the feeder for
numerous potential downstream industries, all with substantial economic benefits, including long-term
employment and royalties with a significant economic contribution to the Muchea-Gingin district.
The Company has engaged with the Department of Water and Environmental Regulation following preliminary
environmental studies to identify key issues pertaining to the project environmental approvals for mining
particularly the vegetation for potential foraging by Red Tail and Carnaby’s cockatoos.
VRX Silica Limited
25
COMPANY REVIEW
VRX Silica has developed a mining and rehabilitation methodology specific to the environment at Muchea
which will enable a successful restoration of mined areas.
A key challenge for industrial minerals projects is meeting market specifications. The silica sand market has
specifications for parameters such as purity (e.g. SiO2 content) in addition to tight specifications for trace
elements such as Fe, Ti, Al and Cr in the glass industry.
The Company is confident that it can meet specifications for the ultra-clear glass market from Muchea.
Key economic assumptions for the Muchea BFS are as follows:
Currency
Australian dollars
Sales contracts in Asia for silica sand are invariably based $US and a
A$0.70 exchange rate has been applied
Project life
25 years
Total Probable Ore Reserve alone supports a 9-10 year project. Mining
will occur solely from the Probable Ore Reserve during the first 9-10
years.
There is a reasonable expectation that with further close spaced drilling
the existing Inferred Mineral Resource would convert to Indicated
Mineral Resource and subsequently Probable Ore Reserve. This will
increase the mine life to well in excess of this time period, however the
model is conservatively restricted to 25 years
Depreciation
15% rate on capital
Corporate tax rate
27% on taxable profit
Production
Steady state of production from Probable Ore Reserves over life of mine,
with the first 2 years at 1 million tonnes per year and thereafter at 2
million tonnes per year
The Company has currently expressions of interest and letters of intent
to purchase 3.5 million tonnes per year of Muchea products and expects
further interest once these products are made available to the market
Shares on Issue
404,318,617
NPV estimation discount
rates
Standard financial modelling conducted at both 10% and 20% discount
rates.
The 20% rate is generally above standard reporting rates but
demonstrates that the Project is still financially robust at this higher rate
Capital cost
Based on estimates ±15% from engineering companies with extensive
experience in sand separation
Operating costs
A$32.74 C1 costs, including royalties
Based on first principles and current rates for equipment
Sales revenue
US$38-55 (A$54-79) per dry metric tonne dependent on product type,
product quality, contract terms and sales quantity
Revenue is constant based on current prices and ignores any projected
growth in prices
Maximum debt
A$30 million
Borrowing rates
12%
VRX Silica Limited
26
COMPANY REVIEW
Accounts receivable
Accounts payable
30 days
30 days
Plant maintenance
5% of capital cost per year
Environmental bond
A$500,000
May be substituted by the WA Department of Mines, Industry Regulation
and Safety’s “Mining Rehabilitation Fund”
Capex contingency
20%
Recoveries
Muchea F80C (80ppm Fe2O3) 20%
Muchea F80 (80ppm Fe2O3) 48%
Muchea F150 (150ppm Fe2O3) 20%
Recoveries are based on CDE testwork at ±5%
Probable Ore Reserve
The Probable Ore Reserve for Muchea totals 18.7 Mt @ 99.9% SiO2 as reported in accordance with the
JORC Code with 14.6Mt @ 99.6% SiO2 contained within the area of the Company’s Mining Lease application
(MLA70/1390).
VRX Silica has previously announced14 an upgraded MRE for Muchea of an Indicated Mineral Resource of
29 Mt @ 99.6% SiO2 in addition to an Inferred Mineral Resource of 179 Mt @ 99.6% SiO2 for a Total MRE
of 208 Mt @ 99.6% SiO2, see Table 12.
Classification
Million Tonnes
29
179
208
Indicated
Inferred
Indicated + Inferred
*Note: Interpreted silica sand mineralisation is domained above a basal surface wireframe. The upper
(overburden) layer within 0.5 m of surface is depleted from the modelled silica sand unit, being reserved for
rehabilitation purposes. All classified silica sand blocks in the model are reported. Differences may occur due
to rounding.
SiO2%
99.6
99.6
99.6
Al2O3%
0.09
0.05
0.06
Fe2O3%
0.03
0.02
0.02
TiO2%
0.07
0.1
0.1
LOI%
0.22
0.23
0.23
Table 12: Muchea Silica Sand Mineral Resource Estimate as at September 2019
VRX Silica has now completed necessary work to convert the Indicated Mineral Resource to Probable Ore
Reserves.
Table 13 details the Probable Ore Reserve that will be produced from the mining of the Indicated Mineral
Resource and processing in a purpose built, wet sand processing plant. The plant will produce three saleable
products for different markets with a total Probable Ore Reserve of 18.7 Million tonnes, with 14.6Mt @
99.6% SiO2 contained within the Mining Lease application (M70/1390) area.
14ASX announcement of 17 June 2019, “Muchea Mineral Resource Estimate Upgrade”.
VRX Silica Limited
27
COMPANY REVIEW
Ore Reserve
Global Within
M70/1390
Classification
Product
Recovery Million
Tonnes
Million
Tonnes
SiO2% Al2O3% Fe2O3% TiO2% LOI %
Probable
Muchea-F80
Muchea-F80C
Muchea-F150
48%
20%
20%
10.2
4.25
4.25
8.0
3.3
3.3
+99.9
0.02
0.008
0.030
+99.9
0.02
0.008
0.030
99.8
0.07
0.015
0.035
0.1
0.1
0.1
Total Reserve
18.7
14.6
Particle Size
Product
850
Muchea-F80
Muchea-F80C
Muche-F150
9.0%
Sieve Opening (μm Retained)
600
0.5%
90.0%
425
49%
1.0%
300
50%
212
0.5%
150
106
75
0.5%
88%
11%
0.5%
Table 13: Muchea Silica Sand Probable Ore Reserve as at October 2019
Metallurgical Factors
CSA Global reviewed the metallurgical testwork to comply with Clause 49 of the JORC Code15. CSA Global
has concluded that the available process testwork indicates likely product qualities for glass and ceramics is
considered appropriate for eventual economic extraction from Muchea. In addition, potentially favourable
logistics and project location support the classification of the Muchea deposit (in accordance with Clause 49)
as an industrial mineral with an Inferred/Indicated Mineral Resource.
The extensive metallurgical testwork which has been completed by CDE Global at their facility in Cookstown,
Northern Ireland, and Nagrom in Kelmscott, Perth, allowed for the creation of a catalogue of silica sand
products that could be produced from Muchea16 (see Table 14).
These products become the recovered products which make up the Ore Reserve (see Table 13).
Chemical Composition
Product
SiO2
%
Al2O3
%
Fe2O3
%
Muchea-F80
+99.9
0.02
0.008
Muchea-F80C
+99.9
0.02
0.005
Muchea-F150
99.8
0.07
0.015
TiO2
%
0.03
0
0.03
0
0.03
5
CaO
%
MgO
%
K2O %
0.005
0.001
0.004
0.005
0.001
0.004
0.020
0.001
0.004
15 Reviewed as part of the metallurgical testwork for the Muchea maiden MRE, see ASX announcement of 20 November
2018, “Muchea Silica Sand Project Maiden Resource”.
16ASX announcement of 26 February 2019, “Testwork Update and Product Catalogues”.
VRX Silica Limited
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COMPANY REVIEW
Particle Size
Sieve micron and % retained on sieve
Product
850
600
425
300
212
150
106
75
53
Muchea-F80
0.5%
49%
50%
0.5%
Muchea-F80C
9.0% 90.0% 1.0%
Muchea-F150
0.5%
88%
11%
0.5%
Table 14: Muchea saleable products from catalogue
The mass balance of the particle sizes was analysed allowing for the recoveries of these products in a wet
processing plant to be estimated.17 The recovery of each product is shown in Table 15.
Product
Industry
Recovery
Muchea-F80
Muchea-F80C
Muchea-F150
Total Recovery
Glassmaking
LCD
Glassmaking
48%
20%
20%
88%
Table 15: Muchea Product Recovery
Material Modifying Factors – Mining Factors
The mining method chosen for Muchea is a rubber wheeled front-end loader, feeding into a 3mm trommel
screen to remove oversize particles and organics. Undersize sand is slurried and pumped to a sand
processing plant located proximal to the Moora-Kwinana railway line. After processing, the silica sand is then
loaded into railway trucks for bulk export from the Kwinana Bulk Terminal.
Mining of the in-situ sand will extract to the extent and base of the Indicated Resource/Probable Ore Reserve
leaving a slightly undulating surface. Appropriate buffer zones are left from the adjacent stakeholders such
as freehold land and the Dongara-Pinjarra gas pipeline. 100% of the material in the mining area is considered
to be sand that can be beneficiated to a saleable silica sand project. The top 500mm has been excluded from
the MRE as it will be reserved for rehabilitation purposes. As there is no waste material, the recovery factor
is considered to be 100% and ore loss therefore is considered to be 0%.
Material Modifying Factors – Environmental Studies
Development location:
• Mining is 100% on Unallocated Crown Land
• East of the Yeal Nature Reserve and State Forest
• West of Freehold land
• South of Gingin Airfield
• Approximately 25 km inland of the coast
• 2km West of Chandala Brook (Registered Aboriginal Heritage Site)
• Outside of World Heritage Areas, National Heritage Places, Ramsar Wetlands, Conservation Reserves
or Commonwealth Marine Reserves
17ASX announcement of 3 May 2019, “High Recovery from Silica Sand Process Plant Design”.
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COMPANY REVIEW
The Probable Ore Reserve is located within an area of deep Bassendean sands, leached of nutrients. The
vegetation type is Banksia Woodlands. The topography is low to medium dunes.
Mine Plan
The production target for Muchea incorporates the maiden Probable Ore Reserve of 14.6 Mt @ 99.9% SiO2
that sits within the Mining Lease application area (see above under “Probable Ore Reserve”) as well as a
portion of the Inferred Mineral Resource.
The Inferred Mineral Resource available to mine within the Mine Plan Pit is 61.4 Mt @ 99.6% SiO2.
In designing the Mine Plan Pit, the Company has examined the restrictions and constraints on mining
activities in the context of surrounding areas and the interests of stakeholders, and planned accordingly. To
that end, the Mine Plan Pit ensures:
• mining will not occur any closer than 100m to the Dongara to Pinjarra gas pipeline;
• mining will not occur any closer than 200m to the boundary of any freehold land and will be at
least 600m from the nearest house; and
•
the Mining Lease area does not intersect with the Gingin Airfield ground and mining will not occur
any no closer than 250m to the boundary of the Gingin Airfield. In addition, mining will not occur
under the flight lines to and from the airfield.
These buffer zones are at least equal to, or are in excess of, industry practice and legislative requirements
(if any). In addition, the western boundary of the Mine Plan Pit is contiguous with the FNA and does not
intersect with any proposed conservation area under the Green Growth Plan.
The Mine Plan Pit is not impacted by any known exclusion areas.
The maiden Probable Ore Reserve is estimated from the Indicated Mineral Resource only. This constitutes
approximately 30% of the estimated total production target (in terms of processed tonnes of silica sand) over
the 25 year mine life for the project BFS estimates. It provides sufficient tonnage for the first 9-10 years of
mining operations. The Company intends to mine solely from the Probable Ore Reserve during that period.
Key assumptions underpinning the financial model for the Project are set out below, including timing for
project start-up and ramp-up to full capacity. The financial model (see below and in the BFS) shows that
Muchea is a viable project with the Probable Ore Reserve only, and the Inferred Mineral Resource is not the
determining factor for its viability.
The ore which forms the Inferred Mineral Resource is contiguous with the Indicated Mineral Resource and
has been categorised as lower confidence due to wider spaced drilling. (Drilling of the Indicated Mineral
Resource is typically 50m spaced along existing tracks, whereas the Inferred Mineral Resource is drilled on
a 400m spacing along existing tracks.)
The Company has undertaken sufficient drilling to assume geological and metallurgical continuity of the sand
deposit. There is negligible difference between the modelled sand in each category and it is believed an
additional 1,500m of drilling would be required to upgrade the inferred resource category. The cost for drilling,
assaying and associated studies is estimated (at current rates) to be in the region of $250,000 and will need
to be undertaken within the first 9 years of mining operations.
Given the simple nature of the silica sand deposit at the Project and the associated geological and
metallurgical confidence, the Company expects that this additional drilling will be sufficient to realise the
production target.
Notwithstanding the above, there is a low level of geological confidence associated with Inferred Mineral
Resources and there is no certainty that further exploration work will result in the determination of Indicated
Mineral Resources or that the production target itself will be realised.
VRX Silica Limited
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COMPANY REVIEW
Figure 7: Muchea Post-Mining of Ore Reserves and Inferred Resources Topography (5:1 vertical exaggeration)
Probable Ore Reserve within green boundaries and Inferred Mineral Resource within blue boundaries.
VRX Silica Limited
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COMPANY REVIEW
Figure 8: Muchea Pre-Mining Topography (10:1 vertical exaggeration)
Figure 9: Muchea Post-Mining Topography (10:1 vertical exaggeration)
VRX Silica Limited
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COMPANY REVIEW
Assessment Process
• Pre-referral submission to DotEE
• Final referral submission to DotEE
• Submission of Section 38 referral to the State EPA
• Seek an Accredited Environment Protection and Biodiversity Conservation Act 1999 (Cth) Assessment
under the State Environmental Protection Act 1986 (WA) via an Environmental Review Document with
public comment
• Undertake any further studies required
• Submission of Environmental Review Document
Mitigation Strategies
• Proposed action lies within a large development envelope, allowing for the flexibility to target areas of
lower significance to MNES
• Disturbance will be kept to a minimum, up to 35 ha per year and 14 ha at any one time
• Progressive rehabilitation using topsoil re-location to ensure topsoil and plants are translocated intact to
previously mined areas
• Conduct further surveys to identify MNES
• Use findings to steer the project and avoid MNES where possible
There are no mine tailings storage requirements, there are no waste dumps and processing requires no
chemicals.
Material Modifying Factors – Infrastructure
The project is located on vacant, unallocated crown land which is east of the Yeal Nature Reserve and Sate
Forrest, west of Freehold land and south of the Gingin Airfield. The southern boundary is the limit of tenure.
The Brand Highway is proximal to the area and access is via the sealed Timaru Road from Brand Highway.
The rail line to the Kwinana Bulk Terminal runs east of the Brand Highway and will be used to transport the
processed silica sand to the Kwinana Bulk Terminal for bulk export.
The project will require its own installed power and water infrastructure and as there will be no
accommodation at the mine site labour will be sourced from the nearest towns, Gingin and Muchea
(approximately 12km and 14 km, respectively, from the mine site).
Costs
Operating Costs
Operating costs were determined from first principles and are estimated to include all costs to mine, process,
transport and load product on to ships.
Royalties
The prevailing rate of royalty due to the State is used in VRX’s economic assessments. The State Royalty
rate is A$1.17 per dry metric tonne and reviewed every 5 years with the next review due in 2020.
A 1% net production royalty from the project will be payable to the original tenement owners.
There are no other royalties payable, though a royalty is in the process of being negotiated with Native Title
claimants and has been included in the project metrics.
VRX Silica Limited
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COMPANY REVIEW
Revenue
Product Quality
Multiple products will be differentiated during processing subject to required particle size distribution by
screening. Recovery of products has been independently assessed by CDE Global, a world leading silica
sand testing laboratory.
