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Radius Gold Inc.ABN: 87 145 011 178 Corporate Directory & Contents Auditors Rothsay Chartered Accountants Level 1, 4 Ventnor Avenue West Perth, Western Australia 6005 Solicitors Steinepreis Paganin Level 4, 16 Milligan Street Perth, Western Australia 6000 Share Registry Automic Registry Services Level 5, 126 Phillip Street Sydney, New South Wales 2000 Tel: 1300 288 664 (within Australia) +62 9698 5414 (outside Australia) hello@automic.com.au Email: Website: www.automic.com.au Securities Exchange Listing in Breaker Shares and Partly Paid Shares Resources NL are quoted on ASX Limited (codes: BRB and BRBCA). The Home Exchange is Perth, Western Australia. Corporate Directory Board of Directors Mr Thomas Sanders Mr Mark Edwards Mr Michael Kitney Mr Linton Putland Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director 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 Cover photos: Lake Roe drilling and a group of site-based Breaker personnel; Lake Roe Coreyard; Lake Roe drilling Contents Chairman’s Letter ____________________________________________________________________________________________ 2 Review of Activities __________________________________________________________________________________________ 3 Tenement Schedule _______________________________________________________________________________________ 10 Directors’ Report ___________________________________________________________________________________________ 11 Auditor’s Independence Declaration _____________________________________________________________________ 22 Statement of Profit or Loss and Other Comprehensive Income __________________________________________ 23 Statement of Financial Position ____________________________________________________________________________ 24 Statement of Changes in Equity ___________________________________________________________________________ 25 Statement of Cash Flows __________________________________________________________________________________ 26 Notes to the Financial Statements _________________________________________________________________________ 27 Directors’ Declaration _____________________________________________________________________________________ 45 Independent Audit Report ________________________________________________________________________________ 46 ASX Additional Information ________________________________________________________________________________ 50 2018 Annual Report 1 Chairman’s Letter Dear Shareholder, 2017/18 was a breakthrough year for Breaker Resources NL in many ways, culminating in a 1.1Moz open pit gold Resource subsequent to the reporting period at the Bombora gold deposit within the 100%-owned Lake Roe Project, 100km east of Kalgoorlie in Western Australia. The Bombora gold deposit is growing quickly and has already established itself as a rare greenfields gold discovery with “camp-scale” growth potential, high- grade mining optionality and affinities with many known dolerite-hosted deposits in WA. In the five months preceding the September 2018 Resource, the Company added nearly 500,000oz at a cost of ~A$11/oz and the deposit remains open in all directions. The rapid growth and low discovery cost reflect the hard-won understanding of a brand new discovery following 155,000m of RC and diamond drilling. The Company expects to be drilling and building value at Lake Roe for many years to come based on the quality and scale of the Bombora deposit and the demonstrated potential along strike. De-risking of the Lake Roe Gold Project has occurred on many fronts. Metallurgical results, for example, point towards high gold recoveries and low-cost processing for the fresh and oxide ores. The ongoing, aggressive drilling campaign involving 3-4 drill rigs demonstrates a high gold endowment of 5,000 to 6,000 ounces per vertical metre, underpinning the mining potential. Nearly 800,000oz of gold occurs in the top 150m of the deposit. Perhaps the most significant de-risking milestone is the outstanding mining potential identified by preliminary open pit optimisation studies. These studies indicate excellent potential for a single, 2km-long open pit with scope to support a large, high-margin standalone development. To apply some perspective, this is based on shallow drilling in the first 2.2km of an 8km-long system within a 550km2 project. In addition, drilling and 3-D modelling have emphatically confirmed continuity of mineralisation, materially de-risking the open pit and underground mining potential in the process. High-grade gold mineralisation is a characteristic of the deposit and should not be under-estimated. It creates optionality, potentially allowing the early scheduling of high-grade mineralisation in an open pit scenario, or underground mining which can add multiples to any open pit resource in the long-term. A pre-feasibility study is well underway to create scope for early monetisation, while Breaker continues to build value and expand the development options through the drill bit. The timing on the PFS will be dictated by the need to establish the overall limits of open pit mining – drilling continues to discover new areas of shallow gold mineralisation thereby increasing the size of a potential open pit, an enviable problem to have. Once we know this, we will start to take steps to quantify an underground resource. In closing off what has been our best year yet, I would like to thank our committed technical and corporate team, including contractors and suppliers, for their hard work and dedication. I would also like to thank our shareholders for their support as we embark on another exciting year with a firm, ongoing focus on building value. Yours sincerely Tom Sanders Chairman 2 Breaker Resources NL Review of Activities Review of Exploration Activities Activities in and subsequent to the 2017/18 financial year were focused on establishing, upgrading and extending a JORC Resource at the Bombora gold deposit within the 100%-owned Lake Roe Gold Project, 100km east of Kalgoorlie in WA. The 2.2km Bombora deposit forms part of an 8km-long gold system situated within a project comprising six granted tenements with an overall area of 556km2. At the time of writing, the Company has completed 155,000m of reverse circulation (RC) and diamond drilling at Lake Roe, comprising 117,000m of RC drilling and 38,000m of diamond and RC pre-collared diamond drilling. Breaker is still discovering new lodes within the 2.2km main discovery zone after 18 months of resource definition drilling, supporting the view that Bombora is a major greenfields gold discovery in the early stages of delineation. The effectiveness of the Company’s