ABN: 87 145 011 178 Corporate Directory & Contents Corporate Directory Board of Directors Mr Thomas Sanders Mr Mark Edwards Mr Michael Kitney Executive Chairman Non-Executive Director Non-Executive Director Auditors Rothsay Chartered Accountants Level 1, 4 Ventnor Avenue West Perth, Western Australia 6005 Senior Management Mr Alastair Barker Miss Michelle Simson Manager Corporate Exploration Manager Affairs/Company Secretary Principal Place of Business & Registered Office 12 Walker Avenue West Perth, Western Australia 6005 +61 8 9226 3666 +61 8 9226 3668 Tel: Fax: Email: breaker@breakerresources.com.au Website: www.breakerresources.com.au ABN 87 145 011 178 Front Cover: Altered dolerite assaying 5.71g/t Au (quartz- biotite-albite-pyrite; Breaker’s first diamond drill hole at the Lake Roe Project; BBRD0056) Contents Solicitors Steinepreis Paganin Level 4, 16 Milligan Street Perth, Western Australia 6000 Share Registry* Automic Registry Services Level 2, 267 St George’s Terrace Perth, Western Australia 6000 Tel: 1300 288 664 (within Australia) +62 9698 5414 (outside Australia) hello@automic.com.au Email: Website: www.automic.com.au * Automic Registry Services commenced as the Company’s share registry provider on 16 October 2017 Securities Exchange Listing Shares and Partly Paid Shares in Breaker Resources NL are quoted on ASX Limited (codes: BRB and BRBCA). The Home Exchange is Perth, Western Australia. Chairman’s Letter ____________________________________________________________________________________________ 2 Review of Activities __________________________________________________________________________________________ 3 Tenement Schedule _______________________________________________________________________________________ 11 Directors’ Report ___________________________________________________________________________________________ 12 Auditor’s Independence Declaration _____________________________________________________________________ 23 Statement of Profit or Loss and Other Comprehensive Income __________________________________________ 24 Statement of Financial Position ____________________________________________________________________________ 25 Statement of Changes in Equity ___________________________________________________________________________ 26 Statement of Cash Flows __________________________________________________________________________________ 27 Notes to the Financial Statements _________________________________________________________________________ 28 Directors’ Declaration _____________________________________________________________________________________ 47 Independent Audit Report ________________________________________________________________________________ 48 ASX Additional Information ________________________________________________________________________________ 52 1 Breaker Resources NL Chairman’s Letter Dear Fellow Shareholder, It is with much pleasure that I present Breaker Resources’ 2016/17 Annual Report. The Company had a particularly successful year, consolidating the exciting 2.2km-long Bombora gold discovery in the 100%-owned Lake Roe Gold Project, located in Australia’s premier gold mining jurisdiction, 100km east of Kalgoorlie, Western Australia. After connecting three separate gold discoveries into one 2.2km-long discovery zone in September 2016, drilling has been continuous and now involves two RC and two diamond drill rigs targeting a maiden open pit JORC Resource in late 2017. We have now completed more than 75,000m of RC and diamond drilling at Lake Roe and our activities have added value and significantly de-risked the project, while boosting its potential: The drilling identified wide, shallow high-grade gold mineralisation with obvious open pit mining potential over a significant area; Deeper reconnaissance diamond drilling intersected high-grade mineralisation indicating potential for underground mining which can add multiples to any shallow gold inventory constrained by the economic limits of open pit mining; The progressive increase in drill density has significantly improved our understanding of the factors controlling the gold mineralisation. This de-risks the mining and assists tracking where the gold goes in order to find more, more efficiently; and Preliminary metallurgical results indicate strong gold recoveries and amenability to conventional milling with modest energy requirements and no deleterious elements. This style of mineralisation at Lake Roe – sulphide lodes and stockwork zones in dolerite, the dominant mineralisation style and host rock in Western Australia – typically extends to the limits of economic mining. We are starting to see indications of this. Resource delineation drilling only began in February 2017 and it is likely to extend well beyond 2017. We have intersected high-grade gold up to 300m below surface in the main 2.2km discovery zone, and there are many high-grade reconnaissance drill intersections directly along strike from the discovery zone that have not yet been followed up. Our initial goal at Lake Roe is to establish a maiden open pit resource in late 2017. Once this is done, we then plan to expand the resource at depth and along strike to build more value, and enable the Company to formulate and optimise a development strategy for a long-term, high-margin open pit and underground mine (subject to successful feasibility studies). The 2016/17 year has been rewarding for Breaker shareholders and our aim for the upcoming year is to continue building shareholder value armed with a rare, high-quality gold discovery of scale and obvious mining potential situated within a 556km2 project area with limited historical exploration. In closing, I would like to thank our committed team, including consultants, contractors and suppliers, for their hard work and professionalism. I would also like to thank our long-term shareholders for their support and welcome new shareholders as we embark on another exciting year fortified by gold, the timeless currency. Yours sincerely Tom Sanders Chairman 2017 Annual Report 2 Review of Activities Review of Exploration Activities Breaker Resources NL’s (Breaker) main focus is its 100%-owned Lake Roe Gold Project. Since announcing what appeared to be a large new gold system in August 2015, Breaker has undertaken over 100,000m of drilling and confirmed a 2.2km long discovery zone that is open in all directions. The 2.2km Bombora discovery forms part of an 8km-long gold system situated within a project comprising six granted tenements with an overall area of 556km2. The strong drilling results over the last year at the Lake Roe Gold Project are consistent with the early stages of a major gold discovery. The width, grade and shallow depth of the gold mineralisation indicate outstanding open pit mining potential, while limited deeper reconnaissance diamond drilling intersections indicate outstanding scope for underground mining. A maiden JORC Resource is planned for late 2017 primarily targeting open pit mineralisation in the upper 200m of the deposit. Once this is done, Breaker then plans to expand the resource at depth and along strike, build more value, and provide a framework with which to optimise a mine development strategy. At the time of this report, there are two reverse circulation (RC) and two diamond drill rigs on site at the Bombora discovery engaged in resource definition drilling. The Company’s exploration activities at Lake Roe during the reporting period include aircore drilling (5,775m), RC drilling (49,330m) and diamond drilling (4,025m). Geological mapping was also completed and preliminary metallurgical testwork and other pre-development activities were initiated. Breaker has also identified significant gold potential on its Ularring Rock Project, located approximately 100km east of Perth, where an in-depth review of historical exploration was undertaken. At the end of the reporting period, the Company held a total of 14 exploration licences and 1 tenement application with a total area of 1,603km2. Lake Roe Gold Project The Lake Roe Project is located 100km east of Kalgoorlie, 60km south-southeast of the 3.5Moz Karari-Carosue Dam gold deposits and 35km north of the 0.9Moz Karonie gold deposit. Since identifying a large new greenfields gold system in an area of thin transported cover (typically 5-10m) in July 2015, the Company has undertaken over 100,000m of aircore, RC and diamond drilling. fractionated (layered) dolerite The main target is high-grade gold mineralisation hosted by a 400m-500m-thick situated between two major shear zones in an area of shallow transported cover, typically 5m to 10m in thickness. The targeted dolerite forms part of a 1,500m-thick greenstone sequence situated geometrically above the east-dipping Keith-Kilkenny Shear Zone, in a similar structural setting to the Carosue and Karonie gold deposits along strike. A secondary target at the Lake Roe Project is the regional-scale Claypan Shear Zone, situated 400m to the east of the fractionated dolerite near the margin of a syenite-associated granite. Gold mineralisation is hosted primarily by the upper (western) iron- rich part of the dolerite, a significant component of which is granophyric in nature. Lode mineralisation is dominated by sulphide-impregnated fault zones (lodes) with up to 5% pyrite and pyrrhotite accompanied by silica, biotite, chlorite and carbonate alteration and minor quartz-pyrite veinlets. Quartz stockwork mineralisation is locally present, spatially associated with some of the sulphide lodes. Figure 1: Lake Roe Location Plan 3 Breaker Resources NL Review of Activities RC Drilling Breaker completed a total of 49,330m of RC drilling during the reporting period and a further 21,175m has been completed in the September 2017 quarter. A brief chronological summary of the drilling follows. Bombora North Discovery A 20-hole, 2,450m RC drill program commenced in August 2016 to evaluate the primary gold potential of a 600m-long zone of anomalous gold identified by shallow aircore drilling situated 1.2km north of the original Bombora discovery drill holes1. Significant gold was intersected on each of the six 100m- or 200m- spaced drill lines tested with significant intersections including2: 18m @ 2.97g/t Au from 12m inc. 10m @ 5.03g/t or 3m @ 14.59g/t or 2m @ 20.09g/t in BBRC0049; 18m @ 2.16g/t Au from 112m inc. 14m @ 2.70g/t or 3m @ 6.18g/t and 1m @ 12.60g/t in BBRC0050; and 10m @ 1.82g/t Au from 78m inc. 4m @ 3.57g/t or 1m @ 10.88g/t in BBRC0055. The Gap Discovery Results in a Single 2.2km-long Discovery Based on the strength of these results, the Company commenced a further program of RC drilling (17 holes for 1,908m) with the objective of testing the 1.2km gap between the Bombora and Bombora North gold discoveries. Significant gold was intersected on each of the 200m-spaced drill lines tested, effective linking the Bombora and Bombora North Prospects establishing a single 2.2km-long zone of gold mineralisation, subsequently termed the Bombora Discovery. Key results include3: 26m @ 2.55g/t Au from 19m inc. 9m @ 4.45g/t in BBRC0070; 12m @ 4.41g/t Au from 48m inc. 9m @ 5.70g/t and 3m @ 12.15g/t in BBRC0071; 17m @ 1.59g/t Au from 28m inc. 8m @ 3.16g/t and 3m @ 9.71g/t in BBRC0063; and 4m @ 10.08g/t Au from 156m in BBRC0065. Wide-spaced reconnaissance RC drilling was also conducted over a 2.4km distance to the north of Bombora to assess the extent of primary gold mineralisation. This drilling identified significant new gold mineralisation up to 2.4km north of the Bombora discovery with a best drill intersection of 37m @ 3.44g/t gold, including 12m at 5.23g/t4. These intersections are significant given the wide drill hole spacing and create potential to extend the 2.2km Bombora discovery zone. Infill Drilling From September 2016, up to four RC and diamond drill rigs have been operating continuously on site. This drilling progressively reduced the drill hole spacing to 100m x 20m. From February 2017 resource