Commodity Prices
Commodity prices for silica sand products have been determined by independent industry source Stratum
Resources. The industry standard is that sales contracts are in US dollars. The exchange rate to convert to
Australian dollars will be the prevailing rate at the time of payment.
Subject to final quality produced, the prices for the commodity will range from US$38 to US$55 per dry metric
tonne FOB. There will be no other treatment, smelting or refining charges and no shipping cost estimates
with all contracts to be based on FOB rates.
Revenue will be based on a negotiated per shipment basis per dry metric tonne FOB with payment by demand
on an accredited bank letter of credit.
Market Assessment
The Company has commissioned an independent assessment of the current market prices for proposed
products by industry leader Stratum Resources. The assessment includes projections for future demand and
supply of silica sand and concludes that there is a future tightening of supply of suitable glassmaking silica
sand with a commensurate increase in price.
Sales volumes have been estimated as a result of received letters of intent and expressions of interest to
purchase products.
Economic Factors
The Company’s economic analysis has calculated at a 10% discounted ungeared post tax NPV. A 20%
discounted NPV has also been calculated to demonstrate the strength of the economic analysis.
The assessment has not considered any escalated future product prices nor any inflation to operating costs.
The analysis has used a US$/A$ exchange rate of US$0.70/A$1.00.
The analysis is based on a 25 year production profile with the Probable Ore Reserve supporting a 9-10 year
project. Mining will occur solely from the Probable Ore Reserve during that period. There is a reasonable
expectation that with further close spaced drilling the existing Inferred Resources would convert to Indicated
Resources and Probable Reserves well in excess of this time period, however the model is conservatively
restricted to 25 years. See above for further information.
Capital requirements are based on independent estimates.
The analysis is most sensitive to the exchange rate and sales prices. The analysis indicates the financials of
the project are very robust and there is a high confidence that a viable long-term mining operation can be
justified.
Due to the higher-grade products the average sales price of Muchea silica sand products is higher than those
from the Arrowsmith silica sand projects.
VRX Silica Limited
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COMPANY REVIEW
Social Factors
On January 31 2020 Wisecat entered into a Native Title Mining Project Agreement for the Muchea Silica Sand
Project with the Whadjuk People Native Title Claim Applicants under Application WAD242/2011 (as the
authorised representatives of the Whadjuk People Native Title Claim Group) and the South West Aboriginal
Land & Sea Council Aboriginal Corporation (SWALSC) in its capacity as agent for the Whadjuk People. It
represented a significant milestone in the development of the Muchea Project and was the result of
negotiations conducted in good faith with the Whadjuk People and SWALSC.
Under the terms of the agreement, the Whadjuk People give their consent to the grant of the Mining Lease
and the Miscellaneous Licences for the Muchea Project within the Native Title claim area and the conduct of
silica sand mining operations at the Muchea Project. The agreement also provides for a set of shared long-
term objectives for the parties and a range of measures designed to achieve those objectives over the term
of the agreement (being the life of the Muchea Project). These include:
•
•
•
•
•
the preservation and management of Aboriginal heritage within the Mining Lease area wherever
possible pursuant to an agreed Heritage Protocol;
the promotion of awareness of the Whadjuk People’s traditional laws and customs and facilitation of
cross-cultural exchange between the members of the Whadjuk People and the tenement holder and
its employees and contractors;
ensuring the environmental impact of agreed mining operations is managed in accordance with
relevant statutory obligations;
maximising employment and contracting opportunities for Whadjuk People contractors in connection
with agreed mining operations; and
the provision of agreed initial and ongoing compensation to the Whadjuk People for the effects on
Native Title arising from the grant of the Mining Lease and Miscellaneous Licences within the Native
Title claim area, the conduct of mining operations and the issue of agreed project approvals.
In addition, the agreement contains provisions that are customary for an agreement of this nature, including
as to confidentiality, warranties, force majeure and dispute resolution procedures.
Signing of this agreement has cleared the path for grant of the Mining Lease and the Miscellaneous Licences
for the Muchea Project. The parties then commenced the formal process with the National Native Title Tribunal
required under this agreement to obtain consent orders for the grant of the Mining Lease M70/1390. On 23
April the Tribunal made a determination “… that the act, being the grant of the M70/1390 to Wisecat Pty Ltd
may be done” and has been forwarded to the Minister for Mines for the grant of the Mining Lease.
In parallel, as part of the environmental approvals process for the grant of a Mining Permit at the Muchea
Project, the Company has continued to compile necessary data to support referrals to the Federal
Department of Environment and Energy (DotEE) and the State Environmental Protection Authority (EPA).
The Company and its environmental consultants held pre-referral meetings with representatives from
DotEE and received valuable feedback as to requirements for the referral.
The project is wholly on unallocated crown land with little negative impact on local communities.
Project Funding
The financial model summarised in the BFS sets out the project metrics and provides a basis for the potential
capital structure of the Company for the development of the project. Total capital expenditure at Muchea (for
a 2 million tonnes per annum processing plant) is estimated at approximately A$33 million (the BFS details
capital cost estimates).
The Company anticipates that the source of funding for the capital investment at Muchea will be any one, or
a combination of, equity, debt and pre-paid offtake from the project. Whilst no final decision has been made
in that regard, the financial model assumes a maximum A$30 million in debt.
VRX Silica Limited
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COMPANY REVIEW
The Company has received a number of enquiries and expressions of interest from debt financiers for the
project. As noted above, the financial model provides for debt capacity and is designed to meet the
expectations of any providers of potential debt funding for their due diligence and other internal requirements.
In addition, VRX Silica has also received enquiries and expressions of interest from organisations across
Asia for silica sand products from the project and holds signed letters of intent for substantial tonnages. A
number of these organisations have expressed interest in becoming a funding partner of the Company for
development of a mine by way of pre-paid offtake arrangements or commercial debt funding.
The balance of the Company’s capital requirements will be funded from equity capital.
Whilst the envisaged project development requires a low capital intensity relative to a greenfields hard rock
mining project, and any one of, or a combination of equity, debt and pre-paid offtake is planned, VRX Silica
has not as yet secured the required capital. The positive financial metrics of the BFS and feedback from
potential funding partners provides encouragement as to the likelihood of meeting optimum project and
corporate capital requirements.
VRX Silica Limited
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COMPANY REVIEW
Muchea, Arrowsmith North and Arrowsmith Central Project Metrics
Key BFS outcomes for Muchea, Arrowsmith North and Arrowsmith Central, and in aggregate, are set out
below.
Post Tax, ungeared NPV10
Post Tax, ungeared NPV20
Post Tax, ungeared IRR
Payback period (yrs) (post tax) (ramp up rate)
Exchange Rate US$/A$
Life of Mine (yrs) (Scope of BFS Study)
Arrowsmith
North
Arrowsmith
Central
$242.3m
$147.6m
$99.8m
$56.1m
79%
2.4
$0.70
25
60%
2.8
$0.70
25
Total Sales (initial 25 years) no escalation
$2,773m
$2,167m
EBIT
Cashflow after finance and tax
Shares on Issue
EPS after tax (per year)
Capex (2 mtpa)
Capex contingency (inc)
$1,144m
$835m
$737m
$539m
$0.08
$0.05
$28.3m
$25.9m
20%
m
404,318,617
Life of Mine C1 costs, FOB Kwinana (inc royalties)
$30.18
Tonnes Processed (initial 25 years) (Mt)
53
Production Target (Mt) (BFS Study) (initial 25 Years)
47.7
Probable Ore Reserves (Mt)
Ore Reserve life (yrs)
JORC Resources (million tonnes)
204
102
771
20%
$27.67
51
39.6
18.9
10
77
Muchea
Total
m
m
$337.9
$146.4
96%
2.3
$0.70
25
m
m
$3,345
$1,540
$1,123
$0.11
$32.8m
20%
$32.74
54
48.3
18.7
9-10
208
$727.8m
$302.3m
83%
2.4
$0.70
25
$8,285m
$3,421m
$2,497m
$0.25
$87m
20%
$30.24
158
136
242
1,056
Notes:
1. A proportion of the production target for each of Arrowsmith Central and Muchea is based on Inferred Mineral
Resource. There is a low level of geological confidence associated with inferred mineral resources and there is no
certainty that further exploration work will result in the determination of indicated mineral resources or that the
production target itself will be realised.
2. The Ore Reserves and, in the case of Arrowsmith Central and Muchea, the Inferred Mineral Resource
underpinning the above production targets have been prepared by a Competent Person in accordance with the
requirements of the JORC Code.
3. The material assumptions are set out in the BFS for each project. All such material assumptions continue to apply
and have not materially changed from the date of release of the BFS’s.
4. All figures are presented in Australian dollars, unadjusted for inflation
VRX Silica Limited
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COMPANY REVIEW
BOYATUP SILICA SAND PROJECT
During the year VRX engaged the Esperance Tjaltjraak Native Title Aboriginal Corporation to conduct an
Aboriginal Heritage Site Avoidance Survey for an approved Programme of Works (PoW) for a drilling program
over the Boyatup Silica Sand Project. The survey was completed in December 2019 and the drilling program
was cleared to commence. It is anticipated the drilling program will be undertaken in 2021. Photographs below
show the On-Country discussions between Traditional Owners and VRX staff during the Heritage Avoidance
Survey.
Figure 10: On-Country discussions.
The drilling program will enable a maiden Mineral Resource to be estimated and Metallurgical Testwork to
determine potential markets for the processed sand.
WARRAWANDA PROJECT
A review of assays conducted on cores from the diamond drilling program undertaken at the Warrawanda
Project indicated that the previously identified quartz outcrops are not of an economic grade and of insufficient
tonnage to warrant further exploration.
The Company relinquished exploration licence E52/2372 and surrendered E52/3447. The Company no longer
holds any tenements at the Warrawanda Project.
VRX Silica Limited
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COMPANY REVIEW
BIRANUP PROJECT
VRX Silica has a stated aim of becoming a global supplier of high-quality silica sand and in keeping with this
the Company is disposing of non-core assets. On 1 July 2020 VRX Silica Limited announced it had entered
into a conditional agreement with New Energy Metals Limited (NEM) for the sale of its wholly-owned
subsidiary and holder of the Biranup base metals and gold project (Biranup Project), Ventnor Gold Pty Ltd
(VGPL)18.
Figure 11: Biranup Tenements
NEM is an unlisted public company planning an Initial Public Offering (IPO) and ASX listing later this
year. NEM has indicated that it will prioritise applications in the IPO from VRX Silica shareholders. The terms
for the sale of the Biranup Project will enable VRX Silica to share in any future exploration success which is
an ideal outcome for VRX Silica and its shareholders.
The Biranup Project is situated in the highly prospective Albany -Fraser Orogen in Western Australia, which
hosts IGO’s Nova nickel mine, the world class ~10Moz Tropicana Gold Deposit and is currently the subject of
an extensive exploration program being conducted by Legend Mining. A great starting point for NEM will be
the extensive and comprehensive exploration data base on the Biranup Project tenements assembled by VRX.
18 ASX announcement of 1 July 2020, “Sale of Biranup Nickel and Gold Project”.
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COMPANY REVIEW
Sale Terms
NEM will acquire the Biranup Project through the purchase of 100% of the issued share capital of VGPL.
The consideration for the sale will be as follows:
• 6,250,000 fully paid ordinary shares in NEM at a deemed issue price of 20c, to be issued at completion;
and
•
cash milestone payments of:
-
-
-
$200,000 upon delineation of a JORC compliant inferred resource of no less than 7.5mt at a grade
of 2% nickel and 0.5% copper on the land comprising the tenements;
$200,000 at the completion of a feasibility study with respect to the Biranup Project demonstrating
an ability to operate it as a commercially viable enterprise, and
$500,000 at the first commercial extraction of any minerals, mineral products, ore or concentrates,
in whatever form, from the Biranup Project.
Completion is subject to and conditional upon the following:
•
completion of due diligence investigations by NEM into VGPL and the Biranup Project to its
satisfaction;
• NEM conducting the IPO, including raising necessary capital and receiving ASX conditional approval
for listing of its securities on ASX; and
•
the parties obtaining all necessary board, shareholder, third party and regulatory approvals and
consents required to complete the sale.
The agreement is otherwise on terms customary for a transaction of this nature, including as to pre-
completion undertakings, warranties and representations, liability limitation and confidentiality.
CORPORATE
China Southern Glass Strategic Alliance
On 11 July 2019, VRX Silica announced it had entered into a memorandum of understanding (MOU) with CSG
Holding Co Ltd19 (China Southern Glass) to form a strategic alliance in connection with the Company’s
Muchea Silica Sand Project.
China Southern Glass is the largest architectural glass manufacturer in the Peoples’ Republic of China (PRC),
involved in the manufacture and sale of glass products including float glass, display glass, automotive glass,
coated glass, mirrors, colour filter glass, solar glass and conservation glass.
The objectives of the strategic alliance include exploring the potential for marketing, promotion and sale in the
PRC of silica sand products from the Muchea project and potential sources of capital finance for the
construction of production facilities at the Muchea project. In addition, the parties will consider potential for
the development of a high-quality glass manufacturing facility in Western Australia for silica sand products
generated from the Muchea project.
Capital Raising
During the period 6 million 2.8c options were exercised and on 4 November 2019 VRX Silica announced it
had successfully completed a bookbuild to raise $4 million (before costs) through a placement of securities
to a range of sophisticated and institutional investors, including existing shareholders and new investors.
19 ASX announcement of 11 July 2019, “China Southern Glass Strategic Alliance”.
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COMPANY REVIEW
The placement funds were raised to accelerate the advancement of the Company’s Arrowsmith North,
Arrowsmith Central and Muchea silica sand projects, including for permitting and approvals, long lead capital
items, detailed engineering work, hydro and resource drilling, and for working capital purposes.
The placement was made under the Company’s placement capacity under Listing Rule 7.1 and resulted in
the issue of 34,782,610 new fully paid ordinary shares at an issue price of 11.5 cents each. Participants in
the placement were also entitled to one free-attaching option for every two shares subscribed for in the
placement exercisable at 18 cents and expiring 31 July 2021 which are quoted on ASX under code “VRXO”.
Hartleys Limited (AFSL No 230052) acted as lead manager to the placement.
EVENTS SUBSEQUENT TO JUNE 30 2020
Arrowsmith North and Arrowsmith Central Projects
On 15 July 2020 VRX announced it had received confirmation that the terms of its proposed Mining Project
Agreement (Agreement) covering the areas of the Arrowsmith North and Arrowsmith Central Silica Sand
Projects have been approved by the Working Group for the Southern Yamatji People, Native Title claimants
over the project areas20.
Delays caused by the COVID-19 crisis, particularly regulations prohibiting movement in and out of Aboriginal
communities and restrictions on public gatherings significantly hampered progress and presented unique
challenges for completing the negotiation process. However, the company worked constructively with the
Yamatji Marlpa Aboriginal Corporation (YMAC) and the Southern Yamatji Working Group to reach consensus.
With the terms of the Agreement having been accepted, the next step is for the Agreement to be formally
signed by all 12 individual Native Title Applicants along with a separate State Deed between those individuals,
the Company and the State. Once fully executed, these documents will be lodged with the Department of
Mines, Industry Regulation and Safety (DMIRS) to finalise the grant of Mining Leases and associated
Miscellaneous Licenses for Arrowsmith North and Arrowsmith Central.