drilling is perhaps best gauged by a discovery cost of A$17/oz based on overall project expenditure of approximately A$18million, which includes all outgoings at Lake Roe since first tenement grant in 2015. A major milestone for the Company was an updated 1,084,000oz open pit Resource1, totalling 24.6Mt at 1.4g/t Au announced in September 2018. Importantly, the Resource includes a high-grade core of 808,000oz @ 2.0g/t Au (12.5Mt reported above 1.0g/t Au), or 417,000oz @ 3.4g/t Au (3.9Mt reported above 2.0g/t Au). The Resource signals that the Bombora deposit is a potentially major greenfields discovery with high gold endowment, excellent mining potential and outstanding scope for further growth. The Resource is open in all directions and represents a 74% increase in contained ounces relative to the maiden Resource of 18 April 2018, with 58% of the Resource in the Indicated category (up 136% to 624,000oz). The Company effectively added 500,000oz in five months which reflects a growing understanding of the deposit. Two rounds of metallurgical testwork undertaken in the period indicate no metallurgical issues and point towards low-cost gold processing. Excellent results for gold recovery were achieved in both oxide material (96-99%) and fresh rock (97-99%) at a relatively coarse grind size of 106-125µm which indicates low energy consumption and hence low operating costs2. Going forward, the Company plans to continue building value with a dual strategy of aggressive drilling to expand and extend the Resource, while concurrently advancing a pre-feasibility study targeting an early standalone open pit development. Lake Roe Drilling Resource delineation drilling at Bombora commenced in February 2017 and is progressively reducing the drill hole spacing to 40m x 20m with local areas of 20m x 20m drilling. Drilling in and subsequent to the reporting period was conducted with three to four rigs operating continuously (typically two RC rigs and two diamond rigs). The drilling has delivered consistent, excellent results that have progressively built an understanding of the geometry of the 2.2km Bombora deposit, as well as the factors controlling the nature and distribution of gold mineralisation. This understanding is reflected in recent 3-D models of the deposit, and the rapid growth of the Resource in recent months. The camp-scale growth potential of the Lake Roe Project is supported by recent reconnaissance RC drilling 2km north of Bombora (Crescent Prospect; Figure 1) which intersected shallow gold mineralisation including 11m @ 3.84g/t Au from 1m and 9m @ 1.88g/t Au from 40m3. Similar growth potential is evident to the south of Bombora where extensive areas of gold anomalism in aircore drilling is still unexplained by the wide-spaced, reconnaissance RC drilling completed to date. 2018 Annual Report 3 Review of Activities An overview of RC and diamond drilling to date is provided in Figure 1 below. Figure 1: Lake Roe RC and diamond drilling over aeromagnetic image Figure 2a: Bombora – mineralisation and geology at 300mRL (slice of 3D model 15m below surface) Figure 2b: Bombora - RC and diamond drill hole location (colour-coded by average down-hole gold) 4 Breaker Resources NL Review of Activities Highlight intersections during and subsequent to the reporting period include4: Hole_ID Interval @ g/t Au From Includes Hole_ID Interval @ g/t Au BBDD0013 7.15m @ 2.45 40.35m 1.65m @ 9.19 BBRC0463 15m @ 2.54 1.45m @ 16.7 54.55m 0.85m @ 25.15 BBRC0466 11m @ 2.26 BBDD0016 45m @ 2.29 6m 22m @ 2.73 BBRC0467 12m @ 1.92 BBDD0020 5.7m @ 3.53 2.5m @ 10.24 152.3m 236.5m 5m @ 3.79 4m @ 4.83 BBRC0468 BBRC0470 8m @ 6.61 5m @ 2.56 6m @ 7.12 7.5m @ 9.03 315.75m 5.25m @ 12.71 BBRC0471 16m @ 2.65 BBDD0023 5.1m @ 4.23 46.9m 3.2m @ 6.14 8m @ 4.03 BBDD0030 16.5m @ 4.50 7m @ 9.37 BBRC0474 12m @ 1.29 BBDD0033 4m @ 6.55 66m 2m @ 11.7 BBRC0482 44m @ 1.42 BBDD0035 84m @ 0.47 9.12m @ 0.85 4.43m @ 14.04 BBRC0476 8m @ 3.03 From 156m 32m 12m 48m 135m 165m 16m 24m 96m 12m 8m Includes 6m @ 3.69 4m @ 5.3 4m @ 3.62 4m @ 12.95 2m @ 5.25 4m @ 10.43 6m @ 4.85 6m @ 4.85 8m @ 1.76 2m @ 9.94 12m @ 2.49 4m @ 5.89 1m @ 16.61 380m 1m @ 16.61 BBRC0483 12m @ 2.64 40m 4m @ 6.75 2m @ 11.35 BBRC0577 52m @ 1.76 4m 32m @ 2.57 3m @ 15.65 BBRC0579 24m @ 0.94 BBRC0581 12m @ 1.15 BBRC0644 27m @ 12.37 120m 13m @ 24.48 BBDD0038 11m @ 2.06 2.49m @ 5.36 6.3m @ 1.57 89m 2m @ 3.16 BBRC0487 44m @ 3.37 BBDD0040 6.51m @ 3.56 22.49m 1.51m @ 8.93 1m @ 33.68 BBDD0042 1.3m @ 9.47 3m @ 4.66 27m @ 1.18 85m 6.2m 100m 348m 1m @ 12.68 2m @ 6.61 3m @ 4.3 BBRC0502 BBRC0555 3m @ 8.79 10m @ 2.8 BBRC0558 12m @ 1.58 14m @ 4.44 BBDD0060 4.72m @ 5.4 246.4m 3m @ 8.18 BBDD0064 2m @ 25.93 42m 1m @ 51.58 BBRC0560 BBRC0574 4m @ 4.3 5m @ 3.13 2.9m @ 89.44 72.11m 1m @ 257.33 BBRC0576 44m @ 1.38 BBRC0370 12m @ 2.31 BBRC0375 3m @ 8.21 4m @ 4.26 BBRC0379 14m @ 4.23 7m @ 5.2 BBRC0390 24m @ 2.24 BBRC0395 12m @ 2.42 BBRC0429 17m @ 1.42 BBRC0440 16m @ 1.76 BBRC0442 20m @ 1.36 5m @ 1.92 BBRC0443 22m @ 1.88 BBRC0444 44m @ 1.04 BBRC0446 19m @ 1.13 BBRC0449 29m @ 1.39 4m @ 2.72 BBRC0450 10m @ 3.36 16m @ 2.23 BBRC0452 20m @ 3.29 20m @ 3.29 4m @ 2.18 8m @ 1.74 4m @ 6.87 20m @ 1.79 BBRC0453 BBRC0456 20m @ 1.81 12m @ 7.15 BBRC0459 3m @ 4.87 BBRC0461 12m @ 0.91 8m @ 5.77 8m @ 2.33 64m 69m 136m 95m 117m 132m 52m 200m 24m 168m 201m 134m 16m 145m 17m 32m 37m 100m 140m 140m 168m 180m 128m 168m 24m 140m 201m 208m 136m 148m 3m @ 8.21 5m @ 7.03 7m @ 4.29 6m @ 4.5 3m @ 6.97 10m @ 2.63 1m @ 11.05 1m @ 7.79 4m @ 3.97 4m @ 3.15 3m @ 4.28 7m @ 2.78 5m @ 6.31 8m @ 3.97 16m @ 4.06 16m @ 4.06 8m @ 3.18 4m @ 3.88 4m @ 20.95 1m @ 12.21 BBRC0656 12m @ 4.54 9m @ 1.37 BBRC0683 20m @ 1.59 BBRC0688 9m @ 1.8 8m @ 1.19 BBRC0689 24m @ 3.12 BBRC0690 12m @ 0.96 BBRC0691 BBRC0692 BBRC0693 8m @ 3.25 4m @ 3.72 8m @ 1.37 12m @ 0.95 BBRC0694 36m @ 2.78 BBRC0696 10m @ 3.14 BBRC0698 20m @ 2.16 BBRC0708 6m @ 4.1 19m @ 2.0 20m @ 3.53 BBRC0724 16m @ 1.22 BBRC0738 11m @ 1.17 BBRC0739 24m @ 1.44 8m @ 3.95 3m @ 15.01 BBRC0749 16m @ 2.96 4m @ 4.25 60m 165m 148m 75m 96m 48m 8m 4m 1m @ 23.35 13m @ 9.00 - 2m @ 11.23 1m @ 20.37 1m @ 6.22 8m @ 7.4 4m @ 13.09 4m @ 3.21 8m @ 3.06 4m @ 3.71 12m 96m 4m @ 4.9 4m @ 3.71 4m @ 2.25 52m 87m 166m 64m 100m 36m 68m 84m 68m 28m 48m 8m 9m 180m 111m 141m 167m 44m 37m 20m 36m 32m 6m @ 7.15 8m @ 1.42 3m @ 5.66 1m @ 13.65 11m @ 6.33 8m @ 1.16 3m @ 7.83 4m @ 1.86 4m @ 1.65 8m @ 8.01 1m @ 27.18 9m @ 4.07 1m @ 11.66 9m @ 3.57 11m @ 5.94 5m @ 9.25 6m @ 2.55 4m @ 7.42 7m @ 6.26 4m @ 9.2 2018 Annual Report 5 Review of Activities Hole_ID Interval @ g/t Au From BBRC0752 12m @ 1.24 34m @ 14.24 BBRC0794 10m @ 3.41 BBRC0805 12.25m @ 4.29 BBRC0817 12m @ 6.78 BBRC0832 20m @ 4.2 BBRC0858 19m @ 2.35 BBRC0901 4m @ 13.70 BBRC0909 12m @ 2.44 4m @ 3.46 3m @ 6.84 