definition drilling on a 40m x 20m hole spacing commenced, targeting a maiden JORC Resource by the end of 2017. The results from infill drilling have yielded many thick, shallow, high-grade drill intercepts that materially upgrade the open pit and underground mining potential and value of the 2.2km-long Bombora discovery. New, very high-grade, sub-horizontal gold lodes were identified in the March 2017 quarter (Table 1) which significantly enhance the potential gold endowment per vertical metre. This is a very significant development. Photo 1: Drill Rigs at Lake Roe 2017 Annual Report 4 Review of Activities After only eight months of 40m x 20m resource drilling, the pattern is continuity, but defining it requires more infill drilling that is currently in progress. The progressive increase in the density of RC and diamond drilling is resolving the geometry and structural controls of the high-grade gold zones which is not possible in wider-spaced drilling. The infill drilling has confirmed that the sulphide lode gold mineralisation at Bombora occur in stacked, steep east-dipping mineralised faults, and flat to west-dipping mineralised faults, especially where they intersect. Stockwork gold mineralisation is also present and has a spatial association with the lodes, particularly the flatter ones. Drill results in the June 2017 quarter, the best to date at Lake Roe, continued to materially upgrade the open pit and underground mining potential. Table 1: More Significant Drill Results March 2017 Quarter5 Table 2: More Significant Drill Results June 2017 Quarter6 Hole_ID Interval @ g/t Au From Includes (Interval @ g/t Au) Hole_ID Interval @ g/t Au From Includes (Interval @ g/t Au) BBRC0166 BBRC0142 BBRC0111 BBRC0194 BBRC0201 BBRC0110 BBRC0264 BBRC0266 BBRC0193 BBRC0269 BBRC0190 BBRC0309 BBRC0200 BBRC0160 BBRC0049 7m @ 61.78 24m @ 7.75 19m @ 7.56 54m @ 2.38 37m @ 3.44 27m @ 3.86 45m @ 1.79 20m @ 3.65 36m @ 1.83 3m @ 21.74 11m @ 5.85 7m @ 8.69 20m @ 2.87 7m @ 7.75 18m @ 2.97 59m 9m 49m 5m 115m 21m 8m 60m 4m 68m 53m 77m 28m 24m 12m 4m @ 105.04 18m @ 10.15 4m @ 32.00 27m @ 3.10 or 11m @ 5.82 12m @ 3.53 14m @ 6.87 15m @ 2.80 12m @ 5.67 or 2m @ 19.64 16m @ 3.48 or 7m @ 6.62 1m @ 56.94 3m @ 16.02 3m @ 17.01 or 2m @ 23.19 9m @ 5.53 or 3m @ 11.88 5m @ 10.59 10m @ 5.03 BBRC0329 BBRC0297 and BBRC0332 BBRC0288 BBRC0295 BBRC0285 BBRC0353 BBRC0413 9m @ 53.29 28m @ 6.01 12m @ 2.72 4m @ 30.51 24m @ 3.62 36m @ 1.52 12m @ 2.92 12m @ 3.93 14m @ 2.67 31m 40m 88m 45m 12m 8m 8m 96m 94m 4m @ 119.24 12m @ 11.2 8m @ 3.68 3m @ 40.61 16m @ 4.68 4m @ 5.98 8m @ 3.87 8m @ 5.78 5m @ 5.26 Figure 2: Selected RC holes colour-coded by average downhole gold over aeromagnetics with interpreted geology – March (blue) and June (red) 2017 quarters metres 5 Breaker Resources NL Review of Activities Figure 3: Cross Section 6601700mN The improved understanding from the infill drilling is already assisting the evaluation of the gold potential outside the Bombora discovery, where many reconnaissance drill intercepts are “floating in space” due to the wide-spaced nature of the drilling. Primary sulphide lodes were discovered at Bombora South for example, after reversing the drill direction. Results include7: 6m at 4.50g/t Au from 130m inc. 4m at 5.97g/t in BBRC0406; and 20m at 1.40g/t Au from 24m inc. 4m at 3.25g/t in BBRC0405. Further exploration success to the north and south of the 2.2km Bombora discovery area will lead to additional resource drilling along strike. Diamond Drilling The main aim of the diamond drilling is structural orientation and validation but some diamond drill holes are selectively extended to provide a preliminary indication of the depth potential below the expected limit of open pit mining. To date, the diamond drilling has validated the grades obtained by the RC drilling, upgraded the understanding of the factors affecting the distribution of the gold, and identified high-grade gold at depth with obvious potential for underground mining. in each and confirmed The first two diamond drill holes (BBRD0056; BBDD0001) identified visible gold the presence of lamprophyre, a relatively rare, deeply-sourced ultra-potassic intrusive rock that has a documented spatial association with large Archean gold deposits in WA and overseas (Golden Mile, Darlot, Superior Province in Canada). Photo 2: Diamond Drilling at Lake Roe 2017 Annual Report 6 Review of Activities Deeper drilling has had considerable success. Diamond drill hole BBDD0020 in the central part of the 2.2km long Bombora discovery intersected multiple high-grade gold lodes8 up to 300m below the previous deepest surface intersection of 5.3m @ 7.07g/t Au in BBDD00109). The flat and steep lodes display good continuity with adjoining intersections and the high-grade nature of the intersections indicates excellent potential for underground mining. (100m below The deeper results are very important. The potential to mine underground lends scope to add multiples to any shallow gold inventory constrained by the limits of economic open pit mining. Table 3: Significant Diamond Drilling Results 2016/1710 Hole_ID Interval @ g/t Au From Includes (Interval @ g/t Au) BBDD0020 7.5m @ 9.03 315.75m 5.25m @ 12.71 and and 2.5m @ 10.24 236.50m - 5.7m @ 3.53 152.30m BBRD0056 2.6m @ 2.51 102.9m and BBDD0001 6m @ 6.91 2m @ 3.01 BBDD0004 1.75m @ 3.39 122m 86m 27m BBDD0006 21.3m @ 5.10 46.4m and BBDD0008 3.55m @ 7.77 50.45m and BBDD0009 1.3m @ 6.79 BBDD0010 5.8m @ 2.68 and 5.3m @ 7.07 64m 151m 244m BBDD0011 4.6m @ 3.00 40.4m and 4m @ 4.83 0.5m @ 10.36 0.4m @ 38.20 1m @ 5.72 1.21m @ 4.73 12.7m @ 7.07 5.1m @ 15.33 1.93m @ 13.83 1.48m @ 17.54 0.5m @ 12.26 2m @ 6.20 3.8m @ 9.29 2.7m @ 4.59 2.2m @ 5.13 Figure 4: (Top) Gram x metre long section of the 2.2km Bombora discovery and immediate extensions showing location of significant down-hole intercepts in relation to Northing and depth (no adjustment for true width); (Inset) Long section view of White Foil Resource at the same scale as above long section Aircore Drilling Reconnaissance aircore drilling undertaken in May 2017 successfully extended the gold system at Lake Roe by 2km to 8km, identifying altered quartz dolerite and lamprophyre in the Northern and Southern Hinge areas, with a gold and pathfinder element signature similar to that at the Bombora discovery. A total of 5,775m was drilled with hole spacing in the hinge areas typically 80m x 200m, 80m x 800m- 1,200m at Claypan South, and 40m x 100m-500m in the banded iron formation area. 7 Breaker Resources NL Review of Activities Other Activities Aeromagnetic Survey and LIDAR Survey A detailed airborne magnetic and radiometric survey was completed at the Lake Roe Project in December 2016 to assist ongoing exploration. The survey was undertaken by MagSpec Airborne Surveys on a flight line spacing of 40m with mean terrain clearance of 30m. An airborne LIDAR survey was completed for detailed elevation control for exploration and mine planning purposes. Photo 3: Aerial Survey at Lake Roe Preliminary Metallurgy Subsequent to the 2016/17 reporting period, the results from preliminary metallurgical testwork conducted on oxide/transition and fresh (primary) mineralisation indicates low processing costs11. The metallurgical testwork results indicate gold recoveries of 95% for weathered and fresh mineralisation with low reagent consumption. Up to 39% of the gold is recoverable by gravity concentration prior to leaching. Comminution testwork results indicate that the mineralisation is only of moderate hardness, suggesting amenability to milling by conventional means with modest energy consumption. A modest bond work index of <16kWh/t in fresh mineralisation is a great result, as is the low reagent consumption and the lack of any obvious deleterious elements. These results are significant because they indicate favourable gold extraction characteristics in the fresh and weathered zones with no significant processing issues identified. The results highlight scope for a conventional gold processing plant that can cost-effectively treat open pit and underground ore. Further testwork is currently underway. The Year Ahead Plans for the year ahead include: Continued resource delineation drilling within the 2.2km Bombora discovery area (RC and diamond); Selective RC drilling outside the Bombora discovery to assess many reconnaissance drill intersections that are “floating in space” due to the wide-spaced nature of the drilling; Selective diamond drilling at depth to scope the magnitude of the underground potential; Generation of a maiden JORC Resource by late 2017; Expansion of the maiden JORC Resource via ongoing resource drilling at depth and along strike throughout 2018, by diamond drilling and RC drilling, both inside and outside the Bombora discovery zone; Ongoing metallurgical testwork; and Baseline environmental and water studies. 2017 Annual Report 8 Review of Activities Ularring Rock Project The Ularring Rock tenements E70/4686 and E70/4901 are located 100km east of Perth. The main tenement covers the Centre Forest and Southern Brook gold-copper prospects, where historic RC drill intercepts of copper-gold mineralisation include 61m @ 0.83g/t Au, and 37m @ 0.72g/t Au and 0.26% Cu. An assessment of this project has highlighted considerable potential. The available data indicates a district scale mineralisation system best developed in the western sector of the tenement where remnant high-grade metamorphosed greenstone is present. The historical drill coverage is limited. Multiple structural and geochemical targets are apparent including a large bullseye groundwater tungsten anomaly. Further work, including private landholder access negotiations and soil sampling, is progressing to advance these targets to the drilling stage. Dexter Gold Project The Dexter Project is located in the southern part of the Burtville and Yamarna Terranes, 140km southeast of Laverton. The project straddles the intersection of the Yamarna, Dexter and Sefton Shear Zones and includes extensive areas of historically unexplored sheared Archean greenstone. The Company previously identified the regional scale Three Bears-Tallows gold-in-soil anomaly, situated near the junction of the Yamarna and Dexter Shear Zones in 2012 and follow-up aircore drilling identified widespread zones of secondary redox gold enrichment. The 12km-long Sandshoes anomaly, situated 20km to the southwest of the Three Bears-Tallows Prospect, was identified in late 2013 near the intersection of the Sefton Lineament and the Dexter Shear Zone. Following an in-depth review of all exploration to date, the Dexter Project tenements were surrendered in early July 2017 to enable an increased focus on the Lake Roe Project. Duketon North Gold Project The Duketon North Project is located north of the 10Moz Moolart Well-Garden Well-Rosemont gold camp, 160km north-northwest of Laverton. The main gold target is greenstone-hosted mineralisation associated with a structurally complex part of the Duketon greenstone belt directly along strike from Moolart Well. A 4km long gold-in-soil anomaly was identified by the Company in mid-2015. Breaker completed a 4,126m program of reconnaissance aircore drilling in late-July 2016 to test for the presence of a new gold system. No significant results were encountered. The Duketon North Project was surrendered in February 2017. References 1: ASX Release 25 July 2016 2: ASX Release 13 September 2016 3: ASX Release 20 September 2016 4: ASX Release 19 December 2016 5: Refer March 2017 Quarterly Report dated 26 April 2017 6: Refer June 2017 Quarterly Report dated 19 July 2017 7: ASX Release 6 July 2017 8: ASX Release 7 August 2017 9: ASX Release 30 May 2017 10: ASX Releases 28 October 2016, 27 March 2017, 30 May 2017, 6 July 2017, 7 August 2017 11: ASX Release 5 October 2017 Competent Persons Statement The information in this report that relates to Exploration Targets and Exploration Results is based on information compiled by Tom Sanders, Competent Person, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Sanders