VRX believes this is the start of what will be a very long term working relationship with the Southern Yamatji
People and VRX in achieving its stated aim of becoming a global supplier of high-quality silica sand.
The negotiated terms provide for a set of shared long-term objectives for the parties and a range of measures
designed to achieve those objectives over the term of the Agreement (being the life of the Arrowsmith projects).
These include:
•
•
•
•
•
the preservation and management of Aboriginal heritage within the areas of the mining leases
pursuant to an agreed heritage protocol;
the promotion of awareness of the Southern Yamatji People’s traditional laws and customs and
facilitation of cross-cultural exchange between the members of the Southern Yamatji People and
VRX and its employees and contractors;
ensuring the environmental impact of agreed mining operations is managed in accordance with
relevant statutory obligations;
maximising employment and contracting opportunities for Southern Yamatji People contractors in
connection with agreed mining operations; and
the provision of agreed initial and ongoing compensation to the Southern Yamatji People for the
effects on native title arising from the grant of the mining leases and miscellaneous licences within
the native title claim area, the conduct of mining operations and the issue of agreed project
approvals.
20 ASX announcement of 15 July 2020, “Native Title Agreement Terms Approved for Arrowsmith”.
VRX Silica Limited
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COMPANY REVIEW
MINERAL RESOURCES AND RESERVES
Mineral Resources
Project
Classification
Muchea
Arrowsmith
North
Arrowsmith
Central
Mt
29
172
208
248
SiO₂
%
Al₂O₃
%
Fe₂O₃
%
TiO₂
%
LOI
%
99.6
0.09
0.03
0.07 0.22
99.6
0.05
0.02
0.10 0.23
99.6
0.06
0.02
0.10 0.23
97.7
1.00
0.40
0.20 0.50
Indicated
Inferred
Total
Indicated
Inferred
523
98.2
0.80
0.30
0.20 0.40
Total
771
98.0
0.86
0.30
0.17 0.41
Indicated 28.2
Inferred 48.3
Total 76.5
96.6
1.70
0.40
0.20 0.70
96.9
1.50
0.40
0.20 0.70
96.8
1.50
0.40
0.20 0.70
Total Mineral Resource 1,056 Million Tonnes
Ore Reserves
Project
Classification
Product
Recovery Mt
Muchea
Probable
F80
F80C
F150
48%
20%
20%
10.2
4.25
SiO2
%
Al2O3
%
Fe2O3
%
TiO2
%
LOI
%
99.9
0.02 0.008
0.03
0.1
4.25 99.8
0.07 0.015 0.035
0.1
Muchea Ore Reserve
18.7 Million Tonnes
Arrowsmith
North
Probable
N40 / NF500
Local Market
N20
24%
60%
6%
60
149
15
99.7
0.2
0.05
0.035
0.1
Arrowsmith North Ore Reserve
223 Million Tonnes
Arrowsmith
Central
Probable
CF400
C20
C40
High TiO2
17%
34%
17%
9%
4.2
8.4
4.2
2.2
99.6
0.25
0.04
0.03
0.1
<1%
2%
Arrowsmith Central Ore Reserve
18.9 Million Tonnes
Total Ore Reserve 261 Million Tonnes
VRX Silica Limited
42
COMPANY REVIEW
Comparison to Previous Year
2019 Mineral
Resource
2020 Mineral
Resource
Change
Million
Tonnes
193.6
28.0
191.0
413
SiO₂%
98.0
97.7
99.6
2019 Ore Reserve
Million
Tonnes
SiO₂%
Project
Arrowsmith North
Arrowsmith Central
Muchea
Total
Project
Arrowsmith North
Arrowsmith Central
Muchea
Total
Million
Tonnes
771.0
76.5
208.0
1,056
SiO₂%
98.0
96.8
99.6
SiO₂%
2020 Ore Reserve
Million
Tonnes
223.0
18.9
18.7
261
99.7
99.6
+99.8
Million
Tonnes
577.4
48.5
17.0
643
Change
Million
Tonnes
223.0
18.9
18.7
261
SiO₂%
-
-0.9
-
SiO₂%
99.7
99.6
-
Competent Persons’ Statements
The information in this report that relates to Arrowsmith North, Arrowsmith Central and Muchea Exploration
Results and Muchea Aircore Drilling Area Mineral Resources are based on data collected and complied under
the supervision of Mr David Reid, who is a full-time employee of VRX Silica. Mr Reid, BSc (Geology), is a
registered member of the Australian Institute of Geoscientists and has sufficient experience that is relevant
to the style of mineralisation and type of deposit under consideration and the activity being undertaken to
qualify as a Competent Person under the 2012 edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (JORC Code). Mr Reid consents to the inclusion of the data
in the form and context in which it appears.
The information in this report that relates to Arrowsmith North, Arrowsmith Central and Muchea Auger area
Mineral Resources is based on information compiled by Mr Grant Louw who was a full-time employee of
CSA Global, under the direction and supervision of Dr Andrew Scogings, who is an Associate of Snowden.
Dr Scogings is a Member of the Australasian Institute of Mining and Metallurgy and a Member of the
Australian Institute of Geoscientists. He is a Registered Professional Geologist in Industrial Minerals. Dr
Scogings has sufficient experience relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the
2012 edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore
Reserves (JORC Code). Dr Scogings consents to the disclosure of information in this report in the form and
context in which it appears.
The information in this report that relates to Arrowsmith North, Arrowsmith Central and Muchea Probable Ore
Reserves is based on data collected and compiled under the supervision of Mr David Reid, who is a full-time
employee of VRX Silica. Mr Reid, BSc (Geology), is a registered member of the Australian Institute of
Geoscientists and has sufficient experience that is relevant to the style of mineralisation and type of deposit
under consideration and the activity being undertaken to qualify as a Competent Person under the 2012
edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(JORC Code). Mr Reid consents to the inclusion of the data in the form and context in which it appears.
VRX Silica Limited
43
DIRECTORS REPORT
Your directors present their report on the Company and its controlled entities for the year ended 30 June
2020.
DIRECTORS
The names of the directors of the Company in office during the financial year and up to the date of this report
are as follows:
Paul Boyatzis
Bruce Maluish
Peter Pawlowitsch
Directors were in office from the beginning of the financial year until the date of this report unless otherwise
stated.
The particulars of the qualifications, experience and special responsibilities of each director are as follows:
Paul Boyatzis, B Bus, AICD, MSDIA, ASA, CPA – Non-Executive Chairman
Mr Boyatzis is a current member of the Australian Institute of Company Directors, the Securities and
Derivative Industry Association of Australia and a member of the Certified Practising Accountants of Australia.
Mr Boyatzis has over 30 years’ experience in the investment and equity markets and an extensive working
knowledge of public companies. He has advised numerous emerging companies and assisted in raising
significant investment capital both locally and overseas.
Director since 24 September 2010.
During the past three years Mr Boyatzis has held the following other listed company directorships:
• Nexus Minerals Ltd – 6 October 2006 to present
• Aruma Resources Ltd – 5 January 2010 to present
Bruce Maluish, BSc (Surv), Dip Met Min – Managing Director
Mr Maluish has more than 30 years’ experience in the mining industry with numerous roles as Managing
Director and General Manager with companies such as the Monarch Group of Companies, Matilda Minerals,
Abelle, Hill 50 and Forsyth Mining, while mining a variety of commodities from gold, nickel and mineral sands
from both open pits and underground.
His management and administrative experience includes the set up and marketing of IPOs, from
commencement of exploration to full production, to the identification, development and expansion of projects
including mergers and acquisitions.
His international experience includes identification of projects and negotiations with clients in Asian markets.
His qualifications include credentials in Surveying, Mining, Project Planning and Finance
Director since 24 September 2010.
During the past three years Mr Maluish has held the following other listed company directorships:
• Nexus Minerals Ltd – 1 July 2015 to present
VRX Silica Limited
44
DIRECTORS REPORT
Peter Pawlowitsch, B.Com, MBA, CPA, FGIA – Non-Executive Director
Mr Pawlowitsch holds a Bachelor of Commerce from the University of Western Australia, is a member of the
Certified Practising Accountants of Australia, a fellow of the Governance Institute and holds a Masters of
Business Administration from Curtin University.
These qualifications have underpinned more than 15 years’ experience in the accounting profession and
more recently in business management and the evaluation of businesses and mining projects.
Director since 12 February 2010.
During the past three years Mr Pawlowitsch has held the following other listed company directorships:
• Dubber Corporation Limited – 26 September 2011 to present
• Knosys Limited – 16 March 2015 to present
• Novatti Group Limited – 19 June 2015 to present
• Rewardle Holdings Limited – 30 May 2017 to 2 January 2019
• Family Zone Cyber Safety Limited – 24 September 2019 to present
Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the directors (direct and indirect) in the shares and options of
VRX Silica Limited were:
Paul Boyatzis
- 4,480,000 ordinary fully paid shares
- 3,000,000 options expiring 30 November 2020, exercisable at 7.2 cents each
- 3,000,000 options expiring 30 November 2021, exercisable at 21.7 cents each
Bruce Maluish
- 14,810,535 ordinary fully paid shares
- 5,000,000 options expiring 30 November 2020, exercisable at 7.2 cents each
- 5,000,000 options expiring 30 November 2021, exercisable at 21.7 cents each
Peter Pawlowitsch
- 25,841,769 ordinary fully paid shares
- 3,000,000 options expiring 30 November 2020, exercisable at 7.2 cents each
- 3,000,000 options expiring 30 November 2021, exercisable at 21.7 cents each
COMPANY SECRETARY
John Geary, B.Bus, Grad Dip Acctg, Grad Dip Adv Taxation
Mr Geary has forty years’ experience in the mineral exploration industry in Australia and overseas. His
experience includes prospecting and the evaluation, acquisition, maintenance and compliance requirements
associated with mining tenements.
He has been actively engaged in the planning and implementation of many exploration programmes and his
experience as a contract driller has enabled him to recognise and identify potential resource value.
He has been involved in the promotion, prospectus preparation and listing of a number of exploration
companies (IPO’s) on the Australian Securities Exchange. He has held the position of Executive Director and
Company Secretary for a number of ASX listed exploration companies in recent years.
VRX Silica Limited
45
DIRECTORS REPORT
CORPORATE INFORMATION
Corporate Structure
VRX Silica Limited is a limited liability company that is incorporated and domiciled in Australia. VRX Silica
Limited has prepared a consolidated financial report incorporating the entities that it controlled during the
financial year as follows:
VRX Silica Ltd
Ventnor Gold Pty Ltd
Ventnor Mining Pty Ltd
Ventnor Pilbara Pty Ltd
VRX Boyatup Pty Ltd
Wisecat Pty Ltd
- parent entity
- 100% owned controlled entity
- 100% owned controlled entity
- 100% owned controlled entity
- 100% owned controlled entity
- 100% owned controlled entity
Nature of Operations and Principal Activities
The principal continuing activities during the year of entities within the consolidated entity was mineral
exploration.
OPERATING AND FINANCIAL REVIEW
Review of Operations
A review of operations for the financial year and the results of those operations is contained within the
company review.
Operating Results
Consolidated loss after income tax for the financial year was $2,366,217 (2019: $6,017,950).
Financial Position
At 30 June 2020, the Group had net assets of $10,160,379 (2019: $8,434,814) with cash reserves of
$2,603,047.
Financing and Investing Activities
The Company issued the following securities during the year:
• 34,782,610 ordinary fully paid shares by placement at an issue price of 11.5 cents each, with
17,391,305 free attaching listed options exercisable at 18 cents each on or before 31 July 2021,
raising $4,000,000; and
• 6,000,000 ordinary fully paid shares on the exercise of options at 2.8 cents each to raise $168,000.
Dividends
No dividends were paid during the year and no recommendation is made as to dividends.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the Company during the financial year are detailed in the company
review.
In the opinion of the directors, there were no other significant changes in the state of affairs of the Company
that occurred during the financial year under review not otherwise disclosed in this report or in the financial
report.
VRX Silica Limited
46
DIRECTORS REPORT
EVENTS SUBSEQUENT TO BALANCE DATE
The impact of the Coronavirus (COVID-19) pandemic is ongoing for the Group up to 30 June 2020, it is not
practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is
rapidly developing and is dependent on measures imposed by the Australian Government and other
countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any
economic stimulus that may be provided.
No matters or circumstances have arisen, since the end of the financial year, which significantly affected, or
may significantly affect, the operations of the Company, the results of those operations, or the state of affairs
of the Company in subsequent financial years, other than outlined in the company review which is contained
in this Annual Report.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Company will continue to pursue its principal activity of exploration and evaluation, particularly in respect
to the projects as more particularly outlined in the company review. The Company will also continue to pursue
other potential investment opportunities to enhance shareholder value.
MEETINGS OF DIRECTORS
The numbers of meetings of directors (including meetings of committees of directors) held during the year
and the number of meetings attended by each director were as follows:
Board of Directors Meetings
Number eligible to attend
Number attended
P Boyatzis
B Maluish
P Pawlowitsch
4
4
4
4
4
4
REMUNERATION REPORT (AUDITED)
This report details the nature and amount of remuneration for each director and executive of VRX Silica
Limited. The information provided in the remuneration report includes remuneration disclosures that are
audited as required by section 308(3C) of the Corporations Act 2001.
For the purposes of this report Key Management Personnel of the Group are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the group, directly or
indirectly, including any director (whether executive or otherwise) of the parent company.
For the purposes of this report the term “executive” includes those key management personnel who are not
directors of the parent company.
Remuneration Committee
The full Board carries out the role and responsibilities of the Remuneration Committee and is responsible for
determining and reviewing the compensation arrangements for the Directors themselves, the Managing
Director and any Executives.
Executive remuneration is reviewed annually having regard to individual and business performance, relevant
comparative remuneration and internal and independent external advice.
VRX Silica Limited
47
DIRECTORS REPORT
The remuneration report is set out under the following main headings:
● Remuneration policy
● Remuneration structure
● Employment contracts of directors and senior executives
● Details of remuneration for year
● Compensation options to key management personnel
● Shares issued to key management personnel on exercise of compensation options
● Additional disclosures relating to key management personnel
A. Remuneration policy
The board policy is to remunerate directors at market rates for time, commitment and responsibilities. The
board determines payments to the directors and reviews their remuneration annually, based on market
practice, duties and accountability. Independent external advice is sought when required. The maximum
aggregate amount of directors’ fees that can be paid is subject to approval by shareholders in general
meeting, from time to time. Fees for non-executive directors are not linked to the performance of the
consolidated entity. However, to align directors’ interests with shareholders’ interests, the directors are
encouraged to hold shares in the Company.
The Company’s aim is to remunerate at a level that will attract and retain high-calibre directors and
employees. Company officers and directors are remunerated to a level consistent with the size of the
Company.
The executive directors and full time executives receive a superannuation guarantee contribution required by
the government, which is currently 9.50%, and do not receive any other retirement benefits. Some
individuals, however, may choose to sacrifice part of their salary to increase payments towards
superannuation.
All remuneration paid to directors and executives is valued at the cost to the Company and expensed.
The Board believes that it has implemented suitable practices and procedures that are appropriate for an
organisation of this size and maturity.
The Company did not pay any performance-based component of remuneration during the year.
B. Remuneration structure
In accordance with best practice corporate governance, the structure of non-executive director and executive
compensation is separate and distinct.