BBRC0911 15m @ 1.53 BBRC0912(PC) 16m @ 1.12 16m @ 1.15 BBRC0915 8m @ 1.30 20m @ 1.66 BBRD0152 31m @ 1.41 8m 44m 82m 264m 152m 8m 1m 32m 84m 68m 154m 140m 28m 108m 40m 60m Includes 8m @ 1.64 7m @ 48.92 5m @ 13.62 3m @ 8.54 8m @ 9.72 4m @ 17.75 4m @ 15.49 11m @ 3.84 2m @ 9.82 5m @ 3.36 8m @ 1.91 8m @ 3.21 12m @ 2.84 5m @ 6.15 5.25m @ 9.35 BBRD0668 Hole_ID Interval @ g/t Au BBRD0553 10.3m @ 2.99 From 200m Includes 4.06m @ 4.24 13.34m @ 1.48 214.66m 5.34m @ 2.17 8m @ 2.13 BBRD0637 5.54m @ 2.06 2m @ 8.59 1m @ 5.14 8m @ 1.54 BBRD0669 236m 214m 160m 170m 116m 5m @ 3.28 1m @ 5.42 1.1m @ 15.33 1m @ 5.14 BBRD0671 1.83m @ 17.57 187.17m 1.04m @ 30.74 2.12m @ 7.52 209.91m 1.37m @ 9.06 BBRD0675 9m @ 35.88 7m @ 2.45 BBRD0676 2m @ 10.86 BBRD0756 2.5m @ 18.53 131m 182m 224m 200m 2.88m @ 108.55 5m @ 3.27 1m @ 18.5 1.7m @ 27.14 3.8m @ 1.22 206.2m BBRD0758 17m @ 13.68 BBRD0760 21m @ 1.45 181m 226m 7m @ 32.66 2.8m @ 6.33 5m @ 1.75 BBRD0772 10m @ 2.94 172m 4.6m @ 6.1 BBRD0784 6m @ 4.31 5m @ 3.58 BBRD0326 4m @ 3.23 56m 1m @ 10.97 4.5m @ 4.86 154.5m 3.5m @ 5.69 BBRD0787 45m @ 2.14 1m @ 9.32 BBRD0802 11m @ 1.11 BBRD0441 7m @ 23.72 BBRD0448 11m @ 0.99 5m @ 7.9 121m 168m 202m 5.36m @ 30.85 1m @ 1.67 3m @ 12.65 BBRD0465 2.5m @ 5.05 147.5m 1m @ 11.42 11m @ 1.31 BBRD0550 20m @ 0.86 185m 56m 2m @ 4.22 4m @ 2.25 12m @ 6.31 BBRD0805 9.6m @ 2.36 12.25m @ 4.29 1m @ 13.57 BBRD0819 21m @ 5.74 Bombora Gold Deposit Geology 1.44m @ 12.02 1m @ 17.26 3m @ 5.48 17m @ 3.23 1.2m @ 6.1 2.3m @ 25.46 1m @ 19.81 5.25m @ 9.35 13m @ 9.12 230m 247m 194m 202m 219m 170m 264m 282m 273m Modelling of the gold mineralisation has unambiguously confirmed the geometry and continuity of mineralisation, significantly de-risking the mining potential. Gold mineralisation at Bombora is largely stratabound, occurring preferentially in quartz dolerite in three dominant geometries that are typically “stacked”, as well as in local zones of stockwork mineralisation. Figure 3: Bombora gold deposit – Structural summary 6 Breaker Resources NL Review of Activities The gold distribution is controlled by multiple, steep NNW-trending mineralised faults with “linking” flat and/or west-dipping mineralised faults. Plunging lodes occur where the gold-bearing structures intersect the chemically favourable, iron-rich western part of the dolerite host rock. Gold occurs throughout the 2.2km discovery zone as sulphide-bearing mineralised shears and quartz lodes in steep shear lodes, flat-dipping quartz reefs and lodes and west-dipping veins and lodes. The repetitive nature of the steep “controlling” mineralised faults, and the deep gold mineralisation intersected to date, indicate that gold mineralisation is likely to extend at depth. The geometry of the steep, flat and west-dipping mineralised structures is depicted in Figures 3 and 4. Figure 4: Three-D model of Bombora gold deposit showing steep, flat and west-dipping lodes looking down and to the northwest (Boundary of preliminary A$2,000 Whittle open pit shell in black) The contribution of ounces to the Bombora Resource for the three main lode geometries and stockwork mineralisation is summarised below. Figure 5: Mineralised lodes and contained ounces Mineral Resource An updated open pit Mineral Resource estimate for the Bombora deposit was reported in September 20185 to a depth of 250 metres below surface (mbs). The Mineral Resource is designed to maximise the profit in an open pit mining scenario and uses a 0.2g/t Au lower cut-off grade for boundary definition reported above a cut-off grade of 0.5g/t Au. 2018 Annual Report 7 Review of Activities Table 1: Lake Roe Project Bombora Deposit Mineral Resource September 2018 Classification Tonnes Au (g/t) Indicated Inferred Total 12,549,000 12,050,000 24,599,000 1.5 1.2 1.4 Ounces 624,000 460,000 1,084,000 Notes: All figures rounded to relect the appropriate level of confidence (apparent Reported at 0.5 g/t Au cutoff. differences may occur due to rounding). Importantly, the Resource includes a high-grade core of 808,000oz @ 2.0g/t Au (12.5Mt reported above 1.0g/t Au), or 417,000oz @ 3.4g/t Au (3.9Mt reported above 2.0g/t Au). A summary of the Resource reported above 1.0g/t Au and 2.0g/t Au is shown in Table 2. Cut-off Table 2: Bombora Mineral Resource at various cut-off grades Indicated Inferred Total Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces (g/t Au) (t) (g/t Au) (oz) (g/t Au) (oz) (g/t Au) (oz) 0.5 1.0 2.0 12,549,000 7,155,000 2,460,000 1.5 2.2 3.6 624,000 12,050,000 498,000 5,320,000 287,000 1,390,000 1.2 1.8 3.0 460,000 24,599,000 310,000 12,475,000 130,000 3,850,000 1.4 2.0 3.4 1,084,000 808,000 417,000 Notes: All figures are rounded to reflect the appropriate levels of confidence. Apparent differences may occur due to rounding. Resource reported above 250mbs (50mRL). Lower cut-off grade of 0.2g/t Au to enhance geological continuity. Drilling below 250mbs has confirmed the presence of significant mineralisation (eg. BBDD0020: 5.95m @ 11.33g/t Au6) but the amount of drilling is not sufficient to quantify a resource. Accordingly, an Exploration Target7 of 1.2 million to 1.4 million ounces of gold is estimated over a vertical distance of 450m below the revised Mineral Resource from approximately 250mbs to 700mbs. The Exploration Target comprises an estimated range of 6.8Mt to 9.7Mt at a grade of 4.5g/t Au to 5.5g/t Au (Figure 6). The tonnage and grade ranges are based on roughly half the observed ounces per vertical metre observed in areas of adequate drilling above 150mbs. Figure 6: Long section showing drill holes coloured by metal content and Exploration Target 8 Breaker Resources NL Review of Activities Other Lake Roe Activities In addition to drilling, other activities undertaken at Lake Roe during the period include geological mapping and rock chip sampling. The Manna Lithium Prospect, an outcropping swarm of lithium-cesium- tantalum pegmatites, was discovered during the March 2018 quarter. First-pass rock chip sampling showed widespread enrichment in lithium (up to 3.81% Li2O), tantalum (up to 366ppm Ta2O5) and niobium (up to 251ppm Nb2O5)8, and strong evidence of chemical zoning. Mapping has confirmed a ~130m wide corridor of sub-cropping spodumene-bearing pegmatite dykes with a strike length of at least 750m. A program of reconnaissance RC drilling to assess the potential significance of the lithium discovery has been completed. Results are pending. Other Exploration The Ularring Rock Project is located 100km east of Perth and covers the Centre Forest and Southern Brook gold-copper prospects. Assessment of the project was ongoing during the period with a review of historical datasets identifying potential for a district scale mineralisation system with multiple structural and geochemical