is an executive of Breaker Resources NL and his services have been engaged by Breaker on an 80% of full time basis; he is also a shareholder in the Company. Mr Sanders has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Sanders consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 9 Breaker Resources NL Review of Activities Review of Corporate Activities With the view to continuing the aggressive drilling program at the Lake Roe Gold Project, in October 2016 Breaker completed a heavily over-subscribed placement which raised $12.4million at an issue price of $0.50 per share. Subsequent to the reporting period, the Company announced the conduct of a placement and share purchase plan (SPP) at an issue price of $0.70. The placement to prominent Australian and overseas institutions and sophisticated and professional investors secured $10million and the SPP was well-supported by shareholders, raising over $1.3million. The Company is well-positioned to progress resource definition drilling and other activities at Lake Roe. A total of 3,247,397 fully paid ordinary shares in the Company was issued during the financial year in part consideration for drilling services undertaken at Lake Roe and a number of shares were converted from partly paid to fully paid. As at 30 June 2017, Breaker’s capital structure was as follows: 127,821,984 fully paid ordinary shares; 5,671,623 partly paid ordinary shares; and 8,800,000 unlisted options at various exercise prices and expiry dates. During the period, the Company redeveloped its website, which went live in May 2017. Figure 5: Redeveloped website home page The Company was represented at a number of conferences during 2016/17 including Diggers and Dealers in Kalgoorlie, RIU Explorers in Fremantle, RIU Resources Round-up in Sydney and Resources Rising Stars on the Gold Coast. The Company’s Annual General Meeting was held on 28 November 2016. On 30 June 2017, the Company dispatched notices to all eligible shareholders advising of tax credits available through Breaker’s participation in the federal government’s Exploration Development Incentive Scheme (EDI). The EDI is intended to encourage shareholder investment in exploration companies undertaking greenfields mineral exploration in Australia. It enables eligible companies to create exploration credits by giving up a portion of their tax losses from eligible exploration expenditure and distributing these to shareholders. At the beginning of the period the Company’s fully paid ordinary shares were trading at $0.165 and as at 30 June 2017, the price was $0.700. 2017 Annual Report 10 Tenement Schedule Tenement Schedule The following is a summary of tenements held by Breaker Resources NL as at 30 June 2017. Project Dexter Lake Roe Pinjin Ularring Rock Tenement Number E38/2530 E38/2695 E38/2934 E39/1611 E39/1614 E28/2515 E28/2522 E28/2551 E28/2555 E28/2556 E28/2559 E28/2629 E70/4686 E70/4901 Status Granted Granted Granted Granted Granted Granted Application Granted Granted Granted Granted Granted Granted Granted Percentage Held/Earning % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Photo 4: Sunset in the Eastern Goldfields 11 Breaker Resources NL Directors’ Report Directors’ Report The directors of Breaker Resources NL herewith submit the financial report for the year ended 30 June 2017. In order to comply with the provisions of the Corporations Act 2001 (Cth), the directors report as follows: Information about Officeholders Directors The names of the directors of the Company during the financial year and up to the date of this report are provided below. All of the directors held their positions for the entire financial year period. Mr Thomas Sanders BSc (Geology); MSc (Mineral Economics); MAusIMM; FAICD Executive Chairman (appointed 2 July 2010) Tom Sanders is a geologist with over 35 years’ experience in the Australian mining industry. He has extensive experience in project generation, exploration, feasibility, mining and corporate management with a strong emphasis on gold and nickel in Western Australia (WA). Mr Sanders has published works on nickel and gold in WA, in addition to regional mineralisation studies on the eastern Kimberley region under contract to the Geological Survey of WA. Mr Sanders has managed a large number of exploration projects, several of which he progressed into production during a 23 year period based in the Kalgoorlie region in WA. He has extensive production experience on several underground and open pit gold and nickel operations. Mr Sanders was responsible for identifying Breaker’s initial projects and guiding the Company to a successful ASX listing in 2012. Mr Sanders previously founded Navigator Resources Limited and steered that company from initial project acquisition to ASX-listing. He then managed the building of a two million ounce gold resource inventory through discovery and acquisition and identified the Cummins Range rare earth resource. During the past three (3) years, Mr Sanders has not served as a director on any other listed company. Mr Mark Edwards BJuris; LLB Non-Executive Director (appointed 2 July 2010) Mark Edwards is a solicitor with over 25 years of experience in resources and corporate law. He has advised a number of ASX-listed companies active in the resources sector and on a range of resources projects in Australia and overseas, including significant nickel, gold and iron ore projects. His professional work has involved him in many facets of the resources industry ranging from ASX listings, exploration and mining joint ventures to project development agreements and project financing. During the past three (3) years, Mr Edwards has not served as a director on any other listed company. Mr Michael Kitney Assoc. Met; Post Grad Dip (Extractive Metallurgy); MSc (Mineral Economics); MAusIMM Non-Executive Director (appointed 2 July 2010) Mike Kitney is a process engineer with over 40 years’ experience in the mining industry. He has participated in the development and construction of projects throughout Australia, Africa, south east Asia and the former Soviet Union. Mr Kitney’s particular strengths are in production and mineral processing, all aspects of environmental management, project evaluation and assessment and leadership of interdisciplinary project teams. He brings to the Company vast project development expertise and practical experience in commissioning new projects. 2017 Annual Report 12 Directors’ Report Mr Kitney has previously held senior technical and project management positions with Kasbah Resources Limited, Alcoa Australia Limited, Minproc Engineers Limited, Property Company of London plc, British Phosphate Commissioners, Nelson Gold Corporation Limited and Avocet Mining plc. He is currently a technical consultant to ASX-listed Prospect Resources Limited. During the past three (3) years, Mr Kitney has served as a director on ASX-listed General Mining Corporation Limited (appointed 20 October 2015; ceased 5 August 2016). Company Secretary The name of the company secretary of the Company during or since the end of the financial year and up to the date of this report, and the term of their appointment, are provided below. Miss Michelle Simson EMBA (Dist.); GradDipACG; ACIS; AGIA Company Secretary (appointed 22 October 2012) Michelle Simson has over 20 years’ administration experience, including the last 14 years in the resources industry working in both exploration and mining companies in the commodities of gold and uranium. She has previously held positions with Agincourt Resources Limited, Nova Energy Limited and Navigator Resources Limited and has completed an Executive Master of Business Administration with Distinction at the University of Western Australia and a Graduate Diploma in Applied Corporate Governance. She is a Chartered Secretary and member of the Governance Institute of Australia. During the past three (3) years, Miss Simson has not served as a director on any other listed company. Board Committee Membership As at the date of this report, the Board has an Audit Committee, Nomination Committee, Remuneration Committee and a Risk Committee. All directors currently comprise membership of each of the committees and the chairmen of the respective committees are: Audit Committee: Mark Edwards; Nomination Committee: Tom Sanders; Remuneration Committee: Mike Kitney; and Risk Committee: Tom Sanders. Directors’ Meetings The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director is as follows: Board of Directors Committee Meetings Audit Nomination Remuneration Risk Director Held Present Held Present Held Present Held Present Held Present Tom Sanders Mark Edwards Mike Kitney 4 4 4 4 4 4 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 13 Breaker Resources NL Directors’ Report Directors’ Interests The following table sets out each director’s relevant interest in shares and options in shares of the Company or a related body corporate as at the date of this report. Director Tom Sanders Mark Edwards Mike Kitney Fully paid ordinary shares Partly paid ordinary shares Unlisted share options Number 21,027,067 1,666,108 1,468,544 Number 1,309,871 65,000 58,125 Number 3,000,000 1,250,000 1,250,000 During the financial year 5,500,000 share options were granted to directors of the Company as part of their remuneration (2016: Nil). Directors’ and Officers’ Insurance During the financial year, Breaker paid a premium to insure the directors and secretary of the Company. Details of the premium are subject to a confidentiality clause under the contract of insurance. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Corporate Structure Breaker Resources NL is a no liability public company limited by shares, domiciled and incorporated in Australia. Principal Activities During the year the Company carried out exploration activities on its tenements in Western Australia with the objective of identifying gold and other economic mineral deposits. Operational Review Activities Review A review of the exploration activities undertaken during the year commences on page 3. Financial Review During the year total exploration expenditure incurred by the Company amounted to $7,111,915 (2016: $2,219,306). In line with the Company’s accounting policies, all exploration expenditure is written off as it is incurred. Net administration expense amounted to $2,311,138 (2016: $30,055). The Company’s operating loss after income tax for the year is $9,423,053 (2016: $2,249,361). At year end the Company held cash and cash equivalents of $3,806,916 (2016: $657,392), and mid-term bank deposits of $3,584,522 (2016: $1,131,045). 