Non-executive Director Compensation
Objective
The Board seeks to set aggregate compensation at a level that provides the Company with the ability to
attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive
directors shall be determined from time to time by a general meeting. An amount not exceeding the amount
determined is then divided between the directors as agreed. The latest determination approved by
shareholders was an aggregate compensation of $250,000 per year.
VRX Silica Limited
48
DIRECTORS REPORT
The amount of aggregate compensation sought to be approved by shareholders and the manner in which it
is apportioned amongst directors is reviewed annually. The Board considers advice from external consultants
as well as the fees paid to non-executive directors of comparable companies when undertaking the annual
review process. Non-Executive Directors’ remuneration may include an incentive portion consisting of
options, as considered appropriate by the Board, which may be subject to Shareholder approval in
accordance with ASX listing rules.
Separate from their duties as Directors, the Non-Executive Directors undertake work for the Company directly
related to the evaluation and implementation of various business opportunities, including mineral
exploration/evaluation and new business ventures, for which they receive a daily rate. These payments are
made pursuant to individual agreement with the non-executive Directors and are not taken into account when
determining their aggregate remuneration levels.
Executive Compensation
Objective
The entity aims to reward executives with a level and mix of compensation commensurate with their position
and responsibilities within the entity so as to:
• reward executives for Company and individual performance against targets set by appropriate
benchmarks;
• align the interests of executives with those of shareholders;
• link rewards with the strategic goals and performance of the Company; and
• ensure total compensation is competitive by market standards.
Structure
In determining the level and make-up of executive remuneration, the Board negotiates a remuneration to
reflect the market salary for a position and individual of comparable responsibility and experience. Due to
the limited size of the Company and of its operations and financial affairs, the use of a separate remuneration
committee is not considered appropriate. Remuneration is regularly compared with the external market by
participation in industry salary surveys and during recruitment activities generally. If required, the Board may
engage an external consultant to provide independent advice in the form of a written report detailing market
levels of remuneration for comparable executive roles.
Remuneration consists of a fixed remuneration and a long term incentive portion as considered appropriate.
Compensation may consist of the following key elements:
• Fixed Compensation;
• Variable Compensation;
• Short Term Incentive (STI); and
• Long Term Incentive (LTI).
Fixed Remuneration
The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate
to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Board having
regard to the Company and individual performance, relevant comparable remuneration in the mining
exploration sector and external advice.
The fixed remuneration is a base salary or monthly consulting fee.
Variable Pay — Long Term Incentives
The objective of long term incentives is to reward directors/executives in a manner which aligns this element
of remuneration with the creation of shareholder wealth. The incentive portion is payable based upon
attainment of objectives related to the director’s/executive’s job responsibilities. The objectives vary, but all
are targeted to relate directly to the Company’s business and financial performance and thus to shareholder
value.
VRX Silica Limited
49
DIRECTORS REPORT
Long term incentives (LTI’s) granted to directors/ executives are delivered in the form of options.
LTI grants to Executives are delivered in the form of employee share options. These options are issued at
an exercise price determined by the Board at the time of issue. The employee share options generally vest
over a selected period.
The objective of the granting of options is to reward Executives in a manner which aligns the element of
remuneration with the creation of shareholder wealth. As such LTI’s are made to Executives who are able
to influence the generation of shareholder wealth and thus have an impact on the Company’s performance.
The level of LTI granted is, in turn, dependent on the Company’s recent share price performance, the seniority
of the Executive, and the responsibilities the Executive assumes in the Company.
Typically, the grant of LTIs occurs at the commencement of employment or in the event that the individual
receives a promotion and, as such, is not subsequently affected by the individual’s performance over time.
C. Employment contracts of directors and senior executives
The employment arrangements of the directors are not formalised in a contract of employment.
D. Details of remuneration for year
Directors
The following persons were directors of VRX Silica Limited during the current and previous financial years:
Paul Boyatzis
Bruce Maluish
Peter Pawlowitsch
Chairman (non-executive)
Director (executive)
Director (non-executive)
There were no other persons that fulfilled the role of a key management person, other than those disclosed
as Executive Directors.
Remuneration
Details of the remuneration of each Director and named executive officer of the Company, including their
personally-related entities, during the year was as follows:
Director
Year
Salary and Fees Superannuation
Short Term
Benefits
Post
Employment
P Boyatzis
B Maluish
P Pawlowitsch
Total
2020
2019
2020
2019
2020
2019
2020
2019
$
60,000
60,000
250,000
a) 245,000
36,530
36,530
346,530
341,530
$
-
-
23,750
19,000
3,470
3,470
27,220
22,470
Share Based
Payments
Options
$
-
237,600
-
396,000
-
237,600
-
871,200
Total
$
60,000
297,600
273,750
660,000
40,000
277,600
373,750
1,235,200
a) During the previous financial year, $45,000 was paid as a payroll payment to Mr Maluish for advisory
services outside his usual executive director duties.
VRX Silica Limited
50
DIRECTORS REPORT
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Director
P Boyatzis
B Maluish
P Pawlowitsch
Year
2020
2019
2020
2019
2020
2019
Fixed
Remuneration
100%
20%
100%
40%
100%
14%
At risk - STI
-
-
At risk - LTI
-
80%
-
-
-
-
-
60%
-
86%
There were no performance related payments made during the year. Performance hurdles are not attached
to remuneration options, however the Board determines appropriate vesting periods to provide rewards over
a period of time to key management personnel.
E. Compensation options to key management personnel
No options were granted as equity compensation benefits to Directors and Executives during the year.
F. Shares issued to key management personnel on exercise of compensation options
Shares were issued to Directors and Executives on the exercise of the following compensation options during
the year. The options were issued free of charge and vested immediately when issued. Each option entitled the
holder to subscribe for one fully paid ordinary share in the Company at various exercise prices with various
expiry dates.
Director
Grant
Date
Number
Granted
P Boyatzis
B Maluish
P Pawlowitsch
28/11/16
28/11/16
28/11/16
Total
1,000,000
2,000,000
1,000,000
4,000,000
Fair Value per
Option at
Grant Date
Exercise
Price per
Option
Last
Exercise
Date
Number
Exercised
During the Year
$0.0112
$0.0112
$0.0112
$0.028
$0.028
$0.028
28/11/19
28/11/19
28/11/19
1,000,000
2,000,000
1,000,000
4,000,000
G. Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of
key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Director
Balance
01/07/19
Received as
Remuneration
Shares Issued
on Exercise of
Options
Acquired/
(disposed)
Net
Change
Other
P Boyatzis
3,480,000
B Maluish
12,810,535
P Pawlowitsch
24,841,769
Total
41,132,304
-
-
-
-
1,000,000
2,000,000
1,000,000
4,000,000
-
-
-
-
Balance
30/06/20
4,480,000
14,810,535
25,841,769
44,132,304
-
-
-
-
VRX Silica Limited
51
DIRECTORS REPORT
Option Holding
The number of options over ordinary shares in the Company held during the financial year by each director
and other members of key management personnel of the consolidated entity, including their personally
related parties, is set out below:
Balance
01/07/19
Received as
Remuneration
Options
Exercised
Options
Expired
Net Change
Other
Balance
30/06/20
Director
P Boyatzis
7,000,000
B Maluish
12,000,000
P Pawlowitsch
7,000,000
Total
26,000,000
-
-
-
-
(1,000,000)
(2,000,000)
(1,000,000)
(4,000,000)
-
-
-
-
-
-
-
-
6,000,000
10,000,000
6,000,000
22,000,000
H. Other transactions with key management personnel
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
During the year, the Company subleased office space for:
-
-
$8,325 to Gyoen Pty Ltd, Mr Peter Pawlowitsch’s consultancy company; and
$29,350 to Aruma Resources Ltd, a company Mr Paul Boyatzis is a director of.
At 30 June 2020, the Group has an outstanding receivable of $16,142 from Aruma Resources Ltd, a company
Mr Paul Boyatzis is a director of.
I. Voting and comments made at the Company's last Annual General Meeting ('AGM')
At the 2019 AGM, 99.5% 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.
J. Additional information
The earnings of the consolidated entity for the five years to 30 June 2020 are summarised below:
2020
$
2019
$
2018
$
2017
$
2016
$
Revenue
EBITDA
EBIT
Loss after income tax
73,665
(2,309,541)
(2,360,768)
(2,366,217)
96,228
(6,015,965)
(6,017,950)
(6,017,950)
75,384
(1,780,193)
(1,781,477)
(1,781,477)
80,355
(999,075)
68,950
(9,980,287)
(1,010,828) (10,013,717)
(1,010,828) (10,013,717)
VRX Silica Limited
52
DIRECTORS REPORT
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial
year end ($)
Total dividends declared
(cents per share)
Basic loss per share
(cents per share)
2020
0.09
-
2019
0.09
-
2018
0.07
-
2017
0.01
-
2016
0.02
-
(0.55)
(1.69)
(0.75)
(0.51)
(7.28)
[THIS CONCLUDES THE REMUNERATION REPORT, WHICH HAS BEEN AUDITED]
INSURANCE OF OFFICERS
The Company has in place an insurance policy insuring Directors and Officers of the Company against any
liability arising from a claim brought by a third party against the Company or its Directors and officers, and
against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of
their conduct while acting in their capacity as a Director or officer of the Company, other than conduct involving
a wilful breach of duty in relation to the Company.
In accordance with a confidentiality clause under the insurance policy, the amount of the premium paid to the
insurers has not been disclosed. This is permitted under Section 300(9) of the Corporations Act 2001.
INDEMNITY AND INSURANCE OF AUDITOR
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor
of the Company or any related entity.
SHARE OPTIONS
At the date of this report there were the following unissued ordinary shares for which options were
outstanding:
• 15,250,000 options expiring 30 November 2020, exercisable at 7.2 cents each
• 25,000,000 options expiring 30 June 2021, exercisable at 10 cents each
• 5,750,000 options expiring 30 November 2021, exercisable at 10 cents each
• 11,000,000 options expiring 30 November 2021, exercisable at 21.7 cents each
• 5,000,000 options expiring 30 November 2021, exercisable at 9 cents each
• 4,000,000 options expiring 30 November 2022, exercisable at 9 cents each
• 3,500,000 options expiring 23 October 2023, exercisable at 15 cents each
• 23,939,525 listed options expiring 31 July 2021, exercisable at 18 cents each
VRX Silica Limited
53
DIRECTORS REPORT
During the year options were issued as follows:
• 3,000,000 options exercisable at 15 cents each on or before 23 October 2023 at an issue price of
$0.0001 per option, issued as part of financial advisory fees
• 500,000 options exercisable at 15 cents each on or before 23 October 2023 at an issue price of
$0.0001 per option, issued for legal fees
• 17,391,305 listed options exercisable at 18 cents each on or before 31 July 2021, issued as free
attaching options on a one-for-two basis to the share placement to investors in November 2019
• 6,548,220 listed options exercisable at 18 cents each on or before 31 July 2021, issued as brokers
options for capital raising costs of the share placement
During the year the following options were exercised:
• 1,000,000 options expiring 31 October 2019, exercised at 2.8 cents each
• 5,000,000 options expiring 28 November 2019, exercised at 2.8 cents each
No other options expired during the year.
Subsequent to year end and up to the date of this report, no other options have been issued or exercised
and no options have expired.
No person entitled to exercise these options had or has any right, by virtue of the option, to participate in any
share issue of any other body corporate.
LEGAL PROCEEDINGS
The Company was not a party to any legal proceedings during the year.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company
for all or any part of those proceedings. The Company was not a party to any such proceedings during the
year.
ENVIRONMENTAL REGULATIONS
The Company is not currently subject to any specific environmental regulation. There have not been any
known significant breaches of any environmental regulations during the year under review and up until the
date of this report.
CORPORATE GOVERNANCE
Under ASX Listing Rule 4.10.3 the Company’s Corporate Governance Statement can be located at the URL
on the Company’s website being: https://vrxsilica.com.au/investor-centre/corporate-governance/
AUDITOR
RSM Australia Partners continues in office in accordance with Section 327 of the Corporations Act 2001.
VRX Silica Limited
54
DIRECTORS REPORT
NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the
auditor are outlined in Note 4 to the financial statements. The directors are satisfied that the provision of non-
audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services do not compromise the auditor’s independence as all non-
audit services have been reviewed to ensure that they do not impact the impartiality and objectivity of the
auditor and none of the services undermine the general principles relating to auditor independence as set
out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting
Professional & Ethical Standards Board.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF RSM AUSTRALIA PARTNERS
There are no officers of the Company who are former partners of RSM Australia Partners.
AUDITOR’S DECLARATION OF INDEPENDENCE
The auditor’s independence declaration as required under section 307C of the Corporations Act 2001, has been
received and is included within the financial report.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
Bruce Maluish
Director
Perth, 30 September 2020
VRX Silica Limited
55
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Continuing operations
Revenue
Exploration and evaluation expenditure
Depreciation
Directors fees and benefits expense
Finance costs
Share based payments
Other expenses
Loss before income tax expense
Income tax expense
Net loss for the year
Consolidated
Note
2020
$
2019
$
2(a)
11
25
2(b)
3
73,665
96,228
(551,344)
(51,227)
(373,750)
(5,449)
(169,432)
(1,288,680)
(2,937,956)
(1,985)
(364,000)
-
(1,525,250)
(1,284,987)
(2,366,217)
(6,017,950)
-
-
(2,366,217)
(6,017,950)
Other comprehensive income
Other comprehensive income for the year, net of tax
-
-
-
-
Total comprehensive loss attributable to the members of
VRX Silica Limited
(2,366,217)
(6,017,950)
Earnings per share attributable to the members of
VRX Silica Limited
Cents
Cents
Basic/diluted earnings per share
5
(0.55)
(1.69)
The accompanying notes form part of these financial statements.
VRX Silica Limited
56
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Trade and other receivables
Plant and equipment
Right-of-use assets
Deferred exploration expenditure
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Provisions
Lease liabilities
Total Current Liabilities
Non-Current Liabilities
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Issued capital
Reserves
Accumulated losses
Total Equity
The accompanying notes form part of these financial statements.
Consolidated
Note
2020
$
2019
$
6
7
2,603,047
102,060
1,545,418
222,593
2,705,107
1,768,011
7
9
10
11
12
13
14
14
26,030
12,211
130,593
7,686,005
45,794
11,016
-
6,972,573
7,854,839
7,029,383
10,559,946
8,797,394
182,635
82,783
46,474
311,892
87,675
87,675
303,215
59,365
-
362,580
-
-
399,567
362,580
10,160,379
8,434,814
16
17
15
34,534,694
4,542,143
(28,916,458)
30,796,699
4,188,356
(26,550,241)
10,160,379
8,434,814
VRX Silica Limited
57
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Consolidated
2020
Issued
Capital
$
Reserves
Accumulated
Losses
$
$
Total
$
Balance at 1 July 2019
30,796,699
4,188,356
(26,550,241)
8,434,814
Loss for the year
Total comprehensive loss for the year
Securities issued during the year
Capital raising costs
Cost of share based payments
-
-
4,168,000
(430,005)
-
-
-
(2,366,217)
(2,366,217)
(2,366,217)
(2,366,217)
-
-
353,787
-
-
-
4,168,000
(430,005)
353,787
Balance at 30 June 2020
34,534,694
4,542,143
(28,916,458)
10,160,379
2019
Balance at 1 July 2018
21,448,698
1,923,506
(20,532,291)
2,839,913
Loss for the year
Total comprehensive loss for the year
-
-
-
-
(6,017,950)
(6,017,950)
(6,017,950)
(6,017,950)
Securities issued during the year
Capital raising costs
Cost of share based payments
9,544,925
(196,924)
-
-
-
2,264,850
-
-
-
9,544,925
(196,924)
2,264,850
Balance at 30 June 2019
30,796,699
4,188,356
(26,550,241)
8,434,814
The accompanying notes form part of these financial statements.