targets, including a large bullseye groundwater tungsten anomaly. A reconnaissance field investigation was completed in 2017/18 and pre-ground work activities will continue. As at 30 June 2018, the Company held approximately 987km2 of tenements comprising nine granted exploration licences and one mining lease application across the Lake Roe and Ularring Rock Project areas. References 1 See section “Mineral Resource” on page 7 and ASX announcement of 4 September 2018 2 ASX Releases 18 October 2017 and 15 January 2018 3 ASX Release 31 July 2018 4 Drill results released to the ASX on the following dates: 6 July 2017, 7 August 2017, 4 September 2017, 17 October 2017, 23 November 2017, 10 January 2018, 15 January 2018, 31 January 2018, 20 February 2018, 28 March 2018, 18 April 2018, 7 May 2018, 13 June 2018, 31 July 2018 and 4 September 2018 5 ASX Release 4 September 2018 6 ASX Release 7 August 2017 7 ASX Release 4 September 2018 8 ASX Release 30 April 2018 Competent Persons Statements 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. The information in this report that relates to the Mineral Resource is based on and fairly represents information and supporting documentation compiled by Christine Shore, who is a Competent Person and a Member of the Australasian Institute of Mining and Metallurgy. Ms Shore is a full time employee of Breaker Resources NL. Ms Shore 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’. Ms Shore consents to the inclusion in the report of the matters based on her information in the form and context in which it appears. 2018 Annual Report 9 Review of Activities & Tenement Schedule Review of Corporate Activities On 25 August 2017 the Company announced the conduct of a capital raising comprising a placement and a share purchase plan (SPP). 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, with shares issued at $0.70. Subsequent to year end, a placement raised over $10.5million (issue price $0.29) to enable the Company to continue its drilling and pre- development activities at Lake Roe. Other equity movements during the reporting period were the issue of shares to a nominee of Ausdrill Limited as part consideration for drilling services and the issue and lapse of unlisted options. In addition, a total of 1,006,250 partly paid shares were paid up. As at 30 June 2018, Breaker’s capital structure was as follows: 146,101,594 fully paid ordinary shares; 4,665,373 partly paid ordinary shares; and 5,650,000 unlisted options at various exercise prices and expiry dates. The Company’s share register transferred from Advanced Share Registry Services to Automic Registry Services during October 2017 and the annual general meeting was held on 23 November 2017. Breaker was represented at a number of conferences during 2017/18 including Diggers and Dealers in Kalgoorlie, RIU Resources Round-up in Sydney, Precious Metals Investment Symposium in Melbourne and Resources Rising Stars events on the Gold Coast and in Sydney and Melbourne. On 30 June 2018, 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 $0.66 and as at 30 June 2018, the price was $0.26. Tenement Schedule The following is a summary of tenements held by Breaker Resources NL as at 30 June 2018. Project Lake Roe Pinjin Ularring Rock 10 Breaker Resources NL Tenement Number E28/2515 E28/2522 E28/2551 E28/2555 E28/2556 E28/2559 M28/388 E28/2629 E70/4686 E70/4901 Status Granted Granted Granted Granted Granted Granted Application Granted Granted Granted Percentage Held/Earning % 100 100 100 100 100 100 100 100 100 100 Directors’ Report Directors’ Report The directors of Breaker Resources NL herewith submit the financial report for the year ended 30 June 2018. 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); MAICD; 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. 2018 Annual Report 11 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 2 2 2 2 2 2 2 2 2 2 2 2 12 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 Number 22,544,660 1,778,190 1,468,544 Number 309,871 65,000 58,125 Unlisted share options Number - 1,250,000 1,250,000 During the financial year Nil share options were granted to directors of the Company as part of their remuneration (2017: 2,500,000). 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 $13,351,027 (2017: $7,111,915). In line with the Company’s accounting policies, all exploration expenditure is written off as it is incurred. Net administration expense amounted to $720,575 (2017: $2,311,138). The Company’s operating loss after income tax for the year is $14,071,602 (2017: $9,423,053). At year end the Company held cash and cash equivalents and term deposits of $5,173,422 (2017: $7,391,438). 2018 Annual Report 13 Directors’ Report Operating Results for the Year Summarised operating results are as follows: Revenues and profit/(loss) from ordinary activities before income tax expenses 257,700 (14,071,602) Revenues Results $ $ Shareholder Return Summarised shareholder return is as follows: Basic profit/(loss) per share Dividends 2018 cents 2017 cents (9.90) (7.88) 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 5,650,000 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 2,500,000 2,000,000 150,000 250,000 250,000 Exercise price $0.400 $0.448 $0.432 $0.644 $0.690 $0.730 Expiry date 30 June 2019 31 December 2019 31 December 2019 31 December 2019 31 December 2019 31 December 2020 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 250,000 $0.730 31 December 2020 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 200,000 $0.403 31 December 2019 Cessation of employment 14 Breaker Resources NL Directors’ Report Type of option Number Exercise price Expiry date Reason for lapse Unlisted 200,000 $0.406 31 December 2019 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 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 2018. 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. 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 22 and forms part of the Directors’ Report for the financial year ended 30 June 2018. 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 2018. 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; 2018 Annual Report 15 Directors’ Report 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. 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. 16 Breaker Resources NL Directors’ Report 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. Use of Remuneration Consultants The Company did not employ the services of any remuneration consultants during the financial year ended 30 June 2018. 