2017 Annual Report 14 Directors’ Report Operating Results for the Year Summarised operating results are as follows: Revenues and profit/(loss) from ordinary activities before income tax expenses 297,503 (9,423,053) Revenues Results $ $ Shareholder Return Summarised shareholder return is as follows: Basic profit/(loss) per share Dividends 2017 cents 2016 cents (7.88) (2.80) No dividends were paid or declared during the year. No recommendation for payment of dividends has been made. Share Options As at the date of this report, there are 8,600,000 unissued ordinary shares of Breaker Resources NL in respect of which options are outstanding. This number comprises: Type of option Unlisted Unlisted Unlisted Unlisted Unlisted Unlisted Number 500,000 5,500,000 2,000,000 200,000 150,000 250,000 Exercise price $0.400 $0.448 $0.432 $0.406 $0.644 $0.690 Expiry date 30 June 2019 31 December 2019 31 December 2019 31 December 2019 31 December 2019 31 December 2019 A total of 200,000 unlisted options lapsed between 30 June 2017 and the date of this report. No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate. Share Options Issued The following options were issued by Breaker Resources NL during the financial year: Type of option Number Exercise price Expiry date Comment Unlisted 5,500,000 $0.448 31 December 2019 Unlisted 2,000,000 $0.432 31 December 2019 Unlisted Unlisted 200,000 $0.403 31 December 2019 200,000 $0.406 31 December 2019 Issued to Directors under Company’s Incentive Option Scheme Issued under Company’s Incentive Option Scheme Issued under Company’s Incentive Option Scheme Issued under Company’s Incentive Option Scheme 15 Breaker Resources NL Directors’ Report Type of option Number Exercise price Expiry date Comment Unlisted Unlisted Unlisted 200,000 $0.620 31 December 2019 150,000 $0.644 31 December 2019 250,000 $0.690 31 December 2019 Issued under Company’s Incentive Option Scheme Issued under Company’s Incentive Option Scheme Issued under Company’s Incentive Option Scheme Shares Issued on Exercise of Options There were Nil shares issued due to the exercise of options during the financial year. Share Options that Expired/Lapsed The following options expired or lapsed during the financial year. Type of option Number Exercise price Expiry date Reason for lapse Unlisted Unlisted Unlisted 1,000,000 1,000,000 200,000 $0.500 $0.478 $0.620 31 December 2016 31 December 2016 31 December 2019 Expiry Expiry Cessation of employment Significant Changes in State of Affairs During the financial year there were no significant changes in the state of affairs of the Company other than those referred to in the Financial Statements and notes thereto. Subsequent Events On 5 July 2017, the Company announced that 200,000 options at an exercise price of $0.403 with an expiry date of 31 December 2019 had lapsed. On 10 July 2017 the Company announced that it had issued 385,482 fully paid ordinary shares at a deemed issue price of $0.678 per share to a supplier in lieu of cash payment for drilling services undertaken at the Company’s Lake Roe Project. Other than the above, there were no matters or circumstances arising since the end of the reporting period that have significantly affected or may significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June 2017. Likely Developments and Expected Results The Company expects to maintain a similar status and level of activities to that at present and hence there are no likely developments in the entity's operations. Environmental Regulations and Performance Breaker is subject to significant environmental regulation in respect to its exploration activities. The Company aims to ensure that the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the year under review. 2017 Annual Report 16 Directors’ Report Proceedings on Behalf of the Company No persons have applied for leave pursuant to section 237 of the Corporations Act 2001(Cth) to bring, or intervene in, proceedings on behalf of Breaker Resources NL. Non-Audit Services There were no non-audit services performed during the year by the auditors for the Company (or by another person or firm on the auditor’s behalf). Auditor’s Independence Declaration The Auditor’s Independence Declaration is included on page 23 and forms part of the Directors’ Report for the financial year ended 30 June 2017. Remuneration Report This Remuneration Report, which forms part of the Directors’ Report, sets out information about the remuneration of Breaker Resources NL’s key management personnel for the financial year ended 30 June 2017. The information provided in this report has been audited as per the requirements of section 308(3C) of the Corporations Act 2001 (Cth). The report is set out under the following main headings: Key management personnel; Principles used to determine the components and amount of compensation; Details of remuneration; Details of share-based compensation; and Details of service agreements and employment contracts. Key Management Personnel For the purposes of this report, key management personnel of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly. The key management personnel during the year were: Tom Sanders Mark Edwards Mike Kitney Alastair Barker Michelle Simson Executive Chairman Non-Executive Director Non-Executive Director Exploration Manager Manager Corporate Affairs/Company Secretary Principles Used to Determine the Components and Amount of Compensation Remuneration Committee The role of the Remuneration Committee is to assist the Company in fulfilling its corporate governance responsibilities relating to remuneration by reviewing and making appropriate recommendations on: remuneration packages of executive directors, non-executive directors and officers; employee incentive and equity-based plans including the appropriateness of performance hurdles and total payments proposed; recruitment, retention and termination policies and procedures for senior executives; and superannuation arrangements. 17 Breaker Resources NL Directors’ Report Remuneration Policy The remuneration policy of Breaker Resources NL has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Company’s results. The Board of Breaker Resources NL believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the Company. The policy for determining the nature and amount of remuneration for senior executives of the Company is summarised below: The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the Board. The Board reviews executive packages annually by reference to the Company’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives are also eligible to participate in the employee incentive option scheme. Where applicable, executives receive a superannuation guarantee contribution required by the government, which during the reporting period was 9.5%. Some individuals may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to key management personnel is valued at the cost to the Company and expensed. Options are valued using the Black-Scholes methodology. The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive 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 fees that can be paid to non-executive directors is subject to approval by shareholders in general meeting. The current remuneration pool limit is $300,000 and is currently utilised to a level of $80,000 per annum. The base fee paid to non-executive directors is $40,000 per annum inclusive of superannuation. Fees for non-executive directors are not linked to the performance of the Company however to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the employee incentive option scheme, although any allocation must be approved by shareholders in general meeting. There is no retirement benefit plan for directors. Performance Based Remuneration The Company currently has no individual performance based remuneration component built into key management personnel remuneration packages. Company Performance, Shareholder Wealth and Key Management Personnel Remuneration The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and key management personnel performance. Currently, this is facilitated through the issue of options to key management personnel to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. 2017 Annual Report 18 Directors’ Report Use of Remuneration Consultants The Company did not employ the services of any remuneration consultants during the financial year ended 30 June 2017. Details of Remuneration The key management personnel of the Company are disclosed above. Remuneration packages contain the following elements: Short-term employee benefits – cash salary and fees, cash bonuses, non-monetary benefits and other; Post-employment benefits – including superannuation and termination; and Share-based payments – shares and options granted. The remuneration for each director and each of the other key management personnel of the Company during the year was as follows: Short-term Post-employment Key management personnel Salary &fees $ Tom Sanders 2017 2016 252,202 220,104 Mark Edwards 2017 2016 Mike Kitney 2017 2016 Alastair Barker 2017 2016 Michelle Simson 2017 2016 36,667 32,000 31,195 30,612 205,499 179,344 176,499 128,708 Non- monetary Super- annuation Retirement benefits $ - - - - - - - - - - $ - - - - 5,472 1,388 - - 24,378 20,285 $ - - - - - - - - - - Share- based payments Options Total $ $ 670,872 923,074 - 220,104 279,530 316,197 - 32,000 279,530 316,197 - 32,000 174,777 380,276 - 179,344 174,777 375,654 - 148,993 No director or executive appointed during the year received a payment as part of his or her consideration for agreeing to hold the position. Details of Share-Based Compensation Shares Nil shares in the Company were issued to key management personnel as part of their remuneration during the year (2016: Nil). Options 7,500,000 options in the Company were issued to key management personnel as part of their remuneration during the year (2016: Nil). There were Nil options exercised or sold by key management personnel during the year (2016: Nil). 19 Breaker Resources NL Directors’ Report During the year, the following share-based payment arrangements for key management personnel were in existence: Option series Grant date Expiry date Fair value per option at grant Vesting date 60510 60511 60532 60533 10 July 2012 31 December 2016 20 November 2012 31 December 2016 28 November 2016 31 December 2019 5 December 2016 31 December 2019 cents 8.52 20.13 22.36 17.48 11 July 2012 27 November 2012 28 November 2016 5 December 2016 A total of 2,000,000 options (comprising Series 60510 and 60511) expired on 31 December 2016 and a total of 7,500,000 options (comprising Series 60532 and 60533) were granted during the reporting period. Shareholdings of Key Management Personnel The numbers of ordinary shares in the Company during the financial year in which each director of Breaker Resources NL and other key management personnel of the Company holds a relevant interest, including their closely related parties, are detailed below: Key management personnel Tom Sanders 2017 2016 Mark Edwards 2017 2016 Mike Kitney 2017 2016 Alastair Barker 2017 2016 Michelle Simson 2017 2016 Key management personnel Tom Sanders 2017 2016 Fully Paid Ordinary Shares Granted as compen- sation Received on exercise of options Balance at start of year Number Number Number 20,989,230 14,925,826 1,636,108 1,180,000 1,468,544 1,191,250 228,912 62,500 - - - - - - - - - - - - - - - - - - - - - - Other changes Number Balance at year end Number 37,837 21,027,067 6,063,404 20,989,230 30,000 456,108 1,666,108 1,636,108 - 277,294 1,468,544 1,468,544 - 166,412 228,912 228,912 - - - - Partly Paid Ordinary Shares Balance at start of year Number Granted as compensation Other changes Number Number Balance at year end Number 1,309,871 1,309,871 - - - - 1,309,871 1,309,871 2017 Annual Report 20 Directors’ Report Key management personnel Mark Edwards 2017 2016 Mike Kitney 2017 2016 Alastair Barker 2017 2016 Michelle Simson 2017 2016 Balance at start of year Number Granted as compensation Other changes Number Number Balance at year end Number 65,000 65,000 58,125 58,125 6,250 6,250 - - - - - - - - - - - - - - - - - - 65,000 65,000 58,125 58,125 6,250 6,250 - - Option Holdings of Key Management Personnel The numbers of options over ordinary shares in the Company during the financial year in which each director of Breaker Resources NL and other key management personnel of the Company holds a relevant interest, including their closely related parties, are detailed below: Key management personnel Balance at start of year Granted as compen- sation Exercised Other changes Balance at year end Vested and exercisable Number Number Number Number Number Number Tom Sanders 2017 2016 Mark Edwards 2017 2016 Mike Kitney 2017 2016 Alastair Barker - 3,000,000 5,000,000 - - 1,250,000 500,000 - - 1,250,000 500,000 - 2017 2016 1,000,000 1,000,000 1,000,000 - Michelle Simson 2017 2016 1,000,000 1,000,000 1,000,000 - - - - - - - - - - - - 3,000,000 3,000,000 (5,000,000) - - - 1,250,000 1,250,000 (500,000) - - - 1,250,000 1,250,000 (500,000) - - (1,000,000) 1,000,000 1,000,000 - 1,000,000 1,000,000 (1,000,000) 1,000,000 1,000,000 - 1,000,000 1,000,000 Details of Service Agreements and Employment Contracts Service agreements are in place between the Company and Executive Chairman Tom Sanders and Exploration Manager Alastair Barker. Manager