VRX Silica Limited
58
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows from operating activities
Payments to suppliers and employees
Interest received
Other income
Interest and other finance costs paid
Note
Consolidated
2020
$
2019
$
(1,640,469)
3,754
94,812
(5,449)
(1,735,630)
5,102
79,650
-
Net cash outflows used in operating activities
6(i)
(1,547,352)
(1,650,878)
Cash flows from investing activities
Expenditure on mining interests
Payment for plant and equipment
Refund of security deposit
Net cash outflows used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payment of capital raising costs
Repayment of lease liabilities
Net cash provided by financing activities
Net increase in cash held
Cash at beginning of the financial year
(1,285,197)
(8,241)
20,000
(1,602,095)
(5,146)
-
(1,273,438)
(1,607,241)
4,168,352
(246,000)
(43,933)
4,659,925
(133,324)
-
3,878,419
4,526,601
1,057,629
1,268,482
1,545,418
276,936
Cash at end of financial year
6
2,603,047
1,545,418
The accompanying notes form part of these financial statements.
VRX Silica Limited
59
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1.
Summary of Significant Accounting Policies
These consolidated financial statements and notes represent those of VRX Silica Limited and
controlled entities. (“Group” or “Consolidated Entity”).
VRX Silica Limited is a company limited by shares incorporated in Australia whose shares are publicly
traded on the Australian Securities Exchange. The nature of the operations and principal activities of
the Group are described in the Directors’ Report.
The separate financial statements of the parent entity, VRX Silica Limited, have not been presented
within this financial report as permitted by the Corporations Act 2001.
The financial report was authorised for issue on 30 September 2020 by the directors of the Company.
(a) Basis of Preparation
The financial report is a general purpose financial report which has been prepared in accordance with
Interpretations, other authoritative
Australian Accounting Standards, Australian Accounting
pronouncements of the Australian Accounting Standards Board (‘AASB’) and the Corporations Act
2001. The group is a for-profit entity for financial reporting purposes under Australian Accounting
Standards.
Except for cash flow information, the financial report has been prepared on an accruals basis and is
based on historical costs modified by the revaluation of selected non-current assets, financial assets
and financial liabilities for which the fair value basis of accounting has been applied.
(b) New Accounting Standards for Application in Current and Future Periods
The consolidated entity has adopted all of the new and revised Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current
reporting period.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117
'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Except
for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease
liabilities are recognised in the statement of financial position. Straight-line operating lease expense
recognition is replaced with a depreciation charge for the right-of-use assets (included in operating
costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the
earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher
when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest,
Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by
interest expense and depreciation in profit or loss. For classification within the statement of cash flows,
the interest portion is disclosed in operating activities and the principal portion of the lease payments
are separately disclosed in financing activities. For lessor accounting, the standard does not
substantially change how a lessor accounts for leases.
VRX Silica Limited
60
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(b) New Accounting Standards for Application in Current and Future Periods (continued)
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have
not been restated. The impact of adoption on opening accumulated losses as at 1 July 2019 was as
follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Variable outgoings and parking licence payments not recognised as a right-
of use asset (AASB 16)
Option to renew for a further 24 months, likely to be taken
Include 2% annual CPI increase
Operating lease commitments discount based on the weighted average
incremental borrowing rate of 3.5% (AASB 16)
Short-term leases not recognised as a right-of-use asset (AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities - non-current (AASB 16)
Change in opening accumulated losses as at 1 July 2019
1 July 2019
$
140,878
(53,599)
98,272
5,976
(12,153)
(1,292)
178,082
(43,933)
(134,149)
-
When adopting AASB 16 from 1 July 2019, the consolidated entity has applied the following practical
expedients:
● applying a single discount rate to the portfolio of leases with reasonably similar characteristics;
● accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short-term
leases;
● excluding any initial direct costs from the measurement of right-of-use assets;
● using hindsight in determining the lease term when the contract contains options to extend or
terminate the lease; and
● not apply AASB 16 to contracts that were not previously identified as containing a lease.
Australian Accounting Standards and Interpretations that have recently been issued or amended but
are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting
period ended 30 June 2020. The consolidated entity's assessment of the impact of these new or
amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set
out below:
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1
January 2020 and early adoption is permitted. The Conceptual Framework contains new definition and
recognition criteria as well as new guidance on measurement that affects several Accounting
Standards. Where the consolidated entity has relied on the existing framework in determining its
accounting policies for transactions, events or conditions that are not otherwise dealt with under the
Australian Accounting Standards, the consolidated entity may need to review such policies under the
revised framework. At this time, the application of the Conceptual Framework is not expected to have
a material impact on the consolidated entity's financial statements.
VRX Silica Limited
61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(c) Statement of Compliance
The financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures
that the financial report, comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).
(d) Basis of Consolidation
The consolidated financial statements comprise the financial statements of VRX Silica Limited
(“Company” or “Parent Entity”) and its subsidiaries as at 30 June each year (“Consolidated Entity” or
“Group”). Control is achieved where the Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent
company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and transactions, income
and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease
to be consolidated from the date on which control is transferred out of the Group. Control exists where
the Company has the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing when the Group controls another entity.
Business combinations have been accounted for using the acquisition method of accounting (refer note
1(e)).
Unrealised gains or transactions between the Group and its associates are eliminated to the extent of
the Group’s interests in the associates. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of associates have
been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held
by the Group and are presented separately in the statement of comprehensive income and within equity
in the consolidated statement of financial position. Losses are attributed to the non-controlling interests
even if that results in a deficit balance.
The Group treats transactions with non-controlling interests that do not result in a loss of control as
transactions with equity owners of the Group. A change in ownership interest results in an adjustment
between the carrying amounts of the controlling and non-controlling interests to reflect their relative
interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling
interests and any consideration paid or received is recognised within equity attributable to owners of
the Company.
When the group ceases to have control, joint control or significant influence, any retained interest in
the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss.
The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint controlled entity or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted for as if the Group
had directly disposed of the related assets or liabilities. This may mean that amounts previously
recognised in other comprehensive income are reclassified to profit or loss.
VRX Silica Limited
62
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(e) Business Combinations
The acquisition method of accounting is used to account for all business combinations, including
business combinations involving entities or business under common control, regardless of whether
equity instruments or other assets are acquired. The consideration transferred for the acquisition of a
subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity
interests issued by the Group. The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any pre-existing equity interest in the
subsidiary. Acquisition-related costs are expenses as incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the
Group recognises any non-controlling interest in the acquiree either at fair value or at the non-
controlling interest’s proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree
and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of
the Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement
of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain
purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration is classified as either equity or a financial liability. Amounts classified as a
financial liability are subsequently remeasured to fair value with changes in fair value recognised in the
statement of comprehensive income.
(f)
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision maker. The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the Board of
Directors of the Company.
(g) Revenue Recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is
expected to be entitled in exchange for transferring goods or services to a customer. For each contract
with a customer, the consolidated entity: identifies the contract with a customer; identifies the
performance obligations in the contract; determines the transaction price which takes into account
estimates of variable consideration and the time value of money; allocates the transaction price to the
separate performance obligations on the basis of the relative stand-alone selling price of each distinct
good or service to be delivered; and recognises revenue when or as each performance obligation is
satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the
customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer
and any other contingent events. Such estimates are determined using either the 'expected value' or
'most likely amount' method. The measurement of variable consideration is subject to a constraining
principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the variable consideration is subsequently
resolved.
VRX Silica Limited
63
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(g) Revenue Recognition (continued)
Amounts received that are subject to the constraining principle are initially recognised as deferred
revenue in the form of a separate refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control
of the goods, which is generally at the time of delivery.
Rendering of services
Revenue from a contract to provide services is recognised over time as the services are rendered
based on either a fixed price or an hourly rate.
Interest
Interest revenue is recognised as interest accrues using the effective interest method.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
(h)
Income Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
▪ when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; or
▪ when the taxable temporary difference is associated with investments in subsidiaries, associates
or interests in joint ventures, and the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and the carry-forward of unused tax
credits and unused tax losses can be utilised, except:
▪ when the deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
▪ when the deductible temporary difference is associated with investments in subsidiaries, associates
or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent
that it is probable that the temporary difference will reverse in the foreseeable future and taxable
profit will be available against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred income tax asset to be utilised.
VRX Silica Limited
64
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(h)
Income Tax (continued)
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised
to the extent that it has become probable that future taxable profit will allow the deferred tax asset to
be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or
loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to
the same taxable entity and the same taxation authority.
The amount of benefits brought to account or which may be realised in the future is based on the
assumption that no adverse change will occur in income legislation and the anticipation that the Group
will derive sufficient future assessable income to enable the benefit to be realised and comply with the
conditions of deductibility imposed by the law.
VRX Silica Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an
income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary
in the tax consolidated group continue to account for their own current and deferred tax amounts. The
tax consolidated group has applied the 'separate taxpayer within group' approach in determining the
appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits
assumed from each subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the tax consolidated group. The
tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit
of each tax consolidated group member, resulting in neither a contribution by the head entity to the
subsidiaries nor a distribution by the subsidiaries to the head entity.
(i) Other Taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
▪ when the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
receivables and payables, which are stated with the amount of GST included.
▪
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the statement of financial position.
Cash flows are included in the cash flow statement on a gross basis and the GST component of cash
flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable
to, the taxation authority.
VRX Silica Limited
65
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(j) Current and Non-Current Classification
Assets and liabilities are presented in the statement of financial position based on current and non-
current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or
consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or
cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12
months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's
normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12
months after the reporting period; or there is no unconditional right to defer the settlement of the liability
for at least 12 months after the reporting period. All other liabilities are classified as non-current.
(k) Cash and Cash Equivalents
Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash
equivalents as described above, net of outstanding bank overdrafts.
(l)
Trade and Other Receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any allowance for expected credit losses. Trade receivables
are generally due for settlement within 30 days.
The consolidated entity has applied the simplified approach to measuring expected credit losses, which
uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables
have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
(m) Non-Current Assets Classified as Held for Sale
Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount
will be recovered principally through a sale transaction rather than through continued use. They are
measured at the lower of their carrying amount and fair value less costs of disposal. For non-current
assets or assets of disposal groups to be classified as held for sale, they must be available for
immediate sale in their present condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write down of the non-current assets
and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any
subsequent increases in fair value less costs of disposal of a non-current assets and assets of disposal
groups, but not in excess of any cumulative impairment loss previously recognised.
Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest
and other expenses attributable to the liabilities of assets held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of disposal groups classified as held for
sale are presented separately on the face of the statement of financial position, in current assets. The
liabilities of disposal groups classified as held for sale are presented separately on the face of the
statement of financial position, in current liabilities.
VRX Silica Limited
66
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(n)
Investments and Other Financial Assets
Investments and other financial assets are initially measured at fair value. Transaction costs are
included as part of the initial measurement, except for financial assets at fair value through profit or
loss. Such assets are subsequently measured at either amortised cost or fair value depending on their
classification. Classification is determined based on both the business model within which such assets
are held and the contractual cash flow characteristics of the financial asset unless, an accounting
mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been
transferred and the consolidated entity has transferred substantially all the risks and rewards of
ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its
carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income
are classified as financial assets at fair value through profit or loss. Typically, such financial assets will
be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with
an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where
permitted. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which
the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify
them as such upon initial recognition.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets
which are either measured at amortised cost or fair value through other comprehensive income. The
measurement of the loss allowance depends upon the consolidated entity's assessment at the end of
each reporting period as to whether the financial instrument's credit risk has increased significantly
since initial recognition, based on reasonable and supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a
12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime
expected credit losses that is attributable to a default event that is possible within the next 12 months.
Where a financial asset has become credit impaired or where it is determined that credit risk has
increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The
amount of expected credit loss recognised is measured on the basis of the probability weighted present
value of anticipated cash shortfalls over the life of the instrument discounted at the original effective
interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance
is recognised within other comprehensive income. In all other cases, the loss allowance is recognised
in profit or loss.
VRX Silica Limited
67
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(o) Plant and Equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment
losses.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as
follows:
Plant and equipment – over 3 to 5 years
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if
appropriate, at each financial year end.
(i) Impairment
The carrying values of property, plant and equipment are reviewed for impairment at each reporting
date, with recoverable amount being estimated when events or changes in circumstances indicate that
the carrying value may be impaired.
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is
determined for the cash-generating unit to which the assets belongs, unless the asset's value in use
can be estimated to be close to its fair value.
An impairment exists when the carrying value of an asset or cash-generating units exceeds its
estimated recoverable amount. The asset or cash-generating unit is then written down to its
recoverable amount.
For plant and equipment, impairment losses are recognised in the statement of comprehensive
income.
(ii) Derecognition and disposal
An item of plant and equipment is derecognised upon disposal or when no further future economic
benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the
asset is derecognised.
VRX Silica Limited
68
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(p) Right-of-use Assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is
measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable,
any lease payments made at or before the commencement date net of any lease incentives received,
any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of
costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site
or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or
the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects
to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its
estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement
of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease
liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease
payments on these assets are expensed to profit or loss as incurred.
(q) Mineral Exploration and Evaluation Expenditure
Exploration and evaluation expenditures in relation to each separate area of interest are recognised as
an exploration and evaluation asset in the year in which they are incurred where the following conditions
are satisfied:
(i)
the rights to tenure of the area of interest are current; and
(ii)
at least one of the following conditions is also met:
(a)
(b)
the exploration and evaluation expenditures are expected to be recouped through
successful development and exploitation of the area of interest, or alternatively, by its sale;
or
exploration and evaluation activities in the area 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 relation to,
the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to
explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation
of depreciation and amortisation of assets used in exploration and evaluation activities. General and
administrative costs are only included in the measurement of exploration and evaluation costs where
they are related directly to operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest
that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount.
The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to
which it has been allocated being no larger than the relevant area of interest) 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 has been made to proceed with development in respect of a particular area of
interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then
reclassified to development.
VRX Silica Limited
69
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(r)
Impairment of Assets
The Group assesses at each reporting date whether there is an indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required, the
Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the
higher of its fair value less costs to sell and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets
or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In
such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs.
When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the
asset or cash-generating unit is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. Impairment losses relating to continuing operations are recognised in those
expense categories consistent with the function of the impaired asset unless the asset is carried at
revalued amount (in which case the impairment loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists,
the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its
recoverable amount. That increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which
case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is
adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on
a systematic basis over its remaining useful life.
(s)
Trade and Other Payables
Trade payables and other payables are carried at amortised costs and represent liabilities for goods
and services provided to the Group prior to the end of the financial year that are unpaid and arise when
the Group becomes obliged to make future payments in respect of the purchase of these goods and
services. The amounts are unsecured and are usually paid within 30 days of recognition.