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: Key management personnel Tom Sanders $ 2018 2017 314,6591 252,202 Short-term Post-employment Share- based payments Salary & fees Non- monetary Super- annuation Retirement benefits Options Total $ - - $ - - $ - - $ - - $ 314,659 252,202 2018 Annual Report 17 Directors’ Report Key management personnel Mark Edwards 2018 2017 Mike Kitney 2018 2017 Alastair Barker $ 40,000 36,667 42,5582 31,195 2018 2017 259,9381 205,499 Michelle Simson 2018 2017 226,9441 176,499 Short-term Post-employment Share- based payments Salary & fees Non- monetary Super- annuation Retirement benefits Options Total $ - - - - - - - - $ - - 6,667 5,472 - - 24,823 24,378 $ - - - - - - - - $ - $ 40,000 279,530 316,197 - 49,225 279,530 316,197 - 259,938 174,777 380,276 - 251,767 174,777 375,654 Notes 1 “Salary & fees” includes a milestone bonus paid in relation to the completion and release of a maiden Mineral Resource for the Lake Roe Gold Project. 2 In addition to directors’ fees of $33,333 and associated superannuation of $6,667 during 2017/18, Metallurgical Design, an entity controlled by Mike Kitney, was paid fees of $9,225 under an agreement for the provision of project management services for Lake Roe metallurgical testwork. 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 (2017: Nil). Options Nil options in the Company were issued to key management personnel as part of their remuneration during the year (2017: 4,500,000). There were Nil options exercised or sold by key management personnel during the year (2017: Nil). During the year, the following share-based payment arrangements for key management personnel were in existence: Option series Grant date Expiry date 60532 60533 28 November 2016 31 December 2019 5 December 2016 31 December 2019 Fair value per option at grant Vesting date cents 22.36 17.48 28 November 2016 5 December 2016 18 Breaker Resources NL Directors’ Report 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 2018 2017 Mark Edwards 2018 2017 Mike Kitney 2018 2017 Alastair Barker 2018 2017 Michelle Simson 2018 2017 Key management personnel Tom Sanders 2018 2017 Mark Edwards 2018 2017 Mike Kitney 2018 2017 Alastair Barker 2018 2017 Michelle Simson 2018 2017 Fully Paid Ordinary Shares Granted as compen- sation Received on exercise of options Balance at start of year Number Number Number Other changes Number Balance at year end Number 21,027,067 20,989,230 1,666,108 1,636,108 1,468,544 1,468,544 228,912 228,912 - - - - - - - - - - - - - - - - - - - - - - 1,517,593 22,544,660 37,873 21,027,067 112,082 30,000 1,778,190 1,666,108 - - 1,468,544 1,468,544 144,250 - 373,162 228,912 16,300 16,300 - - 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 65,000 65,000 58,125 58,125 6,250 6,250 - - - - - - - - - - - - (1,000,000) - - - - - (6,250) - - - 309,871 1,309,871 65,000 65,000 58,125 58,125 - 6,250 - - 2018 Annual Report 19 Directors’ Report 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 Sanders1 2018 2017 Mark Edwards 2018 2017 Mike Kitney 2018 2017 Alastair Barker - - 1,250,000 - - - - 1,250,000 1,250,000 - - 1,250,000 2018 2017 1,000,000 - 1,000,000 1,000,000 Michelle Simson 2018 2017 1,000,000 - 1,000,000 1,000,000 - - - - - - - - - - - - - - - - - - - - - 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 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 Note 1 In the 2017 Financial Report, the Company reported the issue of 3,000,000 unlisted options to Tom Sanders or a closely related party. Legal advice received during 2017/18 indicates these were irregularly issued and the issue was invalid from inception. 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 2018 are provided below: 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 $310,000* (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). 20 Breaker Resources NL Directors’ Report An annual consultancy fee of $250,000* (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 $221,000* per annum (exclusive 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 2018. An increase was implemented during 2017/18. 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 2018 2018 Annual Report 21 Auditor’s Independence Declaration 22 Breaker Resources NL Statement of Profit or Loss Statement of Profit or Loss and Other Comprehensive Income for the Financial Year ended 30 June 2018 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 Profit/(Loss) before income tax Income tax expense Notes 2018 $ 2017 $ 4 4 4 4 4 4 6 30,000 207,210 20,490 257,700 120,000 159,303 18,200 297,503 (570,818) (103,063) (239,657) (494,238) (48,646) (243,604) (13,351,027) (7,111,915) (64,737) (1,822,153) (14,329,302) (9,720,556) (14,071,602) (9,423,053) - - Profit/(Loss) for the year (14,071,602) (9,423,053) Other comprehensive income - - Total comprehensive income/(loss) for the year (14,071,602) (9,423,053) Profit/(Loss) attributable to owners of the Company (14,071,602) (9,423,053) Total comprehensive income/(loss) attributable to owners of the Company (14,071,602) (9,423,053) Basic and diluted profit/(loss) per share attributable to the ordinary equity holders of the Company (cents per share) 15 (9.90) (7.88) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 2018 Annual Report 23 Statement of Financial Position Statement of Financial Position as at 30 June 2018 Current Assets Cash and cash equivalents Term deposits Trade and other receivables Other financial assets Prepaid service 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 Share-based payment reserve Accumulated profit/(loss) Notes 2018 $ 2017 $ 7 7 8 9 11 10 11 12 5,173,422 - 295,703 70,390 12,103 3,806,916 3,584,522 280,674 69,658 - 5,551,618 7,741,770 460,119 - 460,119 257,959 25,308 283,267 6,011,737 8,025,037 1,227,956 1,227,956 943,212 943,212 1,227,956 943,212 4,783,781 7,081,825 13 37,051,251 25,342,430 1,140,114 1,817,586 (33,407,584) (20,078,191) Capital and reserves attributable to owners of the Company 4,783,781 7,081,825 Total Equity 4,783,781 7,081,825 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 24 Breaker Resources NL Statement of Changes in Equity Statement of Changes in Equity for the Financial Year ended 30 June 2018 Attributable to owners of the Company Contributed Equity $ Notes Share- based Payments Reserve $ Accumulated Profit/(Losses) $ Total $ 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 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 - - - - - - (9,423,053) (9,423,053) (9,423,053) (9,423,053) 1,822,153 - 1,822,153 (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 Profit/(Loss) for the year Total comprehensive income/(loss) for the year Options issued during the year Options expired/withdrawn and transferred to accumulated loss Transactions with owners in their capacity as owners: Contributions of equity net of transaction costs - - - - - (14,071,602) (14,071,602) - (14,071,602) (14,071,602) 