Corporate Affairs/Company Secretary Michelle Simson is employed via contract. Details of these arrangements as at 30 June 2017 are provided below: 21 Breaker Resources NL Directors’ Report Service Agreement: Tom Sanders – Executive Chairman Term of agreement – Initial term of two (2) years and further terms of two (2) years, subject to termination provisions; commenced 18 April 2012 (subject to ASX listing). An annual consultancy fee of $275,130* (inclusive of superannuation, plus GST) is paid to Goldfields Geological Associates, an entity controlled by Mr Sanders, for the provision of services by Mr Sanders on a minimum of 80% of fulltime basis. The agreement continues until terminated by either Goldfields Geological Associates or the Company. Subject to the Corporations Act 2001 (Cth) and the ASX Listing Rules, Mr Sanders is entitled to a minimum notice period of 12 months and the Company is entitled to a minimum notice period of three (3) months. Goldfields Geological Associates will be reimbursed for expenses incurred on the Company’s behalf. Service Agreement: Alastair Barker – Exploration Manager Term of agreement – Initial term of two (2) years and further terms of one (1) year subject to termination provisions; commenced 18 April 2012 (subject to ASX listing). An annual consultancy fee of $224,180* (inclusive of superannuation, plus GST) is paid to Horizon Resources Pty Ltd, an entity controlled by Mr Barker, for the provision of services by Mr Barker on a minimum of 80% of fulltime basis. The agreement continues until terminated by either Horizon Resources Pty Ltd or the Company. Subject to the Corporations Act 2001 (Cth) and ASX Listing Rules, Mr Barker is entitled to a minimum notice period of 12 months (or six (6) months after the initial term). The Company is entitled to a minimum notice period of three (3) months. Employment Contract: Michelle Simson – Manager Corporate Affairs/Company Secretary Base salary of $220,000* per annum (inclusive of superannuation). Payment of termination benefit on termination by the employer, other than for gross misconduct, equals three (3) months’ salary. Notice period of three (3) months. * The figures stated represent the respective fees as at 30 June 2017. The 20% reduction applied to key management personnel remuneration in 2013/14 was reinstated during 2016/17. Signed in accordance with a resolution of directors made pursuant to section 298(2) of the Corporations Act 2001 (Cth). On behalf of the directors TOM SANDERS Executive Chairman Perth, 15 August 2017 2017 Annual Report 22 Auditor’s Independence Declaration 23 Breaker Resources NL Statement of Profit or Loss and Other Comprehensive Income Statement of Profit or Loss and Other Comprehensive Income for the Financial Year ended 30 June 2017 Income Government grant and incentive Interest income Other income Total income Expenses Administration expenses Depreciation expenses Employee benefits expenses Exploration and evaluation expenses Share-based payment expenses Total expenses Notes 2017 $ 2016 $ 4 4 4 4 4 4 120,000 159,303 18,200 297,503 507,439 27,227 54,573 589,239 (494,238) (389,105) (48,646) (83,893) (243,604) (146,296) (7,111,915) (2,219,306) (1,822,153) - (9,720,556) (2,838,600) Profit/(Loss) before income tax (9,423,053) (2,249,361) Income tax expense 6 - - Profit/(Loss) for the year (9,423,053) (2,249,361) Other comprehensive income - - Total comprehensive income/(loss) for the year (9,423,053) (2,249,361) Profit/(Loss) attributable to owners of the Company (9,423,053) (2,249,361) Total comprehensive income/(loss) attributable to owners of the Company (9,423,053) (2,249,361) Basic and diluted profit/(loss) per share attributable to the ordinary equity holders of the Company (cents per share) 15 (7.88) (2.80) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 2017 Annual Report 24 Statement of Financial Position Statement of Financial Position as at 30 June 2017 Current Assets Cash and cash equivalents Term deposits Trade and other receivables Other financial assets Total Current Assets Non-Current Assets Plant and equipment Prepaid service Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated profit/(loss) Notes 2017 $ 2016 $ 7 7 8 9 10 11 12 3,806,916 3,584,522 280,674 69,658 657,392 1,131,045 150,631 36,410 7,741,770 1,975,478 257,959 25,308 283,267 12,635 38,512 51,147 8,025,037 2,026,625 943,212 943,212 272,000 272,000 943,212 272,000 7,081,825 1,754,625 13 25,342,430 12,414,330 1,817,586 325,953 (20,078,191) (10,985,658) Capital and reserves attributable to owners of the Company 7,081,825 1,754,625 Total Equity 7,081,825 1,754,625 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 25 Breaker Resources NL Statement of Changes in Equity Statement of Changes in Equity for the Financial Year ended 30 June 2017 Attributable to owners of the Company Share- based Payments Reserve Contributed Equity Accumulated Profit/(Losses) Notes $ $ $ Total $ Balance at 30 June 2015 9,743,750 412,640 (8,862,597) 1,293,793 Profit/(Loss) for the year Total comprehensive income/(loss) for the year Options issued during the year Options expired and transferred to accumulated losses Transactions with owners in their capacity as owners: Contributions of equity net of transaction costs - - - - - - (2,249,361) (2,249,361) (2,249,361) (2,249,361) 39,613 - 39,613 (126,300) 126,300 - 13 2,670,580 - - 2,670,580 Balance at 30 June 2016 12,414,330 325,953 (10,985,658) 1,754,625 Profit/(Loss) for the year Total comprehensive income/(loss) for the year - - - (9,423,053) (9,423,053) - (9,423,053) (9,423,053) Options issued during the year - 1,822,153 - 1,822,153 Options expired and transferred to accumulated losses Transactions with owners in their capacity as owners: Contributions of equity net of transaction costs - (330,520) 330,520 - 13 12,928,100 - - 12,928,100 Balance at 30 June 2017 25,342,430 1,817,586 (20,078,191) 7,081,825 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 2017 Annual Report 26 Statement of Cash Flows Statement of Cash Flows for the Financial Year ended 30 June 2017 Cash flows from operating activities Payments to suppliers and employees Payments for exploration and evaluation expenditure Receipts from government grant and incentive Other income received Interest received Notes 2017 $ 2016 $ (743,430) (569,770) (5,523,072) (1,932,620) 120,000 18,200 159,303 507,439 54,573 27,227 Net cash inflow/(outflow) from operating activities 17 (5,968,999) (1,913,151) Cash flows from investing activities Payments for plant and equipment Payments for other financial assets Investment in term deposits Withdrawn from term deposits (293,970) (33,248) - - (11,584,522) (1,101,045) 9,131,045 - Net cash inflow/(outflow) from investing activities (2,780,695) (1,101,045) Cash flows from financing activities Proceeds from issue of ordinary shares Share issue transaction costs 12,630,779 2,649,183 (731,561) (187,032) Net cash inflow/(outflow) from financing activities 11,899,218 2,462,151 Net increase/(decrease) in cash and cash equivalents 3,149,524 (552,045) Cash and cash equivalents at the beginning of the period 657,392 1,209,437 Cash and cash equivalents at the end of the period 7 3,806,916 657,392 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 27 Breaker Resources NL Notes to the Financial Statements Notes to the Financial Statements for the Year ended 30 June 2017 1. General information Breaker Resources NL is a public company listed on the Australian Securities Exchange, incorporated in Australia and operating in Australia. The Company’s registered office and its principal place of business is 12 Walker Avenue, West Perth WA 6005. Breaker Resources NL’s principal activity is mineral exploration and it is a for-profit entity for the purposes of preparing the Financial Statements. These Financial Statements are for Breaker Resources NL as an individual entity and are presented in the Australian currency. The Financial Statements were authorised for issue by the directors on 15 August 2017. The directors have the power to amend and reissue the Financial Statements. 2. Significant accounting policies The principal accounting policies adopted in the preparation of the Financial Statements are set out below. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with the Corporations Act 2001 (Cth) (Corporations Act) and Australian Accounting Standards and Interpretations (Standards) issued by the Australian Accounting Standards Board (AASB). The Financial Statements and notes of the Company also comply with International Financial Reporting Standards issued by the International Accounting Standards Board. These Financial Statements have been prepared under the historical cost convention. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. Going concern The Financial Statements have been prepared on the basis of going concern which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The ability of the Company to continue as a going concern is dependent upon funding to provide adequate working capital for a further 12 months from the date of signature of the Financial Statements. The directors intend to access further government grant and incentive and raise capital if it is needed. Therefore, they are satisfied that the going concern basis of preparation is appropriate. The Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. (b) New and revised accounting standards i. Amendments to Accounting Standards that are mandatorily effective for the current year In the current year, the Company has applied below applicable amendments to Standards issued by the AASB that are mandatorily effective for an accounting period that begins on or after 1 July 2016, and therefore relevant for the current year end. 2017 Annual Report 28 Notes to the Financial Statements AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation The amendments to AASB 116 ‘Property, Plant and Equipment’ prohibit entities from using a revenue based depreciation method for items of property, plant and equipment. As the Company already uses the straight-line method for depreciation for its plant and equipment, the application of these amendments has had no impact on the Company's financial statements. AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle The amendments impact various Standards. Those applicable to the Company are summarised below: The amendments to AASB 7 ’Financial Instruments: Disclosures’ remove the requirement to provide disclosures relating to offsetting financial assets and financial liabilities in interim financial reports and provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets. The amendments to AASB 119 ‘Employee Benefits’ clarify that the rate used to discount post- employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The assessment of the depth of a market for high qualify corporate bonds should be at the currency level (ie. the same currency as the benefits are to be paid). For currencies for which there is no deep market in such high quality corporate bonds, the market yields at the end of the reporting period on government bonds denominated in that currency should be used instead. The amendments to AASB 134 ‘Interim Financial Reporting’ make provision for disclosures required by the Standard to be given either in the interim financial statements or incorporated by cross-reference from the interim financial statements to some other statement that is available to users of the financial statements on the same terms as the interim financial statements and at the same time. The application of these amendments has had no effect on the Company's financial statements. AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 The amendments clarify that an entity need not provide a specific disclosure required by a Standard if the information resulting from that disclosure is not material, and give guidance on the bases of aggregating and disaggregating information for disclosure purposes. However, the amendments reiterate that an entity should consider providing additional disclosures when compliance with the specific requirements in a Standard is insufficient to enable users of financial statements to understand the impact of particular transactions, events and conditions on the entity’s financial position and financial performance. The application of this amendment has not had a material presentation impact on the financial performance or financial position of the Company. ii. New and revised Accounting Standards in issue not yet adopted At the date of authorisation of the Financial Statements, the Standards applicable to the Company’s business listed below were in issue but not yet effective. The potential effect of the revised Standards on the Company’s financial statements has not yet been determined. 