(t)
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate assets but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in the statement of comprehensive
income net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax
rate that reflects the risks specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is recognised as a
borrowing cost.
VRX Silica Limited
70
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(u)
Employee Benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave
expected to be settled within 12 months of the reporting date are recognised in current liabilities in
respect of employees' services up to the reporting date and are measured at the amounts expected to
be paid when the liabilities are settled
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they
are incurred.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the
reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer
settlement of the liability. The liability is measured as the present value of expected future payments
to be made in respect of services provided by employees up to the reporting date using the projected
unit credit method. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted using market
yields at the reporting date on national government bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
(v)
Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially
recognised at the present value of the lease payments to be made over the term of the lease,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the
consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any
lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the
exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The
variable lease payments that do not depend on an index or a rate are expensed in the period in which
they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying
amounts are remeasured if there is a change in the following: future lease payments arising from a
change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and
termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is
fully written down.
VRX Silica Limited
71
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(w)
Interest-Bearing Loans and Borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration
received net of issue costs associated with the borrowing. Interest calculated using the effective
interest rate method is accrued over the period it becomes due and increases the carrying amount of
the liability.
On the issue of the convertible notes the fair value of the liability component is determined using a
market rate for an equivalent non-convertible bond and this amount is carried as a non-current liability
on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability
due to the passage of time is recognised as a finance cost. The remainder of the proceeds are allocated
to the conversion option that is recognised and included in shareholders equity as a convertible note
reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured in
the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss.
(x)
Finance Costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance
costs are expensed in the period in which they are incurred, including interest on short-term and long-
term borrowings.
(y)
Issued Capital
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 new business are not
included in the cost of acquisition as part of the purchase consideration.
(z)
Earnings per Share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to
exclude any costs of servicing equity (other than dividends) and preference share dividends, divided
by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted
for:
▪
▪
costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that
have been recognised as expenses; and
▪ other non-discretionary changes in revenues or expenses during the period that would result from
the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares
and dilutive potential ordinary shares, adjusted for any bonus element.
VRX Silica Limited
72
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(aa) Share-Based Payment Transactions
The Group provides benefits to employees (including senior executives) of the Group in the form of
share-based payments, whereby employees render services in exchange for shares or rights over
shares (equity-settled transactions).
When provided, the cost of these equity-settled transactions with employees is measured by reference
to the fair value of the equity instruments at the date at which they are granted. The fair value is
determined by using the Black-Scholes model or the binomial option valuation model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than
conditions linked to the price of the shares of VRX Silica Limited (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity,
over the period in which the performance and/or service conditions are fulfilled, ending on the date on
which the relevant employees become fully entitled to the award (the vesting period).
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 Group’s best estimate of
the number of equity instruments that will ultimately vest. 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. The statement of comprehensive income charge or credit for
a period represents the movement in cumulative expense recognised as at the beginning and end of
that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is
only conditional upon a market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the
terms had not been modified. In addition, an expense is recognised for any modification that increases
the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee,
as measured at the date of modification.
If 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,
as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the
computation of earnings per share.
VRX Silica Limited
73
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1. Summary of Significant Accounting Policies (Continued)
(ab) Significant Accounting Estimates and Judgments
Significant accounting judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognised in the financial statements.
Exploration and evaluation assets
The Group’s accounting policy for exploration and evaluation expenditure is set out at Note 1(q). The
application of this policy necessarily requires management to make certain estimates and assumptions
as to future events and circumstances. Any such estimates and assumptions may change as new
information becomes available. If, after having capitalised expenditure under the policy, it is concluded
that the expenditures are unlikely to be recovered by future exploitation or sale, then the relevant
capitalised amount will be written off to the statement of comprehensive income.
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 consolidated entity based on known information. This consideration
extends to the nature of the products and services offered, customers, supply chain, staffing and
geographic regions in which the consolidated entity operates. 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 consolidated
entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19)
pandemic.
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and
assumptions of future events. The key estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of certain assets and liabilities within the next
annual reporting period are:
Impairment of assets
In determining the recoverable amount of assets, in the absence of quoted market prices, estimations
are made regarding the present value of future cash flows using asset-specific discount rates and the
recoverable amount of the asset is determined. Value-in-use calculations performed in assessing
recoverable amounts incorporate a number of key estimates.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair
value of the equity instruments at the date at which they are granted. The fair value is determined from
market value.
VRX Silica Limited
74
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2.
Revenue and Expenses
(a) Revenue
Interest received – other corporations
Government grants
Other
(b) Other Expenses
Audit fees
Consulting fees
Legal fees
Marketing
Rent
Securities exchange and registry fees
Travel
Other
3.
Income Tax
Consolidated
2020
$
2019
$
3,990
50,000
19,675
73,665
35,500
281,800
96,000
428,516
49,284
100,590
76,981
220,009
5,553
-
90,675
96,228
35,500
206,400
107,810
369,878
81,665
99,531
113,407
270,796
1,288,680
1,284,987
(a) Income tax expense
The income tax expense for the year differs from the prima facie
tax as follows:
Loss for year
(2,366,217)
(6,017,950)
Prima facie income tax (benefit) @ 27.5% (2019: 27.5%)
(650,710)
(1,654,936)
Tax effect of non-deductible/(non-assessable) items
Deferred tax assets not brought to account
Total income tax expense
(283,998)
934,708
-
725,512
929,424
-
(b) Deferred tax assets
Deferred tax assets not brought to account arising from tax losses,
the benefits of which will only be realised if the conditions for
deductibility set out in Note 1(h) occur:
There are no franking credits available to the Group.
8,377,008
7,444,427
4. Auditors’ Remuneration
The auditor of VRX Silica Limited is RSM Australia Partners.
Amounts, received or due and receivable by RSM Australia
Partners for:
- audit or review services
- other non-audit services
VRX Silica Limited
35,500
8,000
43,500
35,500
2,000
37,500
75
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
5.
Earnings per Share (EPS)
Basic earnings per share
The earnings and weighted average number of ordinary shares
used in the calculation of basic earnings per share is as follows:
Earnings – Net loss for year
Weighted average number of ordinary shares used in the
calculation of basic EPS
Consolidated
2020
$
2019
$
Cents
Cents
(0.55)
(1.69)
(2,366,217)
(6,017,950)
No.
No.
430,249,718
355,810,049
6.
Cash and Cash Equivalents
Cash at bank
2,603,047
1,545,418
Cash at bank earns interest at floating rates based on daily bank deposit rates.
(i) Reconciliation of loss for the year to net cash flows from
operating activities:
Loss for the year
Depreciation
Equity settled share based payment
Exploration and evaluation expenditure
Changes in assets and liabilities
Receivables
Payables
Provisions
GST payable/receivable
Net cash flows used in operating activities
(ii) Non-cash financing and investing activities:
Shares issued as consideration for mining interests
Options issued as consideration for mining interests
Options issued as consideration for capital raising costs
(2,366,217)
(6,017,950)
51,227
169,432
551,344
1,985
1,525,250
2,937,956
21,969
(61,223)
17,254
68,862
(18,451)
(36,669)
(12,951)
(30,048)
(1,547,352)
(1,650,878)
-
-
184,005
4,885,000
676,000
63,600
184,005
5,624,600
VRX Silica Limited
76
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
7.
Trade and Other Receivables
Current
GST recoverable
Other receivables
Consolidated
2020
$
2019
$
40,755
61,305
102,060
112,701
109,892
222,593
Terms and conditions relating to the above financial instruments:
• Other receivables are non-interest bearing and generally repayable within 30 days.
• Due to the short term nature of these receivables, their carrying value is assumed to approximate their
fair value.
Non-Current
Security bonds
Performance bond
26,030
-
26,030
25,794
20,000
45,794
Allowance for expected credit losses
The Group has not recognised any expected credit losses for the year ended 30 June 2020.
8.
Non-current Asset Held for Sale
Current
Biranup Nickel and Gold Project
-
-
At 30 June 2020, the Biranup Nickel and Gold Project was held for sale to New Energy Metals Limited under
a conditional sale agreement dated 19 June 2020 (Note 21). The value of the project was fully impaired by
$1,276,985 during the year ended 30 June 2019.
9.
Plant and Equipment
Plant and equipment - at cost
Less: Accumulated depreciation
Net carrying amount
Reconciliation
At 1 July, net of accumulated depreciation and impairment
Additions
Depreciation expense
At 30 June, net of accumulated depreciation and impairment
238,994
(226,783)
234,061
(223,045)
12,211
11,016
11,016
4,933
(3,738)
12,211
4,546
8,455
(1,985)
11,016
VRX Silica Limited
77
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
10. Right-of-use Assets
Land and buildings – right-of-use
Less: Accumulated depreciation
Consolidated
2020
$
2019
$
178,082
(47,489)
130,593
-
-
-
There were no additions to the right-of-use assets during the year.
The consolidated entity leases land and buildings for its offices under a two year agreement with an option
to extend for an additional two years. On renewal, the terms of the leases are renegotiated.
The consolidated entity leases warehouse space and office equipment. These leases are either short-term
or low-value, so have been expensed as incurred and not capitalised as right-of-use assets.
11. Deferred Exploration Expenditure
Expenditure brought forward
Acquisition of subsidiary (Note 18)
Tenement acquisitions (Note 19)
Expenditure incurred during the year
Expenditure written off during the year
Expenditure carried forward
6,972,573
-
-
1,264,776
(551,344)
2,634,453
500,000
5,272,215
1,503,861
(2,937,956)
7,686,005
6,972,573
The expenditure above relates principally to the exploration and evaluation phase. The ultimate recoupment
of this expenditure is dependent upon the successful development and commercial exploitation, or
alternatively, sale of the respective areas of interest, at amounts at least equal to book value.
12. Trade and Other Payables
Current
Trade and other payables
182,635
303,215
Terms and conditions relating to the above financial instruments:
•
• Due to the short term nature of trade payable and accruals, their carrying value is assumed to
Trade payables are non-interest bearing and are normally settled on 30 day terms.
approximate their fair value.
VRX Silica Limited
78
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
13. Provisions
Current
Employee benefits
Consolidated
2020
$
2019
$
82,783
59,365
Employee benefits represent annual leave entitlements of employees within the Group and are non-interest
bearing. The entire obligation is presented as current, since the Group does not have a right to defer
settlement.
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have
completed the required period of service and also those where employees are entitled to pro-rata payments
in certain circumstances. The entire amount is presented as current, since the consolidated entity does not
have an unconditional right to defer settlement. However, based on past experience, the consolidated entity
does not expect all employees to take the full amount of accrued leave or require payment within the next 12
months. The following amounts reflect leave that is not expected to be taken within the next 12 months:
Employee benefits expected to be settled after 12 months
-
14. Lease Liabilities
Current
Non-current
46,474
87,675
-
-
-
15. Equity - Accumulated Losses
Accumulated losses at the beginning of the year
Loss after income tax expenses for the year
Accumulated losses at the end of the year
(26,550,241)
(2,366,217)
(20,532,291)
(6,017,950)
(28,916,458)
(26,550,241)
VRX Silica Limited
79
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
16.
Issued Capital
Issued and paid up capital
(a)
Ordinary shares - fully paid
Consolidated
2020
$
2019
$
34,534,694
30,796,699
(b) Movement in ordinary shares on issue
Issue
Price
No. of Shares
$
2020
Balance at the beginning of the year
Exercise of options expiring 31 October 2019
Exercise of options expiring 28 November 2019
Issued for cash pursuant to placement to investors
– 13 November 2019
Expense of issue
Balance at the end of the year
2019
$0.028
$0.028
$0.115
404,318,617
1,000,000
5,000,000
30,796,699
28,000
140,000
34,782,610
-
4,000,000
(430,005)
445,101,227
34,534,694
Balance at the beginning of the year
Issued as consideration for acquisition of subsidiary
(Note 18) – 1 August 2018
Issued for cash pursuant to placement to investors
– 1 August 2018
Expense of issue
Issued as consideration for acquisition of tenement (Note 19)
– 1 August 2018
Issued as consideration for acquisition of tenement (Note 19)
– 19 September 2018
Issued for cash pursuant to placement to directors
– 19 September 2018
Issued as consideration for acquisition of tenement (Note 19)
– 18 February 2019
Issued for cash pursuant to placement to investors
– 9 April 2019
Expense of issue
Issued for cash pursuant to placement to directors
– 4 June 2019
Balance at the end of the year
251,319,868
21,448,698
$0.060
8,333,333
500,000
$0.060
36,550,000
-
2,193,000
(23,072)
$0.060
10,000,000
600,000
$0.065
55,000,000
3,575,000
$0.060
3,450,000
207,000
$0.105
2,000,000
210,000
$0.060
33,333,333
-
2,000,000
(173,852)
$0.060
4,332,083
259,925
404,318,617
30,796,699
VRX Silica Limited
80
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
16.
Issued Capital (Continued)
(c) Share options
At the end of the year, the following options over unissued ordinary shares were outstanding:
•
•
•
•
•
•
•
•
15,250,000 options expiring 30 November 2020, exercisable at 7.2 cents each;
25,000,000 options expiring 30 June 2021, exercisable at 10 cents each;
5,750,000 options expiring 30 November 2021, exercisable at 10 cents each;
11,000,000 options expiring 30 November 2021, exercisable at 21.7 cents each;
5,000,000 options expiring 30 November 2021, exercisable at 9 cents each;
4,000,000 options expiring 30 November 2022, exercisable at 9 cents each;
3,500,000 options expiring 23 October 2023, exercisable at 15 cents each; and
23,939,525 listed options expiring 31 July 2021, exercisable at 18 cents each.
(d) Terms and conditions of issued capital
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company,
to participate in proceeds from the sale of all surplus assets in proportion to the number of and amounts paid
up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
(e) Capital management
Management controls the capital of the Company in order to maintain a good debt to equity ratio, provide the
shareholders with adequate returns and ensure that the Company can fund its operations and continue as a
going concern.
The Company’s debt and capital includes ordinary share capital and financial liabilities, supported by financial
assets. There are no externally imposed capital requirements.
Management effectively manages the Company’s capital by assessing its financial risks and adjusting its
capital structure in response to changes in these risks and in the market. These responses include the
management of debt levels, distributions to shareholders and share issues. There have been no changes in
the strategy adopted by management to control the capital of the Company since the prior year. The gearing
ratios for the year ended 30 June 2020 and 30 June 2019 are as follows:
Total borrowings
Less: Cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
12, 14
6
Consolidated
2020
$
2019
$
316,784
(2,603,047)
(2,286,263)
10,160,379
7,874,116
303,215
(1,545,418)
(1,242,203)
8,434,814
7,192,611
N/A
N/A
VRX Silica Limited
81
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
17. Reserves
Option issue reserve
Option issue reserve
Consolidated
2020
$
2019
$
4,542,143
4,188,356
(i) Nature and purpose of reserve
The option issue reserve is used to accumulate amounts received on the
issue of options and records items recognised as expenses on valuation of
incentive based share options.
(ii) Movements in reserve
Balance at the beginning of the year
Issue of incentive based share options
Options issued in lieu of fees payable
Options issued as consideration for acquisition of tenement
Balance at the end of the year
4,188,356
-
353,787
-
1,923,506
1,126,850
462,000
676,000
4,542,143
4,188,356
18. Acquisition of Subsidiary
On 30 July 2018, the Company announced that it had acquired 100% of the issued capital of Wisecat Pty Ltd
(“Wisecat”). As Wisecat held the option to acquire the Muchea Tenement (E70/4886) (“Muchea Option”), with
no inputs or outputs being acquired, the acquisition was assessed as an asset acquisition rather than a
business combination.