64,737 - 64,737 (742,209) 742,209 - 13 11,708,821 - - 11,708,821 Balance at 30 June 2018 37,051,251 1,140,114 33,407,584 4,783,781 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 2018 Annual Report 25 Statement of Cash Flows Statement of Cash Flows for the Financial Year ended 30 June 2018 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 2018 $ 2017 $ (854,330) (743,430) (12,331,074) (5,523,072) 30,000 20,490 207,210 120,000 18,200 159,303 Net cash inflow/(outflow) from operating activities 17 (12,927,704) (5,968,999) Cash flows from investing activities Payments for plant and equipment Payments for other financial assets Investment in term deposits Withdrawn from term deposits (263,675) (733) (293,970) (33,248) (10,750,000) (11,584,522) 14,334,522 9,131,045 Net cash inflow/(outflow) from investing activities 3,320,114 (2,780,695) Cash flows from financing activities Proceeds from issue of ordinary shares Share issue transaction costs 11,557,187 12,630,779 (583,091) (731,561) Net cash inflow/(outflow) from financing activities 10,974,096 11,899,218 Net increase/(decrease) in cash and cash equivalents 1,366,506 3,149,524 Cash and cash equivalents at the beginning of the period 3,806,916 657,392 Cash and cash equivalents at the end of the period 7 5,173,422 3,806,916 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 26 Breaker Resources NL Notes to the Financial Statements Notes to the Financial Statements for the Year ended 30 June 2018 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 2018. 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 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 2017, and therefore relevant for the current year end. 2018 Annual Report 27 Notes to the Financial Statements AASB 1048 ‘Interpretation of Standards’ The Company has applied the new principal version of AASB 1048 providing an up-to-date listing of Australian Accounting Interpretations, including Interpretation 22 ‘Foreign Currency Transactions and Advance Consideration’ and Interpretation 23 ‘Uncertainty over Income Tax Treatments’. The application of these amendments has had no impact on the Company's financial statements as this is a service standard that ensures there is no difference between the status of Interpretations in the hierarchy between IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ and AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses’ The Company has applied these amendments for the first time in the current year. The amendments clarify how an entity should evaluate whether there will be sufficient future taxable profits against which it can utilise a deductible temporary difference. The application of these amendments has had no impact on the Company's financial statements as the Company already assesses the sufficiency of future taxable profits in a way that is consistent with these amendments. AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107’ The Company has applied these amendments for the first time in the current year. The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non-cash changes. The application of this amendment has not had any impact on the financial statements as the Company has had no liabilities arising from financing activities. AASB 2017-2 ‘Amendments to Australian Accounting Standards – Further Annual Improvements 2014-2016’ Amends AASB 12 ‘Disclosure of Interests in Other Entities’ to clarify that an entity need not provide summarised financial information for interests in subsidiaries, associates or joint ventures that are classified (or included in a disposal group that is classified) as held for sale. The amendments clarify that this is the only concession from the disclosure requirements of AASB 12 for such interests. The application of these amendments has had no effect on the Company's financial statements as the Company has had no interests in such entities. 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. 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; 28 Breaker Resources NL Notes to the Financial Statements 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 2016-5 ‘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; AASB 2008-1 ‘Amendments to Australian Accounting Standards – Annual Improvements 2015-2017 Cycle’, 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; and Interpretation 23 ‘Uncertainty over Income Tax Treatments’, 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. (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. 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 2018 Annual Report 29 Notes to the Financial Statements 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. (i) 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. 30 Breaker Resources NL Notes to the Financial Statements (j) 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. 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. 2018 Annual Report 31 Notes to the Financial Statements 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). 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). 32 Breaker Resources NL Notes to the Financial Statements 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. 2018 Annual Report 33 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 $5,173,422 (2017: $7,391,438) is subject to interest rate risk. The weighted average interest rate received on cash and cash equivalents by the Company was 1.53% (2017: 1.98%). Sensitivity analysis At 30 June 2018, 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 $62,987 lower/higher (2017: $40,244) 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. 34 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 2018 $ 30,000 207,210 20,490 257,700 2017 $ 120,000 159,303 18,200 297,503 Notes (i) There were 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 2018 $ 103,063 13,351,027 2018 $ 134,940 80,000 (5,706) 30,423 239,657 2017 $ 48,646 7,111,915 2017 $ 111,400 73,333 20,701 38,170 243,604 2018 Annual Report 35 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 Reconciliation of segment result to loss before tax: Depreciation expenses Other corporate and administration income/(expenses), net Net profit/(loss) before tax 2018 $ 2017 $ - - 30,000 207,210 20,490 257,700 120,000 159,303 18,200 297,503 (13,351,027) (7,111,915) (103,063) (617,512) (48,646) (2,262,492) (14,071,602) (9,423,053) Segment operating assets 399,309 251,855 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 5,612,428 6,011,737 7,773,182 8,025,037 240,782 64,441 305,223 286,788 7,182 293,970 Segment operating liabilities 1,046,770 774,749 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 181,186 1,227,956 168,463 943,212 2018 $ 2017 $ - - - - Numerical