29 Breaker Resources NL Notes to the Financial Statements AASB 9 ‘Financial Instruments’ and the relevant amending standards, effective for annual reporting periods beginning on or after 1 January 2018, expected to be initially applied in the financial year ending 30 June 2019; AASB 16 ‘Leases’, effective for annual reporting periods beginning on or after 1 January 2019, expected to be initially applied in the financial year ending 30 June 2020; AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses’, effective for annual reporting periods beginning on or after 1 January 2017, expected to be initially applied in the financial year ending 30 June 2018; AASB 2016-5 ‘Amendments to Australian Accounting Standards – Classification and Measurement of Share-based Payment Transactions’, effective for annual reporting periods beginning on or after 1 January 2018, expected to be initially applied in the financial year ending 30 June 2019; and AASB 2017-2 ‘Amendments to Australian Accounting Standards – Further Annual Improvements 2014-2016 Cycle’, effective for annual reporting periods beginning on or after 1 January 2017, expected to be initially applied in the financial year ending 30 June 2018. (c) Segment reporting An operating segment is defined as a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company’s 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. (d) Government grants Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss in the period in which they become receivable. (e) (f) Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Income tax The income tax expense for the year is the tax payable on the current year’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It creates provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. 2017 Annual Report 30 Notes to the Financial Statements Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. However, the deferred tax income is not accounted for if it arises from initial recognition of an asset or liability in a transaction that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise these temporary differences and losses. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (g) Impairment of assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so 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 prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (h) Cash and cash equivalents For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three (3) months or less that are readily convertible to known amounts of cash and which are not subject to significant risk of changes in value, and bank overdrafts. 31 Breaker Resources NL Notes to the Financial Statements (i) (j) Trade and other receivables Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. Financial assets Classification The Company classifies all of its financial assets as loans and receivables. Management determines the classification of its financial assets at initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinate payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value. For the non-current receivables, the fair values are also not significantly different to their carrying amounts. Collectability of loans and receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment) is used where there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables or in an otherwise timely manner. The amount of the impairment allowance is the difference between the asset’s carrying amount and the estimated future cashflows. None of the Company’s loans and receivables has an applicable interest rate hence the cash flows are not discounted. The amount of the impairment loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income within impairment expenses. When a loan or receivable for which an impairment allowance has been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the Statement of Profit or Loss and Other Comprehensive Income. Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all of the risks and rewards of ownership. Impairment The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is any evidence of impairment for any of the Company’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income. (k) Plant and equipment All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. 2017 Annual Report 32 Notes to the Financial Statements Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the Statement of Profit or Loss and Other Comprehensive Income during the reporting period in which they are incurred. Depreciation of plant and equipment is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term. All plant and equipment is depreciated at the rate of 25% per annum. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (refer to Note 2(g)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit or Loss and Other Comprehensive Income. (l) Exploration and evaluation costs Exploration and evaluation costs are written off in the year they are incurred. (m) (n) Trade and other payables These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms. They are presented as current liabilities unless payment is not due within 12 months after the reporting period. Employee benefits Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, and annual leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The short-term employee benefit obligations are presented as payables. Other long-term employee benefit obligations The liabilities for long service leave and annual leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period 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 end of the reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. (o) Share-based payments The Company provides benefits to employees (including directors and contractors) and suppliers in the form of share-based payment transactions, whereby employees and suppliers render goods or services in exchange for shares or rights over shares (equity-settled transactions) (refer to Note 18). 33 Breaker Resources NL Notes to the Financial Statements The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value of options is determined by an internal valuation using a Black-Scholes option pricing model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which any performance conditions are fulfilled, ending on the date on which the relevant employees or suppliers become fully entitled to the award (vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: the extent to which the vesting period has expired; and the number of options that, in the opinion of the directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. (p) 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. (q) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (r) Critical judgements, estimates and assumptions The preparation of these Financial Statements requires the use of certain critical accounting estimates, which, by definition, will seldom equal the actual results. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are: Environmental issues Balances disclosed in the Financial Statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and the directors’ understanding thereof. At the current stage of the Company’s development and its current environmental impact, the directors believe such treatment is reasonable and appropriate. 2017 Annual Report 34 Notes to the Financial Statements Taxation Balances disclosed in the Financial Statements and the notes thereto related to taxation are based on the best estimates of the directors. These estimates take into account both the financial performance and position of the Company as they pertain to current income taxation legislation, and the directors’ understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position represents the directors’ best estimate, pending an assessment by the Australian Taxation Office. 3. Financial risk management The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Risk management is carried out by the full Board via the audit and risk committees as the Company believes that it is crucial for all directors to be involved in this process. The Executive Chairman, with the assistance of senior management as required, has responsibility for identifying, assessing, treating and monitoring risks and reporting to the Board on risk management. (a) Market risk Foreign exchange risk As all current operations are within Australia the Company is not exposed to foreign exchange risk. Commodity price risk Given the current level of operations the Company is not directly exposed to commodity price risk. Interest rate risk The Company is exposed to movements in market interest rates on cash and cash equivalents and bank deposits. The Company’s policy is to monitor the interest rate yield curve out to six (6) months to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The entire balance of cash and bank deposits for the Company of $7,391,438 (2016: $1,788,437) is subject to interest rate risk. The weighted average interest rate received on cash and cash equivalents by the Company was 1.98% (2016: 2.22%). Sensitivity analysis At 30 June 2017, if interest rates had changed by -/+ 100 basis points from the weighted average rate for the year with all other variables held constant, post-tax loss for the Company would have been $40,244 lower/higher (2016: $9,334) as a result of lower/higher interest income from cash and cash equivalents. (b) Credit risk The Company has no significant concentrations of credit risk. The maximum exposure to credit risk at balance date is the carrying amount of those assets as disclosed in the Statement of Financial Position and Notes to the Financial Statements. As the Company does not presently have any debtors, lending, significant stock levels or any other credit risk, a formal credit risk management policy is not maintained. (c) Liquidity risk The Company manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable securities are available to meet the current and future commitments of the Company. Due to the nature of the Company’s activities, being mineral exploration, the Company does not have ready access to credit facilities, with the primary source of funding being equity raisings. 35 Breaker Resources NL Notes to the Financial Statements The Board constantly monitors the state of equity markets in conjunction with the Company’s current and future funding requirements, with a view to initiating appropriate capital raisings as required. The financial liabilities of the Company are generally confined to trade and other payables as disclosed in the Statement of Financial Position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date. (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All financial assets and financial liabilities of the Company at the balance date are recorded at amounts approximating their carrying amount due to their short-term nature. 