The full consideration for the acquisition of Wisecat of 8,333,333 fully paid ordinary shares in the Company
were issued to Goldfire Enterprises Pty Ltd (“Goldfire”), the sole shareholder of Wisecat, on 1 August 2018.
Purchase consideration
Fair value of share consideration issued
Net assets acquired
Deferred exploration expenditure
$
500,000
500,000
500,000
500,000
VRX Silica Limited
82
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
19. Acquisition of Muchea and Boyatup Tenements
On 30 July 2018, the Company announced that Wisecat had entered into a tenement acquisition agreement
with Australian Silica Pty Ltd (“Australian Silica”) to purchase the Muchea Tenement (E70/4886) following the
Company’s acquisition of Wisecat.
The Muchea Tenement acquisition was on the following terms:
•
Initial issue of 10,000,000 shares in the Company to Australian Silica. The shares were issued on 1
August 2018;
Issue, subject to shareholder approval, 55,000,000 shares in the Company and 20,000,000 options, at
an issue price of 0.001 cent per option. Each option is exercisable into a share in the Company on or
before 30 June 2021 at 10 cents. Shareholder approval was obtained on 14 September 2018 and the
shares and options were issued to Australian Silica on 19 September 2018; and
•
• Wisecat will pay Australian Silica an ongoing net production royalty of 1% on gross revenue on all
product sold from minerals mined from the Muchea Tenement minus allowable deductions.
On 4 February 2019, the Company announced that it had completed an agreement with Silatec Pty Ltd for
the acquisition of the Boyatup Silica Sand Project which consists of a single tenement, E69/3560. The
Company issued 2,000,000 shares on 18 February 2019 and paid $10,000 in full consideration for the
acquisition.
Acquisition of Muchea tenements
Fully paid ordinary shares
Unlisted options
Cash received for unlisted options
Stamp duty
Acquisition of Boyatup tenements
Fully paid ordinary shares
Cash consideration
Stamp duty
Total consideration for tenement acquisitions
20. Commitments
Exploration commitments
$
4,175,000
676,000
(200)
194,765
5,045,565
210,000
10,000
6,650
226,650
5,272,215
Consolidated
2020
$
2019
$
The Company has certain obligations to perform minimum exploration work and to expend minimum amounts
of money on such work on mining tenements. These obligations may be varied from time to time subject to
approval and are expected to be fulfilled in the normal course of the operations of the Group. These
commitments have not been provided for in the accounts. Due to the nature of the Group’s operations in
exploring and evaluating areas of interest, it is difficult to accurately forecast the nature and amount of future
expenditure beyond the next year. Expenditure may be reduced by seeking exemption from individual
commitments, by relinquishment of tenure or any new joint venture arrangements. Expenditure may be
increased when new tenements are granted or joint venture agreements amended. The minimum expenditure
commitment on the tenements is:
Not later than one year
497,500
490,000
VRX Silica Limited
83
Consolidated
2020
$
2019
$
29,382
49,157
78,539
81,055
59,823
140,878
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
20. Commitments (Continued)
Operating lease commitments
Non-cancellable operating leases contracted for but not recognised
in the financial statements:
Payable – minimum lease payments
- Not later than one year
- After one year but not more than five years
The property lease is a non-cancellable lease with a 24 month term
commencing 1 April 2019, with rent payable monthly in advance. An
option exists to renew the lease at the end of the 24 month term for
an additional term of 24 months. At 30 June 2020 this consists of the
variable outgoings and parking licence payments portions of the rent
not recognised as a right-of-use asset.
The storage lease is currently on a month by month basis, and as a
short term lease is not recognised as a right-of-use asset.
21. Contingent Liabilities and Assets
Contingent liabilities
It is possible that native title, as defined in the Native Title Act 1993, might exist over land in which the
Company has an interest. It is not possible at this stage to quantify the impact (if any) that the existence of
native title may have on the operations of the Company. However, at the date of this report, the Directors
are aware that applications for native title claims have been accepted by the Native Title Tribunal over
tenements held by the Company.
In connection with Wisecat’s acquisition of the Muchea Tenement (Note 19), Wisecat will pay Australian Silica
an ongoing net production royalty of 1% on gross revenue on all product sold from minerals mined from the
Muchea Tenement minus allowable deductions.
Contingent assets
A binding term sheet dated 19 June 2020 set out the terms upon which New Energy Metals Limited agreed
to acquire 100% of the issued capital of Ventnor Gold Pty Ltd from the Company. Ventnor Gold Pty Ltd, a
wholly owned subsidiary of the Company, owns 100% of the Biranup Nickel and Gold Project tenements.
New Energy Metals Limited is an unlisted public company planning an initial public offering (IPO) and ASX
listing.
The consideration for the sale consists of:
• 6,250,000 fully paid ordinary shares in New Energy Metals Limited at a deemed issue price of 20 cents
•
per share, to be issued at completion of the sale; and
cash milestone payments of:
-
$200,000 upon delineation of a JORC compliant inferred resource of no less than 7.5mt at a grade
of 2% nickel and 0.5% copper on the land comprising the tenements;
$200,000 at the completion of a feasibility study with respect to the Biranup Project demonstrating
an ability to operate it as a commercially viable enterprise, and
$500,000 at the first commercial extraction of any minerals, mineral products, ore or concentrates,
in whatever form, from the Biranup Project.
-
-
VRX Silica Limited
84
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
21. Contingent Liabilities and Assets (Continued)
Completion of the sale is subject to and conditional upon the following:
•
completion of due diligence investigations by New Energy Metals Limited into Ventnor Gold Pty Ltd and
the Biranup Project to its satisfaction;
• New Energy Metals Limited conducting the IPO, including raising necessary capital and receiving ASX
•
conditional approval for listing of its securities on ASX; and
the parties obtaining all necessary board, shareholder, third party and regulatory approvals and consents
required to complete the sale.
22. Financial Reporting by Segments
The Group has identified its operating segments based on the internal reports that are used by the Board
(the chief operating decision makers) in assessing performance and in determining the allocation of
resources.
The operating segments are identified by the Board based on the phase of operation within the mining
industry. For management purposes, the Group has organised its operations into two reportable segments
on the basis of stage of development as follows:
• Development assets
• Exploration and evaluation assets, which includes assets that are associated with the determination
and assessment of the existence of commercial economic reserves.
The Board as a whole will regularly review the identified segments in order to allocate resources to the
segment and to assess its performance.
During the year ended 30 June 2020, the Group had no development assets. The Board considers that it has
only operated in one segment, being mineral exploration within Australia.
Where applicable, corporate costs, finance costs, interest revenue and foreign currency gains and losses are
not allocated to segments as they are not considered part of the core operations of the segments and are
managed on a Group basis.
The consolidated entity is domiciled in Australia. All revenue from external customers is generated from
Australia only. Segment revenues are allocated based on the country in which the customer is located
Revenues of approximately Nil (2019: Nil) are derived from a single external customer.
VRX Silica Limited
85
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
23. Related Party Transactions
(a) Subsidiaries
The consolidated financial statements include the financial statements of VRX Silica Limited and the
subsidiaries listed in the following table.
County of
Incorporation
% Equity Interest
2019
2020
%
%
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
Ventnor Gold Pty Ltd
Ventnor Mining Pty Ltd
Ventnor Pilbara Pty Ltd
VRX Boyatup Pty Ltd
Wisecat Pty Ltd
(b) Parent entity
VRX Silica Limited is the ultimate Australian parent entity and ultimate parent of the Group.
(c) Key management personnel
Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or
payable to each member of the consolidated entity’s key management personnel for the year ended 30 June
2020.
The totals of remuneration paid to key management personnel of the Company during the year are as follows:
Short-term benefits
Post-employment benefits
Share-based payments
Consolidated
2020
$
346,530
27,220
-
373,750
2019
$
341,530
22,470
871,200
1,235,200
Shares Issued to Key Management Personnel on Exercise of Compensation Options
During the year, the Company issued the following fully paid ordinary shares on the exercise of unlisted
options at 2.8 cents each, exercisable on or before 28 November 2019:
1,000,000 shares
Mr Paul Boyatzis
Mr Bruce Maluish
2,000,000 shares
Mr Peter Pawlowitsch 1,000,000 shares
The options were originally issued to directors and executives on 28 November 2016.
VRX Silica Limited
86
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
23. Related Party Transactions (Continued)
Loans with Key Management Personnel
There were no loans to key management personnel or their related entities during the financial year (2019:
nil).
Other Transactions with Key Management Personnel
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
During the year, the Company subleased office space for:
-
-
$8,325 (2019: $11,100) to Gyoen Pty Ltd, Mr Peter Pawlowitsch’s consultancy company; and
$29,350 (2019: $29,350) to Aruma Resources Ltd, a company Mr Paul Boyatzis is a director of.
At 30 June 2020, the Group has an outstanding receivable of:
-
-
nil (2019: $3,053) from Gyoen Pty Ltd, Mr Peter Pawlowitsch’s consultancy company; and
$16,142 (2019: $8,071) from Aruma Resources Ltd, a company Mr Paul Boyatzis is a director of.
During the year, no amount (2019: $35,000) was paid to Mr Peter Pawlowitsch’s consultancy company,
Gyoen Pty Ltd for advisory services outside his usual Board duties. At 30 June 2020, the Group has no
outstanding payable to Gyoen Pty Ltd (2019: $15,000).
During the previous financial year, on 30 July 2018, the Company announced that in conjunction with the
acquisition of Wisecat Pty Ltd and the Muchea Tenement, the Company received firm commitments for a
placement of 40,000,000 shares at an issue price of 6 cents each to raise approximately $2,400,000 (before
costs). The first tranche of 36,550,000 shares were issued to investors on 1 August 2018. The second tranche
of 3,450,000 shares were issued to the directors on 19 September 2018, after shareholder approval was
obtained on 14 September 2018. Mr Paul Boyatzis, Mr Bruce Maluish and Mr Peter Pawlowitsch subscribed
for 450,000, 1,000,000 and 2,000,000 shares respectively under this placement.
On 2 April 2019, the Company announced that it had received commitments for a placement of 37,666,666
shares at an issue price of 6 cents each to raise approximately $2,260,000 (before costs), with the directors
committed to subscribe for an aggregate of 4,333,333 shares. On 9 April 2019, 33,333,333 shares were
issued to investors. On 30 May 2019, shareholders approved the placement of shares to the directors. On 4
June 2019, Mr Paul Boyatzis, Mr Bruce Maluish and Mr Peter Pawlowitsch were issued with 498,750, 500,000
and 3,333,333 shares respectively under this placement.
VRX Silica Limited
87
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
24. Parent Entity Disclosures
(a) Summary financial information
Financial Position
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
Loss for the year
Other comprehensive income
Total comprehensive loss
(b) Guarantees
Parent
2020
$
2019
$
2,689,388
7,795,357
1,716,576
6,958,206
10,484,745
8,674,782
236,691
87,675
324,366
239,968
-
239,968
34,634,694
4,542,143
(29,016,458)
30,896,699
4,188,356
(26,650,241)
10,160,379
8,434,814
(2,366,217)
-
(2,366,217)
(6,017,950)
-
(6,017,950)
VRX Silica Limited has not entered into any guarantees in relation to the debts of its subsidiary.
(c) Other commitments and contingencies
VRX Silica Limited has no commitments to acquire property, plant and equipment, and has no contingent
liabilities apart from the amounts disclosed in Note 21.
(d) Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity as disclosed in
Note 1 except for the following:
● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
● Investments in associates are accounted for at cost, less any impairment, in the parent entity.
● Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
VRX Silica Limited
88
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
25. Share Based Payments
(a) Value of share based payments in the financial statements
Expensed:
Directors remuneration:
Unlisted options
Incentive based payments to employees and consultants:
Unlisted options
Share based payments in lieu of fees payable:
Unlisted options
Issue price of options
Consolidated
2020
$
2019
$
-
-
169,782
(350)
871,200
255,650
398,400
-
Recognised in statement of comprehensive income
169,432
1,525,250
Share based payments to acquire exploration tenements:
Fully paid ordinary shares
Unlisted options
Recognised on statement of financial position
Share based payments in capital raising costs:
Unlisted options
Listed options
Recognised on statement of changes in equity
-
-
-
4,385,000
676,000
5,061,000
-
184,005
184,005
63,600
-
63,600
Total share based payments
353,437
6,649,850
(b) Summary of share-based payments
Shares:
During the previous financial year, the Company issued 10,000,000 shares (fair valued at $0.06 each) on 1
August 2018 and 55,000,000 shares (fair valued at $0.065 each) on 19 September 2018 as part consideration
to acquire the Muchea Tenement (Note 19).
On 18 February 2019, the Company issued 2,000,000 shares, fair valued at $0.105 each, as part
consideration for the acquisition of the Boyatup Tenement (Note 19).
VRX Silica Limited
89
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
25. Share Based Payments (Continued)
Options:
Set out below are the summaries of options granted as share based payments:
2020
Grant
Date
Expiry
Date
Exercise
Price
Balance
01/07/19
Granted
during the
year
Exercised
during the
year
Expired
Balance
30/06/20
Number
vested and
exercisable
02/11/16
28/11/16
30/11/17
11/12/17
14/09/18
18/09/18
21/11/18
30/11/18
09/04/19
31/05/19
23/10/19
11/11/19
29/01/20
31/10/19
28/11/19
30/11/20
30/11/20
30/06/21
30/11/21
30/11/21
30/11/21
30/11/21
30/11/22
23/10/23
23/10/23
31/07/21
$0.028
$0.028
$0.072
$0.072
$0.100
$0.100
$0.100
$0.217
$0.090
$0.090
$0.150
$0.150
$0.180
1,000,000
5,000,000
12,000,000
3,250,000
25,000,000
5,500,000
250,000
11,000,000
5,000,000
4,000,000
-
-
-
-
-
-
-
-
-
-
- 3,000,000
500,000
-
6,548,220
-
(1,000,000)
(5,000,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 12,000,000
-
3,250,000
- 25,000,000
-
5,500,000
250,000
-
- 11,000,000
5,000,000
-
4,000,000
-
3,000,000
-
500,000
-
6,548,220
-
-
-
12,000,000
3,250,000
25,000,000
5,500,000
250,000
11,000,000
5,000,000
4,000,000
1,000,000
500,000
6,548,220
72,000,000 10,048,220
(6,000,000)
- 76,048,220
74,048,220
Weighted average exercise price
$0.105
$0.170
$0.028
-
$0.119
$0.118
2019
Grant
Date
Expiry
Date
Exercise
Price
Balance
01/07/18
Granted
during the
year
Exercised
during the
year
Expired
Balance
30/06/19
02/11/16
28/11/16
30/11/17
11/12/17
14/09/18
18/09/18
21/11/18
30/11/18
09/04/19
31/05/19
31/10/19
28/11/19
30/11/20
30/11/20
30/06/21
30/11/21
30/11/21
30/11/21
30/11/21
30/11/22
$0.028
$0.028
$0.072
$0.072
$0.100
$0.100
$0.100
$0.217
$0.090
$0.090
1,000,000
5,000,000
12,000,000
3,250,000
-
-
-
-
- 25,000,000
5,500,000
-
-
250,000
- 11,000,000
5,000,000
-
4,000,000
-
21,250,000 50,750,000
-
-
-
-
-
-
-
-
-
-
-
Number
vested and
exercisable
1,000,000
5,000,000
12,000,000
3,250,000
25,000,000
5,500,000
250,000
11,000,000
5,000,000
4,000,000
1,000,000
-
-
5,000,000
- 12,000,000
-
3,250,000
- 25,000,000
5,500,000
-
-
250,000
- 11,000,000
5,000,000
-
4,000,000
-
- 72,000,000
72,000,000
Weighted average exercise price
$0.060
$0.124
-
-
$0.105
$0.105
VRX Silica Limited
90
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
25. Share Based Payments (Continued)
Various deferred vesting options issued during the year and listed above are subject to milestones or vesting
dates which are listed below. Probability of achieving these milestones or vesting dates have been assessed
at 100% unless otherwise stated.