reconciliation of income tax expense to prima facie tax payable Profit/(Loss) from continuing operations before income tax expense Prima facie tax benefit at the Australian tax rate of 27.5% (14,071,602) (3,869,691) (9,423,054) (2,591,340) 36 Breaker Resources NL Notes to the Financial Statements Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Capital raising costs Entertainment Share-based payment 2018 $ 2017 $ (85,164) 1,841 (223,483) (54,827) 277 504,723 (4,176,497) (2,141,167) Movements in unrecognised temporary differences (49,958) (40,476) Tax effect of current year tax losses for which no deferred tax asset has been recognised Income tax expense 4,226,455 2,181,643 - - Unrecognised temporary differences Deferred tax liabilities on income tax account Prepayments Plant and equipment FBT payable DTA used to offset DTL Deferred tax liabilities Deferred tax assets on income tax account Accruals Provisions Capital raising costs Carry forward tax losses DTA used to offset DTL 15,256 116,864 803 11.928 70,939 - (132,923) (82,666) - - 29,929 12,832 254,533 7,222,804 (132,923) 7,387,175 20,605 13,092 188,313 4,053,625 (82,666) 4,192,769 Deferred tax liabilities - - In the 2018 income year, the Government enacted a change in the company tax rate based on the type of entity. A company which satisfies a base rate entity test must apply the lower tax rate of 27.5%. A base rate entity is a company that has both an aggregate turnover less than $25million for the 2018 income year and is carrying on a business. Breaker Resources NL may satisfy the criteria to be a base rate entity. However, currently there is a Bill before the Senate that may alter the position of the tax rate for Breaker Resources NL. The retrospective impact, when enacted, will be only on the amount of the deferred tax asset. 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 deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise benefits. The utilisation of tax losses is dependent on the Company satisfying the continuity of ownership test or the same business test at the time the tax losses are applied against taxable income. 2018 Annual Report 37 Notes to the Financial Statements The Company participated in the federal government’s 2015/16 Exploration Development Incentive Scheme (EDI) for eligible exploration entities. As a result the Company has foregone 2016 income tax losses to the extent of $2,219,306 in exchange for the EDI credits of $632,502 for the eligible shareholders. 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 2018 $ 2017 $ 5,173,422 3,806,916 5,173,422 3,806,916 Term deposits classified separate to cash on face of Statement of Financial Position - 3,584,522 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. There were no term deposits with maturities over three months as at 30 June 2018. 8. Trade and other receivables Prepayments GST receivable and FBT instalment Other receivables 2018 $ 55,475 238,689 1,539 295,703 2017 $ 43,373 232,681 4,620 280,674 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 2018 $ 2017 $ 70,390 69,658 38 Breaker Resources NL Notes to the Financial Statements 10. Plant and equipment 2018 2017 Furniture & office equipment $ Exploration equipment $ Motor vehicles $ Total $ Furniture & office equipment $ Exploration equipment $ Motor vehicles $ Total $ Cost 126,454 165,650 684,475 976,579 62,013 151,769 457,575 671,357 Accumulated depreciation (65,644) (126,588) (324,228) (516,460) (55,909) (114,218) (243,271) (413,398) Net book amount 60,810 39,062 360,247 460,119 6,104 37,551 214,304 257,959 Opening net book amount 6,104 37,551 214,304 257,959 Additions 64,441 13,881 226,901 305,223 2,827 7,182 5,591 4,217 12,635 43,051 243,737 293,970 Depreciation charge (9,735) (12,371) (80,957) (103,063) (3,905) (11,091) (33,650) (48,646) Closing net book amount 60,810 39,061 360,248 460,119 6,104 37,551 214,304 257,959 11. Prepaid service Prepaid service 2018 $ 2017 $ 12,103 25,308 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 to the year ended 30 June 2019. 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 2018 $ 1,056,826 171,130 1,227,956 2017 $ 787,698 155,514 943,212 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 2018 2017 Notes Number $ Number $ Ordinary shares fully paid (b),(d) 146,101,594 37,004,598 127,821,984 25,285,714 Ordinary shares partly paid (b),(d) 4,665,373 46,653 5,671,623 56,716 Total issued capital 150,766,967 37,051,251 133,493,607 25,342,430 2018 Annual Report 39 Notes to the Financial Statements (b) Movements in ordinary share capital Beginning of the year Issued during the year: Fully paid shares issued in exchange for services Placement to sophisticated and 2018 2017 Number $ Number $ 133,493,607 25,342,430 106,482,377 12,414,330 1,036,167 734,725 2,211,230 1,028,882 professional investors 14,285,715 10,000,000 24,800,000 12,400,000 Fully paid shares under a Share Purchase Plan 1,951,478 1,366,000 Partly paid shares converted to fully paid shares Transaction costs End of the year (c) Movements in options on issue Beginning of the year Issued Expired or lapsed End of the year - - 191,187 (583,091) - - - - 230,779 (731,561) 150,766,967 37,051,251 133,493,607 25,342,430 2018 Number 5,800,000 250,000 (400,000) 5,650,000 2017 Number 2,500,000 5,500,000 (2,200,000) 5,800,000 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 $0.73 and expire between 30 June 2019 and 31 December 2020. (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. 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. 40 Breaker Resources NL Notes to the Financial Statements The working capital position of the Company at 30 June 2018 and 30 June 2017 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 2018 $ 5,173,422 - 295,703 70,390 (1,227,956) 4,311,559 2017 $ 3,806,916 3,584,522 280,674 69,658 (943,212) 6,798,558 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 (14,071,602) (9,423,053) 2018 $ 2017 $ (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 142,156,382 119,577,225 2018 Number 2017 Number (c) Information on classification of options As the Company has made a loss for the year ended 30 June 2018, 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 2018/19. 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. 