4. Income and expenses (a) Income from continuing operations includes the following revenue items: Government grant and incentive(i) Interest income Other 2017 $ 120,000 159,303 18,200 297,503 2016 $ 507,439 27,227 54,573 589,239 Notes (i) There are no unfulfilled conditions or other contingencies attaching to the government grant and incentive at the year-end. (b) Loss for the year includes the following specific expenses: Depreciation expenses Exploration and evaluation expenses (c) Employee benefit expenses: Wages and superannuation Directors’ fees Annual leave provision Other 2017 $ 48,646 7,111,915 2017 $ 111,400 73,333 20,701 38,170 243,604 2016 $ 83,893 2,219,306 2016 $ 77,358 64,000 3,595 1,343 146,296 During the year, the Company issued unlisted options to its employees and directors. The value of the options was included in Share-based Payments (refer to Note 18). 2017 Annual Report 36 Notes to the Financial Statements 5. Operating segments For management purposes, the Company has identified only one (1) reportable segment as exploration activities undertaken in Australia. This segment includes activities associated with the determination and assessment of the existence of commercial economic reserves from the Company’s mineral assets in this geographic location. Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Company’s accounting policies. Segment revenue Reconciliation of segment revenue to total revenue before tax: Government grant and incentive Interest revenue Other income Total revenue Segment result 2017 $ 2016 $ - 50,000 120,000 159,303 18,200 297,503 507,439 27,227 4,573 589,239 (7,111,915) (2,169,306) Reconciliation of segment result to loss before tax: Depreciation expenses (48,646) Other corporate and administration income/(expenses), net (2,262,492) (83,893) 3,838 Net profit/(loss) before tax (9,423,053) (2,249,361) Segment operating assets 251,855 9,808 Reconciliation of segment operating assets to total assets: Other corporate and administration assets Total assets Segment additions to non-current assets Other corporate additions to non-current assets Total additions to non-current assets 7,773,182 8,025,037 2,016,817 2,026,625 286,788 7,182 293,970 - - - Segment operating liabilities 774,749 227,992 Reconciliation of segment operating liabilities to total liabilities: Other corporate and administration liabilities Total liabilities 6. Income tax Income tax expense Current tax Deferred tax 168,463 943,212 44,008 272,000 2017 $ 2016 $ - - - - Numerical reconciliation of income tax expense to prima facie tax payable Profit/(Loss) from continuing operations before income tax expense (9,423,054) (2,249,361) 37 Breaker Resources NL Notes to the Financial Statements Prima facie tax benefit at the Australian tax rate of 27.5% (2016: 28.5%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Capital raising costs R& D incentive Entertainment Share-based payment 2017 $ 2016 $ (2,591,340) (641,068) (54,827) - 277 504,723 (16,906) (144,620) - 314 (2,141,167) (802,280) Movements in unrecognised temporary differences (40,476) (43,881) Tax effect of current year tax losses for which no deferred tax asset has been recognised Income tax expense 2,181,643 846,111 - - Unrecognised temporary differences Deferred tax liabilities (at 27.5%) on income tax account (2016: 28.5%) Prepayments Plant and equipment FBT payable DTA used to offset DTL Deferred tax liabilities Deferred tax assets (at 27.5%) on income tax account (2016: 28.5%) Accruals Provisions Capital raising costs Carry forward tax losses DTA used to offset DTL 11.928 70,939 - 25,418 2,071 - (82,666) (27,489) - - 20,605 13,092 188,313 4,053,625 (82,666) 4,192,769 5,700 3,547 52,720 2,164,598 (27,489) 2,199,076 Deferred tax liabilities (27.5%) - - Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. The Company’s ability to use losses in the future is subject to the Company satisfying the relevant tax authority’s criteria for using these losses. The Company participated in the federal government’s 2014/15 Exploration Development Incentive Scheme (EDI) for eligible exploration entities. As a result the Company has foregone 2015 income tax losses to the extent of $787,876 in exchange for the EDI credits of $236,363 for the eligible shareholders. In 2017, the government enacted a change in the income tax rate for small business entities from 28.5% to 27.5%. Breaker Resources NL satisfies the criteria to be a small business entity. 2017 Annual Report 38 Notes to the Financial Statements 7. Cash and cash equivalents Cash at bank and in hand Cash and cash equivalents as shown in the Statement of Financial Position and the Statement of Cash Flows 2017 $ 2016 $ 3,806,916 657,392 3,806,916 657,392 Term deposits classified separate to cash on face of Statement of Financial Position 3,584,522 1,131,045 Cash and cash equivalents include short-term deposits made for varying periods of between one (1) month and three (3) months depending on the immediate cash requirements of the Company and earn interest at the respective short-term deposit rates. Term deposits separated from cash and cash equivalents as at 30 June 2017 had maturities from four (4) months to five (5) months earning interest income at an average rate of 2.32%. 8. Trade and other receivables Prepayments GST receivable and FBT instalment Other receivables 2017 $ 43,373 232,681 4,620 280,674 2016 $ 89,188 59,903 1,540 150,631 The carrying amounts of trade and other receivables are assumed to be the same as their fair values, due to their short-term nature. 9. Other financial assets Term deposits as a security 10. Plant and equipment 2017 $ 2016 $ 69,658 36,410 2017 2016 Furniture & office equipment $ Exploration equipment $ Motor vehicles $ Total $ Furniture & office equipment $ Exploration equipment $ Motor vehicles $ Total $ Cost 62,013 151,769 457,575 671,357 54,831 108,717 213,838 377,386 Accumulated depreciation (55,909) (114,218) (243,271) (413,398) (52,004) (103,126) (209,621) (364,751) Net book amount 6,104 37,551 214,304 257,959 2,827 5,591 4,217 12,635 39 Breaker Resources NL Notes to the Financial Statements Furniture & office equipment $ 2,827 7,182 2017 2016 Exploration equipment $ Motor vehicles $ Total $ Furniture & office equipment $ Exploration equipment $ Motor vehicles $ Total $ 5,591 4,217 12,635 14,971 29,587 51,970 96,528 43,051 243,737 293,970 - - - - Opening net book amount Additions Depreciation charge (3,905) (11,091) (33,650) (48,646) (12,144) (23,996) (47,753) (83,893) Closing net book amount 6,104 37,551 214,304 257,959 2,827 5,591 4,217 12,635 11. Prepaid service Prepaid service 2017 $ 2016 $ 25,308 38,512 The Company issued 500,000 options to a supplier in exchange of the use of certain intellectual property owned by the supplier for a period of three years in the year ended 30 June 2016. The prepaid service is being amortised over the agreed period of the use of the property. 12. Trade and other payables Trade creditors Other payables and accruals 2017 $ 787,698 155,514 943,212 2016 $ 239,552 32,448 272,000 Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature. 13. Contributed equity (a) Share capital 2017 2016 Notes Number $ Number $ Ordinary shares fully paid (b),(d) 127,821,984 25,285,714 99,596,129 12,345,467 Ordinary shares partly paid (b),(d) 5,671,623 56,716 6,886,248 68,863 Total issued capital 133,493,607 25,342,430 106,482,377 12,414,330 2017 Annual Report 40 Notes to the Financial Statements (b) Movements in ordinary share capital 2017 2016 Number $ Number $ 106,482,377 12,414,330 75,762,506 9,743,750 Beginning of the year Issued during the year: Fully paid shares via a pro-rata renounceable entitlement issue - - 13,843,875 553,755 Fully paid shares issued in exchange of services Placement to sophisticated and 2,211,230 1,028,882 760,590 208,429 professional investors 24,800,000 12,400,000 6,538,426 850,000 Fully paid shares under a Share Purchase Plan Fully paid shares issued to a director Partly paid shares converted to fully paid shares Transaction costs End of the year - - - - - - 8,423,133 1,095,428 1,153,847 150,000 230,779 (731,561) - - - (187,032) 133,493,607 25,342,430 106,482,377 12,414,330 (c) Movements in options on issue Beginning of the year Issued Exercised Expired or lapsed End of the year 2017 Number 2,500,000 8,500,000 - 2016 Number 8,000,000 500,000 - (2,200,000) (6,000,000) 8,800,000 2,500,000 All options on issue are exercisable on a 1:1 basis for the Company’s ordinary shares and carry no rights to dividends and no voting rights. The options are exercisable at prices between $0.40 and $0.69 and expire between 30 June 2019 and 31 December 2019. (d) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one (1) vote, and upon a poll each share is entitled to one (1) vote, in proportion to the number of and amounts paid as a proportion of the issue price on the shares held. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. The partly paid ordinary shares have a total issue price of $0.20 and are paid up to $0.01. The balance is payable by calls made by the Company no earlier than four (4) years after the date of issue (December 2013). Upon becoming fully paid, each partly paid share will rank equally in all respects with the other issued fully paid shares in the Company. (e) Capital risk management The Company’s objective when managing capital is to safeguard its ability to carry on as a going concern, so that it may continue to provide returns for shareholders and benefits for other stakeholders. 41 Breaker Resources NL Notes to the Financial Statements Due to the nature of the Company’s activities, being mineral exploration, the Company does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of capital risk management is the current working capital position against the requirements of the Company to meet exploration programs and corporate overheads. The Company’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Company at 30 June 2017 and 30 June 2016 is as follows: Cash and cash equivalents Term deposits Trade and other receivables Other financial assets Trade and other payables Working capital position 14. Dividends 2017 $ 3,806,916 3,584,522 280,674 69,658 (943,212) 6,798,558 2016 $ 657,392 1,131,045 150,631 36,410 (272,000) 1,703,478 No dividends were paid during the financial year. No recommendation for payment of dividends has been made. 15. Loss per share (a) Reconciliation of earnings used in calculating profit/(loss) per share Profit/(Loss) attributable to the owners of the Company used in calculating basic and diluted profit/(loss) per share (9,423,053) (2,249,361) 2017 $ 2016 $ (b) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 119,577,225 80,224,437 2017 Number 2016 Number (c) Information on classification of options As the Company has made a loss for the year ended 30 June 2017, all options on issue are considered antidilutive and have not been included in the calculation of diluted earnings per share. These options could potentially dilute basic earnings per share in the future. 16. Commitments (a) Exploration Commitments The Company must maintain current rights of tenure to tenements, which requires outlays of expenditure in 2017/18. Under certain circumstances these commitments are subject to the possibility of adjustment to the amount and/or timing of such obligations however they are expected to be fulfilled in the normal course of operations. 2017 Annual Report 42 Notes to the Financial Statements Estimated expenditure on mining, exploration and prospecting leases for 2017/18 as at the date of this report: 2017 $ 2018 $ 282,000 792,000 (b) Capital Commitments There are no capital expenditure commitments for the Company as at 30 June 2017. (c) Lease Commitments: Company as Lessee The Company leases its office under a non-cancellable operating lease expiring within one (1) year. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one (1) year Later than one (1) year but not later than five (5) years 2017 $ 44,551 - 44,551 2016 $ 44,523 - 44,523 17. Reconciliation of loss after income tax to net cash outflow from operating activities Reconciliation of net loss after income tax to net cash flow from operating activities Net profit/(loss) for the year Non-cash items Depreciation of non-current assets Share-based payments of employee options Share-based payments in exchange of service Change in operating assets and liabilities (Increase)/decrease in trade and other receivables Increase/(decrease)in trade and other payables 2017 $ 2016 $ (9,423,053) (2,249,361) 48,646 1,822,153 1,028,882 (116,839) 671,212 83,893 209,530 - (99,148) 141,935 Net cash inflow/(outflow) from operating activities (5,968,999) (1,913,151) (a) Non-cash transactions During the year, the Company issued 2,211,230 fully paid ordinary shares to a supplier in exchange of services (refer to Note 13). The value of the shares was included in the Exploration and Evaluation Expenses and charged to the profit or loss account. During the year, the Company granted 8,500,000 options to its employee as incentives. The value of the options was included in the Share-based Payments (refer to Note 18). 43 Breaker Resources NL Notes to the Financial Statements 18. Share-based payments (a) Employee share options The Company provides benefits to employees (including directors and eligible contractors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for options to acquire ordinary shares. Options are granted under the plan for no consideration. The table below summarises the share-based payment options granted by Breaker Resources NL: 2017 2016 Outstanding at the beginning of the year Granted Forfeited/cancelled/expired Outstanding at year end Exercisable at year end Number 2,000,000 8,500,000 2,200,000 8,300,000 7,500,000 Weighted average exercise price cents Weighted average exercise price cents Number 48.9 45.7 50.1 45.3 44.4 8,000,000 31.5 - 6,000,000 2,000,000 2,000,000 - - 48.9 48.9 A total of 2,000,000 unlisted options held by key management personnel expired during the year ended 30 June 2017 and a further 200,000 unlisted employee options lapsed due to cessation of employment. The weighted average remaining contractual life of share options outstanding at the end of the financial year was 2.5 years (2016: 0.5 year) and the exercise prices ranged from 40.3 cents to 69.0 cents (2016: 47.8 cents to 50.0 cents). The weighted average fair value of the employee share options granted during the year was 21.44 cents (2016: Nil). The fair value of the options was estimated using a Black-Scholes pricing model. Expected volatility was based on the historical movement of the underlying share price around its average share price. The assumption that the historical volatility is indicative of future trends may also not necessarily be the actual outcome. Inputs into the pricing model Series 60530 Series 60532 Series 60533 Series 60534 Grant date share price Exercise price Expected volatility Option life $0.430 $0.620 89.0% $0.400 $0.448 90.0% $0.330 $0.432 91.0% $0.330 $0.403 91.0% 3.29 years 3.09 years 3.07 years 3.03 years Risk-free interest rate 1.63% 1.89% 1.98% 1.95% Inputs into the pricing model Series 60535 Series 60536 Series 60537 Grant date share price Exercise price Expected volatility Option life $0.330 $0.406 91.0% $0.590 $0.644 93.5% $0.570 $0.690 93.5% 3.03 years 2.87 years 2.86 years Risk-free interest rate 1.95% 2.00% 1.98% 2017 Annual Report 44 Notes to the Financial Statements (b) Other party options In addition to options issued to employees, the Company may also issue unlisted options to other parties. The table below summarises the other share-based payment options granted by Breaker Resources NL: 2017 2016 Weighted average exercise price cents Number 500,000 40.0 - - 500,000 500,000 - - 40.0 40.0 Weighted average exercise price cents - 40.0 - 40.0 40.0 Number - 500,000 - 500,000 500,000 Outstanding at the beginning of the year Granted Forfeited/cancelled/expired Outstanding at year end Exercisable at year end The weighted average fair value of the other party options granted during the year was Nil (2016: 7.92 cents). The fair value of the options was estimated using a Black-Scholes pricing model. (c) Share-based payments expenses During the year, an amount of $330,520 was transferred from the share-based payment reserve to accumulated losses as a result of the lapse of 2,200,000 options. 19. Key management personnel transactions The aggregate compensation made to directors and other members of key management personnel of the Company is set out below: Short term benefits Post-employment benefits 2017 $ 702,062 29,850 731,912 2016 $ 599,580 13,615 613,195 There were no loans to/from key management personnel during the year. Detailed remuneration disclosures are provided in the Remuneration Report commencing on page 17. 20. Related party transactions The Company had no transactions with related parties during the year except for payments and issues of options to the key management personnel disclosed in the Remuneration Report commencing on page 17. There were no guarantees provided to related parties during the year. 45 Breaker Resources NL Notes to the Financial Statements 21. Remuneration of auditor During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms: (a) Audit services Rothsay Chartered Accountants – audit and review of financial reports Total remuneration for audit services 2017 $ 2016 $ 20,000 20,000 20,000 20,000 (b) Non-audit services There were Nil non-audit services provided by the auditor of the Company, Rothsay Chartered Accountants, during the year (2016: Nil). 22. Subsequent events On 5 July 2017, the Company announced that 200,000 options at an exercise price of $0.403 with an expiry date of 31 December 2019 had lapsed. On 10 July 2017 the Company announced that it had issued 385,482 fully paid ordinary shares at a deemed issue price of $0.678 per share to a supplier in lieu of cash payment for drilling services undertaken at the Company’s Lake Roe Project. Other than the above, there were no matters or circumstances arising since the end of the reporting period that have significantly affected or may significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June 2017. 2017 Annual Report 46 Directors’ Declaration Directors’ Declaration The directors declare that: the Financial Statements comprising the Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and accompanying notes set out on pages 28 to 46 are in accordance with the Corporations Act 2001 (Cth), including: i. complying with Accounting Standards, the Corporations Regulations 2001 (Cth) and other mandatory professional reporting requirements; and ii. giving a true and fair view of the Company’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; in the opinion of the directors there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been included in the Notes to the Financial Statements; and the directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001 (Cth). Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001 (Cth). On behalf of the directors TOM SANDERS Executive Chairman Perth, 15 August 2017 47 Breaker Resources NL Independent Audit Report 2017 Annual Report 48 Independent Audit Report 49 Breaker Resources NL Independent Audit Report 2017 Annual Report 50 Independent Audit Report 51 Breaker Resources NL ASX Additional Information ASX Additional Information Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is provided below. The information is current as at 29 September 2017. Corporate Governance Statement The 2017 Corporate Governance Statement of Breaker Resources NL is available on the Company’s website at http://www.breakerresources.com.au/company/corporate-governance. Distribution of Equity Securities Analysis of numbers of equity security holders by size of holding: Fully paid ordinary shares Partly paid shares Number of holders Number of shares Number of holders Number of shares 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 71 200 197 571 24,605 586,629 1,630,707 21,665,028 100,001 and over 170 121,188,375 1,209 145,095,344 9 30 9 29 12 89 3,781 82,404 72,223 1,078,240 4,434,975 5,671,623 Unmarketable Parcel There are 57 holders of unmarketable parcels of fully paid ordinary shares, based on the closing market price of $0.65 on 29 September 2017. Restricted Securities There are no restricted securities on issue. Voting Rights All fully paid ordinary shares carry one (1) vote per share without restriction. Holders of partly paid shares are entitled to a fraction of one (1) vote which is equivalent to the proportion which the amount paid bears to the total issue price. Unlisted options carry no attaching voting rights. Substantial Shareholders The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act, and the details of their holding at the time of notification, are: Shareholder Voting interest Number Voting power % 1 Mr Thomas Stephen Sanders & Mrs Helen Sanders 21,099,703 14.51% 2017 Annual Report 52 ASX Additional Information Top 20 Shareholders The names of the 20 largest holders of quoted fully paid ordinary shares (ASX: BRB) are: Shareholder Ordinary shares Number Equity held % 1 2 3 Mr Thomas Stephen Sanders & Mrs Helen Sanders HSBC Custody Nominees (Australia) Limited Mr Thomas Stephen Sanders & Mrs Helen Sanders Citicorp Nominees Pty Ltd Kurraba Investments Pty Ltd JP Morgan Nominees Australia Limited Morgan Stanley Australia Securities (Nominee) Pty Ltd Neon Capital Limited T T Nicholls Pty Ltd BT Portfolio Services Limited Jasper Hill Resources Pty Ltd Ausdrill International Pty Ltd Bradley Scott Dvorak BNP Paribas Noms Pty Ltd 4 5 6 7 8 9 10 11 12 13 14 15 Mark Robert Edwards 16 Mr Michael John Kitney & Mrs Dale Jayne Kitney 17 Gold Elegant (HK) Investment Limited 18 19 Merrill Lynch (Australia) Nominees Pty Ltd 20 Kemast Investments Pty Ltd Kahala Holdings Pty Ltd 12,114,600 11,572,375 8,895,610 8,772,301 5,021,429 4,665,274 4,452,878 4,400,608 3,000,000 2,738,140 2,474,261 1,994,460 1,954,825 1,605,829 1,532,035 1,468,544 1,394,171 1,295,276 1,292,664 1,200,000 8.349 7.976 6.131 6.046 3.461 3.215 3.069 3.033 2.068 1.887 1.705 1.375 1.347 1.107 1.056 1.012 0.961 0.893 0.891 0.827 The names of the 20 largest holders of quoted partly paid ordinary shares (ASX: BRBCA) are: Shareholder Ordinary shares Number Equity held % 81,845,280 56.408 Mr Thomas Stephen Sanders & Mrs Helen Sanders 1 Cornerstone Capital Pty Ltd 2 HSBC Custody Nominees (Australia) Limited 3 Mr Benjamin Campbell 4 Mr Gary Phillip Grey & Ms Stephanie Reynolds 5 Mr Murray Leslie Siviour 6 Jasper Hill Resources Pty Ltd 7 T T Nicholls Pty Ltd 8 Mr Gavin Victor Hayres & Ms Amanda Yip 9 Cheetah Holdings Pty Ltd 10 11 Mr Ross William Anderson 12 Mr David Anthony O’Dea 13 Mr Graham Robert Foreman Budworth Capital Pty Ltd 14 15 Allora Equities Pty Ltd 16 Mark Robert Edwards 17 Mr Luke Patrick Thomas Sanders 18 Mr Michael John Kitney & Mrs Dale Jayne Kitney 19 20 Bradley Scott Dvorak Future Super Pty Ltd 53 Breaker Resources NL 1,309,871 873,912 437,500 302,835 273,406 248,171 247,732 219,768 200,000 134,390 112,000 100,100 100,000 87,000 65,217 65,000 65,000 58,125 50,000 50,000 23.095 15.408 7.714 5.339 4.821 4.376 4.368 3.875 3.526 2.370 1.975 1.765 1.763 1.534 1.150 1.146 1.146 1.025 0.882 0.882 5,000,027 88,159 ASX Additional Information Unquoted Securities Details of unquoted securities on issue are: Class Unlisted 40 cent options, exercisable on or before 30 June 2019 Unlisted 43.2 cent options, exercisable on or before 31 December 2019 Unlisted 44.8 cent options, exercisable on or before 31 December 2019 Unlisted 64.4 cent options, exercisable between 17 February 2018 and 31 December 2019 Unlisted 69 cent options, exercisable between 20 February 2018 and 31 December 2019 Holders of 20% or more of the class Details of holders of 20% or more of a class of unquoted securities are: Securities Number 500,000 2,000,000 5,500,000 150,000 250,000 Holders Number 1 2 3 1 1 Class Holder Securities Number Held % Unlisted 40 cent options, exercisable on or before 30 June 2019 Lithify Pty Ltd 500,000 100 On-market Buy-back There is no current on-market buy-back. 2017 Annual Report 54 ABN: 87 145 011 178 12 Walker Avenue, West Perth, Western Australia 6005 Tel: +61 8 9226 3666 | Fax: +61 8 9226 3668 Email: breaker@breakerresources.com.au www.breakerresources.com.au