a) Unlisted options granted on 23 October 2019, exercisable at $0.15 each on or before 23 October
2023, were issued as part of financial advisory fees to Argonaut Capital Limited, with the following
vesting criteria applying:
Tranche 1 – 1,000,000 options - no vesting criteria, exercisable from date of issue
Tranche 2 – 1,000,000 options - exercisable only after the receipt of credit approval in respect of any
transaction (or series of transactions) that in aggregate contemplate the issuance of debt
financing of at least $20 million to the Company
Tranche 3 – 1,000,000 options - exercisable only after the raising of sufficient capital, including debt or
equity or other financing, to fully fund construction of the first of one of the Arrowsmith Silica
Sand Projects or the Muchea Silica Sand Project
The assessed fair values of the options was determined using a binomial option pricing model or black-
scholes model, taking into account the exercise price, term of option, the share price at grant date and
expected price volatility of the underling share, expected yield and the risk-free interest rate for the term of
the option. The inputs to the model used were:
2020
Grant date
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (years)
Underlying share price ($)
Option exercise price ($)
Value of option ($)
23/10/19
-
100%
0.745%
4
$0.145
$0.150
$0.0989
11/11/19
-
100%
0.865%
4
$0.115
$0.150
$0.0738
29/01/20
-
100%
0.700%
1.5
$0.095
$0.180
$0.0281
2019
Grant date
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (years)
Underlying share price ($)
Option exercise price ($)
Value of option ($)
14/09/18
-
100%
2.040%
3
$0.065
$0.100
$0.0338
18/09/18
-
100%
2.085%
3
$0.071
$0.100
$0.0409
21/11/18
-
100%
2.120%
3
$0.170
$0.100
$0.1228
30/11/18
-
100%
2.055%
3
$0.145
$0.217
$0.0792
9/04/19
-
100%
1.430%
3
$0.062
$0.090
$0.0318
31/05/19
-
100%
1.100%
3
$0.058
$0.090
$0.0335
The weighted average remaining contractual life of share-based payment options that were outstanding as
at 30 June 2020 was 1.192 years (2019: 1.952 years).
The weighted average fair value of share-based payment options granted during the year was $0.05151 each
(2019: $0.04463).
VRX Silica Limited
91
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
26. Financial Risk Management
The Consolidated entity’s principal financial instruments comprise receivables, payables, loans, cash and
short-term deposits. The Consolidated entity manages its exposure to key financial risks in accordance with
the Consolidated entity’s financial risk management policy. The objective of the policy is to support the delivery
of the Consolidated entity’s financial targets while protecting future financial security.
The main risks arising from the Consolidated entity’s financial instruments are interest rate risk, credit risk and
liquidity risk. The Consolidated entity does not speculate in the trading of derivative instruments. The
Consolidated entity uses different methods to measure and manage different types of risks to which it is
exposed. These include monitoring levels of exposure to interest rates and assessments of market forecasts
for interest rates. Ageing analysis of and monitoring of receivables are undertaken to manage credit risk,
liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews
and agrees policies for managing each of the risks identified below, including for interest rate risk, credit
allowances and cash flow forecast projections.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each class
of financial asset and financial liability are disclosed in Note 1 to the financial statements.
Risk Exposures and Responses
Interest Rate Risk
The Consolidated entity’s exposure to risks of changes in market interest rates relates primarily to the
Consolidated entity’s cash balances. The Consolidated entity constantly analyses its interest rate exposure.
Within this analysis consideration is given to potential renewals of existing positions, alternative financing
positions and the mix of fixed and variable interest rates. As the Company has no variable interest rate bearing
borrowings its exposure to interest rate movements is limited to the amount of interest income it can potentially
earn on surplus cash deposits. The following sensitivity analysis is based on the interest rate risk exposures
in existence at the reporting date.
At balance date, the Consolidated entity had the following financial assets exposed to variable interest rates
that are not designated in cash flow hedges:
Financial Assets
Cash and cash equivalents (interest-bearing accounts)
Net exposure
Consolidated
2020
$
2019
$
2,588,892
1,524,197
2,588,892
1,524,197
VRX Silica Limited
92
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
26. Financial Risk Management (Continued)
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting
date.
At 30 June, if interest rates had moved, as illustrated in the table below, with all other variables held constant,
post tax profit and equity relating to financial assets of the Consolidated entity would have been affected as
follows:
Judgements of reasonably possible movements:
Post tax profit – higher / (lower)
+ 0.05%
- 0.05%
Equity – higher / (lower)
+ 0.05%
- 0.05%
Liquidity Risk
Consolidated
2020
$
2019
$
1,294
(1,294)
1,294
(1,294)
762
(762)
762
(762)
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use
of loans and other available credit lines.
The Consolidated entity manages liquidity risk by monitoring immediate and forecast cash requirements and
ensuring adequate cash reserves are maintained.
Credit risk
Credit risk arises from the financial assets of the Consolidated entity, which comprise deposits with banks
and trade and other receivables. The Consolidated entity’s exposure to credit risk arises from potential default
of the counter party, with the maximum exposure equal to the carrying amount of these instruments. The
carrying amount of financial assets included in the statement of financial position represents the Consolidated
entity’s maximum exposure to credit risk in relation to those assets.
The Consolidated entity does not hold any credit derivatives to offset its credit exposure.
The Consolidated entity trades only with recognised, credit worthy third parties and as such collateral is not
requested nor is it the Consolidated entity’s policy to secure its trade and other receivables.
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses
to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning.
Receivable balances are monitored on an ongoing basis with the result that the Consolidated entity does not
have a significant exposure to bad debts.
The Consolidated entity’s cash deposits are held with a major Australian banking institution otherwise, there
are no significant concentrations of credit risk within the Consolidated entity.
VRX Silica Limited
93
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
26. Financial Risk Management (Continued)
The following table details the expected maturity of the Group’s financial assets and liabilities based on the
earliest date of maturity or payment respectively. The amounts are stated on an undiscounted basis and
include interest.
Consolidated
2020
Financial Assets:
Non-interest bearing
Variable interest rate
Fixed interest rate
Financial Liabilities:
Non-interest bearing
Fixed interest rate
2019
Financial Assets:
Non-interest bearing
Variable interest rate
Fixed interest rate
Financial Liabilities:
Non-interest bearing
Weighted
average
effective
interest rate
%
Less than 1
month
$
1 – 3
Months
$
3 months
– 1 year
$
1 – 5
years
$
-
0.05
0.65
-
3.50
-
0.15
1.60
-
116,215
2,588,892
-
2,705,107
-
-
-
-
2,583
-
-
2,583
182,635
3,791
186,426
-
11,440
11,440
-
31,243
31,243
-
-
23,447
23,447
-
87,675
87,675
243,814
1,524,197
-
1,768,011
303,215
303,215
-
-
-
-
-
-
2,583
-
20,000
22,583
-
-
23,211
23,211
-
-
-
-
Capital Management Risk
Management controls the capital of the Consolidated entity in order to maximise the return to shareholders
and ensure that the Group can fund its operations and continue as a going concern.
Management effectively manages the Group’s capital by assessing the Consolidated entity’s financial risks
and adjusting its capital structure in response to changes in these risks and in the market. These responses
include the management of expenditure and debt levels and share and option issues.
There have been no changes in the strategy adopted by management to control capital of the Consolidated
entity since the prior year.
Commodity Price and Foreign Currency Risk
The Consolidated entity’s exposure to price and currency risk is minimal given the Consolidated entity is still
in the exploration phase.
Fair Value
The methods of estimating fair value are outlined in the relevant notes to the financial statements. All financial
assets and liabilities recognised in the statement of financial position, whether they are carried at cost or fair
value, are recognised at amounts that represent a reasonable approximation of fair values unless otherwise
stated in the applicable notes.
VRX Silica Limited
94
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
27. Events Subsequent to Year End
The impact of the Coronavirus (COVID-19) pandemic is ongoing for the Group up to 30 June 2020, it is not
practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is
rapidly developing and is dependent on measures imposed by the Australian Government and other
countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any
economic stimulus that may be provided.
Other than the above, there are no matters or circumstances that have arisen since 30 June 2020 that have
or may significantly affect the operations, results, or state of affairs of the Company in future financial years.
VRX Silica Limited
95
DIRECTORS' DECLARATION
The directors of the Company declare that:
1.
The financial statements and notes, are in accordance with the Corporations Act 2001 and:
a.
b.
Comply with Accounting Standards, which, as stated in accounting policy Note 1(c) to the financial
statements, constitutes explicit and unreserved compliance with International Financial Reporting
Standards (IFRS); and
Give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2020 and of
its performance for the year ended on that date;
2.
In the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.
3.
The directors have been given the declarations required by s295A of the Corporation Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations
Act 2001.
Bruce Maluish
Director
Perth, 30 September 2020
VRX Silica Limited
96
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
VRX SILICA LIMITED
Opinion
We have audited the financial report of VRX Silica 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 statements, including a summary of
significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
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 then ended; 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 auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
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.
Key Audit Matter
How our audit addressed this matter
Carrying Value of Deferred Exploration Expenditure
Refer to Note 11 in the financial statements
The Group has capitalised a significant amount of
deferred exploration expenditure, with a carrying
value of $7,686,005 as at 30 June 2020.
We considered this to be a key audit matter due to
the significant management judgments involved in
assessing the carrying value of the assets including:
• Determination of whether the exploration and
evaluation expenditure can be associated with
finding specific mineral resources, and the basis
on which that expenditure is allocated to an area
of interest;
• Assessing whether any indicators of impairment
are present and if so, judgement applied to
determined and quantify any impairment loss;
and
• Assessing whether exploration activities have
reached a stage at which the existence of an
economically recoverable reserves may be
determined.
Other Information
Our audit procedures in relation to the carrying value of
deferred exploration expenditure included:
• Ensuring that the right to tenure of the area of
interest was current;
• Agreeing a sample of additions to supporting
documentation and ensuring the amounts are
capital in nature and relate to the area of interest;
• Enquiring with management and reviewing budgets
and other documentation as evidence that active
and significant operations in, or relation to, the area
of interest will be continued in the future;
• Assessing
and
evaluating management’s
assessment that no indicators of impairment existed
at the reporting date; and
• Through discussions with the management and
review of the Board Minutes, ASX announcements
and other
relevant documentation, assessing
that exploration
management’s determination
activities have not yet progressed to the stage where
the existence or otherwise of economically
recoverable reserves may be determined.
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 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 accordingly 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 have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with 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 at: https://www.auasb.gov.au/auditors_responsibilities/ar2.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 within the directors' report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of VRX Silica 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.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 30 September 2020
ALASDAIR WHYTE
Partner
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of VRX Silica Limited for the year ended 30 June 2020, I declare
that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 30 September 2020
ALASDAIR WHYTE
Partner
SECURITIES EXCHANGE INFORMATION
HOLDINGS AS AT 24 SEPTEMBER 2020
Number of Securities Held
No. of Holders No. of Shares
No. of Holders No. of Options
Ordinary Fully Paid Shares
Expiring 31/07/2021 @ $0.18
Listed Options
1
1,001
5,001
10,001
to 1,000
to 5,000
to 10,000
to 100,000
100,001 and over
Total
Number of holders of less
than a marketable parcel
Substantial Shareholders
84
194
344
967
519
2,108
29,946
734,769
2,848,219
41,884,738
399,603,555
445,101,227
171
267,901
1
2
3
61
50
117
7
11
7,001
22,771
2,983,196
20,926,546
23,939,525
41,841
The company has been notified of the following substantial shareholdings:
Peter Pawlowitsch
Voting Rights
Number
25,841,769
The Constitution of the company makes the following provision for voting at general meetings:
On a show of hands, every ordinary shareholder present in person, or by proxy, attorney or representative has one vote.
On a poll, every shareholder present in person, or by proxy, attorney or representative has one vote for any share held
by the shareholder.
20 Largest Holders of Securities as at 24 September 2020:
Ordinary Fully Paid Shares
1. MOSCH PTY LTD
2. MR MICHELE GALEA
3. MR AARON PETER BANKS
4. AUSTRALIAN SILICA PTY LTD
5. SUNSET CAPITAL MANAGEMENT PTY LTD
6. MORKIM PTY LTD
7. GOLDFIRE ENTERPRISES PTY LTD
8. CITICORP NOMINEES PTY LIMITED
9. MASH SUPER PTY LTD
10. MR WAYNE STEPHEN CLARK
11. MR BRUCE DENNIS MALUISH
12. AURO PTY LTD
13. BROWN BRICKS PTY LTD
14. HAVEN SUPER PTY LTD
15. GOLDFIRE ENTERPRISES PTY LTD
16. MR CHRISTOPHER JAMES WEED + MS JANET ELIZABETH BROCKMAN
17. AUSTRALIAN INTERNATIONAL SERVICES PTY LTD
18. PARLIN INVESTMENTS PTY LTD
19. ANDREW MALUISH SUPER PTY LTD
20. LESUER PTY LTD
Number
18,333,332
17,500,000
15,021,250
10,286,815
8,000,000
7,000,000
6,332,324
6,316,721
6,250,000
6,100,000
6,060,535
6,000,000
5,450,000
5,383,437
5,317,783
5,292,300
%
4.12
3.93
3.37
2.31
1.80
1.57
1.42
1.42
1.40
1.37
1.36
1.35
1.22
1.21
1.19
1.19
4,898,378
4,700,025
4,592,759
4,480,000
153,315,659
1.10
1.06
1.03
1.01
34.45
VRX Silica Limited
100
SECURITIES EXCHANGE INFORMATION
Listed Options Expiring 31/07/2021 @ $0.18
1. BLUE FEATHER (QLD) INVESTMENTS PTY LTD
2. ONE MANAGED INVESTMENT FUNDS LIMITED
3. MR CHRISTOPHER JAMES WEED + MS JANET ELIZABETH BROCKMAN
4. MR MARK FEDORUK
5. STEVE MCGOVERN
6. BRYLIE INVESTMENTS PTY LTD
7. ONE MANAGED INVESTMENT FUNDS LIMITED
8. MR PHILIP JAMES WHITMONT
9. ONE MANAGED INVESTMENT FUNDS LIMITED
10. MR MATTHEW STONE
11. MR JOHN ARTHUR JARVIS
12. MR DARREN KENNETH FISHER
13. GOLDFIRE ENTERPRISES PTY LTD
14. MR ROBERT PAUL MARTIN + MRS SUSAN PAMELA MARTIN