2018 Annual Report 41 Notes to the Financial Statements Estimated expenditure on mining, exploration and prospecting leases for 2018/19 as at the date of this report: 2018 $ 2017 $ 365,000 282,000 (b) Capital Commitments There are no capital expenditure commitments for the Company as at 30 June 2018. (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 2018 $ 45,551 - 45,551 2017 $ 44,551 - 44,551 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 2018 $ 2017 $ (14,071,602) (9,423,053) 103,063 64,737 747,929 (15,029) 243,198 48,646 1,822,153 1,028,882 (116,839) 671,212 Net cash inflow/(outflow) from operating activities (12,927,704) (5,968,999) (a) Non-cash transactions During the year, the Company issued 1,036,167 fully paid ordinary shares to a supplier in exchange for 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 250,000 options to its employees as incentives. The value of the options was included in the Share-based Payments (refer to Note 18). 42 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: 2018 2017 Weighted average exercise price cents 45.6 73.0 40.4 43.7 46.0 Number 5,300,000 250,000 400,000 5,150,000 4,900,000 Weighted average exercise price cents 48.9 43.9 50.1 45.6 44.1 Number 2,000,000 5,500,000 2,200,000 5,300,000 4,500,000 Outstanding at the beginning of the year Granted Forfeited/cancelled/expired Outstanding at year end Exercisable at year end A total of 400,000 unlisted employee options lapsed during the year. The weighted average remaining contractual life of share options outstanding at the end of the financial year was 1.5 years (2017: 2.5 years) and the exercise prices ranged from 43.2 cents to 73.0 cents (2017: 40.3 cents to 69.0 cents). The weighted average fair value of the employee share options granted during the year was 25.90 cents (2017: 21.44 cents). 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 BRBOPT06 Grant date share price Exercise price Expected volatility Option life Risk-free interest rate $0.510 $0.730 90.1% 3.05 years 1.96% (b) Other party options In addition to options issued to employees, the Company may also issue unlisted options to other parties. There were no other party options granted during the year. (c) Share-based payments expenses During the year, an amount of $64,737 was recognised as share-based payment expenses. An amount of $742,209 was transferred from the share-based payment reserve to accumulated losses as a result of the lapse of 400,000 options and voiding of 3,000,000 options. 2018 Annual Report 43 Notes to the Financial Statements 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 2018 $ 915,589 31,490 947,079 2017 $ 702,062 29,850 731,912 There were no loans to/from key management personnel during the year. Detailed remuneration disclosures are provided in the Remuneration Report commencing on page 15. 20. Related party transactions The Company had no transactions with related parties during the year except for payments to the key management personnel disclosed in the Remuneration Report commencing on page 15. There were no guarantees provided to related parties during the year. 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 2018 $ 2017 $ 22,000 22,000 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 (2017: Nil). 22. Subsequent events 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 2018. 44 Breaker Resources NL 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 27 to 44 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 2018 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 2018 2018 Annual Report 45 Independent Audit Report 46 Breaker Resources NL Independent Audit Report 2018 Annual Report 47 Independent Audit Report 48 Breaker Resources NL Independent Audit Report 2018 Annual Report 49 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 30 September 2018. Corporate Governance Statement The 2018 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 10,001-100,000 104 295 238 756 29,761 882,512 2,037,785 28,470,542 100,001 and over 197 114,730,994 1,590 146,151,594 8 26 9 23 10 76 3,775 69,904 69,889 852,577 3,619,228 4,615,373 Unmarketable Parcel There are 148 holders of unmarketable parcels of fully paid ordinary shares, based on the closing market price of $0.32 on 30 September 2018. 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 1 2 Mr Thomas Stephen Sanders & Mrs Helen Sanders Norfolk Enchants Pty Ltd Voting interest Number Voting power % 21,099,703 10,000,000 14.51% 6.84 50 Breaker Resources NL 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 % Mr Thomas Stephen Sanders & Mrs Helen Sanders Norfolk Enchants Pty Ltd Mr Thomas Stephen Sanders & Mrs Helen Sanders Kurraba Investments Pty Ltd BT Portfolio Services Limited HSBC Custody Nominees (Australia) Limited Gurravembi Investments Pty Ltd Bradley Scott Dvorak T T Nicholls Pty Ltd Gurravembi Investments Pty Ltd Ausdrill International Pty Ltd BNP Paribas Noms Pty Ltd 1 2 3 4 5 6 7 8 9 10 11 12 13 Mark Robert Edwards 14 15 Mr Michael John Kitney & Mrs Dale Jayne Kitney 16 17 18 19 20 Gold Elegant (HK) Investment Limited Kemast Investments Pty Ltd Allora Equities Pty Ltd Citicorp Nominees Pty Ltd Jasper Hill Resources Pty Ltd Tom Hume Pty Ltd 13,806,868 10,000,000 8,713,792 5,021,429 4,771,510 4,128,975 4,000,000 2,615,117 2,566,471 2,553,254 1,994,460 1,605,829 1,532,035 1,500,000 1,468,544 1,394,171 1,200,000 1,180,941 1,002,883 1,000,000 72,056,279 9.45 6.84 5.96 3.44 3.26 2.83 2.74 1.79 1.76 1.75 1.36 1.10 1.05 1.03 1.00 0.95 0.82 0.81 0.69 0.68 49.30 The names of the 20 largest holders of quoted partly paid ordinary shares (ASX: BRBCA) are: Shareholder Ordinary shares Number Equity held % Jasper Hill Resources Pty Ltd HSBC Custody Nominees (Australia) Limited Mr Benjamin Campbell Cheetah Holdings Pty Ltd Mr Thomas Stephen Sanders & Mrs Helen Sanders Mr Gary Phillip Grey & Ms Stephanie Ann Reynolds Mr Murray Leslie Siviour T T Nicholls Pty Ltd Mr Gavin Victor Hayres & Ms Amanda Yip Bradley Scott Dvorak Collective Noun Investment Pty Ltd Allora Equities Pty Ltd 1 2 3 4 5 6 7 8 9 10 11 12 13 Mr Luke Patrick Thomas Sanders 13 Mark Robert Edwards 14 Mr Michael John Kitney & Mrs Dale Jayne Kitney 15 15 Mr Graham Robert Foreman Kahala Holdings Pty Ltd 16 17 Henconnor Pty Ltd Pendan Pty Ltd 18 19 Mr Glenn Turner 20 Talex Investments Pty Ltd Future Super Pty Ltd 1,096,934 437,500 356,308 324,670 309,871 273,406 248,171 219,768 200,100 152,500 88,145 65,217 65,000 65,000 58,125 50,000 50,000 46,294 45,454 43,478 39,000 29,000 4,263,941 23.77 9.48 7.72 7.03 6.71 5.92 5.38 4.76 4.34 3.30 1.91 1.41 1.41 1.41 1.26 1.08 1.08 1.00 0.98 0.94 0.84 0.63 92.39 2018 Annual Report 51 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 on or before 31 December 2019 Unlisted 69 cent options, exercisable on or before 31 December 2019 Unlisted 73 cent options, exercisable between 16 October 2018 and 31 December 2020 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 2,500,000 150,000 250,000 250,000 Holders Number 1 2 2 1 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. 52 Breaker Resources NL 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
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